Market announcement

Title

THE FOURTH REPORT OF THE REORGANIZATION ADVISOR ON THE FULFILLMENT OF THE REORGANIZATION PLAN

Message

On  19 June  2020, Harju  County  Court  approved  the reorganization plan of AS
Baltika  (Baltika). The  restructuring advisor  needs to  submit a report to the
court  and  the  impacted  creditors  every  six  months.  The  first report was
submitted  in  December  2020. The  fourth  report  is  hereby  published to all
investors.  The data and numbers in the report refer to Baltika on a stand-alone
basis, not as a Group i.e. the numbers are not consolidated.

The  results of the first four months of 2022 were significantly affected by the
war  in  Ukraine,  which  significantly  reduced  the  number  of  store  visits
throughout  the Baltics  in the  first weeks  of March.  In addition, during the
first  quarter, the  entire Baltics  continued to  suffer from  high a COVID-19
morbidity  rate and  this offered  challenges in  terms of day-to-day operations
and, of course, store visits.

Due  to  the  reorganization  proceedings,  Baltika  has  been  able to take the
following  successful steps in implementing its business strategy - closing most
of  the  unprofitable  stores  and  launching  the  new  store  concept in three
locations. Although Baltika's sales revenue decreased due to the planned closure
of  unprofitable stores, this is  compensated by the opening  of the new concept
stores.  Baltika opened new Ivo Nikkolo concept stores in March and April in the
Spice  shopping center in Riga,  in the Rotermann Quarter  in Tallinn and in the
Riga Plaza shopping center in Riga.

According  to  the  reorganization  advisor,  Baltika's  financial  position has
improved   because   of   the  approval  of  the  reorganization  plan  and  the
implementation   of   reorganization  measures.  Baltika's  management  and  the
representative  of the  majority shareholder  have presented  the reorganization
advisor  a plan to restore equity  without increasing the share capital. Baltika
confirms that it will be able to successfully fulfil the commitments made in the
reorganization plan and restore the company's equity.

Brigitta Kippak
Member of the Management Board
[email protected] (mailto:[email protected])


THE REPORT OF THE REORGANISATION ADVISOR ON THE FULFILMENT OF THE REORGANISATION
PLAN

Harju County Court confirmed with 19.06.2020 ruling for civil case 2-20-4688 the
reorganisation plan of AS Baltika (hereafter Baltika).

In accordance with § 50 of the Reorganisation Act, the reorganisation advisor of
Baltika  hereby presents  to the  court and  creditors the fourth written report
regarding the fulfilment of the reorganisation plan.

To  verify the fulfilment of the  reorganisation plan and evaluate the financial
situation,  the reorganisation advisor has used  the audited accounts of Baltika
as at 31.12.2021 and unaudited accounts as at 30.04.2022.

Fulfilment of the reorganisation plan

The  claims  of  30 creditors  in  the  total amount of 12 206 649.74 euros were
transformed  based on  the reorganisation  plan. Claims  were transformed in two
groups.

Total  financial impact of reduction of  claims based on the reorganisation plan
is 5 045 198 euros, which is recorded under other operating revenue in Baltika's
2020 profit and loss statement.

Based  on the reorganisation plan  Baltika had to pay  interest on the claims in
Group  I and starting from  June of 2021 start payments  of principal amounts in
Group  I. Baltika has fulfilled this  obligation to Swedbank AS. Other creditors
in  Group I have  confirmed to reorganisation  advisor that they  do not require
Baltika  to pay in accordance with the  reorganisation plan and agree to be paid
later.

Based  on the  reorganisation plan  payments of  principal amounts  of claims in
Group  II have  to begin  from the  end of  2021. The company has fulfilled this
obligation before 31.12.2021.

Baltika's financial situation

Within  the  first  six  month  after  the  confirmation  of reorganisation plan
Baltika's   financial   situation   had   been  positively  influenced  by  both
transformation  of the creditors' claims and also several substantive changes in
Baltika´s  operations,  as  a  result  of  which  compared to the state prior to
reorganisation, the  gross profit of Baltika from the sale of goods had improved
and  various operating expenses have reduced (incl rent expenses that fall under
several operating expenses, payroll).

The  below  table  contains  the  prognosis  of  2021 profit  and loss statement
presented  in the  reorganisation plan  of Baltika,  actual profit  and loss for
2021, the figures for 4 months from the prognosis (01.01.2022 until 30.04.2022)
and the actual profit and loss statement for the four months of 2022.

