" INTEREXPERT - ZAGREB "d - Brunata

INTEREXPERT - ZAGREB LlC.for auditing, accounting, consultingZAGREB, Trpimirova 9BRUNATALimited liability Company,Šenoina 19, ZAGREBAudit report on financial reports for the yearended April 30 th , 2010Zagreb, July 21 st , 2010

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 2ContentsGENERAL INFORMATION ........................................................................... 3AUDIT REPORT ........................................................................................ 4ACCOUNTING PRINCIPLES ........................................................................ 6INCOME STATEMENT FOR THE YEAR 2009-2010 .......................................... 7BALANCE SHEET ...................................................................................... 8CASH FLOW .......................................................................................... 10STATEMENT ON CHANGES IN STOCKHOLDERS EQUITY .............................. 11NOTES TO FINANCIAL REPORTS .............................................................. 12APPENDIX 6..........................................................................................14APPENDIX 7..........................................................................................22MANAGEMENT LETTER............................................................................23Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 4INTEREXPERT - ZAGREB LlC.ZAGREB, Trpimirova 9Zagreb, July 21 st , 2010AUDIT REPORTto founder of BRUNATA Limited liability Company, ZagrebWe have audited the accompanying financial statements of BRUNATA LlC. (theCompany) which comprise the balance sheet as at April 30 th , 2010 and incomestatement, statement in changes of equity and cash flow statement for the year thenended, a summary of significant accounting policies and other explanatory notes.Management ResponsibilityManagement is responsible for the preparation and fair presentation of these financialstatements in accordance with International Financial Reporting Standards. Thisresponsibility includes: designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financial statements that are freefrom material misstatement, whether due to fraud or error; selecting and applyingappropriate accounting policies; and making accounting estimates that are reasonablein the circumstances.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with International Standards onAuditing. Those standards require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance whether the financialstatements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amountsand disclosures in the financial statements. The procedures selected depend on theauditor’s judgement, including the assessment of the risk of material misstatement ofthe financial statements, whether due to the fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparationand fair presentation of the financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity’s internal control.Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 5An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate toprovide basis for our audit opinion.OpinionIn our opinion, the financial statements present fairly, in all material aspects, thefinancial position of the Company as at April 30 th 2010 and of the results of itsoperations, cash flows and changes in equity for the year then ended in accordancewith International Financial Reporting Standards.INTEREXPERT - ZAGREB LlC.Željko Čupić, General ManagerAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 6ACCOUNTING PRINCIPLES1. The bases for completing: Financial reports of the company are composed andpresented in Kuna, according to Croatian Law on accounting. Reports are composedby acquisition cost method.2. All assets are presented by acquisition cost less accumulated depreciation.Acquisition cost amounts all cost need to put the utility in function for planed purpose3. DepreciationDepreciation is calculated linearly, on the acquisition value of the asset, withdepreciation rate estimated according to lifetime of asset which is acceptableexpenditure.Long-term asset is presented in accounting books on acquisition value.4. Basic accounting principles for valuing stock and small inventory are:- Small inventory is adjusted 100% when put in use5. Short-term receivables from buyers, Government and other receivables arepresented by nominal value.6. Transactions in foreign currency are presented in Kuna using exchange rate on theday of transaction. If exchange rate difference incur they are recognized to income orexpense in the period they have emerged.Liabilities in foreign currency are adjusted using exchange rate on the balance sheetdate.7. Receivables for goods are considered as income when they become known.8. Liabilities and receivables from connected company are presented in individualaccounts.Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 7INCOME STATEMENT FOR THE PERIOD MAY 2009 TO APRIL 2010INCOME STATEMENTIn KunaDescriptionMay 2008 toApril 2009May 2009 toApril 2010Net sales 95.937 2.742.492Production costs 66.153 1.119.267Gros profit 29.784 1.623.225Sales and distribution costs 927.981 1.645.785Administrative expenses 0 0Ordinary Operating profit -898.197 -22.560Other operating income 16.049 459.899Other operating expenses 0 355.611Operating profit -882.148 81.728Income from part.int. In sub. Companies 0 0Other financial income 24.985 62.030Other financial ecpenses 257.896 106.096Profit before extraordinary items -1.115.059 37.662Extraordinary items 0 0Profit before taxes -1.115.059 37.662Tax on profit for the year 0 0Profit -1.115.059 37.662Other shareholder share of profit 0 0Brunata Croatia share of profit -1.115.059 37.662Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 8BALANCE SHEET AS AT APRIL 30 th , 2010In KunaASSETSDescription April 30 th ,2009 April 30 th ,2010Long-term assets 92.054 167.636Intangible assets 0 0Tangible assets 80.711 158.958Land and forest 0 0Buildings 0 0Fixture, fitings and equipment 80.711 158.958Prepayment fixed assets 0 0Tangible assets in prepare 0 0Deposit 11.343 8.678Inventories 433.142 578.968Deposit ( in bank and others ) 159.500 0Other debtors 78.470 5.351.094Accruals 129.674 0Debtors total 367.644 5.351.094Cash and cash equivalents 121.409 89.100Total current assets 922.195 6.019.162TOTAL ASSETS 1.014.249 6.186.798Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 9In KunaLIABILITIESDescription April 30 th , 2009 April 30 th , 2010SHARE CAPITAL 440.000 440.000CORRECTION PREVIOUS YEAR 2.628 0RETAIND PROFIT -3.198.362 -440.000RESULT OF THE YEAR* 146.071PROPOSED DIVIDENDS FOR THE FISCAL YEAR 0 0TOTAL EQUITY -2.755.734 146.071Minority interests 0 0Provisions for deferred taxLONG-TERM LIABILITES 0 3.902.889Current porcion of long term debt 0 0Bank loans 0 0Trade payables and other payables 722.652 270.548Associated companies 2.970.050 1.867.290Corporate tax 0 0Accruals 0 0Other debt 77.281 0SHORT-TERM LIABILITIES 3.769.983 2.137.838Liabilities other than provisions 3.769.983 2.137.838TOTAL EQUITY AND LIABILITIES 1.014.249 6.186.798*Difference between result in Income statement 37.662 Kuna and balance sheet146.071 Kuna should be transferred to assets, more specifically into loss above valueof the capital category in other debtors and decrease it for 108.409 Kuna.Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 10CASH FLOW FOR THE YEAR 2009-2010In KunaDescription 2009-2010CURRENT YEAR PROFIT 37.662RAISING OF STOCK VALUE -145.826REDUCTION OF DEBTORS -452.104RAISING OF DEBTS TO ASSOCIATED COMPANIES 2.800.129RAISING OF OTHER DEBTORS -2.408.481REDUCTION OF OTHER DEBTS -77.281REDUCTION OF ACCRUALS 129.674OTHERSTOTAL CASH FLOW FROM OPERATING ACTIVITIES -116.227REDUCTION OF DEPOSITS 159.500RAISING OF FIXED ASSETS -75.582TOTAL CASH FLOW FROM INVESTMENT ACTIVITIES 83.918RAISING OF LONG-TERM LOANS 0TOTAL CASH FLOW FROM FINANCIAL ACTIVITIES 0TOTAL CASH FLOW -32.309CASH ON ACCOUNT AS AT 1.05.2009 121.409CASH ON ACCOUNT AS AT 30.04.2010 89.100Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 11STATEMENT ON CHANGES IN STOCKHOLDERS EQUITY AS AT APRIL30 th , 2010In KunaDESCRIPTION April 30, 2009 April 30, 20101 SHARE CAPITAL 440.000 440.0002 RESERVES 03 UNCOVERED LOSS -2.080.675 -3.195.7344 RETAINED PROFIT 0 05 CURRENT YEAR PROFIT/LOSS -1.115.059 37.6626 DIVIDEND PAID OUTSUBSCRIBED AND EARND CAPITAL -2.755.734 -2.718.072RAVALUATED RESERVES 0 0revaluation of real estates, equipement and machinesrevaluation of investmentsother revaluationCURRR. DIFFER. BASED ON INVESTMENTS INTO FOREIGN ENTITYDIRECT RAISING OF POSITIONCHANGE OF ACCOUNTING POLICIESCORRECTION OF BASIC MISTAKESDIRECT RAISING OF PROFIT BROUGHT FORWARD IN TOTALTOTAL CHANGES -2.755.734 -2.718.072Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 12NOTES TO FINANCIAL REPORTS1. Service charges and other cost:HRK HRK HRK1/5-30/4 1/5-30/4 1/5-30/42008/09 2009/10 2009/10Accounts Budget Accounts1 Contribution margin, meters 0 0 1.493.0882 Contribution margin, service 0 0 102.2693 Contribution margin, licence fees etc 0 0 04 Contribution margin, other sales 45.833 0 194.1850 0Income 45.833 0 1.789.5420 0a Employee cost 290.243 0 866.004b Carriage and duty 0 0 3.597c Building 69.607 0 93.860d Help materials 0 0 7.126e Office costs 55.547 0 26.720f Postage and telephone 55.825 0 64.398g Servicing 0 0 21.247h Running (car) 17.814 0 130.123i IT costs 0 0 6.531j Fee 32.540 0 135.021k Travel 