2021 Annual Report. VISION. To simplify premium media trading through technology and collaboration. CONTENTS. 2 A Message from the Chairman 4 A Message from the CEO 6 Directors’ Report 18 Remuneration Report 27 Auditors Independence Declaration 28 Consolidated Statement of Profit or Loss and Other Comprehensive Income 29 Consolidated Statement of Financial Position 30 Consolidated Statement of Changes in Equity 31 Consolidated Statement of Cash Flows 32 Notes to the Financial Statements 72 Directors’ Declaration 73 Independent Audit Report to the Members 77 Corporate Governance Statement 77 Shareholder Information 78 Corporate Directory Adslot 2021 Annual Report 1 A MESSAGE FROM THE CHAIRMAN. Dear Shareholder, The 2021 financial year was a challenging year for both the Company and the media industry as a whole, as the worldwide response to COVID-19 disrupted economies and changed the way we work. Despite these challenges, the Company has emerged better placed than ever to take advantage of the changing environment, with proven products, contracts with the industry’s biggest players and a series of macro trends working in the Company’s favour. I would firstly like to thank all our dedicated employees for the significant efforts and sacrifices they have made this past year. Our team agreed to take voluntary salary cuts in order to preserve and sustain the business while also rising to the challenges of working from home. All this, while continuing to develop world class products and manage key client relationships remotely. The team’s resilience saw them deliver consistently on the Company’s key objectives. Over the year, the Company continued to execute agreements with the world’s largest advertising companies, commenced activation of a number of these agreements and delivered a strong record year for total transaction value (TTV) on the Adslot Media platform. An achievement worthy of recognition. Of course, none of this would be possible without the continued support and patience of all our loyal and long-standing investors, who supported us in our capital raising in December last year, without whom we wouldn't have been able to get to this point. Their support has helped to put the Company in prime position for significant adoption, activation and growth in the coming financial year. We very much look forward to repaying the faith of our shareholders. “Despite these challenges, the Company has emerged better placed” Finally, I would like to welcome the appointment of Tom Triscari to the board. The addition of such a highly- regarded industry professional to our team will assist both our corporate and commercial endeavours in the critical US market. We are delighted to have him on board. There is much to be excited about in the coming year, and I look forward to sharing the Company’s successes with you as we progress. Yours sincerely, Andrew Barlow Executive Chairman 2 Adslot 2021 Annual Report Adslot 2021 Annual Report 3 A MESSAGE FROM THE CEO. During FY2021, the Company continued to make significant progress on its core objectives, despite a number of continuing external challenges. Notably the impact and disruption of the COVID-19 pandemic on the media and advertising industries saw delays in expected sales and activation activities. In addition, measures to assist clients in cost management during this period saw a reduction in license fee revenues for the year. Notwithstanding this, the Company ended the year far better than it has ever been placed to deliver on its opportunity and promise. A particular highlight of the year was the substantial increase in Total Transaction Value (TTV) on the Adslot Media platform. This number which represents the total value of media traded via the platform grew by 82% to exceed $28m for the year. Growth in trading was seen across multiple markets including Europe, the UK and the United States. During FY2021, the Company continued to focus on its pursuit of Master Service Agreements (MSAs) with the largest agency groups across the world. During the “The progress the Company made during the past year sets it up well” year, an MSA was executed with GroupM, ensuring that the Company now has trading arrangements in place with five of the six largest agency holding companies in the world. In addition, the Company executed an MSA with the media division of S4 Capital, a fast-emerging digital advertising and marketing services business established by Sir Martin Sorrell in 2018. These agreements now in place with the largest and most influential buyers of media are a critical component to Adslot’s pathway to substantial scaling of trading on the Adslot Media platform and corresponding growth in trading fee revenues. Further, during the year, the Company saw the emergence of new and unique use cases for the Adslot Media platform. The most substantial of these was the development of white-labelled partner marketplaces powered by the platform, whereby buyers can deploy a branded, custom version of the Adslot Media marketplace with their own curated publisher community and commercial terms. During FY2021, the Company saw trading or activation from a growing number of such marketplaces including Orion Worldwide (IPG) and GroupM’s Global Premium Supply Initiative (WPP), as well as Flowershop Media, a pioneering cannabis-focused media agency requiring a compliant-enabled media marketplace. The Company firmly believes that these partner marketplaces represent a unique and highly valuable use case and will be a key driver of growth over the short and medium term. 4 Adslot 2021 Annual Report Whilst revenue for the Symphony platform was reduced due in part to the negotiation of reductions in non-market related fees and temporary tier caps with GroupM, a number of successful milestones were achieved which will set up Symphony for a return to growth in 2022 and beyond. These included: • The successful deployment of Symphony for Omnicom Media Group (OMG) in the Netherlands; this represented the first such deployment for that agency group and country thereby adding greater client and geographic diversity. • The deployment for OMG Netherlands represented the first joint implementation following the execution of a partnership with leading European ERP software provider Marathon. The Company is expanding its joint marketing of an integrated Adslot – Marathon offering which it expects to gain traction with agencies in Europe and beyond. • The conclusion of negotiations with GroupM regarding an extension to the term of its Symphony agreement and the inclusion of Adslot Media terms to all active Symphony markets. This agreement was subsequently signed in August 2021. The progress the Company made during the past year sets it up well to take advantage of several significant macro trends which have been developing in the advertising industry in recent times. Key among these is a flight to quality from advertisers in parallel with a strong desire for buyers and sellers of advertising to transact via increasingly direct relationships to reduce supply chain intermediary friction. Both of these dynamics talk directly to the core features and benefits that Adslot’s platform suite provides, which is increasingly observable across our dealings with large agencies and publishers alike. This combination of proven products and strong contractual positions with key players supported by clear macro trends taking shape across the industry and moving in our direction give the Company great confidence that 2022 will a favourable year in which we deliver on our long-standing potential. Ben Dixon CEO and Executive Director. Adslot 2021 Annual Report 5 Director’s Report DIRECTORS’ REPORT. Mr Andrew Barlow Chairman Mr Ben Dixon CEO and Executive Director Mr Adrian Giles Non-Executive Director Your Directors present Andrew Barlow is the Founder Ben Dixon has over 25 years’ Adrian Giles is an their report, together and Non-Executive Chairman experience in the advertising entrepreneur in the Internet with the financial of Adslot. and ad-tech industries. and Information Technology report of Adslot Ltd An experienced technology This includes both media industries. In 1997 Mr Giles ACN 001 287 510 (‘the entrepreneur, Mr Barlow co- planning and strategy co-founded Sinewave Company’) and its controlled entities founded online competitive intelligence company, Hitwise, roles at leading agencies groups such as Publicis Interactive which pioneered the concept of marketing a (‘the Group’) for the with Adrian Giles in 1997. and Omnicom. During this website using search engines financial year ended Hitwise was ranked one of period, he was involved in the and was the first company 30 June 2021 and the Top 10 fastest growing development of digital media in Australia to offer Search the auditor’s report companies by Deloitte for five strategies for a number of Engine Optimisation (SEO) as thereon. years running, before being prominent technology and a service. sold to Experian Group (LSX. telecommunications brands Mr Giles co-founded Hitwise EXPN) in May 2007. in Australia. which grew over 10 years Mr Barlow was also Founder Mr Dixon was then a to become one of the most and CEO of Max Super, an founder of Facilitate Digital recognised global internet online retail superannuation where he was involved measurement brands in the fund sold to Orchard Funds in conceptualizing and USA, UK, Australia, NZ, Hong Management in 2007. developing the Symphony Kong, and Singapore. Whilst Mr Barlow also led the seed Media workflow platform. positioning the company investment round in Nitro During his tenure as Chief for a NASDAQ listing in early Software Limited (ASX: NTO) Executive Officer at Facilitate 2007 Hitwise was sold to and served as a non-executive Digital he oversaw the Experian (LSX: EXPN) in one director and strategic advisor international expansion of Australia’s most successful to Nitro (from January 2007 of Symphony and its first venture capital backed trade until August 2020). adoption by global agency sales. Mr Barlow is also the Founder of Venturian, a privately- groups. Following the acquisition of Facilitate Digital Mr Giles is also Chairman of Fortress Esports - an owned venture capital fund by Adslot in late 2013 he esports and video game with investments in early- became an Executive Director entertainment company. stage technology companies of Adslot Limited. Mr Giles is Chair of the with unique IP, highly scalable Mr Dixon was appointed Chief Remuneration Committee business models and global Executive Officer of Adslot in and a member of the Audit & market potential, currently February 2018. Risk Committee. focused on emerging fintech and crypto platforms. In July 2020, Mr Barlow became Non-Executive Chairman (from Executive Chairman). Mr Barlow is also a member of the Remuneration Committee. 6 Adslot 2021 Annual Report Ms Sarah Morgan Non-Executive Director Mr Andrew Dyer Non-Executive Director Mr Tom Triscari Non-Executive Director Ms Felicity Conlan Company Secretary Sarah Morgan has Andrew Dyer is a Senior Tom Triscari is a Felicity Conlan brings extensive experience Partner Emeritus and leading expert in the to the Group extensive in the finance industry, Senior Advisor of The programmatic adtech experience in the primarily as part of Boston Consulting Group industry. He is the media/advertising and independent corporate (BCG). Mr Dyer is a founder and CEO of technology sectors advisory firm Grant Samuel. Ms Morgan member of BCG’s global Senior Partner Emeritus has been involved in Council. Lemonade Projects, a programmatic innovation agency where she has held General Manager - Finance and CFO public and private company mergers Mr Dyer is a member of based in NYC running roles with companies the Advisory Committee strategic projects including M&C Saatchi, and acquisitions, as of the recently created and experiments at Network Ten, Beattie well as equity and Digital Financial the intersection of McGuinness Bungay debt capital raisings. Cooperative Research economics, game theory, (London) and Genero She holds a degree Centre and a member of and principles of radical Media. in Engineering and the Finance Committee transparency. Ms Conlan is a Fellow a Master of Business of the Council of the Mr Triscari's programmatic of CPA Australia and Administration from the Australian National experience began in 2007 a member of the University of Melbourne University. developing addressable Australian Institute of and is a Graduate of In his 27 years with BCG TV and data product Company Directors. Australian Institute of Mr Dyer supported senior requirements as a Company Directors. executives in leading consultant for Project Ms Morgan is a Non- companies around the Canoe in New York, an Executive Director of world. He also held initiative led by Comcast Nitro Sof tware Limited local, regional and global and Time Warner. (from November 2019), leadership positions, He managed a multi- Future Generation including leading BCG’s market team at Yahoo! Global Investment Company Limited (from People & Organization and Enablement Europe in Barcelona with responsibility for July 2015) and Whispir Practices. He was also a Right Media, the first Limited (from January member of BCG’s global programmatic exchange. 2019). Ms Morgan was Executive Committee At pre-IPO Criteo in previously a Non- and held roles on several London, Tom built and Executive Director of BCG Board Committees. managed supply-side Hansen Technology Prior to joining BCG in and data science teams. Limited (from October 1994, Mr Dyer worked Tom was brought on 2014 to December 2019). for the Commonwealth as CEO to reposition Ms Morgan is Chair Bank and the Australian Amsterdam-based Yieldr, of the Audit and Risk Federal Government. a DSP platform. In 2015, Committee. Mr Dyer is a member Tom founded Labmatik, of the Audit & Risk a programmatic Committee and a member transformation of the Remuneration consultancy. Committee. Adslot 2021 Annual Report 7 PERFORMANCE. 2021 RESULTS. ADSLOT MEDIA. Total Transaction Value $28.3m up 82% on prior year Trading Fee Revenue $1.1m up 43% on prior year Trading Activity (number of orders) 2,010 up 60% on prior year New partner marketplaces established, expected to drive growth in TTV into FY22 GroupM Global Premium Supply initiative IPG/Kinesso Health, Wellness & Lifestyle FlowerShop Media Cannabis compliance media marketplace Growth in demand continues: Formal MSAs in place with four of the six largest global media agency holding companies – WPP / GroupM, IPG / Matterkind, Havas and Dentsu / Amplifi. MSA signed with Sir Martin Sorrell’s leading-edge media company S4 Capital and its subsidiary agencies, Firewood marketing and Media Monks. Growth in supply continues with 18 key premium publishers added to the marketplace. 8 Adslot 2021 Annual Report SYMPHONY. Licence Fee Revenue $4.6m down 31% - due to COVID related GroupM reductions to development and resourcing fees and temporary fee reductions and market tier caps $6 billion total annualised Media Spend managed via Symphony, returned to pre-COVID levels Partnership and integration with Marathon, opening up new European market opportunities Activation of Omnicom Media Group in the Netherlands under a multi-year agreement Conclusion of negotiations with GroupM regarding mutually beneficial amendments to the multi-market Master Services Agreement, extending the term of the MSA to at least July 2024, including extension of trading terms for the Adslot Media marketplace to Symphony markets. GROUP. Group Revenue $9.6m down 9% on prior year Trading Technology revenues $6.4m down 21% on prior year Adjusted EBITDA Loss $2.4m increased by 103% on prior year While Adslot Media trading fee revenues grew by 43%, these were offset by a lowering of Symphony licence fees resulting in a reduction in overall Group performance. Adslot 2021 Annual Report 9 Directors’ Report Operating Results Trading technology revenue Total revenue and other income EBITDA (loss) Adjusted EBITDA (loss) 1 NPAT (loss) Adjusted NPAT (loss) 1 2021 $ 6,434,298 9,622,603 (2,429,954) 2020 $ Movement $ % 8,115,100 (1,680,802) (21%) 10,572,950 (950,347) (12,725,348) 10,295,394 (9%) 81% (2,429,954) (1,197,614) (1,232,340) (103%) (6,280,774) (6,280,774) (16,617,725) 10,336,951 62% (5,089,991) (1,190,783) (23%) Group revenues for FY21 were $9,622,603 a decrease of 9% versus FY20 ($10,572,950). The Consolidated Group operating loss before interest, income tax, depreciation and amortisation in FY21 was $2,429,954, an 81% reduction in losses versus FY20 ($12,725,348). The Consolidated Group operating loss after tax of $6,280,774 is 62% lower than the loss for the prior year of $16,617,725. Review of Operations FY21 continued to present challenges for businesses globally with the ongoing impacts of COVID-19 pandemic on employees, business and financial markets. Despite these challenges, total revenue and other income for FY21 reduced by only 9% compared to the corresponding period to 30 June 2020. This result was driven by a growth in Adslot Media trading fee revenues of 43% to $1.1 million compared to the prior year, offset by a lowering of licence fees from $7.2 million in FY20 to $5.2 million in FY21. The reduction in license fees incorporated both temporary and permanent fee reductions as part of a mutually beneficial renegotiation and extension of GroupM’s Symphony agreement negotiated over 2020. The Company continued to focus on the following key strategies for the business in FY21: 1. Adslot Media • Activate contracted agency groups to drive growth in trading activity; • Continue to secure Master Service Agreements (MSAs) with agency holding companies; • Deploy further markets for the integrated Symphony – Adslot Media platform; • Secure additional activations of private marketplace instances of Adslot Media; 2. Symphony • Pursue further deployments for Symphony with existing and prospective clients; and 3. Operations • Maintain focus on the cost base of the business. During FY21, Adslot Media achieved its highest Total Transaction Value 2 (TTV) result which reflected the activation of new buyers on the Adslot Media platform. This was driven by a significant improvement in trading activity on the Adslot Media platform from European agencies and from newly contracted opportunities in the US market. Activation of signed MSAs and implementation of new partner marketplaces accelerated towards the end of FY21. As a result, significant improvement in Adslot Media trading activity from the US and UK markets is anticipated in FY22. 