ADNEO LIMITED — Interim / Quarterly Report 2021

Feb 25, 2021

AD1 Holdings Limited Appendix 4D - Half year report For the half year ended 31 December 2020

Name of entity: AD1 Holdings Limited ABN or equivalent company reference: ACN 123 129 162 Current reporting period: the half year ended 31 December 2020 Previous corresponding period: the half year ended 31 December 2019

Results for announcement to the market

				$
Revenue for ordinary activities	Up	22%	to	2,203,180
Net loss after tax for the period attributable	Down	4%	to	1,617,912
to members (from ordinary activities)*
Net loss for the period attributable to members	Down	4%	to	1,617,912

*Net loss from ordinary activities includes share based payments expense and one off transaction costs. Please refer to the accompanying interim financial report for further details.

Explanation of results

Refer to the "Review of operations" on page 2 of the Directors' report for more information.

Net tangible asset per share

Net tangible asset per share
	31 December	30 June
	2020	2020
Net tangible asset per share (cents)	(0.30)	0.01
Dividends
	Amount per	Franked
	security	amount per
		security
Interim dividend (per share)	-	-
Final dividend (per share)	-	-
Franking	-	-
Record date for determining entitlements to the dividend - not applicable	-	-

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 (“Art of Mentoring”). Please refer to Note 11 in the accompanying interim financial report for further details.

• 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

Interim review

The interim financial report has been reviewed by AD1 Holdings Limited’s independent auditor and the review report is attached as part of the interim report.

AD1 Holdings Limited

ABN 29 123 129 162

Interim financial report for the half year 31 December 2020

Contents

Corporate Directory ................................................................................................................................................... 1 Directors' report ......................................................................................................................................................... 2 Auditor’s independence declaration .......................................................................................................................... 5 Consolidated statement of profit or loss and other comprehensive income .............................................................. 6 Consolidated statement of financial position ............................................................................................................. 7 Consolidated statement of changes in equity ............................................................................................................ 8 Consolidated statement of cash flows ....................................................................................................................... 9 Notes to the financial statements ............................................................................................................................ 10 Directors' declaration............................................................................................................................................... 19 Independent auditor's review report to the members .............................................................................................. 20

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2020 and any public announcements made by AD1 Holdings Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

Corporate Directory

Directors Mr Andrew Henderson Non-Executive Chairman Mr Michael Norster Non-Executive Director Mr Prashant Chandra Managing Director & CEO Mr Nicholas Smedley Non-Executive Director Company Secretary Mr Prashant Chandra Mr Harvey Bui Principal registered office in Australia Suite 102, 697 Burke Road Hawthorn East, VIC 3123 1300 554 842 Share and debenture register Link Market Services Limited Level 12, 680 George Street Sydney, NSW 2000 +61 2 8280 7100 Auditor PKF Level 12, 440 Collins Street Melbourne, VIC 3000 Solicitors Thomas Geer Level 39, Rialto Towers 525 Collins Street Melbourne, VIC 3000 Website www.ad1holdings.com.au www.utilitysoftwareservices.com www.artofmentoring.net

Page 1 of 20

Directors’ report 31 December 2020 (continued)

Directors' report

Your directors present the interim financial report of AD1 Holdings Limited (“the Company”) and the entities it controlled (together, the “Group”, or “AD1”) for the half year ended 31 December 2020.

Directors

The following persons held office as directors of the Company during the financial period and up to the date of this report, unless otherwise stated:

Mr Andrew Henderson (Non-Executive Chairman) Mr Michael Norster (Non-Executive Director) Mr Prashant Chandra (Managing Director & CEO) Mr Nicholas Smedley (Non-Executive Director)

Principal activities

During the reporting period, the Group’s principal activities are providing and delivering of software services and technology platforms to its customers, and other related supporting and consulting services.

Review of operations

During the first half of FY21, the Company achieved significant milestones establishing the necessary foundation that will enable it to expedite future growth whilst maintaining sustainable profitability.

