READCLOUD LIMITED — Interim / Quarterly Report 2024

May 28, 2024

1. Company details

Name of entity:ABN:	ReadCloud Limited44 136 815 891
Reporting period:	For the half-year ended 31 March 2024
Previous period:	For the half-year ended 31 March 2023

2. Results for announcement to the market

				$
Revenues from ordinary activities	Up	13%	To	8,136,447
Profit / (Loss) from ordinary activities after tax attributable to the Owners ofReadCloud Limited	Up	277%	To	420,164
Profit / (Loss) for the half-year attributable to the Owners of ReadCloudLimited	Up	277%	To	420,164
Underlying EBITDA*	Up	120%	To	1,040,315

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 $420,164 (31 March 2023 restated: loss of $238,017). Underlying earnings before interest taxation, depreciation and amortisation ('Underlying EBITDA') was $1,040,315 (31 March 2023 restated: $473,788). This is reconciled to the statutory result as follows:

		Consolidated
		31 March 2024	31 March 2023restated
		$	$
	Reported (statutory) net profit / (loss) after tax	420,164	(238,017)
Add back:	Depreciation and amortisation	530,742	584,099
	Loss on disposal of fixed assets	-	95,745
	Share based payments	71,784	53,326
	Transaction costs incurred on business acquisition (expensed inlegal and compliance costs)	-	43,235
	Fair value movement contingent consideration	(1,787,760)	-
	Impairment of goodwill	1,787,760
	Netinterest (revenue) / expense	17,625	(60,033)
	Income tax expense / (benefit)	-	(4,567)
Underlying EBITDA*		1,040,315	473,788

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.

3. Net tangible assets

	ReportingperiodCents	PreviousperiodCents
Net tangible assets per ordinary security	0.80	0.08

4. Control gained over entities

Not applicable.

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.

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 2024 is attached.

12. Signed

Signed ___________________________ Date: 29 May 2024

Cristiano Nicolli Chairman

ReadCloud Limited

ABN 44 136 815 891

Half Year Report - 31 March 2024

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

ReadCloud Limited Corporate Directory 31 March 2024

Directors	Mr Cristiano Nicolli (Non-Executive Chairman)Mr Jonathan Isaacs (Non-Executive Director)Mr Paul Collins (Non-Executive Director)Mr Darren Hunter (Executive Director)Mr Lars Lindstrom (Executive Director)
Company secretary	Mr Luke Murphy
Registered office	Level 1, 126 Church StreetBrighton VIC 3186Phone: +61 3 9078 4833
Principal place of business	Level 1, 126 Church StreetBrighton VIC 3186Phone: +61 3 9078 4833
Share register	Boardroom LimitedLevel 8, 210 George StreetSydney NSW 2000Phone: 1300 737 760; +61 2 9290 9600
Auditor	PKF Melbourne Audit & Assurance Pty LtdLevel 15, 500 Bourke StreetMelbourne VIC 3000Phone: +61 9679 2361
Stock exchange listing	ReadCloud Limited shares and options are listed on the AustralianSecurities Exchange (ASX code: RCL)
Website	www.readcloud.com

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 2024.

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 Jonathan Isaacs	-	Non-Executive Director
Mr Paul Collins	-	Non-Executive Director
Mr Darren Hunter	-	Executive Director and Chief Information Officer
Mr Lars Lindstrom	-	Executive Director

Principal activities

ReadCloud is a leading provider of eLearning software solutions and industry-based training, supporting 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 Vocational Education and Training ('VET'), ReadCloud operates in 2 categories. In VET-in-schools, 'ReadCloudVET' supports the delivery of over 50 qualifications to 15,000 learners across 3 specialist Registered Training Organisations (RTOs).

In industry training, Southern Solutions Training Services ('Southern Solutions') is an RTO that delivers flexible, blended training models in the workplace environment for 14 qualifications including in Early Childhood Education and Care, Business, Aged Care, Hospitality, Logistics and Real Estate.

