Form 8-K/A Bridgeline Digital, Inc. For: Feb 25

May 17, 2021 5:12 PM

UNITED STATED

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A

(Amendment No. 1)

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

 

Date of Report (Date of earliest event reported): February 25, 2021

 

BRIDGELINE DIGITAL, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

001-33567  

52-2263942

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

 

100 Sylvan Road, Suite G-700

Woburn, MA 01801

(Address of principal executive offices, including zip code)

 

(781) 376-5555

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act

Soliciting material pursuant to Rule 14a-12 under the Exchange Act

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Exchange Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001

BLIN

Nasdaq Capital Market

 

 

 

EXPLANATORY NOTE

 

On March 1, 2021, Bridgeline Digital, Inc., a Delaware corporation (the “Company”), completed its previously disclosed acquisition of all of the issued and outstanding shares of Woorank SRL, an entity located in Belgium (“Woorank”). pursuant to the terms and conditions of the Share Purchase Agreement, dated February 2, 2021, by and between the Company and Woorank (the “Acquisition”).

 

This Amendment No. 1 (this “Amendment”) is being filed by the Company for the purpose of amending the Current Report on Form 8-K originally filed by the Company with the U.S. Securities and Exchange Commission (the “Commission”) on March 2, 2021 (the “Original Report”) to provide the financial statements and pro forma financial information required by Items 9.01(a) and (b) of Form 8-K, which were not previously filed with the Original Report, but are permitted to be filed by amendment no later than 71 calendar days after the date the Original Report was required to be filed with the Commission. as permitted by the rules of the SEC.

 

Item 9.01

Financial Statements and Exhibits.

 

(a) Financial statements of business acquired.

 

The following financial statements of Woorank are being filed as exhibits hereto and are incorporated by reference herein:

 

Exhibit 99.1* — Woorank SRL audited financial statements, including the independent auditor’s report as of and for the year ended December 31, 2020.

 

Pursuant to a letter from the Commission, dated April 9, 2021, the Commission stated that it would permit the omission of Woorank financial statements for the year ended December 31, 2019, as required by Rule 8-04 of Regulation S-X. 

 

(b) Pro forma financial information.

 

The following pro forma financial information is being filed as an exhibit hereto and is incorporated by reference herein:

 

Exhibit 99.2 — Unaudited pro forma condensed combined financial statements and explanatory notes for Bridgeline Digital, Inc and Woorank as of September 30, 2020, and for the six months ended March 31, 2021.

 

(c) Not Applicable.

 

(d) Exhibits.

 

 

2.1*

Share Purchase Agreement, by and between the Company and Woorank SRL., dated February 2, 2021, incorporated by reference from Exhibit 2.1 to the Current Report on Form 8-K, filed February 3, 2021.

   

 

 

23.1

Consent of PKF-VMB Bedrijfsrevisoren CVBA Independent Auditor of Woorank SRL

   

 

 

99.1

Audited financial statements of Woorank SRLfor the year ended December 31, 2020 and Independent Auditor’s Report thereon.

   

 

 

99.2

Unaudited pro forma condensed combined financial statements and explanatory notes for Bridgeline Digital Inc. and Woorank SRL as of September 30, 2020 and for the six months ended March 31, 2021.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

BRIDGELINE DIGITAL, INC.

 
 

(Registrant)

 
       
       
       
 

By:

/s/Mark G. Downey 

 
   

Mark G. Downey

 
   

Chief Financial Officer and Treasurer

 

 

Date: May 17, 2021

 

 

 

Exhibit 23.1

 

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS CONSENT

 

 

We consent to the incorporation by reference in this Registration Statement of Bridgeline Digital, Inc. on Form S-3 (File No. 333-230816) of our report dated May 13, 2021 with respect to our audit of the financial statements of Woorank SRL (the "Company"), which includes an explanatory paragraph as to the Company's basis for qualified opinion as a first time adopter of IFRS, as of December 31, 2020 and for the year then ended, which report appears in the amended Form 8-K of Bridgeline Digital, Inc. filed with the U.S. Securities and Exchange Commission on February 3, 2021.

 

 

/s/ PKF-VMB Bedrijfsrevisoren CVBA

 

 

PKF-VMB Bedrijfsrevisoren CVBA

Belgium

May 13, 2021

 

 
 

Exhibit 99.1

 

 

 

 

 

 

 

Woorank SRL

 

Financial Statements

 

For the year ended December 31, 2020

 

 


1

 

 

1

 

Independent Auditors’ Report

4

2

 

Statement of Profit and Loss

6

3

 

Statement of Financial Position

7

4

 

Statement of Changes in Equity

8

5

 

Statement of Cash Flows

9

6

 

Notes to the Financial Statements

10

6.1.

 

General

10

6.1.1.

 

Reporting Entity

10

6.1.2.

 

Material Events in the Reporting Period

10

6.2.

 

Basis of preparation

11

6.2.1.

 

Statement of Compliance

11

6.2.2.

 

Currency

11

6.2.3.

 

Basis of Measurement

11

6.2.4.

 

Significant Accounting Estimates and Judgements

12

6.3.

 

Summary of Significant Accounting Policies

13

6.3.1.

 

Foreign Currency Translation

13

6.3.2.

 

Revenue

13

6.3.3.

 

Intangible assets

14

6.3.4.

 

Property and equipment

14

6.3.5.

 

Impairment of assets

15

6.3.6.

 

Non-current assets held for sale

15

6.3.7.

 

Financial assets

16

6.3.8.

 

Cash and cash equivalents

16

6.3.9.

 

Share Capital

16

6.3.10.

 

Financial liabilities

17

6.3.11.

 

Taxes

17

6.3.12.

 

Employee Benefits

18

6.3.13.

 

New Standards, Amendments to Standards and Interpretations not yet adopted

18

6.4.

 

Revenue from contract with customers

20

6.4.1.

 

Dissaggregation of revenue from contracts with customers

20

6.4.2.

 

Contract liabilities

20

6.4.3.

 

Remaining performance obligations

21

6.5.

 

Disclosure of Expenses

21

 

2

 

6.6.

Employee benefit expenses

22

6.7.

Finance expenses

22

6.8.

Income Tax

23

6.9.

Trade and Other Receivables

24

6.10.

Goodwill and impairment testing

24

6.11.

Property and equipment

25

6.12.

Cash and Cash Equivalents

25

6.13.

Assets classified as held for sale

26

6.14.

Capital and Reserves

26

6.15.

Employment benefit liabilities

26

6.16.

Loans and borrowings

27

6.17.

Trade payables

30

6.18.

Other payables

30

6.19.

Financial Instruments

31

6.20.

Financial Risk Management

31

6.21.

Related Party Transactions

33

6.22.

Subsequent Events

34

 


3

 

 

1.

Independent Auditors’ Report

 

To the Director of Woorank SRL

 

 

We have audited the accompanying financial statements of Woorank SRL (the ‘Company’), which comprise the statement of financial position as of December 31, 2020 and the related statement of profit and loss, statement of changes in equity, and statement of cash flows for the year then ended, and the related notes to the financial statements.

