BDO Statsautoriseret revisionsaktieselskabHavneholmen 29DK-1561 København V20222670Årsrapport2023-07-03Christian Dulong HoffEASYTRANSLATE A/SBygmestervej 10 2. th.2400 Copenhagen NRevisionspåtegning332405622010-10-01Copenhagen2022-01-012022-12-312021-01-012021-12-31BDO Statsautoriseret revisionsaktieselskabHavneholmen291561Copenhagen VCopenhagen2023-06-30Frederik Nicolai Riskær PedersenChristian Dulong HoffChairmanJoachim Snebang Vanggaard JensenFrederik Nicolai Riskær PedersenPeter LadegaardMichael Kai PetersenBetina Charlotte NygaardKonklusionGrundlag for konklusionCopenhagen2023-06-30BDO Statsautoriseret revisionsaktieselskab20222670Martin Dahl JensenRevisionspåtegningState Authorised Public Accountantmne3429415750657241368571083196112903118106648819511071-57461851722668-41723047286464607423094603097751-7624504-729009-2145223-688348-5479281-40661-434950-5435786-40661-5479281-40661271230961546520438268861684618030949982323113842568803575622568803575622612129263338673064794292633312716563296157937645838079937119631601009553634639720630173272669108288878484184991952350142147729513729285342115342110434952414098624340739-26389300-21153269-1714103376517609489070948907032238081000000013333333137992382193109833637560127823041056799412338312424588634147845648140223084256381503006259424727747438618324665884542147729513729285342114349524340739-21153267-43495-54357867989358-7989358-81891118189111534211024140986-2638930035389674680126907890606831204920244684523238151083196112903118-2145223-688348375149301684617915686166-15686166646152226668735966261838268862204972601048979603253952202712309638268864768453660062339848110614411557233981660224554181256880292633026121386732926330261213867326121386731402840Regnskabsklasse BtruetrueToday the Board of Directors and Executive Board have discussed and approved the Annual Report of EASYTRANSLATE A/S for the financial year 1 January - 31 December 2022. The Annual Report is presented in accordance with the Danish Financial Statements Act. In our opinion the Financial Statements give a true and fair view of the Company's assets, liabilities and financial position at 31 December 2022 and of the results of the Company's operations for the financial year 1 January - 31 December 2022. The Management Commentary includes in our opinion a fair presentation of the matters dealt with in the Commentary. We recommend the Annual Report be approved at the Annual General Meeting. To the Shareholders of EASYTRANSLATE A/S We have audited the Financial Statements of EASYTRANSLATE A/S for the financial year 1 January - 31 December 2022, which comprise Income Statement, Balance Sheet, statement of changes in equity, notes and a summary of significant accounting policies. The Financial Statements are prepared in accordance with the Danish Financial Statements Act. In our opinion, the Financial Statements give a true and fair view of the assets, liabilities and financial position of the Company at 31 December 2022 and of the results of the Company's operations for the financial year 1 January - 31 December 2022 in accordance with the Danish Financial Statements Act. Basis for Opinion Grundlag for konklusion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), together with the ethical requirements that are relevant to our audit of the Financial Statements in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Emphasis of matter Without having affected our conclusion, we must refer to the mention in the note to the annual accounts "Information on uncertainty with respect to recognition and measurement" and "prerequisite for going concern", and the management report. Management's Responsibilities for the Financial Statements Management is responsible for the preparation of Financial Statements that give a true and fair view in accordance with the Danish Financial Statements Act and for such Internal control as Management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the Financial Statements unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the Financial Statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and contents of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Statement on Management Commentary Management is responsible for Management Commentary. Our opinion on the Financial Statements does not cover Management Commentary, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management Commentary and, in doing so, consider whether Management Commentary is materially inconsistent with the Financial Statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management Commentary provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the Management Commentary is in accordance with the Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in the Management Commentary. Principal activities EasyTranslate is a SaaS marketplace, where the main activities of the Company are within connecting customers with freelancers services and supporting technologies. EasyTranslate has revolutionized the market for content creation and translation solutions. Our unique platform combines a marketplace of freelancer services with an AI software tool for content creation and translation. Our services are innately international. We are among the first companies in the world to offer AI-generated content and translation as a complete solution. At the same time, we were the first company in Northern Europe to offer generative AI for content creation. We have customers in more than 21 countries split between three different continents, so we are present in most parts of the world. Equally important, our services allow users to test new markets and expand internationally. Our Freemium solution enables e-commerce companies to unfold their global