Review of operations

Financial highlights for 1H24 include:

• 13% growth in Sales & Fee Revenue to $8.14m
• 120% increase in underlying EBITDA to $1.04m
• 4% reduction in Operating Expenses to $3.24m (1H23 $3.37m)
• 11% reduction in Wages and Salaries to $2.07m excluding Southern Solutions Training Services (1H23 $2.34m)
• $3.10 million of cash at 31 March 2024
• 277% increase in Statutory Profit to $0.42m (1H23 restated: $0.24m Statutory Loss)
• Operating Cashflow improved by 53% to $1.74m (1H23 $1.13m)

Operating highlights for 1H24 include:

• 51 new school customers successfully onboarded for the 2024 school year across the eBook Solutions and VET-in-schools businesses
• Step change improvement in retention of direct eBooks customers (Australian schools) from 69% in 2023 to 91% in 2024

• VET-in-schools business preserving high gross margins while delivering improved services and a smoother on-boarding experience at the beginning of the school year. VET-in-schools on track to deliver FY24 gross margin >85%
• Southern Solutions Training Services generated a 42% uplift in revenue on pcp for 1H24. Enrolments continued growth, up 26% on pcp in the March Quarter. 316 students commenced courses in 1H24, continuing positive momentum above target (270)
• Additional government funding secured by Southern Solutions Training Services in NSW
• A disciplined approach to administration and corporate costs in 1H24 delivered a 4% decrease on pcp

The Directors are pleased to report a 13% increase in consolidated Sales & Fee Revenue to $8.14m on a like for like basis (1H23 restated $7.20m) driven by organic growth. Revenue growth has translated into a 120% increase in underlying EBITDA to $1.04m on a like-for-like basis (1H23 restated $0.47m), highlighting the operating leverage in the business.

eBook Solutions

10 new full-curriculum Australian schools have successfully been onboarded for the 2024 school year. The onboarding of schools and provisioning of student and teacher resources at the commencement of the 2024 school year for both the eBook Solutions and VET-in-schools businesses was again improved over prior years in terms of timeliness and accuracy, consolidating system and process improvements implemented over the last 12 months.

Efforts to improve school retention have paid off, with retention increasing from 69% in 2023 to 91% in 2024. Retention has been strengthened by getting closer to our customers, streamlining customer access to required books, and a new team structure that attributes clear accountability for the retention of each school customer. The higher retention rate enables us to execute growth initiatives knowing that the benefits will be captured in a manner that builds sustainable growth.

ReadCloud's eBook Solutions solves access problems faced by many international schools and their students. ReadCloud is an obvious partner for schools in places lacking ready access to contemporary physical books and for schools that have students in multiple locations. A foothold is currently being established with sales made to 5 international schools in the last 12 months.

We have worked closely with our first international school customer, King's InterHigh, to develop a comprehensive communications and marketing plan aimed at fostering greater teacher and student engagement in the use of eLearning tools embedded in the ReadCloud platform. Sales to King's InterHigh were $22,792 in FY22, increased to $204,254 in FY23, and are expected to increase significantly in FY24.

In December 2023, ReadCloud became the preferred eBook supplier to an online school in South Africa and signed a 3-year Partnership Agreement with an international school in Singapore.

Vocational Education & Training segment

ReadCloudVET

ReadCloudVET partners with secondary schools to deliver nationally recognised vocational education and training to students across Australia. ReadCloudVET brings together 3 Registered Training Organisations ("RTOs"):

• Australian Institute of Education and Training, specialising in trades
• COSAMP, specialising in music and creative industries
• Ripponlea Institute, specialising in language

The 3 VET-in-schools RTOs operate from a unified platform and combine to offer a class leading 50 Qualifications. This consolidated approach delivers efficiencies and cost savings for both ReadCloudVET and its partner schools, placing the VET-in-schools business on a solid footing for strong future growth on a largely fixed cost base. The benefit of additional Qualifications being sold to existing schools, and the benefit of new schools partnering with ReadCloudVET in 2025 and beyond, flow through to the bottom line.

39 new VET-in-schools customers were successfully onboarded in 1H24. These new school wins, together with:

• 90% retention of existing school customers; and

• 21 existing VET-in-schools customers adding additional ReadCloudVET qualifications for the 2024 school year;

combined to deliver an 11% increase in Sales & fee revenue for the VET-in-schools business in 1H24.

The 2 key revenue drivers of the VET-in-schools business are the number of VET qualifications delivered and the number of students participating in each qualification. 2024 qualifications increased by a relatively modest 4.2% to 644. The 11% increase in Sales & fee revenue highlights a rotation into higher quality courses that attract more students per course.

The VET-in-schools business is poised to deliver strong double-digit growth in 2025 and beyond from a combination of:

• Improving customer retention we anticipate school retention to exceed 90% for the foreseeable future
• Increasing the number of qualifications per school schools and VET Coordinators are becoming aware of our 50 qualifications on scope and can identify the benefits of dealing with a single provider
• New products ReadCloudVET has just launched Pathway and taster programs specifically for year 10 students which will gain momentum in 2025 onwards. ReadCloudVET has not previously targeted the year 10 segment.
• New markets ReadCloudVET is delivering some groundbreaking trials for the NT Government and is exploring how to establish a meaningful market position in Queensland (where the demand for VET programs is well-established, schools are willing to engage in auspicing arrangements, and processes for becoming a recognised provider and gaining recognition of new qualifications are efficient and supported by State curriculum authorities).

