Latvijas Juras medicinas centrs

Interim / Quarterly Report • Aug 26, 2022

JOINT STOCK COMPANY "LATVIJAS JŪRAS MEDICĪNAS CENTRS"

(Unified registration number: 40003306807)

FINANCIAL STATEMENTS FOR THE 6 MONTH OF 2022 (19 th financial year)

PREPARED IN ACCORDANCE WITH THE LAW 'ON ACCOUNTING' AND 'ANNUAL REPORTS AND CONSOLIDATED ANNUAL REPORTS LAW' OF THE REPUBLIC OF LATVIA

Riga, 2022

JSC Latvijas Jūras medicīnas centrs Address: Patversmes iela 23, Riga, LV-1005 Unified registration number: 40003306807

Contents

Information on the Company
Statement of the Board's Responsibility
Management Report	5 – 6
Financial Statements:
Profit and Loss Statement	9
Balance Sheet	10 – 11
Statement of Changes to the Shareholders' Equity	12
Statement of Cash Flows	13
Notes to the Financial Statements	14 – 26

Information on the Company

Name of the Company	Latvijas Jūras medicīnas centrs
Legal status	Joint Stock Company
Number, place and date of registration	40003306807 Riga, 27 August 1996
	Re-registered with the Commercial Register 4000 330 6807	On 27 February 2004 under the unified registration number
Core business:	Hospital activities (86.10) stores (47.74) Other education n.e.c. (85.59) General medical practice activities (86.21) Special medical practice activities (86.22) Dental practice activities (86.23) Other human health activities (86.90) Residential nursing care activities (87.10) Other residential care activities (87.90) (88.99) Physical well-being activities (96.04) Other personal service activities n.e.c. (96.09)	Retail sale of medical and orthopaedic goods in specialised Other social work activities without accommodation n.e.c.
Registered office	Patversmes iela 23 Riga, LV-1005, Latvia
Largest shareholders	Ilze Birka (17.50%) Mārtiņš Birks (17.50%) SIA 'POM' (8.82%) Guna Švarcberga (10.36%) Jānis Birks (12.80%) Adomas Navickas (6.85%)
Names of the Board members, their positions	Jānis Birks – Chairman of the Board Juris Imaks – Member of the Board Anatolijs Ahmetovs – Member of the Board
Names of the Council members, their positions	Mārtiņš Birks – Chairman of the Council Viesturs Šiliņš – Deputy Chairman of the Council Ineta Gadzjus – Member of the Council Jevgeņijs Kalējs – Member of the Council Uldis Osis – Member of the Council
Reporting year	1 January 2022 – 30 June 2022
Name and address of the certified auditor in charge	KPMG Baltics SIA Licence No. 55 Vesetas iela 7 Riga, LV-1013, Latvia	Certified auditor in charge: Rainers Vilāns Certificate No. 200

Statement of the Board's Responsibility

The Board of AS Latvijas Jūras Medicīnas Centrs (hereinafter – the Company) is responsible for preparing the financial statements of the Company.

The financial statement on pages 9 to 26 is prepared based on accounting records and source documents and present fairly the financial position of Companies as at 30 June 2022 and the results of its operations, and cash flows for the 6-month period of 2022.

The above mentioned financial statement of the Company is prepared in accordance with the laws 'On accounting' and 'Annual Reports and Consolidated Annual Reports Law' effective in the Republic of Latvia, on a going concern basis. Appropriate accounting policies have been applied on a consistent basis. Prudent and reasonable judgements and estimates have been made by the Management in the preparation of the financial statement.

The management of the Company is responsible for the maintenance of a proper accounting system, safeguarding the Company's assets, and the prevention and detection of fraud and other irregularities in the Company. The management is also responsible for compliance with laws of the Republic of Latvia.

Chairman of the Board Jānis Birks

Member of the Board Juris Imaks

Member of the Board Anatolijs Ahmetovs

Management Report

Type of business

A/S Latvijas Jūras medicīnas centrs (hereinafter – LJMC or the Company) is a certified and advanced private medical facility available to everyone, which consists of Sarkandaugava Ambulatory Healthcare Centre at 23 Patversmes iela, Riga; Central Hospital at 23 Patversmes iela, Riga; Vecmilgravis Hospital and Northern Diagnostics Centre 26 Vecmilgravja 5.linija; Riga, and Vecmīlgrāvis Primary Health Care Centre at 10 Melidas iela, Riga. In 2021, the average number of employees at LJMC was 352. The shares of A/S Latvijas Jūras medicīnas centrs are traded on the Baltic Secondary list of Nasdaq Riga.

As of 5 September 2013, A/S Latvijas Jūras medicīnas centrs has been included on the list of medical facilities approved by the Health Inspectorate of Latvia, which provides medical tourism services, namely, LJMC provides medical tourism services as a reliable partner and this provides an insight into the overall Latvian health care system because the list only includes those healthcare institutions which have been registered with the register of health care institutions for at least 3 years and control has been carried out in the health care institution during the past three years.

LJMC has accredited Clinical Diagnostics Laboratory at 23 Patversmes iela with the Latvian National Accreditation Bureau.

LJMC has signed cooperation agreements with all health insurance companies operating in Latvia.

LJMC has received certificate No. MSC-50-034 issued by Exova BM TRADA confirming compliance of the energy management system with ISO 50001:2018.

