Riga Stock Exchange                                                          02.09.2005



JSC “OT Grupa” Management report on financial situation closing the 1st half of 2005



In the fist six months of 2005 JSC “OT Grupa” sales were LVL 2,566,116, which is 16.7% down to 

the same period a year ago. 

The new management board started to work in January 2005, when the financial situation was c

omplicated: the main creditor Latvijas Unibanka required to return the EUR 5.1 million loan; State 

Revenue Service required to pay all tax arrears, or else threatened to announce the company insolvency. 

The company owed to its employees 2-3 month  salary. The customers refused to place orders, because were 

not sure they would be executed. Because of lack of working capital, the company could not buy supplies. 

The suppliers required advance payment. Some of the profitable orders reduced because of lifting of quotas 

for China by the EU.



The new management board restructured the bank loan to leasing (LVL 2.5 million). By restructuring real 

estate, loan of EUR 2.9 million worth was recovered from Unibanka. The proceeds from the pledged equipment 

and fixed assets were used to reduce the liabilities and to supplement the working capital. 



Following the decision of the shareholders’ meeting, the redundant property and equipment was auctioned. 

The book 

value of the offered property did not correspond to market value. To protect the interests of shareholders, 

a licensed valuation company revaluated the assets. This valuation was much lower and did not correspond to 

book value. The proceeds from the auction were channeled to reduce the bank loan and to supplement the working 

capital. The books recorded losses LVL 911,622. This is the main reason why company worked at a loss during the 

first half of the year. The second largest loss is the LVL 30,000 penalty and increase of arrears, as imposed 

by State Revenue Service. The company more than once made attempts to request an extension of the payment term 

and the stopping of calculated delay penalties, however, with no success. Currently, the tax arrears are LVL 

2,323,990.



The sales in the first half of the year and the production costs reflect the actual situation in the company, 

the non-profitability of production, and incapability to cover the production costs. To improve the financial 

situation, cash was raised by selling off some assets. The proceeds were used to pay off liabilities; as a result, 

the amounts payable have decreased.



Further business plan was approved by the shareholders’ meeting of June 21, 2005: To restructure the company 

into technological textile manufacturing and processing park; to auction the company assets; to cut costs by 

reducing maintenance costs and reducing number of jobs; to provide employment to the redundant staff; the proceeds 

from sale of assets to use for paying liabilities, the remaining amounts – to infrastructure improvements.



Unofficial translation by RSE