In July a subsidiary of Elektrobit Corporation, Elektrobit Inc. and the TerreStar Networks Inc. (TSN) liquidating trustee entered into a conditional settlement agreement in the liquidation case. On July 10, 2014, the trustee filed a motion with the United States Bankruptcy Court seeking approval of the settlement. According to the settlement, if the conditions to its effectiveness are fulfilled, the trust shall be obligated to pay EB, an immediate cash payment of USD 1,075,000 (EUR 0.8 million as per exchange rate of August 6, 2014) in full and final satisfaction of its claims against TSN and in resolution of all disputes between EB and the bankruptcy estate of TSN and certain of its subsidiaries and affiliates.
On August 12, 2014 U.S. time the United States Bankruptcy Court formally approved the conditional agreement of settlement between EB and The Liquidating Trust of TSN. On August 28, 2014, U.S. time, EB received a cash payment of USD 1,075,000 (EUR 0.8 million as per exchange rate of August 28, 2014) (the īSettlement Paymentī) in full and final satisfaction of its claim against TSN and in resolution of all disputes between EB and The Liquidating Trust of TSN. Upon receipt by EB of the Settlement Payment, certain mutual releases of liability and other agreements set forth in the Settlement have become effective, and it is anticipated that EBīs participation in the TSN Chapter 11 cases is concluded.
In October Elektrobit Corporationīs subsidiary Elektrobit Inc. entered into a settlement with Internal Revenue Service (IRS) concerning tax treatment of impairment of receivables from TerreStar companies. Originally IRS disallowed a deduction taken on Elektrobit Inc.īs 2010 U.S. federal income tax return for the impairment of the receivables from the TerreStar companies. EB reversed the remaining EUR 0.3 million provision. As a result from the approval of the proposal Elektrobit Inc. paid IRS USD 1.4 million (EUR 1.1 million as per exchange rate of October 8, 2014) taxes including interests for fiscal year 2010 and at the same time submitted a carryback claim of USD 1.3 million (EUR 1.0 million as per exchange rate of October 8, 2014) for fiscal year 2011. Both, the payment to IRS was made and the carryback refund was received during the fourth quarter of 2014.
In August after of receiving full and final settlement payment and finishing of tax appeal process, EBīs activities related to TerreStar reorganization processes were concluded. EB reversed the remaining EUR 0.3 million provision made for legal and consulting costs. The reversal of the provision and the EUR 0.8 million Settlement payment had together approximately EUR 1.1 million non-recurring positive effect on Elektrobit Corporationīs third quarter 2014 operating result.