 

Managements Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Basis for Qualified Opinion

 

International Accounting Standard 1, Presentation of Financial Statements, and IFRS 1 First Time Adopter of International Financial Reporting Standards require that comparative information be disclosed in respect of the previous period for all amounts reported in the financial statements, except when a standard or interpretation permits or requires otherwise. These financial statements have been prepared for the purposes of meeting the requirements of Rule 8-04 of Regulation S-X of the United States Securities Exchange Commission, which does not require the presentation of comparative information. Consequently, no comparative information is presented. The omission of comparative information and related information results in an incomplete presentation of the financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 


4

 

Qualified Opinion

 

In our opinion, except for the omission of comparative information as described in the Basis for Qualified Opinion paragraph, such financial statements referred to above present fairly, in all material respects, the financial position of Woorank SRL as of December 31, 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

 

Wemmel, May 13 2021

 

 

PKF-VMB Bedrijfsrevisoren CVBA,

 

Auditor,

 

Represented by:

 

 

 

Luc Martens,

 

Registered auditor

 

 

 


5

 

 

2.

Statement of Profit and Loss

 

           

Year ended

 
            December 31, 2020  
               
   

 

Notes    

EUR

 

Revenue

    6.4       1,637,336  

Cost of services

    6.5       (337,765 )

Gross Profit

            1,299,571  
                 

Research and development expenses

    6.5       (617,722 )

Selling, general and administrative expenses

    6.5       (502,296 )

Other operating income

            3,104  

Profit from operations

            182,657  
                 

Finance expenses

    6.7       (74,057 )

Profit before tax

            108,600  
                 

Income tax

    6.8       0  

Profit for the year

            108,600  

Other comprehensive income for the year

            0  

Total comprehensive income for the year

            108,600  

 

 

The accompanying notes are an integral part of these financial statements.

 


6

 

3.

Statement of Financial Position

 

   

 

Notes    

Year ended

December 31, 2020

 
               
           

 

EUR
 

Assets

             

Non-current assets

               

Goodwill

    6.10       2,669,250  

Property and equipment

    6.11       4,260  

Other non-current assets

            1,850  

Total non-currents assets

            2,675,360  
                 

Current assets

               

Trade receivables

    6.9       24,955  

Other receivables

    6.9       39,356  

Prepayments and other short-term assets

            17,126  

Cash and cash equivalents

    6.12       439,336  
              520,773  

Assets classified as held for sale

    6.13       200,000  

Total current assets

            720,773  

Total assets

            3,396,133  

Equity

               

Capital

    6.14       2,341,766  

Accumulated profit of the period

            (1,404,882 )

Total equity

            936,884  

Non-current liabilities

               

Long-term bank loans

    6.16       618,730  

Total non-current liabilities

            618,730  

Current liabilities

               

Current portion of long term bank loans

    6.16       360,159  

Other loans

    6.16       1,173,002  

Trade payables

    6.17       52,644  

Other payables

    6.18       59,297  

Contract liabilities

    6.4.2       195,417  

Total current liabilities

            1,840,519  

Total liabilities

            2,459,249  

Total equity and liabilities

            3,396,133  

 

The accompanying notes are an integral part of these financial statements.

 


7

 

4.

Statement of Changes in Equity

 

   

 

Notes    

Attributable to the shareholders

of the Company

EUR

 

For the year ended December 31, 2020

         

Capital

   

Reserves

   

Other

reserves

   

Total equity

 

As at January 1, 2020

    6.14       2,341,766       (1,513,482 )     0       828,284  

Total Comprehensive income for the period

                    108,600               108,600  

Year ended December 31, 2020

    6.14       2,341,766       (1,404,882 )     0       936,884  

 

 

The accompanying notes are an integral part of these financial statements.

 


8

 

5.

Statement of Cash Flows

 

           

Year ended

December 31,

2020

 
               
   

 

Notes    

EUR

 
                 

Operating activities

               

Profit for the year

            108,600  

Adjustments for:

               

Depreciation of property and equipment

    6.11       2,528  

Finance expenses

            74,057  

Subtotal

            185,185  
                 

Changes in working capital

               

Decrease in trade receivables and other receivables

            13,752  

Increase in prepayments and other short-term assets

            (593 )

Decrease in trade payables and other payables

            (97,216 )

Cash generated from operations

            101,128  

Net cash flows from operating activities

            101,128  
                 

Investing activities

               

Purchase of property and equipment

    6.11       0  
                 

Net cash used in investing activities

            0  
                 

Financing activities

               

Proceeds from long-term borrowings

    6.16       400,000  

Repayment of bank loans

            (162,322 )

Repayment of other loans

            (57,080 )

Interest paid on bank loans

            (14,492 )

Interest paid on other loans

            (16,886 )

Net cash from financing activities

            149,220  
                 

Net increase in cash and cash equivalents

            250,348  
                 

Cash and cash equivalents at beginning of the year

            188,988  

Cash and cash equivalents at end of the year

    6.12       439,336  

 

 

The accompanying notes are an integral part of these financial statements.

 


9

 

6.

Notes to the Financial Statements

 

6.1.

General

 

6.1.1.

Reporting Entity

 

Woorank SRL (the “Company”) is a Belgian resident company incorporated in Belgium. The address of the Company’s registered office is 1040 Etterbeek, Cours Saint-Michel 30B, Belgium. The financial statements of the Company are those for the year ended December 31, 2020. The Company has no subsidiary undertakings. Therefore the financial statements cover the individual entity.

 

The Company is providing an SEO (Search Engine Optimization) audit and digital marketing tool that can analyse a client’s site through Google’s eyes and generate an instant audit of a website’s technical, on-page and off-page SEO. The tool does not only help companies increase their search ranking and website traffic, but also improve audience engagement, conversion, and customer retention rates.

 

6.1.2.

Material Events in the Reporting Period

 

Following the outbreak of the coronavirus (COVID-19) in China in December 2019, and it reaching many other countries as well at the beginning of 2020, there was a decrease in economic activity in many areas around the world, including Belgium. The spread of the virus has led, inter alia, to a general disruption in the supply chain, a decrease in global transportation, restrictions on travel and work that were announced by the State of Belgium and other countries around the world and a decrease in the value of financial assets and commodities on the markets in Belgium and the world. Despite this situation, the Company applied full operational capacity following appropriate safety and sanitary procedures.

 

Despite the worldwide negative impact on the Belgian and the world’s economy, the spreading of the coronavirus and the decrease of economic activity as described above, had no major impact on the Company’s operations and results. The Company’s activities are mainly digitalised and the Company works in a decentralized way.

 

Since this event is not under the control of the Company, and matters such as the virus continuing to spread or stopping may affect the Company's assessments, the Company is continuing to regularly follow the changes on the markets in Belgium and the world and is examining the mid and long- term effects on its business results.

 


10

 

 

6.2.

Basis of preparation

 

6.2.1.

Statement of Compliance

 

On March 1, 2021 Woorank SRL was acquired by Bridgeline Digital, Inc, a company quoted on the Nasdaq (BLIN). The financial statements have been prepared at the request of Bridgeline Digital, Inc in order to comply with the United States Securities and Exchange Commission regulations. The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) subject to what is described in the following paragraph.