potential, generate and translate content to promote their products, webshops and apps in 80 different target languages with 180 language combinations delivered by 782 freelancers while reducing the costs of translations significantly. Recognition and measurement uncertainty Development project There is a natural uncertainty associated with the measurement of the company's development activities. It is Management's assessment that the company will in the future generate earnings that substantiate the value and the prerequisite for recognition of the current and future development costs on the company's development assets. An important prerequisite for the measurement of the development assets is a continued transformation of the business model into a subscription-based model. Development in activities and financial and economic position The development and activities in EasyTranslate in 2022 are mainly influenced by the following: - Transition in business model - Product development - Optimisation of the organisation and operation - Refinancing Transition in business model We have successfully transitioned our business model to a subscription-based platform, allowing our customers to effortlessly automate their content production flow and translation process into any language across any platform. We have achieved an impressive 250% growth in ARR in 2022 compared to the end of year 2021. Our growth is a testament to our recurring business model's effectiveness and the value customers find in our services. As a result, we secured a significant investment of over 3 million euros led by Pride Capital Partners in January 2023. Our recent investment from Pride Capital Partners enables us to expand our growth strategy through non-organic growth, including acquisitions, which will support our growth, not only horizontally in the market, but also vertical and by that being able to continue delivering value to our customers. By securing 1,500 company sign-ups in the first year, we have demonstrated the profitability of our business model. Our primary goal is to deliver value to the end-user, which our software development reflects and our LTV and CAC support. EasyTranslate financial results for 2022 were impacted by a tougher market environment, including the war in Ukraine, high inflation, and economic uncertainty. This situation led to a decrease in project-based translation work. On top of these challenges, we strategically shifted our business model from non-recurring to recurring revenue, which finally resulted in an uptick of 250% in recurring revenue from 2021 to 2022. However, despite our efforts to decrease costs, our gross profit shrank from DKK ('000) 24.137 in 2021 to DKK ('000) 15.751 in 2022, leading to a decreased operating result from DKK ('000) -41 in 2021 to DKK ('000) -5.479 in 2022. To navigate this challenging context, EasyTranslate sought to optimize and strengthen its operations. Our product development strategy focuses on enhancing our position in the translation market by combining AI technology, freelance services, and translation management software in a comprehensive solution. Our platform brings all these elements together, resulting in time savings and cost-effectiveness, particularly for our e-commerce customers. Our organizational optimization involved creating an IT department in North Macedonia and reducing costs across the board, making us more streamlined and efficient. Significant events after the end of the financial year Understanding the financial challenges 2022 posed, we took a proactive approach early in 2023 by securing significant refinancing above DKK 20 m. This action primarily served in settling short-term and long-term debt and also converted subordinated loans into capital and added fresh capital injection. This step has solidified our financial position, enabling us to weather future storms and focus on growth. The management therefore expects growth in both result and cashflow, and with the above-mentioned refinancing in January 2023 the Financial Statements are thus based on the going concern principle. In addition, no events have occurred that could materially affect the Company's financial position at 31 December 2022. Share capital Reserve for net revaluation under the equity method Reserve for development costs Retained earnings Total Equity at 1 January 2022 534.211 43.495 24.340.739 -21.153.267 3.765.178 Proposed profit allocation -43.495 -5.435.786 -5.479.281 Other legal bindings Capitalised development costs 7.989.358 -7.989.358 0 Transfers Depreciations -8.189.111 8.189.111 0 Equity at 31 December 2022 534.211 0 24.140.986 -26.389.300 -1.714.103 Staff costs 1 Average number of employees 35 38 Wages and salaries 9.674.680 12.690.789 Pensions 0 6.068 Social security costs 312.049 202.446 Other staff costs 845.232 3.815 10.831.961 12.903.118 Intangible assets 3 Development projects completed Development projects in progress and prepayments Cost at 1 January 2022 37.514.930 16.846.179 Transfer 15.686.166 -15.686.166 Additions 6.461.522 2.666.873 Cost at 31 December 2022 59.662.618 3.826.886 Amortisation at 1 January 2022 22.049.726 0 Amortisation for the year 10.489.796 0 Amortisation at 31 December 2022 32.539.522 0 Carrying amount at 31 December 2022 27.123.096 3.826.886 The aim of the development projects is to further develop the Company’s services and to create automatic work procedures. During the financial year, the Company has completed a series of projects. Property, plant and equipment 4 Other plant, machinery tools and equipment Cost at 1 January 2022 4.768.453 Additions 66.006 Disposals -23.398 Cost at 31 December 2022 4.811.061 Depreciation and impairment losses at 1 January 2022 4.411.557 