READCLOUD LIMITED — Interim / Quarterly Report 2023

May 30, 2023

ReadCloud Limited Appendix 4D Half-year report

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1. Company details

Name of entity: ReadCloud Limited ABN: 44 136 815 891 Reporting period: For the half-year ended 31 March 2023 Previous period: For the half-year ended 31 March 2022

2. Results for announcement to the market

				$
Revenues from ordinary activities	Up	19.4%	To	8,269,401
Profit / (Loss) from ordinary activities after tax attributable to the Owners of	Down	30.2%	To	830,072
ReadCloud Limited
	Down	30.2%	To	830,072
Profit / (Loss) for the half-year attributable to the Owners of ReadCloud
Limited

Dividends

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

Comments

The profit for the Group after providing for income tax amounted to $830,072 (31 March 2022: profit of $1,189,220). Underlying earnings before interest taxation, depreciation and amortisation (‘Underlying EBITDA’) was $1,541,877 (31 March 2022: $1,349,653). This is reconciled to the statutory result as follows:

Reported (statutory) net profit / (loss) after tax Add back: Depreciation and amortisation Loss on disposal of fixed assets Share based payments Transaction costs incurred on business acquisition (expensed in legal and compliance costs) Fair value movement contingent consideration Net interest expense Income tax expense / (benefit) Underlying EBITDA*	Consolidated 31 March 2023 31 March 2022 $ $ 830,072 1,189,220 584,099 514,107 95,745 - 53,326 17,170 43,235 - - (375,000) (60,033) 4,156 (4,567) - 1,541,877 1,349,653	Consolidated 31 March 2023 31 March 2022 $ $ 830,072 1,189,220 584,099 514,107 95,745 - 53,326 17,170 43,235 - - (375,000) (60,033) 4,156 (4,567) - 1,541,877 1,349,653
		1,349,653

For further details on the results, refer to the Review of Operations within the Directors’ Report.

• EBITDA and Underlying EBITDA are non-statutory financial measures which are not prescribed by Australian Accounting Standards (AAS). They represent the profit under AAS adjusted for Interest, Tax, Depreciation and Amortisation and certain other specified items. The Directors consider that EBITDA and underlying EBITDA reflect core earnings of the entity consistent with internal reporting.

ReadCloud Limited Appendix 4D Half-year report

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3. Net tangible assets

Net tangible assets per ordinary security	Reporting period Previous period Cents Cents 0.08 3.79

4. Control gained over entities

Refer to note 13 to the half year financial report for details of the entity over which control has been gained during the financial period. The acquired business contributed revenues of $753,290 and a profit before tax of $101,196 to the Group for the current half-year. If the acquisition had occurred on 1 October 2022, the half-year contributions would have been revenues of $1,070,857 and profit before tax of $166,492.

5. Loss of control over entities

Not applicable.

6. Dividends

Current period

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

Previous period

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

7. Dividend reinvestment plans

Not applicable.

8. Details of associates and joint venture entities

Not applicable.

9. Foreign entities

Details of origin of accounting standards used in compiling the report:

Not applicable.

ReadCloud Limited Appendix 4D Half-year report

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10. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements were subject to a review by the auditors and the review report is attached as part of the Half Year Report.

11. Attachments

Details of attachments (if any):

The Half Year Report of ReadCloud Limited for the half-year ended 31 March 2023 is attached.

12. Signed

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Signed _________

Date: 31 May 2023

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ReadCloud Limited

ABN 44 136 815 891

Half Year Report - 31 March 2023

ReadCloud Limited Contents 31 March 2023

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Corporate directory	2
Directors’ report	3
Auditor’s independence declaration	10
Consolidated statement of profit or loss and other comprehensive income	11
Consolidated statement of financial position	12
Consolidated statement of changes in equity	13
Consolidated statement of cash flows	14
Notes to the consolidated financial statements	15
Directors' declaration	26
Independent review report to the members of ReadCloud Limited	27

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ReadCloud Limited Corporate Directory 31 March 2023

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Directors Mr Cristiano Nicolli (Non-Executive Chairman) Mr Lars Lindstrom (Executive Director) Mr Darren Hunter (Executive Director, Interim CEO during the financial reporting period and Chief Information Officer) Mr Paul Collins (Non-Executive Director) Mr Guy Mendelson (Non-Executive Director) Mr Jonathan Isaacs (Non-Executive Director) Company secretary Ms Melanie Leydin Registered office Level 1, 126 Church Street Brighton VIC 3186 Phone: +61 3 9078 4833 Principal place of business Level 1, 126 Church Street Brighton VIC 3186 Phone: +61 3 9078 4833 Share register Boardroom Limited Level 8, 210 George Street Sydney NSW 2000 Phone: 1300 737 760; +61 2 9290 9600 Auditor PKF Melbourne Audit & Assurance Pty Ltd Level 12, 440 Collins Street Melbourne VIC 3000 Phone: +61 9679 2361 Stock exchange listing ReadCloud Limited shares and options are listed on the Australian Securities Exchange (ASX code: RCL) Website www.readcloud.com

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ReadCloud Limited Directors’ report 31 March 2023

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The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as 'ReadCloud' or the 'Group') consisting of ReadCloud Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the half-year ended 31 March 2023.

Directors

The following persons were Directors of ReadCloud Limited during the whole of the financial half-year and up to the date of this report, unless otherwise stated:

Mr Cristiano Nicolli	-	Non-Executive Chairman
Mr Lars Lindstrom	-	Executive Director
Mr Darren Hunter	-	Executive Director, Interim CEO during the financial reporting period and Chief
		Information Officer
Mr Paul Collins	-	Non-Executive Director
Mr Guy Mendelson	-	Non-Executive Director
Mr Jonathan Isaacs	-	Non-Executive Director (appointed 13 February 2023)

Principal activities

ReadCloud is a leading provider of eLearning software solutions and industry-based training, supporting over 600 schools and educational institutions in partnerships built on support and innovative, integrated resource platforms.

Through ReadCloud’s eReader platform, schools have access to dynamic, interactive digital content from leading publishers, right at their fingertips. Its extensive media-rich embedding options, cross-platform compatibility, enhanced annotations, and immersive reader transforms eBooks across all learning areas into powerful, collaborative experiences.

In the Vocational Education and Training (VET) space, the ‘ReadCloudVET’ group supports the delivery of over 50 qualifications to 15,000 learners across three specialist Registered Training Organisations (RTOs) in VET Delivered to Secondary School Students (VETDSSS) partnerships.

In addition, ReadCloud’s strong connection to industry and career pathway opportunities extends to another of its RTOs, Southern Solutions Training, which offers flexible, blended training models, including delivery in a genuine workplace environment, for qualifications in Early Childhood Education and Care, Business, Aged Care, Hospitality, Logistics and Real Estate.