1 (cid:37)(cid:72)(cid:78)(cid:89)(cid:87)(cid:88)(cid:73)(cid:72)(cid:4)(cid:41)(cid:38)(cid:45)(cid:56)(cid:40)(cid:37)(cid:4)(cid:12)(cid:80)(cid:83)(cid:87)(cid:87)(cid:13)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:37)(cid:72)(cid:78)(cid:89)(cid:87)(cid:88)(cid:73)(cid:72)(cid:4)(cid:50)(cid:52)(cid:37)(cid:56)(cid:4)(cid:12)(cid:80)(cid:83)(cid:87)(cid:87)(cid:13)(cid:30)(cid:4)(cid:37)(cid:72)(cid:72)(cid:77)(cid:82)(cid:75)(cid:4)(cid:70)(cid:69)(cid:71)(cid:79)(cid:4)(cid:77)(cid:81)(cid:84)(cid:69)(cid:77)(cid:86)(cid:81)(cid:73)(cid:82)(cid:88)(cid:4)(cid:83)(cid:74)(cid:4)(cid:43)(cid:83)(cid:83)(cid:72)(cid:91)(cid:77)(cid:80)(cid:80)(cid:4)(cid:12)(cid:86)(cid:73)(cid:74)(cid:73)(cid:86)(cid:4)(cid:82)(cid:83)(cid:88)(cid:73)(cid:4)(cid:21)(cid:20)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:74)(cid:89)(cid:86)(cid:88)(cid:76)(cid:73)(cid:86)(cid:4)(cid:77)(cid:82)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:13)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:83)(cid:82)(cid:71)(cid:73)(cid:4) (cid:83)(cid:74)(cid:74)(cid:4)(cid:52)(cid:86)(cid:83)(cid:90)(cid:77)(cid:87)(cid:77)(cid:83)(cid:82)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:54)(cid:10)(cid:40)(cid:4)(cid:39)(cid:80)(cid:69)(cid:77)(cid:81)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:42)(cid:77)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:4)(cid:61)(cid:73)(cid:69)(cid:86)(cid:4)(cid:22)(cid:20)(cid:21)(cid:25)(cid:19)(cid:22)(cid:20)(cid:21)(cid:26)(cid:4)(cid:12)(cid:86)(cid:73)(cid:74)(cid:73)(cid:86)(cid:4)(cid:82)(cid:83)(cid:88)(cid:73)(cid:4)(cid:28)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:74)(cid:89)(cid:86)(cid:88)(cid:76)(cid:73)(cid:86)(cid:4)(cid:77)(cid:82)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:13)(cid:4)(cid:88)(cid:83)(cid:4)(cid:41)(cid:38)(cid:45)(cid:56)(cid:40)(cid:37)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:50)(cid:52)(cid:37)(cid:56)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:74)(cid:77)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:4) (cid:93)(cid:73)(cid:69)(cid:86)(cid:4)(cid:22)(cid:20)(cid:22)(cid:20)(cid:18) 2 (cid:56)(cid:83)(cid:88)(cid:69)(cid:80)(cid:4) (cid:56)(cid:86)(cid:69)(cid:82)(cid:87)(cid:69)(cid:71)(cid:88)(cid:77)(cid:83)(cid:82)(cid:4) (cid:58)(cid:69)(cid:80)(cid:89)(cid:73)(cid:4) (cid:86)(cid:73)(cid:84)(cid:86)(cid:73)(cid:87)(cid:73)(cid:82)(cid:88)(cid:87)(cid:4) (cid:88)(cid:76)(cid:73)(cid:4) (cid:82)(cid:73)(cid:88)(cid:4) (cid:90)(cid:69)(cid:80)(cid:89)(cid:73)(cid:4) (cid:83)(cid:74)(cid:4) (cid:81)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4) (cid:88)(cid:86)(cid:69)(cid:72)(cid:73)(cid:72)(cid:4) (cid:83)(cid:82)(cid:4) (cid:88)(cid:76)(cid:73)(cid:4) (cid:37)(cid:72)(cid:87)(cid:80)(cid:83)(cid:88)(cid:4) (cid:49)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4) (cid:84)(cid:80)(cid:69)(cid:88)(cid:74)(cid:83)(cid:86)(cid:81)(cid:16)(cid:4) (cid:77)(cid:82)(cid:71)(cid:80)(cid:89)(cid:72)(cid:77)(cid:82)(cid:75)(cid:4) (cid:82)(cid:73)(cid:91)(cid:4) (cid:70)(cid:83)(cid:83)(cid:79)(cid:77)(cid:82)(cid:75)(cid:87)(cid:4) (cid:69)(cid:82)(cid:72)(cid:4) (cid:69)(cid:82)(cid:93)(cid:4) (cid:69)(cid:72)(cid:78)(cid:89)(cid:87)(cid:88)(cid:81)(cid:73)(cid:82)(cid:88)(cid:87)(cid:4)(cid:83)(cid:86)(cid:4)(cid:71)(cid:69)(cid:82)(cid:71)(cid:73)(cid:80)(cid:80)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:4)(cid:81)(cid:69)(cid:72)(cid:73)(cid:4)(cid:88)(cid:83)(cid:4)(cid:84)(cid:86)(cid:73)(cid:90)(cid:77)(cid:83)(cid:89)(cid:87)(cid:4)(cid:70)(cid:83)(cid:83)(cid:79)(cid:77)(cid:82)(cid:75)(cid:87)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:69)(cid:4)(cid:82)(cid:83)(cid:81)(cid:77)(cid:82)(cid:69)(cid:88)(cid:73)(cid:72)(cid:4)(cid:84)(cid:73)(cid:86)(cid:77)(cid:83)(cid:72)(cid:18)(cid:4)(cid:56)(cid:56)(cid:58)(cid:4)(cid:91)(cid:69)(cid:87)(cid:4)(cid:84)(cid:86)(cid:73)(cid:90)(cid:77)(cid:83)(cid:89)(cid:87)(cid:80)(cid:93)(cid:4)(cid:86)(cid:73)(cid:84)(cid:83)(cid:86)(cid:88)(cid:73)(cid:72)(cid:4)(cid:70)(cid:93)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:39)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:4)(cid:69)(cid:87)(cid:4)“the value (cid:83)(cid:74)(cid:4)(cid:81)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4)(cid:88)(cid:86)(cid:69)(cid:72)(cid:73)(cid:72)(cid:4)(cid:83)(cid:82)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:37)(cid:72)(cid:87)(cid:80)(cid:83)(cid:88)(cid:4)(cid:49)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4)(cid:84)(cid:80)(cid:69)(cid:88)(cid:74)(cid:83)(cid:86)(cid:81)” 10 10 Adslot 2021 Annual Report Adslot 2021 Annual Report Directors’ Report Operating Results Trading technology revenue Total revenue and other income EBITDA (loss) Adjusted EBITDA (loss) 1 NPAT (loss) Adjusted NPAT (loss) 1 $16,617,725. Review of Operations 2021 $ 6,434,298 9,622,603 (2,429,954) (6,280,774) (6,280,774) 2020 $ Movement $ % 8,115,100 (1,680,802) (21%) 10,572,950 (950,347) (12,725,348) 10,295,394 (9%) 81% (16,617,725) 10,336,951 62% (5,089,991) (1,190,783) (23%) (2,429,954) (1,197,614) (1,232,340) (103%) Group revenues for FY21 were $9,622,603 a decrease of 9% versus FY20 ($10,572,950). The Consolidated Group operating loss before interest, income tax, depreciation and amortisation in FY21 was $2,429,954, an 81% reduction in losses versus FY20 ($12,725,348). The Consolidated Group operating loss after tax of $6,280,774 is 62% lower than the loss for the prior year of FY21 continued to present challenges for businesses globally with the ongoing impacts of COVID-19 pandemic on employees, business and financial markets. Despite these challenges, total revenue and other income for FY21 reduced by only 9% compared to the corresponding period to 30 June 2020. This result was driven by a growth in Adslot Media trading fee revenues of 43% to $1.1 million compared to the prior year, offset by a lowering of licence fees from $7.2 million in FY20 to $5.2 million in FY21. The reduction in license fees incorporated both temporary and permanent fee reductions as part of a mutually beneficial renegotiation and extension of GroupM’s Symphony agreement negotiated over 2020. 1. Adslot Media The Company continued to focus on the following key strategies for the business in FY21: • Activate contracted agency groups to drive growth in trading activity; • Continue to secure Master Service Agreements (MSAs) with agency holding companies; • Deploy further markets for the integrated Symphony – Adslot Media platform; • Secure additional activations of private marketplace instances of Adslot Media; • Pursue further deployments for Symphony with existing and prospective clients; and 2. Symphony 3. Operations • Maintain focus on the cost base of the business. During FY21, Adslot Media achieved its highest Total Transaction Value 2 (TTV) result which reflected the activation of new buyers on the Adslot Media platform. This was driven by a significant improvement in trading activity on the Adslot Media platform from European agencies and from newly contracted opportunities in the Activation of signed MSAs and implementation of new partner marketplaces accelerated towards the end of FY21. As a result, significant improvement in Adslot Media trading activity from the US and UK markets is US market. anticipated in FY22. 1 (cid:37)(cid:72)(cid:78)(cid:89)(cid:87)(cid:88)(cid:73)(cid:72)(cid:4)(cid:41)(cid:38)(cid:45)(cid:56)(cid:40)(cid:37)(cid:4)(cid:12)(cid:80)(cid:83)(cid:87)(cid:87)(cid:13)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:37)(cid:72)(cid:78)(cid:89)(cid:87)(cid:88)(cid:73)(cid:72)(cid:4)(cid:50)(cid:52)(cid:37)(cid:56)(cid:4)(cid:12)(cid:80)(cid:83)(cid:87)(cid:87)(cid:13)(cid:30)(cid:4)(cid:37)(cid:72)(cid:72)(cid:77)(cid:82)(cid:75)(cid:4)(cid:70)(cid:69)(cid:71)(cid:79)(cid:4)(cid:77)(cid:81)(cid:84)(cid:69)(cid:77)(cid:86)(cid:81)(cid:73)(cid:82)(cid:88)(cid:4)(cid:83)(cid:74)(cid:4)(cid:43)(cid:83)(cid:83)(cid:72)(cid:91)(cid:77)(cid:80)(cid:80)(cid:4)(cid:12)(cid:86)(cid:73)(cid:74)(cid:73)(cid:86)(cid:4)(cid:82)(cid:83)(cid:88)(cid:73)(cid:4)(cid:21)(cid:20)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:74)(cid:89)(cid:86)(cid:88)(cid:76)(cid:73)(cid:86)(cid:4)(cid:77)(cid:82)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:13)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:83)(cid:82)(cid:71)(cid:73)(cid:4) (cid:83)(cid:74)(cid:74)(cid:4)(cid:52)(cid:86)(cid:83)(cid:90)(cid:77)(cid:87)(cid:77)(cid:83)(cid:82)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:54)(cid:10)(cid:40)(cid:4)(cid:39)(cid:80)(cid:69)(cid:77)(cid:81)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:42)(cid:77)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:4)(cid:61)(cid:73)(cid:69)(cid:86)(cid:4)(cid:22)(cid:20)(cid:21)(cid:25)(cid:19)(cid:22)(cid:20)(cid:21)(cid:26)(cid:4)(cid:12)(cid:86)(cid:73)(cid:74)(cid:73)(cid:86)(cid:4)(cid:82)(cid:83)(cid:88)(cid:73)(cid:4)(cid:28)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:74)(cid:89)(cid:86)(cid:88)(cid:76)(cid:73)(cid:86)(cid:4)(cid:77)(cid:82)(cid:74)(cid:83)(cid:86)(cid:81)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:13)(cid:4)(cid:88)(cid:83)(cid:4)(cid:41)(cid:38)(cid:45)(cid:56)(cid:40)(cid:37)(cid:4)(cid:69)(cid:82)(cid:72)(cid:4)(cid:50)(cid:52)(cid:37)(cid:56)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:74)(cid:77)(cid:82)(cid:69)(cid:82)(cid:71)(cid:77)(cid:69)(cid:80)(cid:4) (cid:93)(cid:73)(cid:69)(cid:86)(cid:4)(cid:22)(cid:20)(cid:22)(cid:20)(cid:18) 2 (cid:56)(cid:83)(cid:88)(cid:69)(cid:80)(cid:4) (cid:56)(cid:86)(cid:69)(cid:82)(cid:87)(cid:69)(cid:71)(cid:88)(cid:77)(cid:83)(cid:82)(cid:4) (cid:58)(cid:69)(cid:80)(cid:89)(cid:73)(cid:4) (cid:86)(cid:73)(cid:84)(cid:86)(cid:73)(cid:87)(cid:73)(cid:82)(cid:88)(cid:87)(cid:4) (cid:88)(cid:76)(cid:73)(cid:4) (cid:82)(cid:73)(cid:88)(cid:4) (cid:90)(cid:69)(cid:80)(cid:89)(cid:73)(cid:4) (cid:83)(cid:74)(cid:4) (cid:81)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4) (cid:88)(cid:86)(cid:69)(cid:72)(cid:73)(cid:72)(cid:4) (cid:83)(cid:82)(cid:4) (cid:88)(cid:76)(cid:73)(cid:4) (cid:37)(cid:72)(cid:87)(cid:80)(cid:83)(cid:88)(cid:4) (cid:49)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4) (cid:84)(cid:80)(cid:69)(cid:88)(cid:74)(cid:83)(cid:86)(cid:81)(cid:16)(cid:4) (cid:77)(cid:82)(cid:71)(cid:80)(cid:89)(cid:72)(cid:77)(cid:82)(cid:75)(cid:4) (cid:82)(cid:73)(cid:91)(cid:4) (cid:70)(cid:83)(cid:83)(cid:79)(cid:77)(cid:82)(cid:75)(cid:87)(cid:4) (cid:69)(cid:82)(cid:72)(cid:4) (cid:69)(cid:82)(cid:93)(cid:4) (cid:69)(cid:72)(cid:78)(cid:89)(cid:87)(cid:88)(cid:81)(cid:73)(cid:82)(cid:88)(cid:87)(cid:4)(cid:83)(cid:86)(cid:4)(cid:71)(cid:69)(cid:82)(cid:71)(cid:73)(cid:80)(cid:80)(cid:69)(cid:88)(cid:77)(cid:83)(cid:82)(cid:87)(cid:4)(cid:81)(cid:69)(cid:72)(cid:73)(cid:4)(cid:88)(cid:83)(cid:4)(cid:84)(cid:86)(cid:73)(cid:90)(cid:77)(cid:83)(cid:89)(cid:87)(cid:4)(cid:70)(cid:83)(cid:83)(cid:79)(cid:77)(cid:82)(cid:75)(cid:87)(cid:4)(cid:74)(cid:83)(cid:86)(cid:4)(cid:69)(cid:4)(cid:82)(cid:83)(cid:81)(cid:77)(cid:82)(cid:69)(cid:88)(cid:73)(cid:72)(cid:4)(cid:84)(cid:73)(cid:86)(cid:77)(cid:83)(cid:72)(cid:18)(cid:4)(cid:56)(cid:56)(cid:58)(cid:4)(cid:91)(cid:69)(cid:87)(cid:4)(cid:84)(cid:86)(cid:73)(cid:90)(cid:77)(cid:83)(cid:89)(cid:87)(cid:80)(cid:93)(cid:4)(cid:86)(cid:73)(cid:84)(cid:83)(cid:86)(cid:88)(cid:73)(cid:72)(cid:4)(cid:70)(cid:93)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:39)(cid:83)(cid:81)(cid:84)(cid:69)(cid:82)(cid:93)(cid:4)(cid:69)(cid:87)(cid:4)“the value (cid:83)(cid:74)(cid:4)(cid:81)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4)(cid:88)(cid:86)(cid:69)(cid:72)(cid:73)(cid:72)(cid:4)(cid:83)(cid:82)(cid:4)(cid:88)(cid:76)(cid:73)(cid:4)(cid:37)(cid:72)(cid:87)(cid:80)(cid:83)(cid:88)(cid:4)(cid:49)(cid:73)(cid:72)(cid:77)(cid:69)(cid:4)(cid:84)(cid:80)(cid:69)(cid:88)(cid:74)(cid:83)(cid:86)(cid:81)” 10 Adslot 2021 Annual Report Trading Technology The strategic focus of the business remains Trading Technology revenues. These revenues are comprised of: • Trading Fees – fees charged as a percentage of media traded; generated primarily from Adslot Media but also from Symphony. Trading fees generated via the stand alone Adslot Media platform attract a higher % fee and represent a significant majority of Trading Fees; and • Licence Fees – generated primarily from Symphony, a market-leading workflow automation tool for Media Agencies, and also from customised solutions developed for Publishers. Trading Fees Total Transaction Value (TTV) for the Adslot Media platform for FY21 was $28.3 million. This was an 82% increase when compared to FY20 as advertisers are increasingly demanding higher inventory quality. Adslot trading fees for FY21 was $1.1 million, a 43% increase compared to the prior period. The Company notes that it has made significant progress on the activation of large sources of demand (i.e. media buyers) including those utilising white-labelled partner marketplaces. The impacts of the large demand sources are expected to drive growth in trading activity over the first two quarters of FY22. Adslot 2021 Annual Report 11 Adslot 2021 Annual Report 11 Directors’ Report (Continued) In particular, during FY21, the Company: • Signed an MSA with GroupM, the world’s largest media investment company, to enable the use of the Adslot Media platform as a component of GroupM’s Premium Supply initiative. Trading under this agreement commenced in August 2021 and is expected to scale over future quarters. • Achieved repeat trading with Orion, the trade-enabled media division of the Interpublic Group of Companies (IPG). • Signed an MSA with Sir Martin Sorrell’s leading-edge media company S4 Capital and its subsidiary agencies, Firewood Marketing and Media Monks for use of the Adslot Media platform. Trading under this agreement commenced in August 2021 and is expected to scale over future quarters. • Successfully launched a custom, white-labelled, media marketplace for the fast-growing cannabis industry with partner FlowerShop Media. Publisher onboarding is underway and trading is expected to commence in the September 2021 quarter. • Substantially advanced discussions with a currently-contracted, US-based agency holding company regarding the activation of a white-labelled marketplace for high value audiences. • Seen recurring and consistent trading from European agencies via the integrated deployments of • Symphony and Adslot Media. Improved the sales pipeline with strategic buyers in the US and other markets for use of the Adslot Media platform, either stand alone or as a white-labelled partner marketplace. The Company continues to progress on its core strategic objective of executing and activating Master Services Agreements (MSAs) with the six largest global media agency holding companies, enabling access to the demand they control. The Company’s status with the six largest global media agency holding companies is as follows: • Formal MSAs in place with four of the six largest global media agency holding companies – WPP / GroupM, IPG / Matterkind, Havas and Dentsu / Amplifi; • An active interim trading agreement with a fifth holding company; and • Ongoing discussions with the remaining sixth holding company. During FY21, the Group continued to add premium publishers to its Adslot Media marketplace in key markets around the world. Prominent publishers added during this period included Time Out, REA Group, Glewed, Hello! Magazine, Times of India, Gallery Media, Car Expert, The New Daily, CityAM, ESI Media and Frommers. The Company notes it has a strong sales pipeline of large publishers and expects its catalogue of premium publishers to grow further over the coming year. The Company has previously disclosed that one of the key emerging use cases for Adslot Media is the use of white-labelled and/or customised instances of the platform. This enables the creation of new or existing media marketplaces, powered by Adslot Media technology and managed by Adslot’s partners rather than by the Company itself. In this context, the Company anticipates a future in which the primary Adslot Media marketplace co-exists with a number of partner specific versions of the marketplace, some of which may feature specific functionality. The Adslot Media platform has been architected to manage this situation including the ability for publishers to easily opt into multiple marketplaces without any duplication of effort. Based on the above, the Company believes that a substantial component of the anticipated growth in trading activity over the next 12 months will come from activations of partner marketplaces on behalf of a diverse base of clients. 