CONSOLIDATED INTERIM REPORT Q1 2020...Consolidated interim report / Q1 2020 I. LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD Dear Readers, On behalf of the Management Board of

Consolidated interim report / Q1 2020


CONSOLIDATED INTERIM REPORT

Q1 2020


Table of contents

I. LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD ...................................................................... 3 II. INTRODUCTION................................................................................................................................................ 4 III. KEY INFORMATION ABOUT THE ISSUER’S GROUP ........................................................................................... 5 IV. CONDENSED QUARTERLY FINANCIAL STATEMENTS OF THE COMPANY AND THE GROUP ............................. 6 v. INFORMATION ON PRINCIPLES ADOPTED IN THE PREPARATION OF THE REPORT, INCLUDING INFORMATION ON CHANGES IN THE ACCOUNTING POLICIES ............................................................................... 20 VI. BRIEF DESCRIPTION OF THE ISSUER’S SIGNIFICANT ACHIEVEMENTS OR FAILURES DURING THE REPORTING PERION ALONG WITH DETAILS OF THE MOST IMPORTANT FACTORS AND EVENTS, ESPECIALLY THOSE OF UNUSUAL NATURE, AFFECTING THE RESULTS ACHIEVED BY THE ISSUER ............................................................... 26 VII. WHERE THE ISSUER PUBLISHED EARNINGS GUIDANCE – THE POSITION AS REGARDS ITS FEASIBILITY IN THE YEAR CONCERNED, IN LIGHT OF THE RESULTS PRESENTED IN THE QUARTERLY REPORT .............................. 32 VIII. WHERE THE ISSUER’S INFORMATION STATEMENT CONTAINED THE INFORMATION REFERRED TO IN ARTICLE 10(13A) OF APPENDIX 1 TO THE ALTERNATIVE TRADING SYSTEM RULES – DESCRIPTION OF THE ADVANCEMENT OF THE ISSUER’S OPERATIONS AND INVESTMENTS WITH THE SCHEDULE OF THEIR IMPLEMENTATION ................................................................................................................................................. 33 IX. WHERE THE ISSUER UNDERTOOK DURING THE REPORTING PERIOD INITIATIVES TO INTRODUCE IN THE COMPANY INNOVATIVE SOLUTIONS AIMED AT THE DEVELOPMENT OF ITS BUSINESS – INFORMATION ON SUCH ACTIVITY ................................................................................................................................................................. 33 X. THE NUMBER OF THE ISSUER’S EMPLOYEES IN FULL-TIME EQUIVALENTS ................................................... 33 XI. WHERE THE ISSUER IS THE PARENT COMPANY OF A GROUP AND DOES NOT PREPARE CONSOLIDATED FINANCIAL STATEMENTS – THE REASON WHY SUCH STATEMENTS ARE NOT PREPARED ..................................... 33 XII. INFORMATION ON THE ISSUER’S SHAREHOLDING STRUCTURE WITH DETAILS OF SHAREHOLDERS HOLDING, AS OF THE DATE OF THE REPORT, AT LEAST 5% OF VOTES AT THE GENERAL MEETING ...................... 34

1


I. LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD

Dear Readers,

On behalf of the Management Board of Summa Linguae Technologies S.A., I have a pleasure to present to you

the consolidated interim report for Q1 2020.

As a result of our dynamic geographical expansion and structural changes within our Company related to

acquisitions carried out at the end of 2019, the first quarter of 2020 was a period of internal integration and

delegating tasks in accordance with newly acquired competences. Access to the strategic area of North America

gained through acquired GlobalMe and GlobalVision enabled us not only to expand the group of our customers

that was joined by, e.g. leaders in the IT industry and medical device manufacturing sector, but also gave us

access to new competences, in particular in the area of multilingual data collection and processing technologies

(“data services”).

By acquiring technological infrastructure and resources, our organization also placed in Q1 2020 great emphasis

on intensifying sales efforts, by creating a global team responsible for building relationships leading to long-term

cooperation in executing the most demanding orders. Shannon Zimmerman became the head of the team,

acting as Chief Revenue Officer. Although the above steps entailed additional costs related to expanding sales

structures, they will enable us to effectively increase the level of revenue in the second half of the year and

subsequent years, as well as position the Summa Linguae Technologies brand as one of the leaders in its

industry.

At the end of the first quarter, we had to adapt to new operating conditions due to the pandemic announced by

the WHO and health recommendations necessitated by it. The specific characteristics of the Group’s operation,

the culture of remote work within international structures, internal procedures and a number of strategic

decisions have made it possible to effectively prevent the negative personnel and economic effects of SARS-CoV-

2 with respect to our business. Trying to constantly adapt to the new economic conditions, we strive to

consistently accomplish the 2020 objectives. We belief that the amassed knowledge, experience and

competences will allow the Group to develop dynamically regardless of the circumstances.

In Q1 2020, our Group generated consolidated revenue of 20,386.5 thousand, which represents an increase by

107% YoY, and had GlobalMe and GlobalVision been consolidated on a line-by-line basis in Q1 2019, the

estimated consolidated net sales revenue of the Company’s Group for Q1 2019 would have amounted to approx.

PLN 15.1 million, thus the increase in Q1 2020 YoY would have been approx. 36%. The consolidated EBITDA for

Q1 2020 amounted to PLN 221.0 thousand, while EBITDA adjusted for one-off expenses was PLN 1,240.5

thousand.

I would like to express my gratitude to our Investors, business partners and colleagues for their trust and

cooperation, and kindly invite you to read this Report.

Krzysztof Zdanowski President of the Management Board

Summa Linguae Technologies S.A.

2


II. INTRODUCTION

The Summa Linguae Technologies Group is a leading provider of technological solutions in the area of multilingual

data management.

The Issuer’s strategy focuses on cooperation with global brands operating in promising sectors of economy, such as

IT/ITES, E-Commerce/Retail, E-learning and Life Science.

The range of the Issuer’s services is grouped in three areas:

The Company’s strategy provides for dynamic organic growth through acquisitions and consolidation of the market

for translation and localization services as well as technical solutions in the area of translation/localization and data

services.

The Group operates globally through its branches and subsidiaries in nine countries:

a. Poland

b. USA

c. Canada

d. India

e. Sweden

f. Norway

g. Finland

h. Denmark

i. Romania

e. India

f. Sweden

g. Norway

a. Data Services

- data collection and annotation

- data structuring

b. Managed Services

- end-to-end outsourcing

- placement/staffing

c. Technology-enabled localization services

- localization and translation

- internationalization, transcreation


The Company’s strategy provides also for technological development based both on in-house technologies and

off-the-shelf ones. Not only does it enable effective optimization of processes, both as regards delivered quality

and project implementation time, but it also makes it possible for the Company to offer comprehensive

technological solutions in the area of localization to meet new needs of the ever more globalized market.

III. KEY INFORMATION ABOUT THE ISSUER’S GROUP

The Issuer: Summa Linguae Technologies S.A. headquartered in Krakow at 63 Josepha Conrada Street,

entered into the Register of Companies of the National Court Register kept by the District Court for Kraków-

Śródmieście in Krakow under KRS number 0000400208, VAT ID: 9452165721, REGON statistical number:

122435108.

Table 1. Companies in the Issuer’s Group as at 31 March 2020

Company Abbreviated

names used herein Registered

office

The Parent Company’s share in capital and

votes (as at 31 March 2020)

Share capital

Summa Linguae Technologies S.A.

Summa Linguae Technologies, Issuer, Parent Company

Krakow (Poland)

Parent Company PLN 755,454.60 as at 31

March 2020

Kommunicera Communications AB

Kommunicera, KCAB

Gothenburg (Sweden)

100% SEK 100,000.00

i.e. PLN 41,140.00 as at 31 March 2020

Kommunicera AS Oslo (Norway)

100% (through

Kommunicera Communications AB)

NOK 100,000.00 i.e. PLN 39,530.00 as at

31 March 2020

Lingtech A/S Stenløse near /Copenhagen (Denmark)

100% (through

Kommunicera Communications AB)

DKK 2,466,668.00 i.e. PLN 1,503,680.81 as

at 31 March 2020

Mayflower Language Services Pvt. Ltd.

Mayflower Bangalore (India)

100% in votes* 83.85% in capital

INR 500,060.00 i.e. PLN 27,479.80 as at

31 March 2020

Summa Linguae Romania S.R.L.

Summa Linguae Romania, SLR

Bucharest (Romania)

99.996% RON 254,100.00

i.e. PLN 239,590.89 as at 31 March 2020

Globalme Localizations Inc.

Globalme Vancouver (Canada)

100%

USD 7,012,542.20 i.e. PLN 28,681,297.60 as at 31 March 2020

GlobalVision International Inc.

GlobalVision Westborough near Boston (USA)

100% USD 20.00

i.e. PLN 81.80 as at 31 March 2020


* 100% share in votes in Mayflower under an investment agreement concluded by the Company with

Mayflower and its partners.

** As part of the internal consolidation of the Group, Alche Tech Inc. (subsidiary) based in Portland (USA)

(“Alche Tech”) merged with GlobalVision. After the merger, Alche Tech ceased to operate as a separate entity

and became part of GlobalVision.