The milestones include multi-year contract extensions with its two oldest career-platform customers – NSW Government and VIC Government, maintaining a retention rate for the year of over 95% across all platforms and solutions, signing two important new customers to the Company’s utilities solutions platform, adding a complementary revenue stream of approximately $1 million through the acquisition of Art of Mentoring in October 2020 and the successful completion of an oversubscribed $2.5 million placement in October 2020.

Most notably, the Company laid the foundation for the extension and significant expansion of its contract with energy retailer LPE, which was subsequently executed in February 2021. The new contract is expected to yield a minimum of $10 million in revenue over five years, which is based on the retailer’s current customer numbers. Importantly, this more than doubles the revenue that would have been generated over the same period under the old contract, with significant potential for further upside as customer numbers for the energy retailer continue to grow.

Together, these successful events will provide the Company with the necessary revenue run rate to achieve its first profitable year in FY22.

Priorities for 2H21

The above events mark an important shift in the Company’s focus enabling it to progress from a stabilisation and expansion phase to growth acceleration. In addition to the new customer wins highlighted above, the Company has also built a strong pipeline of project revenue for 2H21 and beyond, especially with its existing customers in the utilities sector.

In the utilities sector, the focus for the Company over the next six months will be to ensure the successful implementation of new contracts for both new and existing clients highlighted above, and delivery of its project pipeline. The Company will invest to create additional delivery capacity over the second half of FY21 to accelerate delivery timeframes and effectively maximise the revenue run-rate for FY22.

The Company has recently undertaken a comprehensive review of its careers-platform solution with a view to exploring further opportunities to become the dominant provider of careers site technology in the market. Whilst Government and Associations continue to be important targets for the Company’s bespoke enterprise solution, the Company will introduce an off-the-shelf solution for SME and large employers. The key target segments for the offthe-shelf careers-platform solution, expected to be launched by the first quarter of FY22, will include healthcare, education & training, professional services, utilities and construction.

The cashflow statements for the next two quarters will reflect the impact of these investments. The revenue and cash receipts as a result of these investments will be realised from FY22 onwards.

The integration of Art of Mentoring is near complete and focus will remain on maximising new client acquisition. Art of Mentoring signed up 15 new clients during the first half of FY21 (8 new clients since acquisition date). Notable customers of this solution include Toyota Australia, Fair Work Ombudsman, Aurizon and Royal Australian Navy.

Page 2 of 20

Directors’ report 31 December 2020 (continued)

Enhancing shareholder value through EPS accretive acquisitions remains an important focus area for the Company and it continues to canvass suitable opportunities to add diversified revenue streams.

Key financial metrics	HY21	HY20	Change
	$	$	%
Revenue from contracts with customers	2,051,971	1,637,020	25.3%
Operating expenses*	(2,500,837)	(3,459,044)	27.7%
Operating result for the period	(297,658)	(1,656,283)	82.0%
Add: Share based payments and transaction costs	(1,320,254)	(24,148)	5367.3%
Loss for the period	(1,617,912)	(1,680,431)	3.7%
Cash receipts from customers	2,256,052	1,588,854	42.0%
Net cash outflows from operating activities	22,734	(2,279,150)	101.0%

*Operating expenses from ordinary activities excludes extraordinary expenses relating to non-cash share-based payments, placement fees, and acquisition of Art of Mentoring.

Revenue from contracts with customers increased by $414,951 or 25.3% compared to the prior half year. The increase in revenue was due to a combination of new customer wins, organic growth with existing customers and the acquisition of Art of Mentoring.

Operating expenses increased by $337,899 (9.7%) compared to HY20 primarily as a result of transaction costs relating to the Art of Mentoring acquisition, placement fees and non-cash share based payments for the Directors and Management. Operating expenses net of these costs was $2,500,837 down $958,207 (27.7%) compared to the same period in FY20.

Net loss for the period was $1,617,912 ($297,658 normalised for the above extraordinary expenses).

