SALE OF ACCOUNTS RECEIVABLE

6 Months Ended

Jun. 30, 2012

SALE OF ACCOUNTS RECEIVABLE

3. SALE OF ACCOUNTS RECEIVABLE

On February 24, 2011, two subsidiaries of the Company, namely CEDC International sp. z o.o. (“CEDC International”) and Polmos Białystok S.A. (“Polmos Bialystok”), entered into factoring arrangements (“Factoring Agreements”) with ING Commercial Finance Polska (“ING Polska”) for the sale up to 290.0 million Polish zlotys (approximately $85.6 million) of receivables. On January 1, 2012, the total limit under the Factoring Agreements was reduced from 290.0 million Polish zlotys ($85.6 million) to 250.0 million Polish zlotys ($73.8 million) and from March 1, 2012 it was further reduced to 220.0 million Polish zlotys ($64.9 million). The Factoring Agreements were to mature on April 30, 2012, however on April 25, 2012 the Company extended these agreements until September 30, 2012 with further decrease of the total limit from April 25, 2012 to 200.0 million Polish zlotys (approximately $59.0 million). On September 28, 2012 the Company further extended these agreements until December 31, 2012 with decrease of the total limit to 170.0 million Polish zlotys (approximately $50.2 million).

As of June 30, 2012, the total balance of receivables under factoring amounted to 181.7 million Polish zlotys (approximately $53.6 million) of the 200.0 million Polish zlotys limit available.

For the three and six months ended June 30, 2012, the Company sold receivables in the amount of 394.6 million Polish zlotys ($116.5 million) and 697.4 million Polish zlotys ($205.8 million), respectively and recognized a loss on the sale in the statement of operations and comprehensive income in the amount of 3.1 million Polish zlotys ($0.9 million) and 6.3 million Polish zlotys ($1.9 million), respectively in respect of the non-recourse factoring. The Company has no continuing involvement with the sold non-recourse receivables.

As of June 30, 2012, the liabilities from factoring with recourse amounted to $1.4 million and are included in the short term bank loans in the balance sheet. Corresponding receivables from factoring with recourse are presented under accounts receivable in the balance sheet.