All subsidiaries listed in Table 1 are consolidated on a line-by-line basis.

IV. CONDENSED QUARTERLY FINANCIAL STATEMENTS OF THE COMPANY AND THE GROUP

The Issuer presents financial data for Q1 2020 along with comparative data for the same period of the previous year.

The balance sheet, income statement, cash flow statement and statement of changes in equity have been drawn

up pursuant to the Accounting Act of 29 September 1994 (Journal of Laws of 2018, item 395, consolidated text,

as amended) and its implementing acts. The data have not been audited. Amounts are given in PLN thousand

unless otherwise specified.

Table 2. Consolidated income statement for Q1 2020 along with comparative data (in PLN thousand)

Consolidated income statement of Summa Linguae Technologies S.A. Q1 2020 Q1 2019

A. Sales revenue and equivalents, of which: 20,386.5 9,854.3

- from related parties which are not consolidated on a line-by-line basis 0.0 0.0

I. Net revenue from sales of products 20,386.5 9,854.3

ii. Movement in inventories - additions (+), withdrawals (-) 0.0 0.0

III. Cost of production for internal purposes 0.0 0.0

IV. Net revenue from sales of goods and materials 0.0 0.0

B. Operating expenses 20,501.0 10,214.8

I. Depreciation 64.4 40.5

II. Consumption of materials and electricity 63.3 64.6

III. Third-party services 4,658.5 5,840.4

IV. Taxes and fees, of which: 357.0 21.0

- excise tax 0.0 0.0

V. Salaries 13,570.1 3,104.1

VI. Social security and other benefits, of which: 1,030.9 760.6

- retirement pay 189.3 107.9

VII. Other costs by type 756.9 383.7

VIII. Value of goods and materials sold 0.0 0.0

C. PROFIT/(LOSS) ON SALES (A-B) -114.5 -360.5

D. Other operating income 309.3 11.9

I. Profit from disposal of non-financial fixed assets 0.0 0.0

II. Subsidies 0.0 0.0

III. Revaluation of non-financial assets 0.0 0.0

IV. Other operating income 309.3 11.9

E. Other operating expenses 140.0 63.6

I. Loss on disposal of non-financial fixed assets 0.00 0.0


II. Revaluation of non-financial assets 0.00 0.0

III. Other operating expenses 140.0 63.6

- of which: amortization of goodwill 101.7 63.6

F. OPERATING PROFIT/(LOSS) (C+D-E) 54.9 -412.3

G. Financial revenue 126.0 10.5 I. Dividends and share in profits, of which: 0.0 0.0

(a) from related parties, of which: 0.0 0.0

- those in which the entity has equity interests 0.0 0.0

(b) from other entities, of which: 0.0 0.0


II. Interest, of which: 28.3 3.7

- from related parties 0.0 0.0

III. Profit on disposal of financial assets, of which: 0.0 0.0

- in related parties 0.0 0.0

IV. Revaluation of non-financial assets 0.0 0.0

V. Other 97.7 6.8

H. Financial costs 873.0 163.1 I. Interest, of which: 63.0 115.4

- payable to related parties 0.0 -0.0

II. Loss on disposal of financial assets, of which: 0.0 0.0


III. Revaluation of financial assets 0.0 0.0

IV. Other 810.0 47.7

I. Profit/(loss) on sale of all or part of shares in controlled entities 0.0 0.0

J. PROFIT/(LOSS) ON ORDINARY ACTIVITIES (F+G+H+/-I) -692.0 -564.8

K. Goodwill write-off 640.4 65.3 I. Goodwill write-off – subsidiaries 640.4 65.3

II. Goodwill write-off – jointly controlled entities 0.0 0.0

L. Negative goodwill write-off 0.0 0.0 I. Negative goodwill write-off – subsidiaries 0.0 0.0

II. Negative goodwill write-off – jointly controlled entities 0.0 0.0

M. Profit/(loss) on shares in subsidiaries measured in accordance with the equity method 0.0

0.0

N. PROFIT/(LOSS) BEFORE TAX (J-K+L+/-M) -3.4 -630.1

O. Income tax -3.4 -10.6

P. Other obligatory charges 0.0 0.0

R. Minority interest profit/(loss) -1,329.1 -163.6

S. NET PROFIT/(LOSS) (N-O-P+/-R) -1,329.1 -783.2

Tabela 3. Consolidated balance sheet as at 31 March 2019 along with comparative data (in PLN thousand)

Consolidated balance sheet of Summa Linguae Technologies S.A. 31.03.2020 31.03.2019

ASSETS

A. NON-CURRENT ASSETS 60,871.7 12,600.2

I. Intangible assets 5,025.8 4,291.8

1. R&D expenses 0.0 0.0

2. Goodwill 3,704.7 4,142.1

3. Other intangible assets 869.0 149.7

4. Advances for intangible assets 452.2 0.0

II. Goodwill of controlled entities 49,994.4 5,008.9

1. Goodwill – subsidiaries 49,994.4 5,008.9

2. Goodwill – jointly controlled entities 0.0 0.0

III. Property, plant and equipment 327.7 245.7


1. Fixed assets 327.7 245.7

(a) freehold land (including right of perpetual use) 0.0 0.0

(b) buildings, premises, rights to premises and constructions 0.0 0.0

(c) plant and machinery 197.7 108.9

(d) vehicles 59.7 27.6

(e) other fixed assets 70.3 109.2

2. Fixed assets under construction 0.0 0.0

3. Advances for fixed assets under construction 0.0 0.0

IV. Non-current receivables 261.7 261.7

1. from related parties 0.0 0.0

2. From other entities in which the reporting entity has equity interests 0.0 0.0

3. From other entities 261.7 261.7

V. Long-term investments 1,272.5 194.5

1. Real property 0.0 0.0

2. Intangible assets 0.0 0.0

3. Not-current financial assets 1,246.9 194.5

(a) in subsidiaries and jointly controlled entities which are not measured using the full or proportional consolidation method

0.0 108.5

- shares 0.0 108.5

- other securities 0.0 0.0

- loans granted 0.0 0.0

- other not-current financial assets 0.0 0.0

(b) in subsidiaries, jointly controlled entities and affiliates measured using the equity method 0.0 0.0

- shares 0.0 0.0




(c) in other entities in which the entity has equity interests 1,246.9 0.0

- shares 14.8 0.0


- loans granted 1,232.1 0.0


(d) in other entities 0.0 86.0

- shares 0.0 0.0




4. Other long-term investments 25.6 0.0

VI. Non-current prepayments and accrued income 3,989.6 2,597.6

1. Deferred tax assets 899.4 917.3

2. Other accrued income 3,090.2 1,680.4

B. CURRENT ASSETS 17,917.9 13,017.3

I. Inventory 0.0 0.0

1. Materials 0.0 0.0

2. Semi-finished goods and work in progress 0.0 0.0

3. Finished products 0.0 0.0

4. Goods 0.0 0.0

5. Advances for deliveries and services 0.0 0.0

II. Current receivables 12,026.6 8,789.8

1. Receivables from related parties 0.0 -0.0

(a)trade receivables, maturing: 0.0 -0.0


- within up to 12 months 0.0 -0.0

- in over 12 months 0.0 0.0

(b) other 0.0 -0.0

2. Receivables from other entities in which the reporting entity has equity interests 0.0 0.0

(a)trade receivables, maturing: 0.0 0.0

- within up to 12 months 0.0 0.0


(b) other 0.0 0.0

3. Receivables from other entities 12,026.6 8,789.8

(a)trade receivables, maturing: 10,637.9 8,078.2

- within up to 12 months 10,637.9 8,078.2


(b) taxes, subsidies, custom duties, social and health insurance and other public liabilities 649.7 314.6