+-------------------+-------------------+-----------+--------------+-----------+
|                   |Prognosis 12 months|           |              |Actual   4 |
|                   |2021 in            |Actual  12 |Prognosis   4 |months 2022|
|Thousand euros     |reorganisation plan|months 2021|months 2022   |           |
+-------------------+-------------------+-----------+--------------+-----------+
|Revenue            |             17 535|      6 113|         8 944|      1 499|
+-------------------+-------------------+-----------+--------------+-----------+
|Total revenue      |             17 535|      6 113|         8 944|      1 499|
+-------------------+-------------------+-----------+--------------+-----------+
|Cost of goods sold |             12 202|      5 402|         4 978|      1 209|
+-------------------+-------------------+-----------+--------------+-----------+
|Gross profit       |              5 333|        711|         3 966|        290|
+-------------------+-------------------+-----------+--------------+-----------+
|Gross profit margin|                30%|        12%|           44%|        19%|
+-------------------+-------------------+-----------+--------------+-----------+
|Various   operating|                   |           |              |           |
|expenses           |              2 432|      1 640|           845|        403|
+-------------------+-------------------+-----------+--------------+-----------+
|Payroll            |              2 267|      2 028|           814|        616|
+-------------------+-------------------+-----------+--------------+-----------+
|Depreciation,      |                   |           |              |           |
|amortisation    and|                   |           |              |           |
|impairment         |                162|         56|            65|         39|
+-------------------+-------------------+-----------+--------------+-----------+
|Other     operating|                   |           |              |           |
|expense (-) /income|                   |           |              |           |
|(+)                |               -119|        111|             0|         -7|
+-------------------+-------------------+-----------+--------------+-----------+
|Operating income (-|                   |           |              |           |
|loss)              |                591|     -2 902|         2 243|       -774|
+-------------------+-------------------+-----------+--------------+-----------+

Results  of  2021 have  been  significantly  affected  by restrictions caused by
Covid-19 pandemic  and closure of stores in Lithuania, Latvia and Estonia. Sharp
decline in revenue starting from December 2020 (stores were completely closed in
Latvia  and Lithuania from December of 2020 and  in Estonia from March of 2021,
and  reopened to visitors  in May of  2021 in Lithuania and  Estonia and June of
2021 in  Latvia), which was partly compensated by an increase in revenue from e-
channel,  meant  that  during  2021 Baltika's  actual  revenue, gross profit and
operating  profit were considerably lower  than the respective figures presented
in the prognosis in the reorganisation plan.

Revenue,  gross profit  and operating  profit for  the four  months of 2022 were
significantly affected by the following events:

 1. Unpredicted state of war between Russia and Ukraine that had an impact of
    the sales of Baltika in the first weeks of March (decline in number of
    visitors to stores). The strongest impact was experienced in the Lithuanian
    market where visitor numbers began to decline from the second half of
    February (local media was covering the threat of potential war). By the end
    of March the situation in the Baltics had stabilised and visitor numbers
    started to recover gradually.
 2. All Baltic countries experienced high rates of COVID-19 cases in the first
    quarter of 2022, which impacted negatively on the visits to stores and also
    presented challenges to everyday management of stores' operations, due to
    which quality of service also declined and impacted on sales negatively.
 3. Decline in revenue resulted from planned closure of loss making stores:

     a. In January of 2022 three stores were closed in Estonia:

           i. Narva Fama
          ii. Pärnu Kaubamajakas
         iii. Tallinn Viru Centre

     b. In March of 2022 two more stores were closed:

          i. In Nautica centre in Tallinn
         ii. In Spice trade centre in Riga

     c. In April of 2022 the outlet store in Tallinn was closed

In  Estonia, which is the  market with the largest  number of stores, closure of
loss making stores is planned to continue until July of 2022.

Decline  in revenue  will be  compensated by  opening of  three new  Ivo Nikkole
concept stores:

     a. 17.03.2022 in Spice trade centre in Riga
     b. 28.03.2022 in Rotermann quarter in Tallinn
     c. 6.4.2022 in Riga Plaza trade centre in Riga

The  actual cumulative profit and loss  for 28 months from 1 January 2020 to 30
April  2022, the period  which reflects  the effect  of reorganisation  plan and
closure  of stores  due to  COVID-19, shows that  cumulatively both actual total
revenue  and total operating profit are significantly lower than foreseen on the
reorganisation plan (see table below).

