ADNEO LIMITED — Annual Report 2021

Aug 25, 2021

AD1 Holdings Limited ACN 123 129 162

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Suite 102, 697 Burke Rd Hawthorn East, VIC Australia 3132 +61 3 8199 0455 ad1holdings.com.au

AD1 releases FY21 results

Melbourne, Australia, 26 August 2021: AD1 Holdings Limited (ASX: AD1) ( AD1 or the Company ) today released its financial results for the financial year ended 30 June 2021.

Key highlights of FY21:

• Significant growth of 65% YoY in revenue for ordinary activities, contributed by both organic growth and business acquisition.

• Successful acquisition and integration the Art of Mentoring ( AOM ) business in October 2020 not only added over $1 million in revenue but also expanded the group’s footprint within the lucrative HR tech market. Since becoming part of the group, AOM has continued its strong performance and added over 20 new customers to its portfolio, ended FY21 with significant revenue growth of 35% and a strong pipeline moving into the new fiscal year.

• Platform growth YoY – 60% increase in Utility Software Services (‘USS’) meters under management, 37% increase in ApplyDirect users and 27% increase in inbound traffic.

• Strong momentum observed throughout the year within the utilities sector with the introduction of 3P Energy and Powerclub in H1 FY21 and the signing of LPE in H2 FY21.

• Achieved high customer retention (100% across the ApplyDirect and Utilities Software Services customer base and 83% within AOM).

• ApplyDirect signed a project with the NSW Government in May 2021 to enhance its iworkforNSW careers platform and the accompanying mobile applications. The product "refresh" will further enhance the candidate experience and support NSW Government as an employer of choice. The development is well progressed and expected to be made available to the NSW Government in what was August 2021, will be September 2021.

• Introduction of the ApplyDirect’s off-the-shelf product with development currently on the way with expected pilots underway in the September 2021 quarter. Once product market fit is confirmed the B2B SaaS product will open opportunities within the broader market.

• Successfully secured $2 million debt facilities to support the delivery of revenue generating initiatives

AD1 Managing Director and CEO, Brendan Kavenagh, said: “FY21 has been a successful year for achieving significant YoY growth. The acquisition of Art of Mentoring has strengthened the Groups HR Tech footprint in what is a very quick moving and competitive space. AoM continue to respond to demand and are continuing to build on their client portfolio. ApplyDirect continues to support existing customers and delivering on projects to improve the service offering. Parallel to this, ApplyDirect is currently investing in the recruitment platform and is focused heavily on bringing that product to market with a series of pilot projects over the coming months.”

“Understanding our customers and providing them with the ongoing support to be successful is a key requirement for FY22. Customer retention and improving customer satisfaction are key focus areas for all businesses, which will be achieved on the back of continued investment in product innovation and product refinement across each business to ensure we continue to deliver value to existing and new customers. Strong emphasis on leveraging the existing customer base and a targeted approach to new customers as a group will also be a key focus area. A team approach to realising cross sell opportunities, leveraging networks and internal IP across the AD1 companies is also a major focus as we build momentum. Making the linkages internally through carefully planned and executed sales strategy will result in improved

People. Software. Solutions

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collaboration and improved opportunity to offer better experiences for both staff and clients. In addition to leveraging existing customer opportunities, we are also looking to partner with companies who have complementary offerings and can strengthen their go to market with customer using our product as a white label offering where required.”

“Other key priorities include investment in sales and marketing across the Group which involves collateral and website refresh to support the team to unlock future growth. Our aim is to speed up the sales cycle and grow our customer numbers across each business. We will continue to focus on product refinement, a customer first approach and delivering to customer needs. A big focus on staff retention and engagement by establishing key engagement programs is also in plan”

END

This release has been authorised by the Board of Directors of the Company.

Andrew Henderson

Brendan Kavenagh

Chairman CEO AD1 Holdings Limited AD1 Holdings Limited 03 8199 0455 03 8199 0455

Appendix 4E – Preliminary final report For the year ended 30 June 2021

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Name of entity:

ABN or equivalent company reference: Current reporting period: Previous corresponding period:

AD1 Holdings Limited ACN 123 129 162 the year ended 30 June 2021 the year ended 30 June 2020

Results for announcement to the market

Results for announcement to the market
				$
Revenue for ordinary activities	Up	65%	to	6,043,798
Net loss after tax for the period attributable	Up	2%	to	2,219,600
to members (from ordinary activities)
Netlossforthe period attributable tomembers	Up	2%	to	2,219,600

Dividends

There were no dividends paid, recommended, or declared during the current financial period.