Reversal of depreciation of assets disposed of -23.398 Depreciation for the year 166.022 Depreciation and impairment losses at 31 December 2022 4.554.181 Carrying amount at 31 December 2022 256.880 Note Financial non-current assets 5 Investments in subsidiaries Rent deposit and other receivables Cost at 1 January 2022 292.633 0 Additions 26.121 38.673 Disposals -292.633 0 Cost at 31 December 2022 26.121 38.673 Carrying amount at 31 December 2022 26.121 38.673 Long-term liabilities 6 31/12 2022 Repayment Debt outstanding 31/12 2021 total liabilities next year after 5 years total liabilities Subordinate loan capital 3.363.756 3.363.756 0 3.223.808 532.300 532.300.01 Bank loan 13.333.333 3.333.333 0 16.666.667 533.100 533.100.01 Other non-current liabilities 3.798.144 1.401.746 0 5.529.090 535.600 535.600.01 Frozen holiday pay 1.402.840 0 1.402.840 1.405.795 535.900 535.900.01 21.898.073 8.098.835 1.402.840 26.825.360 The investors providing subordinated loans have pledged to retract for other creditors, if needed, so that the Company can meet ordinary financial liabilities. Contingent liabilities As security for rent deposit, the Company has provided a guarantee of a nominal amount of DKK ('000) 499. The Company has entered a tenancy agreement. The notice period of the lease is 11 months, and the total tenancy commitments comprise DKK ('000) 996. Charges and securities 8 As security for debt of DKK ('000) 26,580, the Company has provided company charge of a nominal amount of DKK ('000) 17,000. The company charge includes the following assets, of which the carrying amount on the balance sheet date come to: DKK Development projects completed 27.123.096 411 Development projects in progress and prepayments 3.826.886 416 Other plant, machinery tools and equipment 256.880 422 Trade receivables 3.764.583 450.100 Prerequisite for going concern 9 EasyTranslate has finalised a major refinancing of more than DKK 20 m in January 2023, as planned. The refinancing will secure the future development of EasyTranslate. The refinancing includes primarily settlement of short-term and long-term debt, conversion of subordinated loans into capital and new capital injection. Easytranslate’s short-term bank debt facilities are periodically renegotiated. An agreement has not yet been concluded covering all months of 2023. It is Management's expectation that the overdraft facilities will be renegotiated in accordance with the current overdraft facilities. Information on uncertainty with respect to recognition and measurement 10 Development project There is a natural uncertainty associated with the measurement of the Company's development activities. It is Management's assessment that the company will in the future generate earnings that substantiate the value and the prerequisite for recognition of the current and future development costs on the Company's development assets. An important prerequisite for the measurement of the development assets is a continued transformation of the business model into a subscription-based model. The Annual Report of EASYTRANSLATE A/S for 2022 has been presented in accordance with the provisions of the Danish Financial Statements Act for enterprises in reporting class B and certain provisions applying to reporting class C. Regnskabsklasse B1 true true The Annual Report is prepared consistently with the accounting principles applied last year. Net revenue Revenue from the sale of services is recognised in the Income Statement when delivery is made to the buyer. Net revenue is recognised exclusive of VAT and less duties and discounts related to the sale. Other operating income Other operating income includes items of a secondary nature in relation to the enterprises' principal activities. Cost of sales Cost of sales comprises services consumed in the financial year measured at cost. Other external expenses Other external expenses include sales and administrative costs, including costs of energy, marketing, premises, loss on bad debts, lease expenses, etc Staff costs Staff costs comprise wages and salaries, including holiday pay and pensions, and other costs of social security etc., for the Company's employees. Income from investments in subsidiaries The proportional share of the results of subsidiaries, stated according to the Parent Company’s accounting policies and with full elimination of unrealised intercompany profits/losses and deduction of amortisation of added value and goodwill resulting from purchase price allocation at the date of acquisition, is recognised in the Parent Company’s Income Statement. In connection with transfers, potential profits are recognised when the economic rights related to the sold subsidiaries are transferred, however, at the earliest when the profit has been realised or is regarded as realisable. Moreover, realised losses other than impairments are included where identified. Financial income and expenses Financial income and expenses include interest income and expenses, realised and unrealised gains and losses arising from securities, debt and transactions in foreign currencies, as well as charges and allowances under the tax-on-account scheme, etc. Financial income and expenses are recognised by the amounts that relate to the financial year. Interest income and expenses are calculated on amortised cost prices. Tax The tax for the year, which consists of the current tax for the year and changes in deferred tax, is recognised in the Income Statement by the share that may be attributed to the profit for the year, and is recognised directly in equity by the share that may be attributed to entries directly to equity. Intangible fixed assets Development projects comprise costs, including wages and salaries, and