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Press release from CNW Group

SiriusXM Canada Reports Strong Full Year 2011 Growth

Thursday, November 17, 2011

SiriusXM Canada Reports Strong Full Year 2011 Growth07:00 EST Thursday, November 17, 2011Pro Forma Revenue of $239 Million, up 18%Pro Forma Adjusted EBITDA of $26.5 Million, up 302%Total Subscribers of approximately 2.0 Million; Net Adds of 251,400Self-Paying Subscribers of 1.4 Million; Net Self-Pay Adds of 177,900TORONTO, Nov. 17, 2011 /CNW/ - Canadian Satellite Radio Holdings Inc. (TSX: XSR), parent of SiriusXM Canada, today released audited annual financial results or F2011 prepared in accordance with Canadian GAAP. A copy of the reported financial results for F2011 is attached. To more accurately reflect the performance of the newly combined entity, the company has also released unaudited pro forma financial results without purchase accounting adjustments for the three and twelve month periods ended August 31, 2011 and 2010 prepared as if the previously completed combination transaction had occurred on September 1, 2009.FY2011 Pro Forma Annual and Fourth Quarter HighlightsFY2011 Revenue grew 17.9% to $238.7 million from $202.5 million in FY2010Q4 revenue improved 13.4% to $61.4 million from $54.1 million in Q4 FY2010FY2011 Adjusted EBITDA increased 302.2% to $26.5 million from $6.6 million in FY2010Q4 Adjusted EBITDA grew 149.0% to $11.1 million from $4.4 million in Q4 FY2010Cash and cash equivalents of $26.0 million as at August 31, 2011Completed debt refinancing, replacing 12.75% senior notes with 9.75% senior notes in addition to an offering of new senior notes with the same termsGrew total subscribers 14.5% to 2.0 million from 1.7 million at August 31, 2010Increased Self-Paying Subscribers to 1.4 million from 1.2 million at August 31, 2010"SiriusXM Canada's results in 2011 were strong and reflect significant growth among subscribers, revenue and adjusted EBITDA," said Mark Redmond, President and CEO, SiriusXM Canada Inc. "Our fourth quarter performance reflects some of the early cost synergies from the merger, and we currently anticipate fully realizing our goal of approximately $20 million in synergies on an annualized basis over the coming quarters. Backed by an unrivaled product offering and the strongest audio content in the marketplace, we believe we have the right strategy and resources in place to continue delivering strong financial results. We are very optimistic about fiscal 2012 and our ability to drive improvements in profit, cash, OEM business, achieve cost synergies and maintain a high level of subscriber satisfaction."Pro Forma Financial and Operational HighlightsPro Forma results for the fiscal year and fourth quarter assume the combination of XM Canada and Sirius Canada Inc. occurred as of September 1, 2009.Principally due to purchase accounting, reverse take over accounting and a change in year end, reported Canadian GAAP actual results for the period differ significantly from pro forma adjusted results. The Company has provided below certain pro forma financial information that are not impacted by purchase accounting for this reporting period. These figures are subject to the qualification and assumptions set out in the notes to such results. All figures are in Canadian dollars unless otherwise stated. Financial *Q4FY2011Q4 FY2010FY2011FY2010 (Unaudited)(Unaudited)(Unaudited)(Unaudited)Total Revenue$61,383$54,146$238,660$202,511Adjusted EBITDA**$11,062$4,442$26,522$6,593     Operating *       Self-Paying Subscribers1,3931,2151,3931,215   Total Subscribers1,9831,7321,9831,732   SAC$50$57$54$60   CPGA$75$84$84$96     * All financial figures in the table above are in thousands except, SAC and CPGA** Adjusted EBITDA is a non-GAAP measure. A reconciliation of pro forma profit (loss) to pro forma Adjusted EBITDA is provided below.Financial Review of Pro Forma ResultsRevenue was $238.7 million for the year ending August 31, 2011, up 17.9% from $202.5 million in the year ending August 31, 2010 primarily as a result of the growth in the Company's subscriber base. Revenue for Q4 FY2011 increased to $61.4 million, up 13.4% from $54.1 million in Q4 FY2010.The decrease in SAC to $54 in FY2011 from $60 in FY2010 is mainly attributable to lower subsidies and distribution costs in the automotive channel due to contractual changes with certain OEM partners. Q4 FY2011 SAC was $50, down from $57 in Q4 F2010.CPGA decreased to $84 in FY2011 from $96 in FY2010, reflecting lower subsidies and distribution costs, lower advertising and marketing costs and higher gross subscriber additions. Q4 FY2011 CPGA decreased to $75 from $84 in Q4 FY2010.FY2011 Adjusted EBITDA improved to $26.5 million in 2011 from $6.6 million in FY2010, as revenue growth outpaced the increase in expenses, reflecting the scalability of the business. Q4 FY2011 Adjusted EBITDA grew 149.0% to $11.1 million.As at August 31, 2011, SiriusXM had total cash and cash equivalents of $26.0 million compared to $51.2 million (excluding restricted cash) as at August 31, 2010. During the year ended August 31, 2011, $44.7 million in cash was distributed to the former shareholders of Sirius Canada in accordance with the terms of the combination transaction agreement.Please see the Company's Management Discussion & Analysis filed November 17, 2011 for a more detailed explanation of the differences between GAAP actual financial results and the pro forma results described in this press release.The non-GAAP measures used in this press release should be used in addition to, but not as a substitute for, the analysis provided in the consolidated statement of operations and comprehensive income. Please see the Company's Management Discussion & Analysis filed November 17, 2011 for complete definition of non-GAAP measures.Conference Call and Webcast DetailsSiriusXM Canada will hold a conference call to discuss the FY2011 results on November 17, 2011 at 8:30 a.m. ET. All interested parties can join the call by dialing 647-427-7450, or 1-888-231-8191. Please dial-in 15 minutes prior to the call to secure a line.  The conference call will be archived for replay until Thursday, November 24, 2011 at midnight. To access the archived conference call, please dial 416-849-0833, or 1-855-859-2056 and enter the reservation code 27769165. A live audio webcast of the conference call in addition to a slide presentation will be available at http://www.xmradio.ca/  and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.  An archived replay of the webcast will be available for 365 days at www.newswire.ca.ReconciliationsThe following is a reconciliation of Pro forma profit (loss) before the undernoted to Pro forma Adjusted EBITDAIn ($000's)Q4 FY2011Q4 FY2010FY2011FY2010     Operating Loss(3,472)(2,617)(16,715)(22,666)     Add back non-Adjusted Operating Profit (Loss) itemsincluded in loss      Amortization6,2906,83426,43027,186EBITDA2,8184,2179,7154,520   Merger and restructuring costs3,848 12,321(15)   Stock based compensation1602252502,088   Write-down of intangibles**4,236 4,236 Adjusted EBITDA 11,0624,44226,5226,593** Related to costs that had been capitalized in respect of a Subscriber Management System ("SMS") that was in the early stages of implementation.Forward-Looking StatementsCertain statements included above may be forward-looking in nature. Such statements can be identified by the use of forward-looking terminology such as "expects," "may," "will," "should," "intend," "plan," or "anticipates" or the negative thereof or comparable terminology, or by discussions of strategy. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements of fact, including with respect to future operating performance and merger benefits and costs synergies. Although SiriusXM Canada believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. SiriusXM Canada's forward-looking statements are expressly qualified in their entirety by this cautionary statement. SiriusXM Canada makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as required by applicable law. Additional information identifying risks and uncertainties is contained in Canadian Satellite Radio Holdings Inc.'s filings with the Canadian securities regulators, available at www.sedar.com.About SiriusXM Canada Canadian Satellite Radio Holdings Inc. (TSX: XSR) operates as SiriusXM Canada. SiriusXM Canada is the country's leading audio entertainment company and broadcasts more than 120 satellite radio channels featuring premier sports, news, talk, entertainment and commercial-free music. SiriusXM Canada offers an array of content from the most recognized news and entertainment brands as well as from professional sports leagues including the NHL, NFL, MLB and CFL.SiriusXM programming is available on a variety of devices including pre-installed and after-market radios in cars, trucks and boats, smartphones and mobile devices, and consumer electronics products for homes and offices. SiriusXM programming is also available online at www.sirius.ca and www.xmradio.ca and on Apple, BlackBerry and Android-powered mobile devices.SiriusXM Canada has partnerships with every major automaker and its radio products are available at more than 3,000 retail locations nationwide.Consolidated Financial StatementsCanadian Satellite Radio Holdings Inc.August 31, 2011November 16, 2011Independent Auditor's ReportTo the Shareholders of Canadian Satellite Radio Holdings Inc.We have audited the accompanying consolidated financial statements of Canadian Satellite Radio Holdings Inc. and its subsidiaries, which comprise the consolidated balance sheet as at August 31, 2011 and the consolidated statement of operations and comprehensive income, shareholders' equity and cash flows for the period then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.Management's responsibility for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian generally accepted accounting principles (Canadian GAAP), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.Auditor's responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian GAAP. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Canadian Satellite Radio Holdings Inc. and its subsidiaries as at August 31, 2011 and the results of their operations and their cash flows for the period then ended in accordance with Canadian GAAP.Other matterThe financial statements as of November 30, 2010, and for the period then ended, prior to the reclassifications described in Note 3, were reported on by other auditors who expressed an opinion without reservation on those statements in their report dated May 31, 2011.We have audited the reclassifications to the 2010 financial statements and in our opinion, such adjustments, in all material respects, are appropriate and have been properly applied.