TenderHut S. A. Board Report on Capital Group operations ...

TenderHut S. A. Board Report

on Capital Group operations

year 2016

Revenue 2016

Revenue according to operations Revenue according to sector

IT services

Software

Hardware

Technological

Research and Development Education Commercial

Financial

Health services

Other

Revenue according to country of origin Revenue according to company

UK

Poland

USA

Switzerland

Sweden

Other

Results during 2010 - 2016

m

illio

ns

PLN

Revenue Profit / Loss

Listing of contents

1. Description of TenderHut S.A. Capital Group's organization with specification of units subject to

consolidation .................................................................................................................................................................... .... 5

a) Companies entering into TenderHut S.A. Capital Group…………………………………….…………………... 5

b) Share of dominant unit in the capital of affiliated companies as of 31 December 2016…………... 6

c) Method of consolidation……………………………………………………………………………………………………. . 6

2. General information about TenderHut Capital Group……………………………………………………………. 6

3. Divisions of the Capital Group……………………………………………………………………………………………… 8

4. History of the Capital Group………………………………………………………………………………………………… 8

5. TenderHut Capital Group's synergy…………………………………………………………………………………….. 9

6. TenderHut Capital Group's mission, vision and values…………………………………………………………. .9

7. TenderHut Capital Group's strategy………………………………………………………………………………………9

8. Basic information about products, services and ready markets……………………………………………..10 9. Effects of changes in the economic unit's structure, including due to merging of economic units, takeover or sale of the Capital Group's units, capital investments, division, restructuring and abandonment of activity ………………………………………………………………………………………………………………………………12 10. Significant events over the course of the Capital Group's growth 12

a) Significant contracts .................................................................................................................. 12

b) Other significant events over the course of the Capital Group's growth ................................... 13

c) Important achievements in research and development .............................................................. 14

11. Forecasts and plans ................................................................................................................... 14

12. Changes in the basic principles of managing the company and its Capital Group …................16 13. Shareholder structure ................................................................................................................ 16

14. Ongoing proceedings before a court, relevant body for arbitration

proceedings or body of public administration ........................................................................... 17

15. Information concerning one or more significant transactions between the Capital Group or one of

its subsidiaries and affiliated entities under conditions other than market conditions ……………...17

16. Dividends paid .......................................................................................................................... 17

17. Salaries, bonuses and benefits of Management Board and Supervisory Board members ......... 17

18. Loans, credit, advances and payments of a similar nature paid to persons

entering into management, supervisory or administrative bodies of trading companies .......... 17

19. Average employment during fiscal year, with division into occupational groups .................... 17

20. Information concerning the contract signed with an entity authorized to audit financial statements and

this entity's remuneration .......................................................................................................... 18

21. Information concerning transactions with affiliated entities ..................................................... 18

22. Consolidated financial statement .............................................................................................. 19

23. Description of basic risks and threats ........................................................................................ 23

Commentary of the President of the Board of TenderHut S.A. on the Capital Group's operations in 2016

To whom it may concern,

at the end of 2016, TenderHut Capital Group has

worked out nearly PLN 9 mln consolidated

revenue, reaching a 39% dynamic compared to

2015 (PLN 6.44 mln). The year 2016 ended with

minimal net profit at a level of PLN 12,000, which

significantly deviates from the profit achieved in

2015 (PLN 1.22 mln).

The main reason for this situation was the

necessity of changing the Capital Group's

strategy, which was based on the execution of

public projects in 2015. Due to the significant

reduction in the number of public procurement

proceedings in Poland in 2016, we implemented

a new strategy based on foreign expansion and

acquisition of foreign clients. In 2016, we

invested in building our European sales network

and in searching for and training foreign

partners. At this time, we already have 4 foreign

offices in: Stockholm, Copenhagen, London and

Zurich.

Waldemar Birk President of the Board, TenderHut S.A.

In order to secure the execution of projects and recruitment of specialists, we acquired two local IT

companies: LemonTea and QBurst Poland, whose resources were incorporated into the SoftwareHut

company. To ensure the complementarity of TenderHut Group's offer, we founded a new company,

LegalHut, concerned with legal consulting within the scope of IT projects, and we transformed QBurst

Poland, acquired at the end of the year, into the ProtectHut company, which specializes in information

security.

In 2016, the following entities joined the ranks of TenderHut Group's clients: Deloitte Consulting, PwC

Experience Lab, Deloitte Digital, PKO Leasing S.A., Zaiks, Intergraph Polska and Contento Wassum.

In 2017, we plan to continue our growth strategy through foreign expansion and organic growth linked

to acquisitions on the IT market.

Waldemar Birk President of the Management Board

1. Description of TenderHut S.A. Capital Group's organization with specification of units subject to consolidation.

TenderHut S.A. Capital Group was created in 2015 as a result of the purchase by TenderHut S.A. of

shares in two limited liability companies. Thus, besides the dominant entity, two Companies were part

of TenderHut S.A. Capital Group as of 31 December 2015: Solution4Labs Sp. z o.o. and SoftwareHut Sp.

z o.o. In 2016, TenderHut S.A. purchased shares or took over contracts in the other two companies. In

relation to the above, besides the dominant entity, four Companies were part of TenderHut S.A. Capital

Group as of 31 December 2016: Solution4Labs Sp. z o.o., SoftwareHut Sp. z o.o., LegalHut Sp. z o.o. and

QBurst Poland Sp. z o.o.

a) Companies entering into TenderHut S.A. Capital Group

75% shares

100% shares

100% shares

100% shares (On 05/06/2017, the name QBurst Poland Sp. z o.o. was changed to ProtectHut Sp. z o.o.)

b) Share of dominant unit in the capital of affiliated companies as of 31 December 2016

Status as of 31/12/2014 Share of

TenderHut S.A.