Ripponlea Institute was one of the first providers to begin delivery of the new TAE40122 Certificate IV in Training & Assessment. VET trainers (even qualified secondary school teachers) have historically been required to hold the TAE qualification. Requirements have changed so that qualified teachers must only complete 3 modules of the TAE course to be eligible to teach VET Qualifications. This removes a significant barrier to the continuation of VET Programs within a school when a teacher leaves. While sales of the full TAE qualification may be subdued, ReadCloudVET expects a meaningful benefit to arise following the removal of this barrier to becoming a VET Trainer within schools. Many teachers nationally may be required to update their credentials to include successful completion of some modules from this new course. For reference, Training Revenue from this ancillary source for 1H24 was $75,592 compared to $68,558 in pcp.

Southern Solutions Training Services

Acquired by ReadCloud in November 2022, Southern Solutions is a RTO with a leading position in delivering nationally accredited vocational training to industry. Southern Solutions specialises in Early Childhood Education and Care, Business, Aged Care, Hospitality, Logistics and Real Estate. 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 realised.

A key to Southern Solutions' service offering is its ability to offer Government subsidised training in New South Wales, Victoria, and South Australia, and in Queensland via an arrangement with TAFE Queensland. Southern Solutions holds a Skills First funding contract in Victoria and was recently awarded an increase under its Smart and Skilled funding contract with NSW. There is currently no cap on the funded spaces available to Southern Solutions in South Australia.

316 students commenced with Southern Solutions in 1H24, 17% ahead of the 45 students per month target. One of Southern Solutions' most popular courses for childcare workers has a new curriculum resulting in a longer average completion time. This has had a one-off impact in deferring the achievement of milestones that release government payments. In the coming months, once the longer average completion time has worked through the system, we anticipate that progress payments will deliver the full benefit of the stronger student enrolments being achieved by Southern Solutions. For reference, enrolments in the March quarter were up 26% on pcp.

While the performance of Southern Solutions is improving on pcp, the Directors have determined that it is appropriate to impair the component of Goodwill attributed to Southern Solutions by $1,787,760 to reflect this business's fair value. Refer to Note 8 to the consolidated financial statements for further information on impairment.

Outlook

ReadCloud remains on target to deliver full year positive operating cashflow and positive underlying EBITDA.

Initiatives taken to strengthen retention rates are paying off and will have enduring benefits. The 13% increase in revenue in 1H24 sets a baseline for future growth. Growth rates in some key revenue drivers are anticipated to consistently exceed 13% in coming periods.

Disciplined cost control will remain a cornerstone for the remainder of FY24 and into FY25, enabling ReadCloud to capture the full benefit of the operating leverage in its businesses.

ReadCloud is continuing its transition into a customer driven organisation. The new structure creates stronger connections with customers and more cohesion internally, with the challenges from integrating 5 businesses (4 acquired RTOs and the original eBooks business) now behind us.

ReadCloud's operating context remains favourable. The ongoing digitisation of education and increasing array of learning materials suits an agnostic digital first platform like eBooks Solutions, the importance of Vocational Education and Training is increasing in relevance and profile, and the focus on education is turning more to domestic students. Childcare, a key industry area for Southern Solutions, continues to attract investment and focus. With a stronger understanding of its markets and a closer connection to its customers, ReadCloud is positioned to deliver meaningful growth that positively impacts financial performance.

Reported result

The Group recorded a 1H24 consolidated Underlying EBITDA* of $1.04 million versus $0.47 million for the prior corresponding period (1H23 restated) and a 1H24 consolidated statutory profit after tax of $0.42m (1H23 restated: loss of $0.24m). Refer to Note 3 to the consolidated financial statements for further information on restatement of comparative amounts.

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.