Review of operations

Financial highlights for 1H FY23 include:

• 19.4% growth in consolidated Sales & fee revenue to $8.27 million (pcp $6.93 million)

• 19.0% organic growth in Vocational Education and Training (“VET”) segment revenue

• 43.0% growth in VET segment revenue to $4.44 million (pcp $3.09 million) when the contribution from Southern Solutions is combined with 19.0% organic growth

• $1.54 million 1H FY23 underlying EBITDA (pcp $1.35 million)

• $2.48 million of cash at 31 March 2023 and zero debt

Operational highlights for 1H FY23 include:

• 60 New school customers successfully onboarded for the 2023 school year across the eBook Solutions and VET-in-schools businesses

• ReadCloud’s eBook Solutions offering added to the Queensland Department of Education preferred supplier panel for the provision of classroom resources to Queensland Government schools

• Successful completion of Southern Solutions Training Services (“Southern Solutions”) acquisition and approval of the change in control by the regulator

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ReadCloud Limited Directors’ report 31 March 2023

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• Growth opportunities for the Southern Solutions Training Services business are materialising in the form of new government funding contracts and corporate partnerships

• Board and CEO succession plan successfully executed with recent appointments of Mr Jonathan Isaacs as a Non-Executive Director and Mr Andrew Skelton as Chief Executive Officer

The Directors are pleased to report a 19.4% increase in consolidated Sales & fee revenue for 1HFY23 to $8.27 million (pcp $6.93 million), driven by organic growth of the VET-in-schools business and the Southern Solutions acquisition. Revenue growth has translated into 1HFY23 Underlying EBITDA of $1.54 million (pcp $1.35 million).

Revenue from eBook Solutions and from VET-in-schools is seasonal and primarily captured in the first half. Australian schools typically purchase ReadCloud software, eBooks and VET courses in the first half of the financial year. The Company's cost base (other than publisher and bookseller fees and trainer costs which represent the cost of sales and are variable) is essentially incurred evenly across the year. Therefore, the 1H FY23 EBITDA result is not indicative of the likely full-year result.

Full-curriculum segment (eBook Solutions)

16 New full-curriculum schools have successfully been onboarded for the 2023 school year. The on-boarding of schools and provisioning of student and teacher resources at the commencement of the 2023 school year for both the eBook Solutions and VET-in-schools businesses was significantly improved over prior years in terms of timeliness and accuracy, leveraging system and process improvements implemented over the last 12 months.

Late in the December 2022 quarter, ReadCloud’s eBook Solutions offering was added to the Queensland Department of Education Standing Offer Arrangement, a preferred supplier panel for the provision of classroom resources to Queensland Government schools. Whilst too late in the selling season to have an impact on the 2023 school year, it is expected that this will open additional doors for the selling season for the 2024 school year.

During 1HFY23, ReadCloud worked closely with its first international school customer, King’s InterHigh, on planning for the forthcoming 2023-2024 British school year. King’s InterHigh has recently merged with two other international schools, significantly increasing the size of the student / parent cohort that will be targeted for ReadCloud’s booklisting service for the purchase of required eBooks delivered via the ReadCloud platform. A comprehensive communications and marketing plan developed in conjunction with King’s InterHigh and aimed at fostering greater teacher and student engagement in the use of eLearning tools embedded in the ReadCloud platform is scheduled for implemention in the coming months.

Vocational Education & Training segment

1HFY23 has seen the successful onboarding of 44 new VET-in-schools customers. These new school wins together with:

• strong retention of existing school customers;

• 27 existing VET-in-schools customers adding additional ReadCloud VET qualifications for the 2023 school year; and

• a price increase for some COSAMP and Ripponlea Institute school customers

have combined to deliver a 19.0% increase in Sales & fee revenue for the VET-in-schools business in 1HFY23.

The migration of all three ReadCloud VET-in-schools Registered Training Organisations (“RTOs”), Australian Institute of Education and Training, COSAMP and Ripponlea Institute, onto the unified ReadCloud VET platform was completed during 1HFY23. This migration is delivering efficiencies and synergistic cost savings, placing the VET-in-schools business on a solid footing for strong future growth on a largely fixed cost base.

Our Ripponlea Institute RTO is one of the first providers in Australia capable of delivering the new TAE40122 Certificate IV in Training & Assessment, while most other providers currently only offer the now superseded equivalent course. Many teachers nationally may be required to update their credentials to include successful completion of this new course.

Southern Solutions

On 9 November 2022 ReadCloud completed the acquisition of Southern Solutions. Established in 2014, Southern Solutions is a RTO with a leading position in delivering nationally accredited post-secondary school training for qualifications in Early Childhood Education and Care, Business, Aged Care, Hospitality, Logistics and Real Estate. The acquisition launched ReadCloud into the broader VET market, which has a target audience of 3.9 million

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ReadCloud Limited Directors’ report 31 March 2023

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enrolments annually and provides a growth opportunity in industries with skills shortages and strong government backing. The Australian childcare sector, for example, is estimated to be in need of an additional 16,000 qualified staff.

In FY22, Southern Solutions generated sales revenue of $2.0m and delivered EBIT of $0.36 million. The total consideration for the acquisition includes $1.8 million of deferred cash and share consideration that is contingent on FY23 and FY24 EBIT performance. Southern Solutions is integrating into the ReadCloud Group well and synergies with the existing VET-in-schools business in the finance, operations, administration and compliance functions are being identified and realized.

The training provided by Southern Solutions is delivered under the same compliance oversight as the VET-inschools business. Importantly, the change in ownership of Southern Solutions was formally approved by the Australian Skills Quality Authority during the half.

Management is pleased to report that growth opportunities identified during its due diligence on Southern Solutions are materialising. A key to Southern Solutions’ service offering is its ability to offer State-subsidised training via contracts with State Governments in New South Wales, the Australian Capital Territory and South Australia, and in Queensland via an arrangement with TAFE Queensland. During 1HFY23 Southern Solutions submitted an application for Victorian Government funding and engaged in discussions with a number of childcare centre operators, culminating in:

• the recent award of a Victorian Government VET Funding contract enabling Southern Solutions to offer government-subsidised VET programs to Victorian trainees; and

• Southern Solutions being selected as the preferred training provider for a large national childcare centre operator with over 150 childcare centres.

Reported result

The Group recorded a 1H FY23 consolidated Underlying EBITDA* of $1.54 million versus $1.35 million for the prior corresponding period (1HFY22) and a 1H FY23 consolidated statutory profit after tax of $0.83 million versus $1.19 million for 1HFY22 (excluding a revaluation of contingent acquisition consideration in 1HFY22 the 1HFY22 consolidated statutory profit after tax would have been $0.81 million).

Underlying EBITDA* is reconciled to the statutory profit as detailed below. This reconciliation adds back the effect of certain non-operating and non-recurring items which would not ordinarily relate to the Group’s underlying performance.