(c) other 739.1 397.0

(d) claimed in court 0.0 0.0

III. Short-term investments 3,600.5 2,023.1

1. Current financial assets 3,600.5 2,023.1

(a) in subsidiaries and jointly controlled entities 0.0 0.0

- shares 0.0 0.0



- other current financial assets 0.0 0.0

(b) in associates 0.0 0.0

- shares 0.0 0.0




(c) in other entities 0.0 69.2

- shares 0.0 0.0




(d) cash and cash equivalents 3,600.5 1,953.9

- cash in hand and at bank 3,600.5 1,891.7

- other cash 0.0 62.2

- other financial assets 0.0 0.0

2. Other short-term investments 0.0 0.0

IV. Current prepayments and accrued income 2,290.7 2,204.5

C. CALLED UP SHARE CAPITAL 0.0 0.0

D. TREASURY SHARES 0.0 883.4

TOTAL ASSETS 78,789.6 26,500.9

EQUITY AND LIABILITIES

A. EQUITY 47,382.6 5,923.9

I. Share capital 755.5 389.6

II. Reserve capital, of which: 50,083.6 7,751.7

- share premium 50,083.6 7,489.9

III. Revaluation reserve, of which: 0.0 -0.0

- fair value revaluation 0.0 -0.0

IV. Other capital reserves, of which: 820.3 854.3


- created in accordance with the Articles of Association 0.0 0.0

V. Exchange rate differences on translation of foreign operations -770.2 -129.3

VI. Profit/(loss) brought forward -2,177.3 -2,159.1

VII. Net profit/(loss) -1,329.1 -783.2

VIII. Net profit write-offs during the financial year (negative value) 0.0 0.0

B. MINORITY INTERESTS 2,468.0 1,309.2

C. NEGATIVE GOODWILL OF CONTROLLED ENTITIES 0.0 0.0

I. Negative goodwill – subsidiaries 0.0 0.0

II. Negative goodwill – jointly controlled entities 0.0 0.0

D. LIABILITIES AND PROVISIONS FOR LIABILITIES 28,939.0 19,267.9

I. Provisions for liabilities 663.8 1,187.5

1. Provision for deferred income tax 5.9 78.8

2. Provision for retirement and similar benefits 313.8 213.2

- long-term 313.8 213.2

- short-term 0.0 0.0

3. Other provisions 344.1 895.5

- long-term 0.0 412.0

- short-term 344.1 483.5

II. Non-current liabilities 2,500.0 3,131.5

1. Payable to related parties 0.0 0.0

2. Payable to other entities in which the reporting entity has equity interests 0.0 0.0

3. Payable to other entities 2,500.0 3,131.5

(a) loans and borrowings 2,500.0 2,720.4

(b) arising from issue of debt securities 0.0 0.0

(c) other financial liabilities 0.0 0.0

(d) bill-of-exchange liabilities 0.0 0.0

(e) other 0.0 411.1

III. Current liabilities 24,217.7 13,944.1

1. Payable to related parties 0.0 -0.0

(a)trade liabilities, maturing: 0.0 -0.0

- within up to 12 months 0.0 -0.0


(b) other 0.0 -0.0


(a)trade liabilities, maturing: 0.0 0.0



(b) other 0.0 0.0


(a) loans and borrowings 1,285.1 936.8



(d) trade liabilities, maturing: 6,823.0 3,493.1



(e) received advances for deliveries and services 144.1 9.0

(f) bill-of-exchange liabilities 0.0 0.0

(g) taxes, custom duties, social and health insurance and other public liabilities 1,572.0 913.1

(h) payroll liabilities 2,255.4 1,805.2

(i) other 11,991.1 6,779.9

4. Special purpose funds 0.0 0.0


IV. Accruals 1,557.5 1,004.8

1. Negative goodwill 0.0 0.0

2. Other accrued income 1,557.5 1,004.8

- long-term 0.0 0.0

- short-term 1,557.5 1,004.8

TOTAL LIABILITIES AND EQUITY 78,789.6 26,500.9

Table 4. Consolidated cash flow statement for Q1 2020 along with comparative data (in PLN thousand)

Consolidated cash flow statement of Summa Linguae Technologies S.A. Q1 2020 Q1 2019

A. OPERATING CASH FLOWS

I. NET PROFIT/(LOSS) -1,329.1 -783.2

II. Adjustments (total) -590.2 -1,644.4

1. Minority interest profit/(loss) 0.0 163,6

2. Profit/(loss) on shares in entities measured using the equity method 0.0 0,0

3. Amortization and depreciation 158.5 104.1

4. Goodwill write-off 640.4 65,3

5. Negative goodwill write-off 0.0 0,0

6. Foreign exchange gains/losses 763.4 0,0

7. Interest and share in profits (dividends) -10.1 -2,9

8. Profit/(loss) on investing activity 0.0 0,0

9. Movement in provisions -199.4 63.4

10. Movement in inventory 0.0 0.0

11. Movement in receivables 3,523.8 -547.7

12. Movement in current liabilities, excluding loans and borrowings -5,833.1 -1,462.2

13. Movement in prepayments and accrued income 258.2 -115.9

14. Other adjustments 108.1 87.9

III. Net operating cash flow (I+/-II) -1,919.3 -2,427.6

B. CASH FLOW FROM INVESTING ACTIVITIES

I. Inflows 0.0 315.6

1. Disposal of intangible assets and property, plant and equipment 0.0 0.0

2. Disposal of investments in real property and intangible assets 0.0 0,0

3. From financial assets, of which: 0.0 3.7

(a) in entities measured using the equity method 0.0 0.0

(b) in other entities 0.0 3.7

- sale of financial assets 0.0 0,0

- dividends and share in profits 0.0 0,0

- repayment of long-term loans granted 0.0 0,0

- Interest 0.0 3,7

- other inflows from financial assets 0.0 0,0

4. Other inflows from investments 0.0 312.0

II. Outflows 1,917.4 2.6 1. Purchase of intangible assets and property, plant and equipment 677.8 2.6

2. Investment in real property and intangible assets 0.0 0.0

3. For financial assets, of which: 1,239.6 0.0


(b) in other entities 1,233.4 0.0

- purchase of financial assets 0.0 0.0

- long-term loans granted 1,233.4 0.0

4. Dividends and other interests in profit paid to minority shareholders 0.0 0.0

5. Other capital expenses 0.0 0.0


III. Net cash flows from investing activities (I-II) -1,917.4 313.1

C. CASH FLOWS FROM FINANCING ACTIVITIES

I. Inflows 515.4 3,341.0

1. Net inflows from issue of shares and other securities and from capital contributions 8.6 2,786.5

2. Loans,and,borrowings 506.8 554,5

3. Issue,of,debt,securities 0.0 0,0

4. Other financial inflows 0.0 0.0

II. Outflows 293.9 1,151.8 1. Purchase,of,treasury,shares 12.1 0.0

2. Dividends,and,other,payments,to,shareholders 0.0 0.0

3.Profit distribution expenses other than payments to shareholders 0.0 0.0

4. Repayment,of,loans,and,borrowings 281.8 1,146.0

5. Redemption of debt securities 0.0 0.0

6. Other financial liabilities 0.0 0.0

7. Payment of liabilities under finance lease agreements 0.0 5.1

8. Interest 0.0 0.7

9. Other financial expenses 0.0 0.0

III. Net cash flows from financing activities (I-II) 221.4 2,189.1

D. TOTAL NET CASH FLOWS (A.III.+/-B.III+/-C.III) -3,615.2 74.6

E. BALANCE SHEET MOVEMENT IN CASH, of which: -3,615.2 74.6 - movement in cash due to foreign exchange differences 0.0 0.0

F. OPENING BALANCE OF CASH 7,215.7 1,879.2

G. CLOSING BALANCE OF CASH (F+/-D), of which: 3,600.5 1,953.9 - restricted cash 0.0 0.0

Table 5. Consolidated statement of changes in equity for Q1 2020 along with comparative data (in PLN)

Consolidated statement of changes in equity of Summa Linguae Technologies S.A. Q1 2020 Q1 2019

I. Opening balance of equity (OB) 7,896.6 6,519.1

- amendments to adopted accounting policies 0.0 0.0

- corrections of errors 0.0 0.0

I.a. Opening balance of equity (OB) after adjustments 7,896.6 6,519.1

1. Opening balance of share capital 450.4 389.6

1.1. Movement in share capital 305.0 0.0

(a) increase (due to) 305.0 0.0

- issue of shares 305.0 0.0

(b) decrease (due to) 0.0 0.0 - redemption of shares 0.0 0.0

1.2. Closing balance of share capital 755.5 389.6

2. Opening balance of reserve capital 10,532.9 7,751.7 2.1. Movement in reserve capital 10,532.9 0.0

(a) increase (due to) 40,879.0 0.0

- share premium 40,879.0 0.0

- (statutory) profit distribution 0.0 0.0

- profit distribution (above the minimum statutory value) 0.0 0.0


(b) decrease (due to) 1,328.3 0.0

- loss coverage 0.0 0.0

- share issue costs 1,328.3 0.0

2.2. Closing balance of reserve capital 50,083.6 7,751.7

3. Opening balance of revaluation reserve 0.0 0.0


3.1. Movement in revaluation reserve 0.0 0.0


(b) decrease (due to) 0.0 0.0

- disposal of fixed assets 0.0 0.0

3.2. Closing balance of revaluation reserve 0.0 0.0

4. Opening balance of other capital reserves 820.3 854.3 4.1. Movement in other capital reserves 0.0 0.0



4.2. Closing balance of other capital reserves 820.3 854.3

5. Exchange rate differences from translation -770.2 -129.3

6. Opening balance of profit/(loss) carried forward -3,416.1 -2,159.1 6.1. Opening profit carried forward 0.0 3,209.0



6.2. Opening balance of profit carried forward, after adjustments 0.0 3,209.0


- distribution of profit carried forward 0.0 0.0


6.3. Closing profit carried forward 0.0 3,209.0

6.4. Opening loss carried forward -3,416.1 -5,368.1



6.5 Opening loss carried forward, after adjustments -3,416.1 -5,368.1


- loss carried forward to be covered 0.0 0.0


6.6. Closing balance of loss carried forward -2,177.3 -5,368.1

6.7. Closing balance of profit/(loss) carried forward -2,177.3 -2,159.1

7. Net profit/(loss) -1,329.1 -783.2 (a) net profit 0.0 0.0

(b) net loss -1,329.1 -783.2

(c) profit write-offs 0.0 0.0

II. CLOSING BALANCE OF EQUITY (CB) 47,382.6 5,923.9

III. EQUITY ACCOUNTING FOR PROPOSED PROFIT DISTRIBUTION/(LOSS COVERAGE)

47,382.6

5,923.9

Table 6. Separate income statement for Q1 2020 along with comparative data (in PLN thousand)