ReadCloud Limited Directors' report 31 March 2024

		Consolidated
		31 March20214	31 March 2023Restated
		$	$
	Sales & fee revenue	8,136,447	7,201,312
	Less publisher and bookseller fees	(3,503,220)	(3,143,902)
Less trainer costs		(517,243)	(371,846)
	Margin after publisher and bookseller fees	4,115,984	3,685,564
	Add: Other income	171,954	168,359
	Less operating expenses:
	Advertising & marketing	(23,540)	(70,735)
	Computer software	(88,576)	(73,857)
	Employment expenses	(2,611,853)	(2,656,966)
	Legal & compliance	(48,786)	(54,350)
Office expenses		(26,011)	(40,709)
	Professional services expenses	(208,650)	(220,485)
	Telephone, internet & data hosting	(52,044)	(62,500)
Travel expenses		(32,924)	(106,311)
Other expenses		(143,306)	(86,929)
		(3,235,690)	(3,372,842)
Finance costs		(29,558)	52,740
	Add net interest expense / (revenue)	17,625	(60,033)
	Underlying EBITDA*	1,040,315	473,788
Add:	Fair value movement in contingent consideration	1,787,760	-
	Net interest revenue / (expense)	(17,625)	60,033
	Income tax benefit	-	4,567
Less:	Depreciation and amortisation	(530,742)	(584,099)
	Impairment of goodwill	(1,787,760)	-
	Loss on disposal of fixed assets	-	(95,745)
	Share based payments	(71,784)	(53,326)
	Transaction costs incurred on business acquisition(expensed in legal and compliance fees)	-	(43,235)
	Statutory net profit / (loss) after tax	420,164	(238,017)

* 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 1H24 are discussed below.

Revenue and gross margins

Revenue

ReadCloud achieved a 13% ($0.94m) increase in 1H24 consolidated Sales & fee revenue to $8.14m (1H23: $7.20m), reflecting:

• 9% growth in Direct customer eBook Solutions sales and fee revenue to $3.60m (1H23 $3.30m) driven by strong retention of existing customers and new schools wins for the 2024 school year;

• consistent Reseller eBook Solutions sales and fee revenue ($0.55m for 1H24 versus $0.53m for 1H23); and
• 18% growth in Vocational Education and Training ("VET") segment revenue to $3.98m (pcp $3.37m), driven by:
  • 11% growth in sales & fee revenue for the VET-in-schools business to $2.91m (1H23 restated: $2.62m); and
  • 42% sales and fee revenue growth for the Southern Solutions business to $1.07m (1H23: $0.75m).

Gross margins

ReadCloud achieved a 12% ($0.43m) increase in 1H24 consolidated gross profit (Sales & fee revenue less publisher and bookseller fees and trainer costs) to $4.02 million (1H24 $3.52m), reflecting 16% growth in gross profit for the VET segment and a 2% decline in gross profit for the eBook Solutions segment.

1H24 gross profit for the eBook Solutions segment (Sales & fee revenue less publisher and bookseller fees) declined by 2% to $0.86m (1H23: $0.88m) primarily as a result of:

• a decline in gross margin on eBook sales because of price discounts on eBooks given to Queensland Government schools as part of the Queensland Government Department of Education Standing Offer Arrangement; 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 1H24 (Sales & fee revenue less direct costs mainly comprising publisher costs and trainer costs) increased by 16% ($0.45m) to $3.25m (1H23 $2.80m), reflecting:

• 12% ($0.28m) 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
• 42% growth in Sales & fee revenue for the Southern Solutions business, which translated into a $0.59m gross profit contribution.

Operating expenses

Disciplined cost control has resulted in a 4% reduction in Operating Expenses to $3.24m (1H23 $3.37m). Significant operating expenses are discussed below.

Employment expenses

1H24 Employment expenses declined by 1.7% to $2.61m (1H23: $2.66m) reflecting:

• a 11.3% reduction in wages and salaries excluding Southern Solutions Training Services to $2.07m (1H23: $2.34m);
• a $0.12m increase in Southern Solutions Training Services wages and salaries (excluding trainers, which are included in trainer costs) as a result of increased activity in this business in the current half-year; and
• a $0.10m increase in other employment costs mainly relating to payroll tax and employee leave accruals.

Professional services expenses

1H24 Professional services expenses were $0.21m (1H23: $0.22m), with the main components including:

• audit fees;
• company secretarial fees;
• compliance consulting costs;

• contract administration and bookkeeping costs;
• share registry costs; and
• tax consulting fees.

Other expenses

1H24 Other expenses were $0.14m (1H23: $0.09m), with the main components including insurance, staff recruitment and amenities and room hire costs associated with training delivery.

Fair value movement in contingent consideration

The fair value movement in contingent consideration reflects management's expectation that the EBIT performance hurdle for the 12 months to 30 June 2024 that would trigger the payment of deferred consideration to the Southern Solutions Training Services vendors will not be met. As a result, the contingent consideration liability in respect of the Southern Solutions Training Services acquisition has been remeasured to $0.

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

No matter or circumstance has arisen since 31 March 2024 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

___________________________

Cristiano Nicolli Chairman

29 May 2024

PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 15, 500 Bourke Street Melbourne, Victoria 3000 T: +61 3 9679 2222 F: +61 3 9679 2288 info@pkf.com.au pkf.com.au

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 2024, 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 in relation to the review; and
• (b) no contraventions of any applicable code of professional conduct in relation to the review.

