SIA “Aktīvs M Audits”

LV42403014203, Vienības gatvē 99-7,

Rīgā, LV-1058

Independent Auditor's Report

To the shareholders of the JSC Ditton pievadķēžu rūpnīca

Our Opinion on the Financial Statements

We have audited the accompanying financial statements of JSC Ditton pievadķēžu rūpnīca (“the Company") set out on pages 18 to 41 of the accompanying annual report, which comprise:

• the balance sheet as at 31 December 2022, 

• the profit and loss statement for the year ended on 31 December 2022, 

• the statement of changes in equity for the year ended on 31 December 2022, 

• the statement of cash flows for the year ended on 31 December 2022, as well as 

• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes. 

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the JSC Ditton pievadķēžu rūpnīca (the Company) as at 31 December 2022, and of its financial performance and its cash flows for the year ended on 31 December 2022 in accordance with the ‘Law On the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia.

Basis for Opinion

In accordance with the Law on Audit Services of the Republic of Latvia, we conducted our audit in accordance with International Standards on Auditing adopted in the Republic of Latvia (ISAs). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (incl. International Independence Standards) and independence requirements included in the Law on Audit Services of the Republic of Latvia that are relevant to our audit of the financial statements in the Republic of Latvia. We have also fulfilled our other professional ethics responsibilities and objectivity requirements in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (incl. International Independence Standards) and Law on Audit Services of the Republic of Latvia.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty in regards to the Company's ability to continue its operation

Please refer to the Note 26 of the annex to the financial statement, describing that in the year ending on 31 December 2022, the Company as a result of its operation incurred losses in the amount of EUR 47,186, the short-term liabilities of the Company exceed the total amount of its short-term liquid current assets by EUR 924,029. As described in the Note 26 of the annex to the financial statement, these circumstances, together with the other circumstances described in the management report, indicate that there is a material uncertainty that could cast significant doubt on the Company's ability to continue its operation in the future.

We do not object to this circumstance.

Emphasis of circumstances

Please refer to the Note 20 of the annex to the financial statement. Civil proceedings have been initiated against the company in connection with the claim brought by the Latvian Investment and Development Agency (LIAA) on the collection of fines from the Company as a beneficiary of the ERDF co-financed project. The Company has filed a counter-claim, and both statements of claim are currently being processed. The outcome of these circumstances cannot currently be determined, and therefore no provisions have been created in the financial statement, the need of which could possibly arise from the impact of these circumstances.

We do not object to this circumstance.

Our Audit Approach

During the audit planning process, we have determined the materiality level and assed the risks of material misstatement of the financial statement. Especially we have assed, whether the Management has made subjective assumptions, such as those about significant accounting estimates, which include assumptions and uncertainties about future events. The same as by other audits, performed by us, we have assed management internal control breach risk, including assessment, whether there are evidences of bias indicating a risk of material misstatement due to fraud.

Materiality

The scope of the audit depends on application of materiality. The audit is planned with the aim to obtain reasonable assurance that the financial statements are free from material misstatement. Misstatements may result from fraud or error. They are considered to be material if, individually or aggregate, they are reasonably expected to influence the economic decisions of the users concerning the financial statements.

Basing on our professional judgement, we have set specific materiality thresholds including the total materiality level applicable to the financial statements as a whole and is given in the following schedule. Along with qualitative considerations, they helped us to determine the scope, type, duration of the audit and the scope of audit procedures, in order to estimate impact of individual and aggregated misstatements on financial statements as a whole.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Reporting on Other Information

Company management is responsible for the other information. The other information comprises:

• Information about the Company, as set out on pages 3 to 5 of the accompanying Annual Report,  

• the Management Report, as set out on pages 14 to 17 of the accompanying Annual Report, 

• the Statement on Management Responsibility, as set out on page 17 of the accompanying Annual Report, 

• the Statement of Corporate Governance, as set out on pages 7 to 10 of the accompanying Annual Report. 

Our opinion on the financial statements does not cover the other information included in the Annual Report, and we do not express any form of assurance conclusion thereon, except as described in the Other reporting responsibilities applicable to other information in accordance with the legislation of the Republic of Latvia section of our report.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed and in light of the knowledge and understanding of the entity and its environment obtained in the course of our audit, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

Other reporting responsibilities applicable to other information in accordance with the legislation of the Republic of Latvia

In accordance with the Law on Audit Services of the Republic of Latvia our responsibility is to consider whether the Management Report is prepared in accordance with the requirements of the Law On the Annual Reports and Consolidated Annual Reports of the Republic of Latvia.

Based solely on the work required to be undertaken in the course of our audit, in our opinion:

• the information given in the Management Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and 

• the Management Report has been prepared in accordance with the requirements of the Law On the Annual Reports and Consolidated Annual Reports of the Republic of Latvia. 

In accordance with the Law on Audit Services with respect to the Statement of Corporate Governance, our responsibility is to consider whether the Statement of Corporate Governance includes the information required in section 56.1, first paragraph, clause 3, 4, 6„ 8 and 9, as well as section 56.2, second paragraph, clause 5, and third paragraph of the Financial Instruments Market Law and if it includes the information stipulated in section 56.2 second paragraph, clause 1, 2, 3, 4, 7 and 8 of the Financial Instruments Market Law. In our opinion, the Statement of Corporate Governance includes the information required in section 56.1, first paragraph, clause 3, 4, 6„ 8 and 9, as well as section 56.2, second paragraph, clause 5, and third paragraph of the Financial Instruments Market Law and it includes 1he information stipulated in section 56.2 second paragraph, clause 1, 2, 3, 4, 7 and 8 of the Financial Instruments Market Law.

In accordance with the Law on Audit Services our responsibility is to provide information in the auditors' report as to whether the Company has prepared a non-financial statement and whether the non-financial statement is included in the management report or is prepared as separate part of the annual report. The audited Company is not required to prepare a non-financial statement.

In accordance with the Law on Audit Services our responsibility is also to provide an opinion whether the Remuneration report contains the information referred to in the section 59.4 of the Financial Instruments Market Law and whether material misstatements are stated in the Remuneration report in connection with the financial information provided in the annual report. In our opinion the Remuneration report contains the information referred to in the section 59.4 of the Financial Instruments Market Law and no material misstatements are stated in the Remuneration report in connection with the financial information provided in the annual report.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with the International Financial Reporting Standards approved in European Union and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor’s Responsibility for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion. forgery, intentional omissions, misrepresentations, or the override of internal control; 

• obtain an understanding of internal control relevant to the audit 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 Company’s internal control; 

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; 

• conclude on the appropriateness of management‘s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern; 

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves a fair presentation; 

• obtain sufficient appropriate audit evidence about the Company's financial information to provide an opinion on the financial statements.  

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and objectivity, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other statements and approvals to be included in the auditors' report in accordance with the requirements of the regulatory enactments of the Republic of Latvia and the European Union when providing audit services to Companies that are public interest entities