Activities in the 12 months of 2021 and further development

The Company's activities in the 12 months of 2021

In 2021, LJMC continued to provide high-quality medical services and attract new patients. Similar to prior years, also in 2021 LJMC employed excellent doctors from Latvia and competent medical personnel. Activities of highly qualified and professional personnel allowed LJMC to provide examinations of competitive and exceptional quality and adherence to strict precautionary standards, and personnel can ensure safe and accessible services for patients when providing health care services. LJMC is on the official list of providers of medical tourism services maintained by the Health Inspection of the Republic of Latvia. In 2021, LJMC published information in the catalogue "Health Tourism in Latvia", created and supported by LIDA.

During 2021, LJMC, when providing health care services, adapted flexibly to the normative documents of the Ministry of Health, which imposed restrictions on preventing and overcoming the spread of Covid-19. Both secondary ambulatory health care services and daily hospital services, as well as paid health care services were provided to the extent permitted in the normative documents, ensuring continuity of activity and the monitoring of the impact of new events and conditions.

In 2021, LJMC promoted paid health care services, ensuring increase in the number of patients living in Latvia, promoting competitiveness and recognition of LJMC.

The Radiology Department in 2021 provided the full range of diagnostic services (magnetic resonance, X-ray examinations and ultrasonography) increasing the amount and quality of services (both state paid services and services paid by patients). PET/CT radiological examinations are available and payable both by private means and state funds.

In order to ensure compliance with the requirements of GDPR in 2021, LJMC in cooperation with an independent data protection inspector continued improvement of documents in compliance with the laws and regulations, continued improvement of renewing the contracts (on the use of medical facilities in digital form, use of medical information system, insurance company services, communication services), and began the training process for LJMC staff.

In 2021, LJMC signed agreements with the National Health Service for the provision of state paid medical services in the amount provided by the budget for 2021.

In 2021, LJMC continued working on ISO. In 2019, LJMC received ISO 9001:2015 quality certification in functional diagnostics and radiological diagnostics, in-patient medical rehabilitation and day-care rehabilitation valid until 14 March 2025, and continued updating the hygiene and disinfection plan, and implementing ISO certification in other units of LJMC.

Management Report

Further development of the Company

To attract even more patients, in 2021 LJMC will by made investments to introduce innovative solutions for providing medical services, improve the qualification of the staff and enhance patient service. Also, LJMC will continue the state policy in re-profiling of hospitals to ambulatory healthcare institutions, thus adding to the health care service offering. In 2022, the LJMC will continue to further ensure compliance with precautionary standards in the provision of healthcare services, so that cooperation between the patients and healthcare professionals could facilitate access to those services.

Continuing to improve the available services with a highly qualified and professional diagnostic service, the Radiology Department of LJMC, as one of the most modern and innovative cancer diagnostic centres in Eastern Europe, will help to increase the flow of local and foreign patients when a safe flow of patients is restored.

By attracting patients not only from Latvia and other Baltic countries, but also from other EU countries and offering high-quality medical services, LJMC will increase its competitiveness in the Baltics medical market.

Financial results

In the 6 months of 2022, LJMC operated in accordance with the budget approved for 2022. The profit of LJMC is EUR 292 295.

Risk management

LJMC continues carrying out activities seeking to limit the negative impact of potential financial risks on the financial position of LJMC by implementing a set of control and analysis measures. Financial assets exposed to credit risk are mostly cash, trade receivables and other receivables. Credit risk is managed by LJMC by performing regular debtor control procedures and debt collection measures aiming to identify and solve any problems on a timely basis.

Liquidity risk is managed by LJMC in line with the principle of prudence ensuring that appropriate credit resources are available to cover liabilities as they fall due. LJMC does not use loans, except operating leases.

Subsequent events and going concern

No other significant subsequent events have occurred in the period from the year-end to the date of these financial statements that would require adjustments to be made to these financial statements and disclosures added to the notes thereto. The Russia-Ukraine war is not expected to have material effect on the operations of the Company. The Company does not plan to enter into transactions with Russia, Belarus and Ukraine.

Chairman of the Board Jānis Birks

Member of the Board Juris Imaks

Member of the Board Anatolijs Ahmetovs

Address: Patversmes iela 23, Riga, LV-1005 Unified registration number: 40003306807

Financial statements

Profit and Loss Statement for the 6-month period of 2022

		Note	30.06.2022	2021 EUR	30.06.2021 EUR
1.	Net sales	2	5 184 566	9 363 852	4 622 346
2.	Cost of goods and services	3	(4 639 643)	(8 146 691)	4 622 346
3.	Gross profit		544 923	1 217 161	523 834
4.	Administrative expenses	4	(343 341)	(580 253)	(278 555)
5.	Other operating income	5	108 559	247 435	84 395
6.	Other operating expenses	6	(17 846)	(3 439)	(565)
7.	Profit before corporate income tax Corporate income tax for the reporting		292 295	880 904	329 109
8.	year		-	(645)	-
9.	Profit for the reporting year		292 295	880 259	329 109
	Number of shares		800 000	800 000	800 000
x	Earnings per share (EUR)*		0.37	1.10	0.41

* Profit or loss after corporate income tax / average number of shares during the reporting year.

The accompanying notes on pages 14 to 26 form an integral part of these financial statements.