Non-controlling

shares

SoftwareHut Sp. z o.o. 75% 25%

Solution4Labs Sp. z o.o. 100% 0%

LegalHut Sp. z o.o. 100% 0%

QBurst Poland Sp. z o.o. * 100% 0%

* QBurst Poland Sp. z o.o is a subsidiary, as TenderHut S.A. had 100% of votes in the General Assembly of Shareholders as of the balance sheet date.

c) Method of consolidation

Statements of subsidiaries are consolidated using the full method. In the full method of consolidation, the full

values of individual items from corresponding statements of the dominant entity and subsidiaries are summed.

After these amounts are summed, exclusions and other corrections are made pursuant to the Act.

The following are subject to exclusion:

- value of shares owned by dominant body and other consolidated units in subsidiaries expressed in the price of purchase along with the part of net assets of subsidiaries appraised according to fair value that corresponds to the share of the dominant unit and other consolidated units of the Capital Group in subsidiaries as of the date on which control was first exercised over them;

- effect of mutual transactions between consolidated units.

2. General information about TenderHut Capital Group

TenderHut S.A.

Headquarters: ul. Sienkiewicza 110, 15-005 Białystok

Country of registration: Poland

NIP (Taxpayer ID No.): 5423161397 REGON (Statistical ID No.): 200346301

KRS (National Court Register): 0000355489

Amount of initial capital: PLN 150,000.00 Website: www.tenderhut.pl

Composition of the Board:

Waldemar Birk - President of the Board Robert Strzelecki - Vice President of the Board Anna Serpina-Forkasiewicz - Vice President of the Board until 18/10/2016 October 18th, 2016 – TenderHut S.A. Supervisory Board passes resolution concerning the dismissal of Ms. Anna Serpina-Forsakiewicz from the position of Vice President of the Board. Composition of Supervisory Board: Tomasz Paweł Krześniak - Supervisory Board Member and Chairman of the Supervisory Board since 22/03/2017 Agnieszka Mróz - Supervisory Board Member and Vice Chairman

http://www.tenderhut.pl/

Marek Forkasiewicz - Supervisory Board Member and Chairman until 21/03/2017

Wojciech Strzelecki - Supervisory Board Member since 21/03/2017

March 21st, 2017 – General Assembly of Shareholders passes resolution to dismiss Mr. Marek

Forkasiewicz from the position of Supervisory Board Member and a resolution appointing Mr.

Wojciech Strzelecki as Supervisory Board Member.

Object of activity:

The Capital Group consists of 4 mutually cooperating subsidiaries.

SoftwareHut Sp. z o.o. SoftwareHut specializes in designing, adapting and expanding IT

systems (www portals, mobile applications, dedicated systems and many others), offering

broad IT outsourcing services. SoftwareHut also renders programming

services for companies belonging to the Group.

Legal status: Limited liability company

Headquarters address: Sienkiewicza 110, 15-005 Białystok


NIP (Taxpayer ID No.): 9662098244

REGON (Statistical ID No.): 361904992


Amount of initial capital: PLN 5,000.00

Website: www.softwarehut.com

Solution4Labs Sp. z o.o. Solution4Labs renders services for implementation and adaptation of LIMS-class systems to

laboratories' individual needs.


Headquarters address: Sienkiewicza 110, 15-005 Białystok





Amount of initial capital: PLN 5,000.00

Website: www.solution4labs.pl

LegalHut Sp. z o.o. LegalHut renders legal consulting and substantive consulting services within the scope of public

procurement proceedings as well as tender proceedings in the field of IT products and services.


Headquarters address: Tamka 16/12, 00-349 Warsaw




http://www.softwarehut.com/

http://www.solution4labs.pl/


Amount of initial capital: PLN 5,000.00 Website: www.legalhut.pl

ProtectHut Sp. z o.o.

ProtectHut is focused on information security problems, supporting clients in implementing European

directives concerning security in cyberspace.

Headquarters address: ul. Sienkiewicza 110, 15-005 Białystok





Amount of initial capital: PLN 5,000.00 Website: www.protecthut.com

3. Divisions of the Capital Group

TenderHut S.A. has a branch in Warsaw (00-349), ul. Tamka 16/12

TenderHut S.A. also has foreign representative branches:

Sweden (Stockholm),

Denmark (Copenhagen),

United Kingdom (London), Switzerland (Zurich).

4. History of the Capital Group

PHASE Start of activity

TenderHut was created in 2010 under its original name, CodeArch, specializing in building web portals,

business applications as well as professional hosting of online applications and portals.

PHASE Part of the SMT Group

In 2012, the company became a part of the SMT Software company.

For three years, CodeArch served the function of the developer division of the SMT Group in Białystok.

PHASE Changes in ownership

In November 2014, Waldemar Birk, Anna Serpina-Forkasiewicz and Robert Strzelecki started talks with

the SMT Group about buying back CodeArch.

Negotiations were finally concluded and a sale agreement was signed in March 2015. CodeArch became

independent from the SMT Group once more.

PHASE New strategy and the beginning of the Capital Group

In April 2015, a subsidiary was founded - Solution4Labs (laboratory systems).

In May 2015, the company's name was changed from CodeArch to TenderHut.

In June 2015, a subsidiary was founded - SoftwareHut (software).

In February 2016, a subsidiary was founded - LegalHut (legal consulting in the field of IT).

In March 2016, LemonTea was acquired and merged with SoftwareHut.

http://www.legalhut.pl/

http://www.protecthut.com/

In December 2016, QBurst Poland was acquired (Polish division of the Indian QBurst Technologies).

In February 2017, the LIT company was acquired and its resources merged with SoftwareHut.

In June 2017, QBurst Poland's name was changed to ProtectHut.

5. TenderHut Capital Group's synergy

Companies in the TenderHut Capital Group function as connected vessels and draw benefits from the

effects of synergy. TenderHut Group provides all of its subsidiaries with services related to administration,

recruitment, accounting, marketing and PR and creates further foreign branches where it sells the services

of all subsidiaries.

• In offering their services, LegalHut, Solution4Labs and ProtectHut outsource IT programming to

SoftwareHut.