Explanation of results

For the current reporting period, revenue from ordinary activities increased by $2,388,883 (equivalent to 65%) to $6,043,798 (2020: $3,654,915), out of which $1,136,715 was contributed by the addition of Art of Mentoring ( AOM ) revenue starting from the end of October 2020. Excluding AOM, the organic growth in revenue from the rest of the business was approximately 32% compared to the previous financial year.

Net loss for this financial year of $2,219,600 (2020: $2,181,158) included $1,484,982 in non-cash share-based payment expense (2020: $19,305). Net operating loss for the year, excluding the aforementioned non-cash expense was $734,618 (2020: $2,161,852), which represents a significant improvement of approximately 66% compared to prior year.

Net tangible asset per share

	30	June	30	June
		2021		2020
Net tangible asset pershare (cents)		(0.47)		0.01

Other information required by Listing Rule 4.2A

• Distribution Reinvestment Plan – n/a

• Changes in controlled entities - On 26 October 2020, the Group completed the acquisition of 100% equity interest in Art of Mentoring Holdings Pty Ltd and its wholly owned subsidiary, Art of Mentoring Pty Ltd.

• Details of associates and joint venture entities - n/a

• Foreign entities - n/a

• Details of individual and total dividends or distributions and dividend or distribution payments - n/a

Audit

This report should be read in conjunction with the preliminary financial report. The financial statements in the preliminary financial report are in the process of being audited.

People. Software. Solutions

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Preliminary financial report For the year ended 30 June 2021

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Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2021

Notes Revenue from continuing operations Revenue from contracts with customers 4 Other income Interest income Expenses Employee benefit expense Software development and other IT expense Consulting and professional service expense Advertising and marketing expense Occupancy, utilities and office expense Depreciation and amortisation expense Travel expense Interest expense Other expense Total expenses Loss before income tax Income tax expense Loss for the year Other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive loss for the year Earnings per share attributable to the ordinary equity holders of the Group: Basic earnings per share 3 Diluted earnings per share 3	2021 2020 $ $ 5,338,590 3,400,947 705,199 251,069 9 2,899
	6,043,798 3,654,915
	(4,798,393) (2,933,314) (925,433) (1,214,419) (1,785,160) (1,024,206) (139,463) (74,634) (124,379) (149,052) (440,485) (227,013) (18,421) (27,413) (32,012) (17,238) 346 (132,567)
	(8,263,398) (5,799,856)
	(2,219,600) (2,144,941) - (36,217)
	(2,219,600) (2,181,158) - -
	(2,219,600) (2,181,158)
	(0.39) (0.41) (0.39) (0.41)

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Consolidated statement of financial position As at 30 June 2021

Notes ASSETS Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Property, plant and equipment Other non-current assets Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Employee benefit obligations Current tax liabilities Lease liability Contract liability Other liabilities Total current liabilities Non-current liabilities Employee benefit obligations Lease liability Other liabilities Total non-current liabilities Total liabilities Net assets EQUITY Share capital Reserve Accumulated losses Total equity

30 June 2021 30 June 2020 $ $ 523,434 459,742 1,873,287 771,073 2,396,721 1,230,815 103,716 177,397 82,327 82,327 6,544,477 1,473,158 6,730,520 1,732,882 9,127,241 2,963,697 1,555,157 490,509 302,666 157,986 437,680 525,216 54,224 85,690 492,867 80,099 1,290,312 - 4,132,906 1,339,500 57,120 24,100 - 48,187 1,241,827 - 1,298,947 72,287 5,431,853 1,411,787 3,695,388 1,551,910 29,156,778 26,368,683 1,606,435 53,702 (27,067,825) (24,870,475) 3,695,388 1,551,910

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Consolidated statement of changes in equity For the year ended 30 June 2021