amortisation, which directly or indirectly can be related to the Company’s development activities and which fulfil the criteria for recognition in the Balance Sheet. The accounting item is measured at the lower of the capitalised costs less accumulated amortisation and recoverable amount. Capitalised development costs are amortised on a straight-line basis over the estimated useful life after completion of the development work. The amortisation period is normally 5 years. Intangible fixed assets are generally written down to the recoverable amount if this is lower than the carrying amount. Profit or loss from sale of intangible fixed assets is calculated at the difference between the sales price and the carrying amount at the time of the sale. Profit and loss are recognised in the Income Statement under other operating income or other operating expenses. Tangible fixed assets Other plant, fixtures and equipment are measured at cost less accumulated depreciation and impairment losses. The depreciation base is cost less estimated residual value after end of useful life. The cost includes the acquisition price and costs incurred directly in connection with the acquisition until the time when the asset is ready to be used. Straight-line depreciation is provided on the basis of an assessment of the expected useful lives of the assets and their residual value: Useful lifeResidual value Other plant, fixtures and equipment 3-10 years 0 % Profit or loss on sale of tangible fixed assets is stated as the difference between the sales price less selling costs and the carrying amount at the date of sale. Profit or loss is recognised in the Income Statement as other operating income or other operating expenses. Financial non-current assets Investments in subsidiaries are measured in the Parent Company Balance Sheet under the equity method, which is regarded as a method of measuring/consolidation. Investments in subsidiaries are measured in the Balance Sheet at the proportional share of the enterprises’ carrying equity value, calculated in accordance with the Parent Company’s accounting policies with deduction or addition of unrealised intercompany profits or losses and with addition or deduction of the residual value of positive or negative goodwill calculated according to the acquisition method. Negative goodwill is recognised in the Income Statement when the equity interest is acquired. Where the negative goodwill is related to acquired contingent liabilities, the negative goodwill will be recognised as income when the contingent liabilities have been settled or cease. Net revaluation of investments in subsidiaries is transferred under equity to reserve for net revaluation under the equity value method to the extent that the carrying amount exceeds the acquisition value. Impairment of fixed assets The carrying amount of intangible fixed and tangible assets together with fixed assets, which are not measured at fair value, are assessed annually for indications of impairment other than that reflected by amortisation and depreciation. In the event of impairment indications, an impairment test is made for each asset or group of assets, respectively. If the recoverable amount is lower than the carrying amount, the asset is written down to the recoverable amount. The recoverable amount is calculated at the higher of the capital value and the sales value less expected costs of a sale. The capital value is determined as the Company's share in the current value of the net cash flows which the subsidiary is expected to generate through its activities and from sale of assets after the end of their useful lives. A discount rate is used which reflects the risk-free market rate and the owners' minimum return on interest requirements for similar assets. The growth rate in the terminal period is determined in accordance with the standards within the industry. Receivables Receivables are measured at amortised cost which usually corresponds to nominal value. The value is written down to meet expected losses. Accruals, assets Accruals recognised as assets include costs incurred relating to the subsequent financial year. Tax payable and deferred tax Current tax liabilities and receivable current tax are recognised in the Balance Sheet as the calculated tax on the taxable income for the year, adjusted for tax on the taxable income for previous years and taxes paid on account. Deferred tax is measured on the temporary differences between the carrying amount and the tax value of assets and liabilities. Deferred tax assets, including the tax value of tax loss carryforwards, are measured at the amount at which the asset is expected to be used within a reasonable number of years, either by setoff against tax on future earnings or by setoff against deferred tax liabilities within the same legal tax entity. Deferred tax is measured on the basis of the tax rules and tax rates that under the legislation in force on the Balance Sheet date will be applicable when the deferred tax is expected to crystallise as current tax. Any changes in the deferred tax resulting from changes in tax rates, are recognised in the Income Statement, except from items recognised directly in equity. Liabilities Financial liabilities are recognised at the time of borrowing by the amount of proceeds received less transaction costs. In subsequent periods, the financial liabilities are measured at amortised cost equal to the capitalised value when using the effective interest, the difference between the proceeds and the nominal value being recognised in the Income Statement over the loan period. The amortised cost of current liabilities corresponds usually to the nominal value. 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