Separate income statement of Summa Linguae Technologies S.A. Q1 2020 Q1 2019

A. Sales revenue and equivalents, of which: 2,714.7 2,078.6

- from related parties which are not consolidated on a line-by-line basis 1,166.6 0.0

I. Net revenue from sales of products 2,714.7 2,078.6

II. Movement in inventories - additions (+), withdrawals (-) 0.0 0.0

III. Cost of production for internal purposes 0.0 0.0

IV. Net revenue from sales of goods and materials 0.0 0.0

B. Operating expenses 3,122.6 2,202.0

I. Amortization and depreciation 22.0 9.7

II. Consumption of materials and energy 28.4 16.7

III. Third-party services 1,856.9 1,516.7

IV. Taxes and fees, of which: 3.6 1.0

V. Salaries 1,088.1 548.9

VI. Social security and other benefits, of which: 122.1 83.4


VII Other costs by type 1.5 25.6

VIII. Value of goods and materials sold 0.0 0.0

C. PROFIT/(LOSS) ON SALES (A-B) -407.9 -123.5

D. Other operating income 0.2 0.0

I. Profit on disposal of non-financial fixed assets 0.0 0.0

II. Subsidies 0.0 0.0

III. Revaluation of non-financial assets 0.0 0.0

IV. Other operating income 0.2 0.0

E. Other operating expenses 96.7 63.6

I. Loss on disposal of non-financial fixed assets 0.0 0.0

II. Revaluation of non-financial assets 0.0 0.0

III. Other operating expenses 96.7 63.6

- of which: amortization of goodwill 101.7 63.6

F. OPERATING PROFIT/(LOSS) (C+D-E) -504.4 -187.1

G. Financial revenue 19.5 4.4

I. Dividends and share in profits, of which: 0.0 0.0

(a) from related parties, of which: 0.0 0.0


(b) from other entities, of which: 0.0 0.0


II. Interest, of which: 16.4 3.8

- from related parties 16.4 3.8

III. Profit on disposal of financial assets, of which: 0.0 0.0


IV. Revaluation of non-financial assets 0.0 0.0

V. Other 3.1 0.6

H. Financial expenses 38.0 80.4

I. Interest, of which: 34.9 71.2

- to related parties 3.8 0.0

II. Loss on disposal of financial assets, of which: 0.0 0.0


III. Revaluation of financial assets 0.0 0.0

IV. Other 3.1 9.2

I. PROFIT/(LOSS) BEFORE TAX (F+G-H) -522.9 -263.1

J. Income tax 0.0 0.0

K. Other obligatory charges 0.0 0.0

L. NET PROFIT/(LOSS) (I-J-K) -522.9 -263.1

{

Table 7. Separate balance sheet as at 31 March 2020 along with comparative data (in PLN thousand)

Separate balance sheet of Summa Linguae Technologies S.A. 31.03.2020 31.03.2019

ASSETS

A. NON-CURRENT ASSETS 52,034.4 13,238.1

I. Intangible assets 3,749.6 4,144.4

1. R&D expenses 0.0 0.0

2. Goodwill 3,704.7 4,142.1

3. Other intangible assets 44.9 2.3

4. Advances for intangible assets 0.0 0.0

II. Property, plant and equipment 75.0 96.5

1. Fixed assets 75.0 96.5

(a) freehold land (including right of perpetual use) 0.0 0.0

(b) buildings, premises, rights to premises and constructions 0.0 0.0

(c) plant and machinery 15.3 18.3

(d) vehicles 16.9 27.6


(e) other fixed assets 42.8 50.6

2. Fixed assets under construction 0.0 0.0

3. Advances for fixed assets under construction 0.0 0.0

III. Non-current receivables 0.0 0.0

1. from related parties 0.0 0.0

2. From other entities in which the reporting entity has equity interests 0.0 0.0

3. From other entities 0.0 0.0

IV. Long-term investments 48,118.9 8,966.0

1. Real property 0.0 0.0

2. Intangible assets 0.0 0.0

3. Not-current financial assets 48,118.9 8,966.0

(a) in related parties 46,886.8 8,880.0

- shares 46,739.1 8,689.9




(b) in other entities in which the entity has equity interests 0.0 0.0

- shares 0.0 0.0




(c) in other entities 1,232.1 86.0

- shares 0.0 0.0


- loans granted 1,232.1 86.0


4. Other long-term investments 0.0 0.0

VI. Non-current prepayments and accrued income 90.9 31.1

1. Deferred tax assets 90.9 31.1

2. Other accrued income 0.0 0.0

B. CURRENT ASSETS 5,433.1 5,790.5

I. Inventory 0.0 0.0

1. Materials 0.0 0.0

2. Semi-finished goods and work in progress 0.0 0.0

3. Finished products 0.0 0.0

4. Goods 0.0 0.0

5. Advances for deliveries and services 0.0 0.0

II. Current receivables 4,116.2 3,544.5

1. Receivables from related parties 2,493.6 1,328.7

(a)trade receivables, maturing: 2,493.6 1,328.7



(b) other 0.0 0.0

2. Receivables from other entities in which the reporting entity has equity interests 0.0

0.0

(a)trade receivables, maturing: 0.0 0.0



- taxes, subsidies, custom duties, social and health insurance 0.0 0.0

- Other 1,622.6 0.0

3. Receivables from other entities 891.7 2,215.8

(a)trade receivables, maturing: 891.7 1,834.5

- within up to 12 months 0.0 1,834.5


(b) taxes, subsidies, custom duties, social and health insurance and other public liabilities 205.6

67.3

(c) other 0.0 314.0

(d) claimed in court 0.0 0.0


III. Short-term investments 98.8 1,247.9

1. Current financial assets 98.8 1,247.9

(a) in related parties 29.1 13.2

- shares 0.0 0.0





- shares 0.0 0.0




(c) cash and cash equivalents 69.7 1,165.6

- cash in hand and at bank 69.7 1,165.6

- other cash 0.0 0.0

- other financial assets 0.0 0.0

2. Other short-term investments 0.0 0.0

IV. Current prepayments and accrued income 1,218.1 998.1

C. CALLED UP SHARE CAPITAL 0.0 0.0

D. TREASURY SHARES 0.0 0.0

TOTAL ASSETS 57,467.5 19,028.6

EQUITY AND LIABILITIES

A. EQUITY 50,461.8 7,378.7

I. Share capital 755.5 389.6

II. Reserve capital, of which: 50,083.6 7,751.7

- share premium 49,507.5 7,489.9

III. Revaluation reserve, of which: 0.0 0.0

- fair value revaluation 0.0 0.0

IV. Other capital reserves, of which: 820.3 854.3

- created in accordance with the Articles of Association 0.0 0.0

- for treasury shares 0.0 0.0

VI. Profit/(loss) brought forward -674.5 -1,353.7

VII. Net profit/(loss) -522.9 -236.1

VIII. Net profit write-offs during the financial year (negative value) 0.0 0.0

B. LIABILITIES AND PROVISIONS FOR LIABILITIES 7,005.6 11,649.9

I. Provisions for liabilities 5.9 14.9

1. Provision for deferred income tax 5.9 1.6

2. Provision for retirement and similar benefits 0.0 0.0

- long-term 0.0 0.0


3. Other provisions 0.0 13.3

- long-term 0.0 0.0


II. Non-current liabilities 2,500.0 2,916.9




(a) loans and borrowings 2,500.0 2,916.9



(d) other 0.0 0.0

III. Current liabilities 4,023.1 8,255.7






(b) other 0.0 0.0





(b) other 0.0 0.0


(a) loans and borrowings 640.4 117.8



(d) trade liabilities, maturing: 2,450.0 1,004.6



(e) received advances for deliveries and services 0.0 0.0

(f) bill-of-exchange liabilities 0.0 0.0

(g) taxes, custom duties, social and health insurance and other public liabilities 651.8 195.7

(h) payroll liabilities 257.5 165.3

(i) other 0.0 6,763.8

4. Special purpose funds 0.0 0.0

IV. Accruals 476.6 462.4

1. Negative goodwill 0.0 0.0

2. Other accrued income 476.6 462.4

- long-term 0.0 0.0

- short-term 476.6 462.4

TOTAL LIABILITIES AND EQUITY 57,467.5 19,028.6

Table 8. Separate cash flow statement for Q1 2020 along with comparative data (in PLN thousand)

