XXL.EE

COMMENTARY TO THE FINANCIAL RESULTS

 

MANAGEMENT REPORT FOR 1998-99 FINANCIAL YEAR

 

AS Pennu Computer Technology was established on 10.09.1990; at the 

end of 1997 the company was reorganized into AS Pennu Computer 

Technology Group and registered at Tallinn Commercial Registry on 

14.06.1996 under entry number 10040414. On 23.08.1999 the general 

meeting of company's shareholders decided to amend the Articles of 

Associated to change the company's business name to AS XXL.EE. The 

decision became effective after registration at the Commercial 

Registry on 10.11.1999. AS XXL.EE legal address is Tartu Rd. 87D, 

Tallinn; company's business address is Pärnu Rd. 139, Tallinn. 

 

At second half of 1998 restructuring of the company began. Within 

the past years the company had expanded its activities to several 

fields that are not related to its core activities. The company's 

executive board decided to concentrate on the core business in 

order to better exploit the market position on high growth 

potential information technology market. 

 

In May 1998 the company decided to terminate the activities of PCT 

Liisingu AS. PCT Liisingu AS was established in 1997 in order to 

support the sales of computers through leasing and factoring 

services; however, the leasing portfolio of PCT Liisingu AS also 

contained car and real estate leases. 

 

In October 1998 the company sold its 30% holding in ID Süsteemide 

AS, and 76.4% holding Järve Kinnisvara Hoolduse AS (EEK 4,030,000 

), the core business of which was construction and administration 

of office and shopping building in Tallinn (address Järvevana Rd. 

9). 

 

As a part of new sales strategy, the company decided to dispose its 

holdings in computer shops outside of Tallinn in the beginning of 

1999. In April 1999 the company sold its holding in A&Ü 

Majandustarkvara to co-owners for EEK 250,000. In June 1999 the 

company sold its 20% holding in AS Kernel to co-owners for EEK 

80,000. The activities of Arvutisalong Infotek (owner PCT Arvutid) 

in Viljandi were also terminated.

Due to nadir of computer and computer components market and 

changing business logic the company decided in spring 1999 to 

expand its activities in new media, i.e. first and foremost web 

design and internet portal services. On 23.08.1999 the general 

meeting of AS XXL.EE shareholders approved the decision to acquire 

full ownership in XXL Internetivärav. For that purpose AS XXL.EE 

issued directly 100,000 shares to the owners of XXL Internetivärav, 

to be paid for through non-monetary payment. XXL Internetivärav is 

the owner of trademark XXL and owns Internet portal xxl.ee. 

 

On 13.11.1999 the company established a digital media services 

company XXL Digital SIA in Latvia, where AS XXL.EE has 75% holding.

 

TURNOVER AND PROFIT

 

Between 01.07.1998 - 31.12.1999 the consolidated and unaudited net 

turnover of AS XXL.EE totaled EEK 140,464,697. Consolidated and 

unaudited net loss stood at EEK 53,429,599. 

 

Since AS XXL.EE owners' equity account is of negative value as of 

31.12.1999, the company intends to organize a share issue in the 

first half of year 2000 in order to conform the volume of owners' 

equity with the legal requirements. 

Monthly salary of the company's chief executive was EEK 5,000 

(before January 1999 EEK 15,000 per month). Between 01.07.1998 and 

31.12.1999 total salaries to the Management Board members amounted 

to EEK 493,800, and to Supervisory Board members EEK 313,656.

 

Total salaries amounted to EEK 7,345,045; as of 31.12.1999 the 

company employed 34 workers.

 

At the second half of 1999 the company changed the period of 

financial year; the new financial year of AS XXL.EE lasts from 

January to December. Proceeding from the above the duration of AS 

XXL.EE 1998-1999 financial year is 18 months.

 

 

Arho Anttila arho@xxl.ee

Chief Executive

+372 6 283 601