 

These financial statements do not include all of the presentation principles of IFRS as issued by the IASB for a complete set of financial statements. International Accounting Standard 1, Presentation of Financial Statements, and IFRS 1 First Time Adopter of International Financial Reporting Standards require that comparative information be disclosed in respect of the previous period for all amounts reported in the financial statements, except when a standard or interpretation permits or requires otherwise. These financial statements have been prepared for the purposes of meeting the requirements of Rule 8-04 of Regulation S-X of the United States Securities Exchange Commission, which does not require the presentation of comparative information. Consequently, no comparative information is presented. The omission of comparative information and related information results in an incomplete presentation of the financial statements in accordance with IFRS as issued by the IASB.

 

The principal accounting policies adopted in the preparation of the financial statements are set out in Note 6.3.

 

There are a number of standards, amendments to standards, and interpretations, which have been issued by the IASB that are effective in future accounting periods that the Company has decided not to adopt early. None of these changes to existing standards or interpretations and amendments are expected to have a significant effect on the financial statements of the Company (see also Note 6.3.13.).

 

The financial statements were authorized for issue by the Company’s Director on May 13, 2021. They have been prepared under the assumption that the Company operates on a going concern basis.

 

6.2.2.

Currency

 

These Financial Statements are presented in Euro (EUR) and all “currency” values are rounded to the nearest Euro, except where otherwise indicated.

 

6.2.3.

Basis of Measurement

 

The financial statements have been prepared on a historical cost basis, except for the available-for-sale financial asset that is measured at the lower of its carrying amount and fair value less costs to sell.

 


11

 

6.2.4.

Significant Accounting Estimates and Judgements

 

The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and judgements that are important for the presentation of the financial statements are addressed in the following notes:

 

-

Going Concern - The judgement in accounting policies that is the most important for the presentation of the financial statements relates to going concern. At December 31, 2020 Woorank SRL’s current liabilities exceeded current assets by 1,119,746 EUR (1,319,746 EUR if Assets classified as held for sale (see Note 6.13) are excluded). The Company recognized a profit of 108,600 EUR for the year then ended. Management has determined and believes there is no doubt the Company can continue as a going concern for the foreseeable future taking into account the following elements. As described in Note 6.22 and as mentioned above, Woorank SRL was acquired by Bridgeline Digital, Inc. at March 1, 2021 and agreed new terms and conditions for the loans with former shareholders reducing the third party short term debts as reported in the balance sheet by 1,173,002 EUR. Management analyzed cash on hand after December 31, 2020 and reviewed the latest forecast and projections for all cash expenditures and receipts. Management also considered the guaranteed payment from Bridgeline Digital, Inc. related to the loan with one of the former shareholders and the ability to receive funding from Bridgeline Digital, Inc., if needed for extraordinary events.

 

-

Impairment testing of goodwill and non-financial assets - Estimate of future cash flows when determining the recoverable value of cash generating units including goodwill and determination of the discount rate to apply to those future cash flows (Note 6.10).

 


12

 

 

6.3.

Summary of Significant Accounting Policies

 

6.3.1.

Foreign Currency Translation

 

Foreign currency transactions and balances

 

Transactions in foreign currencies are translated to the reporting currency of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the exchange rate at that date.

 

Foreign currency differences arising on translation are generally recognized in profit or loss.

 

6.3.2.

Revenue

 

Overview

 

The Company derives its revenue mainly from Software Licenses, which are comprised of subscription fees (“SaaS”), Customers who license the software on a subscription basis, which can be described as “Software as a Service” or “SaaS”, do not take possession of the software.

 

Revenue is recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company’s subscription service arrangements that are recognized as revenue are non-cancelable and do not contain refund-type provisions. Revenue is reported net of applicable sales and use tax.

 

The Company recognizes revenue from contracts with customers using a five-step model, which is described below:

 

-

Identify the customer contract;

 

-

Identify performance obligations that are distinct

 

-

Determine the transaction price

 

-

Allocate the transaction price to the distinct performance obligations

 

-

Recognize revenue as the performance obligations are satisfied

 

Identify the customer contract

 

A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability and consideration is probable.

 


13

 

 

Identify performance obligations that are distinct

 

A performance obligation is a promise to provide a distinct service or a series of distinct services. A service that is promised to a customer is distinct if the customer can benefit from the service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the service to the customer is separately identifiable from other promises in the contract.

 

Determine the transaction price

 

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding sales taxes that are collected on behalf of government agencies.

 

Allocate the transaction price to the distinct performance obligations

 

The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the services being provided to the customer. The Company determines the SSP of its services based upon the historical average sales prices for each types of software license and professional services sold.

 

Recognize revenue as the performance obligations are satisfied

 

Revenues are recognized when or as control of the promised services is transferred to customers. Revenue from SaaS licenses is recognized ratably over the subscription period beginning on the date the license is made available to customers. Most subscription contracts are one-month and one-year terms.

 

The Company recognizes revenue from other professional services as the services are provided.

 

Customer Payment Terms

 

Software Licenses require upfront payment.

 

Invoicing for professional services are either monthly or upon achievement of milestones and payment terms for such billings are within 30 days from invoice date.

 

6.3.3.

Intangible assets

 

Goodwill is not amortized, but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.

 

6.3.4.

Property and equipment

 

Property and equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any.

 


14

 

Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of the asset, less its residual value.

 

Depreciation is recognized in profit and loss on a straight-line basis over the estimated useful lives of the assets as follows:

 

 

Operating equipment:                           3 years

 

Installations – office furniture:            10 years

 

 

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively, if appropriate.

 

6.3.5.

Impairment of assets

 

Goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate goodwill might be impaired.

 

Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

 

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.

 

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

 

6.3.6.

Non-current assets held for sale

 

Non-current assets are classified as held for sale if it is highly probable that they will be recovered primarily through a sale transaction or a distribution to the owners and not through continuing use. This applies also to when the Company is obligated to a sale plan that involves losing control over a associate, whether or not the Company will retain any post-sale non-controlling interests in the associate.

 

Immediately before classification as held for sale or distribution, the assets are re-measured in accordance with the Company’s accounting policies. Thereafter, the assets are measured at the lower of their carrying amount and fair value less cost to sell.

 

In subsequent periods, depreciable assets classified as held for sale or distribution are not periodically depreciated, and investments in associates classified as held for sale are not accounted for by the equity method.

 


15

 

6.3.7.

Financial assets

 

Financial assets at amortized cost

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at fair value through profit or loss:

 

-

It is held within a business model whose objective is to hold assets so as to collect contractual cash flows; and

 

-

The contractual terms of the financial asset give rise to cash flows representing solely payments of principal and interest on the principal amount outstanding on specified dates.

 

Trade receivables are recognized initially at the amount of consideration that is unconditional. They are subsequently measured at amortized cost using the effective interest method, less loss allowance.

 

Impairment of financials assets

 

For trade receivables and contract assets, the Company applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Company assesses the credit risk of each financial asset individually at each reporting date based on the expected cash inflows.