Chairman of the Board Jānis Birks

Member of the Board Juris Imaks

Member of the Board Anatolijs Ahmetovs

Chief Accountant Gunta Kaufmane

Balance Sheet as at 30 June 2022

	Note	30.06.2022	2021 EUR	30.06.2021 EUR
Assets
Long-term assets
I Fixed assets:
1. Land, buildings and engineering structures			4 919 770	4 381 673
2. Equipment and machinery		1 264 750 4 852 122	883 062	669 021
3. Other fixed assets		77 200	70 196	62 767
4. Construction in progress			70 407	26 555
Total fixed assets:	8	6 269 901 75 829	5 943 435	5 140 016
Total long term investments:		6 269 901	5 943 435	5 140 016
Current assets
I Stock:
1. Raw materials, primary materials and
auxiliary materials		151 712	156 517	161 230
Total stock:		151 712	156 517	161 230
II Receivables:
1. Trade receivables		127 983	102 008	71 398
2. Other receivables and advanced payments		591 767	600 254	25 682
3. Prepaid expenses 4. Accrued income		341 337959	7 270 429 311	2 377 382 718
5. Due from related parties Prepaid expenses				8 932
Total receivables:		1 058 050	1 138 843	491 107
Prepaid expenses III Cash:	14	893 524	1 017 259	1 863 454
4. Prepaid expenses Total current assets:		2 103 286	2 312 619	2 515 799
Total assets		8 373 187	8 256 054	7 655 807

The accompanying notes on pages 14 to 26 form an integral part of these financial statements.

Balance Sheet as at 30 June 2022

EUR	EUR
Equity and Liabilities
Shareholders' equity:
1. Share capital 15 1 120 000 1 120 000	1 120 000
2. Long-term investment revaluation reserve 2 472 973 2 472 973 3. Reserves:	2 472 973
b) reserves according to Statutes 63 819 63 819	63 819
4. Retained earnings:
a) retained earnings brought forward from 2 523 721 1 803 462 previous years	2 132 571
b) profit for the reporting year 292 295 880 259
Total shareholders' equity: 6 472 808 6 340 513	5 789 363
Liabilities: Long term liabilities:
1. Deferred income 19 628 654 628 654	669 617
Total long term liabilities: 628 654 628 654	669 617
Short-term liabilities:
1. Customer advances 51 606 34 057	1 831
2. Accounts payable to suppliers and contractors 148 563 303 198 3 Taxes and compulsory state social security	259 957
contributions 324 545
18 249 572	68 497
4. Other creditors 347 123 277 672	271 865
5. Deferred income 19 364 262 58 126	55 513
6. Accrued liabilities 35 626 364 262	339 164
Total short term liabilities: 1 271 725 1 286 887	1 196 827
Total liabilities: 1 900 379 1 915 541	1 866 444
Total equity and liabilities 8 373 187 8 256 054	7 655 807

The accompanying notes on pages 14 to 26 form an integral part of these financial statements.

Chairman of the Board Jānis Birks

Member of the Board Juris Imaks

Member of the Board Anatolijs Ahmetovs

Chief Accountant Gunta Kaufmane

Balance Sheet as at 30 June 2022

	Share capital EUR	Long-term investment revaluation reserve EUR	Reserves set in the Company's statutes EUR	Retained earnings brought forward from previous years EUR	Profit/ (loss) for the reporting year EUR	Total shareholder's equity EUR
Balance as at 31 December 2020 Profit of 2020 transferred to retained earnings of	1 120 000	2 472 973	63 819	1 585 907	273 555	5 516 254
previous years				273 555	(273 555)	-
Result of revaluation in 2020 (see Note 18) Profit for the reporting year Dividends for 2017
				(56 000)	-	(56 000)
Profit for the reporting year Balance as at 31					880 259	880 259
December 2021 Profit of 2020 transferred to retained earnings of	1 120 000	2 472 973	63 819	1 803 462	880 259	6 340 513
previous years				880 259	(880 259)
Dividends for 2017 Profit for the reporting				(160 000)		(160 000)
year					292 295	292 295
Balance as at 30 June 2022	1 120 000	2 472 973	63 819	2 523 721	292 295	6 472 808

The accompanying notes on pages 14 to 26 form an integral part of these financial statements.

Chairman of the Board Jānis Birks

Member of the Board Juris Imaks

Member of the Board Anatolijs Ahmetovs

Chief Accountant Gunta Kaufmane

Statement of Cash Flows for 6 month period of 2022

	Note	30.06.2022	2021 EUR	30.06.2021 EUR
I. Cash flows from operating activities
1. Profit before corporate income tax Adjustments for:		292 295	880 904	329 109
a) impairment of fixed assets	8	201 979	286 644	139 653
2. Profit before adjustments for the effect of changes to current assets and short-term liabilities Adjustments for:		494 274	1 167 548	468 762
a) decrease/ (increase) in trade receivables
b) decrease/ (increase) in stock c) increase/ (decrease) in accounts payable to		80 793 4 805	(817 879) (17 961)	(170 151) (22 674)
suppliers and other liabilities		(15 162)	87 591	38 075
3. Gross cash flows from operating activities		564 710	419 299	314 012
Corporate income tax
		-	(1 064)
Net cash generated from operating activities		-	418 235	314 012
II. Cash flows from investing activities
a) purchase of fixed and intangible assets	8	(528 445)	(1 110 016)	(159 606)
6. Net cash flows used in investing activities		(528 445)	(1 110 016)	(159 606)
III. Cash flows from financing activities
a) Dividend paid		(160 000)	(56 000)	(56 000)
7. Net cash flows used in financing activities		(160 000)	(56 000)	(56 000)
Net increase/(decrease) in cash and cash		(123 735)
equivalents in the reporting year			(747 781)	(215 606)
Cash and cash equivalents at the beginning of the year		1 017 259	1 765 040	1 765 040
Cash and cash equivalents at the end of the year	14	893 524	1 017 259	1 863 454

The accompanying notes on pages 14 to 26 form an integral part of these financial statements.

