The Riga City Kurzeme District Court has approved amendments to JSC "VEF Radiotehnika RRR" legal protection process action plan (January 11, 2016 version) on February 12, 2016.

Changes in the legal protection process action plan:

Due to changes in the economic situation in our neighboring country - Russia, the investor plans according to the conclusion of a protocol on attraction of investments (Legal protection process action plan (June 11, 2015 version) month 13) have changed and he refused to invest in the acoustic system production. In view of this it was necessary to change the company's development strategy and look for alternative sources of financing, which also succeeded in preserving the interests of the company - to restore the production process, but the sale of real estate and maintaining production facilities with lease rights.

Company will going to sell with leaseback rights 6967/7842 undivided share of the land and its existing building in Riga, Kurzemes prospect 3D cadastre No. 0100 080 2328. Above real estate is planned to sell up to 17 month of action plan by EUR 1'300'00.00, which has signed a letter of intent with a potential buyer SIA KNOPS (Appendix No. 11). The planned sales price is right VCG Panel's property assessment (Appendix No. 12). Part of this amount - EUR 690'485 will be used to fully satisfy claim of secured creditors, EUR 133'748 for partial satisfaction of unsecured creditors' claims and the remaining amount will be spent to the manufacturing process to restore the acoustic systems and cabinets for professional acoustic production. At the moment part of this property is used for the production and office needs and the sales contract is planned to be incorporated into the long-term lease to a company. Similarly, the company will remain the property of the acoustic laboratory and all the former "Radiotehnika" factory farm utilities, which must ensure the success of the production process of the acoustic systems and additional revenue from utility sales.

Common revenue from production sales is estimated at EUR 1'386'753 (before VAT) during action plan proceedings. Company plans to sell the bulk of production in export markets: EU, USA, China, India. Company plans to use factoring services in order to reduce its working capital need. Taking into account the volume of exports, it is expected that from month 16 till month 24, the company will have an overpayment of VAT. Accordingly, the plan provides for the proceeds of the excess VAT recovery within two months of the overpayment has arisen.