 

The Company considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

 

Derecognition

 

Financial assets are derecognized when the contractual rights of the Company to the cash flows from the asset expire, or the Company transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset were transferred. When the Company retains substantially all of the risks and rewards of ownership of the financial asset, it continues to recognize the financial asset.

 

6.3.8.

Cash and cash equivalents

 

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand.

 

6.3.9.

Share Capital

 

Ordinary shares are classified as equity.

 

Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

 


16

 

6.3.10.

Financial liabilities

 

Non-derivative financial liabilities

 

Non-derivative financial liabilities include loans and borrowings from banks and others, and trade and other payables.

 

Initial recognition of financial liabilities

 

The Company initially recognizes debt securities issued on the date that they originated. All other financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

 

Subsequent measurement of financial liabilities

 

Financial liabilities are recognized initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost.

 

Transaction costs directly attributable to an expected issuance of an instrument that will be classified as a financial liability are recognized as an asset in the framework of deferred expenses in the statement of financial position. These transaction costs are deducted from the financial liability upon its initial recognition, or are amortized as financing expenses in the statement of income when the issuance is no longer expected to occur.

 

6.3.11.

Taxes

 

Current tax is provided at the amounts expected to be paid applying tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred tax accounts are determined, based on the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities shown on the statement of financial position. Deferred tax assets and liabilities are not recognized if they arise in the following situations: the initial recognition of goodwill; or the initial recognition of assets and liabilities that affect neither accounting nor taxable profit.

 

The amount of deferred tax provided is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the date of the statement of financial position.

 

The Company does not recognize deferred tax liabilities, or deferred tax assets, on temporary differences when it is not considered probable that the temporary differences will reverse in the foreseeable future.

 

A deferred tax asset is recognized only to the extent that it is probable based on all available positive and negative evidence that future taxable profits will be available against which the asset can be utilised. Such evidence includes, but is not limited to, recent cumulative earnings or losses, expectations of future taxable income by taxing jurisdiction, and the carry-forward periods available for the utilisation of deferred tax assets. The carrying amount of the deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

 


17

 

Deferred tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same tax authority. Current tax assets and liabilities are offset where the entity has a legal enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

6.3.12.

Employee Benefits

 

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

 

A liability is recognized for the amount expected to be paid under short-term vacation pay or year-end bonus if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

 

The employee benefits are classified, for measurement purposes, as short-term benefits.

 

6.3.13.

New Standards, Amendments to Standards and Interpretations not yet adopted

 

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Company has decided not to adopt early.

 

 

The following amendments are effective for the period beginning 1 January 2022:

 

 

Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);

 

 

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);

 

 

Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and

 

 

References to Conceptual Framework (Amendments to IFRS 3).

 


18

 

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. The amendments also clarify that 'settlement' includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments were originally effective for annual reporting periods beginning on or after 1 January 2022. However, in May 2020, the effective date was deferred to annual reporting periods beginning on or after 1 January 2023.

 

 

IFRS 17 Insurance Contracts (effective 1 January 2023) - In June 2020, the IASB issued amendments to IFRS 17, including a deferral of its effective date to 1 January 2023.

 

The Company does not expect any Amendments and other Standards issued by the IASB, but not yet effective, to have a material impact on the Company.

 


19

 

 

6.4.

Revenue from contract with customers

 

6.4.1.

Dissaggregation of revenue from contracts with customers

 

The Company derives revenue from following sources:

 

     

For the year ended

December 31, 2020

 
 

Timing of revenue

recognition

 

EUR

 
           

Subscriptions

Over time

    1,528,344  

Other

Over time

    108,992  
           

Total

    1,637,336  

 

 

The Company generated revenue in the following primary geographical markets during the period ended December 31, 2020, with Belgium and the United States representing the majority of revenues:

 

   

For the year ended

December 31, 2020

 
       
   

EUR

 
         

Belgium

    437,367  

United States

    1,129,497  

The rest of the world

    70,472  
         

Total

    1,637,336  

 

 

6.4.2.

Contract liabilities

 

Contract liabilities consist of billings or customer payments in excess of amounts recognized as revenue. Current contract liabilities relate to performance obligations that will be satisfied within one year.

 

The Company’s current contract liabilities primarily arise from subscription fees that are invoiced in advance of the period of service and are recognized monthly when the performance obligation has been satisfied.

 


20

 

The following table provides an overview of trade receivables and contract liabilities from contracts with customers.

 

   

Year ended

December 31,

2020

 
         
   

EUR

 
         

Trade receivables, net

    24,955  
         

Contract liabilities

    195,417  

Current

    195,417  

 

 

All of the total contract liabilities are expected to be recognized in revenue during 2021.

 

There are no contract assets.

 

6.4.3.

Remaining performance obligations

 

The transaction price allocated to remaining performance obligations that are unsatisfied, or partially unsatisfied, represents contracted revenue that will be recognized in future periods. The Company’s future performance obligations consist primarily of subscription obligations relating to future periods of the month or one year contractual term of its contracts.

 

 

6.5.

Disclosure of Expenses

 

Details of expenses by nature are as follows:

 

           

For the year ended

December 31, 2020

 
               
   

 

Notes    

EUR

 

Expenses by nature

               
                 

Employee benefit expenses

    6.6       (1,112,824 )

Rental fees

            (31,615 )

IT related expenses (server location, licenses)

            (260,815 )

Professional fees

            (22,286 )

Depreciation and amortization

            (2,528 )

Bank and related expenses

            (15,779 )

Travel cost

            (3,294 )

Other general and administrative expenses

            (8,642 )
                 

Total

            (1,457,783 )

 


21

 

   

For the year ended

December 31, 2020

     
   

EUR

 

Expenses by type

       
         

Cost of services

    (337,765 )

Research and development expenses

    (617,722 )

Selling, general and administrative expenses

    (502,296 )
         

Total

    (1,457,783 )

 

 

See Note 6.21 of the financial statements regarding management fees          and expenses paid to related parties.

 

 

6.6.

Employee benefit expenses

 

Details of employee benefits which both include employee related benefits and management fees are as follows:

 

   

For the year ended

December 31, 2020

 
       
   

EUR

 
         

Wages and salaries

    (285,343 )

Social security

    (49,999 )

Contractors

    (634,913 )

Management fees and expenses

    (122,546 )

Other benefits

    (20,023 )
         

Total

    (1,112,824 )

 

 

6.7.

Finance expenses

 

Finance expenses consist of interest expenses on outstanding loans.

 


22

 

 

6.8.

Income Tax

 

Current income tax

 

The enacted tax rate amounts to 25%. The Company does not have a taxable basis an therefore no amount as current income tax is recorded in the Statement of Profit and Loss.

 

The main differences between the actual tax charge for the year, which is nil, and the standard rate of income tax applied to the profit for the year (25%) can be summarized as follows:

 

 

   

For the year

ended

December 31,

2020

 
         
   

EUR

 
         

Profit for the year

    108,600  

Income tax expense

    0  

Profit before income taxes

    108,600  
         

Tax using the Company’s domestic tax rate of 25%

    27,150  

Tax expense in the income statement

    0  

Difference to explain

    27,150  
         
         

Expenses not deductible for tax purposes

    871  

Temporary differences

    (21.352 )

Use of existing tax losses

    (6.669 )
         

Total

    (27,150 )

 

 

Deferred taxes

 

The company has deferred tax assets that have not been recognized in the Statement of Financial Position. Items can be summarized as follows:

 

   

Year ended

December 31, 2020

 
       
   

EUR

 
         

Tax losses

    2,914  

Timing differences

    16,005  

Total

    18,919  

 


23

 

Tax losses carried forward do not expire under Belgian tax law. Due to the uncertainty surrounding the Company’s ability to realize taxable profits in the near future the Company has not recognized any deferred tax assets.