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ReadCloud Limited Directors’ report 31 March 2023

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Sales & fee revenue Less publisher and bookseller fees Less trainer costs Margin after publisher and bookseller fees Add: Other income Less operating expenses: Advertising & marketing Employment expenses Legal & compliance Professional services expenses Telephone, internet & data hosting Travel expenses Other expenses Finance costs Add net interest expense / (revenue) Underlying EBITDA Add: Fair value movement in contingent consideration Net interest revenue / (expense) Income tax benefit Less: Depreciation and amortisation Loss on disposal of fixed assets Share based payments Transaction costs incurred on business acquisition (expensed in legal and compliance fees) Reported (statutory) net profit / (loss) after tax*

Consolidated 31 March 2023 31 March 2022 $ $ 8,269,401 6,925,201 (3,143,902) (2,935,259) (371,846) (42,584) 4,753,653 3,947,358 168,359 159,427 (70,735) (163,341) (2,554,386) (1,989,865) (54,350) (35,975) (220,485) (246,747) (62,500) (52,711) (106,311) (28,699) (304,075) (239,602) 52,740 (4,348) (60,033) 4,156 1,541,877 1,349,653 - 375,000 60,033 (4,156) 4,567 - (584,099) (514,107) (95,745) - (53,326) (17,170) (43,235) - 830,072 1,189,220

1,541,877 - 60,033 4,567 (584,099) (95,745) (53,326) (43,235) **830,072 **

Reported (statutory) net profit / (loss) after tax

* EBITDA and underlying EBITDA are non-statutory financial measures which are not prescribed by Australian Accounting Standards (AAS). They represent the profit under AAS adjusted for Interest, Tax, Depreciation and Amortisation and certain other specified items. The Directors consider that EBITDA and underlying EBITDA reflect core earnings of the entity consistent with internal reporting.

Material revenues and expenses included in the statutory net profit after tax for 1H FY23 are discussed below.

Revenue and gross margins

Revenue

ReadCloud achieved a 19.4% ($1.34 million) increase in 1HFY23 consolidated Sales & fee revenue to $8.27 million (pcp $6.93 million), reflecting:

• a consistent result for the eBook Solutions segment revenue of $3.83 million for 1HFY23 (pcp $3.83 million);

• • 19.0% growth in Sales & fee revenue for the VET-in-schools business to $3.69 million (pcp $3.09 million); and

• revenue from the Southern Solutions business acquired in November 2022 of $0.75 million.

The 19.0% increase in Sales & fee revenue for the VET-in-schools segment was driven by new school wins for the 2023 school year, existing school customers taking additional VET qualifications this year and a price increase for some COSAMP and Ripponlea Institute school customers.

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ReadCloud Limited Directors’ report 31 March 2023

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Gross margins

ReadCloud achieved a 20.4% ($0.81 million) increase in 1HFY23 consolidated gross profit (Sales & fee revenue less publisher and bookseller fees and trainer costs) to $4.75 million (pcp $3.95 million), reflecting 33.2% growth in gross profit for the VET segment and a 15.2% decline in gross profit for the eBook Solutions segment.

1HFY23 gross profit for the eBook Solutions segment (Sales & fee revenue less publisher and bookseller fees) declined by 15.2% to $0.88 million (1HFY22: $1.04 million) primarily as a result of:

• a decline in software licence fees (on which ReadCloud makes a 100% margin) as a result of customer churn and new school customers being provided with the ReadCloud software on a complimentary basis;

• a decline in gross margin on eBook sales as a result of price discounts on eBook given to Queensland Government schools as part of the Queensland Government Department of Education Standing Offer Arrangement. Whilst ReadCloud gave away some margin in order to be added to the panel, management believes that the long-term benefits of panel membership will outweigh the initial cost, since many Queensland government schools are precluded from dealing with suppliers that are not on the Standing Offer Arrangement and it enables ReadCloud to compete on the basis of product rather than price; and

• a change in the eBook sales mix (ReadCloud makes higher margins on some publishers’ products versus others).

Gross profit for the VET segment for 1HFY23 (Sales & fee revenue less direct costs mainly comprising publisher costs and trainer costs) increased by 33.2% ($0.96 million) to $3.87 million (pcp $2.90 million), reflecting:

• 19.0% ($0.59 million) growth in Sales & fee revenue for the VET-in-schools business, which largely translated into increased gross profit given that the vast majority of training materials used for the delivery of VET programs to schools are proprietary to ReadCloud; and

• a revenue contribution from the Southern Solutions business (acquired in November 2022) of $0.75 million, which translated into a $0.43 gross profit contribution. Direct costs of training delivered by Southern Solutions include trainers engaged by the business and third-party course material providers.

Operating expenses

Significant expenses included in the statutory net profit after tax for 1HFY23 are discussed below. 1HFY23 costsaving measures have been implemented that will be reflected in the second half of the financial year.

Employment expenses

Employment expenses were $2.55 million for 1HFY23 (pcp $1.99 million), with the increase over prior comparable period attributable to investment in additional operational staff in both the VET and full-curriculum segments in anticipation of future growth and the Southern Solutions acquisition ($0.19 million).

Management believe the current staffing base, together with the improved platform and processes, are capable of delivering and supporting increased scale in the business.

Professional services expenses

1HFY23 Professional services expenses were $0.22 million (pcp $0.25 million), with the main components including:

• RTO compliance consulting services;

• audit fees;

• staff recruitment fees;

• share registry costs;

• company secretarial fees;

• contract administration and bookkeeping costs; and

• tax consulting fees.

Travel expenses

1HFY23 Travel expenses were $0.11 million (pcp $0.03 million), with the prior comparable period impacted by COVID travel restrictions.

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ReadCloud Limited Directors’ report 31 March 2023

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Other expenses

1HFY23 Other expenses were $0.30 million (pcp $0.24 million), with the main components including payroll tax, software licences, insurance and occupancy expenses.

Depreciation and amortisation expense

1HFY23 depreciation and amortisation expense was $0.58 million (pcp $0.51 million), with the increase due to more capitalised software development costs from previous financial years commencing amortisation during 1HFY23 and the amortisation of intangible assets acquired as part of business combinations.

Loss on disposal of fixed assets

In January 2023 ReadCloud transferred the property lease for the premises previously occupied by COSAMP to a third party. The Company had previously rationalised office locations in order to realise cost savings, leaving two offices comprising its Head Office and a premises from which it operated a commercial recording studio business (trading as Salt Studios). This business was non-core to the Company’s activities and discontinued in January 2023. As part of the lease transfer the new tenant has assumed all obligations under the lease including leasehold make-good obligations. The written down value of leasehold improvements and studio equipment at the date of the transfer ($0.07 million and $0.03 million respectively) has been written off in the 1HFY23 financial period.

Leadership

Following a Board-led review of the Company’s strategy and focus on driving accelerated growth and profitability, which also included consideration of the increased staff and operational management focus required as a result of the Southern Solutions acquisition, in December 2022 ReadCloud founder Lars Lindstrom stepped down from his role as Chief Executive Officer to take on a new role focused on strategy and the growth opportunities presented by international schools and Southern Solutions.

The Board, in conjunction with an executive search agency, commenced a search for an appropriately qualified and experienced Chief Executive Officer and on 8 May 2023 announced the appointment of Mr Andrew Skelton as the new Chief Executive Officer. Andrew has more than 20 years of leadership experience, most recently as Chief Executive Officer of A2B Australia Ltd (ASX A2B) and a track record of growing business by delivering significant transformation programs, executing growth strategies in highly competitive industries, and navigating market, technological and regulatory changes. Andrew commenced with ReadCloud on 15 May 2023.