33.718 0 50.697l Advertising 0 0 67.168m Entertainment guests 15.613 0 5.625n Insurance and memberships 4.226 0 6.377o Depreciations 49.552 0 43.043p Bankcharges and interests bank, net 147.741 0 106.090q Interest from bank -300 0 6r Other Cost 250.987 0 115.424s Other employee costs 137.779 0 2.823Costs 1.160.892 0 1.751.8800 0Result in -1.115.059 0 37.662Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 132. InventoriesStock on hand:softwarewelding devicevents and junction platesprofilesother parts and samples in total value of 578.968 Kuna3. DebtorsReceivables as at April 30 th , 2010 amount 5.351.094 Kuna and consist of:Receivables from clients amounting 2.320.820 KunaOther receivables amounting 1.929 KunaLoss above value of the capital amounting 2.864.143 KunaAccruals of costs for future periods amounting 164.201 KunaAmount of loss should additionally be decreased for 108.409 Kuna, which is differencebetween results in Income statement and Balance sheet reported.Accruals of costs for future periods consist of sundry material cost amounting 77.987Kuna, license cost amounting 4.070 Kuna, cost of interest for 1 st quarter amounting55.144 Kuna, and 27.000 Kuna from previous accounting company which cannot beidentified.4. Associated companiesAmount of 1.867.290 Kuna refers to liabilities to associated company for:Merchant goods 1.598.117Interest for the loan 269.1735. Debt to associated companiesThe company uses a loan from associated company amounting3.902.889 Kuna. (€ 530.562, interest rate 5,2 to 6,14 % per annum).6. Trade payables and other payablesRefers to domestic trade payables amounting 23.175 Kuna, liabilities for salaries forApril 2010 amounting 40.779,24 Kuna and 206.594 Kuna of liabilities for VAT, incometax, surtax, salary contributions and other fees and taxes payable to Government.Audit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 141.1 Appendix 6 (Questionnaire) – BRUNATA CROATIAQUESTIONNAIREAuditor firm: Interexpert-Zagreb, d.o.o. Zagreb, CroatiaName of local company: Brunata CroatiaBalance date: April 30 th , 2010Your co-operation as auditors of the subsidiary is requested by completion of thisquestionnaire which is intended to assist us, as auditors of the parent Company, informing our opinion on the consolidated financial statements with particularreferences to the accounting principles and procedures employed throughout theGroup. If any matters of major concern arise during the course of your audit, wewould like to be informed immediately. If you have any questions in regard to thisquestionnaire or otherwise, we shall be pleased to discuss them with you at yourconvenience.Where the answer to any questions is “NO”, please attach a note of explanation, inwriting, making reference to the respective question in an appendix to thequestionnaire.Partner: Željko ČupićDate: July 21 st , 2010SignatureAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 15GENERAL AUDIT APPROACH1. General1.1 Can you confirm that no limitations wereplaced on the scope of your audit?1.2 Can you confirm that there are no seriousdisputes with the Company regardingaccounting matters?1.3 Has your audit been performed inaccordance with International AuditingStandards (ISA)?1.4 Has your financial and other independenceof the client been maintained throughout?1.5 Are you going to give an unqualifiedopinion on the Statutory Accounts?1.6 Have you carried out an adequate reviewfor illegal payments?1.7 Have you carried out an adequate reviewfor management involvement in materialtransactions?1.8 Are there changes in the accountingpolicies since the previous audit? If yes,have these changes been properlyreported in summary of critical matters?1.9 Are there adjustments relating to earlierperiods?YESYESYESYESYESYESYESNONO1.101.11Were letters obtained from all legaladvisors covering liabilities on lawsuits,contingent liabilities or any other matterswhich may affect the accuracy of thefinancial statements?Did you read the minutes of the board andexecutive committee meetings both forthe period under review and to date, anddid you follow through any relevantfinancial matters to the accounts?NONOAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 161.12Did you obtain direct confirmation of bankbalances, contingent liabilities, etc., fromall the banks used by the client?YES2. Accounting system and internal controls2.1 Have you reviewed the accounting systemand tested the operation of the company’sinternal controls during the year?2.2 Did your review and testing cover allsignificant areas of the client’s accountingsystem which is computerized?2.3 Have significant weaknesses beenreported to the management, and werethere any corrective actions undertaken?2.4 Can you confirm