• LegalHut provides legal consulting for all companies in the Group.

• ProtectHut provides information security-related services to all companies in the Group.

Cross-selling and complementarity of services affords the TenderHut Group a constant influx of new

clients. Employing the specialized know-how of each subsidiary and its own resources ensures that the

TenderHut Group maximizes profits.

6. TenderHut Capital Group's mission, vision and values Company vision

TenderHut is a Group of technologically innovative companies. IT systems are currently an integral part of

everyone's daily life. They support people's basic living needs and support production processes in all

branches of the economy, supply, management and services. TenderHut Group wishes to create these

systems and provide the services related to them.

Company mission

The world of business is continuously confronted with growing competition and constant technical,

operational and economic changes. TenderHut Group wishes to deliver dedicated and specialized services

to provide clients with the capabilities of meeting the challenges of their business life.

TenderHut's values

• People

• Innovation in business

• Integration of the IT industry

7. TenderHut Capital Group's strategy

The strategy of the TenderHut Group adopted for 2016-2020 provides for maximization of profits through

focus on:

• increasing the synergy effect between companies in the Group,

• organic growth based on acquisition of IT entities,

• creating a complementary offer for clients that is consistent with current market demands,

• offering original, innovative IT products and services,

• foreign expansion.

1 1 GUS (Central Statistical Office) - Report: Structural changes of groups of entities in the national economy in the REGON register, 1st half of 2016 2 According to https://www.crn.pl/aktualnosci/polski-rynek-it-bedzie-wart-34-mld-zl-wzrost-przyspieszy - accessed 24/01/2017 3 Based on: ABSP.pl - 2015 Rynek usług IT w Polsce [IT services market in Poland], pp. 4 - 20

At the same time, respect for employees' interests, their personal growth and broadening of their professional

horizons is the constant center of attention of TenderHut Group's Board.

The strategic objective is to maximize profits while simultaneously maintaining healthy employee - employer -

client relations.

8. Basic information about products, services and ready markets

The activity of TenderHut S.A. Capital Group can be classified into the following areas:

• IT services

- Process outsourcing (original technological products offered on the market for the purpose of

optimizing the business processes of potential clients - SoftwareHut Sp. z o.o., Solution4Labs Sp. z o.o.)

- Technological outsourcing (creation of business software and rendering service with its use as well as

IT specialist outsourcing services - SoftwareHut Sp. z o.o., Solution4Labs Sp. z o.o.)

• Consulting services

- Outsourcing of sales - TenderHut S.A.

- Public procurement proceedings – LegalHut

- Legal aid, audits and training – LegalHut

- Information security – ProtectHut

- Optimization of work processes at laboratories - Solution4Labs

• Sale of computer hardware and software

The IT services sector in Poland is growing dynamically. According to data from GUS (Central Statistical

Office), the number of IT companies has grown from 40.2 thousand to 79.6 thousand1, almost two-fold, over

six years (2009-06/2016). The value of the IT services sector in Poland is estimated at about 29% of the value

of the entire IT market, which reached a level of PLN 34 bln2 in 2016. The value of the Polish IT services

market has grown by approx. 4% since 2014 and now amounts to more than USD 3.5 bln (approx. PLN 14 bln).

The highest market value was noted in project services (over 50% of the value of the IT services market -

about USD 1.9 bln), including system integration above all. Support services generated 29.5% while

outsourcing services generated 18.8% of the value of the IT services market. The value of the IT services

market in Poland makes up about 1.7% of the global market for these services3. According to IDC, the financial

sector was the largest recipient of IT services in 2013 (24.1% share in the market), followed by administration

(20.5%), media and communications (ICT) (16.4%), and finally the production sector (14.3%). According to

analyses by IDC, the Polish IT services market will grow 4% on average over the course of the next five years.

In 2019, its value in Poland will exceed USD 4 bln.

https://www.crn.pl/aktualnosci/polski-rynek-it-bedzie-wart-34-mld-zl-wzrost-przyspieszy

https://www.crn.pl/aktualnosci/polski-rynek-it-bedzie-wart-34-mld-zl-wzrost-przyspieszy

4 Poland IT Services Market 2014–2018 Forecast and 2013 Analysis, IDC; IDC CEE Black Book Q3/2014.

In 2016, the most important market for TenderHut S.A. Capital Group was the market related to IT services, mainly IT outsourcing. Revenue gained from this segment of activity made up 67% of the Group's total revenue. Computer software sales made up 32% and hardware sales 1% of revenue4.

Revenue according to type 2016

IT services 67%

Software 32%

Hardware 1%

Over 50% of the Capital Group's revenue in 2016 was generated by clients originating from

technological companies, for which the Group's subsidiaries perform projects as subcontractors.

Another significant branch of activity is Research & Development and Education - clients from this

group generated 38% of consolidated revenue. TenderHut ranked 20th in Computerworld's

TOP200 ranking, in the category "Largest suppliers of IT solutions and services for the education

and R&D sector in 2016".

Revenue according to sector 2016

Technological 51%

Research and Development, Education

38%

Commercial 5%

Financial 2%

Health services 2%

Other 2%

According to the strategy it has adopted, the Capital Group intensified its efforts to internationalize

the operations of subsidiaries in 2016. Foreign expansion bore fruit in the form of export revenues,

which made up 62% of total revenue, and the remaining 38% of revenue originating from Polish

clients is largely made up of contracts under which the Capital Group's subsidiaries work as

subcontractors for end-clients from Japan, France and the United Kingdom.

Revenue according to country 2016

UK 46%

Poland 38%

USA 7%

Switzerland 3%

Sweden 3%

Other 3%

9. Effects of changes in the economic unit's structure, including due to merging of economic units,

takeover or sale of the Capital Group's units, capital investments, division, restructuring and

abandonment of activity.