The Company has also progressed with a Board succession plan, with the appointment of Mr Jonathan Isaacs in February 2023. Jonathan has over 20 years’ experience as a senior manager and Board member in the corporate sector, most recently as the Chief Financial Officer of Clemenger Group, Australia’s largest marketing communications company.

Outlook

The education sector, including the provision of eLearning solutions and vocational training services, is presenting several growth opportunities in the coming years. After a period of consolidation and restructuring, ReadCloud is positioned to capture growth by selling its education technology and training services into more schools and organisations. The alignment of existing resources to focus on customer facing initiatives and sales will be rigorously assessed and the investments made to date in platform technology, proprietary curriculum, and process improvement enable ReadCloud to pursue a growth agenda without a material change to the cost base.

ReadCloud's eLearning business is well positioned to benefit from the steady transition to eBooks in preference to traditional hard copy textbooks, a theme that may be accelerated locally by schools commencing their transition towards the new Australian school curriculum, which must be completed by 2026. In the near term, we expect to benefit from the September commencement of a new school year at King's InterHigh in the UK, our first international school customer. In Australia, repricing aspects of our offering in Queensland and membership of the Queensland Government preferred supplier panel are anticipated to generate market share benefits that, in the medium term, more than offset the reduction in margin earned in that State (absorbed in 1H23). Internally, the business is focused on strengthening customer retention and examining initiatives to optimise sales efforts in Australia and internationally.

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ReadCloud Limited Directors’ report 31 March 2023

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ReadCloud's VET-in-schools offering, delivered through specialist Registered Training Organisations, is expected to benefit from the work done in recent months to standardise processes and streamline service delivery for schools. Our analysis indicates that ReadCloud's VET-in-schools specialist RTOs collectively offer a category leading 50 courses, with the nearest competitor offering circa 20 courses. Comprehensive course coverage and scale-based efficiencies are expected to drive growth in this segment.

ReadCloud's corporate training, delivered primarily by Southern Solutions, is positioned to capture benefits from partnerships with industry participants, particularly in Early Childhood Education and Care, and to benefit from efficiencies gained in compliance, administration and finance by operating as a part of the ReadCloud Group. Southern Solutions is strengthening its position as a significant provider of State-subsidised VET qualifications in key industries with skills shortages. Southern Solutions was recently awarded a new Government VET Funding contract in Victoria for Certificate and Diploma Courses in Early Childhood Education and Care, augmenting its existing funding arrangements in NSW, the ACT, South Australia and, via TAFE, in Queensland. The Victorian funding contract also encompasses Certificate IV in Ageing Support, the predominant qualification applicable in the Aged Care industry.

Historically, ReadCloud's revenue has been heavily weighted towards the first half. Year 11 and 12 'headstart' orders will continue to play a role in delivering second half revenue, and it should be noted that Southern Solutions earns revenue throughout the year as students enroll in and progress through training courses. Many international schools commence their academic year in the second half of the calendar year. Successfully growing revenue earned from the provision of corporate training by Southern Solutions and from expanding the customer base of eLearning to capture additional international schools will enhance revenue generation, including in the second half of future years.

ReadCloud has a strong customer base, a leading platform, class leading content and learning resources across 57 VET qualifications, and freshly developed centralised processes for compliance and customer support. Tailwinds in the education and training sector are encouraging as the economy rebuilds after the pandemic and skills shortages in key industries are addressed. ReadCloud is now positioned to grow and unlock its embedded operational leverage.

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the consolidated entity during the financial half-year.

Matters subsequent to the end of the financial half-year

On 8 May 2023 the Company announced the appointment of Mr Andrew Skelton as the new Chief Executive Officer with effect from 15 May 2023.

No other matter or circumstance has arisen since 31 March 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.

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 immediately after this Directors' report.

This report is made in accordance with a resolution of Directors, pursuant to section 306(3)(a) of the Corporations Act 2001.

On behalf of the Directors

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_________ Cristiano Nicolli Chairman

31 May 2023

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Auditor’s Independence Declaration to the Directors of ReadCloud Limited

In relation to our review of the financial report of ReadCloud Limited for the half-year ended 31 March 2023, 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 ReadCloud Limited and the entities it controlled during the financial period.

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PKF Melbourne, 31 May 2023

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Kaitlynn Brady Partner

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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 separately owned firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

ReadCloud Limited Consolidated statement of profit or loss and other comprehensive income For the half-year ended 31 March 2023

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Note Revenue and other income Sales & fee revenue 4 Other income 4 Total revenue and other income Expenses Advertising & marketing Depreciation and amortisation Employment expenses Fair value movement of contingent consideration Legal & compliance Loss on disposal of fixed assets Professional services expenses Publisher and bookseller fees expense Share based payments Telephone, internet & data hosting Trainer costs Travel expenses Other expenses Finance costs Profit/(Loss) before income tax expense/(benefit) Income tax expense/(benefit) Profit/(Loss) after income tax expense/(benefit) for the half-year attributable to the Owners of ReadCloud Limited Other comprehensive income for the half-year, net of tax Total comprehensive profit/(loss) for the half-year attributable to the Owners of ReadCloud Limited Basic earnings / (loss) per share 12 Diluted earnings / (loss) per share 12	Consolidated 31 March 2023 $ 31 March 2022 $ 8,269,401 6,925,201 168,359 159,427 8,437,760 7,084,628 70,735 163,341 584,099 514,107 2,554,386 1,989,865 - (375,000) 97,585 35,975 95,745 - 220,485 246,747 3,143,902 2,935,259 53,326 17,170 62,500 52,711 371,846 42,584 106,311 28,699 304,075 239,602 (52,740) 4,348 825,505 1,189,220 4,567 - 830,072 1,189,220 - 830,072 1,189,220 Cents Cents 0.68 0.99 0.68 0.99	Consolidated 31 March 2023 $ 31 March 2022 $ 8,269,401 6,925,201 168,359 159,427 8,437,760 7,084,628 70,735 163,341 584,099 514,107 2,554,386 1,989,865 - (375,000) 97,585 35,975 95,745 - 220,485 246,747 3,143,902 2,935,259 53,326 17,170 62,500 52,711 371,846 42,584 106,311 28,699 304,075 239,602 (52,740) 4,348 825,505 1,189,220 4,567 - 830,072 1,189,220 - 830,072 1,189,220 Cents Cents 0.68 0.99 0.68 0.99
		7,084,628 163,341 514,107 1,989,865 (375,000) 35,975 - 246,747 2,935,259 17,170 52,711 42,584 28,699 239,602 4,348
		1,189,220 -
		1,189,220 - 1,189,220
		Cents 0.99 0.99

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

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ReadCloud Limited Consolidated statement of financial position As at 31 March 2023