Chairman of the Board Jānis Birks

Member of the Board Juris Imaks

Member of the Board Anatolijs Ahmetovs

Chief Accountant Gunta Kaufmane

(1) Information on the Company's activities and summary of significant accounting principles

Information on the Company

The legal address AS Latvijas Jūras medicīnas centrs (LJMC or the Company) is 23 Patversmes iela, Riga, Latvia. The Company was registered with the Commercial Register under the common registration number 40003306807. The largest shareholders of the Company are Ilze Birka (17.50%), Mārtiņš Birks (17.50%), Jānis Birks (12.80%), Guna Švarcberga (10.36%), SIA POM (8.82%), Adomas Navickas (6.85%).

The Board comprises Jānis Birks (Chairperson of the Board), Juris Imaks (Board Member) and Anatolijs Ahmetovs (Board Member). The Chairperson of the Council is Mārtiņš Birks, Council Members are Viesturs Šiliņš, Ineta Gadzjus, Jevgēņija Kalējs and Uldis Osis.

The core business of the Company according to NACE rev 2. is Hospital activities (NACE 86.10); Retail sale of medical and orthopaedic goods in specialised stores (47.74); Education n.e.c. (85.59); General medical practice activities (86.21); Special medical practice activities (86.22); Dental practice activities (86.23); Other human health activities (86.90); Residential nursing care activities (87.10); Other residential care activities (87.90); Other social work activities without accommodation n.e.c. (88.99); Physical well-being activities (96.04); Other personal service activities n.e.c. (96.09).

Basis of preparation

The financial statements were prepared in accordance with the law 'On Accounting' and the 'Annual Reports and Consolidated Annual Report Law' (hereinafter – the Law).

The management believes that the accounting policies used in the preparation of these financial statements are largely consistent with those used last year.

According to Article 3(6) of the Annual Reports and Consolidated Annual Reports Law, the Company applies the requirements of the law applicable to large companies as its transferable securities are included in the regulated market of the Republic of Latvia.

The profit and loss statement was prepared according to the turnover costing method. The cash flow statement was prepared according to the indirect method. The financial statements are prepared on the historical cost basis except for fixed assets disclosed under Land, buildings and engineering structures – land and buildings, which are measured using a revaluation method.

Accounting principles

The financial statements were prepared in accordance with the following policies:

• a) Going concern assumption that the Company will continue as a going concern;
• b) Consistent valuation principles with those used in the prior year;
• c) Items were valued in accordance with the principle of prudence, i.e.:
  • the financial statements reflect only the profit generated to the balance sheet date;
  • all incurred liabilities and current or prior year losses have been taken into consideration even if discovered within the period after the date of the balance sheet and preparation of the financial statements;
  • all amounts of impairment and depreciation have been taken into consideration irrespective of whether the financial result was a profit or loss.
• d) Income and expenses incurred during the reporting year have been taken into consideration irrespective of the payment date or date when the invoice was issued or received; Expenses were matched with revenue for the reporting period.
• e) Assets and liabilities have been valued separately;
• f) The opening balance agrees with the prior year closing balance.
• g) All material items, which would influence the decision-making process of users of the financial statements, have been recognised and insignificant items have been combined and their details disclosed in the notes.
• h) Business transactions are recorded taking into account their economic contents and substance, not the legal form.

Related parties

Related parties represent both legal entities and private individuals related to the company in accordance with the following rules.

a) A person or a close member of that person's family is related to a reporting entity if that person:

• i. has control or joint control over the reporting entity;
• ii. has significant influence over the reporting entity; or
• iii. is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

b) An entity is related to a reporting entity if any of the following conditions applies:

• i. The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);
• ii. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);
• iii. Both entities are joint ventures of the same third party;
• iv. One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
• v. The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.
• vi. The entity is controlled, or jointly controlled by a person identified in (a);
• vii. a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
• viii. The entity or any member of the group to which the entity belongs provides management personnel services to the entity or the parent of company of the entity.

Related party transaction – a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Financial instruments and financial risks

Financial instrument is an agreement that simultaneously results in financial assets of one party and financial liabilities of the other party.

The key financial instruments held by the Company are financial assets such as trade receivables, amounts due from related parties and other receivables, and financial liabilities such as prepayments from clients, accounts payable to suppliers and contractors and other creditors arising directly from its business activities.

Financial risks connected with the Company's financial instruments, financial risk management Key financial risks related to the Company's financial instruments are:

• Credit risk is the risk that the Company may incur financial losses if parties to the transactions fail to fulfil their liabilities under the contracts, and credit risk is primarily connected with trade receivables;
• Currency risk– risk that the Company may suffer unexpected losses arising from fluctuations in the foreign exchange rates; the Company is not exposed to currency risk as it does not significant amounts of currencies other than EUR.
• Interest rate risk risk that the Company may incur losses due to fluctuations in interest rates;
• Liquidity risk risk that the Company will not be able to meet its financial liabilities in due time.

Management has implemented procedures to control the key risks.

Credit risk

The inability of insurance companies and patients to pay for the services provided by the Company in due time and in full amount. Most of the services are paid for within a short period of time after the provision of services or are funded by state or insurance providers, so the credit risk is low.

Interest rate risk

Management believes that interest rate risk is not material.

Liquidity risk

The Company has no external loans and it has significant financial resources to settle its liabilities.

Fair value of financial assets and liabilities

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Financial assets and financial liabilities are carried at cost which according to management approximates their fair value at acquisition plus any related additional expenses. Purchase costs are acquisition costs of goods or services (net of discounts received) with added additional costs related to the purchase.

Reporting period

The reporting period comprises the 6 months from 1 January 2022 to 30 June 2022.

Currency unit and revaluation of foreign currency

All amounts in these financial statements are expressed in the official currency of Latvia – euro (EUR), the functional currency of the Company.