LegalHut

A new subsidiary, LegalHut Sp. z o.o., was created in February 2016. The company was founded

under Company Deed of Association dated February 1st, 2016, and on February 3rd, 2016, it was

registered in the Business Register of the National Court Register kept by the District Court in

Warsaw. LegalHut renders a series of specialized services pertaining to public procurement

proceedings and provides legal services for both contractors and employers. The law office

specializes in the fields of public procurement proceedings, copyright law, industrial property law,

law of obligations related to the preparation of drafts of civil-legal contracts intended for awarding

of a public order, as well as in conducting negotiations and solving problems over the course of IT

projects.

LemonTea

In March, TenderHut Group acquired the rights to the logo of the LemonTea company from

Białystok and merged its contracts and resources with the programming-related SoftwareHut

subsidiary. The owner of LemonTea - Robert Matyszewski - was appointed Vice President of the

Board for sales at SoftwareHut. LemonTea specialized in front-end technologies, and advertising

agencies as well as start-ups on the UK, DE, USA markets constituted their ready markets.

QBurst Poland

In late 2016 and early 2017, TenderHut Group purchased 100% of shares in QBurst Poland, which

served the function of the developer branch of QBurst Technologies, headquartered in India. The

merging of this entity expanded the offer of SoftwareHut - the Group's programming company -

with respect to the latest technologies employing machine learning, the Internet of Things and

Azure cloud.

10. Significant events over the course of the Capital Group's growth

a) Significant contracts

TenderHut

In 2016, TenderHut signed cooperation agreements with Deloitte Consulting, Deloitte Digital,

Intergraph Polska, iAlbatros S.A., PKO Leasing S.A., Procurence Sp. z o.o., iBrows AG (currently PwC

Expirience Lab), Azumio Inc., Datavisual Inc., Delaware, Nomination, among others. Under these

agreements, it renders IT outsourcing services, delivers IT software and hardware.

SoftwareHut

In 2016, SoftwareHut signed cooperation agreements with Contento Wassum Academy, Scratch

App, Asseco S.A., Azumio and DataVisual, among others. Under these agreements, it provides an

array of specialized services related to both front-end and back-end development.

LegalHut

In 2016, LegalHut signed cooperation agreements with the City Hall and Commune Office of

Piaseczno, rdGiS, DahliaMatic, LSLABS, Wrocław Institute of Spatial Information and Artificial

Intelligence Applications, among others. Under these agreements, LegalHut provides legal

consulting and legal aid services to support IT projects.

b) Other significant events over the course of the Capital Group's growth

Partnership with Thermo Fisher Scientific

TenderHut and Thermo Fisher Scientific signed a contract for distribution of a laboratory

information management system (LIMS). SoftwareHut had already cooperated with Thermo

Fisher Scientific nearly 1.5 years ago by supporting a client's LIMS implementations in 600

laboratories throughout 100 countries around the world. In light of the excellent results of

cooperation, both companies decided to sign a partnership agreement for distribution of Thermo

Fisher Scientific laboratory software. Thermo Fisher Scientific manufactures laboratory

equipment and software, generates 17 bln dollars in revenue and provides 50,000 jobs in 50

countries around the world. SoftwareHut's specialists have broad experience in LIMS-class

projects on account of their implementations of Thermo Fisher systems. The jointly offered

service includes a concept presentation of the target program, covering the system's architecture,

basic functions and parameters, license purchasing and integration of all components. The

inauguration of the LIMS system will be concluded by training in its use. Nevertheless, future

actions for developing and maintaining the system following successful installation are important.

Deloitte FAST

Deloitte's Technology Fast 50 Ranking lists the fastest-growing technology companies from

Central and Eastern Europe based on revenue growth over the last four years. The criteria of the

ranking's main category include: active on the market for at least four years and operational

revenue no less than EUR 50,000 during 2012 - 2015. TenderHut can claim a revenue growth

dynamic of over 389%. Revenue for 2012 was PLN 1.14 mln, and in 2015 - PLN 5.57 mln. This

success placed it 38th in the entire ranking and 13th among the 21 Polish entities. Meanwhile, it is

in 293th place in the "Deloitte Technology Fast 500" ranking covering the EMEA region - Europe,

Africa and the Middle East. Out of the 15 Polish companies in the ranking, TenderHut is the 13th.

Stockholm Branch

In October 2016, TenderHut Group opened its first foreign branch. Sweden is one of the most

innovative countries in the world. Particular emphasis is placed on research and development in

technology. IT specialists are an investment in the technological progress of enterprises. The

TenderHut Capital Group meets the demands of Scandinavian markets. Its new branch supports

the sale of services by all of the Group's companies: SoftwareHut (IT outsourcing), LegalHut (legal

consulting on tender proceedings for IT products and services), Solution4Labs (LIMS-class

laboratory systems) and local customer service on the Scandinavian market. Sweden is a good

place to expand the reach of the entire TenderHut Group to other Scandinavian countries -

Norway and Denmark - as well as Finland. Andrzej Senator, a business professional with

achievements in increasing revenue and profits, is responsible for managing the Stockholm office.

He has over 30 years of experience in strategic, operational and sales management in leading

enterprises active in Sweden and Poland. He has been tasked with expanding the company's

activity to Nordic markets. He is fluent in Swedish and English.

Copenhagen Branch

In November 2016, TenderHut Group opened its second foreign branch in Denmark. The

Copenhagen branch supports the sale of services by all of the Group's companies: SoftwareHut (IT

outsourcing), LegalHut (legal consulting on tender proceedings for IT products and services),

Solution4Labs (LIMS-class laboratory systems) and local customer service on the Danish market.