Separate cash flow statement of Summa Linguae Technologies S.A. Q1 2020 Q1 2019

A. OPERATING CASH FLOWS

I. NET PROFIT/(LOSS) -522.9 -263.1

II. Adjustments (total) 218.0 -1,263.8

1. Amortization and depreciation 116.1 73.3

2. Foreign exchange gains/losses 0.0 0.0

3. Interest and share in profits (dividends) 0.0 0.0

4. Profit/(loss) on investing activity 0.0 0.0

5. Movement in provisions and deferred income tax 0.0 13.3

6. Movement in inventory 0.0 0.0

7. Movement in receivables 1,364.6 -1,224.3

8. Movement in current liabilities, excluding loans and borrowings -1,224.2 -322.3

9. Movement in prepayments and accrued income -38.5 196.2

10. Other adjustments 0.0 0.0

III. Net operating cash flow (I+/-II) -305.0 -1,526.9

B. CASH FLOW FROM INVESTING ACTIVITIES

I. Inflows 0.0 312.0

1. Disposal of intangible assets and property, plant and equipment 0.0 0.0

2. Disposal of investments in real property and intangible assets 0.0 0.0

3. From financial assets. of which: 0.0 0.0



- sale of financial assets 0.0 0.0

- dividends and share in profits 0.0 0.0


- repayment of long-term loans granted 0.0 0.0

- Interest 0.0 0.0

- other inflows from financial assets 0.0 0.0

4. Other inflows from investments 0.0 312.0

II. Outflows 1,298.1 0.0

1. Purchase of intangible assets and property, plant and equipment 58.5 0.0

2. Investment in real property and intangible assets 0.0 0.0

3. For financial assets, of which: 1,239.6 0.0

(a) in related parties 6.2 0.0

(b) in other entities 1,233.4 0.0

- purchase of financial assets 0.0 0.0

- long-term loans granted 1,233.4 0.0

4. Other capital expenses 0.0 0.0

III. Net cash flows from investing activities (I-II) -1,298.1 312.0

C. CASH FLOWS FROM FINANCING ACTIVITIES

I. Inflows 103.8 2,924.2

1. Net inflows from issue of shares and other securities and from capital contributions

8.6 2,786.5

2. Loans and borrowings 95.1 137.7

3. Issue of debt securities 0.0 0.0

4. Other financial inflows 0.0 0.0

II. Outflows 0.0 1,151.1

1. Purchase of treasury shares 0.0 0.0

2. Dividends and other payments to shareholders 0.0 0.0

3. Profit distribution expenses other than payments to shareholders 0.0 0.0

4. Repayment of loans and borrowings 0.0 1,146.0

5. Redemption of debt securities 0.0 0.0

6. Other financial liabilities 0.0 0.0

7. Payment of liabilities under finance lease agreements 0.0 5.1

8. Interest 0.0 0.0

9. Other financial expenses 0.0 0.0

III. Net cash flows from financing activities (I-II) 103.8 1,773.1

D. TOTAL NET CASH FLOWS (A.III.+/-B.III+/-C.III) -1,499.3 558.1

E. BALANCE SHEET MOVEMENT IN CASH, of which: -1,499.3 558.1

- movement in cash due to foreign exchange differences 0.0 0.0

F. OPENING BALANCE OF CASH 1,569.0 607.5

G. CLOSING BALANCE OF CASH (F+/-D), of which: 69.7 1,165.6

- restricted cash 12.4 0.0


Table 9. Separate statement of changes in equity for Q1 2020 along with comparative data (in PLN thousand)

Separate statement of changes in equity of Summa Linguae Technologies S.A. Q1 2020 Q1 2019

I. Opening balance of equity (OB) 11,129.0 7,761.8

- corrections of errors from previous years 0.0 0.0

- effects of changes in accounting policies 0.0 0.0

I.a. Opening balance of equity (OB) after adjustments 11,129.0 7,761.8

1. Opening balance of share capital 450.4 389.6

1.1. Movement in share capital 305.0 0.0




- redemption of shares 0.0 0.0

1.2. Closing balance of share capital 755.5 389.6

2. Opening balance of reserve capital 10,532.9 7,751.7

2.1. Movement in reserve capital 39,550.7 0.0

(a) increase (due to) 40,879.0 0.0

- share premium 40,879.0 0.0

- (statutory) profit distribution 0.0 0.0

- profit distribution (above the minimum statutory value) 0.0 0.0

- share issue costs 0.0 0.0


- share issue costs 1,328.3 0.0

2.2. Closing balance of reserve capital 50,083.6 7,751.7

3. Opening balance of revaluation reserve 0.0 0.0

3.1. Movement in revaluation reserve 0.0 0.0



- disposal of fixed assets 0.0 0.0

3.2. Closing balance of revaluation reserve 0.0 0.0

4. Opening balance of other capital reserves 820.3 854.3

4.1. Movement in other capital reserves 0.0 0.0


- INCREASE – declared unpaid shares 0.0 0.0

- INCREASE – ISSUE OF SERIES G SHARES 0.0 0.0


- issue of series E shares 0.0 0.0

- transfer to the share capital due to registration in the National Court Register 0.0 0.0

4.2. Closing balance of other capital reserves 820.3 854.3

5. Opening balance of profit/(loss) carried forward -674.5 -1,353.7

5.1. Opening balance of profit carried forward 1,109.1 98.5



5.2. Opening balance of profit carried forward, after adjustments 1,109.1 98.5

5.3. Movement in profit carried forward 0.0 0.0





- decrease – movement to reserve capital 0.0 0.0

5.4. Closing balance of profit carried forward 1,109.1 98.5

5.5. Opening balance of loss carried forward -1,783.6 -1,452.2



5.6. Opening balance of loss carried forward, after adjustments -1,783.6 -1,452.2

5.7. Movement in loss carried forward 0.0 0.0






5.8. Closing balance of loss carried forward -1,783.6 -1,452.2

5.9. Closing balance of profit/(loss) carried forward -674.5 -1,353.7

6. Net profit/(loss) -522.9 -263.1

(a) net profit 0.0 0.0

(b) net loss -522.9 -263.1

(c) profit write-offs 0.0 0.0

II. Closing balance of equity (CB) 50,461.8 7,378.7

III. Equity accounting for proposed profit distribution 50,461.8 7,378.7

v. INFORMATION ON PRINCIPLES ADOPTED IN THE PREPARATION OF THE REPORT, INCLUDING INFORMATION ON CHANGES IN THE ACCOUNTING POLICIES

These financial statements cover the period from 1 January 2020 to 31 March 2020 and have been

prepared assuming that the Company will continue its business in the foreseeable future, and that it

neither intends nor is forced to abandon its business or significantly reduce its scale. To the Issuer’s

knowledge, there are no circumstances indicating a threat to the continued operation of the Company.

The Company prepares a comparative income statement.

The cash flow statement is prepared using the indirect method.

The Polish zloty is the reporting currency.

The Company's financial result for the period concerned includes all revenue generated by it, as well as

revenue payable to it and costs related to this revenue, calculated on an accrual basis and in accordance

with the principle of prudence and the matching principle.

The accounting principles adopted in the preparation of these financial statements are compliant with the

Accounting Act.

Particular assets are measured at their actual purchase prices or costs, subject to the principle of prudence.

Liabilities are measured in the amount due. In the case of financial liabilities, the adjusted purchase price

can be used, and for those intended for sale within up to three months – the market value or a fair value

otherwise specified.

Intangible assets and fixed assets

Intangible assets, fixed assets and fixed assets under construction are measured at their purchase price or

manufacturing cost, less accumulated depreciation.

Depreciation is calculated in accordance with the straight-line method.


In the case of assets for which there is a suspicion that they will not bring economic benefits in the

foreseeable future, an allowance is made for impairment losses.

The Company uses the following tax depreciation rates for its key categories of assets:

1) For intangible assets:

all are charged against costs within a period of 48 months,

whereby the components relating to fees for modification of computer software are treated as

services.

2) For fixed assets:

A. Buildings - 2.5%

B. plant and machinery - 10% - 30%

C. Vehicles - 20%

D. other fixed assets - 20%

whereby:

a. fixed assets of a greater value (over PLN 2,500) are depreciated linearly,

b. fixed assets of a lesser value (up to PLN 2,500) are depreciated (posted to expenses) as

follows: 100% of the value at the time of purchase,

c. tax depreciation rates are used.

Until financial year 2018, the Company amortized the goodwill of Contact Language Services P. Stróżyk, P.

Siwiec spółka jawna (CLS) and that of Summa Linguae Outsourcing Sp. z o.o. (SLO), adopting a 20-year

write-off period, pursuant to Article 44b(10) of the Accounting Act. Since 2019, the period of amortizing

the goodwill of SLO has been reduced to 10 years. The adopted amortization periods result, among others,

from contracts signed with customers acquired along with CLS and SLO and the history of cooperation with

them. In accordance with its strategy, Summa Linguae Technologies S.A. does not foresee the sale of the

organized parts of the aforementioned enterprises and intends to draw tangible economic benefits from

them for minimum 10 years in the case of SLO and 20 years in the case of CLS. The Management Board of

Summa Linguae T S.A. believes that the proposed period for carrying out amortization of the goodwill

reflects in the best way the actual period of drawing economic benefits arising from the acquisitions.

Since Q4 2015 inclusive, amortization of the goodwill as defined above has been recognized in other

operating expenses.

Permanent investments

Acquired or generated financial assets and other financial investments are recognized in the accounts as at

their acquisition or generation date, at their acquisitions/purchase price.

As at the balance sheet date, shares in other entities and other investments classified as fixed assets are

measured at their acquisition price less any impairment losses.


Impairment losses are charged to financial expenses. If the reason for which assets were written down has

ceased to exist, the equivalent of all or part of the previously made impairment losses increases the value

of a given asset and is recognized in financial income.