+--------------------------+---------------------------+-----------------------+
|                          |Prognosis in reorganisation|                       |
|                          |                   plan for|   Actual for 28 months|
|Thousand euros            |  28 months till 30.04.2022|        till 30.04.2022|
+--------------------------+---------------------------+-----------------------+
|Revenue                   |                     38 779|                 17 503|
+--------------------------+---------------------------+-----------------------+
|Total revenue             |                     38 779|                 17 503|
+--------------------------+---------------------------+-----------------------+
|Cost of goods sold        |                     28 482|                 15 190|
+--------------------------+---------------------------+-----------------------+
|Gross profit              |                     10 297|                  2 313|
+--------------------------+---------------------------+-----------------------+
|Gross profit margin       |                        27%|                    13%|
+--------------------------+---------------------------+-----------------------+
|Various operating expenses|                      6 121|                  4 182|
+--------------------------+---------------------------+-----------------------+
|Payroll                   |                      6 614|                  5 221|
+--------------------------+---------------------------+-----------------------+
|Depreciation, amortisation|                           |                       |
|and impairment            |                        364|                    176|
+--------------------------+---------------------------+-----------------------+
|Other operating expense (-|                           |                       |
|) /income (+)             |                      3 776|                  3 851|
+--------------------------+---------------------------+-----------------------+
|Operating income (-loss)  |                        974|                 -3 415|
+--------------------------+---------------------------+-----------------------+

The  comparison between actual profit and  loss for 28 months and prognosis made
while compiling reorganisation plan shows that actual various operating expenses
and  payroll expenses  are lower  than in  prognosis. Therefore,  the deficit of
operating  profit can be explained  by lower revenue and  gross profit, which in
turn  is caused by the circumstances described above (closed stores, low visitor
number due to high rates of Covid cases, and war in Ukraine).

For  the fulfilment  of the  reorganisation plan  it is important that Baltika's
future  financial results, considering the worsening  in 2021 and the first half
of  2022, are such that they allow  repayment of creditors' claims in accordance
with the terms of the reorganisation plan. According to explanations provided to
reorganisation  advisor by Baltika's management, Baltika's financial results and
cash flows would be sufficient for that purpose.

The  number of Baltika's employees reduced from 112 as at the end of March 2020
to 58 as at 31.10.2020 and 39 as at 30.04.2022.

Baltika's  shareholders' equity is  EUR -821 thousand  as at 30.04.2022. Baltika's
consolidated  equity as  per audited  annual financial  statements for  the year
ended  31.12.2021 is also not meeting the requirements of the Commercial Code of
Estonia  (as of year-end equity amounts to EUR312 thousand, according to the first
quarter  interim report as of 31.03.2022 equity decreases to EUR-1,033 thousand).
In the Management Report for 2021 the management states that a detailed plan for
restoring sufficient equity level would be discussed at the next general meeting
of shareholders, which has not yet taken place by the date of this report.

As at 30.04.2022 Baltika had overdue payables to suppliers in the amount of EUR369
thousand,  of which  EUR138 thousand  have not  been paid  as of  the date of this
report,  of the later amount  majority is formed by  a supplier invoice disputed
due  to quality problems. Baltika's free cash (unused bank overdraft) balance as
of  30 April  2022 is  EUR738  thousand.  Company's  current receivables amount to
EUR2 494  thousand and current liabilities to EUR1 724 thousand. Therefore there are
currently no indications of liquidity problems.

Based  on the  above, the  reorganisation advisor  is of  the opinion  that as a
result   of   confirming   of  the  reorganisation  plan  and  implementing  the
reorganisation  measures Baltika´s financial situation has improved. Baltika has
followed   in   its   operations  the  reorganisation  plan  and  fulfilled  the
reorganisation  measures. Due to worsening of financial performance from the end
of  2020, Baltika's  equity  as  of  30 April  2022 has  become  negative, which
indicates  that uncertainty exists that may cast doubt upon Baltika's ability to
continue  as  a  going  concern.  Baltika's  management  and a representative of
majority  shareholder  have  presented  reorganisation  advisor with a plan that
would  result  in  restoring  the  equity  without a share capital increase, but
reorganisation  advisor is not in  a position to disclose  details of this plan.
Restoring  of equity  to the  level prescribed  by the  Commercial Code  is thus
dependent  on realisation  of the  aforementioned plan  or may  alternatively be
achieved by decision of the general meeting of shareholders' to raise additional
share  capital. Assuming one of  these alternatives materialises, fulfilling the
reorganisation  plan, including paying  the creditors' claims  in the period set
out in reorganisation plan is still realistic.

The  reorganisation  advisor  confirms,  that  he  has  forwarded this report in
addition  to  the  court  also  to  all  the  creditors  that  are  impacted  by
reorganisation.
In Tallinn, on 17 June, 2022

Artur Suits
Reorganisation advisor of Aktsiaselts Baltika

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