that there is no seriousweakness e.g. such as to cause difficultyin verifying the accounts or to requiresignificant additional audit test?2.5 Where significant matters came to yourattention which indicated the internalcontrol system was either not adequate orwas not operating effectively, did youadopt alternative or extended auditprocedures to verify the relevant items inthe accounts?YESYESNOYESN/A3. Review of statutory accounts and reporting package3.1 Do the accounting policies adopted for thestatutory accounts comply with local lawand International Accounting practice?YESAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 173.2 Do the accounting policies adopted for thereporting package comply with Grouppractice?3.3 Have all intra-group transactions beenaudited?3.4 Have the local financial statements of theprevious year been agreed upon by theshareholders.3.5 Have you obtained the Board minutes forall matters of significance requiring formalBoard approval?3.6 Can you confirm there are no matterswhich require entering in the minutes bythe parent Company Board of Directors?3.7 Have there any asset pledged as securitybeen identified and disclosed?YESYESN/AN/AYESNO4 Statutory and reporting package profit and loss accounts4.1 Have you obtained relevant reliableevidences sufficient to enable you to drawconclusions on the following matters:4.2 Whether all income and expenses havebeen recorded?4.3 Whether recorded income and expensestransactions did in fact occur?4.4 Whether income and expenses have beenmeasured in accordance with the statedaccounting policies on an acceptable andconsistent basis?4.5 Whether income and expenses have beenproperly disclosed where appropriate?YESYESYESYES4.6 Have you obtained satisfactory explanationson P&L accounts and reported themin Strategy review memorandumAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 18Material changes in gross and netprofit percentages compared withthe previous year?Material fluctuations in individualitems of income and expense?4.7 Have all material, exceptional, extraordinaryand prior year items beenproperly identified, disclosed andexplained in the accounts?YESYESYES5. Statutory and Reporting Package balance sheet items5.1 Generally, have you obtained relevantreliable evidences sufficient to enable youto draw conclusions on the followingmatters:Whether all assets and liabilitieshave been recorded?Whether the recorded assets andliabilities exist?Whether the assets are owned bythe Company and whether theliabilities are those of the Company?Whether the assets are in use andwill be used in the next year?Whether the amounts attributed tothe assets and liabilities have beenarrived at in accordance with theDanish GAAP on an acceptable andconsistent basis?Whether the amounts attributed tothe assets and liabilities are fair?Whether the assets, liabilities,capital and reserves have beenproperly disclosed?YESYESYESYESYESYESYESAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 196. Share capital and reserves6.1 Can you confirm that there are norestrictions on the distribution orremittance of retained earnings eitherunder local law or under contracts oragreements?6.2 Have the title, number of shares, pervalue and amounts paid in been disclosed?6.3 Have the carrying basis, number of sharesand purpose of treasury stock beendisclosed?6.4 Do retained earnings or reserves classifiedin the balance sheet as equity capitalinclude any items which, at some futuretime, will enter into the determination oftaxable income and become subject totaxations? If yes, please provide details.6.5 Can you confirm that new share issuesand dividend payments during the yearhave been adequately authorized andaccounted for?YESYESN/AN/AN/A7. Creditors and provisions7.1 Did you verify the year end cut-offprocedures to see that all liabilities hadbeen provided?7.2 Were balances payable to individualcreditors verified either by directconfirmation or by agreeing/reconcilingsuppliers’ statements?7.3 Were large or unusual provisions, if any,and movements thereon, disclosed in theaccounts?7.4 Has adequate provision been made for alleventualities likely to result in a loss (e.g.warranties, claims, guaranties, long-termpurchase or sale contracts)?YESYESYESN/AAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 207.5 Are the Company’s pension liabilities fullyprovided for?N/A8. Contingencies8.1 Are you satisfied from your inquiries thatall significant contingent liabilities andgains have either been provided for orbeen noted in the reporting package?YES9. Tax9.1 Have adequate provisions been made inthe accounts for the tax likely to beassessed on all income and gains up tothe balance sheet date?9.2 Are there any material matters in disputewith