The Company remained cashflow positive for the reported period with cash receipts from customers of $2,256,052, an increase of 42% compared to the prior corresponding period. Cash outflows from operating activities decreased by $1,635,000 (42.3%) with a net cash inflow for the period of $22,734.

COVID-19 and impact on the Company’s state of affairs

Given the strength of the Company’s underlying revenue streams, the Company was able to perform well under the pandemic restrictions that existed during most of 2020. The Company experienced significant delays in decision making from prospective customers as a result of the ongoing economic uncertainty. However, with improving conditions the Company is building on its sales momentum with new wins outlined above and a strong sales pipeline.

Seamless service delivery to our customers whist ensuring the health and safety of all our staff is our highest priority. In addition to complying with the guidelines recommended by the health authorities through the various stages, the Company enabled all staff to work remotely in the early stages of the outbreak and has continued to maintain its services without any disruptions. The benefit of cloud-hosting all of our solutions also enables our platforms to continue operating with no impact.

The Company acknowledges that there remains a risk of further or additional government restrictions, which may result in further sales pipeline execution delays. The Company continues to monitor the conditions for any changes and will update the market accordingly.

Significant changes in the current reporting period

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 (“Art of Mentoring”). Accordingly, from the 26 October 2020 the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity and statement of cash flows represent the consolidated activities of the Group. The interim financial position and performance of the Group reflects the recognition of goodwill and other intangible assets related to the acquisition.

Page 3 of 20

Directors’ report 31 December 2020 (continued)

Matters subsequent to the end of the financial period

On 9 February 2021, the Company announced the signing of a 5-year agreement for an estimated value of $10 million over the contract term to extend and expand its service offering to Locality Planning Energy Ltd.

No additional matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or in subsequent financial periods.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5.

The Directors report has been issued following a resolution of the Directors pursuant to section 306(3) of the Corporations Act 2001 .

For and on behalf of the Board,

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Mr Prashant Chandra Managing Director & CEO

Melbourne 26 February 2021

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Auditor’s Independence Declaration to the Directors of AD1 Holdings Limited

In relation to our review of the financial report of AD1 Holdings Limited for the half-year ended 31 December 2020, I declare to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 ; and

• (b) no contraventions of any applicable code of professional conduct.

This declaration is made in respect of AD1 Holdings Limited and the entities it controlled during the financial period.

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PKF Kenneth Weldin Melbourne, 26 February 2021 Partner

PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 12, 440 Collins Street, Melbourne, Victoria 3000 T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au 5 Liability limited by a scheme approved under Professional Standards Legislation PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

Consolidated statement of profit or loss and other comprehensive income

For the half year ended 31 December 2020

Notes Revenue from continuing operations Revenue from contracts with customers 3 Other income Interest income Expenses Employee benefit expense 4 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 period Other comprehensive income Other comprehensive income for the period, net of tax Total comprehensive loss for the period Loss per share attributable to the ordinary equity holders of the Group: Basic loss per share 5 Diluted loss per share 5

31 December 2020 31 December 2019 $ $ 2,051,9711,637,020 151,202164,491 71,250 2,203,1801,802,761 (2,382,995) (1,859,631) (420,966) (745,708) (693,021) (514,068) (45,871) (58,547) (64,985) (84,587) (164,497) (93,391) (198) (21,812) (11,041) (5,170) (37,518) (100,276) (3,821,092) (3,483,192) (1,617,912) (1,680,431) - - (1,617,912) (1,680,431) - - (1,617,912) (1,680,431) (0.28) (0.33) (0.28) (0.33)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

Page 6 of 20

Consolidated statement of financial position

As at 31 December 2020

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 6 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 7 Total current liabilities Non-current liabilities Employee benefit obligations Lease liability Other liabilities 7 Total non-current liabilities Total liabilities Net assets EQUITY Share capital Reserve Accumulated losses Total equity