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Note Assets Current assets Cash and cash equivalents Trade and other receivables 5 Prepayments Total current assets Non-current assets Non-current deposits Property, plant & equipment 6 Intangible assets 7 Right-of-use assets 8 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 9 Employee entitlements Contract liabilities Contingent consideration 10 Lease liabilities 8 Total current liabilities Non-current liabilities Employee entitlements Lease liabilities 8 Contingent consideration 10 Deferred tax liability Total non-current liabilities Total liabilities Net assets Equity Contributed equity 11 Reserves Accumulated losses Total equity	Consolidated 31 March 2023 $ 30 September 2022 $ 2,477,686 2,467,408 2,997,350 944,749 81,868 105,492 5,556,904 3,517,649 36,300 36,300 62,206 176,399 11,000,316 8,015,119 248,042 332,124 11,346,864 8,559,941 16,903,768 12,077,590 2,830,825 799,470 357,734 398,698 178,886 290,920 - 74,999 124,780 159,443 3,492,225 1,723,530 134,396 118,572 159,330 222,803 1,738,800 - 32,934 - 2,065,460 341,375 5,557,685 2,064,904 11,346,083 10,012,685 18,408,754 17,958,754 288,345 235,019 (7,351,016) (8,181,088) 11,346,083 10,012,685	Consolidated 31 March 2023 $ 30 September 2022 $ 2,477,686 2,467,408 2,997,350 944,749 81,868 105,492 5,556,904 3,517,649 36,300 36,300 62,206 176,399 11,000,316 8,015,119 248,042 332,124 11,346,864 8,559,941 16,903,768 12,077,590 2,830,825 799,470 357,734 398,698 178,886 290,920 - 74,999 124,780 159,443 3,492,225 1,723,530 134,396 118,572 159,330 222,803 1,738,800 - 32,934 - 2,065,460 341,375 5,557,685 2,064,904 11,346,083 10,012,685 18,408,754 17,958,754 288,345 235,019 (7,351,016) (8,181,088) 11,346,083 10,012,685
		3,517,649
		36,300 176,399 8,015,119 332,124
		8,559,941
		12,077,590
		799,470 398,698 290,920 74,999 159,443
		1,723,530
		118,572 222,803 - -
		341,375
		2,064,904
		10,012,685
		17,958,754 235,019 (8,181,088)
		10,012,685

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

12

ReadCloud Limited Consolidated statement of changes in equity For the half-year ended 31 March 2023

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Consolidated Balance at 1 October 2021 Profit after income tax expense/(benefit) for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Transactions with Owners in their capacity as Owners: Contributions of equity, net of transaction costs Share-based payments Balance at 31 March 2022 Consolidated Balance at 1 October 2022 Profit after income tax expense/(benefit) for the half-year Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year Transactions with Owners in their capacity as Owners: Issues of shares as consideration for acquisitions (note 11) Share-based payments Balance at 31 March 2023	Issued capital $ 17,408,754 - -	Share-based payment reserve $ 456,848 - -	Accumulated losses $ (6,799,278) 1,189,220 - 1,189,220 - - (5,610,058) Accumulated losses $ (8,181,088) 830,072 - 830,072 - - (7,351,016)	Total equity $ 11,066,324 1,189,220 -
	- 550,000 -	- - 17,170		1,189,220 550,000 17,170
	17,958,754	474,018		12,822,714
	Issued capital $ 17,958,754 - -	Share-based payment reserve $ 235,019 - -		Total equity $ 10,012,685 830,072 -
	- 450,000	- - 53,326		830,072 450,000 53,326
	18,408,754	288,345		11,346,083

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

13

ReadCloud Limited Consolidated statement of cash flows

For the half-year ended 31 March 2023

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Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Research and development tax incentive refund Interest income Income tax Net cash received from operating activities Cash flows from investing activities Payments for purchase of business, net of cash acquired 13 Payments for property, plant and equipment 6 Payments for software development 7 Purchase of intellectual property materials 7 Net cash (used in)/from investing activities Cash flows from financing activities Repayment of lease liabilities 8 Interest paid on lease liabilities 8 Net cash (used in)/from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial half-year Cash and cash equivalents at the end of the financial half-year	Consolidated 31 March 2023 $ 31 March 2022 $ 5,913,500 4,929,179 (5,258,136) (3,821,182) 424,051 395,728 7,291 192 46,537 (46,537) 1,133,243 1,457,380 (731,513) - (12,784) (13,474) (267,847) (264,941) (23,230) (116,446) (1,035,374) (394,861) (79,132) (85,403) (8,459) (4,467) (87,591) (89,870) 10,278 972,649 2,467,408 4,471,183 2,477,686 5,443,832	Consolidated 31 March 2023 $ 31 March 2022 $ 5,913,500 4,929,179 (5,258,136) (3,821,182) 424,051 395,728 7,291 192 46,537 (46,537) 1,133,243 1,457,380 (731,513) - (12,784) (13,474) (267,847) (264,941) (23,230) (116,446) (1,035,374) (394,861) (79,132) (85,403) (8,459) (4,467) (87,591) (89,870) 10,278 972,649 2,467,408 4,471,183 2,477,686 5,443,832
		1,457,380 - (13,474) (264,941) (116,446)
		(394,861)
		(85,403) (4,467)
		(89,870)
		972,649 4,471,183
		5,443,832

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

14

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2022

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Note 1. Basis of preparation and significant accounting policies

The financial statements cover ReadCloud Limited as a consolidated entity (‘the Group’) consisting of ReadCloud Limited and the entities it controlled at the end of, or during, the half-year. The financial statements are presented in Australian dollars, which is the Group’s functional and presentation currency. ReadCloud Limited is a listed public company limited by shares, incorporated and domiciled in Australia.

A description of the nature of the Group’s operations and its principal activities are included in the directors' report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 31 May 2023.

These general-purpose financial statements for the half-year reporting period ended 31 March 2023 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.

These financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 September 2022 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

New or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Note 2. Critical accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. The key judgements and estimates used by Management in applying the Group’s policies for the period have been updated to reflect the latest information available. Those judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below.

Capitalised software development costs

The Group capitalises software development costs associated with the ReadCloud platform, based on management’s judgement that technological and economic feasibility is confirmed. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation of the project and the expected period of benefits.

Impairment of non-financial assets

The Group tests goodwill annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Other non-financial assets are assessed at each reporting date by evaluating conditions specific to the Group and to the particular asset that may indicate an impairment trigger. Resultant testing requires the recoverable amount of the asset or cash-generating unit, as relevant, to be determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.

Income tax

Judgement is required in determining amounts impacting the provision for income tax, such as in relation to entitlements to access R&D offset as of the interim reporting date. Liabilities are determined on the Group's current understanding of the tax law.

15

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 2. Critical accounting judgements, estimates and assumptions (continued)

Share-based payments

The grant date fair value of share-based payments is recognised as an expense with a corresponding increase in equity, over the period that the recipients unconditionally become entitled to the awards. The Group follows the guidelines of AASB 2 Share-based payment and takes into account all performance conditions in estimating the probability and expected timing of achieving these performance conditions. Accordingly, the expense recognized over the vesting period may vary based upon information available and estimates made at each reporting period, until the expiry of the vesting period.