Petter Ottesen, who has many years of experience in IT, is the local partner responsible for

managing the branch. By working as a programmer, database specialist, consultant and salesman

for many international brands (including Siemens, Software AG, Bull France, DLH Group, Fujitsu),

he has gained business experience in Denmark and Norway. He has been tasked with expanding

the company's activity to the Danish market. He is fluent in: Danish, German, Swedish and English.

c) Important achievements in research and development

Internationalization of Solution4Labs

During the period from 01 September 2016 to 28 February 2017, Solution4Labs is executing the

project "Internationalization of original LIMS-class system by Solution4Labs Sp. z o.o." The project

is co-financed with European Union funds. The project was selected for co-financing under the

Eastern Poland Operational Programme, Priority Axis 1 Entrepreneurial Eastern Poland, Measure

1.2 Internationalization of SMEs. The project's primary objective was to develop a new business

model related to internationalization of operations. This business model will pertain to the entry of

Solution4Labs onto foreign markets with a LIMS-class system for management of laboratory

processes.

11. Forecasts and plans

The Board of TenderHut Group has made an estimate of revenue in 2017. The forecast assumes

achievement of consolidated revenue at PLN 20 mln. SoftwareHut, responsible for 50% of the

Group's revenue, will generate the most revenue in 2017. TenderHut, the dominant unit in the

group, will bring in 30% of the Group's revenue, Solution4Labs will generate 15%, and the

remaining companies, LegalHut and ProtectHut, 2.5% each, according to the forecast.

Estimated revenue according to company 2017

For the time being, the main source of revenue will be applications and services related to e-

business and the latest technologies, such as the Internet of Things, machine learning, as well as

VR and AR solutions, meaning virtual and augmented reality. The Capital Group's Management

Board is aware that there will be a significant rise in orders in these areas and wishes to focus

its activities there.

Virtual Reality and Augmented Reality

Virtual reality, which allows a user from the real world to interact with a computer-simulated

world, as well as augmented reality, which combines both of these worlds, will be invading the IT

market in 2017, and not just the games market. As part of its research and development,

Solution4Labs is working on integrating Microsoft HoloLens goggles with a LIMS-class system, a

system for managing information in laboratories. LIMS-class systems eliminate paper

documentation in scientific institutions and continuously systematize, monitor and analyze

enormous amounts of data. After integration of HoloLens goggles, LIMS will take researchers' work

even further into the future, by allowing them to see the precise contents of the test tube they are

looking at. The new solution will save time and money and will have a positive impact on the

environment. The appearance of VR and AR in LIMS-class systems is the next step in introducing

modern technologies into laboratories.

Machine Learning

Today, it would be difficult to imagine advanced IT systems that do not reap the benefits of

machine learning, which is now even used in daily weather forecasts. The growing number of

services offered by giants like Microsoft or Google is the proof that this subject still carries

enormous potential. They facilitate the creation of systems largely based on machine learning.

Internet of Things (IoT)

Electronic devices that gather, process and exchange data through the Internet are enjoying

increasing interest. SoftwareHut has completed work on the OfficeApp application, a network of

smart devices communicating with each other for the purpose of managing office functions. Above

all, this solution facilitates communication in the company - one can use it to check where a specific

employee can be found: on which floor they are on, in which room, where their workstation is. The

application also displays the availability of bathrooms and conference rooms. It is always

individually adapted to the needs of the business that is to use it. Gartner's estimates state that, in

2020, 26 bln devices will be connected to the Internet. Time and money savings, improved living

comfort and security are among the main benefits of using the Internet of Things.

Information security

Cybersecurity-related activities are gaining strategic significance for many organizations in the IT

industry. The year 2017 will be a year in which we will hear about information security more and

more often - hacker attacks and data leaks due to the absence of protection. Hackers can penetrate

systems in various ways. Sometimes they find a programming error and steal data through this

error, but they usually exploit users' gullibility. A company employee who makes a trivial password

for system access, who does not care for their computer's security, may be the person who will

cause a data leak. Polish companies have very poorly developed structures related to information

security. In reality, only large corporations that employ entire departments related to this subject

care about IT security. But small, medium and even micro-enterprises often use various systems

available online and do not even think about how to protect these systems against hacking.

European IT outsourcing in the nearshoring direction

In 2017, the demand for qualified IT specialists will continue to grow, but there will be a noticeable

trend of departure from offshoring cooperation with Asian IT companies with regard to employment.

More and more companies will plan to transfer their business processes to a country that is

geographically and culturally near. Growth of offshoring costs has been noted over the last several

years. The option is not as attractive as it once was in terms of price. European enterprises, from e.g.

Sweden, Denmark and the Netherlands prefer to order their IT projects from Central and Eastern

Europe not only due to smaller cultural differences, but above all, due to the programmers' superior

education, analytical and critical-thinking skills, as well as knowledge of foreign languages.

Nearshoring is based on employing the services of a supplier found in the neighborhood of the

ordering company's country. This is why Poland, which is close to the West in business as a country

with regard to both culture and mentality, can hope to gain much from this new trend.

Skill center

TenderHut Group plans to create a Skill Center to render services for all of Europe and America

in the scope of optimizing laboratory work using IT systems, with particular emphasis on

Thermo Fisher Scientific products and services. Consultants in the Skill Center will specialize in

consulting for implementations of IT systems in laboratories of all fields, using the experience

gained over the course of the largest LIMS implementation project in the world - preparation for

implementing a LIMS-class system in 600 laboratories in 100 countries around the world for

32,000 users.

12. Changes in the basic principles of managing the company and its Capital Group

No such changes occurred during the period 01/01/2016 - 31/12/2016.

13. Shareholder structure

The initial capital of the dominant unit did not change in the fiscal year, and as of 31 December

2016, amounted to PLN 150,000 and consisted of 150,000 A-series bearer bonds, each with a

nominal value of PLN 1.

Date 31/12/2016 31/12/2015

Balance at beginning of fiscal year 150,000.00 150,000.00

Increases in base capital 0.00 0.00

Decreases in base capital 0.00 0.00

Balance at end of fiscal year 150,000.00 150,000.00

Ms. Anna Serpina-Forkasiewicz was a shareholder in the company until 20 October 2016. Her

shares (20% of capital) were purchased by the remaining shareholders, Mr. Waldemar Birk and

Mr. Robert Strzelecki.

The structure of capital ownership as of 31 December 2016 is as follows:

Item

no.