12 12 Adslot 2021 Annual Report Adslot 2021 Annual Report Directors’ Report (Continued) In particular, during FY21, the Company: • Signed an MSA with GroupM, the world’s largest media investment company, to enable the use of the Adslot Media platform as a component of GroupM’s Premium Supply initiative. Trading under this agreement commenced in August 2021 and is expected to scale over future quarters. • Achieved repeat trading with Orion, the trade-enabled media division of the Interpublic Group of Companies (IPG). • Signed an MSA with Sir Martin Sorrell’s leading-edge media company S4 Capital and its subsidiary agencies, Firewood Marketing and Media Monks for use of the Adslot Media platform. Trading under this agreement commenced in August 2021 and is expected to scale over future quarters. • Successfully launched a custom, white-labelled, media marketplace for the fast-growing cannabis industry with partner FlowerShop Media. Publisher onboarding is underway and trading is expected to commence in the September 2021 quarter. • Substantially advanced discussions with a currently-contracted, US-based agency holding company regarding the activation of a white-labelled marketplace for high value audiences. • Seen recurring and consistent trading from European agencies via the integrated deployments of Symphony and Adslot Media. • Improved the sales pipeline with strategic buyers in the US and other markets for use of the Adslot Media platform, either stand alone or as a white-labelled partner marketplace. The Company continues to progress on its core strategic objective of executing and activating Master Services Agreements (MSAs) with the six largest global media agency holding companies, enabling access to the demand they control. The Company’s status with the six largest global media agency holding companies is as follows: • Formal MSAs in place with four of the six largest global media agency holding companies – WPP / GroupM, IPG / Matterkind, Havas and Dentsu / Amplifi; • An active interim trading agreement with a fifth holding company; and • Ongoing discussions with the remaining sixth holding company. During FY21, the Group continued to add premium publishers to its Adslot Media marketplace in key markets around the world. Prominent publishers added during this period included Time Out, REA Group, Glewed, Hello! Magazine, Times of India, Gallery Media, Car Expert, The New Daily, CityAM, ESI Media and Frommers. The Company notes it has a strong sales pipeline of large publishers and expects its catalogue of premium publishers to grow further over the coming year. The Company has previously disclosed that one of the key emerging use cases for Adslot Media is the use of white-labelled and/or customised instances of the platform. This enables the creation of new or existing media marketplaces, powered by Adslot Media technology and managed by Adslot’s partners rather than by the Company itself. In this context, the Company anticipates a future in which the primary Adslot Media marketplace co-exists with a number of partner specific versions of the marketplace, some of which may feature specific functionality. The Adslot Media platform has been architected to manage this situation including the ability for publishers to easily opt into multiple marketplaces without any duplication of effort. Based on the above, the Company believes that a substantial component of the anticipated growth in trading activity over the next 12 months will come from activations of partner marketplaces on behalf of a diverse base of clients. Licence Fees Licence Fees Total Licence Fee revenues across Symphony and Adslot Media were $5.2 million in FY21, representing a Total Licence Fee revenues across Symphony and Adslot Media were $5.2 million in FY21, representing a reduction on the prior financial year (FY20: $7.2 million). reduction on the prior financial year (FY20: $7.2 million). Note: Symphony Licence Fee revenues for FY18 were normalised to allow for the reversal of a one-off payment, Note: Symphony Licence Fee revenues for FY18 were normalised to allow for the reversal of a one-off payment, as outlined in the 20 July 2018 Symphony Outlook release. as outlined in the 20 July 2018 Symphony Outlook release. Significant events for the past year for Symphony include: Significant events for the past year for Symphony include: • Partnership and integration with Marathon, a Sweden-based provider of Enterprise Resource Planning • Partnership and integration with Marathon, a Sweden-based provider of Enterprise Resource Planning (ERP) software to the media industry across Europe, opening up new European markets for Symphony; (ERP) software to the media industry across Europe, opening up new European markets for Symphony; • Execution of a multi-year agreement for deployment of Symphony with Omnicom Media Group in the • Execution of a multi-year agreement for deployment of Symphony with Omnicom Media Group in the Netherlands, representing additional diversification of the Company’s geographic and client footprint for Netherlands, representing additional diversification of the Company’s geographic and client footprint for the Symphony product; the Symphony product; • Validation of the Symphony – Adslot Media offering with a significant increase in media traded in Europe • Validation of the Symphony – Adslot Media offering with a significant increase in media traded in Europe on the integrated platform; and on the integrated platform; and • Conclusion of negotiations with GroupM regarding mutually beneficial amendments to its multi-market • Conclusion of negotiations with GroupM regarding mutually beneficial amendments to its multi-market Symphony Master Services Agreement first signed in August 2016. Amendments included: Symphony Master Services Agreement first signed in August 2016. Amendments included: o an effective extension of the term of the MSA by no less than 3 years, until at least July 2024; o an effective extension of the term of the MSA by no less than 3 years, until at least July 2024; o o the extension of trading terms for the Adslot Media marketplace to any market where Symphony the extension of trading terms for the Adslot Media marketplace to any market where Symphony is deployed, enabling GroupM markets using Symphony to access the integrated Symphony – is deployed, enabling GroupM markets using Symphony to access the integrated Symphony – Adslot Media solution without the need for commercial agreements at a local level; and Adslot Media solution without the need for commercial agreements at a local level; and temporary fee reductions and market tier caps in the half year to 31 December 2020 removed from temporary fee reductions and market tier caps in the half year to 31 December 2020 removed from 1 January 2021. 1 January 2021. o o The Company continues to progress discussions with a number agency holding companies regarding potential The Company continues to progress discussions with a number agency holding companies regarding potential multi-market deployments of Symphony. The Company anticipates further positive developments in these multi-market deployments of Symphony. The Company anticipates further positive developments in these negotiations, providing growth in licence fees in FY22. negotiations, providing growth in licence fees in FY22. 12 Adslot 2021 Annual Report Adslot 2021 Annual Report 13 Adslot 2021 Annual Report 13 Adslot 2021 Annual Report 13 Directors’ Report (Continued) Services Services revenue is derived predominantly from Webfirm, the Group’s Australian-based digital marketing services business, providing website design, hosting, search engine optimisation (SEO), search engine marketing (SEM) and social media marketing services to small-to-medium enterprises. The COVID-19 pandemic resulted in Webfirm’s digital marketing services clients putting a hold on their SEO retained services in the last quarter of FY20, with reductions continuing in FY21. Webfirm revenue for FY21 was $1.5 million, a $0.1 million reduction year-on-year (FY20: $1.6 million). Services revenue, including Webfirm and custom development work for Symphony and Adslot Media customers, for FY21 was $1.8 million, a $0.1 million increase year-on-year (FY20: $1.7 million). Government Stimulus The Group was eligible for Government stimulus in FY21 including JobKeeper (Australia), Paycheck Protection Program (US), Victorian government business support grant and the short time work allowance (Germany), which totalled $1.1 million (FY20: $0.3 million). People The impacts of COVID-19 necessitated a number of changes to the Company’s employee policies, in particular related to time spent in the office. This included: • Company’s entire workforce initially moved to working from home in March 2020 with little measured disruption to productivity; • The cancellation of all international travel, with the exception of limited intra-Europe travel; and • The introduction of a hybrid in-office/remote arrangement for Australian staff (subject to subsequent lockdowns). The Group adopted all government and public health authority guidelines in each of our markets. We have also put additional measures in place to support the health and wellbeing of all our employees in these uncertain times, including a new Employee Assistance Program offering counselling advice to employees and their families and a People & Culture team focused of employee engagement. Cost Management Total operating costs of $12.0 million for FY21 represents a $0.3 million (3%) increase in costs (FY20: $11.7 million), including increased legal fees of $0.6 million primarily due to the FY16 R&D AAT appeal. Due to the impact of the COVID-19 pandemic a number of cost saving initiatives were implemented. The following employee cost reductions were implemented in FY20 (but also impacted FY21) and in FY21: • The Chairman and non-executive directors waived all fees for the quarter to September 2020 (reductions starting March 2020); • 15% salary reduction for the CEO and CFO for the quarter to September 2020 (following 30% reduction in the quarter to June 2020); • up to 12.5% salary reductions across employees earning above a minimum threshold for the quarter to September 2020 (following 25% reductions in the quarter to June 2020); and • ongoing management of all employee related expenses. These initiatives resulted in a $1.5 million or 12% cash saving in employment costs across employee benefits expense and Intellectual Property. Premises costs represent the largest fixed cost of the business. In FY21: • • • the UK and Germany offices were terminated with employees working 100% remotely; rent savings resulting from the Sydney team moving to a smaller premises in the same building in November 2020; and significant rent reduction from WeWork co-working space in New York due to COVID-19. Cost reductions were targeted to ensure continued investment in strategic and revenue-generating product development, and no disruption to existing client relationships. 14 14 Adslot 2021 Annual Report Adslot 2021 Annual Report Directors’ Report (Continued) Services Services revenue is derived predominantly from Webfirm, the Group’s Australian-based digital marketing services business, providing website design, hosting, search engine optimisation (SEO), search engine marketing (SEM) and social media marketing services to small-to-medium enterprises. The COVID-19 pandemic resulted in Webfirm’s digital marketing services clients putting a hold on their SEO retained services in the last quarter of FY20, with reductions continuing in FY21. Webfirm revenue for FY21 was $1.5 million, a $0.1 million reduction year-on-year (FY20: $1.6 million). Services revenue, including Webfirm and custom development work for Symphony and Adslot Media customers, for FY21 was $1.8 million, a $0.1 million increase year-on-year (FY20: $1.7 million). The Group was eligible for Government stimulus in FY21 including JobKeeper (Australia), Paycheck Protection Program (US), Victorian government business support grant and the short time work allowance (Germany), which totalled $1.1 million (FY20: $0.3 million). Government Stimulus People The impacts of COVID-19 necessitated a number of changes to the Company’s employee policies, in particular related to time spent in the office. This included: • Company’s entire workforce initially moved to working from home in March 2020 with little measured • The cancellation of all international travel, with the exception of limited intra-Europe travel; and • The introduction of a hybrid in-office/remote arrangement for Australian staff (subject to subsequent disruption to productivity; lockdowns). The Group adopted all government and public health authority guidelines in each of our markets. We have also put additional measures in place to support the health and wellbeing of all our employees in these uncertain times, including a new Employee Assistance Program offering counselling advice to employees and their families and a People & Culture team focused of employee engagement. Cost Management Total operating costs of $12.0 million for FY21 represents a $0.3 million (3%) increase in costs (FY20: $11.7 million), including increased legal fees of $0.6 million primarily due to the FY16 R&D AAT appeal. Due to the impact of the COVID-19 pandemic a number of cost saving initiatives were implemented. The following employee cost reductions were implemented in FY20 (but also impacted FY21) and in FY21: • The Chairman and non-executive directors waived all fees for the quarter to September 2020 • 15% salary reduction for the CEO and CFO for the quarter to September 2020 (following 30% (reductions starting March 2020); reduction in the quarter to June 2020); • up to 12.5% salary reductions across employees earning above a minimum threshold for the quarter to September 2020 (following 25% reductions in the quarter to June 2020); and • ongoing management of all employee related expenses. These initiatives resulted in a $1.5 million or 12% cash saving in employment costs across employee benefits expense and Intellectual Property. Premises costs represent the largest fixed cost of the business. In FY21: • • • the UK and Germany offices were terminated with employees working 100% remotely; rent savings resulting from the Sydney team moving to a smaller premises in the same building in November 2020; and significant rent reduction from WeWork co-working space in New York due to COVID-19. Cost reductions were targeted to ensure continued investment in strategic and revenue-generating product development, and no disruption to existing client relationships. EBITDA The EBITDA loss for FY21 was $2.4 million (FY20: $12.7 million). In FY20 the Group made a one-off provision of $1.5 million for the part repayment of the FY16 R&D claim and a non-cash goodwill impairment charge of $10.0 million. The Adjusted EBITDA loss for the FY20, excluding these adjustments, was $1.2 million. The EBITDA loss for FY21 was $2.4 million, representing a $1.2 million increased loss on the prior period Adjusted EBITDA, primarily due to the $0.9 million reduction in revenue. Cash Management Key major shareholders and new investors supported the Group in a capital raise of $4.0 million in FY21 contributing net cash inflows of $3.7 million (after transaction costs). Net cash outflows from operating activities for FY21 were $0.3 million, representing a $3.1 million decrease (FY20: $3.4 million). Cash receipts for FY21 were $13.6 million, a 30% decrease of $5.7 million on the prior period (FY20: $19.3 million). Cash payments for operating activities at $15.4 million was a 32% reduction of $7.3 million on the prior period (FY20: $22.8 million), primarily due to reduced publisher payments. The lower cash collections resulted from the reduction in Licence Fees in FY21 and the composition of Adslot Media trades under a ‘direct’ model - the latter also resulting in reduced publisher payments (see Adslot Media payment methods). The Group received $1.7 million (FY20: $0.3 million) in R&D receipts across operating activities ($0.4 million) and investing activities ($1.3 million). The Group received $1.3 million in government stimulus in the period (FY20: $0.1 million). Cash as at 30 June 2021 was $6.8 million (FY20: $6.2 million). Adslot Media Payment Methods: The Company employs two distinct payment methods for trades conducted via Adslot Media. The method employed may be determined by the preferences of either the buyer or seller, but is agreed between those parties prior to transaction. The two payment methods are: • Clearing House: in this model the Company collects the total fees associated with the campaign from the buyer and remits to the publisher net of its fees. This results in higher cash collections but also an associated publisher payment outflow. • Direct: in this model the publisher invoices the buyer directly whilst the Company invoices the publisher for its fees associated with the activity traded. This results in lower cash collections but no associated publisher payment outflow. The Company notes that trades in Europe via the Symphony integration are primarily via a direct model. In addition a larger proportion of US trading via partner marketplaces in the 2021 financial year occurred via the direct model. All other trading is generally conducted via the clearing house model. 