Estimation of useful lives of assets

The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

Note 3. Operating segments

Segment information is based on the information that management uses to make decisions about operating matters and allows users to review operations through the eyes of management. Operating segments represent the information reported to the chief operating decision makers (CODM), being the executive management team, for the purposes of resource allocation and assessment of segment performance. The Group’s reportable segments under AASB 8 are as follows:

• the provision of eBook solutions to secondary schools across Australia; and

• the provision of Vocational Education and Training courses and services.

Cyclical nature of the Group’s business

Each segment has a different revenue profile. For the eBook solutions segment revenue from eBook sales is recognised at the time of eBook purchases by schools, with the significant majority of eBook sales occurring in the months of December through February (just prior to and immediately following the commencement of the school year).

For the Vocational Education and Training business, the Group receives:

• auspicing fees for the provision of services to secondary schools that enables these schools to offer their students nationally accredited VET courses under the auspices of one of the Group’s Registered Training Organisation (“RTO”) licences; and

• training fees for the delivery of nationally accredited post-secondary school training.

The significant majority of auspicing fees are invoiced to schools in February and March each year (the peak student enrolment period), with the component of these fees relating to the pre-approval of a school to operate under the RTO licence and the provision of course materials recognised as revenue at the time of invoicing. While other components of auspicing fees are recognised over time, the majority of the Group’s auspicing fee revenue is recognised in the first half of the Group’s financial year. In contrast, the Group has a more even spread of training fee revenue throughout the financial year that is driven by student enrolments and student progress through qualifications.

The trade receivables and payables profiles are impacted by the cyclical nature of the Group’s business, when viewed from the half-year and year-end perspectives.

Consistent with information presented for internal management reporting purposes, segment performance is measured by underlying EBITDA contribution, where underlying EBITDA (a non-statutory financial measure not prescribed by Australian Accounting Standards – “AAS”) represents the profit under AAS adjusted for Interest, Tax, Depreciation and Amortisation and certain other specified items.

16

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 3. Operating segments (continued)

Consolidated – 31 March 2023

	eBook solutions	Vocational	Unallocated
		Education and	public company
		Training	costs	Total
	$	$	$	$
Sales revenue	3,831,149	4,438,252	-	8,269,401
Other income	167,625	734	-	168,359
Total revenue	3,998,774	4,438,986		8,437,760
Underlying EBITDA	66,110	1,729,785	(254,017)	1,541,878
Depreciation and amortisation	(409,799)	(174,300)	-	(584,099)
Loss on disposal of fixed assets	-	(95,745)		(95,745)
Share based payments	(28,535)	(24,791)		(53,326)
Transaction costs incurred on	(43,235)	-	-	(43,235)
business acquisitions
Net interest revenue / (expense)	59,413	619	-	60,033
Income tax benefit / (expense)	-	4,567	-	4,567
Reported (statutory) net profit after tax	(356,046)	1,440,135	(254,017)	830,072
Total segment assets	5,277,797	11,625,971		16,903,768
Total segment liabilities	(2,996,678)	(2,561,007)		(5,557,685)
Consolidated – 31 March 2022

	eBook solutions	Vocational	Unallocated
		Education and	public company
		Training	costs	Total
	$	$	$	$
Sales revenue	3,828,260	3,096,941	-	6,925,201
Other income	159,426	-	-	159,427
Total revenue	3,987,687	3,096,941	-	7,084,628
Underlying EBITDA	172,158	1,348,941	(171,446)	1,349,653
Depreciation and amortisation	(400,827)	(113,280)	-	(514,107)
Share based payments	(2,039)	(15,131)	-	(17,170)
Fair value movement of contingent	375,000	-	-	375,000
consideration
Net interest revenue / (expense)	(2,307)	(1,849)	-	(4,156)
Income tax benefit / (expense)	-	-	-	-
Reported (statutory) net profit after tax	141,985	1,218,681	(171,446)	1,189,220
Total segment assets	7,813,725	8,400,253		16,213,979
Total segment liabilities	(2,772,992)	(618,273)		(3,391,265)

17

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 4. Revenue and other income

Sales & fee revenue eBook sales Software licence fees Auspicing fees Training fees Sales & fees - other Other income Government grants – R&D tax incentive Interest Other revenue Revenue and other income	Consolidated 31 March 2023 31 March 2022 $ $ 3,544,485 3,438,868 325,006 447,684 3,484,685 2,923,571 891,844 81,665 23,381 33,413 8,269,401 6,925,201 154,720 159,235 7,291 192 6,348 - 168,359 159,427 8,437,760 7,084,678
	8,269,401
	154,720 7,291 6,348
	168,359
	8,437,760

The Group’s total sales revenue is recognised according to the following timing:

Goods transferred at a point in time Services transferred over time	Consolidated 31 March 2023 31 March 2022 $ $ 3,567,866 3,472,281 4,701,535 3,452,920 8,269,401 6,925,201
	8,269,401

Note 5. Current assets - trade and other receivables

Trade receivables Accrued revenue Less provision for doubtful debts Deposits R&D tax incentive receivable Income tax refund due	Consolidated 31 March 2023 30 September 2022 $ $ 2,351,122 427,636 480,590 - (14,800) - 2,816,912 427,636 - 46,525 154,719 424,051 25,719 46,537 2,997,350 944,749

18

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 6. Non-current assets – Property, plant & equipment

Computer & office equipment - at cost Less: Accumulated depreciation Leasehold improvements - at cost Less: Accumulated depreciation	Consolidated 31 March 2023 30 September 2022 $ $ 236,520 289,736 (174,314) (190,107) 62,206 99,629 - 168,730 - (91,960) - 76,769 62,206 176,399	Consolidated 31 March 2023 30 September 2022 $ $ 236,520 289,736 (174,314) (190,107) 62,206 99,629 - 168,730 - (91,960) - 76,769 62,206 176,399
	62,206 - -	99,629 168,730 (91,960)
	-	76,769
	62,206	176,399

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Consolidated Balance at 1 October 2021 Additions Additions through business combinations Depreciation expense Balance at 31 March 2022 Balance at 1 October 2022 Additions Disposals Depreciation expense Balance at 31 March 2023	Computer & office equipment Leasehold improvements Total $ $ $ 119,751 120,117 239,868 13,474 - 13,474 - (9,811) (9,811) (30,030) (11,468) (41,498)
	103,195 98,838 202,033
	99,629 76,769 176,399 12,784 - 12,784 (24,995) (69,077) (94,072) (25,212) (7,692) (32,905)
	62,206 - 62,206

19

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 7. Non-current assets - intangibles