Balance at 1 July 2019 Adjustment - adoption of AASB 16 Adjusted balance at 1 July 2019 Loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Shares issued Options granted Options expired/forfeited Share-based payment expense Balance at 30 June 2020 Opening balance at 1 July 2020 Loss for the year Total comprehensive loss for the year Transactions with owners in their capacity as owners: Shares issued Options granted Capital raising costs Business acquisition Options expired/forfeited Share-based payment expense Balance at 30 June 2021	Share Capital Reserve Accumulated losses Total $ $ $ $ 24,535,633 598,198 (23,245,867) 1,887,964 - - (7,252) (7,252)
	24,535,633 598,198 (23,253,119) 1,880,712 - - (2,181,158) (2,181,158)
	- - (2,181,158) (2,181,158)
	1,833,050 - - 1,833,050 - 4,476 - 4,476 - (564,490) 563,802 (688) - 15,518 - 15,518
	1,833,050 (544,496) 563,802 1,852,356
	26,368,683 53,702 (24,870,475) 1,551,910
	26,368,683 53,702 (24,870,475) 1,551,910 - - (2,219,600) (2,219,600)
	- - (2,219,600) (2,219,600)
	2,500,000 - - 2,500,000 - 1,561,679 - 1,561,679 (212,463) (212,463) 500,558 500,558 - (22,254) 22,250 (4) - 13,307 - 13,307
	2,788,095 1,552,733 22,250 4,363,078
	29,156,778 1,606,435 (27,067,825) 3,695,388

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Consolidated statement of cash flows For the year ended 30 June 2021

Consolidated statement of cash flows For the year ended 30 June 2021
	Note	2021	2020
		$	$
Cash flows from operating activities
Receipts from customers		5,003,082	3,638,091
Payments to suppliers and employees		(5,698,796)	(6,308,374)
Government grants and tax incentives (less costs)		548,859	584,198
Income taxes paid		(87,536)	-
Interest income		9	2,899
Interest and other costs of finance paid		(20,359)	(7,350)
Net cash (outflow) from operating activities	6	(254,741)	(2,090,536)
Cash flows from investing activities
Payments for property, plant and equipment		(29,691)	(14,738)
Term deposit		-	(14,627)
Payments for Software Development		(1,013,062)	-
Acquisition of Art of Mentoring Pty Ltd (net of cash acquired)		(894,650)	-
Net cash (outflow) from investing activities		(1,937,403)	(29,364)
Cash flows from financing activities
Proceeds from issues of shares and other equity securities		2,500,000	1,833,050
Capital raising costs		(122,463)	-
Transaction costs related to loans and borrowings		(17,500)
Repayments of lease liabilities		(104,201)	(92,395)
Net cash inflow from financing activities		2,255,836	1,740,655
Net increase / (decrease) in cash and cash equivalents		63,692	(379,245)
Cash and cash equivalents at the beginning of the financial year		459,742	838,987
Cash and cash equivalents at end of period		523,434	459,742

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Notes to the preliminary financial report

1. Basis of preparation and significant accounting policies

This preliminary final report of AD1 Holdings Limited ( Company ) has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

This report is to be read in conjunction with any public announcements made by the Company during the reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 and Australian Securities Exchange Listing Rules.

There have been no material changes to the consolidated entity’s application of its significant accounting policies as presented in the consolidated entity’s financial statements for the year ended 30 June 2020, and the preparation of current financial information, and the presentation of any prior period comparatives, is consistent from one reporting period to the next.

Readers of this report should refer to note 3 ‘Significant accounting policies’ in the consolidated entity’s financial statements for the year ended 30 June 2020 for details of those policies.

2. Significant changes in the current reporting period

The preliminary financial report of AD1 Holdings was particularly affected by the acquisition of 100% equity interest in Art of Mentoring Holdings Pty Ltd and its wholly owned subsidiary, Art of Mentoring Pty Ltd ( Art of Mentoring ) on 26 October 2020 which resulted in the recognition of goodwill and other intangible assets.