(Signed) PricewaterhouseCoopers LLPChartered Accountants, Licensed Public AccountantsCanadian Satellite Radio Holdings Inc.CONSOLIDATED BALANCE SHEETS    August 31,November 30, 20112010 $$ASSETS  Current  Cash and cash equivalents26,015,439 47,610,454Accounts receivable (note 12)10,718,676 8,652,620Prepaid expenses and other assets2,587,736 1,918,196Inventory (note 7)2,265,438 1,409,832Total current assets41,587,289 59,591,102Long-term prepaids and other assets901,563 36,720Property and equipment (notes 8)9,680,308 2,636,352Intangible assets(notes 9)206,113,620 4,415,866Future tax asset (note 15)51,545,684-Goodwill (note 4)96,732,525 -Total assets406,560,989 66,680,040   LIABILITIES AND SHAREHOLDERS' EQUITY  Current  Accounts payable and accrued liabilities34,618,651 32,366,090Due to related parties (note 5)17,203,492 19,836,681Future tax liability (note 15)- 1,133,756Interest payable3,085,071 -Deferred revenue126,995,705 79,892,903Total current liabilities181,902,919 133,229,430Deferred revenue20,084,379 12,710,409Other long-term liabilities (note 14)9,746,037 200,156Due to related parties (note 5)1,208,332 -Long-term debt (note 6)146,143,284 -Total liabilities359,084,951 146,139,995Contracts, contingencies and commitments (notes 5 and 14)  Shareholders' equity (deficiency)  Share capital (note 10)147,169,430 36,000,100Contributed surplus4,324,032 -Accumulated deficit(104,017,424)(115,460,055)Total shareholders' equity (deficiency)47,476,038 (79,459,955)Total liabilities and shareholders' equity406,560,98966,680,040   See accompanying notes  Approved by Board ofDirectors (signed) John I. Bitove       (signed) Anthony Viner John I. Bitove, Director     Anthony Viner, DirectorCONSOLIDATED STATEMENTS OF OPERATIONS ANDCOMPREHENSIVE INCOME          Period fromDecember 1, 2010 to August 31, 2011Period from January 1, 2010 to November 30, 2010 $$   REVENUE  Broadcasting139,594,553 141,347,218Equipment1,323,441 932,238 140,917,994 142,279,456EXPENSES  Cost of revenue (notes 5 and 14)58,660,582 54,603,434General and administrative (notes 5 and 14)4,842,509 6,620,449Information and technology (note 5)5,395,960 5,255,819Merger costs (note 4)3,501,293 1,668,173Write-down of intangible assets (note 9)4,235,953 -Stock-based compensation (note 10)184,684 -Sales and marketing (note 5)48,235,042 56,083,338Amortizationof intangible assets and property and equipment (notes 8 and 9)8,031,023 2,407,024 133,087,046 126,638,237Operating income7,830,948 15,641,219Interest income (note 9)329,145 186,592Interest expense (note 6)(3,427,853) -Loss on debt repayment (note 4 and 9)(1,908,263) -Foreign exchange loss(315,095) (92,245)Net income before income tax2,508,882 15,735,566Income tax recovery (note 15)15,344,226 -Net income and comprehensive income for the period17,853,108 15,735,566   Net earnings  per share - basic and fully diluted (note 13)$0.19 $0.18   See accompanying notes  CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) Common sharesPreferred sharesTotal share  AccumulatedAccumulated comprehensive other Total shareholders'  Class AClass BClass CcapitalSurplusdeficitincomedeficiency  #$#$#$$$$$$            Balance, December 31, 20096,262 63 3,738 37 3,600,000 36,000,000 36,000,100 -(128,340,607)- (92,340,507)Dividends (note 10)--------(2,635,397)-(2,635,397)Net income for the period--------15,735,566-15,735,566Part VI.1 tax (note 15)--------(219,617)-(219,617)Balance, November 30, 20106,262 63 3,738 37 3,600,000 36,000,000 36,000,100 - (115,460,055)- (79,459,955)Dividends on Class C preferred shares (note 10)--------(1,601,753)-(1,601,753)Part VI.1 tax reverse--------1,133,757-1,133,757Dividends on Class C shares (note 10)--------(5,942,481)-(5,942,481)Return of Capital(6,262)-(3,738)-(3,600,000)(36,000,000)(36,000,000)---(36,000,000)CSRH shares outstanding at time of merger24,389,51773,168,55181,428,13381,428,133--154,596,684---154,596,684CSRH shares issued to Sirius shareholders (note 4)25,248,444-138,108,402--------CSRH cash deficiency notes (note 4)-(3,038,441)-(4,479,427)--(7,517,868)---(7,517,868)Equity component of convertible debt acquired-------1,539,196--1,539,196Vested stock options at acquisition (note 4)-------2,614,513--2,614,513Stock compensation expense-------184,684--184,684Stock options exercised5,70022,515----22,515(14,361)--8,154Shares for interest - convertible note24,17467,999----67,999---67,999Conversion of shares by related party (note 4)346,003190,682(1,038,009)(190,682)-------Net income for the period--------17,853,108-17,853,108Balance, August 31, 201150,013,83870,411,369218,498,52676,758,061- - 147,169,4304,324,032(104,017,424)- 47,476,038 STATEMENTS OF CASH FLOWS Period fromPeriod from December 1, 2010 toJanuary 1, 2010 toAugust 31, 2011November 30, 2010 $$OPERATING ACTIVITIES  Net income for the period17,853,108 15,735,566Add(deduct) items not involving cash   Amortization of intangible assets6,861,192 1,521,862 Amortization of property and equipment1,169,831 885,162 Future income tax recovery(15,344,226)- Write down of intangible asset4,235,953 - Stock-based compensation expense184,684 - Accrued interest2,709,537 - Interest accretion expenses129,234 - Loss on repayment of debt1,908,263 - Share issued for interest settlement67,999 - Unrealized foreign exchange losses7,879 -Net change in non-cash working capital  related to operations (note 11)(12,046,186)6,975,199Cash provided by operating activities7,737,268 25,117,789   INVESTING ACTIVITIES  Cash acquired on acquisition (note 4)2,223,112 -Proceeds on sale of property and equipment1,757 -Purchase of property and equipment(180,198)(84,686)Purchase of intangible assets(1,931,242)(2,100,016)Cash provided by (used) in investing activities113,429 (2,184,702)   FINANCING ACTIVITIES  Distributions to shareholders (note 4)(44,723,690)-Proceeds from exercise of stock options 8,154 -Proceeds from debt (note 6)62,000,000-Debt financing fees (note 6)(4,118,803)-Repayments of debt (note 6)(42,611,373)-Cash used in financing activities(29,445,712)-Net increase (decrease) in cash during the period(21,595,015)22,933,087Cash and cash equivalents, beginning of period47,610,454 24,677,367Cash and cash equivalents, end of period26,015,439 47,610,454See accompanying notesCanadian Satellite Radio Holdings Inc.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. ORGANIZATION AND NATURE OF BUSINESS Canadian Satellite Radio Holdings Inc. (the Company or CSRH) was incorporated on July 31, 2002 for the purpose of establishing and operating a Canadian satellite radio service. We broadcast music, sports, talk, entertainment and other content on a subscription fee basis in Canada. Subscribers can also receive certain of our content over the Internet and mobile devices. Our Satellite radios are primarily distributed through automakers (OEM's), through retail locations and through our websites. We have agreements with every major automaker to offer satellite radios as factory installed or dealer installed equipment in their vehicles.On June 21, 2011, the Company completed the business combination with Sirius Canada Inc. (Sirius) that was announced in November 2010 (note 4). The Company now operates and markets itself as Sirius XM Canada.The transaction was accounted for as a reverse takeover whereby Sirius is deemed to be the acquirer of Canadian Satellite Radio Holdings Inc., using the purchase method of accounting. This basis of accounting reflects the combination as a continuation of the financial statements of Sirius adjusted for the legal capital of CSRH; as such, the historical consolidated financial statements of the Company before the acquisition are those of Sirius.The previous financial year-ends of Sirius were November 30, 2010 and December 31, 2009; in conjunction with the merger transaction the year-end was changed to be August 31, 2011. The results for the Company therefore include the results for Sirius from January 1, 2010 to November 30, 2010 and December 1, 2010 to August 31, 2011 and the results for CSRH for the period June 21, 2011, the date of the transaction, to August 31, 2011.On June 16, 2005, the Canadian Radio-television and Telecommunications Commission (CRTC) approved the respective applications for licenses for satellite radio subscription undertakings to the Company's two wholly owned subsidiaries Canadian Satellite Radio Inc. (CSR) and Sirius Canada Inc. (Sirius). The decisions granted broadcast licenses to carry on a satellite subscription undertaking, subject to certain conditions. On April 11, 2011 the CRTC issued Broadcasting Decision CRTC 2011-240 authorizing the change to the effective control of the satellite subscription radio undertakings of CSR and Sirius. The term of these licenses was extended until August 31, 2012.The Company has two operating segments and one aggregated reportable segment. All of the Company's property and equipment and intangible assets are located in Canada.Subsequent to year-end on September 1, 2011, our two wholly owned subsidiaries, CSR and Sirius were amalgamated and renamed Sirius XM Canada Inc.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThese consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles (GAAP), Part V, Pre-change over accounting standards. The significant accounting policies are as follows:Principles of consolidationThe consolidated financial statements include the accounts of the Company and its subsidiaries, CSR and Sirius. All material intercompany transactions and balances have been eliminated.Use of estimatesThe preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to the valuation of accounts receivable and other receivables, accounts payable and accrued liabilities, the estimated useful lives of long-lived assets, the carrying value of intangibles and goodwill and the valuation of tax assets and liabilities. For business combinations significant judgment is applied to determine the fair value of acquired assets and assumed liabilities. The Company relies on historical experience and on various other assumptions that are believed to be reasonable under the circumstances in making judgments about the carrying value of assets or liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions.Foreign currency translationMonetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the exchange rates in effect at the consolidated balance sheet dates and non-monetary assets and liabilities are translated at rates in effect when the assets were acquired or obligations incurred. Revenue and expenses are translated at average exchange rates prevailing during the period. All exchange gains or losses are included in the consolidated statement of operations and comprehensive income for the period.Cash and cash equivalentsCash and cash equivalents consist of cash on deposit and highly liquid short-term interest bearing securities with original maturities of less than 90 days. Cash and cash equivalent are designated as held-for-trading and are carried at fair value.Prepaids and other assetsPrepaids and other assets consist of prepayments for goods and services, including marketing payments, performance rights fees and lease inducements. These amounts are deferred and expensed as the goods or services are used by the Company.InventoryInventory is valued at the lower of cost and net realizable value. Cost of sales is determined using average weighted cost. The entire balance consists of finished goods.Property and equipmentProperty and equipment are reported at cost less accumulated amortization.Repairs and maintenance that do not enhance the service potential of the related assets are charged to expense as incurred. Betterments are capitalized. The cost and related accumulated amortization of property sold are removed from the accounts, and gains and losses are recognized in the consolidated statements of operations and comprehensive income. Property and equipment balances are tested in accordance with the policy for impairment of long-lived assets with definite lives as described below.Amortization is calculated using the straight-line method over the estimated useful lives of the Company's property and equipment as follows:Terrestrial repeaters7 yearsComputer hardware3 - 5 yearsOffice equipment3 - 5 yearsFurniture and fixturesBroadcast equipment7 years3 - 10 yearsLeasehold improvements    Term of leaseAsset retirement obligationsThe Company has obligations with respect to the retirement of terrestrial repeater equipment and restoration of facilities to their original state at the end of the lease term. Accruals are made based on management's estimate of current market restoration costs, inflation rates and discount rates. At the inception of a lease, the present value of the expected cash payments is recognized as an asset retirement obligation, with a corresponding amount recognized in property and equipment assets. The property asset amount is amortized and the liability is accreted over the period from the lease inception to the time the Company expects to remove the terrestrial repeater equipment and vacate the premises, resulting in both amortization and accretion costs in the consolidated statements of operations and comprehensive income. The Company reviews its asset retirement obligations on a periodic basis and adjusts the liability as necessary to reflect any changes in the estimates. Such changes will be recorded in the accounts of the Company as they occur.Intangible assetsIntangible assets with definite useful lives are amortized over their useful lives using the straight-line