Consolidated 31 March 2023 30 September 2022 $ $ Goodwill - at cost 8,416,116 5,400,553 Software - at cost 5,156,206 4,888,359 Less: Accumulated amortisation (3,041,320) (2,713,808) 2,114,886 2,174,551 Registered Training Organisation Licence 200,000 150,000 Less: Accumulated amortisation (111,188) (78,669) 88,812 71,331 Intellectual property in Vocational Education & Training course materials 767,831 644,601 Less: Accumulated amortisation (387,330) (275,918) 380,501 368,683 11,000,316 8,015,119 Reconciliation Software at cost Goodwill Registered Training Organisation licence Intellectual property in course materials Total Consolidated $ $ $ $ $ Balance at 1 October 2022 2,174,551 5,400,553 71,331 368,684 8,015,119 Additions 267,847 - - 23,230 291,077 Additions through business combinations (Note 13) - 3,015,563 50,000 100,000 3,165,563 Amortisation expense (327,512) - (32,519) (111,413) (471,444) Balance at 31 March 2023 2,114,886 8,416,116 88,812 380,501 11,000,316	Consolidated 31 March 2023 30 September 2022 $ $ Goodwill - at cost 8,416,116 5,400,553 Software - at cost 5,156,206 4,888,359 Less: Accumulated amortisation (3,041,320) (2,713,808) 2,114,886 2,174,551 Registered Training Organisation Licence 200,000 150,000 Less: Accumulated amortisation (111,188) (78,669) 88,812 71,331 Intellectual property in Vocational Education & Training course materials 767,831 644,601 Less: Accumulated amortisation (387,330) (275,918) 380,501 368,683 11,000,316 8,015,119 Reconciliation Software at cost Goodwill Registered Training Organisation licence Intellectual property in course materials Total Consolidated $ $ $ $ $ Balance at 1 October 2022 2,174,551 5,400,553 71,331 368,684 8,015,119 Additions 267,847 - - 23,230 291,077 Additions through business combinations (Note 13) - 3,015,563 50,000 100,000 3,165,563 Amortisation expense (327,512) - (32,519) (111,413) (471,444) Balance at 31 March 2023 2,114,886 8,416,116 88,812 380,501 11,000,316	Consolidated 31 March 2023 30 September 2022 $ $ Goodwill - at cost 8,416,116 5,400,553 Software - at cost 5,156,206 4,888,359 Less: Accumulated amortisation (3,041,320) (2,713,808) 2,114,886 2,174,551 Registered Training Organisation Licence 200,000 150,000 Less: Accumulated amortisation (111,188) (78,669) 88,812 71,331 Intellectual property in Vocational Education & Training course materials 767,831 644,601 Less: Accumulated amortisation (387,330) (275,918) 380,501 368,683 11,000,316 8,015,119 Reconciliation Software at cost Goodwill Registered Training Organisation licence Intellectual property in course materials Total Consolidated $ $ $ $ $ Balance at 1 October 2022 2,174,551 5,400,553 71,331 368,684 8,015,119 Additions 267,847 - - 23,230 291,077 Additions through business combinations (Note 13) - 3,015,563 50,000 100,000 3,165,563 Amortisation expense (327,512) - (32,519) (111,413) (471,444) Balance at 31 March 2023 2,114,886 8,416,116 88,812 380,501 11,000,316	Consolidated 31 March 2023 30 September 2022 $ $ Goodwill - at cost 8,416,116 5,400,553 Software - at cost 5,156,206 4,888,359 Less: Accumulated amortisation (3,041,320) (2,713,808) 2,114,886 2,174,551 Registered Training Organisation Licence 200,000 150,000 Less: Accumulated amortisation (111,188) (78,669) 88,812 71,331 Intellectual property in Vocational Education & Training course materials 767,831 644,601 Less: Accumulated amortisation (387,330) (275,918) 380,501 368,683 11,000,316 8,015,119 Reconciliation Software at cost Goodwill Registered Training Organisation licence Intellectual property in course materials Total Consolidated $ $ $ $ $ Balance at 1 October 2022 2,174,551 5,400,553 71,331 368,684 8,015,119 Additions 267,847 - - 23,230 291,077 Additions through business combinations (Note 13) - 3,015,563 50,000 100,000 3,165,563 Amortisation expense (327,512) - (32,519) (111,413) (471,444) Balance at 31 March 2023 2,114,886 8,416,116 88,812 380,501 11,000,316
	2,114,886	8,416,116	88,812 380,501 11,000,316

20

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 8. Leases

A. Expenses

Expenses from transactions not recognised as leases:

Rental expense relating to leases of low-value assets B. Cash flows Total cash outflow for leases C. Right-of-use assets Right-of-use assets – at cost Less: Accumulated depreciation Reconciliation Opening balance at 1 October 2022 Opening accumulated depreciation Depreciation charge Less disposals Balance at 31 March 2023 D. Lease liabilities Current Non-current	Consolidated 31 March 2023 31 March 2022 $ $ 966 3,945 Consolidated 31 March 2023 31 March 2022 $ $ 87,591 89,870 Consolidated 31 March 2023 30 September 2022 $ $ 357,178 788,283 (109,136) (456,158) 248,042 332,124 788,283 (456,158) (79,752) (4,331) 248,042 Consolidated 31 March 2023 30 September 2022 $ $ 124,780 159,443 159,330 222,803 284,110 382,246	Consolidated 31 March 2023 31 March 2022 $ $ 966 3,945 Consolidated 31 March 2023 31 March 2022 $ $ 87,591 89,870 Consolidated 31 March 2023 30 September 2022 $ $ 357,178 788,283 (109,136) (456,158) 248,042 332,124 788,283 (456,158) (79,752) (4,331) 248,042 Consolidated 31 March 2023 30 September 2022 $ $ 124,780 159,443 159,330 222,803 284,110 382,246
		382,246

Additional information

As at 31 March 2023 the Company had only one property lease in place, being for its Head Office located at Level 1, 126 Church Street Brighton VIC 3186. For the purpose of calculating unavoidable future lease payments only the current term of this property lease has been considered on the basis that there is no installed critical infrastructure at this location and therefore the property is viewed as readily replaceable.

21

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 8. Leases (continued)

Weighted average lease term

The average unavoidable property lease term, weighted by the outstanding lease liability as 31 March 2023 is 1.92 years (30 September 2022: 2.40 years).

Note 9. Current liabilities - trade and other payables

Trade payables Accrued expenses GST payable / (receivable) Dividends payable to former owners of Southern Solutions Training Services Other payables Note 10. Contingent consideration Contingent consideration - PKY Media contingent consideration due within one year contingent consideration due in greater than one year Contingent consideration – Southern Solutions Training Services contingent consideration due within one year contingent consideration due in greater than one year		Consolidated 31 March 2023 30 September 2021 $ $ 1,423,764 482,291 848,322 56,250 119,980 (27,296) 120,000 - 318,759 288,225 2,830,825 799,470 Consolidated 31 March 2023 30 September 2022 $ $ - 74,999 - - - 74,999 - - 1,738,800 - 1,738,800 - 1,738,800 74,999
		-
		- 1,738,800
		1,738,800
		1,738,800

The balance of contingent consideration as at 30 September 2022 represented the deferred consideration owing in respect of the acquisition of PKY Media Pty Ltd (trading as College of Sound and Music Production, “COSAMP”, acquired on 28 October 2020). The revenue hurdle in respect of which this consideration was contingent was achieved, resulting in the issue to the vendors of 197,368 fully-paid ordinary shares in the Company at a notional value of $0.38 per share as final consideration for the acquisition on 7 December 2022 (refer Note 11. Equity).