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

PKF Kaitlynn Brady Melbourne, 29 May 2024 Partner

PKF Melbourne Audit & Assurance Pty Ltd is a member of PKF Global, the network of member firms of PKF International Limited, each of which is a separately owned legal entity and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm(s). Liability limited by a scheme approved under Professional Standards Legislation.

ReadCloud Limited Consolidated statement of profit or loss and other comprehensive income For the half-year ended 31 March 2024

		Consolidated
	Note	31 March2024	31 March2023Restated
Revenue and other income		$	$
Sales & fee revenueOther income	55	8,136,447171,954	7,201,312168,359
Total revenue and other income		8,308,401	7,369,671
Expenses
Advertising & marketing		23,540	70,735
Computer software		88,576	73,857
Depreciation and amortisation		530,742	584,099
Employment expenses		2,611,853	2,656,966
Fair value movement of contingent consideration		(1,787,760)	-
Impairment of goodwill		1,787,760	-
Legal & compliance		48,786	97,585
Loss on disposal of fixed assets		-	95,745
Office expenses		26,011	40,709
Professional services expenses		208,650	220,485
Publisher and bookseller fees expense		3,503,220	3,143,902
Share based payments		71,784	53,326
Telephone, internet & data hosting		52,044	62,500
Trainer costs		517,243	371,846
Travel expenses		32,924	106,311
Other expenses		143,306	86,929
Finance costs		29,558	(52,740)
Profit/(Loss) before income tax expense/(benefit)		420,164	(242,584)
Income tax expense/(benefit)		-	(4,567)
Profit/(Loss) after income tax expense/(benefit) for thehalf-year attributable to the Owners of ReadCloud Limited		420,164	(238,017)
Other comprehensive income for the half-year, net of tax		-	-
Total comprehensive profit/(loss) for the half-yearattributable to the Owners of ReadCloud Limited		420,164	(238,017)
		Cents	Cents
Basic earnings / (loss) per share	15	0.29	(0.20)
Diluted earnings / (loss) per share	15	0.29	(0.20)

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

ReadCloud Limited Consolidated statement of financial position As at 31 March 2024

		Consolidated
	Note	31 March2024$	30 September2023$
Assets
Current assets
Cash and cash equivalents		3,099,541	1,709,430
Trade and other receivables	6	2,636,755	1,154,201
Prepayments		98,250	111,825
Total current assets		5,834,546	2,975,456
Non-current assets
Non-current deposits		36,300	36,300
Property, plant & equipment	7	44,589	51,125
Intangible assets	8	8,857,390	10,829,511
Right-of-use assets	9	128,982	188,512
Total non-current assets		9,067,261	11,105,448
Total assets		14,901,807	14,080,904
Liabilities
Current liabilities
Trade and other payables	10	2,663,309	1,000,665
Provision for employee entitlements	11	293,151	374,245
Contract liabilities	12	1,396,942	868,965
Contingent consideration	13	-	1,763,280
Lease liabilities	9	137,484	131,036
Total current liabilities		4,490,886	4,138,191
Non-current liabilities
Provision for employee entitlements	11	199,364	153,181
Lease liabilities	9	21,844	91,767
Deferred tax liability		26,843	26,843
Total non-current liabilities		248,051	271,791
Total liabilities		4,738,937	4,409,982
Net assets		10,162,870	9,670,922
Equity
Contributed equity	14	19,754,944	19,754,944
Reserves		371,016	331,963
Accumulated losses		(9,963,090)	(10,415,985)
Total equity		10,162,870	9,670,922

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

ReadCloud Limited Consolidated statement of changes in equity For the half-year ended 31 March 2024

Consolidated	Issuedcapital$	Share-basedpaymentreserve$	Accumulatedlosses$	Total equity$
Balance at 1 October 2022	17,958,754	235,019	(8,181,088)	10,012,685
Profit after income tax expense/(benefit) for thehalf-year (restated)	-	-	(238,017)	(238,017)
Other comprehensive income for the half-year,net of tax	-	-	-	-
Total comprehensive income for the half-year	-	-	(238,017)	(238,017)
Transactions with Owners in their capacity asOwners:
Issues of shares as consideration foracquisitions	450,000	-	-	450,000
Share-based payments		53,326	-	53,326
Balance at 31 March 2023	18,408,754	288,345	(8,419,105)	10,277,994