method as follows:General Motors of Canada Limited  (GMCL) distribution rights 13 yearsHonda distribution rights 8 yearsNissan distribution rights 10 yearsHyundai distribution rights 0.9 yearsToyota distribution rights 5.4 yearsSubscriber relationships 3.5 yearsXM activation fees 3.5 yearsNHL Trademark 10 yearsComputer software 3-5 yearsComputer software licenses Term of licenseIntangible assets are measured at cost. For intangible assets recorded as part of the business combination, they are recorded at their estimated fair value at the date of the business combination.XM activation fees comprised activation fees for XM subscribers to Sirius XM Radio Inc (Sirius XM). These are included in intangible assets and amortized over the estimated life of the customer relationship.The Company evaluates the recoverability of intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible assets may not be recoverable.Intangible assets with definite lives are tested in accordance with the policy for impairment of long-lived assets as described below.Intangible assets with indefinite lives, which comprise our broadcast licenses, are not amortized. The Company has determined the broadcast licenses have indefinite lives as the licences can be renewed without substantial cost. These assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test compares the carrying value of the intangible asset with its fair value, and an impairment loss is recognized for the excess, if any, in the period in which the impairment is determined.GoodwillGoodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.An impairment test is performed annually or more frequently if indicators of impairment exist. The fair value of each of the Company's reporting units is compared to its carrying value and if the fair value exceeds its carrying value, goodwill is not impaired. If the carrying value exceeds the fair value, the implied fair value of goodwill is compared to the carrying value of the goodwill. If the implied fair value exceeds the carrying value then goodwill is not impaired; otherwise, an impairment loss will be recorded for the amount the carrying value exceeds the implied fair value.Impairment of long-lived assets with definite livesLong-lived assets with definite lives comprise property and equipment and certain intangible assets. The Company evaluates the recoverability of these long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. This valuation is performed by comparing the carrying amounts of these assets to the related estimated undiscounted future cash flows expected to be derived from these assets. If these undiscounted future cash flows are less than the carrying amount of the asset, then the carrying amount of the asset is written down to its fair value, based on the related estimated discounted future cash flows. While the Company believes that its estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect its evaluations of asset recoverability.Employee savings planThe Company sponsors the Sirius Canada Inc. Group Registered Retirement Savings Plan ("RRSP") (the "Plan") for eligible employees. The Plan allows eligible employees to voluntarily contribute to a Group RRSP subject to certain defined limitations. Currently, the Company matches 100% of an employee's voluntary contributions, up to 4% of an employee's pre-tax base salary, in the form of cash contributions. The total expense resulting from the Company's matching contribution to the Plan was $208,559 for the period December 1, 2010 to August 31, 2011 (period of January 1, 2010 to November 30, 2010 - $238,664).Income taxesIncome taxes are accounted for under the liability method of accounting for income taxes. Under this method, future tax assets and liabilities are recognized for the differences between the financial statement and income tax bases of assets and liabilities, and for operating losses. A valuation allowance is provided for the portion of future tax assets that is more likely than not to remain unrealized. Significant judgment is involved in determining the realizability of temporary differences and tax loss carry-forwards. Future tax assets and liabilities are measured using the substantively enacted tax rates and laws expected to apply when these assets or liabilities are expected to be realized or settled. Future income tax assets and liabilities are adjusted for the effects of changes in income tax laws in the year in which the change occurs. Tax reserves are established for uncertain income tax positions based on management's best estimates.Stock-based compensationThe Company expenses the fair value of share options and other stock-based awards when granted to employees, directors and senior officers over the related vesting period. At the time of the grant, the Company estimates the number of awards that are expected to vest and recognizes this expense over the vesting period. Estimates of the number of options that are expected to be forfeited are updated each period. For awards with graded vesting, the fair value of each tranche is recognized over its respective vesting period.Revenue recognitionThe Company derives revenue primarily from subscription and activation fees (net of customer rebates earned), equipment sales and advertising.Revenue is recognized as it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, the product has been delivered or the services have been provided, the sales price is fixed or determinable and collectability is reasonably assured. In addition to this general policy, the following paragraphs describe revenue recognition policies from the Company's major categories: subscriber and activation fees, equipment sales and advertising.Subscription and activation feesThe Company recognizes subscription fees as service is provided to the subscriber. Subscription fees include music royalty fees and other fees. Prepaid subscription fees billed in advance are recorded as deferred revenue and recognized as revenue ratably over the term of the applicable subscription plan.At the time of sale, vehicle owners purchasing or leasing a vehicle with a subscription to the Company's service typically receive between a three-month and one-year prepaid subscription. Prepaid subscription fees received from automakers are recorded as deferred revenue and amortized to revenue ratably over the service period, upon activation. The Company reimburses automakers for certain costs associated with the satellite radio installed in the applicable vehicle at the time the vehicle is manufactured. The associated payments to the automakers are included in subscriber acquisition costs, which are part of sales and marketing. Although the Company receives payments for the subscription from the automakers, they do not resell the service; the automakers facilitate the sale of the service to their customers, acting similarly to an agent for the Company.  The Company is principally obligated in these relationships as the Company is responsible for providing the service to the customers, including being obligated to the customers in the case of an interruption of service.Sales incentives consisting of rebates to customers are accounted for as reductions of revenue when the revenue is recognized or the incentive is offered. Certain fees billed to automakers for services offered to automobile purchasers during the promotional periods are offset by amounts owed to the automakers for subsidies related to the sale of the automobiles with the Company's product in accordance with Emerging Issues Committee Abstract No. 156, Accounting by a Vendor for Consideration given to a Customer (including a Reseller of the Vendor's Products).Activation fees are recognized evenly over the estimated term of a subscriber relationship which is based upon historical customer subscription terms. The Company currently estimates this period to be 42 months. Fees received in advance are recognized as deferred revenue.Equipment salesEquipment revenue from the direct sale of satellite radios and accessories is recognized upon shipment. Shipping and handling costs billed to customers are recorded as revenue. Shipping and handling costs associated with shipping goods to customers are recorded within cost of service expense.The Company recognizes revenue for sales of bundled packages, which might include a radio, activation and/or service component, pursuant to Emerging Issues Committee Abstract No. 142, Revenue Arrangements with Multiple Deliverables (EIC142). Pursuant to EIC142, the Company allocates the consideration received based on the relative fair values of the individual components, consisting of service fees (subscription and activation fees) and equipment sales. Objective and reliable evidence of fair value exists for all units of accounting in the arrangement.Advertising revenueThe Company recognizes advertising revenue from the sales of advertisements in the period in which the advertising is broadcast.Non-monetary transactionsNon-monetary transactions involve the exchange of advertising and satellite radio services for advertising and other services. During the period December 1, 2010 to August 31, 2011, the Company completed non-monetary transactions in the amount of $158. These transactions were measured at the fair value of the goods and services received.All non-monetary transactions are measured at the fair value of the goods and services received or provided, whichever is more reliably determined, except when: (a) the transaction lacks commercial substance; (b) the transaction is an exchange of product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties in the exchange; (c) neither the fair value of the asset received nor the fair value for the asset given up is reliably measurable; or (d) the transaction is a non-monetary , non-reciprocal transfer to owners that represent a spin-off of other form of restructuring or liquidation. In these cases, the transaction is measured at the carrying value.Interest incomeInterest income is accrued using the effective interest rate method.Advertising costsAdvertising costs are expensed as the services are received.Sales and marketing costsSales and marketing includes advertising and costs for media and events, which are expensed as incurred.Marketing also includes incentives and subsidies to retailers and manufacturers to promote the distribution of radios with the capacity to receive either XM satellite digital radio programming (XM radios) or Sirius satellite digital radio programming (Sirius radios). These costs are generally expensed at the time of payment which approximates the timing of the sale or activation of the XM radios and Sirius radios.Subscriber acquisition costsSubscriber acquisition costs consist of costs incurred to acquire new subscribers and include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a satellite radio and a prepaid subscription to the Company's service in the sale or lease price of a new vehicle or offer a free trial; subsidies paid for chip sets and certain other components used in manufacturing radios; device royalties for certain radios; commissions paid to retailers and automakers as incentives to purchase, install and activate radios; and provisions for inventory allowance. Subscriber acquisition costs do not include advertising, loyalty payments to distributors and dealers of radios and revenue share payments to automakers and retailers of radios. Advertising costs are included in sales and marketing and loyalty payments are included in cost of revenue.Subsidies paid to radio manufacturers and automakers are expensed upon shipment of the product or activation of the radio. Commissions paid to retailers and automakers are expensed upon either the purchase or activation of radios.Broadcast license acquisition costsAll costs related to renewing the broadcast license are expensed as incurred.Programming royalty arrangementsThe Company has entered into agreements for the payment of copyright royalties with a number of Canadian copyright collectives. The Company accrues these royalties based on tariff rates that have been set by the Copyright Board of