Foreign currency transactions are translated into EUR according to currency exchange rates effective at the date of transaction and determined by reconciliation of the system of the European Central Bank and other central banks and which is published on the website of the European Central Bank.

As at the reporting date, all monetary assets and liabilities are translated into EUR according to exchange rates published on the website of the European Central bank. Non-monetary items of assets and liabilities are revalued to euros in accordance with the reference exchange rate published by the European Central Bank on the transaction date.

Exchange rate per EUR 1:

	31.12.2021	31.12.2020
USD	1.13260	1.22710

Gain or loss resulting from payments under transactions executed in foreign currencies and the translation of monetary assets and liabilities denominated in foreign currencies is reflected in the profit and loss statement of the respective period.

Estimates and judgements

The preparation of financial statements requires the management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. The actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognized in the period when those estimates are reviewed and in the future periods.

Key sources of estimation uncertainty are the following:

(i) Useful lives of fixed and intangible assets

Management estimates the useful lives of fixed and intangible assets in proportion to the expected duration of use of the asset (its expected capacity or effectiveness) based on historical experience with similar fixed assets and future plans. Land is not subject to depreciation. For other assets, depreciation and amortization is calculated on a straight-line basis over the entire useful life of the respective intangible asset and fixed asset in order to write their value or revalued value down to the estimated book value at the end of the useful life based on the following rates:

	%
Intangible assets	20
Buildings and constructions	2.5 - 2.85
Communication equipment and instruments	33.33
Other fixed assets	20

Current maintenance and repair costs of fixed assets are recognized in the profit and loss statement as incurred.

(ii) Fixed assets

Fixed assets other than land, buildings and constructions are carried at cost less accumulated depreciation and impairment losses.

Land, buildings and constructions are measured by the Company using the revaluation model. The balance sheet item Land, buildings and engineering structures of the financial statements of the Company is presented at revalued value, which equals fair value at the revaluation date net of subsequent accumulated deprecation and impairment loss.

Based on the Company's position as at 31 December 2020, the Company has estimated the value of the balance sheet item 'Land, buildings and engineering structures', and in accordance with the estimation, has determined the carrying amount of all land, buildings and engineering structures in line with market value and based on evaluation of external certified valuers. For more details on revaluation please refer to Note 8.

According to the policy, revaluation of a single building or construction requires the whole category to be revalued. To determine the impact of revaluation at the date of revaluation accrued depreciation is netted of cost or other value, which replaces cost in the financial statements, and the carrying amount is increased or decreased according to the revalued value of the building or structure in the following manner: depreciation accrued to the date of revaluation is initially written-off of the current carrying amount of fixed asset, and afterwards the residual value is increased or decreased according to the fair value of fixed asset as a result of revaluation.

In case the fair value of fixed assets at the balance sheet date is lower than their carrying amount, and such impairment is expected to be permanent, fixed assets are recognized at the lower value. The revaluation result is recognized in the profit and loss statement except where a previously recognized increase in the value of fixed assets offsets an impairment loss. In that event, the long term investment revaluation reserve is decreased by the amount of impairment.

In case the value of fixed assets at the balance sheet date is higher than the valuation on the balance sheet, fixed assets are revalued to the higher value if the increase in value may be assumed to be other than temporary. The increase in value resulting from revaluation is recognized under 'Long term investment revaluation reserve'. If an increase in the value resulting from revaluation compensates for the impairment of the same fixed asset which was previously recognized as an expense in the profit and loss statement, then the increase resulting from revaluation is recognized as income in the profit and loss statement as incurred. The long term investment revaluation reserve is decreased when the revalued asset is disposed, is no longer utilized, or the increase of value is no longer reasonable.

The increase in value recognized in the long term investment revaluation reserve under equity is reversed by recognizing a decrease in the profit and loss statement upon liquidation or disposal of the revalued fixed asset.

Receivables

Receivables are disclosed at amortised cost net of impairment allowances. Doubtful debt allowances are recognized based on an individual management assessment of the recoverability of each receivable when objective evidence exists that the Company will not be able to recover the full amount of receivables according to the previously agreed repayment terms. The amount of allowance represents the difference between the carrying and recoverable amount of receivables. The allowance is charged to the profit and loss statement.

Provisions

Provisions are recognized when a past event has given rise to a present obligation or losses and the amount can be estimated reasonably. The likelihood of loss is assessed based on management assumptions. In order to determine the amount of loss management is required to select an appropriate calculation method and make specific assumptions connected with the specific risk. No provisions were made as at 31 December 2021.

Revenue recognition

Income from sales of goods

Revenue from the sales of goods is recognized in the profit and loss statement after the risks and rewards of ownership are transferred to the client.

No revenue is recognized if according to the provisions of the transaction the Company retains significant risks pertaining to the ownership of goods and the goods can be returned.

Income from services

Income from services provided is recognized in the profit and loss statement as generated. Income is received and recorded according to signed cooperation agreements.

Rental income

Rental income is recognised on a straight-line basis over the rental term.

Long and short term classification

Amounts with terms of receipt, payment or write off due in more than one year after the balance sheet date are classified as long term. Amounts to be received, paid or written off within a year are classified as short term.

Lease transactions

Operating lease – (the Company as a Lessor)

The Company leases premises, which are part of revalued fixed assets. Depreciation is calculated on a straight-line basis over the entire useful life of the respective fixed asset in order to write its value down to the estimated carrying amount at the end of the useful life based on the rates set for similar fixed assets. Income from operating lease and client prepayments is charged to the profit and loss statement on a straight-line basis over the period of lease.