Consolidated	Issuedcapital$	Share-basedpaymentreserve$	Accumulatedlosses$	Total equity$
Balance at 1 October 2023	19,754,944	331,963	(10,415,985)	9,670,922
Profit after income tax expense/(benefit) for thehalf-yearOther comprehensive income for the half-year,net of tax	--	--	420,164-	420,164-
Total comprehensive income for the half-year	-	-	420,164	420,164
Transactions with Owners in their capacity asOwners:Share-based paymentsLapse of options	--	71,784(32,731)	-32,731	71,784-
Balance at 31 March 2024	19,754,944	371,016	(9,963,090)	10,162,870

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

ReadCloud Limited Consolidated statement of cash flows For the half-year ended 31 March 2024

Consolidated

	Note	31 March2024$	31 March2023$
Cash flows from operating activities
Receipts from customers		7,166,721	5,913,500
Payments to suppliers and employees		(5,784,445)	(5,258,136)
Research and development tax incentive refund		333,039	424,051
Interest income		11,933	7,291
Income tax refund		11,729	46,537
Net cash received from operating activities		1,738,977	1,133,243
Cash flows from investing activities
Payments for purchase of business, net of cash acquired		-	(731,513)
Payments for property, plant and equipment	7	(8,347)	(12,784)
Payments for software development	8	(261,595)	(267,847)
Purchase of intellectual property materials	8	(10,372)	(23,230)
Net cash used in investing activities		(280,314)	(1,035,374)
Cash flows from financing activities
Repayment of lease liabilities	9	(63,474)	(79,132)
Interest paid on lease liabilities	9	(5,078)	(8,459)
Net cash used in financing activities		(68,552)	(87,591)
Net increase in cash and cash equivalents		1,390,111	10,278
Cash and cash equivalents at the beginning of the financialhalf-year		1,709,430	2,467,408
Cash and cash equivalents at the end of the financial half-year		3,099,541	2,477,686

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

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 29 May 2024.

These general-purpose financial statements for the half-year reporting period ended 31 March 2024 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 2023 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 material 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. This has not resulted in any material impacts to the financial statements.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. This is not anticipated to result in any material impacts to the financial statements.

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.

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2024

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. Restatement of prior period comparative amounts

In the second half of the year ended 30 September 2023 the Group adopted changes to the revenue recognition methodology in respect of auspicing fee revenue and certain other VET in schools revenue streams. This has resulted in:

• revenue being recognised more evenly throughout the school year (in line with the delivery of VET courses); and
• the deferral of a larger proportion of revenue to the second half of each financial year.

Applying the changed revenue recognition methodology to the prior period comparatives, the table below summarises the impact on the Group's statement of profit or loss and other comprehensive income for the halfyear ended 31 March 2023:

	Half-year ended 31 March 2023
Consolidated statement of profit or loss and othercomprehensive income	As previouslyreported	Adjustment	Restated
	$	$	$
Sales & fee revenue	8,269,401	(1,068,089)	7,201,312
Total revenue	8,437,760	(1,068,089)	7,369,671
Profit/(Loss) before income tax expense/(benefit)	825,505	(1,068,089)	(242,584)
Income tax expense/(benefit)	(4,567)	-	(4,567)
Profit/(Loss) after income tax expense/(benefit) for thehalf-year attributable to the Owners of ReadCloud Limited	830,072	(1,068,089)	(238,017)
Total comprehensive profit/(loss) for the half-yearattributable to the Owners of ReadCloud Limited	830,072	(1,068,089)	(238,017)
Basic and diluted earnings per share (cents)	0.68	(0.88)	(0.20)
Underlying EBITDA	1,541,877	(1,068,089)	473,788

Note 4. 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 schools; 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 majority of eBook sales occurring in the months of December through February (just prior to and immediately following the commencement of the Australian 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.

Revenue is earned in line with the provision of services provided.

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.

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2024

Note 4. Operating segments (continued)

Consolidated – 31 March 2023 (restated)

	eBook solutions	VocationalEducation and	Unallocatedpublic company
		Training	costs	Total
	$	$	$	$
Sales & fee revenue	3,831,149	3,370,163	-	7,201,312
Other income	167,625	734	-	168,359
Total revenue	3,998,774	3,370,897	-	7,369,671
Underlying EBITDA	66,110	661,695	(254,017)	473,788
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 onbusiness acquisitions	(43,235)	-	-	(43,235)
Net interest revenue / (expense)	59,414	619	-	60,033
Income tax benefit / (expense)	-	4,567	-	4,567
Reported (statutory) net profit after tax	(356,045)	372,045	(254,017)	(238,017)
Total segment assets	5,277,796	11,625,972	-	16,903,768
Total segment liabilities	(2,996,677)	(3,629,276)	-	(6,625,953)