Canada. The cost of these royalty arrangements is expensed as a cost of revenue.Financial instrumentsAll financial instruments are classified into the following categories: held-for-trading, held-to-maturity investments, loans and receivables, available-for-sale financial assets or other financial liabilities. All financial instruments are included in the consolidated financial statements and are initially measured at fair values. Subsequently, all financial instruments are re-measured to fair value at each reporting period except for loans and receivables, held-to-maturity investments and other financial liabilities which are measured at amortized cost using the effective interest method. Held-for-trading financial instruments are subsequently measured at fair value and all gains and losses as a result of measurement are included in the statement of operations and comprehensive income in the year in which they arise. Available-for-sale financial instruments are subsequently measured at fair value with revaluation gains and losses included in other comprehensive income until the instrument is derecognized or an impairment loss is recognized.DerivativesDerivatives are carried at fair value and are reported as financial assets when the Company has a contractual right to receive cash or another financial asset from a counterparty or exchange financial instruments with a counterparty under conditions that are potentially favorable to the Company and as financial liabilities where the Company has a contractual obligation to deliver cash or another financial asset to a counterparty or to exchange financial instruments with a counterparty that are potentially unfavorable to the Company. The changes in fair value during the period are recorded in the statement of operations and comprehensive income. As at August 31, 2011 and November 30, 2010 and during the periods then ended, the Company did not have any derivatives outstanding.Embedded derivativesDerivatives embedded in other financial instruments or contracts are separated from their host contracts and accounted for as derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the embedded derivative are the same as those of a free-standing derivative; and the combined instrument or contract is not measured at fair value, with changes in fair value recognized in the statement of operations and comprehensive income. There embedded derivatives within the combined instruments are measured at fair value with changes therein recognized in the consolidated statement of operations and comprehensive income.Earnings (loss) per shareEarnings per share is computed by dividing the net income for the year, adjusted for dividends accrued on preferred Class C shares, by the weighted average number of common shares outstanding during the period.Diluted earnings per share is calculated using the treasury stock method to compute the dilutive effect of stock options and the "if converted method" to compute the dilutive effect of convertible securities. Under the treasury stock method, options are assumed to be diluted when the average price of the common shares during the period exceeds the exercise price of the options. Under the "if converted" method convertible securities are assumed to be converted at the beginning of the period.3. ADOPTION OF NEW ACCOUNTING POLICIESSection 1582 of the Canadian Institute of Chartered Accountants' ("CICA") Handbook, "Business Combinations", replaces the existing Section 1581, "Business Combinations". The CICA also issued Section 1601, "Consolidated Financial Statements" and Section 1602, "Non-controlling Interests", which replaces Section 1600, "Consolidated Financial Statements". These new sections are based on the IASB's IFRS 3, "Business Combinations", and will replace the existing guidance on business combinations and consolidated financial statements. The objective of the new standards is to harmonize Canadian accounting for business combinations with the international and U.S. accounting standards. The three new standards were adopted concurrently beginning December 1, 2010 and were applied to the Company's consolidated financial statements for the year ended August 31, 2011 and specifically the business combination described in note 4.Reclassification of expensesEffective June 21, 2011, the Company changed its accounting policies with regards to the classification of OEM revenue share costs, CRTC Part I and Part II fees, and certain other expenses to align the accounting policies of the merged companies. The comparative results have been reclassified to conform with the current period presentation as described below. There is no impact on the net income for the period ends.`      Restated   Adjustment   PreviouslyreportedCost of service     $54,603,434   $11,590,636   $43,012,798General and administrative     6,620,449   (2,036,220)   8,656,669Merger costs     1,668,173   1,668,173   -Sales and marketing     56,083,338   (11,222,589)   67,305,927Net income and comprehensive income     $15,735,566   $ -   $15,735,566Future accounting pronouncementsThe Company will cease to prepare its consolidated financial statements in accordance with Canadian GAAP as set out in Part V of the CICA Handbook - Accounting ("Canadian GAAP") for the periods beginning on September 1, 2011 when it will start to apply International Financial Reporting Standards as published by the International Accounting Standards Board. Consequently, future accounting changes to Canadian GAAP are not discussed in these consolidated financial statements as they will never be applied by the Company.4. MERGER TRANSACTION Merger TransactionOn November 24, 2010, the Company entered into a Purchase Agreement with Sirius and each of the shareholders of Sirius, being Sirius XM Radio Inc. (Sirius XM), Canadian Broadcasting Corporation (CBC) and Slaight Communication Inc (Slaight), (collectively, the Vendors).  The Purchase Agreement set out the terms and conditions relating to the acquisition of all of the issued and outstanding shares of Sirius by CSRH (the "Merger"). On June 21, 2011, the Company completed the business combination with Sirius that was announced in November 2010.The business combination was effected to create a larger Canadian media company and nationwide audio entertainment provider with increased scale. The business combination will generate cost savings through merged operations and processes and increased revenue through exclusive content and programming relationships and distribution agreements with every major automaker and retailers nationwide.As consideration for all the issued and outstanding shares of Sirius, CSRH issued from treasury 25,248,444 Class A Shares and 138,108,402 Class B Shares (the "Consideration Shares") to the shareholders of Sirius. The Consideration Shares represent approximately a 58% equity interest in CSRH immediately following closing of the transaction, with the CSRH shareholders retaining a 42% equity interest (in each case the ratio was determined on a partially diluted basis, after taking the potential future exercise of in-the-money stock options into account). Accordingly, the transaction was accounted for as a reverse takeover whereby Sirius is deemed to be the acquirer of CSRH, using the purchase method of accounting. This basis of accounting reflects the combination as a continuation of the financial statements of Sirius adjusted for the legal capital of CSRH.CSRH had a cash balance (including cash, cash equivalents and restricted investments) at closing, excluding any impact of the refinancing, and including costs incurred related to the financing ("Closing Cash Balance"), of less than $9 million (the "Required Cash Balance"). In accordance with the agreement, the Vendors received non-interest bearing promissory notes (the "Promissory Notes") issued by Sirius in an aggregate principal amount equal to the Required Cash Balance, minus, the CSRH Closing Cash Balance ("the Sirius Note Distribution Amount").These promissory notes were issued in the amount of $7,517,868. The amount of these promissory notes was recorded as a reduction of the value of the consideration transferred to the shareholders of CSRH.As Sirius had a Closing Cash Balance that was greater than the Required Cash Balance of $9 million, the Vendors received from Sirius or the Combined Group, directly or indirectly, such excess amount in cash and promissory notes immediately prior to the closing of the transaction (the "Sirius Cash Distribution Amount"). The Sirius Cash Distribution Amount was paid in cash of $44,723,690 at closing and by way of promissory notes in the amount of $3,655,423. In addition a note of $1,208,332 was issued that will become payable upon final resolution of certain contingencies if in favor of Sirius. These amounts were accounted for as equity transactions with the shareholders of the Company prior to closing of the transaction as noted below.The total amount of notes issued of $11,173,291 related to the Sirius Cash Distribution Amount and the Sirius Note Distribution Amount are recorded as due to related parties in current liabilities. The notes are payable on the earliest of (i) June 21, 2013, (ii) the first day CSRH is free cash flow positive for a consecutive period of six months in the aggregate and (iii) such date as determined by the board of directors of CSRH. The notes do not bear interest.The summary of distributions made to shareholders noted above and the related reductions of equity are as follows              Cash            $44,723,690Notes issued            12,381,623Other amounts            92,489Total distributions            $57,197,802              Return of Capital            $36,000,000Previously accrued dividends            15,255,321Dividends on common shares            5,942,481Total equity transactions            $57,197,802FinancingConcurrently with the closing of the merger transaction, the Company completed an exchange offer to exchange the Company's outstanding 12.75% US dollar Senior notes due 2014 (US$ Senior notes) for newly issued 9.75% Canadian dollar Senior notes due 2018 (Senior notes) (note 6). The new Senior notes bear interest of 9.75%, payable semi-annually and have a maturity date June 21, 2018. 98.7% of the US$ Senior notes were tendered at US$1,000 principal amount for $1,015 of new notes. The Company obtained the consent from holders of the US$ Senior notes to proposed amendments which eliminated the Company's obligation to comply with substantially all of the financial covenants contained in the US$ Senior notes indenture. By tendering their notes, the holders of the US$ Senior notes were deemed to have consented to the amendments. As of August 31, 2011, there was US$0.9 million of US$ Senior notes due 2014 that remain outstanding and $68.8 million of new Senior notes issued in the exchange offering. The exchange offer was accounted for as an extinguishment of the US$ Senior notes. It was determined that the financing closed subsequent to the business combination and the difference between the fair value of the US$ senior notes and the fair value of the new Senior notes was recorded as a loss (note 6).As a condition of the merger, the Company also conducted an offering of new Senior notes in the amount of $62 million. These notes are identical to the Senior notes due 2018 described above. The merger, the exchange offering and the concurrent offering of the Senior notes all closed on June 21, 2011. The notes holders were entitled to a commitment fee of 0.5% of the principal of the notes for each month prior to the merger closing to a maximum of 1.5% of the principal of the notes. The consolidated statement of operations and comprehensive income includes an interest expense of $0.3 million for the period ending August 31, 2011.Subsequent to the completion of the merger and financing, with the proceeds of the offering, the Company fully repaid the XM credit facility and the Subordinated promissory notes (note 6).Business combinationThe merger has been accounted for using the purchase method of accounting and the results for CSRH have been included in the consolidated statement of operations and comprehensive income for the period June 21, 2011 to August 31, 2011. The following table summarizes the consideration transferred for CSRH and the fair value of assets acquired and liabilities assumed as of the acquisition date of June 21, 2011. The process for determining the fair value of acquired assets and liabilities assumed is complete, with the exception of the value assigned to acquired tax losses. The process of allocating the goodwill acquired to the operating units has not yet been completed.            