Shareholders Number

of

shares

Value of shares Share in

initial

capital

Number

of votes

Share in total

number of votes

at General

Assembly of

Shareholders

(%)

1 Waldemar Birk 75,000 PLN 75,000.00 50% 75,000 50%

2 Robert Strzelecki 75,000 PLN 75,000.00 50% 75,000 50%

14. Ongoing proceedings before a court, relevant body for arbitration proceedings or body

of public administration.

No significant proceedings.

15. Information concerning one or more significant transactions between the Capital

Group or one of its subsidiaries and affiliated entities under conditions other than

market conditions

No such transactions occurred during the period 01/01/2016 - 31/12/2016.

16. Dividends paid

No dividends were paid during the period 01/01/2016 - 31/12/2016.

17. Salaries, bonuses and benefits of Management Board and Supervisory Board members

14. Salaries, bonuses and benefits of Management Board and Supervisory Board members

Date 31/12/2016 31/12/2015

Management Board 78,353.38 15,750.01

Supervisory Board 0.00 0.00

Total 78,353.38 15,750.01

18. Loans, credit, advances and payments of a similar nature paid to persons entering into

management, supervisory or administrative bodies of trading companies

No loans were granted, advances paid, nor payments of a similar nature made to persons entering into

bodies managing, supervising, or administrating any of the companies forming the Capital Group in

fiscal year 2016, as before in 2015.

19. Average employment during fiscal year, with division into occupational groups

31/12/2016 31/12/2015

Intellectual workers 26.9 2.1

Total 26.9 2.1

20. Information concerning the contract signed with an entity authorized to audit financial statements and this entity's remuneration.

The remuneration of the expert auditor for the fiscal year ending on 31 December 2016 for

mandatory annual auditing of TenderHut S.A. unit financial statement and auditing of consolidated

report for the Capital Group will amount to PLN 10,500.00 plus VAT in the applicable rate

according to the contract.

21. Information concerning transactions with affiliated entities

TenderHut: Costs Revenue

SoftwareHut Sp. z o.o.

- purchase of IT services 2,912,141.57 138,385.48

- office lease 0.00 83,449.50

- sale of goods 0.00 128,269.93

- reinvoicing of medical services 31.00 155.00

- reinvoicing of airline tickets 0.00 20,166.03

- reinvoicing of training services 0.00 25,623.36

- reinvoicing of multisport card 938.88 0.00

- sale of other materials 0.00 20,164.11

- amortized interest on loan 0.00 11.79

- interest on loan 11.79 0.00

Solutions4Labs Sp. z o.o.

- sale of IT services 6,792.50 100,020.00

- office lease 0.00 4,029.13

- amortized interest on loans 0.00 2,884.17

- interest on loan 2,884.17 0.00


LegalHut Sp. z o.o.

- office lease 0.00 21,000.00

- sale of goods 0.00 1,368.16


- interest on loans 0.00 713.01

SoftwareHut:

costs income, revenue Solutions4Labs Sp. z o.o.

- reinvoicing of Multisport card 0.00 312.96

LegalHut Sp. z o.o. - reinvoicing of Multisport card 0.00 312.96 - purchase of legal services 6,113.91 0.00

22. Consolidated financial statement

CONSOLIDATED BALANCE SHEET

(all numerical data presented in Polish zlotys)