Consolidated – 31 March 2024

	eBook solutions	VocationalEducation andTraining	Unallocatedpublic companycosts	Total
	$	$	$	$
Sales & fee revenue	4,159,783	3,976,664	-	8,136,447
Other income	171,215	739	-	171,954
Total revenue	4,330,998	3,977,403	-	8,308,401
Underlying EBITDA	133,421	1,113,809	(206,915)	1,040,315
Depreciation and amortisation	(399,724)	(131,018)	-	(530,742)
Share based payments	(38,228)	(33,556)	-	(71,784)
Fair value movement of contingentconsideration	-	1,787,760	-	1,787,760
Impairment of goodwill	-	(1,787,760)		(1,787,760)
Net interest revenue / (expense)	(18,364)	739	-	(17,625)
Reported (statutory) net profit after tax	(322,895)	949,974	(206,915)	420,164
Total segment assets	5,314,958	9,586,849	-	14,901,807
Total segment liabilities	(2,781,945)	(1,956,992)	-	(4,738,937)

Note 5. Revenue and other income

Consolidated
31 March
31 March	2023
	Restated
$	$
	3,544,485
	325,006
	2,487,327
	821,113
	23,381
8,136,447	7,201,312
	154,720
	7,291
	6,348
171,954	168,359
	7,369,671
	20243,863,261312,9112,774,8901,140,97044,415160,02111,933-8,308,401

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

		Consolidated
	31 March2024$	31 March2023Restated$
Goods transferred at a point in timeServices transferred over time	3,907,6764,228,771	3,567,8663,633,446
	8,136,447	7,201,312

Note 6. Current assets - trade and other receivables

	Consolidated
	31 March2024$	30 September2023$
Trade receivables	1,882,058	824,232
Less provision for doubtful debts	(38,344)	(14,800)
	1,843,714	809,432
Accrued revenue	633,019	-
R&D tax incentive receivable	160,022	333,040
Income tax refund due	-	11,729
	2,636,755	1,154,201

Note 7. Non-current assets – Property, plant & equipment

	Consolidated
	31 March2024$	30 September2023$
Computer & office equipment - at costLess: Accumulated depreciation	251,445(206,856)	243,098(191,973)
	44,589	51,125

Reconciliations

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

Consolidated	Computer &office equipment$
Balance at 1 October 2023AdditionsDisposals	51,1258,347-
Depreciation expense	(14,883)
Balance at 31 March 2024	44,589

Note 8. Non-current assets - intangibles

	Consolidated
	31 March2024$	30 September2023$
Goodwill - at cost	8,449,045	8,449,045
Less: Impairment	(1,787,760)	-
	6,661,285	8,449,045
Software - at cost	5,692,958	5,431,363
Less: Accumulated amortisation	(3,708,471)	(3,378,401)
	1,984,487	2,052,962
Registered Training Organisation Licence	200,000	200,000
Less: Accumulated amortisation	(154,284)	(135,428)
	45,716	64,572
Intellectual property in Vocational Education & Training course materials	779,592	769,221
Less: Accumulated amortisation	(613,690)	(506,289)
	165,902	262,932
	8,857,390	10,829,511

Note 8. Non-current assets – intangibles (continued)

Reconciliation

Consolidated	Software atcost$	Goodwill$	RegisteredTrainingOrganisationlicence$	Intellectualpropertyin coursematerials$	Total$
Balance at 1 October 2023	2,052,962	8,449,045	64,572	262,932	10,829,511
Additions	261,595	-	-	10,372	271,967
Amortisation expense	(330,070)	-	(18,856)	(107,402)	(456,328)
Impairment of goodwill	-	(1,787,760)	-	-	(1,787,760)
Balance at 31 March 2024	1,984,487	6,661,285	45,716	165,902	8,857,390

Impairment of goodwill

Southern Solutions was acquired in November 2022 for up-front and deferred consideration totaling $3.15 million of which $3.05 million was attributed to goodwill. $1,800,000 of the consideration was payable upon the achievement of stretch growth targets. The previously recorded present value of the $1,800,000 deferred consideration was $1,787,760.

The near-term projections for Southern Solutions establish that the likelihood of the deferred consideration being payable are minimal. Accordingly, the Directors determined to record an impairment charge of $1,787,760 to the value of goodwill corresponding to Southern Solutions.

Post impairment, the carrying value of the Group's goodwill is $6,661,285.