Operating lease – (the Company as a lessee)

Payments for operating lease are recognized in the profit and loss statement on a straight-line basis over the period of lease.

Fixed assets

All fixed assets other than land, buildings and constructions are recognised on the balance sheet at historical cost less depreciation.

For other assets, depreciation and amortization is calculated in accordance with the straight-line method over the entire useful life of the respective intangible assets and fixed assets in order to write their value or revalued value down to the estimated book value at the end of the useful life.

The depreciation method is reviewed at least on an annual basis, at the year-end.

Subsequent expenses are added to the book value of the asset or recognized as a separate asset only where it is highly probable that future benefits related to this item would flow into the company and expenses of this item can be estimated reliably. Such expenses are written off over the entire useful life of the respective asset. When capitalizing the costs of installed spare parts, the book value of the spare parts is written off in the profit and loss statement.

Profit or loss from disposal of fixed assets is calculated as the difference between the carrying amount of the asset and income generated from sale, and income from the reversal of the revaluation reserve of the respective fixed asset, and charged to the profit and loss statement as incurred.

Accounting and valuation of stock

Stock is carried at the lower of cost and net realizable value. Stock has been valued according to the FIFO method. Stock accounting is based on the perpetual method. Stock has been counted during the annual stock take.

Remuneration

Remuneration is set according to employment contracts, taking into account the changing requirements and trends of the labour market: by mutual agreement on the application of specific principles: %, fixed numbers, individual conditions, combined conditions. Employees have access to the procedure for calculating remuneration (data selection algorithms, data processing procedures,

data flow organisation). The Company provides only short-term remuneration benefits to its employees.

Grants

Grants received for special types of capital investments are treated as deferred income which is gradually recognised as revenue over the useful life of the fixed assets received or acquired using grants. Grants received to cover expenses are recognised in the same period when the related expenses have arisen, if all the conditions of receiving the grant are met.

Corporate income tax

(a) Current tax

On 1 January 2018 the Law on Enterprise Income Tax of the Republic of Latvia entered into force and set out a new regime for paying taxes. The tax rate is 20% from the taxable base determined by dividing the value of the amount taxable with corporate income tax by coefficient 0.8, includes:

• distributed profit (dividends calculated, payments equivalent to dividends, conditional dividends), and

• conditionally distributed profit (such as non-operating expenses and other specific cases provided for by the law).

The new tax regime is not applicable to the distribution of dividends from profit accumulated to 31 December 2017 and taxed under the previous taxation regime.

(2) Net sales

Net sales represents revenue generated during the reporting period from the Company's basic activities – sales of services, net of value added tax and discounts.

	2022	2021
	EUR	EUR
Ambulatory medical services	4 809 232	8 721 772
Services covered by insurance	375 334	642 080
Paid ambulatory medical services	210 187	359 565
Paid in-patient care	165 147	282 515
	5 184 566	9 363 852

The Company provides services only in the territory of the Republic of Latvia.

The Company does not disclose information on distribution of net sales by lines of business in accordance with Regulation No. 1893/2006 (EK) of the European Parliament and European Council of 20 December 2006, with which the statistic classification of business activity NACE rev 2 is established, as its disclosure could have a severe negative impact on the interests of the Company.

(3) Cost of goods and services

The item represents costs incurred for generating net sales – such as costs of goods and services at acquisition cost, and costs related to purchase of goods and services.

	2022	2021
	EUR	EUR
Remuneration	2 588 806	4 409 742
Medicines, medical materials	506 668	864 355
Compulsory state social security contributions	593 564	997 841
Non-deductible value added tax	192 990	372 725
Lease of equipment	82 304	279 627
Depreciation	201 979	286 644
Utilities and maintenance	155 375	224 023
Office items and equipment, other materials	92 523	176 127
Repair costs	53 305	226 154
Medical examinations and other services	40 082	72 284
IT expenses	7 134	13 321
Advertisement expenses	4 944	630
Security	12 359	26 631
Changes in doubtful debt allowances	-	-
Medical fund risk expenses	5 452	13 129
Transport	9 028	17 365
Office expenses	6 210	10 790
Patient catering expenses	12 937	23 593
Real estate tax	-	6172
Insurance	12 067	12 494
Staff training expenses	862	1 818
Risk duty	735	1 445
Benefits and gifts to employees	1159	1 849
Changes in cost of accrued vacations	-	25 098
Other costs related to services	59 160	82 834
	4 639 643	8 146 691

- 645

Notes to the financial statements

(4) Administrative expenses

	2022	2021
	EUR	EUR
Remuneration	256 139	416 643
Compulsory state social security contributions	59 884	95 395
Communication expenses	8 123	19 998
Audit of the financial statements	3 030	21 434
Office expenses	5 945	5 092
Bank services	6 141	10 783
Legal services	2 484	8 802
Representation expenses	720	603
Other	875	1 503
	343 341	580 253

(5) Other operating income

	2022	2021
	EUR	EUR
Income from rent	65 853	170 490
Amortisation of funds received from EBRD	-	10 513
Other income – tax refund	-	-
Other income	42 706	66 432
	108 559	247 435

Other income consists of income from catering and laundry service, advertising and beauty care services.

(6) Other operating expenses

	2022	2021
	EUR	EUR
Penalties	54	1 142
Other expenses	17 792	2 297
	17 846	3 439
(7) Corporate income tax
	2022	2021
	EUR	EUR
Current tax	-	645

Total
EUR
9577594
528 445
(427)
10 105 612
3 634 159
201 979
(427)
3 835 711
5 120 063
5 943 435
6 269 901

In December 2020, land, buildings and constructions were valued by independent experts. The valuation was carried out by the independent experts using a combination of the comparable transactions method and income method.

