Motion to restore trading in MBF Group shares

The Management Board of MBF Group SA has accepted, with due respect and understanding, the decision of the Issuers Supervision Team / Issuers Department of the Warsaw Stock Exchange S.A., communicated by e-mail, to uphold the suspension of trading in the shares of MBF Group SA, which took place in accordance with the provision of Resolution 503/2023 of the WSE Management Board dated June 1, 2023. Nevertheless, since, according to our assessment and the justification provided, the further suspension is supported by the decision of the Issuers Department, which is, as you can read in the Exchange materials, discretionary, we have requested the suspension or conditional suspension of trading in MBF Group SA shares. Full text of the proposal below.

Ladies and Gentlemen, Dear Director,

Acting on behalf of and for the benefit of MBF Group SA with its registered office in Warsaw (hereinafter also: “Company”, “Issuer”), I kindly request the repeal or conditional repeal of the WSE Management Board’s Resolution of June 1 regarding the suspension of trading in MBF Group SA shares.

First of all, I would like to point out that the aforementioned suspension of the Issuer’s shares was caused by a violation of the ATS Regulations regarding the completeness of the submitted separate and consolidated annual report. It is beyond doubt and any criticism that the reports were not submitted under the terms and conditions of § 6.1 and § 7.1 of the ATS Regulations, due to the lack of attached audit reports performed by an independent auditor. The deficiency was corrected immediately upon receipt of the auditor’s reports, i.e. on the date of their receipt (EBI current reports dated June 5, 2023).

In addition, the annual reports were supplemented with an appropriate commentary in accordance with the provisions of § 6.1.8) and § 7.1.8) of the ATS Regulations, i.e.: there was a comprehensive presentation of “the position of the management board or managing person, together with the opinion of the supervisory board or person supervising the issuer relating to the qualified opinion, negative opinion or refusal to express an opinion on the financial statements expressed by the audit firm in the audit report.” In accordance with the guidelines of the ATS Regulations, detailed reference was also made to: a) an indication of the impact of the subject of the qualification, negative opinion or refusal to express an opinion, on the annual financial statements, including results and other financial data, and b) a presentation of the actions taken or planned by the issuer in connection with the situation.

In the opinion of the Issuer’s management, the aforementioned actions have fulfilled all the obligations imposed on the Company, which are regulated by the provisions of the ATS Rules and Regulations, and should form the basis for amending the resolution to suspend the Company’s shares. As a basis for the further suspension, it was pointed out that “in accordance with the provision of § 17 para. 3 of the ATS Rules, current and periodic information provided by issuers to the public, referred to in Appendix No. 3 to the ATS Rules, should: 1) contain information that reflects the specifics of the situation described in a true, fair and complete manner, 2) be prepared in a way that allows investors to assess the impact of the information provided on the economic, property and financial situation of the issuer or on the price or value of the listed securities.”

The Issuer’s Management Board is of the opinion that the submission of the audit report, which includes the refusal to issue an opinion (very carefully explained and described) – regardless of the Issuer’s position towards the refusal to issue an opinion – constitutes and contains a true, fair and complete picture of the audit report. In addition, the report allows investors to assess the impact of the information provided on the economic, property and financial situation of the issuer or on the price or value of the listed securities. On the basis of the auditor’s report, together with the relevant commentary of the management and supervisory board, investors and Shareholders can make their own assessment of the current situation and then react to it by selling or buying shares, or by refraining from selling or buying shares.

Maintaining the Resolution suspending trading in the Issuer’s shares closes any possibility for Shareholders to react to the publication of complete annual reports that meet § 6.1 and § 7.1 of the ATS Regulations. Therefore, the Company’s Board of Directors – without escaping its own responsibility to Shareholders and the common law (Commercial Companies Code, Accounting Act, etc.) – takes the position that the aforementioned. The decision hits the Issuer’s Shareholders the hardest. Transmission of the separate and consolidated annual report, together with the report of the auditor who declined to issue an opinion, for the so-called “annual report”. informed investor is the same information as the issuance of any other opinion. On the basis of the annual reports provided, Shareholders were therefore given an objective opportunity to assess for themselves the situation found, particularly with regard to the two critical auditor’s reports.