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2024

Note 9. Leases

A. Expenses

Expenses from transactions not recognised as leases:

	Consolidated
	31 March2024$	30 March2023$
Rental expense relating to leases of low-value assets	-	966

B. Cash flows

		Consolidated
	31 March2024$	31 March2023$
Total cash outflow for leases	68,552	87,591

C. Right-of-use assets

	Consolidated
	31 March2024	30 September2023
	$	$
Right-of-use assets – at costLess: Accumulated depreciation	357,179(228,197)	357,179(168,667)
	128,982	188,512
Reconciliation
Opening balance at 1 October 2023	188,512
Depreciation charge	(59,530)
Balance at 31 March 2024	128,982
D.Lease liabilities

		Consolidated
	31 March2024$	30 September2023$
Current	137,484	131,036
Non-current	21,844	91,767
	159,328	222,803

Additional information

As at 31 March 2024 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.

ReadCloud Limited Notes to the consolidated financial statements For the half-year ended 31 March 2024

Note 9. Leases (continued)

Weighted average lease term

The average unavoidable property lease term, weighted by the outstanding lease liability as 31 March 2024 is 1.08 years (30 September 2023: 1.58 years).

Note 10. Current liabilities - trade and other payables

		Consolidated
	31 March2024$	30 September2023$
Trade payables	534,747	223,834
Accrued expenses	1,634,043	474,074
GST payable / (receivable)	193,045	(4,595)
Other payables	301,474	307,352
	2,663,309	1,000,665

Note 11. Employee entitlements

		Consolidated
	31 March2024$	30 September2023$
Annual leave (current)Long service leave (current)	282,99110,160293,151	364,8209,425374,245
Long service leave (non-current)	199,364	153,181

Note 12. Current liabilities – Contract liabilities

	Consolidated
	31 March2024$	30 September2023$
Unearned revenue - software	11,120	18,848
Unearned revenue - distribution agreement	-	100,000
Unearned revenue – auspicing fees	1,385,822	750,117
	1,396,942	868,965

Note 13. Contingent consideration

		Consolidated
	31 March2024	30 September2023
Contingent consideration due within one yearContingent consideration due in greater than one year	-	1,763,280
	-	-
	-	1,763,280

The balance of contingent consideration as at 30 September 2023 represented the deferred consideration owing in respect of the acquisition of Southern Solutions Training Services Pty Ltd ("Southern Solutions"), which was acquired (with effect from 9 November 2022) 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.

Based on actual EBIT achieved by Southern Solutions through to 31 March 2024, management has assessed a vey low probability of the deferred consideration EBIT targets being met. As a result, the contingent consideration liability has been remeasured to $nil as at 31 March 2024, resulting in a $1,787,760 reduction in the contingent consideration payable.

Note 14. Equity - contributed equity

	Consolidated
	31 March2024Shares	30 September2023Shares	31 March2023$	30 September2023$
Ordinary shares - fully paid	146,204,505	146,204,505	19,754,944	19,754,944
Movements in ordinary share capital
Details	Date	Shares	Issue price	$
BalanceMovements	30 September 2023	146,204,505-		19,754,944-
Balance	31 March 2024	146,204,505		19,754,944

Share buy-back

There is no current on-market share buy-back.

Note 15. Earnings per share

	Consolidated
	31 March2024	31 March2023Restated
	$	$
Profit/(Loss) after income tax attributable to the Owners of ReadCloud Limited	420,164	(238,046)
	Number	Number
Weighted average number of ordinary shares used in calculating basic earnings pershare	146,204,505	121,360,225
Weighted average number of ordinary shares used in calculating diluted earningsper share	146,204,505	121,360,225
	Cents	Cents
Basic earnings / (loss) per shareDiluted earnings / (loss) per share	0.290.29	(0.20)(0.20)

Note 16. Events after the reporting period

No matter or circumstance has arisen since 31 March 2024 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.

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 2024 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

___________________________

Cristiano Nicolli Chairman

29 May 2024

PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 15, 500 Bourke Street Melbourne, Victoria 3000 T: +61 3 9679 2222 F: +61 3 9679 2288 info@pkf.com.au pkf.com.au

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

Conclusion

We have reviewed the 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 2024, 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 accompanying half-year financial report of ReadCloud Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the Group's financial position as at 31 March 2024 and of its 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 halfyear 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.

Responsibilities of the Directors 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 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 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 financial position as at 31 March 2024 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.

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.

PKF Kaitlynn Brady Melbourne, 29 May 2024 Partner

PKF Melbourne Audit & Assurance Pty Ltd is a member of PKF Global, the network of member firms of PKF International Limited, each of which is a separately owned legal entity and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm(s). Liability limited by a scheme approved under Professional Standards Legislation.