Consideration transferred                $Fair value of shares held by CSRH shareholders          154,596,684Fair value of vested CSRH stock options          2,614,513Less: notes issued to Sirius shareholders for CSRH cash deficiency          (7,517,868)Total consideration transferred          149,693,329                        Assets acquired           Cash and cash equivalents          2,223,112Accounts receivable          1,673,628Prepaid expenses and other assets          5,486,856Current assets          9,383,596Long-term prepaid expenses          916,000Property and equipment          8,157,574Future tax asset          36,201,458Intangible assets:            CRTC license          85,800,000 OEM distribution rights          78,700,000 Subscriber relationship          42,800,000 Other intangibles          3,105,560Goodwill          96,732,525Total assets          361,796,713            Liabilities assumed           Accounts payable and accrued liabilities          29,140,858Interest payable          3,328,918Deferred revenue          31,404,369Current liabilities          63,874,145Long-term debt          128,826,027Deferred revenue          6,831,631Other long-term liabilities          11,032,385 Total liabilities          210,564,188Equity portion of convertible debt          1,539,196Net assets acquired and liabilities assumed           149,693,329The fair value of the CSRH shares was determined based on the number of shares outstanding at June 21, 2011 and the closing share price at June 21, 2011 of $3.00.The vested CSRH stock options were valued using a black-scholes model. The following assumptions were used for the options: risk-free interest rate of 1.19% to 1.98%; expected life of 2 to 5.3 years; expected dividend yield of nil%; and expected volatility of 72.0% to 115.4%. No modifications were made to the CSRH options that were outstanding at the time of the business combination.The portion of the convertible debt that is convertible to equity was valued using a discount rate of 11.0%.The promissory notes issued by CSRH to the former Sirius shareholders' was deducted from the consideration transferred.Merger costs of $3,501,293 relating to severances of $1,935,084, including a payment to the Executive Chairman of $885,046. The remaining amount relates to professional services fees and other costs. Of the amounts relating to severance $588,418 remains unpaid at August 31, 2011 and is expected to be paid in the next year.The goodwill arising from the acquisition is attributable to economies of scale and synergies expected to be generated from combining the XM and Sirius businesses, the economic value of unrecognized tax losses and the assembled workforce.The goodwill is not expected to be deductible for tax purposes.Revenue and net income information and pro forma informationThe amount of revenue and net loss of CSRH included in the consolidated statement of operations and comprehensive income for the period June 21, 2011 to August 31, 2011 is:Revenue     $11,679,801Net loss     ($10,763,835)The following pro forma revenue and net income of the combined Company as if the acquisition date was December 1, 2010 is disclosed below. The pro forma amounts include the results of CSRH, deferred revenue fair value adjustment, amortization of intangible assets recognized upon acquisition and revised interest expense as a result of the debt financing, which resulted in lower interest expense. The pro forma amounts do not include any possible synergies from the acquisition. The pro forma information is provided for illustrative purpose only and does not reflect the actual results that would have occurred, nor is it indicative of future results of operations of the combined Company.Revenue     $178,395,641Net loss      ($ 26,085,066)5. RELATED PARTY TRANSACTIONSRelated parties of the Company include shareholders who have significant interest in the Company. Significant shareholders of the Company include Sirius XM, CBC, Slaight, and CSRI, a company controlled by John I. Bitove. Related parties also include companies controlled, jointly controlled or influenced by these shareholders. Related parties also include members of the board of directors, management and immediate family members of management or shareholders with significant influence.Amounts due to related parties consist of the following:                 August 31,2011   November 30,2010      $   $           CBC (i)     4,087,035   5,109,915Slaight (ii)     3,634,972   4,557,984Sirius XM (iii)     10,685,385   10,168,782CSRI (including related parties of CSRI) (iv)     4,432   -      18,411,824   19,836,681Less: current portion     (17,203,492)   (19,836,681)Long term portion     1,208,332   -Related party transactions with the parties listed above included within the statement of operations and comprehensive income are as follows:                 Period fromDecember 1, 2010to August 31,2011   Period fromJanuary 1 toNovember 30,2010      $   $           Cost of service     17,749,885   13,366,130Sales and marketing     4,793,460   8,369,977Information and technology     2,167,714   2,631,091General and administrative     116,511   10,853      24,827,570   24,378,051These transactions have been measured at their respective exchange amounts, being the consideration paid or received as established and agreed to by the related parties.In addition to the amounts expensed above for the period from December 1, 2010 to August 31, 2011, property and equipment totalling $87,438 (period from January 1, 2010 to November 30, 2010 - $108,918) and intangible assets totalling $187,151 (period from January 1, 2010 to November 30, 2010 - $383,496)relating to purchases made for computer hardware and computer software from Sirius XM are presented within the balance sheet.(i) Transactions with CBC    Sirius Canada extended a 12-year agreement with the CBC for an additional 5 years. This agreement is a non-exclusive, non-transferable license agreement whereby the Company has distribution rights to transmit channels currently owned by the CBC within Canada. The amounts owing to CBC for the distribution rights, as at August 31, 2011 and for the period from December 1, 2010 to August 31, 2011, have been accrued and expensed subject to the terms below.   The incurred costs during the year related to CBC agreement were approximately $2,814,757. As of August 31, 2011 $4,087,035 was included in due to related parties. This balance includes promissory notes issued as per the merger transaction (note 4) of $3,634,972.   Future minimum annual commitments to related parties under the license agreements and the license and service agreement noted above totals $24,478,138 and are included in note 14.  (ii) Transactions with Slaight   The Company incurred costs during the year related to business events from Slaight, totaling approximately $4,309. As of August 31, 2011 the balance $3,634,972 was included in due to related parties. This balance includes promissory notes issued as per the merger transaction (note 4) of $3,634,972.  (iii) Transactions with Sirius XM   In 2005, Sirius Canada entered into a license and service agreement with Sirius XM whereby the Company acquired the right to distribute channels owned or licensed by Sirius XM within Canada. In return, the Company is obligated to pay Sirius XM a percentage of its gross revenue, to a maximum of 15%.   The Company acquired a license and technical service agreement with Sirius XM whereby the Company acquired the right to distribute channels owned or licensed by Sirius XM. In return, the Company is obligated to pay Sirius XM a percentage of subscriber revenue (15%), activation charges, fees under the Technical Service Agreement and reimbursement of other charges paid on CSRH's behalf.   Future minimum annual commitments due to related parties under the license agreements and the license and service agreement noted above totals $2,272,000 are included in note 14.   The costs incurred during the period related to Sirius XM agreement was approximately $21,916,573. As of August 31, 2011, the balance $10,685,385 was included in due to related parties. This balance includes promissory notes issued as per the merger transaction (note 4) of $5,111,678.   In addition to the license agreements and the license and service agreement listed above, the Company previously had accumulated dividends owing to shareholders as described in note 10.  (iv)Transactions with John Bitove, CSRI and its affiliates   During the period, CSRI converted 1,038,009 Class B to 346,003 Class A shares. The Class A shares were transferred to third parties to settle a previously existing obligation of CSRI.   The Company received advertising sales services from Priszm LP totaling approximately $14,060. As of August 31, 2011, a balance $4,432 was included in due to related parties. Priszm LP is owned directly and indirectly, approximately 60% by Priszm Canadian Income Fund and approximately 40% by a company controlled by the Chairman of the Company.   Additional related party transactions with companies affiliated with John Bitove or CSRI impacting the statement of operations and comprehensive income are as follows:   The Company incurred costs during the year related to business events from Knightsbridge Investments Inc. totaling approximately $87,007. As of August 31, 2011, no balance was outstanding. The Chairman of the Company holds a minority interest in Knightsbridge Investments Inc.   The Company incurred costs for the use of a broadcast centre within the Wayne Gretzky's Restaurant under an agreement with Long Playing LP (LPLP), totaling approximately $1,921. As of August 31, 2011, no balance was outstanding. The principal of LPLP is related to the Chairman of the Company.   The Company incurred approximately $10,927 in expenses related to the reimbursement of operating and travel expenses from a company controlled by the Chairman of the Company.   