The decision upholding the suspension perversely results in the NewConnect exchange market (which by definition has fewer regulations and obligations) becoming more restrictive than the regulated market, where a refusal to issue an opinionis NOT a reason to suspend trading in shares. Hardly any companies undergoing restructuring or bankruptcy are listed on both the alternative and regulated markets , and this is objectively assessing the situation for the entity and its shareholders “slightly” worse than the annual report of the auditor with a refusal to give an opinion. At this point, I would like to point out that despite the auditor’s strongly critical assessment, she did not question the threat to the Company’s going concern in the report.

As mentioned above, the decision to uphold the Share Suspension Trading Resolution was made despite the fulfillment of all points of the ATS Regulations regarding the publication of annual reports. On the other hand, the continuation of the suspension itself was taken on a discretionary basis, as you can read in the article on issuers’ disclosure obligations(https://newconnect.pl/obowiazki-informacyjne-emitentow). As you can read there, the Issuers Department of the WSE considers a certain type of annual reports to be incomplete.

We fully understand the good intentions on eliminating companies that damage the image of the NewConnect market, and we fully support the process of removing “rotten apples.” This harms the image of the market, harms the companies listed there and ultimately harms and hinders the proper assessment of the quality of the entities. However, in the Issuer’s opinion, it would be advisable to maintain appropriate proportions in the WSE’s actions, so that the harshest sanctions are directed against entities that repeatedly violate the ATS Rules (all the time keeping in mind first and foremost the interest and safety of Shareholders, whose deprivation of share trading is a punishment not for the Company, but for themselves).

However, since the assessment of the incompleteness of the annual reports is discretionary, we hope to change it, when considering an application for revocation of the Resolution or conditional revocation of the Resolution, we strongly urge you to consider the following facts:

1. The proximate cause of the current accidents was the tragic event we reported on in EBI RB No. 2/2023, dated February 10, 2023, i.e. death p. Robert Meller, the auditor with whom the Issuer had a contract to audit the Company for 2022.
2. Learning of the occurrence of the tragic event necessitated the need to cooperate as soon as possible with an auditing firm that has appropriate audit deadlines, while agreeing to the Issuer’s reporting cut-off dates. Regardless of the final outcome, this has been achieved, as the Company reported in EBI RB 5/2023 dated February 28, 2023.

Moreover, while critically evaluating the Issuer’s actions at the same time, please keep in mind that:

1. Since its IPO in 2012 to date, the Company has always received its financial audit reports as completely correct and additionally unqualified.
2. For several years, the Company has adopted a policy of publishing quarterly and annual reports a few weeks before the final (boundary) deadline, and except for an incident in 2020, we meet these deadlines.
3. In the current year, too, the original publication date for the financial statements was far ahead of the final publication date, but the events described in the commentary on the reports prevented us from meeting the deadlines.
4. After receiving the current independent auditor’s audit report – we immediately made it public without making the document secret or extending the publication date until everything was in the Issuer’s favor.
5. After receiving the refusal of the opinion, the Company’s AGM approving the report was immediately canceled and corrective measures were taken, including the decision to re-examine the reports (taking into account the changes about which the Issuer has no doubts). Reaching back to historical events, it is not difficult to identify companies that published nothing at all and left Shareholders with the problem on their own (to the point of exclusion from the market, which in itself is most beneficial to the avoiding managers).
6. The critical assessment contained in the auditor’s reports, regardless of the opinion issued by management and the board of directors in this regard, does not at any time or to any extent even suggest a threat to the Company’s continued operations.

In view of the above, we kindly request that the above situation be reassessed and trading in the Issuer’s shares be suspended or conditionally suspended. In our humble opinion, the decision we are asking you to make will also promote the proper performance of ongoing disclosure obligations in the context of negative and incidental events that may occur in the future, over which the Issuer has no control. In addition, the suspension of trading provides a real opportunity for the Company’s shareholders and all investors to react, who should be able to protect their capital and manage their risk in the face of the situation.

At the same time, the Company’s Management Board informs the Issuer Supervision Team and the Issuers Department of the WSE that, notwithstanding the above, the Company’s commitment to promptly revise its 2022 financial statements for re-examination by an independent auditor and subsequent approval by the Annual General Meeting of Shareholders remains in effect.

With best regards -.
Janusz Czarnecki, President of the Management Board
MBF Group SA

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