During the half-year ended 31 March 2023, the Company acquired Southern Solutions Training Services Pty Ltd (“Southern Solutions”) for a total consideration of up to $3,150,000, including deferred consideration of up to $1,800,000 payable in cash and ReadCloud shares that is contingent on Southern Solutions achieving defined EBIT targets for the 12-month periods ending 30 June 2023 and 30 June 2024.

As at 31 March 2023 a contingent consideration liability of $1.8 million has been measured based on the expectation of Southern Solutions achieving the maximum performance hurdle for the 12-month period ending 30 June 2024, with the expected timing of payments reflected in the table above. The non-current contingent consideration liability (due in greater than one year) has been discounted to present value using the interest rate for an Australian government bond of comparable maturity.

22

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 11. Equity - contributed equity

Consolidated 31 March 2023 30 September 2022 31 March 2022 30 September 2022 Shares Shares $ $ Ordinary shares - fully paid 121,837,289 119,764,921 18,408,754 17,958,754 Movements in ordinary share capital Details Date Shares Issue price $ Balance 30 September 2022 119,764,921 17,958,754 Shares issued as consideration for acquisition of Southern Solutions Training Services Pty Ltd 10 November 2022 1,875,000 $0.20 375,000 Shares issued as consideration for acquisition of PKY Media Pty Ltd 7 December 2022 197,368 $0.38 75,000 Balance 31 March 2023 121,837,289 18,408,754	31 March 2023 Shares 121,837,289	Consolidated 30 September 2022 31 March 2022 30 September 2022 Shares $ $ 119,764,921 18,408,754 17,958,754	Consolidated 30 September 2022 31 March 2022 30 September 2022 Shares $ $ 119,764,921 18,408,754 17,958,754	Consolidated 30 September 2022 31 March 2022 30 September 2022 Shares $ $ 119,764,921 18,408,754 17,958,754
			Shares Issue price 119,764,921 1,875,000 $0.20 197,368 $0.38 121,837,289	$ 17,958,754 375,000 75,000
				18,408,754

Share buy-back

On 16 March 2022, the Company announced its intention to undertake an on-market buy-back of up to 11,831,755 shares (being approximately 10% of the Company’s issued ordinary shares). During the financial half-year ended 31 March 2023 no shares were purchased on-market.

Note 12. Earnings per share

Profit/Loss after income tax attributable to the Owners of ReadCloud Limited Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares used in calculating diluted earnings per share Basic earnings / (loss) per share Diluted earnings / (loss) per share	Consolidated 31 March 2023 31 March 2022 $ $ 830,072 1,189,220 Number Number 121,360,225 119,764,921 121,360,225 119,764,921 Cents Cents 0.68 0.99 0.68 0.99
	Number 121,360,225
	121,360,225
	Cents 0.68 0.68

23

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 13. Business combinations

The Company acquired 100% of the shares in Southern Solutions Training Services Pty Ltd (“Southern Solutions”) with effect from 9 November 2022 for a total consideration of up to $3,150,000. Established in 2014, Southern Solutions is a leading Registered Training Organisation that predominantly delivers nationally accredited postsecondary school training for qualifications in Early Childhood Education and Care, Business, Aged Care, Hospitality, Logistics and Real Estate. The acquisition positions ReadCloud in the broader VET market, which has a target audience of 3.9 million students annually and provides a large growth opportunity in industries with large skills shortages and strong government backing.

The goodwill of $2,978,063 represents the value of Southern Solutions’ brand, reputation and relationships in the Vocational Education and Training market. The acquired business contributed revenues of $753,290 and a profit before tax of $101,196 to the Group for the period from 9 November 2022 to 31 March 2023. If the acquisition had occurred on 1 October 2022, the half-year contributions would have been revenues of $1,070,857 and profit before tax of $166,492.

The values identified in relation to the acquisition of Southern Solutions are provisional as at 31 March 2023 pending the finalisation of intangible asset valuations.

Details of the acquisition are as follows:

Cash and cash equivalents Trade receivables Other receivables Other current assets Acquired intangible assets Trade & other payables Dividends payable to vendors Provision for employee entitlements Deferred tax liability Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid to the vendors on acquisition date Shares issued to the vendors on acquisition date Contingent consideration (undiscounted)* Acquisition costs (legal fees) expensed to profit or loss Cash used during the financial year to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: Shares issued to the vendors on acquisition date Less: Cash and cash equivalents acquired Less: contingent consideration due within one year Less: contingent consideration due in greater than one year Net cash used during the year

Fair value $ 243,487 145,407 25,719 3,848 150,000 (103,578) (240,000) (52,946) (37,500) 134,437 3,015,563 3,150,000 975,000 375,000 1,800,000 3,150,000 43,235 3,150,000 (375,000) (243,487) (850,000) (950,000) 731,513

Net cash used during the year

• Contingent consideration comprises up to $1,800,000 of cash and ReadCloud shares, which is contingent on Southern Solutions achieving defined EBIT targets for the 12-month periods ending 30 June 2023 and 30 June 2024.

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ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2023

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Note 13. Business combinations (continued)

Accounting policy for business combinations

The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired.

The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.

On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date.

Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss.

Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.

The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any noncontrolling interest in the acquiree and the fair value of the consideration transferred and the fair value of any preexisting investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer.

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

Note 14. Events after the reporting period

On 8 May 2023 the Company announced the appointment of Mr Andrew Skelton as the new Chief Executive Officer with effect from 15 May 2023.

No other matter or circumstance has arisen since 31 March 2023 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.

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ReadCloud Limited Directors’ declaration 31 March 2023

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In the Directors' opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes give a true and fair view of the Group's financial position as at 31 March 2023 and of its performance for the financial half-year ended on that date; and

• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of Directors made pursuant to section 303(5)(a) of the Corporations Act 2001.

On behalf of the Directors

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_________ Cristiano Nicolli Chairman

31 May 2023

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Independent Auditor’s Review Report to the Members of ReadCloud Limited

Conclusion

We have reviewed the accompanying half-year financial report of ReadCloud Limited (the Company) and its subsidiaries (collectively, the Group), which comprises the consolidated statement of financial position as at 31 March 2023, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the half-year ended on that date, a statement of accounting policies, other selected explanatory notes, 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 ReadCloud Limited 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 March 2023, and of its consolidated financial performance for the half-year ended on that date; and

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

Basis for conclusion

We conducted our review in accordance with ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity (ASRE 2410). Our responsibilities are further described in the Auditor ’ s responsibilities for the review of the half-year financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board ’ s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the annual financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

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 the Australian Accounting Standards and the Corporations Regulations 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 for the Review of the Half-Year Financial Report

Our responsibility is to express a conclusion on the half-year financial report based on our review. ASRE 2410 requires us to conclude whether we have become aware of any matter 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 March 2023 and its consolidated financial performance for the half-year ended on that date, and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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, 31 May 2023

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Kaitlynn Brady Partner

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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 separately owned firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.