As at the balance sheet date, shares in other entities and other investments recognized as fixed assets for

which maturity dates have been specified are measured at their amortized cost.

Short-term investments

Acquired shares and other current assets are recognized in the accounts as at the date of their acquisition

or generation, at the acquisition cost.

As at the balance sheet date, assets classified as short-term investments are measured at their market price.

The effects of changes in the value of short-term investments affect in the total amount financial income or

expenses, respectively.

As at the balance sheet date, assets classified as short-term investments for which maturity dates have

been specified are measured at amortized cost.

Inventory

Materials and goods acquired during the financial year are recognized at their purchase price. The costs of

consumption of materials and goods are determined on the first-in, first-out basis. Inventory of materials

and goods is measured as at the balance sheet date at their purchase price, not higher, however, than the

net selling price of a given asset.

Inventory assets produced during the financial year are recognized at the manufacturing cost.

Finished and semi-finished products are measured as at the balance sheet date at their manufacturing cost,

which is not higher, however, than the net selling price of a given asset.

Inventory assets which have lost their commercial and utility value are written down. Inventory write-

downs are classified respectively as other operating expenses.

The Issuer keeps inventory quantity and value records.

Receivables and liabilities

Receivables denominated in PLN are recognized at the amount due, subject to the principle of prudence.

Liabilities (including loans and borrowings) denominated in PLN are measured at the amount due. In the

case of financial liabilities, the adjusted purchase price can be used, and for those intended for sale within

up to three months – the market value or a fair value specified otherwise.

Receivables and liabilities denominated in foreign currencies are recognized at the time of their origination

at the average exchange rate determined for a given currency by the President of the National Bank of


Poland on the day preceding the day of their recognition. Foreign exchange gains/(losses) arising on the

date of payment due to the difference between the exchange rate as at that date and the exchange rate on

the date when receivables or liabilities originated, are charged to financial income or expenses,

respectively.

Receivables and liabilities in foreign currencies outstanding as at the balance sheet date are measured at

the average exchange rate determined for a given currency on that day by the President of the National

Bank of Poland.

The value of receivables is re-measured based on the probability of their payment by creating an allowance

for bad debts.

Cash

Domestic cash in hand and at bank is measured at its par value. Transactions denominated in foreign currencies are recognized in the accounts as of the date on which they were carried out – unless separate provisions on the funds from the budget of the European Union and other countries of the European Economic Area and on non-reimbursable funds from foreign sources provide otherwise – at the following exchange rate, accordingly: at the rate actually applied on that date, resulting from the nature of the transaction – in the case of sale or purchase of currencies and payment of receivables or liabilities.

As at the balance sheet date, cash in foreign currencies is measured at the average exchange rate

determined for that date for a given currency by the President of the National Bank of Poland.

Foreign exchange gains/(losses) determined at the end of the financial year are recognized as financial

income or expenses, respectively.

Capitals

The share capital is recognized in the amount specified in the Articles of Association and entered in the

relevant court register.

Accruals and provisions for liabilities

Accruals are made when the Company incurs expenses relating to future reporting periods. Accruals

include mainly:

▪ property insurance, ▪ costs of lease,

▪ costs directly related to issue of bonds,

▪ other.

Provisions are made for certain or highly probable future liabilities that may be caused by past events

where the amount or date of their payment or incurrence is not certain, but they can be reliably estimated.

The Company creates provisions for expenses in the amount of probable liabilities falling in the current

reporting period, which arise from services provided to the Company by its contractors and the obligation


to meet future liabilities relating to current operations, whose value can be estimated, although the date

when they will arise is yet unknown.

Provisions are recognized in other operating expenses, financial expenses or extraordinary losses,

depending on the circumstances which caused the loss.

Liabilities recognized as accrued ones and rules for determining the amounts thereof should be based on

acceptable trade practices. Accruals include mainly future liabilities related to current operations, such as:

▪ liabilities payable to the employees, including holiday and retirement pay, ▪ liabilities towards unknown persons, whose amount can be reliably estimated, although the date

when they will arise is yet unknown, including those relating to warranty repairs and guarantee for durables sold.

Accrued expenses are charged to operating expenses.

Deferred income

The Company's deferred income includes in particular the equivalent of revenue from services that will be

performed in future reporting periods, intangible assets and fixed assets received free of charge, in the part

not covered with depreciation write-offs, and negative goodwill.

Deferred income includes also cash received to finance the acquisition or construction of fixed assets,

including fixed assets under construction and development work. Amounts charged to deferred income

increase gradually the amount of other operating revenue, in parallel with amortization or depreciation

write-offs of fixed assets or costs of development work funded from these sources.

Provisions for deferred income tax and deferred income tax assets

Due to temporary differences between the book value of assets and liabilities and their tax value and tax

loss deductible in the future, the Issuer creates a provision for deferred income tax and determines such

deferred income tax assets.

Deferred income tax assets are determined in the amount of the expected future income tax deduction in

relation to deductible temporary differences which will result in a future reduction of the income tax base

and a reduction of the deductible tax loss determined in accordance with the principle of prudence.

A provision for deferred income tax is established in the amount of income tax payable in the future with respect

to taxable temporary differences, i.e. differences that will increase the income tax base in the future.

The amount of the provision for deferred income tax and that of deferred income tax assets are

determined using the income tax rates applicable in the year when the tax liability arose.

In its balance sheet, the Company presents the balance of deferred income tax assets and provisions for

deferred income tax.


Financial instruments

Acquired financial assets are measured at the price of expenditure (the par value and transaction costs

incurred directly in connection with the acquisition of the financial assets).

As of the balance sheet date, assets held for trading and available for sale are measured at fair value, while

held-to-maturity assets and loans granted by the Company – at amortized cost.

Financial liabilities are recognized in the accounts in the amount due. As at the balance sheet date, financial

liabilities held for sale are measured at their fair value. Other financial liabilities are recognized as at the

balance sheet date at amortized cost.

Gains and losses from revaluation, as at the balance sheet date, of financial assets and financial liabilities

classified as held for trading (including derivatives) and financial assets classified as held for sale and

measured at fair value (with the exception of hedged items) are recognized, respectively, as financial

income or expenses of the reporting period.

In the case of financial assets and liabilities measured at purchase price (with the exception of hedged and

hedging items), discount or premium amortization and other differences determined as at the date of their

exclusion from the accounts, are recognized, respectively, as financial income or expenses under interest in

the reporting period.

An embedded derivative instrument is measured as at the date of its recognition in the accounts and as at

the balance sheet date at its fair value. The difference between the fair value determined as at the balance

sheet date and the fair value as at the date of recognition in the accounts is recognized in profit/(loss) on

financing activity.

Derivative instruments used to hedge fair value are measured at fair value, and the change is recognized in

profit/(loss) on financing activities.

Derivative instruments intended for cash flow hedging are measured at fair value, and the change is

recognized in the revaluation reserve to the extent representing an effective hedge, while the part which

does not constitute an effective hedge is recognized in profit/(loss) on financing activity.

Financial profit/(loss)

Financial profit/(loss) accounts for: profit/(loss) on sales, profit/(loss) on other operating activities,

profit/(loss) on financing activities, profit/(loss) on extraordinary operations and mandatory charges on

profit. The Company prepares a comparative income statement.

The amount to be paid by the recipient of finished products and services, less output tax on goods and

services, constitutes revenue from sale of finished products and services. The date of transfer of goods to

the recipient or receipt of a service by it is the date of sale.


The amount to be paid by the recipient of goods or materials, less output tax on goods and services, constitutes

revenue from sale of goods and materials. The date of transfer of goods or materials is the date of sale.

The value of goods and materials sold at the purchase price, commensurate with the revenue on this

account, is the value of goods and materials sold.

Other operating income and expenses include expenses and revenues which are not directly related to

operating activities, but affect profit/(loss).

Financial income includes revenue from financing activities, whereas financial expenses include expenses

incurred with respect to such activities. Interest, fees and foreign exchange gains/(losses) relating to fixed

assets under construction accrued to the date of putting those assets into use influence the initial value of

those assets. After putting a given fixed asset into use, foreign exchange gains/(losses) and interest on

liabilities and investment loans affect profit/(loss) on financing activities.

The difference between generated extraordinary profits and extraordinary losses incurred as a result of

random events unrelated to the general risk of the entity’s business is the result on extraordinary events.

Rules governing consolidation

These consolidated financial statements have been drawn up based on the financial statements of the

parent company and those of the entities controlled by the parent company (subsidiaries).

The subsidiaries, i.e. Summa Linguae Romania, Mayflower, Kommunicera, Globalme and GlobalVision have

been consolidated on a line-by-line basis since the parent company took control over them until such

control ceases to exist. Any transactions, balances, revenue and expenses settled between the

consolidated entities are subject to relevant elimination.

Mayflower subsidiary is consolidated on a line-by-line basis due to the Investment Agreement (and annexes

thereto) binding on Summa Linguae Technologies S.A., concluded by this subsidiary, its partners and the

parent company. Arrangements made in the aforementioned documents provided that the parent

company took full control over the operational and financial policy of Mayflower in January 2018.