31 December 2020 30 June 2020 $ $ 1,917,967 459,742 699,342 771,073 2,617,309 1,230,815 125,596 177,397 82,327 82,327 5,812,743 1,473,158 6,020,666 1,732,882 8,637,975 2,963,697 612,354 490,509 257,088 157,986 525,216 525,216 106,836 85,690 514,758 80,099 1,365,539 - 3,381,791 1,339,500 39,009 24,100 - 48,187 1,241,827 - 1,280,836 72,287 4,662,627 1,411,787 3,975,348 1,551,910 29,156,778 26,368,683 1,284,706 53,702 (26,466,136) (24,870,475) 3,975,348 1,551,910

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Page 7 of 20

Consolidated statement of changes in equity

For the half year ended 31 December 2020

Note Balance at 1 July 2019 Adjustment – adoption of AASB 16 Adjusted Balance at 1 July 2019 Loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners: Shares issued Options granted Options expired/forfeited Share-based payment expense Balance at 31 December 2019 Balance at 1 July 2020 Loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners: Shares issued 8 Options granted 9 Options expired/forfeited 9 Share-based payment expense 8 Acquisition of business combination Capital Raising Costs Balance at 31 December 2020	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
	- - (1,680,431) (1,680,431)
	- - (1,680,431) (1,680,431)
	1,833,050 - - 1,833,050 - 2,080 - 2,080 - (155,930) 155,242 (688) - 9,701 - 9,701
	1,833,050 (144,149) 155,242 1,844,143
	26,368,683 454,049 (24,778,308) 2,044,424
	26,368,683 53,702 (24,870,475) 1,551,910 - - (1,617,912) (1,617,912)
	- - (1,617,912) (1,617,912)
	2,500,000 2,500,000 1,244,627 1,244,627 (22,251) 22,251 - 8,628 8,628 500,558 500,558 (212,463) (212,463)
	2,788,095 1,231,004 22,250 4,041,350
	29,156,778 1,284,706 (26,466,136) 3,975,348

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Page 8 of 20

Consolidated statement of cash flows

For the half year ended 31 December 2020

Cash flows from operating activities Receipts from customers Payments to suppliers and employees R&D claim Interest income Interest and other costs of finance paid Net cash inflow/(outflow) from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for software development Acquisition of Art of Mentoring (net of cash acquired) Net cash (outflow) from investing activities Cash flows from financing activities Proceeds from issues of shares and other equity securities Capital raising costs Repayments of lease liabilities Net cash inflow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of period	31 December 2020 31 December 2019 $ $ 2,256,052 1,588,854 (2,731,472) (3,864,084) 500,410 - 7 1,250 (2,263) (5,170)
	22,734 (2,279,150)
	(5,456) (197) (33,702) - (894,650) -
	(933,808) (197)
	2,500,010 1,833,050 (130,710) - (42,665)
	2,369,300 1,790,385
	1,458,226 (488,962) 459,742 838,987
	1,917,967 350,025

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Page 9 of 20

Notes to the financial statements 31 December 2020 (continued)

Notes to the financial statements

1. Basis of preparation of half-year report

The consolidated interim financial statements of AD1 Holdings Ltd (“AD1” or the “Group”) are for the six (6) months ended 31 December 2020 and are presented in Australian Dollars ($), which is the functional currency of the Group. These general purpose interim financial statements have been prepared in accordance with the requirements of the Corporations Act 2001 and AASB 134 Interim Financial Reporting . They do not include all of the information required in annual financial statements in accordance with Australian Accounting Standards, and should be read in conjunction with the financial statements of the Group for the year ended 30 June 2020 and any public announcements made by the Group during the half-year in accordance with continuous disclosure requirements arising under the Australian Securities Exchange Listing Rules and the Corporations Act 2001 .

The interim financial statements have been approved and authorised for issue by the Board of Directors on 26 February 2021.

(a) Going concern

The interim financial statements have been prepared on the going concern basis, which assumes that the Group will be able to meet its liabilities as they fall due for the foreseeable future.