A new revaluation was not performed on 31 December 2021, as the management assessed that no significant changes had taken place in the market and the recognised carrying amount did not differ materially from the fair value of the property.

The fair value of land and building was determined by an external, independent property valuer, having appropriate recognised professional qualification and recent experience in the location and category of the property being valued.

The following table shows the valuation technique used in measuring the fair value of core real estate items included in position 'Buildings and land', as well as the significant unobservable inputs used:

Type	Valuation method	Significant unobservable data	Inter-relation between significant unobservable inputs and fair value measurement
Buildings and land in the amount of EUR 3 000 000 at Patversmes iela, Riga	Fair value has been estimated based on the average of: Market comparison technique: The fair value was based on results of comparable sales of similar buildings. Discounted cash flow technique: The model is based on discounted cash flows from rendering services	Price per m2 EUR 452 Rent rate per m2 – EUR 2.3-9 Capacity – 90% Capitalisation rate – 9%	The fair value would increase (decrease) if the price per m2 was higher (lower). The estimated fair value would increase (decrease), if: rent rate would be higher (lower); capacity percentage would be higher (lower); capitalisation rate would be lower (higher);
Buildings and land in the amount of EUR 850 000 at Vecmīlgrāvja 5.līnija, Riga	Fair value has been estimated based on the average of: Market comparison technique: The fair value was based on results of comparable sales of similar buildings. Discounted cash flow technique: The model is based on discounted cash flows from rendering services	Price per m2 EUR 327 Rent rate per m2 EUR 3.5-5 Capacity – 90% Capitalisation rate – 9%	The fair value would increase (decrease) if the price per m2 was higher (lower). The estimated fair value would increase (decrease), if: cent rate would be higher (lower); capacity percentage would be higher (lower); capitalisation rate would be lower (higher).

Type	Valuation method	Significant unobservable data	Inter-relation between significant unobservable inputs and fair value measurement
Buildings and land in the amount of EUR 630 000 at Melidas iela, Riga	Fair value has been estimated based on the average of:		Fair value would increase (reduce), if the price per m2 was higher (lower).
	Market comparison technique: The fair value was based on results of comparable sales of similar buildings.	Price per m2 EUR 315	The estimated fair value would increase (decrease), if: rent rate would be higher (lower); capacity percentage would be higher (lower);
	Discounted cash flow technique: The model is based on discounted cash flows from rendering services	Rent rate per m2 EUR 5 Capacity – 90% Capitalisation rate – 9.0%	capitalisation rate would be lower (higher).

According to Section 52(2)(2) of the Annual Reports and Consolidated Annual Reports Law, disclosures are provided concerning revalued fixed assets indicating their value had revaluation not taken place:

Had revaluation not taken place, the carrying amount of land, buildings and constructions as at 31.12.2021 would be EUR 3 191 888.

Including:	30.06.2022	31.12.2021
	EUR	EUR
-historical cost	4 617 716	4 617 716
-accumulated depreciation	(1 425 828)	(1 425 828)

(9) Stock
	30.06.2022	31.12.2021
	EUR	EUR
Medicines in warehouse	129 663	121 308
Medicines in departments	21 556	20 639
Other materials	493	14 570
	151 712	156 517
(10) Trade receivables
	30.06.2022	31.12.2021
	EUR	EUR
Insurance companies	102 400	66 802
Other institutions, companies and individuals	197 434	207 057
Doubtful debt allowance	(171 851)	(171 851)
	127 983	102 008
(11) Other receivables
	30.06.2022 EUR	31.12.2021 EUR
Overpaid taxes (see Note 20)	5393	6
Value added tax on unpaid services	197	4 786
Prepayments for fixed assets	586 177	571 228
Other receivables	-	24 234
	591 767	600 254
(12) Prepaid expenses
	30.06.2022 EUR	31.12.2021 EUR
Rent	-	-
Insurance	341	6 866
Other	- 341	404 7 270
(13) Accrued income
	30.06.2022 EUR	31.12.2021 EUR
Accrued income for invoices issued after the year end	337 959	426 311
	337 959	426 311

'Accrued income' represents invoices from the National Health Service issued after the reporting period.

(14) Cash
By currency:		30.06.2022		31.12.2021
		Currency	EUR	Currenc	EUR
				y
Current account	USD	5 840	5 156	5 840	5 156
Current account	EUR		877 343	-	1 004 291
Cash on hand	EUR		11 025	-	7 812
			893 524		1 017 259

(15) Share capital

Share capital of the Company as at 30 June 2022 amounted to EUR 1 120 000 (31.12.2021: EUR 1 120 000) and consisted of 800 000 shares with nominal value of EUR 1.40.

The share capital of the Company is owned by the following shareholders:

	30.06.2022		31.12.2021
	Number of	Holding (%)	Number of	Holding (%)
	shares		shares
Ilze Birka	140 000	17.50%	140 000	17.50%
Mārtiņš Birks	140 000	17.50%	140 000	17.50%
SIA 'POM'	70 565	8.82%	-	-
Ilze Aizsilniece	-	-	70 565	8,82%
Guna Švarcberga	82 917	10.36%	82 917	10.36%
Jānis Birks	102 388	12.80%	102 388	12.80%
Adomas Navickas	54 811	6.85%	54 811	6.85%
Other shareholders (up to
5% shares per each)	209 319	26.17%	209 319	26.17%
Total	800 000	100.00%	800 000	100.00%
Share capital (EUR)	1 120 000		1 120 000

All shares of the Company are name (publicly issued shares) shares.