ASSETS BALANCE AS OF BALANCE AS OF

31/12/2016 31/12/2015

A Fixed assets 266,064.52 95,321.24

I Intangible and legal assets 55,695.80 0.00

3 Other intangible and legal assets 55,695.80 0.00

II Company value of subordinate units 972.00 593.50

1 Company value - subsidiaries 972.00 593.50

III Tangible fixed assets 140,046.05 31,678.74

1 Fixed assets 140,046.05 31,678.74

b buildings, business premises and civil engineering structures 47,601.86 0.00

c technical equipment and machinery 84,664.32 31,678.74

e other fixed assets 7,779.87 0.00

IV Long-term receivables 1,813.00 0.00

3 From other units 1,813.00 0.00

V Long-term investments 0.00 0.00

VI Long-term accruals and deferrals 67,537.67 63,049.00

1 Assets arising from deferred income tax 64,878.00 63,049.00

2 Other accruals and deferrals 2,659.67 0.00

B Current assets 2,828,629.98 2,930,437.83

I Inventory 291,218.30 0.00

1 Materials 22.00 0.00

2 Semi-products and products in progress 286,196.30 0.00

5 Advance payments for deliveries and services 5 000,00 0.00

II Short-term receivables 1,711,362.32 1,538,523.42

3 Receivables from other units 1,711,362.32 1,538,523.42

a for deliveries and services, with payment period: 1,554,834.80 1,511,532.52

- up to 12 months 1,554,834.80 1,511,532.52

b for taxes, subsidies, customs duties, social and health

insurance, and other fees

115,551.00 26,205.00

c other 40,976.52 785.90

III Short-term investments 797,594.63 1,366,562.35

1 Short-term financial assets 797,594.63 1,366,562.35

d cash funds and other pecuniary assets 797,594.63 1,366,562.35

- cash funds in cash office and on accounts 797,194.63 1,366,562.35

- other pecuniary assets 400.00 0.00

IV Short-term accruals and deferrals 28,454.73 25,352.06

C Deposits receivable to base capital (fund) 0.00 0.00

D Own shares 0.00 0.00

TOTAL ASSETS 3,094,694.50 3,025,759.07

LIABILITIES BALANCE AS OF BALANCE AS OF

31/12/2016 31/12/2015

A Own equity 1,091,885.23 1,079,241.71

I Base capital (fund) 150,000.00 150,000.00

II Reserve capital (fund), including: 1,582,264.62 356,622.02

- surplus of sales value (issue price) above nominal value of

shares

0.00 0.00

VI Profit (loss) from previous years -653,022.91 -653,022.91

VII Net profit (loss) 12,643.51 1,225,642.60

B Minority interests 158,403.41 56,082.36

C Negative company value of subordinate units 898,577.02 0.00

I Negative company value - subsidiaries 898,577.02 0.00

D Liabilities and reserve for liabilities 945,828.85 1,890,435.00

I Reserve for liabilities 10,700.00 6,589.00

1 Reserve arising from deferred income tax 200.00 589.00

3 Other reserves 10,500.00 6,000.00

- short-term 10,500.00 6,000.00

II Long-term liabilities 0.00 0.00

III Short-term liabilities 877,623.62 1,883,846.00

3 Liabilities toward other units 877,623.62 1,883,846.00

d for deliveries and services, with maturity period: 699,601.90 1,823,448.30

- up to 12 months 699,601.90 1,823,448.30

g for taxes, customs duties, social and health insurance, and other

fees

94,630.75 36,442.48

h for salaries 43,993.28 19,771.69

and other 39,397.69 4,183.53

IV Accruals and deferrals 57,505.23 0.00

2 Other accruals and deferrals 57,505.23 0.00

- short-term 57,505.23 0.00

TOTAL LIABILITIES 3,094,694.50 3,025,759.07

CONSOLIDATED PROFIT AND LOSS BALANCE SHEET


01/01/2016

31/12/2016

1/1/2015,

12/31/2015

A Net sales revenue, including: 8,929,201.50 6,440,714.23

I Net revenue from product sales 8,724,314.43 6,269,535.53

II Change of product stock 163,002.87 0.00

IV Net revenue from sales of goods and materials 41,884.20 171,178.70

B Operating costs 8,672,095.36 5,035,597.86

I Depreciation 51,959.88 2,094.29

II Consumption of materials and energy 423,993.13 462,423.35

III Outsourced services 5,441,473.04 4,185,538.90

IV Taxes and fees 22,993.99 26,550.60

V Salaries 2,116,745.05 157,772.51

VI Social insurance premiums and other fees, including: 346,706.53 5,656.19

- pension fund 0.00 0.00

VII Other generic costs 226,746.86 30,826.95

VIII Value of goods and materials sold 41,476.88 164,735.07

C Profit (loss) from sales (A-B) 257,106.14 1,405,116.37

D Remaining operating income 33,155.04 23,122.94 I Profit on expenditure of non-financial fixed assets 0.00 21,256.00

IV Other operating income 37,260.27 1,866.94

E Remaining operating costs 37,550.24 8,410.21

III Other operating costs 37,550.24 8,410.21

F Profit (loss) from operations (C+D-E) 252,710.94 1,419,829.10

G Financial income 37,600.45 13,964.37

II Interest 42.60 21.10

V Other 37,557.85 13,943.27

H Financial costs 65,079.83 2,299.51

I Interest, including: 220.63 2,299.51

IV Other 64,859.20 0.00

I Profit (loss) on sale of all or a part of shares in subordinate units 0.00 0.00

J Profit (loss) on economic activity (F+G-H+/-I) 225,231.56 1,431,493.96

K Depreciation allowance of company value 0.00 0.00

L Depreciation allowance of negative company value 0.00 0.00

M Profit (loss) from shares in subordinate units estimated

according to the ownership rights method

0.00 0.00

N Gross profit (loss) (J-K+L+/-M) 225,231.56 1,431,493.96

O Income tax 110,267.00 151,019.00

P Other mandatory profit reductions (loss increases) 0.00 0.00

R Minority profits (losses) 102,321.05 54,832.36

M Net profit (loss) (N-O-P+/-R) 12,643.51 1,225,642.60

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY


01/01/2016

31/12/2016

1/1/2015,

12/31/2015

I Own equity at beginning of period (BO) 1,079,241.71 -146,400.89

I.a. Own equity at beginning of period (BO) after error corrections

1,079,241.71 -146,400.89

1 Base capital (fund) at beginning of period 150,000.00 150,000.00

1.2 Base capital end of period 150,000.00 150,000.00

2 Reserve capital (fund) at beginning of period 356,622.02 356,622.02

2.1 Changes in reserve capital (fund)

a increases (arising from) 1,225,642.60 0.00

- division of profit (mandated by law) 82,904.61 0.00

- division of profit (above the minimum value mandated by law) 1,142,737.99 0.00

2.2 Balance of reserve capital at end of period 1,582,264.62 356,622.02

3 Capital from updated appraisal at beginning of period 0.00 0.00

3.2 Capital from updated appraisal at end of period 0.00 0.00

4 Other reserve capital at beginning of period 0.00 0.00

4.2 Other reserve capital at end of period 0.00 0.00

5 Exchange rate conversion differences 0.00 0.00

6 Profit (loss) from previous years at beginning of period -653,022.91 -597,950.90

6.4 Loss from previous years at beginning of period -653,022.91 -597,950.90

6.5 Loss from previous years at beginning of period after corrections -653,022.91 -597,950.90

a increases (arising from) 0.00 -55,072.01

- transfer of loss from previous years to be covered 0.00 -55,072.01

6.6 Loss from previous years at end of period -653,022.91 -653,022.91

6.7 Profit (loss) from previous years at end of period -653,022.91 -653,022.91

7 Net result

a Net profit 12,643.51 1,225,642.60

II Own equity at end of period 1,091,885.23 1,079,241.71

III Own equity after accounting for proposed division of profit

(coverage of losses)