VI. BRIEF DESCRIPTION OF THE ISSUER’S SIGNIFICANT ACHIEVEMENTS OR FAILURES DURING THE REPORTING PERION ALONG WITH DETAILS OF THE MOST IMPORTANT FACTORS AND EVENTS, ESPECIALLY THOSE OF UNUSUAL NATURE, AFFECTING THE RESULTS ACHIEVED BY THE ISSUER

1. SALES REVENUE

In Q1 2020, the Group generated consolidated revenue of PLN 20,386.5 thousand. This is an increase by

107% compared to the Group’s revenue in Q1 2019. Maintaining dynamic growth YoY is the result of the


consistent implementation of the development strategy based on acquisitions and international expansion

on those selected markets that the Company considers strategic for its business.

Assuming pro-forma consolidation of Globalme and GlobalVision on a line-by-line basis from 1 January 2019

to 31 December 2019, the estimated annualized consolidated sales revenue of the Company’s Group for Q1

2019 would amount to approx. PLN 15.1 million, hence a 36% increase compared to Q1 2020.

Figure 1. Consolidated quarterly revenue of the Group in the period Q1 2018 – Q1 2020 (in PLN million)

20.4

15.2

9.9 10.8

10.3

7.9

3.9 4.6

4.3

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020

27


Figure 2. Comparison of consolidated quarterly revenue of the Group YoY (in PLN million)

2019 2020

20.4

15.2

9.9 10.8

10.3

Q1 Q2 Q3 Q4

The acquisition of North American GlobalMe and GlobalVision, which took place in December 2019, had a

significant impact on the level of revenue generated in Q1 2020 and the growth dynamics YoY. These

entities have been consolidated on a line-by-line basis since December 2019.

The increase in revenue is also due to cooperation between the Group’s companies at all business levels.

The growing level of specialization and building competitive advantage using state-of-the-art technologies,

especially by focusing on the provision of services for IT/ITES, retail/e-commerce, e-learning sectors as well

as entities dealing with life science/manufacturers of medical devices, enables the Company to serve the

largest international customers that are leaders in their industries. Provision of services for this type of

customers is facilitated by innovative technologies and solutions, which drives the Issuer’s competitive

advantage.

Based on recent acquisitions, the Group is expanding its structures striving to maximize the potential built

through market consolidation in the international arena. The foregoing is reflected, among others, in

establishing cooperation with Shannon Zimmerman who in the past quarter joined the Group’s key

management as Chief Revenue Officer. The use of the latest technologies and acquired experience, as

confirmed by testimonials, results in an inflow of new international customers ordering increasingly

complex projects, which translates directly into better financial results generated by the Group.

The current scale of the Group’s business places it among 100 largest global companies in the LSP industry

on a highly fragmented market1.

2. FINANCIAL RESULTS

1 Based on a prestigious report “The Nimdzi 100” prepared in March 2019 by Nimdzi, a leading research and advisory company (https://www.nimdzi.com/2019-nimdzi-100/).


In Q1 2020, the Group generated consolidated EBITDA2 in the amount of PLN 1,240.5 thousand. Profit

generated in Q1 2020 was reduced, like in previous quarters, by a significant amount of one-off costs,

associated mainly with consulting and legal services as well as intra-Group integration, totalling PLN 1,019.5

thousand.

As regards its net result, the Group recorded a loss in the amount of PLN 1,329.1 thousand (in the same

period in 2019, the loss amount was PLN 783.2 thousand).

The Group’s net result for Q1 2020 was reduced by the costs of expanding the sales structures in North

America – positive effects of these efforts, i.e. increased revenue, will be observed in the second half of the

year.

The result was also affected by financial costs arising from the balance sheet valuation of liabilities payable

to the former owners of GlobalMe and GlobalVision, arising from the acquisitions. The total amount

charged to the financial result in this respect in Q1 2020 was PLN 763.4 thousand.

The net result was additionally reduced by the increased costs of the goodwill write-off due to the recent

consolidations. In Q1 2020, the goodwill write-off amounted to a total of PLN 640.4 thousand.

The above values are a significant non-cash burden on the financial result for the previous quarter.

The ongoing technological and operational integration between the companies in the Group undoubtedly

results in ever greater synergistic effects at the level of revenue and costs. Having new acquisitions in mind,

the costs associated with internal integration will continue to be significant, and the Company has great

potential for further optimization, both as regards costs and revenue, through, e.g. development of

technological solutions and the greater use of synergies and economies of scale.

3. IMPLEMENTATION OF THE DEVELOPMENT STRATEGY

In Q1 2020, the Company focused on activities aimed at internal integration of the Group and optimization

of processes following successful acquisitions carried out in North America in Q4 2019. The acquisition of

GlobalMe entities registered in Canada (about which the Issuer informed in ESPI Current Report 44/2019 of

16 November 2019) and GlobalVision registered in the USA (about which the Issuer informed in ESPI

Current Report 51/2019 of 9 December 2019) was financed with funds from the issue of series L shares,

the majority of which was taken up by V4C Poland Plus Fund S.C.A. SICAV-FIAR, about which the Issuer

informed in ESPI Report 46/2019 of 22 November 2019.

As part of activities aimed at the internal consolidation of the Group, a subsidiary of the Company, i.e.

1229913 B.C. LTD. with its registered office in Vancouver (Canada) (“HoldCo”) was merged with GlobalMe,

2 Profit adjusted for one-off costs related mainly to acquisitions and integration of acquired entities, purchase of equipment associated with rapid growth of the business and costs of investment in technological development and one-off costs related to optimization of employment.


about which the Issuer informed in Current Report 2/2020 of 7 February 2020. Following the merger,

HoldCo changed its name to GlobalMe Localizations Inc.

The acquisition of both targets and the internal integration of the Group is in line with the strategy that the

Issuer consistently implements to build, using advanced technologies and IT solutions, a global company

that will be at the forefront of international LSPs. The acquisitions abruptly increased the scale of the

Group’s operations due to broader access to the North American market, and by acquiring new

competences and resources – enabled the Company to offer more comprehensive data services. The

synergy effects resulting from the acquisitions allow for further optimization of the operating leverage.

- - -

In Q1 2020, the Company – based on the resources acquired as part of the acquisitions – supplemented its

existing structures with new production and sales competences, which was reflected, for example, in

establishing cooperation with Shannon Zimmerman, who after taking, in January, the position of Chief

Revenue Officer will be responsible for coordinating sales activities. Shannon Zimmerman has over 20 years

of experience in the LSP industry in the USA – initially as the founder and CEO of Sajan (SAJA – Nasdaq), and

then, after the acquisition by Amplexor, Deputy CEO of a leading global LSP (12th place in the latest Nimdzi

2020 Top -100 report)

- - -

As part of the Group’s sales activities, GlobalMe was awarded a contract for the provision of data services

(“Contract”) from an e-commerce company operating the world’s largest online store based in the USA

(“Employer”), as announced by the Issuer in Current Report 4/2020 of 15 January 2020.

The Contract involves the collection, transcription and annotation of audio/voice content (data) intended

for training artificial intelligence (AI) algorithms that are then used by the Employer in the voice interface

offered by it. The Contract will be executed with the use of a proprietary application and Robson

technology platform owned by GlobalMe, and the total value of the Contract is USD 388,000.00 (PLN

1,474,400 converted at the exchange rate of USD 1= PLN 3.80), with the deadline for implementation in

April 2020.

- - -

In Current Report 5/2020 of 17 January 2020, the Issuer announced that it entered, on 16 January 2020,

into an arrangement with Innoventure Alternatywna Spółka Inwestycyjna Sp. z o.o. with its registered office

in Krakow (“Innoventure”) and Exfluency GmbH with its registered office in Zug (“XFL”). The arrangement

terminated the agreement concluded with Innoventure regarding the acquisition of shares in Misje3000

Spółka z ograniczoną odpowiedzialnością with its registered office in Krakow (“Company”), as announced

by the Issuer in Current Report 4/2018 of 7 February 2019 (“Agreement”). With the termination of the

Agreement the Parties to the Arrangement reaffirmed that all the Issuer’s or Innoventure’s rights and


obligations under the Agreement had expired. The Issuer and Innoventure waived any claims they may

have in relation to or under the Agreement.

The Parties to the Arrangement also resolved that XFL would have the right to purchase 99 shares in the

Company (“Shares”) from Innoventure at a price determined based on the mechanism set out in the

Arrangement, if the Shares were paid for by 31 January 2020 – for PLN 1,222,000.00 (one million two

hundred and twenty two thousand zlotys) (“Price”). XFL’s right to purchase the Shares may be exercised by

31 March 2020 at the latest. If XFL fails to request to purchase the Shares by this deadline, Innoventure will

have the right to request the purchase of the Shares for the Price by XFL. If XFL fails to perform its

obligations under the Agreement, the Issuer will be required to remedy the damage suffered by the Fund

or to acquire the Shares for the price and on the terms on which the Shares were to be acquired by XFL.