The Company incurred costs for the management of a call centre operation, on behalf of Mobilicity, in the amount of $24,356 which were subsequently charged to Mobilicity. There is no outstanding balance in accounts receivable owed from Mobilicity as of August 31, 2011. The Company's Chairman is also the Chairman and controlling shareholder of Mobilicity.6. LONG-TERM DEBT     August 31,2011 November 30,2010 $ $    Senior notes$126,719,584 -Convertible notes18,522,652 -US$ Senior notes901,048 -     146,143,284 -    Senior NotesUpon closing of the merger transaction, the Company completed an exchange offer to exchange CSRH's outstanding 12.75% US$ Senior notes (US$ Senior notes) for newly issued 9.75% Senior notes (the Senior notes). At the same time, the Company conducted a concurrent offering of new notes. The notes issued under the exchange offering and the new issue have the same terms. The total amount of Senior notes issued consist of $130.8 million aggregate principal amount of 9.75% Senior notes, due in 2018. Interest payments on the Senior notes are due semi-annually, on June 21 and December 21. The Senior notes are redeemable at the option of the Company on or after June 21, 2014. Any redemptions prior to June 21, 2017 will include an applicable premium of up to 7.3%. The premium varies on the date of redemption. As at August 31, 2011, the principal amount of the Senior notes outstanding is $130.8 million.As part of the issuance of the above-mentioned Senior notes, the Company incurred fees paid to agents, legal and other costs amounting to $4,118,803, which were included in the carrying value of the notes and will be amortized to interest expense using the effective interest rate method. During the period ended August 31, 2011, $67,387 of interest accretion expense was included in the consolidated statement of operations and comprehensive income. During the period ended August 31, 2011, the cash interest expense for the Senior notes was $2,437,783 and the accrued interest payable balance at August 31, 2011 included $2,437,783 for the Senior notes. The effective interest rate for the Senior notes is 10.4%.As described above, the Senior notes include the right to redeem the notes at the option of the Company. This redemption right has been determined to be an embedded derivative that is required to be bifurcated from the underlying debt, or host contract, and accounted for as a derivative at fair value with changes in fair value recorded in the consolidated statement of operations and comprehensive income. As at August 31, 2011, the amortized cost of the host contract, excluding transaction costs, was $126.7 million, and the fair value of the derivative was not significant.Convertible notesOn June 21, 2011, the Company assumed $20 million aggregate principal amount of 8.0% unsecured subordinated convertible notes, due September 12, 2014 (the convertible notes). Interest payments on the convertible notes are due semi-annually, on June 30 and December 31. $4.0 million of the convertible notes are held by Sirius XM, (as successor to XM Satellite Radio Holdings Inc, and $1.7 million are held by the shareholders of CSRI, including John I. Bitove, the Chairman of the Company and a shareholder. The debenture holders may elect to receive interest payments in the form of Class A Subordinate Voting Shares of the Company based on the market price of the Class A Subordinate Voting Shares at the time of the payment. During the period ended August 31, 2011, 24,174 Class A Subordinate Voting Shares were issued to debenture holders who elected to receive the June 30, 2011 interest payments in shares.The convertible notes are convertible at the option of the debenture holders at any time at a conversion price of $5.92 per share. The notes are redeemable at the option of the Company at any time. The Company may elect to pay the amount due on the maturity of the debentures in cash or Class A Subordinate Voting Shares. The number of shares to be issued would be determined based on dividing the principal amounts of the debentures due by 95% of the market price of the Class A Subordinate Voting Shares on the maturity date, provided that the market price of the Class A Subordinate Voting Shares exceeds $3.00.This financial instrument contains both a liability and an equity element. On June 21, 2011, as part of the purchase accounting, the Company determined the fair value of the liability, the most easily measurable component, to be $18,460,805 and assigned the residual amount of $1,539,196 to the equity component as permitted under the CICA Handbook Section 3863, "Financial Instruments -Presentation" (CICA 3863). Over the term of the convertible notes, the liability will be accreted to its estimated future payment amount with the increase in liability value recorded as interest expense over the period the liability is outstanding. During the period ended August 31, 2011, $61,847 of interest accretion expense was included in the consolidated statements of operations and comprehensive income.During the period ended August 31, 2011 the cash interest expense for the convertible notes was $266,666 and the accrued interest payable balance at August 31, 2011 included $266,666 for the convertible notes. The effective interest rate based on the liability element is 11.0%.US$ Senior notesConcurrently with the closing of the merger transaction, the Company completed an exchange offer to exchange the Company's outstanding 12.75% $US Senior notes due in 2014 for newly issued 9.75% Senior notes due 2018. 98.7% of the US$ Senior notes were tendered at US$1,000 principal amount for $1,015 of Senior notes. The Company obtained the consent from holders of the US$ Senior notes to proposed amendments which eliminated the Company's obligation to comply with substantially all of the financial covenants contained in the US$ Senior notes indenture. By tendering their notes, the holders of the US$ Senior notes were deemed to have consented to the amendments.As of August 31, 2011, there was US$920,000 of US$ Senior notes due 2014 that remained outstanding. These US$ Senior notes have an interest rate of 12.75% and the interest payments are due semi-annually, on February 15 and August 15. During the period ending August 31, 2011, the cash interest expense of the US$ Senior notes was $51,662 and the accrued interest payable balance at August 31, 2011 was $5,090.  The effective interest rate is 12.75%.Loss on settlement of debtAs described in note 4, as part of the purchase accounting, the Company assumed long term debt from CSRH which included $67.8 million in US$ senior notes. The Company incurred a loss of $1,908,263 on the settlement of US$ Senior notes exchanged for Senior notes due 2018. The Company also settled $4,805,795 of accrued principal and interest on assumed US$ subordinated promissory notes and the $37,805,578 of accrued principal and interest assumed on the XM credit facility.7. INVENTORYInventory consists of the following: August 31, 2011November 30, 2010     $$   Finished goods2,265,4381,409,832The amount of inventory recognized as an expense in cost of service for the period from December 1, 2010 to August 31, 2011 was $1,495,765 (period from January 1, 2010 to November 30, 2010 - $1,194,156).8. PROPERTY AND EQUIPMENTProperty and equipment consist of the following: August 31, 2011  AccumulatedNet book Costamortizationvalue $$$    Terrestrial repeaters9,827,4523,630,4446,197,008Computer hardware1,598,2221,167,482430,740Broadcast equipment18,5184,86013,658Office equipment241,97373,631168,342Furniture and fixtures544,718330,119214,599Leasehold improvements3,444,928788,9672,655,961 15,675,8115,995,5039,680,308 November 30, 2010  AccumulatedNet book Costamortizationvalue $$$    Terrestrial repeaters4,550,8352,936,0921,614,743Computer hardware1,368,5231,015,345353,178Office equipment116,44794,08622,361Furniture and fixtures436,626235,423201,203Leasehold improvements991,650546,783444,867 7,464,0814,827,7292,636,352Total amortization expense presented within the statement of operations and comprehensive income for the period from December 1, 2010 to August 31, 2011 which relates to property and equipment is $1,169,831 (period from January 1, 2010 to November 30, 2010 - $885,162).9. INTANGIBLE ASSETSIntangible assets consist of the following: August 31, 2011  AccumulatedNet book Costamortizationvalue $$$    Indefinite life intangibles assets:   CRTC license85,800,000-85,800,000Definite life intangibles assets:   GMCL distribution rights22,300,001501,12421,798,877Honda distribution rights22,714,5211,241,85321,472,668Nissan distribution rights5,408,219166,1475,242,072Hyundai distribution rights6,335,342980,5045,354,838Toyota distribution rights21,941,918287,34521,654,573    XM activation fees272,3753,208269,167NHL trademark2,922,626116,9042,805,722Subscriber relationships42,800,0002,038,09540,761,905Computer software4,853,3954,119,383734,012Computer software licenses2,874,2822,654,496219,786 218,222,67912,109,059206,113,620 November 30, 2010  AccumulatedNet book Costamortizationvalue $$$    Computer software6,976,6013,469,5113,507,090Computer software licenses2,687,1311,778,355908,776 9,663,7325,247,8664,415,866Total amortization expense presented within the statement of operations and comprehensive income for the period from December 1, 2010 to August 31, 2011 which relates to intangible assets is $6,861,192 (the period from January 1, 2010 to November 30, 2010 - $1,521,862).As at August 31, 2011, computer software totaling $855,064 (November 30, 2010 - $383,496) represents internally-developed intangible assets.As a result of the merger, the Company has decided to adopt and expand the existing Subscriber Management and Billing System and abandoned certain intangible assets that were not yet in use, resulting in an expense in the amount of $4,235,953 during the period10. SHARE CAPITALPrior to the reverse take-over, Sirius Canada Inc.'s authorized share capital consisted of the following:Unlimited number of voting Class A shares with no par value and no fixed dividends;Unlimited number of non-voting Class B shares with no par value and no fixed dividends; andUnlimited number of non-voting Class C preferred shares with no par value and 8% cumulative dividends.The Class A shares and Class B shares participate in the equity of the Company on an equal per share basis.  Class C preferred shares were redeemable by the Company at any time at the redemption price.  Class C preferred shareholders were entitled to cumulative dividends, payable when declared by the Board of Directors.As at August 31, 2011, the Company had accrued $nil (November 30, 2010 - $13,653,567) of cumulative dividends in accordance with the terms of the Class C preferred shares. As at June 21, 2011 the cumulative dividend accrued related to the Sirius Class C preferred shares was $15,255,321 and was settled in full as part of the business combination and related transactions (note 4).  The above amount was included in the due to related parties balance as detailed within note 5 at November 30, 2010. The Sirius Class A and B shares were acquired by CSRH in exchange for the issuance of its Class A and B shares to the former Sirius shareholders.  The Sirius Class C preferred shares were redeemed and cancelled on June 21, 2011.The Company's authorized share capital after the reverse take-over consists of the share capital of CSRH which is as follows:Unlimited number of subordinate voting Class A shares with no par value and no fixed dividends;Unlimited number of voting Class B shares with no par value and no fixed dividends; andUnlimited number of non-voting Class C preferred shares with no par value and no fixed dividends.Class B Voting Shares are convertible at any time at the holder's option into fully paid and non-assessable Class A Subordinate Voting Shares upon the basis of one Class A Subordinate Voting Share for three Class B Voting Shares. Each Class B Voting Share participates in the equity of the Company on a per share basis equal to one third of the rate of participation of the Class A Subordinate Voting Shares and the Class C preferred Non-voting Shares.As at August 31, 2011, the Company had issued 50,013,839 Class A Subordinate Voting Shares and 218,498,523 Class B Voting Shares.Stock optionsThe Company assumed on acquisition of CSRH the CSRH stock option plan.  The plan was established for the purpose of providing additional incentives to attract and retain employees, directors and senior officers of the Company and its affiliates.  The stock option plan permits the Board of Directors of the Company to grant employees, directors and senior officers stock options to purchase common shares up to a maximum of 10% of the number of shares outstanding.  Under the plan, unless otherwise fixed by the Board, options expire on the seventh anniversary of the grant date.  Any option not exercised prior to the expiry date will become null and void.  In connection with certain Substitution Events or Change of control transactions, as these terms are defined in the plan, including a take-over bid, merger or other structured acquisition, the Board of Directors may accelerate the vesting date of all unvested options such that all optionees will be entitled to exercise their full allocation of options.On August 23, 2011, the Company granted stock options to the Board of Directors and members of the Company's management team for 1,525,000 Class A Subordinate Voting Shares with an exercise price of $3.00. The exercise price was equal to the market price of the shares at the time of grant. The options vest immediately or over 5 years. The fair value of the stock options granted was $2.3 million and an amount of $0.1 million was recorded in the consolidated statement of operations and comprehensive income during the period ended August 31, 2011.The fair value of the options was estimated on the date of the grant using the Black-Scholes option pricing model. The following assumptions were used for the options: risk-free interest rate of 0.94% to 1.98%; expected life of 1 to 5 years; expected dividend yield of nil%; and expected volatility of 52.0% to 115.6%.  