the tax authorities?9.3 Up to which date have tax computationsbeen formally agreed with the taxauthorities?YESNOJune 30, 20109.4 Have you reconciled the tax charge? YES10. Fixed assets (including intangible assets)10.110.210.310.410.5Are you satisfied that the Company has agood title to the fixed assets recorded inits accounts?Was satisfactory evidence and authorityexamined in your audit to verify majoradditions and disposals?Are all fixed assets other than landdepreciated?Are the depreciation rates for fixed assetsbased on useful lives?Do you consider that the depreciationrates are reasonable in thecircumstances?YESYESYESYESYESAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 2110.610.7Are intangible assets valued in accordancewith Group instructions?Do you consider that the carrying value ofintangible assets is reasonable in relationto their benefit to the company?N/AYES11. Cash and overdrafts11.111.2Were all bank balances and overdraftsconfirmed by the banks/financialinstitutions received by you directly?Can you confirm there is no informationconcerning cash and bank balances (e.g.any restrictions) which should be broughtto our attention?YESYES12. Inventories12.112.212.3Have you observed the physical inventorytaking?Have you reviewed and forwarded thelocal subsidiaries questionnaire oninventory valuation?Have you performed a lower of cost ormarket analysis on the major inventoryvalue items?YESN/ANOAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 221.2 Appendix 7 (Post balance sheets events review)POST BALANCE SHEETS EVENTSAuditor firm: INTEREXPERT-ZAGREBName of local company: BRUNATA CROATIABalance date: April 30 th , 2010We confirm that we have performed a subsequent events review from the date of ouraudit report until today’s date. Our review has been conducted in accordance with ISA560 and has comprised discussions with Management, and a review, to the extentappropriate, of management accounts, minutes and other management information.We have from Management received an updated Letter of Representation in whichManagement confirms that, to the best of its knowledge and belief, no events haveoccurred subsequent to July 31 st , 2010 which has materially changed the financialposition of the Component.We report that there have been no adjustments that are required to be reflected inthe Group Reporting Package for Brunata Croatia for the year ended April 30 th ,2010, and there were no further adjusting or non-adjusting events arising from ourreview of which you should be aware.PartnerNameŽeljko Čupić_______________Date July 21 st , 2010_______________SignatureAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 23INTEREXPERT-ZAGREB, LlC.for audit, accounting and consultingZAGREB, Trpimirova 9BRUNATALimited liability CompanyZAGREB, Šenoina 19LETTER TO MANAGEMENT(RELATED TO AUDIT REPORT OF FINANCIAL STATEMENT FOR THE YEAR ENDEDAPRIL 30 th , 2010)Zagreb, July 21 st , 2010Dear Ladies and Gentlemen,based on the our Contract dated August 31, 2009, we have performed an audit offinancial statements for the period from May 01 st 2009 to April 30 th 2010 andassembled a Questioner for completion by auditor received from auditors of the group- AP/ Statsauthoriserede Revisoren, Kobenhavn, Denmark.In our offer we have committed to review following documents:Yearly statement 2009 – 2010balance of accounts for the period May 1 st 2009 to April 30 th 2010bookkeeping records and other accounting documentations from thebookkeeping office Racunovodstvo Pizent LlC. ZagrebWe have also committed that the audit would be performed in accordance with:Letter of Presentation on the Annual Report as at April 30 th , 2010 for BrunataCroatiaQuestionnaire for completion by auditorInternational Accounting Policies for BRUNATA INTERNATIONAL A/SAudit opinion on pages 4 - 5

BRUNATA Limited liability Company, ZagrebAudit report – year ended April 30 th , 2010Page 24During our audit we have also examined:balance of accounts for the period January 01 st 2009 to December 31 st 2009Profit and loss account, Balance sheet, Profit tax sheet on the December 31 st2009 as it was submitted to the Tax office in CroatiaFinal VAT sheetdata on payrolls – IP sheet for year 2009 and 2010Bookkeeping records and invoices for significant expenses (payrolls, lease,bookkeeping service, student services etc.)After examining the documentations we have fulfilled the Questionnaire for the auditorof the group Brunata with which we have verified information stated in the document:Yearly Statement 2009-10 Croatia – Balance Statement 2010.04 and Income – CostStatement 2010.04.Kind regards,INTEREXPERT-ZAGREB________________________________Željko Čupić, B.sc.econ, Authorised auditorAudit opinion on pages 4 - 5