 

 

6.9.

Trade and Other Receivables

 

The trade and other receivables can be summarized as follows:

 

   

Year ended

December 31, 2020

 
   

EUR

 

Trade receivables

    24,955  
         

Other receivables

    39,356  

VAT receivable

    14,356  

Belgian income tax receivable

    25,000  
         

Total trade and other receivables

    64,311  

 

 

6.10.

Goodwill and impairment testing

 

The carrying amount of goodwill is summarized as follows:

 

   

Year ended

December 31, 2020

 
   

EUR

 
         

Goodwill

    4,970,401  

Impairment losses

    (2,301,151 )

Net book value

    2,669,250  

 

 

The Company is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows.

 


24

 

The recoverable amount has been determined from value in use calculations based on cash flow projections from forecasts covering a four year period and including a perpetuity thereafter. Other major assumptions are as follows:

 

   

Year ended

December 31, 2020

 
   

EUR

 
         

Discount rate

    12,31 %

EBITDA margin

    10,00 %

Growth rate beyond budgeted period

    0  

 

 

No further goodwill impairment adjustments were necessary for the year ended December 31, 2020.

 

6.11.

Property and equipment

 

Acquisitions and disposals

 

During the year 2020, the Company did not acquire any fixed assets.

 

Property and equipment

 

   

Installations

   

Operating

Equipment

   

Total

 
   

EUR

   

EUR

   

EUR

 

Cost

                       

As at January 1, 2020

    72,721       25,051       97,772  

As at December 31, 2020

    72,721       25,051       97,772  
                         

Accumulated Depreciation

                       

As at January 1, 2020

    (68,426 )     (22,558 )     (90,984 )

Depreciation

    (1,998 )     (530 )     (2,528 )

As at December 31, 2020

    (70,424 )     (23,088 )     (90,984 )
                         

Net book value

                       

As at January 1, 2020

    4,295       2,493       6,788  

As at December 31, 2020

    2,297       1,963       4,260  

 

 

6.12.

Cash and Cash Equivalents

 

Cash and cash equivalents can be summarized as follows:

 

   

Year ended

December 31, 2020

 
   

EUR

 

Cash and cash equivalents

       

Bank balance

    439,336  

Total cash and equivalents

    439,336  

 

 

There are no restrictions on cash.

 


25

 

6.13.

Assets classified as held for sale

 

In February 2021, the Company sold its investment in Wordlift s.r.l. (“Wordlift”), a limited liability company existing and organized under the laws of Italy and with registered offices at Via Giulia n. 117, 00186 Rome. The Company previously held 10,2533% of Wordlift’s shares. Till the date of the transaction Boris Demaria, director of the Company held one (1) director seat in the Board of Directors of Wordlift, out of four directors.

 

In 2020, management committed to a plan to sell this associate following the potential acquisition of the shares of the Company by a third party and following the assessment that the associate did not constitute a strategic investment for the Company.

 

The total proceeds of the sale amount to 280,000 EUR and of which 90.000 EUR was paid at the effective date of the sale. The balance of 190.000 EUR will be settled within 36 months from that date. The payments are secured by a first ranking pledge on the 10,2533% of the shares of Wordlift.

 

 

6.14.

Capital and Reserves

 

The share capital of the Company consists of 117,645 ordinary shares with no nominal value for a total amount of 2,341,766 EUR. All shares have the same rights. There have been no movements in the number of shares during the period ended December 31, 2020. There are no treasury shares.

 

We refer to Note 6.22 on Subsequent Events.

 

There are no items classified as “other comprehensive income”.

 

 

6.15.

Employment benefit liabilities

 

Employee benefit liabilities include short-term benefits and are included in ‘Other payables’. The composition of employee benefit liabilities is as follows:

 

   

Year ended

December 31, 2020

 
   

EUR

 

Presented under current liabilities other payables

       

Accrual for annual leave

    37,662  

Other

    165  

Total short-term employee benefits

    37,827  

 

 

The company does not have any pension plans for its employees.

 


26

 

6.16.

Loans and borrowings

 

This Note provides information regarding the contractual terms of the Company’s interest bearing loans and borrowings at amortized cost. Further information on the Company's exposure to credit, liquidity and market risks is included in Note 6.20 of the Financial Statements.

 

Following is an overview of outstanding loans and borrowings at the reporting date:

 

   

Year ended

December 31, 2020

 
   

EUR

 

Long term bank loans

    618,730  

Non-current

    618,730  
         

Short term bank loans

    360,159  

Other loans

    1,173,002  

Current

    1,533,161  

Total loans and borrowings

    2,151,891  

 

 

All loans and borrowings are denominated in EUR.

 

 

A.

Bank loans

 

Bank loans can be summarized as follows:

 

   

Year ended December 31, 2020

 
   

Non-current

   

Current

   

Total

 

Secured

                       

Roll-over credit

    380,953       19,047       400,000  

Investment credits

    237,777       341,112       578.889  

Total secured bank loans

    618,730       360,159       978.889  

Total bank loans

    618,730       360,159       978.889  

 

 

(i)

Roll-over credit

 

On April 17, 2020, the Company entered into a 400,000 EUR roll-over credit line with Bank Crelan to finance the working capital for a period of 7 years. As at December 31, 2020, the Company has drawn the full amount of this credit line. The drawn part of the credit bears a floating rate based on the 3-month EURIBOR increased by 1,30% annually. The credit is collaterized by means of a personal guarantee by a shareholder of the Company for an amount of 50,000 EUR.

 


27

 

(ii)

Investment credits

 

The Business Credit Flex credits and the Investment credit have a total carrying value of 578,889 EUR at December 31, 2020.

 

The Business Credit Flex credits are investment credits which have a floating interest rate based on 3-month EURIBOR increased by 1,5% annually with maturities between 19 to 22 months. These Business Credit Flex credits allow an early repayment at each interest due date and/or the interest revision date.

 

The Investment credit has a fixed interest rate of 0,99% annually with maturity of 9 months.

 

The investment credits are collaterized by means of the following:

 

-

Pledge and proxy for a pledge on the trading fund for a total amount of the outstanding amount of the Business Credit Flex credits.

 

-

Subordination of the loan with a former shareholder for 300,000 EUR related to the Business Credit Flex loans.

 

-

Personal guarantee from a former shareholder for 100,000 EUR related to the Business Credit Flex loans.

 

-

Co-debtorship by a former shareholder for all credit lines.

 

The above collateral does not apply to the bank guarantees provided to by the bank.

 

 

(iii)

Suretyship credit  bank guarantee

 

The Company has one suretyship credit with Belfius Bank for an amount of 50,000 EUR in favour of a payment provider and with no specific maturity date.