14 Adslot 2021 Annual Report Adslot 2021 Annual Report 15 Adslot 2021 Annual Report 15 Directors’ Report (Continued) Matters Subsequent to the End of the Financial Year On 1 July 2021, Adslot announced the launch of the FlowerShop private marketplace. On 2 August 2021, Adslot announced the commencement of trading with Firewood Marketing, a subsidiary of S4 Capital. On 9 August 2021, Mr Tom Triscari was appointed as a US-based Non-Executive Director, as outlined in the ASX release lodged on 10 August 2021. In conjunction with his appointment, Mr Triscari received 6,000,000 options as outlined in Appendix 3X lodged on 10 August 2021. The Company granted the following unlisted share options: • 9,500,000 options issued to employees as outlined in the Appendix 3G lodged on 4 August 2021 • 6,250,000 options issued to a third party as outlined in the Appendix 3G lodged on 4 August 2021 On 11 August 2021, Adslot announced that GroupM had commenced trading on its private, white-labelled version of the Adslot Media marketplace. On 30 August 2021, Adslot announced the extension of its global Symphony contract with GroupM. COVID-19 Pandemic The coronavirus pandemic continues to impact how the business operates across all geographic regions (at the time of lodgement, the Company’s employees are working remotely, with the exception of the Shanghai team). It is not practicable to estimate the duration or potential quantum of the impact of the health and economic crisis, after the reporting date. Other than the above, there has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future years. Environmental regulations The Group’s operations are not subject to any significant environmental regulations under the Commonwealth, State or any other country in which the entity operates. Dividends The Directors do not recommend the declaration of a dividend. No dividend has been declared or paid during the year. 16 16 Adslot 2021 Annual Report Adslot 2021 Annual Report On 2 August 2021, Adslot announced the commencement of trading with Firewood Marketing, a subsidiary of S4 Capital. On 9 August 2021, Mr Tom Triscari was appointed as a US-based Non-Executive Director, as outlined in the ASX release lodged on 10 August 2021. In conjunction with his appointment, Mr Triscari received 6,000,000 options as outlined in Appendix 3X lodged on 10 August 2021. The Company granted the following unlisted share options: • 9,500,000 options issued to employees as outlined in the Appendix 3G lodged on 4 August 2021 • 6,250,000 options issued to a third party as outlined in the Appendix 3G lodged on 4 August 2021 On 11 August 2021, Adslot announced that GroupM had commenced trading on its private, white-labelled version of the Adslot Media marketplace. On 30 August 2021, Adslot announced the extension of its global Symphony contract with GroupM. COVID-19 Pandemic team). The coronavirus pandemic continues to impact how the business operates across all geographic regions (at the time of lodgement, the Company’s employees are working remotely, with the exception of the Shanghai It is not practicable to estimate the duration or potential quantum of the impact of the health and economic crisis, after the reporting date. Other than the above, there has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future years. Environmental regulations The Group’s operations are not subject to any significant environmental regulations under the Commonwealth, State or any other country in which the entity operates. Dividends the year. The Directors do not recommend the declaration of a dividend. No dividend has been declared or paid during Directors’ Report (Continued) Matters Subsequent to the End of the Financial Year Shares under option On 1 July 2021, Adslot announced the launch of the FlowerShop private marketplace. Details of unissued shares or interests under option as at 30 June 2021 are: Issue Type Expiry Date Exercise Price $ Balance at beginning of the year (Number) Issued during the year Forfeited during the year Exercised during the year (Number) (Number) (Number) Ordinary options 04/10/2021 0.073 3,000,000 Ordinary options 25/11/2021 0.060 5,600,000 Ordinary options 25/02/2022 0.035 23,500,000 Ordinary options 15/05/2022 0.034 11,400,000 Ordinary options 27/05/2022 0.036 4,000,000 Ordinary options 30/01/2023 0.060 5,050,000 Ordinary options 02/09/2023 0.041 11,700,000 Ordinary options 12/12/2023 Ordinary options 15/12/2022 Ordinary options 29/01/2024 Ordinary options 12/07/2024 Ordinary options 06/08/2024 Ordinary options 16/12/2024 0.045 0.044 0.032 0.028 0.034 0.043 4,000,000 8,000,000 8,000,000 - - - Balance at end of the year (Number) 3,000,000 5,600,000 23,500,000 11,400,000 4,000,000 5,050,000 11,150,000 4,000,000 8,000,000 8,000,000 - - - - - - - - - - - - - - - - (550,000) - - - - - - - - - - - - - 25,625,000 (2,250,000) - 23,375,000 18,000,000 2,500,000 - - 84,250,000 46,125,000 (2,800,000) - - - 18,000,000 2,500,000 127,575,000 Indemnification and Insurance of Officers The Group has during the financial year, in respect of each person who is or has been an officer of the Group or a related body Corporate, made a relevant agreement for indemnifying against a liability incurred as an officer, including costs and expenses in successfully defending legal proceedings. Since the end of the financial year, the Group has paid premiums to insure all directors and officers of Adslot Ltd and the Adslot Group of companies, against costs incurred in defending any legal proceedings arising out of their conduct as a director and officer of the Group, other than for conduct involving a wilful breach of duty or a contravention of Sections 232 (5) or (6) of the Corporations Act 2011, as permitted by section 241A (3) of the Corporations Act. Disclosure of the premium amount is prohibited by the insurance contract. Proceedings on behalf of the Group No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001. Auditor’s Independence Declaration The auditor’s independence declaration for the year ended 30 June 2021 has been received and can be found on page 27 of the financial report. Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined in Note 19 to the financial statements. The Directors are satisfied that the provision of non-audit services, during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. 16 Adslot 2021 Annual Report Adslot 2021 Annual Report 17 Adslot 2021 Annual Report 17 Remuneration Report The remuneration report is set out under the following headings: Section 1: Section 2: Section 3: Section 4: Section 5: Section 6: Section 7: Section 8: Non-executive directors’ and Chairman’s remuneration Executive remuneration Details of remuneration Executive contracts of employment Long Term Incentives (equity-based compensation) Culture, accountability and remuneration Equity holdings and transactions Other transactions with key management personnel Section 1: Non-executive directors’ and Chairman’s remuneration Non-executive directors’ fees are reviewed annually and are determined by the Board. In making its determination it takes into account fees paid to other non-executive directors of comparable companies. Non-executive directors’ fees are within the maximum aggregate limit of $350,000 per annum agreed to by shareholders at the Annual General Meeting held on 30 November 2009. To preserve the independence and integrity of their position, non-executive directors do not receive performance-based bonuses. For the 2021 financial year, the Chairman’s fees were $100,000 per annum. For the 2021 financial year, non-executive directors’ fees were $50,000 per annum. Mr Andrew Dyer received options in lieu of his non-executive director fees for the 2021 year. In addition, the Chair of the Audit & Risk Committee and the Remuneration Committee received a further $25,000 in recognition of the additional workload of those positions. With the onset of the COVID-19 pandemic and in support of the Group’s immediate actions to reduce costs, the Chairman and non-executive directors waived their fees from March 2020 to September 2020 inclusive. Section 2: Executive remuneration The Board of Directors are responsible for determining and reviewing compensation arrangements for key management personnel and the executive team. The Remuneration Committee makes recommendations on remuneration of key management personnel to the Board. The Board assesses the appropriateness of the nature and amount of emoluments of these employees on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit by: a) Attracting the highest quality employees; b) Retaining the best performing employees; c) Aligning the employees with shareholder outcomes; d) Aligning employee motivation to a cascading set of key performance indicators that drive the most optimal strategic outcomes for the business; and e) Ensuring it aligns with the latest industry best practice. Executives’ remuneration consists of a fixed cash component, short-term incentives in the form of cash bonuses, and long-term incentives in the form of equity-based compensation linked to the long-term prospects and future performance of the Group. The inclusion of equity-based compensation in executives’ remuneration provides a direct link between their remuneration and shareholder wealth, otherwise there are no direct relationships. The Board has regard to the following variables to assess the Group’s performance and benefits for shareholder wealth: Item EPS (cents) Net loss ($) 2021 (0.33) 2020 (0.96) 2019 (0.49) 2018 (0.91) 2017 (0.70) 6,280,774 16,617,725 7,042,755 11,653,319 8,630,187 Share price at 30 June ($) 0.028 0.018 0.028 0.026 0.051 18 18 Adslot 2021 Annual Report Adslot 2021 Annual Report Remuneration Report The remuneration report is set out under the following headings: Non-executive directors’ and Chairman’s remuneration Section 1: Section 2: Section 3: Section 4: Section 5: Executive remuneration Details of remuneration Executive contracts of employment Long Term Incentives (equity-based compensation) Section 6: Culture, accountability and remuneration Section 7: Equity holdings and transactions Section 8: Other transactions with key management personnel Section 1: Non-executive directors’ and Chairman’s remuneration Non-executive directors’ fees are reviewed annually and are determined by the Board. In making its determination it takes into account fees paid to other non-executive directors of comparable companies. Non-executive directors’ fees are within the maximum aggregate limit of $350,000 per annum agreed to by shareholders at the Annual General Meeting held on 30 November 2009. To preserve the independence and integrity of their position, non-executive directors do not receive performance-based bonuses. For the 2021 financial year, the Chairman’s fees were $100,000 per annum. For the 2021 financial year, non-executive directors’ fees were $50,000 per annum. Mr Andrew Dyer received options in lieu of his non-executive director fees for the 2021 year. In addition, the Chair of the Audit & Risk Committee and the Remuneration Committee received a further $25,000 in recognition of the additional workload of those positions. With the onset of the COVID-19 pandemic and in support of the Group’s immediate actions to reduce costs, the Chairman and non-executive directors waived their fees from March 2020 to September 2020 inclusive. Section 2: Executive remuneration The Board of Directors are responsible for determining and reviewing compensation arrangements for key management personnel and the executive team. The Remuneration Committee makes recommendations on remuneration of key management personnel to the Board. The Board assesses the appropriateness of the nature and amount of emoluments of these employees on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit by: a) Attracting the highest quality employees; b) Retaining the best performing employees; c) Aligning the employees with shareholder outcomes; optimal strategic outcomes for the business; and e) Ensuring it aligns with the latest industry best practice. d) Aligning employee motivation to a cascading set of key performance indicators that drive the most Executives’ remuneration consists of a fixed cash component, short-term incentives in the form of cash bonuses, and long-term incentives in the form of equity-based compensation linked to the long-term prospects and future performance of the Group. The inclusion of equity-based compensation in executives’ remuneration provides a direct link between their remuneration and shareholder wealth, otherwise there are no direct The Board has regard to the following variables to assess the Group’s performance and benefits for 2021 (0.33) 2020 (0.96) 2019 (0.49) 2018 (0.91) 2017 (0.70) 6,280,774 16,617,725 7,042,755 11,653,319 8,630,187 Share price at 30 June ($) 0.028 0.018 0.028 0.026 0.051 relationships. shareholder wealth: Item EPS (cents) Net loss ($) 18 Adslot 2021 Annual Report Section 3: Details of remuneration Details of the remuneration of the directors and the key management of the Group and its controlled entities are set out in the following tables. The key management personnel of Adslot Ltd and its controlled entities include the following directors and executive officers: Directors Position Date appointed/resigned as Director Mr Andrew Barlow Non-Executive Chairman Appointed 16 February 2010 Mr Ben Dixon Chief Executive Officer Appointed 1 February 2018 Executive Director Appointed 23 December 2013 Mr Andrew Dyer Non-Executive Director Appointed 28 May 2018 Mr Adrian Giles Non-Executive Director Appointed 26 November 2013 Ms Sarah Morgan Non-Executive Director Appointed 27 January 2015 Executive Officers Position Date appointed/resigned as Executive Ms Felicity Conlan Company Secretary Chief Financial Officer Appointed 9 October 2017 Appointed 30 August 2017 Mr Tom Peacock Chief Commercial Officer Appointed 23 December 2013 Due to the impact of COVID-19 on the Group, a number of employment cost reduction initiatives were implemented in the period which included: • The Chairman and non-executive directors waived all fees from March to September 2020 (inclusive); • The CEO and the CFO had a salary reduction of 30% in the quarter to June 2020 and 15% in the quarter to September 2020; • Up to 25% and 12.5% salary reductions across employees earning above a minimum threshold for the quarters to June 2020 and September 2020 respectively; • Further headcount reductions due to redundancy and natural attrition; and • A freeze on all salary increases and new hires. Adslot 2021 Annual Report 19 Adslot 2021 Annual Report 19 Remuneration Report (Continued) Group 2021 Name Executive directors Short-term benefits Salary & fees $ Short Term Incentive $ Other $ Long Term Benefits Long Service Leave $ Post- employment benefits Share-based payment Super- annuation Share Options Performance Rights Total $ $ $ $ Mr B Dixon 288,750 - - 5,443 21,694 249,231 - 565,118 Non-executive directors Mr A Barlow (i) Mr A Giles Ms S Morgan Mr A Dyer 68,493 51,370 51,370 - Other key management personnel Ms F Conlan Mr T Peacock Totals 264,688 231,531 956,202 - - - - - - - - - - - - - - - - - - 6,507 4,880 4,880 - - - - 46,505 1,390 4,350 21,694 21,237 9,397 9,397 - - - - - - 75,000 56,250 56,250 46,505 297,169 266,515 11,183 80,892 314,530 - 1,362,807 (i) Mr Barlow moved from an Executive Chairman role to a non-executive role in July 2020. Short Term Incentives Short Term Incentives (STIs) paid in the year, along with the total STI opportunity in each year, relating to the 2020 and 2021 financial years, are outlined in the table below: Name Amount Paid Total 2020 STI Opportunity Amount Paid Total 2021 STI Opportunity Assessment Criteria Mr B Dixon Ms F Conlan Mr T Peacock $ - - - $ 100,000 100,000 (a) 100,000 (a) $ - - - $ 100,000 Group performance to budget and executive management to achieve KPIs 100,000 (a) Revenue achievement and KPIs 100,000 (a) Revenue achievement and KPIs (a) A new STI plan was introduced in 2020 with a $100,000 STI opportunity. A third assessed on revenue targets at the half year and the balance assessed on revenue targets and