During the six months ended 31 December 2020, the Group recorded a consolidated loss of $1,617,912 (31 December 2019: $1,680,431) and net cash inflows from operating activities of $22,734 (31 December 2019: net outflows of $2,279,150). The consolidated net loss from ordinary activities excluding share based payments expense and one off transaction costs was $297,658 or 82% reduction in loss made compared to period ending 31 December 2019.

In assessing the Group as a going concern, the Directors have considered the following:

• recent contract wins, existing revenue streams and the revenue pipeline of the Group;

• the recent capital raise of approximately $2.5 million in October 2020; and

• the Group’s ability to consider available non-dilutive funding alternatives should there be a requirement to manage any short-term timing impacts to the cash flows.

Based on these factors, it is the view of the Directors that the Group is sufficiently capitalised to continue as a going concern. The Directors acknowledge that this assessment incorporates a number of assumptions and judgments and have concluded that the range of possible outcomes considered in arriving at this support the entity’s ability to continue as a going concern as at the date of this report.

Accordingly, the interim financial statements have been prepared on a going concern basis, which contemplates that continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business, and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the entity not continue as a going concern.

(b) Basis for preparation

These interim financial statements include the assets and liabilities of AD1 Holdings and its controlled entity as a whole as at the end of the period and the consolidated results and cash flows for the period.

An entity is considered to be a controlled entity where we are exposed, or have rights, to variable returns from our involvement with the entity and have the ability to affect those returns through our power to direct the activities of the entity. We consolidate the results of our controlled entity from the date on which we gain control until the date we cease control.

The acquisition method of accounting is used to account for business combinations by the Group.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.

The interim financial statements of the controlled entities are prepared for the same reporting period as AD1 Holdings, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies.

Page 10 of 20

Notes to the financial statements 31 December 2020 (continued)

2. Segment information

The Group operates in one segment, being the provision and delivery of software services and technology platforms to its customers, and other related supporting and consulting services. The segment details are therefore fully reflected in the body of the interim financial report.

3. Revenue from contracts with customers

(a) Disaggregation of revenue from contracts with customers

SaaS and Managed Services IT Development and Consulting Digital Marketing Services at a point in time Services transferred over time	31 December 2020 31 December 2019 $ $ 1,456,243 1,085,305 595,729 549,573 - 2,141 2,051,971 1,637,020 622,621 549,573 1,429,350 1,087,446 2,051,971 1,637,020

(b) Information of major customers

The Group had the following major customers with revenues amount to 10 percent or more of the total group revenues:

revenues:
	31	December	31	December
		2020		2019
		$		$
Customer A		34%		51%
Customer B		22%		14%
Customer C		11%		*
Customer D		*		12%

*Less than 10%

4. Expenses

Employee benefit expense Share-based payment Salaries and wages Superannuation Other employee related expenses	31 December 2020 31 December 2019 $ $ 1,163,254 11,093 956,856 1,718,428 109,810 143,661 153,074 (13,551) 2,382,995 1,859,631

Page 11 of 20

Notes to the financial statements 31 December 2020

(continued)

5. Loss per share

(a) Basic & diluted loss per share

	31 December	31 December
	2020	2019
	Cents	Cents
Basic loss per share	(0.28)	(0.33)
Diluted loss per share	(0.28)	(0.33)
(b)Reconciliation of loss used in calculating loss per share
	31 December	31 December
	2020	2019
	$	$
Loss attributable to the ordinary equity holders of the Group used in calculating
basic & diluted loss per share
	(1,617,912)	(1,680,431)
(c)Weighted average number of shares used as denominator
	31 December	31 December
	2020	2019
	$	$
Weighted average number of ordinary shares used as the denominator in
calculating basic & diluted loss per share	570,237,752	516,152,160

As the Group is still loss making, options over ordinary shares outstanding at 31 December 2020 and 31 December 2019 are considered anti-dilutive and were excluded from the diluted weighted average number of ordinary shares calculation