 


28

 

 

B.

Other Loans and borrowings

 

The company has amounts outstanding from both a former vendor and a former shareholder as follows:

 

Identity
of Borrower

Type

Loan date

Original loan amount

(in EUR)

Interest Mechanism

Payment date of Principal

Other Material Terms

 

Amortized cost

At December 31, 2020

The Company

Loan from former controlling shareholder

June 10, 2015 as amended on December 20, 2016

300,000 EUR

4% annually (no number of days as basis for calculation determined)

No date determined but may be repaid if and when the Company is able to but is repayable at first request of the lender. At the reporting period the loan is still outstanding for its nominal amount.

Subordinated to the payment of the Vendor Loan from a former shareholder and to the Belfius loans (investment credits).

 

247,502

The Company

Loan from others

March 27, 2015 as amended from time to time and for the last time on May 31, 2016

1,500,000 EUR

No interests due, except in case of late payment of instalments, being 3% annually pro rata temporis on all amounts which are due at instalment date. The amount of interests will be added to the final tranche of the loan

Remaining instalments 400,000 EUR instalment date at July 1, 2019 500,000 EUR instalment date July 1, 2020 57,080 EUR payable and paid in the course of 2020

The lender remains owner of the “Woorank” trademark until payment of the last instalment of the vendor loan.

 

 

925,500

Total Other loans

 

1,173,002

 


29

 

The terms and the conditions of the other loans have been amended as described in Note 6.22 on Subsequent events.

 

For the fair value, see also Note 6.19 on Financial Instruments.

 

 

6.17.

Trade payables

 

Trade payables include the following:

 

   

Year ended

December 31, 2020

 
   

EUR

 

Trade payables

       

Outstanding supplier balances

    32,257  

Accrued charges

    20,387  

Total trade payables

    52,644  

 

 

There are no supplier financing arrangements.

 

 

6.18.

Other payables

 

Other payables include the following:

 

   

Year ended

December 31, 2020

 
   

EUR

 

Other payables

       

Foreign VAT payable

    12,573  

Employee benefits

    37,827  

Current account with former shareholder

    8,790  

Other

    107  

Total other payables

    59,297  

 

 

For related parties see Note 6.21.

 


30

 

 

6.19.

Financial Instruments

 

The following table discloses the carrying amount of the Company’s financial instruments in categories:

 

     

Year ended

December 31,

2020

 
 

Categories

 

EUR

 

Financial assets

         

Trade and other receivables

FAAC (*)

    64,311  

Cash and cash equivalents

FAAC (*)

    439,336  

Total

    503,647  
           

Financial liabilities

         

Loans and borrowings

FLAC (**)

    2,151,891  

Trade and other payables

FLAC (**)

    111,940  

Total

    2,263,831  

 

 

(*) Financial assets measured at amortized cost
(**) Financial liabilities measured at amortized cost

 

Trade and other receivables, cash and cash equivalents as well as trade and other payables have short terms to maturity, hence their carrying amounts are considered to be the same as their fair values. The fair values of the borrowings are not materially different from their carrying amounts, because interest payable on those borrowings is either close to current market rates or the loans have short term maturities.

 

 

6.20.

Financial Risk Management

 

The Group's operations expose it to a number of financial risks such as credit risks, liquidity risks and market risks. Management and the previous owners have managed these risks as described below. As of 2021 these risks are monitored together with the management of the parent company Bridgeline Digital Inc.

 

A. Framework for risk management

 

The Director of the Company has overall responsibility for the establishment and oversight of the Company’s risk management framework.

 

The Company’s risk management policy was formulated to identify and analyze the risks that the Company faces, to set appropriate limits for the risks and controls, and to monitor the risks and their compliance with the limits. The risk policy and risk management methods are reviewed regularly to reflect changes in market conditions and in the Company’s operations.

 

The overall objective of the Company is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility.

 


31

 

B. Credit risk

 

Credit risk relates to the risk that a counterparty will fail to fulfil its contractual obligations with the result that the Company would suffer a loss. Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only high quality parties are accepted.

 

The Company is also exposed to credit risk from credit sales. The Company monitors on a regular basis the ageing of its trade receivables. No allowance for trade receivables and contract assets has been judged necessary, as the company requires upfront payments for the majority of its revenues. No trade receivables are past due nor impaired at December 31, 2020.

 

The Company evaluates the concentration of risk with respect to trade receivables and contract assets regularly. There are no customers which represent more than 10% of the contract assets or trade receivables.

 

C. Market risk

 

Market risk arises from the Company’s use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate mainly because of changes in interest rates (interest rate risk) and in foreign exchange rates (currency risk).

 

(i)

Interest rate risk

 

The Company’s interest rate risk arises from borrowings at variable interest rates and to a minor extent to the interest rate on cash and cash equivalents. Borrowings issued at fixed rates expose the Company to fair value interest rate risk as disclosed in note 6.19.

 

Based on simulations performed, the impact on post tax profit and equity of a 1% shift in the interest rates on outstanding loans with variable interest rates would be a maximum increase or decrease of 9.789 EUR.

 

(ii)

Foreign exchange risk

 

The Company conducts its operations mainly out of Belgium in a EURO environment. Customers are invoiced partly in EURO, but predominantly in USD and to a limited extent in GBP and AUD. No hedging instruments have been used in 2020.

 

At December 31, 2020, there are no significant currency risks on assets and liabilities with the exception of cash and cash equivalents based on notional amounts:

 

   

EUR

   

USD

   

GBP

   

AUD

 

Cash and cash equivalents

    240,609       185,813       11,409       1,505  

 

A 10 % strengthening or weakening of the USD would have increased, respectively decreased, reported equity by 18,581 EUR. A 10% strengthening or weakening of the GBP and AUD against the EUR would not significantly affect reported equity.

 


32

 

D. Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

 

This does not take into account the potential effect of extreme circumstances that cannot reasonably be predicted.

 

The table below analyses the Company‘s financial liabilities into relevant maturity groupings based on their remaining term at the reporting date. The amounts disclosed in the table are the contractual undiscounted cash flows, including interest payments.

 

   

< 3 months

   

Between 3

months and

1 year

   

Between 1

and 2 years

   

Between 2

and 5 years

   

More

than 5

years

   

Total

 

Loans & borrowings

    1,074,854       277,311       612,045       237,511       98,218       2,299,939  

Trade & other payables

    111,941       0       0       0       0       111,941  

At December 31 2020

    1,186,795       277,311       612,045       237,511       98,218       2,411,880  

 

 

In order to meet its cash outflow obligations, the Group uses cash flows generated from operating activities and credit facilities with financial institutions if necessary. In addition, following the acquistion by Bridgeline Digital Inc., the company has been able to make new arrangements with existing lenders other than the banks to repay the existing loans that have been presented as current debts over a longer period of time as described in Note 6.22 on Subsequent events. We also refer to Note 6.2.4. with respect to the going concern assumption.

 

E. Capital risk management

 

The Company’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for the other stakeholders and to obtain over time an optimal capital structure to reduce the cost of capital.

 

The Company sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

 

 

6.21.