(16) Revaluation reserves

Revaluation reserve as at 31 December 2020 includes the result of revaluation of fixed assets. In 2021, the revaluation reserve was not changed.

Long-term investment revaluation reserve

	2022	2021
	EUR	EUR
Revaluation reserves as at 30 June	2 472 973	2 472 973
Appreciation as a result of revaluation	-	-
Decrease as a result of revaluation	-	-
Revaluation reserves as at 30 June	2 472 973	2 472 973
(17) Other liabilities
	30.06.2022	31.12.2021
	EUR	EUR
Salaries	346 260	277 050
Payments to the trade union	863	622
	347 123	277 672

(18) Taxes and compulsory state social security contributions
	Balance as at 31.12.2021	Calculated for 2022	Paid in 2022	Balance as at 30.06.2022
	EUR	EUR	EUR	EUR
Corporate income tax	149	-	(188)	(39)
VAT	17 687	22 891	(36 261)	4 317
Real estate tax	(6)	3087	(3102)	(21)
Natural resources tax	3 961	-	(9333)	(5 372)
Risk duty	119	735	(730)	124
Social contributions	148 929	944 332	(884 479)	208 782
Personal income tax	78 727	518 815	(486 181)	111 361
Total	249 566	1 489 860	(1 420 274)	319 152
Including:
Overpaid taxes	(6)			(5393)
Tax liabilities	249 572			324 545
Overpaid taxes are disclosed under 'Other receivables'.
(19) Deferred income
			30.06.2022 EUR	31.12.2021 EUR
The part of capital grants to be charged to profit or loss within 1 to 5 years			58 126	58 126
The part of capital grants to be charged to profit or loss for more than 5 years			320 655	320 655
Lease payment of 10 years			236 250	236 250
The part of capital grants to be charged to profit or loss for more than 5 years			13 623	13 623
Deferred income, long term			628 654	628 654

The part of capital grants to be charged to profit or loss within
one year	10 929	10 929
Lease payment of 10 years	22 500	45 000
The part of capital grants to be charged to profit or loss within
one year	2 197	2 197
Deferred income, short term	35 626	58 126

In 2012, the Company received EBRD funding to purchase fixed assets. In 2021, the Company recognised revenue of EUR 10 513 (2020: EUR 10 513) (see Note 5).

In 2021, the Company received EBRD funding to purchase fixed assets. In 2021, the Company received funding from CFCA for the purchase of fixed assets in the amount of EUR 17 578 (agreement No. 9.3.2.0/20/a/074). The Company started to revenue recognition in 2022.

The Company received lease payments for the next 10 years amounting to EUR 450 000. In 2021, the Company recognised revenue of EUR 45 000 (2020: EUR 45 000) according to the terms of lease agreements that secured lease rights for a specified period and promoted operating activities in line with the specific classification. Revenue is reflected under 'Income from rent', refer to Note 5.

(20) Accrued liabilities
	30.06.2022	31.12.2021
	EUR	EUR
Accrued expenses for unused vacations Accrued liabilities to suppliers	364 262 -	364 262 -
	364 262	364 262
(21) Average number of employees by category
	2022	2021
Average number of employees in the reporting year:	352	352
incl. Members of the Board	3	3
Members of the Council	5	5
Other employees	344	344
(22) Personnel expenses
	2022	2021
Type of costs	EUR	EUR
Remuneration	2 844 945	4 826 385
Compulsory state social security contributions	653 448	1 093 236
	3 498 393	5 919 621
(23) Remuneration to management	2022	2021
	EUR	EUR
Members of the Board
remuneration (variable and fixed)	124 139	174 950
· compulsory state social security contributions	27 890	39 369
Members of the Council
remuneration	13 660	27 319
· compulsory state social security contributions	3 020	6 040
Other members of the administration
remuneration	118 340	214 374
· compulsory state social security contributions	28 974	49 986
	316 023	512 038

(24) Future liabilities

As at 30 June 2022, the Company has no effective future payment liabilities under agreements related to the purchase of fixed assets (31.12.2021: none).

The management has no information on issued guarantees, legal proceedings and other contingent liabilities, which could impact the financial position of the Company as at 30 June 2022 (31.12.2021: none).

(25) Related party transactions

In 2021, the Company issued invoices to SIA Kodolmedicīnas klīnika for rent payments in the amount of EUR 17 864 (2020: EUR 32 560). In 2021, additional provisions were not accrued (2020: EUR 58 821). The outstanding amount of the credit line as at 31 December 2021 is EUR 163 863 (31 December 2020: EUR 163 863). Since December 2021, SIA Kodolmedicīnas klīnika ir not considered as a related company. The provisions are made as at 31.12.2020 to reduce the impact of transaction risk in the profit and loss statement.

(26) Remuneration to the certified auditor

	2022 EUR	2021 EUR
Audit of the financial statements	3 030	20 386
	3 030	20 386

(27) Information on operating lease and rent agreements with a significant impact on the Company's activities

The Company has 11 effective operating lease agreements regarding equipment. Under these agreements, lease payments, including VAT, are the following:

In 2020 EUR 386 090 In 2021 EUR 299 530 From 2022 to 2025 EUR 119 281

(28) Subsequent events

No significant subsequent events have occurred in the period from the year-end to the date of these financial statements that would require adjustments to be made to these financial statements or disclosures added within the financial statements. The Russia-Ukraine war is not expected to have material effect on the operations of the Company. The Company does not plan to enter into transactions with Russia, Belarus and Ukraine.

Chairman of the Board Jānis Birks

Member of the Board Juris Imaks

Member of the Board Anatolijs Ahmetovs

26 August 2022

Chief Accountant Gunta Kaufmane