6. Intangible Assets

Software & licences Customer contracts Other copyright material Goodwill . Other liabilities Other current liabilities Contingent consideration – Tranche 2 Other non-current liabilities Contingent consideration – Tranche 3	31 December 2020 30 June 2020 $ $ 915,258 150,051 611,959 127,967 332,334 - 3,953,291 1,195,139 5,812,843 1,473,157 31 December 2020 30 June 2020 $ $ 1,365,539 - 1,241,827 -

7. Other liabilities

Contingent consideration relates to the acquisition of Art of Mentoring. Refer to Note 11 Business Combinations for further details.

Page 12 of 20

Notes to the financial statements 31 December 2020 (continued)

8. Share capital
(a)Ordinary shares
	31 December	31 December	31 December	31 December
	2020	2019	2020	2019
	Shares	Shares	$	$
Ordinary shares – full paid	**604,456,397 **	548,058,530	29,156,878	26,368,683
	604,456,397	548,058,530	29,156,878	26,368,683
(b)Movements in ordinary share capital
			Number of
			shares	$
31 December 2020
Opening balance			548,058,530	26,368,683
Issue of new ordinary shares			48,076,923	2,500,000
Acquisition of Art of Mentoring			8,320,944	500,558
Capital raising costs				(212,463)
Closing balance			604,456,397	29,156,778
31 December 2019
Opening balance			425,855,214	24,535,633
Issue of new ordinary shares			122,203,316	1,833,050
Closing balance			548,058,530	26,368,683
(c)Details of movements in ordinary shares
		Number of
Date Details		shares	Issue price	Amount
			$	$
31 December 2020
19-Oct-20 Issue of new ordinary shares under	placement	48,076,923	0.052	2,500,000
19-Oct-20 Capital raising costs		-	-	(122,463)
26-Oct-20 Issue of shares to the vendor as part consideration for acquisition (Art of Mentoring)		8,320,944	0.052	500,558
27-Nov-20 Capital raising costs – underwriters	option	-	-	(90,000)
		56,397,867		2,788,095
31 December 2019
19-Jul-19 Issue of shares to a cornerstone investor		43,333,333	0.015	650,000
30-Aug-19 Issue of shares under the Share Purchase Plan		55,536,650	0.015	833,050
13-Sep-19 Issue of shares to a cornerstone investor		23,333,333	0.015	350,000
		122,203,316		1,833,050

Ordinary shares participate in dividends and the proceeds on winding up the Group in proportion to the number of shares held. At shareholder meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The ordinary shares have no par value.

Page 13 of 20

Notes to the financial statements 31 December 2020 (continued)

9. Reserve

(a) Options reserve

Options over ordinary shares	31 December 2020 31 December 2019 31 December 2020 31 December 2019 Options Options $ $ 245,347,811 41,444,219 1,284,706 454,050 245,347,811 41,444,219 1,284,706 454,050

The reserve is used to recognise:

• The fair value of options issued to employees but not exercised; and

• The fair value of options issued for goods and services received but not exercised.

(b) Movements in options reserve

31 December 2020 Opening balance Issue of new options over ordinary shares Share based payments expense Options forfeited/expired Closing balance 31 December 2019 Opening balance Issue of new options over ordinary shares Share based payments expense Options forfeited/expired Closing balance	Number of options $ 18,183,323 53,702 227,914,488 1,244,627 - 8,628 (750,000) (22,251) 245,347,811 1,284,706 57,399,053 598,198 4,500,000 2,080 - 9,701 (20,454,834) (155,930) 41,444,219 454,050

Page 14 of 20

Notes to the financial statements 31 December 2020 (continued)