Related Party Transactions

 

Key management within the Company charge their fees to the Company partly through their management companies and partly directly. There are no non-cash benefits in addition to the fees charged.

 


33

 

Compensation to related parties (including directors) that are contracted by the Company can be summarized as follows:

 

   

For the year ended

December 31, 2020

 
   

EUR

 

Management fees and expenses – research and development expenses

    147,832  

Management fees and expenses – selling, general and administrative expenses

    68,028  

Total

    215,860  

 

 

Liabilities with related parties can be presented as follows:

 

   

Year ended

December 31, 2020

 
   

EUR

 

Presented under loans and borrowings

       

Other loans – loan with related parties

    247,502  

Presented under other payables

       

Current account with related parties

    8,790  

Total

    256,292  

 

 

The current account with related parties is interest free. For the terms and conditions of the loans we refer to Note 6.16.

 

 

6.22.

Subsequent Events

 

Share transaction

 

On March 1, 2021, the shareholders of the Company entered into a Share Purchase Agreement with Bridgeline Digital Inc., a company organized and existing under the laws of Delaware, USA, having its registered office at 100 Sylvan Road, Suite G-700, Woburn, MA, 01801, USA and executive offices located at 150 Woodbury Road, Woodbury NY, 11797, USA (“Bridgeline”) whereby Bridgeline became the owner of all of the Company’s equity upon shareholders approval of the agreement.

 

As part of the Share Purchase Agreement, the terms and conditions of both the former shareholder loan of 300,000 EUR and the loan towards a former shareholder with an outstanding principal amount of 900,000 EUR have been amended.

 

The shareholder loan with a principal amount of 300,000 EUR shall be repaid in 5 installments, each in the amount of 60,000 EUR. The first installment shall be paid on the date falling 6 months after full repayment of all outstanding amounts under the former shareholder loan of 900,000 EUR which is due March 1, 2023 and under the Belfius bank loans (final reimbursement in 2022). The subsequent installments shall be paid at semi-annual intervals thereafter, but not later than 1 january 2026. The interest rate amounts to 4% compounded annually. The repayment of the shareholder loan is subordinated to the repayment by the Company of any amounts due to the Belfius bank and due to the former shareholder. The loan is unsecured.

 


34

 

The loan to the former shareholder was partially reimbursed by Bridgeline at transaction date for 300.000 EUR. The balance of the loan is subject to the following repayment schedule:

 

 

-

EUR 300,000 and interests on March 1, 2022.

 

 

-

EUR 300,000 and interests on March 1, 2023.

 

The interest rate amounts to 3% annually and is unsecured. The Woorank ‘Trademark’ that was previously held by the lender has been transferred at no cost to the Company. Any disputes between the lender and the Company have been resolved.

 

For all existing bank loans the company expects to continue the current terms and conditions after the acquisition.

 

 

 


35

Exhibit 99.2

 

Bridgeline Digital, Inc.

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma combined financial information are based on the historical financial statements of Bridgeline Digital, Inc. (“Bridgeline” or the “Company”) and Woorank SRL (“Woorank”), after giving effect to the Company’s acquisition of Woorank on March 1, 2021 and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma combined financial information. A pro forma balance sheet as of March 31, 2021 is not required as the Company’s balance sheet as of March 31, 2021 included in the Form 10-Q for the quarter ending March 31, 2021 reflects the impact of the acquisition.

 

The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and does not represent the consolidated results or financial position of Bridgeline had the Transaction been completed as of the dates indicated. Specifically, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies, revenue enhancements or restructuring costs that the combined company may achieve or incur as a result of the Transaction. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. The pro forma adjustments represent the Company’s best estimates and are based upon current available information and certain assumptions that the Company believes are reasonable under the circumstances.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with:

 

 

Bridgeline’s historical consolidated financial statements and accompanying notes contained in Bridgeline’s Annual Report on Form 10-K for its fiscal year ended September 30, 2020, filed with the Securities and Exchange Commission (the “Commission”) on December 23, 2020;

 

 

Bridgeline’s historical consolidated financial statements and accompanying notes contained in Bridgeline’s Quarterly Report on Form 10-Q for its quarter ended March 31, 2021, filed with the Commission on May 17, 2021;

 

 

Woorank SRL historical financial statements and accompanying notes for its fiscal year ended December 31, 2020, included as Exhibit 99.1 in this amended Current Report on Form 8-K;

 

 

The SPA filed as Exhibit 10.1 to Bridgeline’s Current Report on Form 8-K filed with the Commission on February 25, 2021.

 

Accounting Periods Presented

 

Woorank’s historical fiscal year ended on December 31, 2020 and, for purposes of this unaudited pro forma condensed combined financial information has been recaptioned and/or combined with the Company’s fiscal year ended September 30, 2020 financial statements as explained below.

 

The unaudited pro forma condensed combined statements of operations of the Company and Woorank for the year ended September 30, 2020 are presented as if the Woorank acquisition had taken place on October 1, 2019, and due to different fiscal period ends, combines the historical results of the Company for the year ended September 30, 2020 and the historical results of Woorank for the year ended December 31, 2020.

 

Reporting Currency

 

As the Company’s reporting currency is US Dollars (USD), a translation rate of 1.172 EUR/USD (the closing spot rate on December 31, 2020) was used to translate Woorank’s historical financial statements from EUR to USD for purposes of these unaudited pro forma condensed combined financial statements.

 

 

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands, except share and per share data)

 

1. Basis of Pro Forma Presentation

 

The unaudited pro forma condensed combined financial information has been prepared using the historical financial information of Bridgeline and Woorank and presents the pro forma effects of the Transaction and certain adjustments described herein in accordance with Article 11 of Regulation S-X. The historical financial information of Woorank has been prepared in accordance with international financial reporting standards generally accepted in Belgium, while Bridgeline has been prepared in accordance with accounting principles generally accepted in the United States.

 

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), with Bridgeline deemed as the accounting acquirer. The unaudited pro forma condensed combined financial information may differ from the final purchase accounting for a number of reasons, including the fact that the estimates of fair values of assets acquired and liabilities assumed are preliminary and subject to change when the formal valuation and other analyses are finalized. The differences between the preliminary estimates and the final purchase accounting could have a material impact on the accompanying unaudited pro forma condensed combined financial information.

 

The historical financial information has been adjusted to give effect to matters that are (i) directly attributable to the Transaction, (ii) factually supportable and (iii) with respect to the statements of operations, expected to have a continuing impact on the operating results of the combined company. The unaudited pro forma condensed combined statements of operations exclude non-recurring items directly related to the Transaction.