personal KPIs at the full year No STIs were paid to key management personnel in relation to the 2021 financial year. 20 20 Adslot 2021 Annual Report Adslot 2021 Annual Report Remuneration Report (Continued) Group 2021 Name Short-term benefits employment Share-based payment Salary & fees $ Short Term Incentive Other $ $ Post- Benefits benefits Long Term Long Service Leave $ Super- Share Performance annuation Options Rights $ $ $ $ Total Mr B Dixon 288,750 - - 5,443 21,694 249,231 - 565,118 Executive directors Non-executive directors Mr A Barlow (i) Mr A Giles Ms S Morgan Mr A Dyer Ms F Conlan Mr T Peacock Totals 68,493 51,370 51,370 - 264,688 231,531 956,202 Other key management personnel - - - - - - - - - - - - - - - - - - 6,507 4,880 4,880 - - - - 46,505 1,390 4,350 21,694 21,237 9,397 9,397 - - - - - - 75,000 56,250 56,250 46,505 297,169 266,515 11,183 80,892 314,530 - 1,362,807 (i) Mr Barlow moved from an Executive Chairman role to a non-executive role in July 2020. Short Term Incentives Short Term Incentives (STIs) paid in the year, along with the total STI opportunity in each year, relating to the 2020 and 2021 financial years, are outlined in the table below: Name Mr B Dixon Amount Paid Total 2020 STI Opportunity Amount Paid Total 2021 Opportunity STI Assessment Criteria $ 100,000 $ 100,000 Group performance to budget and executive management to achieve KPIs Ms F Conlan 100,000 (a) 100,000 (a) Revenue achievement and KPIs $ - - - $ - - - Mr T Peacock 100,000 (a) 100,000 (a) Revenue achievement and KPIs (a) A new STI plan was introduced in 2020 with a $100,000 STI opportunity. A third assessed on revenue targets at the half year and the balance assessed on revenue targets and personal KPIs at the full year No STIs were paid to key management personnel in relation to the 2021 financial year. Group 2020 Name Executive directors Mr A Barlow (i) Mr B Dixon Salary & fees $ 95,883 277,500 Non-executive directors Mr A Giles Mr Q George (ii) Ms S Morgan Mr A Dyer 50,000 2,273 45,662 - Other key management personnel Ms F Conlan Mr T Peacock Totals 237,708 224,063 933,089 Short-term benefits Short Term Incentive Other $ $ Long Term Benefits Long Service Leave $ Post- employment benefits Share-based payment Super- annuation $ Share Options $ Performance Rights $ - - - - - - - - - - - - - - - - - - - 5,715 5,784 - 20,739 2,557 - - - - - - 4,338 - - - - 4,409 1,186 4,685 20,324 20,009 2,979 2,979 11,586 71,194 12,924 - - - - - - - - - Total $ 101,667 306,511 50,000 2,273 50,000 4,409 262,197 251,736 1,028,793 (i) (ii) includes $35,000 consultancy fees incurred during his appointment as Executive Chairman. Mr George resigned on 16 July 2019. Short Term Incentives Short Term Incentives (STIs) paid in the year, along with the total STI opportunity in each year, relating to the 2019 and 2020 financial years, are outlined in the table below: Name Amount Paid Total 2019 STI Opportunity Amount Paid Total 2020 STI Opportunity Assessment Criteria $ $ Mr B Dixon 50,000 100,000 Ms F Conlan Mr T Peacock - - 50,000 N/A (a) $ - - - $ 100,000 Group performance to budget and executive management to achieve KPIs 100,000 (b) Revenue achievement and KPIs 100,000 (b) Revenue achievement and KPIs (a) (b) Not applicable as total bonus opportunity is based on a percentage of the Group’s performance. A new STI plan was introduced in 2020 with a $100,000 STI opportunity. A third assessed on revenue targets at the half year and the balance assessed on revenue targets and personal KPIs at the full year No STIs were paid to key management personnel in relation to the 2020 financial year. 20 Adslot 2021 Annual Report Adslot 2021 Annual Report 21 Adslot 2021 Annual Report 21 Remuneration Report (Continued) Section 4: Executive contracts of employment Formal contracts of employment for all members of the key management personnel are in place. Contractual terms for most executives are similar but do, on occasions, vary to suit different needs. The following table summarises the key contractual terms for all key management personnel. Length of contract Open ended. Fixed Remuneration Remuneration comprises salary and statutory employer superannuation contributions. Incentive Plans Notice Period Resignation Retirement Eligible to participate. Incentive criteria and award opportunities vary for each executive. Key Management Personnel, including executive directors, have notice periods ranging from three to four months. The Chief Executive Officer has a notice period of four months and the Chief Financial Officer and Chief Commercial Officer have notice periods of three months. Other Executives have notice periods ranging from four weeks to three months. Employment may be terminated by giving notice consistent with the notice period. There are no financial entitlements due from the Group on retirement of an executive. Termination by the Group The Group may terminate the employment agreement by providing notice consistent with the notice period or payment in lieu of the notice period. Redundancy Payments for redundancy are discretionary and are determined having regard to the particular circumstances. There are no contractual commitments to pay redundancy over and above any statutory entitlement. Termination for serious misconduct The Group may terminate the employment agreement at any time without notice, and the executive will be entitled to payment of remuneration only up to the date of termination. Section 5: Long Term Incentives (equity-based compensation) Incentive Option Plan At the November 2017 Annual General Meeting, shareholders approved the creation of the Group’s Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which convert to fully-paid ordinary shares upon exercise, subject to meeting certain vesting criteria. The Incentive Option Plan was re-approved by shareholders at the January 2021 Annual General Meeting. The objective of the Incentive Option Plan is to attract, motivate and retain key employees and the Group considers that the adoption of the Incentive Option Plan and the future issue of options under the Incentive Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. Adslot continually reviews its operations, performance and the broader market conditions to ensure that incentives offered to key executives are aligned with the growth of the Group and shareholder outcomes whilst ensuring it can attract and retain experienced talent in a competitive industry. Adslot continues to operate within a highly competitive employment environment for experienced people in the technology and software field. No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director of the Group. The following tables show grants and movements of share-based compensation to directors and senior management during the current financial year and the previous financial year: 22 22 Adslot 2021 Annual Report Adslot 2021 Annual Report Notice Period Resignation Retirement Group Redundancy Remuneration Report (Continued) Section 4: Executive contracts of employment Formal contracts of employment for all members of the key management personnel are in place. Contractual terms for most executives are similar but do, on occasions, vary to suit different needs. The following table summarises the key contractual terms for all key management personnel. Length of contract Open ended. Fixed Remuneration Remuneration comprises salary and statutory employer superannuation Incentive Plans Eligible to participate. Incentive criteria and award opportunities vary for each contributions. executive. Key Management Personnel, including executive directors, have notice periods ranging from three to four months. The Chief Executive Officer has a notice period of four months and the Chief Financial Officer and Chief Commercial Officer have notice periods of three months. Other Executives have notice periods ranging from four weeks to three months. Employment may be terminated by giving notice consistent with the notice period. There are no financial entitlements due from the Group on retirement of an executive. Termination by the The Group may terminate the employment agreement by providing notice consistent with the notice period or payment in lieu of the notice period. Payments for redundancy are discretionary and are determined having regard to the particular circumstances. There are no contractual commitments to pay redundancy over and above any statutory entitlement. Termination for serious misconduct The Group may terminate the employment agreement at any time without notice, and the executive will be entitled to payment of remuneration only up to the date of termination. Section 5: Long Term Incentives (equity-based compensation) Incentive Option Plan At the November 2017 Annual General Meeting, shareholders approved the creation of the Group’s Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which convert to fully-paid ordinary shares upon exercise, subject to meeting certain vesting criteria. The Incentive Option Plan was re-approved by shareholders at the January 2021 Annual General Meeting. The objective of the Incentive Option Plan is to attract, motivate and retain key employees and the Group considers that the adoption of the Incentive Option Plan and the future issue of options under the Incentive Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. Adslot continually reviews its operations, performance and the broader market conditions to ensure that incentives offered to key executives are aligned with the growth of the Group and shareholder outcomes whilst ensuring it can attract and retain experienced talent in a competitive industry. Adslot continues to operate within a highly competitive employment environment for experienced people in the technology and software field. of the Group. No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director The following tables show grants and movements of share-based compensation to directors and senior management during the current financial year and the previous financial year: 2021 Name Series Ian Lowe (i) Ben Dixon Felicity Conlan Tom Peacock Felicity Conlan Tom Peacock Andrew Dyer Felicity Conlan Tom Peacock Felicity Conlan Tom Peacock Ben Dixon (ii) OP # 18-1 OP # 18-1 OP # 18-2 OP # 18-2 OP # 18-3 OP # 18-3 OP # 18-5 OP # 20-1 OP # 20-1 OP # 21-1 OP # 21-1 OP # 21-2 Andrew Dyer (iii) DOP # 21-1 Balance at beginning of the year (Number) 2,000,000 1,000,000 1,000,000 1,000,000 6,500,000 6,500,000 4,000,000 1,000,000 1,000,000 - - - - Granted during the year (Number) Expired during the year (Number) Exercised during the year (Number) Balance at the end of the year (Number) Vested and exercisable at the end of the year (Number) - - - - - 2,000,000 2,000,000 - 1,000,000 1,000,000 - - - - - - - - - - - - 1,000,000 1,000,000 1,000,000 1,000,000 6,500,000 6,500,000 6,500,000 6,500,000 - - - 4,000,000 4,000,000 - - 1,250,000 1,250,000 18,000,000 2,500,000 - - - - - - - - - - - 1,000,000 1,000,000 1,250,000 1,250,000 333,334 333,334 - - - 18,000,000 12,000,000 - 2,500,000 1,250,000 - 47,000,000 35,916,668 24,000,000 23,000,000 (i) Based on the Separation and Exit Deed signed with the Group, Mr Lowe is entitled to retain the 2,000,000 options issued to him. The Board has agreed to exercise its discretion to waive the vesting condition that Mr Lowe remains an employee. (ii) Approved at the Annual General Meeting on 28 January 2021. (iii) Mr Dyer’s options were granted outside of the Option Plan and are subject to the same terms and conditions as set out in the Option Plan. The grant was approved at the Annual General Meeting on 28 January 2021. The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2021 included: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value $ Expected Volatility Risk Free Interest rate OP # 21-1 OP # 21-2 DOP # 21-1 13/07/20 12/07/24 0.028 0.019 126.55% 0.25% 07/08/20 06/08/24 0.034 0.023 129.74% 0.25% 17/12/20 16/12/24 0.043 0.029 137.18% 0.09% 22 Adslot 2021 Annual Report Adslot 2021 Annual Report 23 Adslot 2021 Annual Report 23 Remuneration Report (Continued) 2020 Name Series Ian Lowe (i) Ben Dixon Felicity Conlan Tom Peacock Felicity Conlan Tom Peacock Andrew Dyer Felicity Conlan Tom Peacock OP # 18-1 OP # 18-1 OP # 18-2 OP # 18-2 OP # 18-3 OP # 18-3 OP # 18-5 OP # 20-1 OP # 20-1 Balance at beginning of the year (Number) 2,000,000 1,000,000 1,000,000 1,000,000 6,500,000 6,500,000 4,000,000 Granted during the year (Number) Expired during the year (Number) Exercised during the year (Number) Balance at the end of the year (Number) Vested and exercisable at the end of the year (Number) - - - - - 2,000,000 2,000,000 - 1,000,000 1,000,000 - - - - - - - - - - - - 1,000,000 1,000,000 1,000,000 1,000,000 6,500,000 6,500,000 6,500,000 6,500,000 - - - 4,000,000 4,000,000 - 1,000,000 - 1,000,000 22,000,000 2,000,000 - - - - - - 1,000,000 1,000,000 - - 24,000,000 22,000,000 (i) Based on the Separation and Exit Deed signed with the Group, Mr Lowe is entitled to retain the 2,000,000 options issued to him. The Board has agreed to exercise its discretion to waive the vesting condition that Mr Lowe remains an employee. The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2020 included: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value $ Expected Volatility Risk Free Interest rate OP # 20-1 03/09/19 02/09/23 0.041 0.028 62.60% 0.99% Details of Share Options, ESOP and other rights to ordinary shares in the Group provided as remuneration of directors and the key management personnel of the Group are set out below: Name Directors Mr A Giles Mr A Barlow Mr B Dixon Ms S Morgan Mr A Dyer Other key management personnel Ms F Conlan Mr T Peacock Options Granted During the Year 2021 (Options) 2020 (Options) Number $ Number $ - - - - 18,000,000 324,301 - 2,500,000 1,250,000 1,250,000 - 58,743 18,225 18,225 - - - - - - - - - - 1,000,000 1,000,000 10,724 10,724 The assessed fair value at issue date of the rights, and the assessed fair value at grant date of the options, granted to the executive are allocated equally over the period from issue/grant date to vesting date, and the amount is included in the remuneration tables above. 24 24 Adslot 2021 Annual Report Adslot 2021 Annual Report Remuneration Report (Continued) 2020 Name Series Ian Lowe (i) Ben Dixon Felicity Conlan Tom Peacock Felicity Conlan Tom Peacock Andrew Dyer Felicity Conlan Tom Peacock OP # 18-1 OP # 18-1 OP # 18-2 OP # 18-2 OP # 18-3 OP # 18-3 OP # 18-5 OP # 20-1 OP # 20-1 2,000,000 1,000,000 1,000,000 1,000,000 6,500,000 6,500,000 4,000,000 - - - - - 1,000,000 - 1,000,000 Balance at Exercised Balance at the Vested and beginning of Granted during Expired during during the end of the exercisable at the the year (Number) the year (Number) the year (Number) year year end of the year (Number) (Number) (Number) - - - - - 2,000,000 2,000,000 - 1,000,000 1,000,000 - - - 4,000,000 4,000,000 - - - - - - - 1,000,000 1,000,000 1,000,000 1,000,000 6,500,000 6,500,000 6,500,000 6,500,000 1,000,000 1,000,000 - - - - - - - - - 22,000,000 2,000,000 24,000,000 22,000,000 (i) Based on the Separation and Exit Deed signed with the Group, Mr Lowe is entitled to retain the 2,000,000 options issued to him. The Board has agreed to exercise its discretion to waive the vesting condition that Mr Lowe remains an employee. The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2020 included: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value $ Expected Volatility Risk Free Interest rate OP # 20-1 03/09/19 02/09/23 0.041 0.028 62.60% 0.99% Details of Share Options, ESOP and other rights to ordinary shares in the Group provided as remuneration of directors and the key management personnel of the Group are set out below: Name Directors Mr A Giles Mr A Barlow Mr B Dixon Ms S Morgan Mr A Dyer Ms F Conlan Mr T Peacock Other key management personnel Options Granted During the Year 2021 (Options) 2020 (Options) Number $ Number $ - - - 18,000,000 324,301 2,500,000 58,743 - - - - - - - - - - - - - 1,250,000 1,250,000 18,225 18,225 1,000,000 1,000,000 10,724 10,724 Section 6: Culture, accountability and remuneration The Group’s values of respect, collaboration, communication, integrity and innovation remain critical to our culture and effectively guide our employees in making decisions that realise opportunity for the benefit of our clients, our shareholders, our employees and the communities in which we operate. Employees are made aware that these values form the basis of all behaviours and actions. These behavioural expectations are outlined in the Board approved Code of Conduct. The Group communicates and reinforces our culture through executive communications, non-monetary performance recognition, policy reminders and updates, training, learning and development. The Remuneration Committee and the Board are able to assess culture in many ways including through People & Culture reporting, senior management off-sites, department head presentations, staff survey results, as well as through personal observation of management and staff behaviours and actions. The remuneration framework supports our principles by motivating staff to be innovative but also be accountable for their decisions within the business. Section 7: Equity holdings and transactions The number of shares in the Group held during the financial year by each Director of Adslot Ltd and other key management personnel of the Group, including their personally related parties, are set out below: 2021 Name Directors Mr A Giles Mr A Barlow Mr B Dixon Ms S Morgan Mr A Dyer Other key management personnel Ms F Conlan Mr T Peacock Totals Balance at the start of the year Received during the year on exercise of an option or right Net other changes during the year Balance at the end of the year (Number) (Number) (Number) (Number) 12,571,452 58,352,668 37,603,660 200,500 49,111,342 500,000 3,375,000 161,714,622 - - - - - - - - 2,123,339 9,350,000 14,694,791 67,702,668 - 37,603,660 1,034,483 5,000,000 1,234,983 54,111,342 - - 500,000 3,375,000 17,507,822 179,222,444 Section 8: Other transactions with Key Management Personnel Transactions with Directors and their personally related entities: During the year the Company earned revenue of $25,888 (2020: $28,242) from a company requiring web development, hosting and marketing services related to Mr Adrian Giles on normal commercial terms and conditions. There were no other transactions with directors and their personally related entities for the financial years ending 30 June 2021 and 30 June 2020. This marks the end of the audited remuneration report. This report is made in accordance with a resolution of directors. The assessed fair value at issue date of the rights, and the assessed fair value at grant date of the options, granted to the executive are allocated equally over the period from issue/grant date to vesting date, and the amount is included in the remuneration tables above. Andrew Barlow Chairman 30 August 2021 24 Adslot 2021 Annual Report Adslot 2021 Annual Report 25 Adslot 2021 Annual Report 25 Other Directors’ Report Disclosures Directors Andrew Barlow Chairman Sarah Morgan Non-Executive Director Ben Dixon CEO & Executive Director Andrew Dyer Non-Executive Director Adrian Giles Non-Executive Director Tom Triscari Non-Executive Director Mr Andrew Barlow, Mr Adrian Giles, Mr Ben Dixon, Ms Sarah Morgan and Mr Andrew Dyer were directors for the whole financial year and up to the date of this report. Mr Tom Triscari (Non-Executive Director) was appointed on 9 August 2021. Directorships of other listed companies Other than those disclosed on pages 6 to 7 of this Annual Report no director holds a Directorship in any other listed companies in the three-year period immediately before the end of the financial year. Directors’ shareholdings The following table sets out each director’s relevant interest in shares or options in shares of the Group as at the date of this report. Directors Ordinary Shares Share Options Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Ms Sarah Morgan Mr Andrew Dyer Mr Tom Triscari # 67,702,668 14,694,791 37,603,660 1,234,983 54,111,342 - # - - 19,000,000 - 6,500,000 6,000,000 Remuneration of directors and senior management Information about the remuneration of directors and senior management is set out in the remuneration report of this directors’ report. Directors’ Meetings The following table sets out the number of meetings of the Group’s Directors held during the year ended 30 June 2021 and the number of meetings attended by each Director. Directors Held Attended Held Attended Held Attended Board of Directors Remuneration Committee Audit and Risk Committee Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Ms Sarah Morgan Mr Andrew Dyer 8 8 8 8 8 8 8 8 8 8 4 4 - - 3 4 4 - - 3 - 6 - 6 6 - 5 - 6 6 Principal activities Adslot Ltd derives revenue from two principal activities: 1. Trading Technology - comprises Adslot Media, a leading global media trading technology platform, and Symphony, market-leading workflow automation technology for media agencies. 2. Services - comprises digital marketing services - provided by the Group’s Webfirm division - and project- based customisation of Trading Technology. 26 26 Adslot 2021 Annual Report Adslot 2021 Annual Report Other Directors’ Report Disclosures Directors Andrew Barlow Chairman Sarah Morgan Ben Dixon Adrian Giles CEO & Executive Director Non-Executive Director Andrew Dyer Tom Triscari Non-Executive Director Non-Executive Director Non-Executive Director Mr Andrew Barlow, Mr Adrian Giles, Mr Ben Dixon, Ms Sarah Morgan and Mr Andrew Dyer were directors for the whole financial year and up to the date of this report. Mr Tom Triscari (Non-Executive Director) was appointed on 9 August 2021. Directorships of other listed companies Other than those disclosed on pages 6 to 7 of this Annual Report no director holds a Directorship in any other listed companies in the three-year period immediately before the end of the financial year. The following table sets out each director’s relevant interest in shares or options in shares of the Group as at Directors’ shareholdings the date of this report. Directors Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Ms Sarah Morgan Mr Andrew Dyer Mr Tom Triscari of this directors’ report. Directors’ Meetings Ordinary Shares Share Options # 67,702,668 14,694,791 37,603,660 1,234,983 54,111,342 - # - - - 19,000,000 6,500,000 6,000,000 Remuneration of directors and senior management Information about the remuneration of directors and senior management is set out in the remuneration report The following table sets out the number of meetings of the Group’s Directors held during the year ended 30 June 2021 and the number of meetings attended by each Director. Directors Held Attended Held Attended Held Attended Board of Directors Remuneration Committee Audit and Risk Committee Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Ms Sarah Morgan Mr Andrew Dyer 8 8 8 8 8 8 8 8 8 8 4 4 - - 3 4 4 - - 3 - 6 - 6 6 - 5 - 6 6 Principal activities Adslot Ltd derives revenue from two principal activities: 2. Services - comprises digital marketing services - provided by the Group’s Webfirm division - and project- based customisation of Trading Technology. Collins Square, Tower 5 727 Collins Street Melbourne Victoria 3008 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Adslot Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Adslot Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants M J Climpson Partner – Audit & Assurance Melbourne, 30 August 2021 1. Trading Technology - comprises Adslot Media, a leading global media trading technology platform, and Symphony, market-leading workflow automation technology for media agencies. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. 26 Adslot 2021 Annual Report 24 Adslot 2021 Annual Report 27 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2021 Notes 3 3 4,10 4,8 4 21 4 10 8 5 Total revenue from continuing operations Other income Total revenue and other income Hosting & other related technology costs Employee benefits expense Impairment of receivables Other operating expenses Share-based payment expense Depreciation and amortisation expenses Impairment of Goodwill Provision for R&D claim for financial year 2015/2016 Interest Expense Total expenses Loss before income tax expense Income tax benefit / (expense) Loss after income tax expense Net loss attributable to the members Other comprehensive income / (loss) Items that may be reclassified subsequently to profit or loss Foreign exchange translation Total other comprehensive income / (loss) Total comprehensive loss attributable to the members Earnings per share (EPS) from loss from continuing operations attributable to the ordinary equity holders of the Group Basic earnings per share Diluted earnings per share 17 17 2021 $ 8,233,147 1,389,456 9,622,603 (1,370,854) (7,629,008) 19,085 (2,526,739) (537,168) (3,596,794) - - (97,994) (15,739,472) (6,116,869) (163,905) (6,280,774) (6,280,774) 2020 $ 9,835,906 737,044 10,572,950 (1,290,381) (7,654,417) (19,565) (2,550,892) (207,270) (3,665,792) (10,000,000) (1,527,734) (148,041) (27,064,092) (16,491,142) (126,583) (16,617,725) (16,617,725) (3,383) (3,383) 31,588 31,588 (6,284,157) (16,586,137) 2021 Cents (0.33) (0.33) 2020 Cents (0.96) (0.96) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 28 28 Adslot 2021 Annual Report Adslot 2021 Annual Report Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position For the year ended 30 June 2021 As at 30 June 2021 Total revenue from continuing operations Other income Total revenue and other income Hosting & other related technology costs Employee benefits expense Impairment of receivables Other operating expenses Share-based payment expense Depreciation and amortisation expenses Impairment of Goodwill Interest Expense Total expenses Loss before income tax expense Income tax benefit / (expense) Loss after income tax expense Net loss attributable to the members Other comprehensive income / (loss) Provision for R&D claim for financial year 2015/2016 Items that may be reclassified subsequently to profit or loss Foreign exchange translation Total other comprehensive income / (loss) Earnings per share (EPS) from loss from continuing operations attributable to the ordinary equity holders of the Group Basic earnings per share Diluted earnings per share Notes 3 3 4,10 4,8 4 21 4 10 8 5 17 17 2021 $ 8,233,147 1,389,456 9,622,603 (1,370,854) (7,629,008) 19,085 (2,526,739) (537,168) (3,596,794) - - (97,994) (15,739,472) (6,116,869) (163,905) (6,280,774) (6,280,774) (3,383) (3,383) 2021 Cents (0.33) (0.33) 2020 $ 9,835,906 737,044 10,572,950 (1,290,381) (7,654,417) (19,565) (2,550,892) (207,270) (3,665,792) (10,000,000) (1,527,734) (148,041) (27,064,092) (16,491,142) (126,583) (16,617,725) (16,617,725) 31,588 31,588 2020 Cents (0.96) (0.96) Total comprehensive loss attributable to the members (6,284,157) (16,586,137) Current assets Cash and cash equivalents Trade and other receivables Prepayments Total current assets Non-current assets Property, plant & equipment Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Other liabilities Lease liability Provisions Total current liabilities Non-current liabilities Lease liability Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Notes 2021 $ 2020 $ 7 8 9 5 10 11 12 13 14 13 14 5 15 16 6,826,853 4,040,885 249,988 6,160,440 4,822,711 209,723 11,117,726 11,192,874 1,780,962 1,845,736 34,386 36,370 12,694,084 13,184,940 14,509,432 15,067,046 25,627,158 26,259,920 4,516,056 3,098,704 641,141 594,101 720,720 685,610 886,952 634,916 6,472,018 5,306,182 1,161,470 683,482 34,386 960,915 675,146 36,370 1,879,338 1,672,431 8,351,356 6,978,613 17,275,802 19,281,307 155,607,845 151,866,361 1,473,259 939,474 (139,805,302) (133,524,528) 17,275,802 19,281,307 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 28 Adslot 2021 Annual Report Adslot 2021 Annual Report 29 Adslot 2021 Annual Report 29 Consolidated Statement of Changes in Equity For the year ended 30 June 2021 2021 Balance at 1 July 2020 Movement in foreign exchange translation reserve Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) Notes Issued Capital $ 151,866,361 Reserves $ 939,474 Accumulated Losses $ (133,524,528) Total Equity $ 19,281,307 16 - (3,383) - - (3,383) (3,383) (3,383) - - - - (6,280,774) (6,280,774) (3,383) (6,280,774) (6,284,157) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Employees share-based expense reserve Directors share-based payments expense 15 16 16 3,741,484 - - - 490,663 46,505 3,741,484 537,168 - - - - 3,741,484 490,663 46,505 4,278,652 Balance 30 June 2021 155,607,845 1,473,259 (139,805,302) 17,275,802 2020 Balance at 1 July 2019 Notes Issued Capital $ 145,838,216 Reserves $ 649,149 Accumulated Losses $ (116,890,245) Total Equity $ 29,597,120 Adjustment from adoption of AASB 16 - - (16,558) (16,558) Adjusted balance at 1 July 2019 Movement in foreign exchange translation reserve Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Share-based payments - third party Employees share-based payments reserve 16 15 16 16 145,838,216 649,149 (116,906,803) 29,580,562 - - - - 31,588 31,588 - - 31,588 31,588 - (16,617,725) (16,617,725) 31,588 (16,617,725) (16,586,137) 6,079,612 (51,467) - 6,028,145 - 51,467 207,270 258,737 - - - - 6,079,612 - 207,270 6,286,882 Balance 30 June 2020 151,866,361 939,474 (133,524,528) 19,281,307 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes 30 30 Adslot 2021 Annual Report Adslot 2021 Annual Report Consolidated Statement of Changes in Equity For the year ended 30 June 2021 Consolidated Statement of Cash Flows For the year ended 30 June 2021 Contributions of equity, net of transaction costs 3,741,484 - - - 490,663 46,505 3,741,484 537,168 3,741,484 490,663 46,505 4,278,652 Balance 30 June 2021 155,607,845 1,473,259 (139,805,302) 17,275,802 Balance at 1 July 2020 Movement in foreign exchange translation reserve Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) Transactions with equity holders in their capacity as equity holders Employees share-based expense reserve Directors share-based payments expense 2021 2020 Balance at 1 July 2019 Adjustment from adoption of AASB 16 Adjusted balance at 1 July 2019 Movement in foreign exchange translation reserve Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Share-based payments - third party Employees share-based payments reserve 15 16 16 16 15 16 16 Notes Issued Capital $ Accumulated Reserves Losses $ $ Total Equity $ 151,866,361 939,474 (133,524,528) 19,281,307 16 - (3,383) (3,383) - - (3,383) (3,383) - (6,280,774) (6,280,774) (3,383) (6,280,774) (6,284,157) - - - - - - - - Notes Issued Capital $ Accumulated Reserves Losses $ $ Total Equity $ 145,838,216 649,149 (116,890,245) 29,597,120 - (16,558) (16,558) 145,838,216 649,149 (116,906,803) 29,580,562 31,588 31,588 - - 31,588 31,588 - (16,617,725) (16,617,725) 31,588 (16,617,725) (16,586,137) 6,079,612 (51,467) - 6,028,145 - 51,467 207,270 258,737 6,079,612 - 207,270 6,286,882 - - - - - - - - Balance 30 June 2020 151,866,361 939,474 (133,524,528) 19,281,307 Notes 2021 $ 2020 $ Cash flows from operating activities Receipts from trade and other debtors Interest received Receipt of R&D tax incentive and other Grants 13,555,868 19,294,163 12,324 49,746 1,713,958 183,175 Payments to trade creditors, other creditors and employees (15,473,076) (22,769,767) Income tax refund Interest paid 1,118 4,338 (103,379) (144,063) Net cash outflows from operating activities 22 (293,187) (3,382,408) Cash flows from investing activities Payments for property, plant and equipment Receipt of R&D tax incentive relating to capitalised assets Payments for intangible assets Net cash outflows from investing activities (9,066) 1,337,683 (3,105,558) (6,099) 277,760 (4,562,586) (1,776,941) (4,290,925) Cash flows from financing activities Proceeds from issue of shares Payments of equity raising costs Payments for leased assets Proceeds from borrowings 4,002,000 (278,984) (914,787) 163,732 6,400,000 (328,250) (681,698) 167,315 12(ii) Net cash inflows from financing activities 2,971,961 5,557,367 Net increase / (decrease) in cash held Cash at the beginning of the financial year Effects of exchange rate changes on cash 901,833 6,160,440 (235,420) (2,115,966) 8,165,544 110,862 Cash at the end of the financial year 7 6,826,853 6,160,440 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 30 Adslot 2021 Annual Report Adslot 2021 Annual Report 31 Adslot 2021 Annual Report 31 Notes to the Financial Statements For the year ended 30 June 2021 Summary of Significant Accounting Policies The financial report covers Adslot Ltd (‘the Company’) and controlled entities (‘the Group’). Adslot Ltd is a listed public company, incorporated and domiciled in Australia. The financial report is for the financial year ended 30 June 2021 and is presented in Australian dollars. The principal accounting policies adopted in the preparation of these consolidated financial statements are summarised below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations The Group has adopted all of the new, revised or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. Any new, revised or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation This general-purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. It is noted that Directors have considered the impact of the COVID-19 pandemic on accounting policies, judgements and estimates, as outlined in the applicable area in the Notes to the Financial Statements. Compliance with IFRS Australian Accounting Standards include International Financial Reporting Standards as adopted in Australia. Compliance with Australian Accounting Standards ensures that the financial statements and notes of Adslot Ltd comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Adslot Ltd is a for-profit entity for the purpose of preparing the financial statements. Historical cost convention These financial statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets. Under the historical cost convention assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. 