3. Earnings per share

a. Basic & diluted earnings per share

Basic & diluted earnings per share
	2021	2020
	Cents	Cents
Basic earnings per share	(0.39)	(0.41)
Diluted earnings per share	(0.39)	(0.41)
Reconciliation of loss used in calculating earnings per share
	2021	2020
	$	$
Loss attributable to the ordinary equity holders of the Group used in calculating
basic & diluted earnings per share	(2,219,600)	(2,181,158)

b. Reconciliation of loss used in calculating earnings per share

c. Weighted average number of shares used as denominator

Weighted average number of shares used as denominator
	2021	2020
	No. of shares	No. of shares
Weighted average number of ordinary shares used as the denominator in
calculating basic & diluted earnings per share	570,237,752	532,061,638

As the Group is still loss making, options over ordinary shares outstanding at 30 June 2021 and 30 June 2020 are considered anti-dilutive and were excluded from the diluted weighted average number of ordinary shares calculation

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4. Revenue from contracts with customers

Revenue from contracts with customers
Rendering of services disaggregation: Managed Services (including SaaS and Business Process Outsourcing) IT Development and Consulting Digital Marketing Timing of revenue recognition: At a point in time Over time	2021 2020 $ $ 3,713,664 2,556,058 1,624,926 823,208 - 21,681
	5,338,590 3,400,947 1,764,166 823,208 3,574,424 2,577,739
	5,338,590 3,400,947

5. Business combinations

a. Summary of acquisition

On 26 October 2020, AD1 Holdings acquired 100% of the issued share capital and received effective control of Art of Mentoring.

Art of Mentoring is Australia’s leading mentoring program provider that delivers best-in-class programs through an intuitive SaaS platform. Art of Mentoring operates a SaaS business focused on designing, implementing and providing mentoring services to organisations using a range of evidenced-based programs, expert consultants and software.

The acquisition is expected to provide significant benefits to the Group, including the addition of a diversified recurring revenue stream of approximately $1 million with excellent growth outlook and significant sales synergies with the Company’s career-platform offering.

The acquisition of Art of Mentoring is initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognized and also recognizes additional assets or liabilities during the measurement period, based on new information obtained about the acts and circumstances that existed at acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of acquisition or (ii) when the acquirer receives all the information possible to determine fair value.

Details of the purchase consideration, the net assets acquired, and goodwill are as follows:

Purchase consideration: Cash paid – Tranche 1 Ordinary shares issued – Tranche 1 Contingent consideration – Tranche 2 Contingent consideration – Tranche 3 Total purchase consideration	Fair Value $ 1,068,801 500,558 1,290,313 1,241,827
	4,101,499

Contingent consideration is payable to Art of Mentoring across 2 tranches upon meeting specific performance milestones per the sale agreement.

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5. Business combinations (continued)

The provisional fair values of the identifiable net assets acquired are detailed below:

Purchase consideration (refer to (b) below): Assets Cash and cash equivalents Trade debtors Software – replacement cost Other copyright materials Customer contracts Liabilities Contract Liabilities Provision for annual leave Trade creditors Net identifiable assets acquired Add: goodwill(i) Less: changes in fair value of contingent consideration – Tranche 2 Acquisition date fair value of the total consideration transferred

Fair Value $ 174,151 122,816 748,000 345,000 531,000 (415,924) (19,276) (67,094) 1,418,673 2,758,052 (75,226)

4,101,499

(i) Goodwill recognised is primarily attributable to the expected synergies and other benefits from combining the assets and activities of AoM with those of the Group’s. The Group operates as one operating segment and goodwill was allocated to a single cash operating unit as at acquisition date. The goodwill is not deductible for tax purposes.

6. Cash flow information

Reconciliation of loss after income tax to net cash outflow from operating activities (net of acquisitions and disposals of controlled entity balances)

Loss for the year Adjustment for: Depreciation Amortisation Share based payment expense Changes in fair value of contingent consideration Interest expense of lease liability Change in operating assets and liabilities: (Increase)/decrease in accounts receivable Increase/(decrease) in accounts payable Increase/(decrease) in provisions Increase/(decrease) in other current liabilities Net cash outflow from operating activities

2021 2020 $ $ (2,219,600) (2,181,158) 116,267 103,320 323,794 123,693 1,484,982 19,305 (75,226) - - 9,888 (1,102,214) (68,950) 1,127,092 31,971 177,700 (164,824) (87,536) 36,219 (254,741) (2,090,536)

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