(c) Details of movements in options reserve

					Number of
Date	Details				options	Amount
						$
31 December 2020
23-Jul-20	Options granted - ESOP				2,000,000	9,691
28-Sep-20	Options lapsed				(750,000)	(22,250)
27-Nov-20	Options granted				195,000,000	1,130,632
27-Nov-20	Options granted - ESOP				25,000,000	14,304
24-Dec-20	Options granted – underwriters options				5,914,488	90,000
31-Dec-20	Share-based payment expense for options granted			in prior period	-	8,627
					227,164,488	**1,231,004 **
31 December 2019
24-Jul-19	Options granted				4,500,000	2,080
18-Aug-19	Options lapsed				(125,000)	(2,985)
23-Aug-19	Options lapsed				(750,000)	(17,913)
4-Sep-19	Options lapsed				(750,000)	(17,913)
8-Sep-19	Options lapsed				(250,000)	(5,971)
29-Sep-19	Options lapsed				(500,000)	(11,942)
5-Oct-19	Options lapsed				(1,000,000)	(23,883)
11-Oct-19	Options forfeited				(75,000)	(688)
13-Oct-19	Options lapsed				(50,000)	(1,194)
28-Nov-19	Options lapsed				(1,000,000)	(23,883)
1-Dec-19	Options lapsed				(950,000)	(22,689)
11-Dec-19	Options lapsed				(250,000)	(5,971)
18-Dec-19	Options lapsed				(875,000)	(20,898)
20-Dec-19	Options lapsed				(13,879,834)	-
31-Dec-19	Share-based payment expense for options granted			in prior period	-	9,701
					(15,954,834)	(144,148)
10. Share based payments
(a)Options granted during the period
		31	December	31 December	31 December	31 December
			2020	2020	2019	2019
			Number of	Average	Number of	Average
			options	exercise price	options	exercise price
				$		$
Opening balance			18,183,323	0.09	57,399,053	0.17
Granted during the period		227,914,488		0.20	4,500,000	0.08
Exercised during the period			-	-	-	-
Forfeited/expired during the period			(750,000)	0.33	(20,454,834)	0.14
Closing balance		245,347,811		0.20	41,444,219	0.17

10. Share based payments

Page 15 of 20

Notes to the financial statements 31 December 2020 (continued)

(b) Fair value of options granted

The assessed fair value of options granted at grant date was determined using the Black Scholes model and a trinomial model (variation of the Hull-White model), where applicable, that takes into account the exercise price, barrier price, life of the options, share price at grant date, the expected share price volatility of the underlying share, the expected dividend yield, the risk-free rate for the life of the options, as following:

			No. of
Grant	Expiry	Exercise	options	Share price	Dividend	Risk-free	Fair value at
date	date	price	granted	at grant date	Yield	Interest Rate	grant date
		$		$			$
23-Jul-2020	22-Jul-2024	0.050	666,666	0.029	Nil	0.40%	15,333
23-Jul-2020	22-Jul-2024	0.075	666,666	0.029	Nil	0.40%	14,667
23-Jul-2020	22-Jul-2024	0.100	666,668	0.029	Nil	0.40%	14,000
27-Nov-2020	23-Dec-2025	0.100	75,000,000	0.045	Nil	0.30%	1,087,500
27-Nov-2020	27-Nov-2025	0.200	60,000,000	0.045	Nil	0.30%	840,000
27-Nov-2020	27-Nov-2025	0.300	30,000,000	0.045	Nil	0.30%	411,000
27-Nov-2020	27-Nov-2025	0.400	30,000,000	0.045	Nil	0.30%	402,000
27-Nov-2020	27-Nov-2025	0.100	10,000,000	0.045	Nil	0.30%	146,000
27-Nov-2020	27-Nov-2025	0.200	7,000,000	0.045	Nil	0.30%	98,000
27-Nov-2020	27-Nov-2025	0.300	4,000,000	0.045	Nil	0.30%	54,800
27-Nov-2020	27-Nov-2025	0.400	4,000,000	0.045	Nil	0.30%	53,600
24-Dec-2020	24-Dec-2022	0.077	5,914,488	0.052	Nil	0.25%	90,000

(c) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

Expense from options granted in current period Expense from options granted in prior period Reversal of expense from options forfeited in current period	31 December 2020 31 December 2019 $ $ 1,154,627 2,080 8,627 9,700 - (688)
	1,163,254 11,093

11. 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.