 

2. Description of the Acquisition

 

On March 1, 2021, the Company, pursuant to a Share Purchase Agreement (the “Purchase Agreement”), acquired all of the issued and outstanding shares of Woorank, an entity located in Belgium. The Company accounted for the Woorank transaction as a business combination in accordance with ASC Topic 805, Business Combinations. The purchase price consisted of (1) cash paid at closing, (2) deferred cash payable in installments post-closing, (3) a seller note issued to one of the selling shareholders, and (4) amounts payable to one selling shareholder as consideration for assistance with certain matters related to the acquisition for a period of one-year from the closing date of the acquisition. The Purchase Agreement also provides for additional consideration, in the event of achievement of certain revenue targets and operational goals, to the selling shareholders pursuant to three separate earn-out provisions. Under certain conditions, up to € 600 thousand (approximately $723 thousand) of the purchase price is payable, at the Company’s discretion, in shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at a price per share equal to the greater of (i) the closing price of the Company’s common stock on the date of issuance or (ii) $3.38. On the closing date, the Company issued 29,433 shares of its common stock for a portion of the purchase price. At March 31, 2021, € 550 thousand of the remaining purchase price and related earn-out may be settled, at the Company’s option, in shares of the Company’s common stock.

 

3. Purchase Price Consideration and Allocation

 

The Company accounted for the Woorank transaction as a business combination. The Company determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset of a group of similar assets. Assets acquired and liabilities assumed have be recognized at their estimated fair values as of the acquisition date. The fair value of intangible assets was based on valuations using a discounted cash flow model (level 3 inputs) which requires significant estimates and assumptions, including estimating future revenues and costs. The fair value of contingent consideration was determined based on the probability of achievement of the revenue targets and operational goals, which includes estimating future revenues. The fair value of debt obligations assumed was based on the interest rates underlying these instruments in relation to the market rates available for similar instruments. The excess of the purchase price over the assets acquired and liabilities assumed was recognized as goodwill. The goodwill is attributable to expected synergies and customer cross selling opportunities between the Company and Woorank.

 

 

 

 

The acquisition date fair value of consideration transferred was as follows:

 

Cash, including deferred cash payable

  $ 711  

Common stock (29,433 shares at $3.38 per share)

    99  

Seller’s note

    352  

Contingent consideration (earn-outs)

    1,617  

Total consideration paid

  $ 2,779  

 

The preliminary acquisition date fair value of assets acquired and liabilities assumed was as follows:

 

Assets acquired:

       

Cash

  $ 627  

Non-cash current assets

    351  

Property and equipment

    5  

Intangible assets:

       

Acquired software

    282  

Customer relationships

    1,280  

Domain and trade names

    116  

Goodwill

    2,461  

Total assets acquired

    5,122  

Liabilities assumed:

       

Current liabilities

    198  

Assumed debt obligations

    2,145  

Total liabilities assumed

    2,343  
         

Total consideration paid

  $ 2,779  

 

The average useful lives of the identifiable intangible assets acquired was five years for acquired software, eight years for customer relationships and twelve years for domain and trade names.

 

4. Notes to Unaudited Pro Form Condensed Combined Statement of Operations for the Six Months Ended March 31, 2021

 

 

A)

Reflects the elimination of acquisition related transaction costs of $284 that were incurred by the Company in the six months ended March 31, 2021.

 

 

 

BRIDGELINE DIGITAL, INC.

PRO FORMA CONDENSED CONSOLIDATED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED SEPTEMBER 30, 2020

(unaudited)

(in thousands, except share data)

 

   

Historical

   

Historical

           
   

Bridgeline

   

Woorank

 

Pro Forma

 

Pro Forma

 
   

Digital

   

SRL

 

Adjustments

 

Combined

 

Revenue:

                         

Digital engagement services

  $ 3,409     $ -       $ 3,409  

Subscription and perpetual licenses

    7,498       1,963         9,461  

Total revenue

    10,907       1,963         12,870  
                           

Cost of revenue:

                         

Digital engagement services

    1,831       -         1,831  

Subscription and perpetual licenses

    2,676       405         3,081  

Total cost of revenue

    4,507       405         4,912  

Gross profit

    6,400       1,558         7,958  
                           

Operating expenses:

                         

Sales and marketing

    2,614       -         2,614  

General and administrative

    2,455       599         3,054  

Research and development

    1,641       740         2,381  

Depreciation and amortization

    968       3         971  

Goodwill impairment charge

    -       -         -  

Restructuring and acquisition-related

    366       -         366  

Total operating expenses

    8,044       1,343         9,387  

Income (loss) from operations

    (1,644 )     215         (1,429 )

Interest and other, net

    (7 )     (85 )       (92 )

Government grant income (Note 10)

    960       -         960  

Change in fair value of warrant liabilities

    1,028       -         1,028  

Income (loss) before income taxes

    337       130         467  

Provision for income taxes

    11       -         11  

Net income (loss)

  $ 326       130       $ 456  

Dividends on convertible preferred stock

    (106 )     -         (106 )

Deemed dividend on amendment of Series A convertible

                         

preferred stock

    (2,314 )     -         (2,314 )

Net income (loss) applicable to common shareholders

  $ (2,094 )     130       $ (1,964 )

Net income/(loss) per share attributable to common shareholders:

                   

Basic

  $ (0.59 )             $ (0.55 )

Diluted

  $ (0.59 )             $ (0.55 )

Number of weighted average shares outstanding:

                         

Basic

    3,555,032                 3,555,032  

Diluted

    3,555,032                 3,555,032  

 

 

 

BRIDGELINE DIGITAL, INC.

PRO FORMA CONDENSED CONSOLIDATED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED MARCH 31, 2021

(unaudited)

(in thousands, except share data)

 

 

Historical

 

Historical

               
 

Bridgeline

 

Woorank

 

Pro Forma

   

Pro Forma

 
 

Digital

 

SRL

 

Adjustments

   

Combined

 

Revenue:

                         

Digital engagement services

$ 1,722   $ -           $ 1,722  

Subscription and perpetual licenses

  3,988     666             4,654  

Total revenue

  5,710     666             6,376  
                           

Cost of revenue:

                         

Digital engagement services

  848     -             848  

Subscription and perpetual licenses

  1,175     84             1,259  

Total cost of revenue

  2,023     84             2,107  

Gross profit

  3,687     582             4,269  
                           

Operating expenses:

                         

Sales and marketing

  969     -             969  

General and administrative

  1,073     259             1,332  

Research and development

  828     315             1,143  

Depreciation and amortization

  471     -             471  

Goodwill impairment charge

  -     -             -  

Restructuring and acquisition-related

  294     -     (284 )

(A)

  10  

Total operating expenses

  3,635     574             3,925  

Income (loss) from operations

  52     8             344  

Interest and other, net

  2     (59 )           (57 )

Government grant income (Note 10)

  88     -             88  

Change in fair value of warrant liabilities

  (1,859 )   -             (1,859 )

Income (loss) before income taxes

  (1,717 )   (51 )           (1,484 )

Provision for income taxes

  1     -             1  

Net income (loss)

$ (1,718 ) $ (51 )         $ (1,485 )

Dividends on convertible preferred stock

  -     -             -  

Deemed dividend on amendment of Series A convertible preferred stock

  -     -             -  

Net income (loss) applicable to common shareholders

$ (1,718 ) $ (51 )         $ (1,485 )

Net income/(loss) per share attributable to common shareholders:

                     

Basic

$ (0.36 )               $ (0.32 )

Diluted

$ (0.36 )               $ (0.32 )

Number of weighted average shares outstanding:

                         

Basic

  4,706,889                   4,706,889  

Diluted

  4,706,889                   4,706,889  

 

 

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