Number ofoptions Weightedaverageexercise price $     Balance as at November 30, 2011 - - Options assumed on acquisition 1,659,292 3.49 Granted 1,525,000 3.00 Exercised (5,700) 1.43 Forfeited (5,000) 2.04     Balance as at August 31, 2011 3,173,592 3.28The options assumed on acquisition were assumed from CSRH as a result of the merger transaction and were valued at the acquisition date as part of the consideration transferred (note 4). Outstanding options as at August 31, 2011 are as follows:Exercise price $ Number outstanding Remaining contractual life (years) Number exercisable8.74    16,667    1.9    16,6676.53    27,500    2.6    27,5005.38    804,500    3.0    804,5001.37    211,025    4.2    101,0001.54    588,900    5.2    340,5003.00    1,525,000    7.0    225,0003.28    3,173,592    5.4    1,515,16711. SUPPLEMENTAL CASH FLOW DISCLOSUREThe net change in non-cash working capital balances related to operations consists of the following: Period from December 1, 2010 to August 31, 2011Period from January 1 to November 30, 2010 $$Decrease (increase) in assets  Accounts receivable(392,428)4,177,172Prepaid expenses and other assets4,868,473(397,720)Inventory(855,606)(811,344)   Increase (decrease) in liabilities  Accounts payable and accrued liabilities(31,593,785)2,424,137Due to related parties(313,612)1,136,703Deferred revenue16,240,772446,251   Net change in non-cash working capital balances related to operations(12,046,186)6,975,199Interest income received included in operating activities is as follows: Period from December 1, 2010 to August 31, 2011Period from January 1 to November 30, 2010 $$   Interest income received329,145186,59212. FINANCIAL INSTRUMENTSThe Company has designated the following classifications for its financial assets and financial liabilities:Cash is classified as held-for-trading with a total carrying value of $26,015,439 at August 31, 2011 (November 30, 2010 - $47,610,454).Accounts receivable are classified as loans and receivables, which are measured at amortized cost using the effective interest rate method. No interest in relation to these instruments was recognized in the financial statements as at August 31, 2011 or November 30, 2010.Accounts payable, accrued liabilities and amounts due to related parties are classified as other financial liabilities, which are measured at amortized cost using the effective interest rate method. No interest expense in relation to these instruments was recognized in the financial statements as at August 31, 2011 or November 30, 2010.Long term debt is classified as other financial liabilities and measured at amortized cost using the effective interest rate method.                                     Carrying Values at August 31, 2011                       Held for Trading ($)       Held to Maturity ($)     Loans and Receivables ($)          Other Financial Liabilities ($)               Financial Assets                    Cash and cash equivalents      26,015,439          -          -          -       Restricted investments         -          -          -          -       Accounts receivable         -          -       10,718,676          -   26,015,439     -  10,718,676       - Financial Liabilities                                     Accounts payable and accrued liabilities         -          -          -       34,618,651        Due to related parties         -          -          -       18,411,824       Other long-term liabilities         -          -          -       9,746,037        Other interest payable         -          -          -       375,534       Senior notes         -          -          -       126,719,584       Interest payable on Senior notes         -          -          -       2,437,783       Liability component of convertible notes         -          -          -     18,522,652       Interest payable on convertible notes         -          -          -       266,664       US Senior notes         -          -          -       901,048       Interest payable on US Senior notes         -          -          -       5,090                      -       -       -       212,004,867Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk includes foreign exchange risk interest rate risk and other price risk.To perform sensitivity analysis, the Company assesses the impact of hypothetical changes in interest rates and foreign currency exchange rates on foreign currency denominated and interest-bearing financial instruments. Information provided by the analysis does not represent the Company's view of future market changes, nor does it necessarily represent the actual changes in fair value that would occur under normal market conditions because, of necessity, all variables other than the specific market risk factor are held constant. In reality, changes in one factor may result in a change to another, which may magnify or counteract the sensitivities.Foreign currency riskThe Company is exposed to fluctuations of the Canadian dollar in relation to the US dollar, resulting from US dollar-denominated cash, accounts receivable, and certain liabilities.Most of the Company's revenue and expenses are received or paid in Canadian dollars. The Company's only exposure to material foreign currency risk is with respect to the US$ Senior notes, payments under OEM agreements, the NHL contract and a license and service agreement with Sirius XM.Given that the Company's exposure is limited to the aforementioned payments, management does not actively manage this risk. The Company does not currently use foreign currency derivatives.As at August 31, 2011, the Canadian/U.S. foreign exchange rate was 1.0210. Assuming that all other variables remain constant, a decrease of 10% (with opposite impacts on an increase of similar proportion) in the Canadian dollar would have the following impact on the ending balances of certain balance sheet items:  $   Financial assets  Cash (36,014)Accounts receivable 34,639   Financial liabilities  Accounts payable -Accrued liabilities (718,925)Loans and interest payable (133,611)Due to related parties (292,625)Net foreign exchange gain (1,146,536)The impact on the net income is equivalent to the net foreign exchange gain presented in the table above. There is no impact on other comprehensive income.Interest rate riskThe Company is subject to interest rate risk from changes in interest rates on the Company's cash balances.The interest rates on the Company's senior notes and convertible notes are fixed and therefore the Company is not exposed to material interest rate risk. Consequently, the Company does not use interest rate derivative instruments to manage exposure to interest rate fluctuations.Credit riskCredit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company is exposed to credit risk, primarily in relation to its cash and accounts receivable, both of which are uncollateralized.The carrying amount of these financial assets represent the maximum credit exposure which was as follows:          August 31, 2011November 30, 2010    $$      Cash   26,015,43947,610,454Accounts receivable   10,718,6768,652,620      The Company's objective is to minimize its exposure to credit risk in order to prevent losses on financial assets by placing its cash with major chartered Canadian banks. All of these chartered Canadian banks have a risk rating of B or higher per Moody's. Due to their short-term nature and placement with major chartered Canadian banks, cash is not exposed to material credit risk.With respect to accounts receivable, exposure to credit risk varies due to the composition of individual customer balances. Subscription fees are received through either credit card payments or cheque remittances from subscribers or OEM's. The majority of subscriber billings are credit card transactions and are subject to minimal credit risk.For accounts where subscription fees are invoiced and subsequently paid by cheque or cash remittances, the Company regularly monitors customer balances to assess credit risk.For credit card transactions, the Company performs an authorization check at the time of billing.  As all receivable amounts relating to credit card transactions have been authorized by the credit card processor, there is limited credit risk associated with these receivables.The Company assesses the credit risk of accounts receivable by evaluating the age of accounts receivable based on the invoice date.  Accounts receivable are considered past due 31 days after the invoice date.  The following table sets out details of the aging of accounts receivable that are outstanding and the related allowance for doubtful accounts:          August 31, 2011November 30, 2010    $$      Current   7,298,2886,617,92931-60 days   2,994,0072,073,54461-90 days   287,40191,491Over 90 days   368,154206,484Less allowance for doubtful accounts   (229,174)(336,828)    10,718,6768,652,620No past due accounts have been renegotiated with different terms.The Company has a concentration of credit risk with certain OEM's who are billed for trial subscriptions. Within accounts receivable that are outstanding, $2,893,989 is due from Chrysler Canada, and $2,360,912 is due from Ford of Canada. The Company believes that the concentration of credit risk of the remainder of accounts receivable is limited as accounts receivable are widely distributed among many subscribers across Canada and there are no specific types of customers that have unique characteristics.Liquidity riskLiquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.Company's management believes that cash flows from operations should be sufficient to cover committed cash requirements for capital investments, working capital and potential dividends in the future.The Company monitors its liquidity risk by forecasting its future cash flows over a 15 month horizon, updated on a quarterly basis. The Company's projections of future cash flows are prepared using assumptions that reflect management's planned courses of action and reflect management's best estimate of future economic conditions.  The key assumptions used in management's models include the number of estimated new subscribers which reflect estimated growth in automobile sales and the extent of penetration in the market; the number of customers expected to cancel existing subscriptions; the volume of multi-year advance subscriptions estimated to be entered into; estimated price increases; amounts of royalties and commissions; and reduction of discretionary costs.  Since these projections are based on assumptions about future events, actual cash flows will vary from the Company's projections and such variations may be material.As at August 31, 2011, obligations related to financial liabilities and their maturities are as follows:       TotalLess than 1 year1-3 years4-5 yearsMore than 5 years $$$$$      Accounts payable and accrued liabilities31,543,42231,543,422   Due to related parties15,068,17013,859,838  1,208,332Due to related parties *3,343,6543,343,654         Other long-term liabilities1,515,817 1,515,817        Principal on 9.75% senior notes130,771,000   130,771,000Interest on 9.75% senior notes89,251,20812,750,17325,500,34525,500,34525,500,345      Principal on 8.00% convertible notes20,000,000  20,000,000 Interest on 8.00% convertible notes5,133,3331,600,0003,200,000333,333       Principal on 12.75% US senior notes *901,048 901,048  Interest on 12.75% US senior notes*287,209114,884172,325        NHL Agreement - Deferred accrual*5,876,4001,958,8003,917,600        NHL Trademark payments on principal*5,381,9721,116,4293,137,3871,128,155 Interest on NHL Trademark1,381,301538,194730,295112,812 Total310,454,53466,825,39439,074,81747,074,645157,479,677* Balance denominated in US dollars, subject to fluctuations in exchange rateFair valueCash and cash equivalents reported at fair value.  