Page 16 of 20

Notes to the financial statements 31 December 2020 (continued)

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 1,365,539 1,241,827
	4,176,725

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

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) 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
	4,176,725

(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.

(i) Revenue and profit contribution

The acquired business contributed operating revenues of $177,381 and net loss of $27,302 to the Group for the period from 27 October 2020 to 31 December 2020.

(b) Purchase consideration – cash inflow

Inflow of cash to acquire subsidiary, net of cash acquired Cash consideration Plus: Balances acquired Cash Net outflow of cash – investing activities	31 December 2020 $ (1,068,801) 174,151
	(894,650)

Acquisition-related costs

Acquisition-related costs of $156,978 attributable to the issue of shares are included in other expense and professional fees in the statement of profit or loss and other compressive income and in operating cash flows in the statement of cash flows.

Page 17 of 20

Notes to the financial statements 31 December 2020 (continued)

12. Investment in controlled entities

The Group’s principal subsidiaries at 31 December 2020 is set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business.

Name of entity	Place of	Ownership held	by the	Ownership interest held	Ownership interest held
	business/county of	group		by non-controlling
	incorporation			interests
		2020	2019	2020	2019
		%	%	%	%
Ultimate parent entity
AD1 Holdings Limited	Australia
Controlled entity
Utility Software Services Pty Ltd	Australia	100	100		-	-
Art of Mentoring Holdings Pty Ltd	Australia	100	-		-	-
Art of Mentoring Pty Ltd	Australia	100	-		-	-

13. Related Party Transactions

The Group has the following transactions with Blue NRG, of which Michael Norster is a director. Additional services were received from More Investment and Capital Heights, of which Nicholas Smedley is a director.

Revenue from contract with customer Payment for electricity supplied Receivables for services rendered Payment for M&A and corporate advisory services	31 December 2020 31 December 2019 $ $ 697,006 836,399 1,865 3,923 - 1,231 91,500 - 1,163,254 11,093

All transactions were made on nominal commercial terms and conditions and at market rates.

14. Contingencies

The Group had no contingent liabilities at 31 December 2020 (31 December 2019: nil).

15. Events occurring after the reporting period

On 9 February 2021, the Company announced the signing of a 5-year agreement for an estimated value of $10 million over the contract term to extend and expand its service offering to Locality Planning Energy Ltd.

No additional matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or in subsequent financial periods.

Page 18 of 20

Directors' declaration

31 December 2020

In the directors' opinion:

• (a) the interim financial statements and notes set out on pages 5 to 17 are in accordance with the Corporations Act 2001 , including:

• (i) complying with Accounting Standard AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and

• (ii) giving a true and fair view of the Group's financial position as at 31 December 2020 and of its performance for the half year on that date, and

• (b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable, and

This declaration is made in accordance with a resolution of directors.

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Mr Prashant Chandra Managing Director & CEO

Melbourne 26 February 2021

Page 19 of 20

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Independent Auditor’s Review Report to the Members of AD1 Holdings Limited

Report on the Half-Year Financial Report

Conclusion

We have reviewed the accompanying half-year financial report of AD1 Holdings Limited (the Company) and its subsidiaries (the Group) which comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the halfyear financial report of AD1 Holdings Ltd is not in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the consolidated financial position of the Group as at 31 December 2020 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . In accordance with the Corporations Act 2001 , we have given the directors’ of the Company a written Auditor’s Independence Declaration.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the Company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, anything has come to our attention that causes us to believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s consolidated financial position as at 31 December 2020 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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PKF Melbourne, 26 February 2021

Kenneth Weldin Partner

PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 12, 440 Collins Street, Melbourne, Victoria 3000 T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au Liability limited by a scheme approved under Professional Standards Legislation

PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

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