• Suomi
• English

Tecnotree Corporation’s Auditor’s Report

Tecnotree Corporation
Stock Exchange Release
18 March 2015 at 8.32 am EET

This is the Auditor’s report for the year ended 31 December 2014 to the Annual General Meeting of Tecnotree Corporation:

This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the report is legally binding.

AUDITOR’S REPORT

To the Annual General Meeting of Tecnotree Corporation

We have audited the accounting records, the financial statements, the report of the Board of Directors, and the administration of Tecnotree Corporation for the year ended 31 December, 2014. The financial statements comprise the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, statement of changes in shareholder’s equity and consolidated cash flow statement and notes to the consolidated financial statements, as well as the parent company’s balance sheet, income statement, cash flow statement and notes to the financial statements.

Responsibility of the Board of Directors and the President and CEO

The Board of Directors and the President and CEO are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the preparation of financial statements and the report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company’s accounts and finances, and the President and CEO shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the report of the Board of Directors are free from material misstatement, and whether the members of the Board of Directors of the parent company or the President and CEO are guilty of an act or negligence which may result in liability in damages towards the company or have violated the Limited Liability Companies Act or the articles of association of the company.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements and report of the Board of Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and the report of the Board of Directors.

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

Basis for a qualified opinion

As presented in Note 18. Trade and other current receivables, the consolidated balance sheet includes project accounting receivables totaling EUR 22.5 million related to long-term projects. Thereof EUR 12.7 million relates to a project for which we have not received sufficient appropriate audit evidence for measurement purposes. This receivable is also included in the project accounting receivables in the parent company’s balance sheet.

A qualified opinion on the consolidated financial statements

In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, except for the possible effects of the matter described in Basis for a qualified opinion above.

A qualified opinion on the parent company’s financial statements and Board of Directors' Report

In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland, except for the possible effects of the matter described in Basis for a qualified opinion above. The information in the report of the Board of Directors is consistent with the information in the financial statements

Remark

As stated in the Board of Directors' Report and the financial statements, the parent company's equity was less than one half of share capital on 31 December 2014. We would like to remark that the parent company’s equity has already fallen below the limit required under the Limited Liability Companies Act (Chapter 20, section 23) during the financial year and the Board of Directors of the parent company has not without delay taken measures required under the Act.

Emphasis of matter

Financial position

We draw attention to the Note 24 Financial risk management to the consolidated financial statements, Accounting principles for the consolidated financial statements, section Going concern basis and to the Board of Directors' Report, section Risks and uncertainty factors. As disclosed in these sections, the financial position of the Group and the parent company is tight and there are material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern. The Company had all its credit facilities in full use and the Company has partly breached financing-related covenants. During the financial year the parent company has had to rely on very short-term financing obtained under separate agreements, totaling EUR 2.8 million. The parent company has continuously had significant amounts of overdue trade payables to its suppliers during the year. On 5 March 2015 the Company decided to apply for debt restructuring proceedings as its liquidity position has further weakened.

Going concern principle and debt restructuring proceedings

We draw attention to the sections dealing with the debt restructuring proceedings in the consolidated financial statements and the Board of Directors' Report, as well as to the sections discussing going concern basis under the accounting policies for the consolidated financial statements and under the parent company’s accounting principles.

On 5 March 2015 the Company filed an application for debt restructuring proceedings with the District Court of Espoo and on 9 March 2015 the District Court of Espoo decided to commence the corporate debt restructuring proceedings. The Administrator has to prepare and deliver the draft restructuring program to the District Court of Espoo on 6 July 2015 at the latest.

Tecnotree Corporation has comply with the plan to be authorized by the court. As explained in the Board of Directors' Report and the accounting policies for the consolidated financial statements this involves risks. Tecnotree Corporation has to fully take care of its post-restructuring obligations which requires sufficient cash flow financing, i.e. payments from clients. As explained in the Board of Directors' Report and the accounting policies for the consolidated financial statements, after filing the application for debt restructuring proceedings the Company is likely to face problems, especially with those companies from which Tecnotree has previously made purchases. Also clients may have doubts about risks related to Tecnotree which may impact future orders to be received.

There are material uncertainties relating to the going concern basis of the Company. The financial position described above and debt restructuring proceedings indicate the existence of a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. Should the going concern basis prove inappropriate in the foreseeable future, adjustments to the carrying amounts of Tecnotree Corporation’s and the Group’s assets would be necessary.

Customer receivables

We also draw attention to the section Risks and uncertainty factors in the Board of Directors' Report and the subsections Carrying out customer projects, profitability, forecasting, and Risks relating to international operations, receivables and developing markets. As disclosed in Note 18. Trade and other current receivables to the consolidated financial statements, customer and project accounting receivables need significant amount of working capital, totaling EUR 42.2 million. Part of these items include measurement risk higher than normally, as explained in the Board of Directors' Report, section Risks and uncertainty factors.

Goodwill

Consolidated assets include goodwill amounting to EUR 16.6 million. It is further stated in the Board of Directors’ Report, section Risks and uncertainty factors, that there are risks relating to goodwill and to management's financial expectations and assumptions used in the goodwill impairment tests.

Interim Report for period from 1 January to 30 June 2014

We refer to the Securities Market Act, Chapter 7, section 8, subsection 2 and state that the matters described above shall be considered when assessing the compliance of the consolidated interim report with the related rules and regulations for the period from 1 January to 30 June 2014.

Helsinki March 17, 2015

KPMG Oy Ab

Toni Aaltonen
Authorized Public Accountant




TECNOTREE CORPORATION

DISTRIBUTION
NASDAQ OMX Helsinki Ltd
Main Media
www.tecnotree.com

About Tecnotree
Tecnotree is a global provider of telecom IT solutions for the management of products, customers and revenue. Tecnotree helps communications service providers to transform their business towards a marketplace of digital services. Tecnotree empowers service providers to monetise on service bundles, provide personalised user experiences and augment value throughout the customer lifecycle. With over 1000 telecom experts, Tecnotree serves more than 100 service providers in over 70 countries. Tecnotree is listed on the main list of NASDAQ OMX Helsinki with the trading code TEM1V. For more information on Tecnotree, please visit  www.tecnotree.com