The carrying values of accounts receivable, accounts payable, accrued liabilities and amounts due to related parties approximate their fair values due to the short-term nature of these financial instruments.The carrying value of the Senior notes is $126,719,584 while the face value of the Senior notes is $130,771,000. The fair value of the Senior notes is $130,771,000 and is determined using the market price of the publicly traded Senior notes. The carrying value of the US$ Senior notes is $901,048 while the face value of the US$ Senior notes is $901,000. The fair value of the US$ Senior notes is not materially different from the carry value.The carrying value of the debt component of the convertible notes is $18,522,652 while the face value of the convertible notes is $20,000,000. The fair value of the convertible notes is $19,445,169 and is estimated using a discounted future cash flow valuation model. This model includes observable inputs such as contractual payment terms, maturity dates and relevant market interest rates, as well as unobservable inputs, such as a credit spread attributable to the Company's own credit risk.Capital disclosuresThe Company's objectives when managing capital are to:(a) maintain financial flexibility to meet financial obligations and growth objectives; and(b) maintain a capital structure that allows multiple financing options to the Company should a financing need arise.The Company defines the capital that it manages as its long-term debt and shareholders' equity (deficiency).    August 31, 2011November 30, 2010    $  $Senior notes(126,719,584)-Convertible notes(18,522,652)-US$ Senior notes(901,048)-Shareholders' (equity) deficiency(47,476,038)79,459,955   Total capital(193,619,322)79,459,955Cash 26,015,43947,610,454In managing capital, the Company focuses on liquid resources available for operations.  The need for sufficient liquid resources is considered in the preparation of an annual budget and in the monitoring of cash flows and actual operating results compared to the budget.The basis for the Company's capital structure is dependent on the Company's expected growth, financial obligations and changes in the business. To maintain or adjust its capital structure, the Company may issue additional shares or raise debt.The Company's objectives and strategies are reviewed periodically.13.EARNINGS PER SHARE    Period from December 1 toAugust 31,2011Period from January 1 to November 30,2010   Net income and comprehensive income for the period$17,853,108$15,735,566Less: Dividends on Class C preferred shares$(1,601,753)$(2,635,397) $16,251,355$13,100,169Weighted average number of shares outstanding  84,831,472  71,284,578Basic earnings per share$  0.19$  0.18   Effect of dilutive stock options on weighted average number of shares outstanding   140,938   -Diluted earnings per share$   0.19$  0.18   For comparative periods, the shares outstanding are based on the equivalent Sirius shares that were outstanding adjusted for the exchange ratio. For purposes of the weighted average number of shares outstanding, the Class B Voting Shares were converted into the equivalent number of Class A Subordinate Voting Shares on the basis of one Class A Subordinate Voting Share for three Class B Voting Shares. Class B Voting Shares participate in the dividends and distributions at a rate of one third of each Class A Subordinate Voting Share.The stock options where the exercise price is above the average share price during the period and where vesting is contingent on performance conditions that were not met as at August 31, 2011 (note 10) were not included in the computation of diluted loss per share as they would have been anti dilutive for the periods presented. In addition shares issuable from the convertible notes (note 6) were not included, as the effect would have been anti-dilutive for the years presented.14. CONTRACTS, CONTINGENCIES AND COMMITMENTSLease obligationsFuture minimum annual lease payments under operating leases for office spaces and terrestrial repeater sites are approximately as follows. The annual minimum lease payments in the following table do not include any common costs, such as property taxes and utilities, which cannot be determined in advance. The leases range in length from three to ten years.             $       2012     1,939,3902013     1,348,5232014     1,300,3822015     1,181,6402016     913,146Thereafter     1,711,947      8,395,028   In addition to the above operating commitments, the Company has related party commitments which are detailed within note 5.National Hockey LeagueOn June 21, 2011, the Company assumed a commitment to reimburse Sirius XM for a portion of its obligations under a term sheet signed on September 9, 2005 between, Sirius XM and the National Hockey League to secure satellite radio National Hockey League broadcast and marketing rights. The remaining term of the agreement between Sirius XM and the National Hockey League is 4 years and $37.7 million.The Company recognizes the periodic cost of the programming on a straight-line basis in which the Company broadcasts the program while the payments vary as noted below. The Company accounts for the difference between the periodic cost of the services and the amount paid in each period as an other financial liability. The periodic service cost reflects the fees over the term of the arrangement less the interest component determined using the effective interest rate method. As at August 31, 2011, $7,733,033 (US$7,894,072) is included in other long term liabilities and the current amounts are included in accounts payable and accrued liabilities.As part of a payment deferral agreement, the Company will compensate the NHL for any loss on value below $2.50 of the 102,150 Class A Subordinate Voting Shares issued to the NHL for the amended agreement signed during the year ended August 31, 2008. The compensation for any loss on value of the Class A Subordinate Voting Shares has been determined to be an embedded derivative that is required to be bifurcated from the underlying host contract and accounted for as a derivative at fair value with changes in fair value recorded in earnings. As at August 31, 2011, a value of $0.1 million was assigned to this embedded derivative.Remaining contractual payments under the contract are as follows:               $        2012      9,059,4502013      9,304,3002014      11,948,6802015      7,345,500       37,657,930  Service provider agreementOn June 21, 2011, the Company assumed an agreement between CSRH and Accenture Inc. (Accenture) for maintenance and development services for CSRH's customer care and billing system. Under this amendment, the Company is committed to pay $11.2 million over the remaining term of the agreement. The Company accounts for the cost of services provided by Accenture on a straight-line basis over the term of the agreement while payments are set out below. The difference between the periodic cost of the services and the amount paid in each period is accounted for as an other financial liability. The periodic service cost reflects the fees over the term of the arrangement less the interest component determined using the effective interest rate method.In addition to the service agreement listed above, the Company has related party commitments with CBC of $23.9 million and Sirius XM of $2.3 million which are detailed within note 5.Remaining contractual payments to service providers under contract are as follows:           $      2012    9,378,2082013    6,461,9362014    6,215,0582015    2,859,0002016    2,484,000Thereafter      12,952,000       40,350,202  Advertising and marketing commitmentsOn June 21, 2011, the Company assumed agreements which committed the Company to $8 million of expenditures related to advertising and marketing and joint advertising with commercial partners. This total includes an arrangement between CSRH and Corus Entertainment Inc. (Corus) for the purchase of advertising. CSRH has agreed to purchase $1.9 million of advertising from Corus over the next two years.  The Company also has an agreement with GMCL for advertising and marketing. Over the next 7.3 years, the Company will spend $6.1 million in advertising and commissions with GMCL.Remaining contractual payments under the advertising and marketing contracts are as follows:           $      2012    4,492,9972013    3,053,5832014    1,141,6672015       454,0672016       463,397Thereafter    1,092,723       10,698,434  Broadcast licenseAs a condition of the broadcast licenses from the CRTC, the Company must contribute a minimum of 5% of the gross revenues of the satellite radio undertaking to eligible third parties directly connected to the development of Canadian musical and artistic talent during each broadcast year. As at August 31, 2011, the amount included in accounts payable and accrued liabilities is $1,048,748 (November 30, 2010 $1,336,546).Performance rightsOn April 11, 2009, the Copyright Board of Canada issued the certified statement of royalties to be collected by the Society of Composers, Authors and Music Publishers of Canada (SOCAN), Re:Sound, formerly the Neighboring Rights Collective of Canada (NRCC) and by CMRRA/SODRA Inc. (CSI), (together, "the Collectives') in respect of multi-channel subscription satellite radio services.  In accordance with an agreement with the Collectives, the Company must remit approximately 6% of the Company's gross revenues to the Collectives.ContingenciesFrom time to time the Company may be engaged in legal proceedings or claims that have arisen in the ordinary course of business. The outcome of all of the proceedings or claims against the Company, are subject to future resolution, including the uncertainties of litigation. Based on information currently known to the Company, management believes that the probable ultimate resolution of any such proceedings and claims, will not have a material adverse effect on the financial condition of the Company, taken as a whole.15. INCOME TAXESFuture income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and loss carry forwards for income taxes.The reconciliation of the provision for income taxes computed at the statutory tax rates is as follows:    Period from December 1 toAugust 31, 2011Period fromJanuary 1 to November 30, 2010       $    $   Net income before taxes2,508,88215,273,325Statutory tax rate28.55%31.0%   Income tax expense at statutory tax rate716,2864,734,731Change in valuation allowance and rate changes(16,060,512)(4,734,731)Net income tax expense (recovery)(15,344,226)-   Significant components of the Company's estimated future tax assets and liabilities are as follows:    August 31, 2011November 30, 2010 $$   Tax basis in excess of book value169,0002,393,000Other1,501,000665,000Non-capital loss carry forward122,473,00022,032,000Total future tax assets124,143,00025,090,000   Tax liability on broadcast license(10,725,000)-Tax liability on other intangibles(18,599,000)-Total future tax liability(29,324,000)-   Net future tax asset94,819,000-Valuation allowance for net future tax assets(43,273,316)(25,090,000)Net future tax asset51,545,684-A valuation allowance has been provided to partially offset the future tax assets on the basis that it is not more likely than not that the benefit of these losses will be utilized.The Company previously accrued a Part VI.1 future tax liability at November 30, 2010 of $1,133,756 for accumulated dividends to shareholders on their taxable preferred shares. The liability was extinguished as a result of the merger transaction.As at August 31, 2011, the Company has approximately $490,000,000 in Canadian non-capital tax losses available to be applied against future years' taxable income, which expire as follows:           $2024    39,000,0002025    249,000,0002026    66,000,0002027    46,000,000202820292030    26,000,00024,000,00038,000,0002031    2,000,000     490,000,000             For further information: Investors  Morlan Reddock  416-408-6899  investor.relations@xmradio.ca Kristen Dickson TMX Equicom 416-815-0700 ext 273 kdickson@equicomgroup.com