The Issuer’s Management Board also announces that on 16 January 2020, the Issuer and XFL concluded a

loan agreement under which the Issuer granted XFL a loan in the amount of PLN 1,222,000.00 (one million

two hundred twenty-two thousand zlotys) to cover the Price of the Shares. The interest rate on the loan is

5% per annum. The principal amount of the loan with interest shall be reimbursed by 31 December 2029 at

the latest. The Parties to the loan agreement have resolved that the Issuer will pay the loan amount directly

to Innoventure’s bank account.

- - -

In EIB Current Report of 5 February 2020, the Issuer’s Management Board announced that on 5 February

2020, it became aware of a decision of the District Court for Kraków-Śródmieście in Krakow, 11th

Commercial Division of the National Court Register, pursuant to which the Registry Court registered, on 5

February 2020, amendments to the Company’s Articles of Association, including a change in the amount of

the Company’s share capital, i.e. its increase by PLN 305,025.20 (say: three hundred five thousand twenty

five zlotys 20/100), due to the issue of series L bearer shares.

- - -

In Q1 2020, there were changes to the Company’s Supervisory Board. In the EIB current report of 25

February 2020, the Issuer announced the appointment of Ms. Emilia Wardrop Mamajova and Ms. Tatiana

Balkovicova to the Company’s Supervisory Board.

The new members of the Company’s Supervisory Board have a university degree in economics earned at

international universities and extensive managerial experience in finance and investment. They are

associated with the Issuer’s shareholder – V4C Poland Plus Fund S.C.A. SICAV-FIAR with its registered office

in Luxembourg via LSP Investments S.a.r.l. registered in Luxembourg. The term of office of the newly

appointed members of the Company’s Supervisory Board expires on 28 June 2024.

- - -

On 2 March 2020, the Issuer announced in an EIB report that it concluded an agreement with Poland Audit

Services Sp. z o.o. (audit firm) based in Warsaw, entered in the list of audit firms under number 3790


(“Auditor”). Under the agreement the auditor shall audit of the Issuer’s separate financial statements and

the Group’s consolidated financial statements for the financial year 2019. The above selection was made by

the Issuer’s Supervisory Board.

- - -

In Current Report 15/2020 of 16 March 2020 the Company’s Management Board announced that it

became aware of the conclusion, on 11 March 2020, with the National Depository for Securities S.A.

(Krajowy Depozyt Papierów Wartościowych S.A. – “KDPW”) of an agreement on registration in the

depository for securities of 1,000,000 series A bearer shares and 920,034 series K bearer shares of the

Company (“Shares”) and assigning to them the following ISIN code: PLSMLNG00010, provided that the first

listing of the Shares is set in the alternative trading system in which other Company’s shares with the above

ISIN code are listed.

- - -

In Q1 2020, the Issuer was also forced to take preventive actions aimed at protecting its human capital and

counteracting the possible economic effects of the pandemic caused by SARS-CoV-2 virus. Having

previously used geographically dispersed resources and having built international structures within the

Group, with remote work culture in place, the Issuer managed to effectively minimize the risk of the

negative impact of the virus on the implementation of orders by adapting relevant tools and

communication channels.

As part of the above activities, the Issuer plans to further responsibly manage its finances and operations,

using, where available, solutions proposed by particular state administration bodies in the countries where

the Group has its offices.

Given the above, the Issuer’s current situation in the context of the pandemic seems to be stable, and the

decisions taken so far seem adequate and are considered to effectively safeguard the Group’s global

interests. At present, the Issuer’s focus in this respect is on providing adequate safeguards for its activities

in operational and economic terms in case of any further development of the pandemic in the following

quarters. Being aware that the virus may have a delayed negative impact on the Issuer's market and

customers, the Company constantly monitors the situation and is ready to flexibly react in the future.

VII. WHERE THE ISSUER PUBLISHED EARNINGS GUIDANCE – THE POSITION AS REGARDS ITS FEASIBILITY IN THE YEAR CONCERNED, IN LIGHT OF THE RESULTS PRESENTED IN THE QUARTERLY REPORT

The Issuer did not published earnings guidance for 2020.


VIII. WHERE THE ISSUER’S INFORMATION STATEMENT CONTAINED THE INFORMATION REFERRED TO IN ARTICLE 10(13A) OF APPENDIX 1 TO THE ALTERNATIVE TRADING SYSTEM RULES – DESCRIPTION OF THE ADVANCEMENT OF THE ISSUER’S OPERATIONS AND INVESTMENTS WITH THE SCHEDULE OF THEIR IMPLEMENTATION

The Management Board of Summa Linguae Technologies S.A. announces that the Issuer’s Information

Statement did not contain the information referred to in Article 10(13a) of Appendix 1 to the

Alternative Trading System Rules.

IX. WHERE THE ISSUER UNDERTOOK DURING THE REPORTING PERIOD INITIATIVES TO INTRODUCE IN THE COMPANY INNOVATIVE SOLUTIONS AIMED AT THE DEVELOPMENT OF ITS BUSINESS – INFORMATION ON SUCH ACTIVITY

The Issuer actively monitors technological solutions and innovations deployed in the sector. The

Management Board of the Issuer considers technological development in this area as a chance to

increase competitiveness, optimize profitability of operations and streamline processes associated

with the implementation of translation and localization projects.

All measures taken to grow the Issuer’s business through deployment of innovative solutions are

described in section VI herein.

X. THE NUMBER OF THE ISSUER’S EMPLOYEES IN FULL-TIME EQUIVALENTS

As at 31 March 2020, the Summa Linguae Technologies Group employed – under contracts of

employment or similar ones in the foreign companies – 268 full-time equivalent employees (including

35 ones in the parent company), whereby 75 directly employees performed work for other entities as

part of managed services.

XI. WHERE THE ISSUER IS THE PARENT COMPANY OF A GROUP AND DOES NOT PREPARE CONSOLIDATED FINANCIAL


STATEMENTS – THE REASON WHY SUCH STATEMENTS ARE NOT PREPARED

The Issuer is the parent company of the Summa Linguae Technologies Group and prepares

consolidated financial statements.

XII. INFORMATION ON THE ISSUER’S SHAREHOLDING STRUCTURE WITH DETAILS OF SHAREHOLDERS HOLDING, AS OF THE DATE OF THE REPORT, AT LEAST 5% OF VOTES AT THE GENERAL MEETING

The Issuer’s shareholding structure as at the date of this quarterly report, accounting for shareholders

holding at least 5% of votes at the General Meeting of Shareholders, is presented in Table 11 and Chart

3 below.

Table 11. Shareholding structure of Summa Linguae Technologies S.A.

No.

Shareholder

Number Number of votes

Share

of shares in the votes

1. V4C Poland Plus Fund S.C.A. SICAV-FIAR 4,135,332 4,135,332 54.7% - Directly 2,950,000 2,950,000 39.0%

- Indirectly through LSP Investments S.a.r.l. 1,185,332 1,185,332 15.7%

2. Krzysztof Zdanowski (indirectly and directly) 919,545 919,545 12.2% - Directly 281,505 281,505 3.7%

- Indirectly through Amidio Services Ltd. 638,040 638,040 8.4%

3. Madhuri Hegde 769,188 769,188 10.2%

4. eM64 FIZAN 545,862 545,862 7.2%

5. Potemma Limited* 390,674 390,674 5.2%

6. Other 793,945 793,945 10.5%

TOTAL 7,554,546 7,554,546 100.0%

* As informed in the announcement of the Agreement referred to in Current Report 24/2020 of 9 April 2020.


Figure 3. Shareholding structure of Summa Linguae Technologies S.A. (share in the share capital and votes)

Potemna Other

10.5% Limited

V4C Poland 5.2%

Plus Fund S.C.A.

eM64 FIZAN SICAV-FIAR

54.7% 7.2%

Madhuri Hegde 10.2%

Krzysztof Zdanowski

(indirectly and directly )

12.2% As at the date of this quarterly Report, two shareholders’ agreements are in force with respect to the Issuer’s stock ownership.

1. Agreement 1 – of 22 November 2019 regarding the purchase of the Company’s shares by the Fund and the

pursuit of a sustainable policy with respect to the Company. The parties to the agreement include Madhuri

Hegde, Krzysztof Zdanowski and the Fund. As at 15 May 2020, the parties to the agreement hold in total

5,824,065 Company’s shares, representing 77.1% of the share capital of the Company and entitling to

5,824,065 votes at the General Meeting of the Company’s Shareholders, representing 77.1% of the total

number of votes in the Company.

2. Agreement 2 – of 7 April 2020 (date of putting its signature by the last party to the agreement) regarding

the unanimous vote at the General Meeting of Shareholders of the company under the name Summa

Linguae Technologies S.A. with its registered office in Krakow. In accordance with the notification

announced by the Company in Current Report 24/2020 on 9 April 2020, parties to the agreement include

eM64 FIZAN, Potemma Limited, Czesław Kowalski, Martyna Sypnicka, Dominik Sypnicki, Bartłomiej

Sieczkowski, Krzysztof Zasun, Monika Sieczkowska, Piotr Drzewiecki, Sebastian Janda and Paweł

Laskarzewski. The parties to the agreement hold in total 1,572,778 Company’s shares, r

Documents

CONSOLIDATED INTERIM REPORT Q1 2020...Consolidated interim report / Q1 2020 I. LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD Dear Readers, On behalf of the Management Board of