1,091,885.23 1,079,241.71

CONSOLIDATED CASH FLOW STATEMENT


01/01/2016

31/12/2016

1/1/2015,

12/31/2015 A Operational cash flows

I Net profit (loss) 12,643.51 1,225,642.60

II Total corrections: -365,620.81 248,268.29

1 Minority profits (losses) 102,321.05 56,082.36

2 Profit (loss) from shares in units estimated according to the

ownership rights method 0.00

-593.50

3 Depreciation 51,959.88 2,094.29

6 Profit (loss) arising from exchange rate differences 10.03 0.00

7 Interest and shares in profits (dividends) -42.60 1,733.51

8 Profit (loss) from investment activity 0.00 -21,277.10

9 Change of reserve balance 4,111.00 -9,171.00

10 Change of inventory balance -291,218.30 2,294.00

11 Change of receivables balance -174,651.90 -1,507,753.77

12 Change of short-term liabilities balance, with the exception of loans

and credit

-1,006,222.38 1,807,702.12

13 Change of the accruals and deferrals balance 948,112.41 -82,842.62

III Net operational cash flows -352,977.30 1,473,910.89

B Investment cash flows

I Income 42.60 0.00

1 Sale of intangible and legal assets and tangible fixed assets

0.00 21,706.00

3 From financial assets, including: 42.60 21.10

b in other units 42.60 21.10

- interest 42.60 21.10

II Expenses 216,022.99 33,380.45

1 Purchase of intangible and legal assets and tangible fixed assets

216,022.99 33,380.45

III Net investment cash flows -215,980.39 -11,653.35

C Financial cash flows

I Income 300,000.00 0.00

2 Credit and loans 300,000.00 0.00

II Expenses 300,000.00 143,423.36

4 Payment of credit and loans 300,000.00 131,000.00

8 Interest 0.00 12,423.36

III Net financial cash flows 0.00 -143,423.36

D Net total cash flows -568,957.69 1,318,834.18

E Change of cash funds on balance, including: -568,967.72 1,318,834.18

- change of cash funds on balance due to exchange rate differences -10.03 0.00

F Cash funds at beginning of period 1,366,562.35 47,728.17

G Cash funds at end of period, including: 797,594.63 1,366,562.35

- restricted access funds 0.00 0.00

23. Description of basic risks and threats Exchange rate risk

Rate risk

A significant part of revenue from sale of the Capital Group's services is settled in foreign currencies - EUR

or GBP above all, which generates the risk of influence exerted by changes of the EUR/PLN or GBP/PLN

exchange rates. An unfavorable progression of the exchange rates of the currencies in which sales are

conducted may result in periodical changes in the Capital Group's revenue and may negatively impact its

financial condition in consequence. However, foreign contracts are characterized by such a high margin in

comparison to domestic contracts that it mitigates this risk.

Risk of price change

TenderHut Group is exposed to the risk of price change to a rather limited extent. Companies in the Capital

Group determine prices for clients on the basis of precise information about the salaries of the project

teams selected to execute the project. On the revenue side, determined prices are, as a rule, not subject to

further corrections over the course of a project. In turn, the salaries of project teams do not rise in jumps

due to their nature and are largely independent of the company's decision. Projects performed by

TenderHut Group Companies last several months on average, which means that there is a low risk of a

change in the price of purchase affecting profitability.

purchase affecting profitability.

Credit risk Credit risk, defined as the probability of clients' failure to meet their obligations toward Companies

in the TenderHut Group, is limited in many ways. The basic detection mechanism is ongoing

monitoring of receivables. As a result of this monitoring, collection actions are taken immediately.

From the preventive side, the Companies are mainly focused on proper selection of clients, i.e.

undertaking cooperation with renowned enterprises of good repute.

Risk related to recipients and signed contracts

TenderHut Group minimizes this risk by dedicating special attention to cooperation with key

clients, monitoring these clients' satisfaction with cooperation, and delegating employees with

adequate experience to provide service to them. The Group limits the risk describe above by

increasing the number of key clients, diversifying and continuously developing the range and

quality of services rendered and varying remuneration under signed contracts in such a manner

that termination of one service does not signify a lost client, merely a transitional drop in the

revenue provided by them. Diversification of clients, limiting the concentration of recipients, and

offering varied services is a factor that minimizes the risk of dependency on key clients.

Risk related to general macroeconomic situation

Companies in TenderHut Group take advantage of the effect of markets' natural geographic

diversification. The Capital Group has branches and clients in different countries, rendering services

in Poland for subsidiaries of international corporations originating from various countries. Thus, it

cannot be stated that the macroeconomic situation of any given country, including Poland, could

have a preponderant impact on the Company's financial situation.

Risk of change of legal regulations, their interpretation and application

Changes of legal regulations (or even their official interpretations and rules for application) may

affect the economic activity conducted by the Capital Group e.g. by increasing operating costs,

reducing the amount of margins or reducing profitability, introducing specific administrative or

factual restrictions, requirements for obtaining additional permits, etc. Instability of the legal

system may make proper assessment of the effects of future events and the process of making

economic decisions difficult. Changes in legal regulations may, or may not, have a negative impact

on the Capital Group's activity and functioning.

Risk of competition

The Capital Group's activity is exposed to pressure from competing entities. The risk related to

competition is further exacerbated by the fact that the Group conducts activity on foreign markets

(through foreign branches or from Poland in the case where the nature of services rendered does

not require a physical representative in the country where the service is to be rendered), which

additionally exposes the Group to direct competition with the entities present on those markets.

There is a risk that the Group will not build sufficient skills and organizational structures to ensure

a leading position on the market.

Risk related to new teleinformational technologies

The market on which TenderHut Group is active is characterized by a high rate of change in

technology and the standard of services rendered. New technologies make it possible to create new,

more advanced solutions. The growth of Companies in TenderHut Group is dependent, among other

things, on skills in utilizing the capabilities offered by new teleinformational technologies and the

capacity to expand the offer to meet standards that are established. In relation to the above, there is

a risk that TenderHut Group will not be able to meet the demands posed by the dynamic

development of teleinformational technologies. Furthermore, in the case of development work on

innovative solutions used to render services, there is a risk of losses related to the absence of

coverage for the expenses incurred to create the solution. These factors may have a negative impact on

the financial

condition of TenderHut Group and on the rate of implementation of its growth plan. The Capital

Group tries to limit this risk as much as possible through ongoing analysis of the market, available IT

technologies and the feasibility of their commercial application.

Waldemar Birk

President of the Management Board

Robert Strzelecki

Vice President of the Management Board

TenderHut S. A. Board Report on Capital Group operations ...

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