32 32 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements For the year ended 30 June 2021 Summary of Significant Accounting Policies The financial report covers Adslot Ltd (‘the Company’) and controlled entities (‘the Group’). Adslot Ltd is a listed public company, incorporated and domiciled in Australia. The financial report is for the financial year ended 30 June 2021 and is presented in Australian dollars. The principal accounting policies adopted in the preparation of these consolidated financial statements are summarised below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations The Group has adopted all of the new, revised or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. Any new, revised or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation Corporations Act 2001. Compliance with IFRS This general-purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the It is noted that Directors have considered the impact of the COVID-19 pandemic on accounting policies, judgements and estimates, as outlined in the applicable area in the Notes to the Financial Statements. Australian Accounting Standards include International Financial Reporting Standards as adopted in Australia. Compliance with Australian Accounting Standards ensures that the financial statements and notes of Adslot Ltd comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Adslot Ltd is a for-profit entity for the purpose of preparing the financial statements. Historical cost convention These financial statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets. Under the historical cost convention assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Going concern Management continues to invest resources to support growth in trading fees, primarily from media agency holding companies and their subsidiaries in the US and UK markets. In December 2020 the Group successfully raised $4.0 million via a share placement, resulting in $3.7 million net cash inflows in the period under review. Inflows from financing activities of $3.0 million, combined with the net cash outflows from operating and investing activities of $2.1 million, resulted in net cash inflows of $0.9 million in the 2021 financial year. Management anticipates incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. Based on the findings made by Innovation and Science Australia in relation to the FY16 R&D activities, the ATO amended the R&D Tax Incentive Offset for FY16. The Group continues to defend the legitimacy of its claim and has requested a review of the findings by the Administrative Appeals Tribunal (AAT). If successful, the $1.5 million will be refunded to the Group. The FY2021 R&D claim of $1.1 million is expected to be received in the first half of the 2022 financial year. A delay in expected growth in revenues, and/or a delay in payment of the FY2021 R&D claim, has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. However, the directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: the Group had a cash position of $6.8 million at 30 June 2021; • • FY2021 R&D claim of $1.1 million is expected to be received in the first half of FY2021; • Symphony licence fees which are largely recurring and predictable; • ongoing cost management initiatives including reduction to office space in each market, reducing the largest fixed cost of the business outside salaries; the opportunity to implement further cost reductions; and the Group has a proven track record of successfully raising capital from existing and new investors. • • As part of the directors’ consideration of the appropriateness of adopting the going concern basis in preparing the financial statements, a range of scenarios regarding the ongoing impact of the COVID-19 pandemic on the Group’s current and future earnings were critically reviewed. The scenarios are most sensitive to the assumptions made for Adslot Media in the USA where the greatest revenue growth is expected. It is noted that media spend has returned to pre-COVID-19 levels in the primary markets Adslot Media currently operates. Accordingly, the directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 32 Adslot 2021 Annual Report Adslot 2021 Annual Report 33 Adslot 2021 Annual Report 33 Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 24. Business combinations Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. The Group recognises identifiable assets and liabilities assumed in the business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition date fair values. Goodwill is stated after separate recognition of identifiable intangible assets calculated as the excess of the sum of the fair value of the consideration transferred over the acquisition date fair value of identifiable net assets. If the identifiable net assets exceed the consideration transferred, the excess amount is recognised in profit or loss immediately. Any deferred settlement of cash consideration is discounted to its present value as at the date of acquisition. The discount rate used is the incremental borrowing rate that the Group can obtain from an independent financier under comparable terms and conditions. Foreign Currency Exchange In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Exchange differences are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise. On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars at exchange rates prevailing on the reporting date. Income and expense items are translated at the closing exchange rates for the period. Exchange differences arising, if any, are charged/credited to other comprehensive income and recognised in the Group’s foreign currency translation reserve in equity. On disposal of a foreign operation the cumulative translation difference recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. 34 34 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 24. Business combinations Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. The Group recognises identifiable assets and liabilities assumed in the business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition date fair values. Goodwill is stated after separate recognition of identifiable intangible assets calculated as the excess of the sum of the fair value of the consideration transferred over the acquisition date fair value of identifiable net assets. If the identifiable net assets exceed the consideration transferred, the excess amount is recognised in profit or loss immediately. Any deferred settlement of cash consideration is discounted to its present value as at the date of acquisition. The discount rate used is the incremental borrowing rate that the Group can obtain from an independent financier under comparable terms and conditions. Foreign Currency Exchange In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Exchange differences are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise. On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars at exchange rates prevailing on the reporting date. Income and expense items are translated at the closing exchange rates for the period. Exchange differences arising, if any, are charged/credited to other comprehensive income and recognised in the Group’s foreign currency translation reserve in equity. On disposal of a foreign operation the cumulative translation difference recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. Cash and cash equivalents For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and deposits at call which are readily convertible to cash and are not subject to significant risk of changes in value, net of bank overdrafts. Cash held on behalf of Publishers represents the share of campaign fees held before release to Adslot Publishers. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Leasehold improvements are depreciated using the straight-line method over the remaining period of the underlying lease. Depreciation is calculated on a straight-line basis for all plant and equipment. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of asset and is recognised in profit or loss. The following depreciation rates are used for each class of depreciable asset: Computer Equipment Plant & Equipment Leasehold Improvements Receivables 33– 40% per annum 20 – 33% per annum 20 – 100% per annum Trade receivables are recognised initially at fair value and thereafter are measured at amortised cost, less provision for impairment. They are non-derivative financial assets with fixed or determinable amounts not quoted in an active market. Trade accounts receivable are generally settled between 14 and 60 days and carried at amounts recoverable. Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off. The Group makes use of a simplified approach in accounting for trade receivables and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. The amount of the expected credit loss is recognised in profit or loss. Subsequent recoveries of amounts previously written off are credited against the allowance account. Trade and other creditors – financial liabilities Trade accounts payable and other creditors represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. Financial liabilities are measured subsequently at amortised cost using the effective interest method. 34 Adslot 2021 Annual Report Adslot 2021 Annual Report 35 Adslot 2021 Annual Report 35 Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Borrowings Borrowings are initially recognised at fair value (less transaction costs) and subsequently measured at amortised cost. Any difference between the proceeds and the redemption amount is recognised in profit or loss over the period of the borrowing using the effective interest method. Finance costs Finance costs are recognised as expenses in the period in which they are incurred except where they are incurred in the construction of a qualifying asset in which case the finance costs are capitalised as part of the asset. Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities are always provided for in full. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Tax consolidation legislation Adslot Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Adslot Ltd, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right where the entity is subject to tax as part of the tax-consolidated group. To the extent that it is not probable that taxable profit will be available in the foreseeable future against which the unused tax losses or unused tax credits can be utilised, the deferred tax assets of its own and its controlled entities are not recognised. 36 36 Adslot 2021 Annual Report Adslot 2021 Annual Report Employee benefits Wages and salaries, annual leave and sick leave Short-term employee benefits are current liabilities included in employee benefits, measured at the undiscounted amount that the Group expects to pay as a result of the unused entitlement. Annual leave is included in ‘provisions’. The Group does not discount the leave liability calculations as the Group expects all annual leave for all employees to be used wholly within 12 months of the end of reporting period. Long service leave The liability for long service leave is recognised in the non-current provision for employee benefits and is measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. Share-based compensation benefits Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. The fair value at grant date is determined using an appropriate pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected price volatility of the underlying share, the expected dividends yield and the risk-free interest rate for the term of the option. The fair value determined at the grant date of the equity-settled share-based payments is recognised as an expense, with a corresponding increase in equity (share-based payments reserve) on a straight-line basis over the vesting period. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital while the proceeds received, net of any directly attributable transaction costs, are credited to share capital. Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Borrowings are initially recognised at fair value (less transaction costs) and subsequently measured at amortised cost. Any difference between the proceeds and the redemption amount is recognised in profit or loss over the period of the borrowing using the effective interest method. Finance costs are recognised as expenses in the period in which they are incurred except where they are incurred in the construction of a qualifying asset in which case the finance costs are capitalised as part of the Borrowings Finance costs asset. Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities are always provided for in full. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised future. directly in equity. Tax consolidation legislation Adslot Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Adslot Ltd, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right where the entity is subject to tax as part of the tax-consolidated group. To the extent that it is not probable that taxable profit will be available in the foreseeable future against which the unused tax losses or unused tax credits can be utilised, the deferred tax assets of its own and its controlled entities are not recognised. 36 Adslot 2021 Annual Report Adslot 2021 Annual Report 37 Adslot 2021 Annual Report 37 Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Intangible Assets Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (acquisition date). Goodwill is measured as the excess of the fair value of consideration paid over the fair value of the identifiable net assets of the entity or operations acquired. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment at least on an annual basis. An impairment loss for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. Research and development expenditure Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the assets to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefits from the related project. The carrying value of an intangible asset arising from development costs is tested for impairment annually when the asset is not yet available for use or more frequently when an indicator of impairment arises during the reporting period. Intellectual property The intellectual property relates to the platform technology, branding and domains acquired as a result of the acquisition of Adslot, QDC IP Technology and Facilitate Digital businesses. Where the useful life is assessed as indefinite, assets are not amortised and the carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. It is carried at cost less impairment losses. For those assets assessed as having a finite life, they are amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of intellectual property relating to the Adslot, QDC IP Technology and Facilitate Digital business is 4 to 5 years. Domain name Acquired domain names are accounted for at cost, useful life is assessed as indefinite and the assets are not amortised. The carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. They are carried at cost less impairment losses. Software Software represents internally developed software platforms capitalised according to accounting standards. Software is assessed as having a finite life and is amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of software is 5 years. The carrying value of the software is tested for impairment when an indicator of impairment arises during the reporting period. 38 38 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Intangible Assets Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (acquisition date). Goodwill is measured as the excess of the fair value of consideration paid over the fair value of the identifiable net assets of the entity or operations acquired. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment at least on an annual basis. An impairment loss for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. Research and development expenditure Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the assets to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefits from the related The carrying value of an intangible asset arising from development costs is tested for impairment annually when the asset is not yet available for use or more frequently when an indicator of impairment arises during project. the reporting period. Intellectual property The intellectual property relates to the platform technology, branding and domains acquired as a result of the acquisition of Adslot, QDC IP Technology and Facilitate Digital businesses. Where the useful life is assessed as indefinite, assets are not amortised and the carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. It is carried at cost less impairment losses. For those assets assessed as having a finite life, they are amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of intellectual property relating to the Adslot, QDC IP Technology and Facilitate Digital business is 4 to 5 years. Domain name Software Acquired domain names are accounted for at cost, useful life is assessed as indefinite and the assets are not amortised. The carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. They are carried at cost less impairment losses. Software represents internally developed software platforms capitalised according to accounting standards. Software is assessed as having a finite life and is amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of software is 5 years. The carrying value of the software is tested for impairment when an indicator of impairment arises during the reporting period. Leased assets and liabilities In line with AASB 16 ‘Leases’, the Group recognises a right-of-use asset and a corresponding lease liability at the commencement of a lease. The right-of-use asset is recognised at an amount equal to the initial measurement of the lease liability, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. The lease liability is measured at the present value of future lease payments comprising; fixed lease payments less incentives, variable lease payments, residual guarantees payable, payment of purchase options where exercise is reasonably certain and any anticipated termination penalties. The lease payments are discounted at the rate implicit in the lease, or where not readily determinable, at the entity’s incremental borrowing rate. For all new contracts, the Group considers whether a contract is, or contains a lease. A lease is defined as a contract or a part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration. To apply this definition, the Group assesses whether the contract meets three key evaluations as follows: • • • the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group; the Group has the right to obtain substantially all of the economic benefits from the use of the identified asset throughout the period of use, considering its rights within the scope of the contract; and the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the liability is remeasured, the corresponding amount is reflected in the right-of-use asset. Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except: i. Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii. For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. 38 Adslot 2021 Annual Report Adslot 2021 Annual Report 39 Adslot 2021 Annual Report 39 Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Revenue recognition The Group derives revenue from trading technology and services. To determine whether to recognise revenue, the Group follows a 5-step process: Identifying the contract with a customer Identifying the performance obligations 1. 2. 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied The Group often enters into transactions involving a range of the Group’s products and services. In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties. Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised services to its customers. The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. Revenue recognised for the major business activities for each category as follows: Revenue from Trading Technology Revenue from Trading Technology - Licence Fees Adslot and Symphony licence fees are derived by providing customers access to the Group’s technology platforms. The fee is based on either annual contracted amounts, the number of users, a tier system based on historical volumes traded on the platform, and/or resources allocated. The contracts are ongoing but cancellable with defined notice periods. The Group is expected to maintain its performance obligations throughout the contracted period for the client to achieve the benefits of the platforms. As per AASB 15, revenue is recognised over time; since the promise to grant a licence as a performance obligation is satisfied over time. The client simultaneously receives and consumes the benefit from the Group’s performance of providing access to the platforms. Revenue from Trading Technology – Trading Fees Adslot trading fee revenues are recognised over time. Only the portion of the media campaign that is retained by the Group for their services is recorded as revenue. This is typically a percentage of the total media transacted on the Adslot platform. Where media campaigns are realised over a period a time, the portion that extends beyond the reporting period is not taken up as revenue as the performance obligations have not been satisfied. Where the funds for these campaigns are prepaid by advertisers those amounts are treated as contract liabilities in the Consolidated Statement of Financial Position. As the fees are usage-based revenues the revenue is recognised over time when the usage occurs and the performance obligations are satisfied. Funds collected or collectable from advertisers and due to be repaid to publisher clients are disclosed in the accounts as publisher creditors and categorised under Trade and other payables in the Consolidated Statement of Financial Position. Symphony trading fees are charged to publishers for the use of the Symphony platform as a workflow solution. The fee is based on a percentage fee calculated from the total transacted value of campaigns. As per AASB 15, revenue is recognised over time when the usage occurs and the performance obligations are satisfied. 40 40 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Revenue recognition the Group follows a 5-step process: 1. 2. Identifying the contract with a customer Identifying the performance obligations 3. Determining the transaction price The Group derives revenue from trading technology and services. To determine whether to recognise revenue, 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied The Group often enters into transactions involving a range of the Group’s products and services. In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties. Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised services to its customers. The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. Revenue recognised for the major business activities for each category as follows: Revenue from Trading Technology Revenue from Trading Technology - Licence Fees Adslot and Symphony licence fees are derived by providing customers access to the Group’s technology platforms. The fee is based on either annual contracted amounts, the number of users, a tier system based on historical volumes traded on the platform, and/or resources allocated. The contracts are ongoing but cancellable with defined notice periods. The Group is expected to maintain its performance obligations throughout the contracted period for the client to achieve the benefits of the platforms. As per AASB 15, revenue is recognised over time; since the promise to grant a licence as a performance obligation is satisfied over time. The client simultaneously receives and consumes the benefit from the Group’s performance of providing access to the platforms. Revenue from Trading Technology – Trading Fees Adslot trading fee revenues are recognised over time. Only the portion of the media campaign that is retained by the Group for their services is recorded as revenue. This is typically a percentage of the total media transacted on the Adslot platform. Where media campaigns are realised over a period a time, the portion that extends beyond the reporting period is not taken up as revenue as the performance obligations have not been satisfied. Where the funds for these campaigns are prepaid by advertisers those amounts are treated as contract liabilities in the Consolidated Statement of Financial Position. As the fees are usage-based revenues the revenue is recognised over time when the usage occurs and the performance obligations are satisfied. Funds collected or collectable from advertisers and due to be repaid to publisher clients are disclosed in the accounts as publisher creditors and categorised under Trade and other payables in the Consolidated Statement of Financial Position. Symphony trading fees are charged to publishers for the use of the Symphony platform as a workflow solution. The fee is based on a percentage fee calculated from the total transacted value of campaigns. As per AASB 15, revenue is recognised over time when the usage occurs and the performance obligations are satisfied. Revenue from Services Service revenue is recognised at a point in time or over time based on when the performance obligations are met, and the customer can realise benefit from service received without further involvement from the Group. Statement of work revenue is derived as a once off Symphony activation fee or custom development work. The revenue is recognised at a point in time when the Group has completed its performance obligation and the customer has obtained the ability to direct the use of, and obtain substantially all of the remaining benefits from, the work carried out. Website development revenue is recorded based on project delivery revenue over time as the project is completed. All projects are assigned percentages of project completion (based on actual work in progress) and all website development revenue applicable to percentage of incomplete work is recorded as contract liabilities. As such revenue is recognised over time when the performance obligations are met and when the Group receives a right to payment for performance completed to date. Search Engine Optimisation and Search Engine Advertising attempts to improve search engine rankings of the client’s website or bid on certain keywords in order for their clickable ads to appear in search results. These are ongoing contracts and can be cancelled with 90 days’ notice. The Group needs to continuously manage these campaigns; as such the revenue is recognised over time as the clients simultaneously receive the service and the Group satisfies its performance obligations. Hosting revenue is derived for hosting the client’s websites in third party cloud servers managed by the Group. These contracts are ongoing and can be cancelled with 90 days’ notice. Clients may pay upfront annually. The Group needs to continually satisfy the performance obligations of hosting the site and provide customer support, as and when required. Therefore, revenue is recognised over time. For Domain Names Registration and SSL Certification, at the time of initial activation the service has been transferred in full to the customer; and the customer is able to realise benefits from services received without further involvement from the Group. Furthermore, the Group separately prices and sells these products. There is no further performance obligation for the Group. As such revenue needs to be recognised at a point in time. Interest revenue Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount can be measured reliably, taking into account the effective yield on the financial asset. Government grants In accordance with AASB 120, government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Where appropriate grants relating to expense items are recognised as other income, over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income and are amortised on a straight-line basis over the expected lives of the assets. Sale of non-current assets The net gain from the sale of non-current asset sales is recognised as income at the date control of the asset passes to the buyer, usually when the signed contract of sale becomes unconditional. 40 Adslot 2021 Annual Report Adslot 2021 Annual Report 41 Adslot 2021 Annual Report 41 Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Financial Instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through the profit or loss statement, and which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Subsequent measurement of financial assets For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified as financial assets at amortised cost. Classifications are determined by both: • The entity’s business model for managing the financial asset; and • The contractual cash flow characteristics of the financial assets. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as financial assets at fair value through profit and loss): • • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as government bonds. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. Trade and other receivables and contract assets are subject to review at least at each reporting date to identify expected credit losses. At reporting date and throughout the reporting period the Group did not have any other financial instruments other than trade and other receivables. 42 42 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Financial Instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through the profit or loss statement, and which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Leasehold improvements The cost of improvements to leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvement to the Group, whichever is the shorter. Earnings per share Basic earnings per share Basic earnings per share for continuing operations and total operations attributable to members of the Group are determined by dividing net profit after income tax from continuing operations and the net profit attributable to members of the Group respectively, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period. The number of shares used in the calculation at any time during the period is based on the physical number of shares issued. Classification and initial measurement of financial assets Diluted earnings per share Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Subsequent measurement of financial assets Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. For the purpose of subsequent measurement, financial assets, other than those designated and effective as Dividends Provision is made for the amount of any dividend determined or recommended by the directors on or before the end of the financial year but not distributed at reporting date. Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. hedging instruments, are classified as financial assets at amortised cost. Classifications are determined by both: • The entity’s business model for managing the financial asset; and • The contractual cash flow characteristics of the financial assets. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as financial assets at fair value through profit and loss): they are held within a business model whose objective is to hold the financial assets and collect its • • contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as government bonds. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. Trade and other receivables and contract assets are subject to review at least at each reporting date to identify expected credit losses. At reporting date and throughout the reporting period the Group did not have any other financial instruments other than trade and other receivables. 42 Adslot 2021 Annual Report Adslot 2021 Annual Report 43 Adslot 2021 Annual Report 43 Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Chief Executive Officer. The Company’s global platforms and services form one operating segment. Provisions, contingent assets and contingent liabilities Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and management has either communicated the plan’s main features to those affected or started implementation. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group is virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote. Critical accounting judgements and key sources of estimation uncertainty Critical judgements in applying the entity’s accounting policies The following are the critical judgements (apart from those involving estimations, which are dealt with below), that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. It is noted that directors have considered the impact of the COVID-19 pandemic on accounting policies, judgements and estimates where appropriate. Unrecognised deferred tax assets As disclosed in Note 5, the Group recognises deferred tax assets relating to temporary differences, capital losses or operating losses when it is probable that they will be able to be utilised in future reporting periods. Due to the continuing operating losses, the Directors have determined it is not appropriate to recognise deferred tax assets until a point in time where it is probable that future taxable income is going to be available to utilise the assets. The tax benefit of deferred tax assets not recognised is $10,349,969 (2020: $10,018,203). Refer to Note 5 for further details. Revenue recognition In web development and web hosting business operations, management assesses stage of completion of each project and recognises revenue in the period in which development work is undertaken. In making its judgement, management considered the standard duration of such contracts, stage of progress in contracts and commencement date of such contracts. Accordingly, management has deferred recognising some web development and web hosting revenue of an estimated value of services to be rendered in the future. 44 44 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) Segment reporting Officer. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Chief Executive The Company’s global platforms and services form one operating segment. Provisions, contingent assets and contingent liabilities Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and management has either communicated the plan’s main features to those affected or started implementation. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group is virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote. Critical accounting judgements and key sources of estimation uncertainty Critical judgements in applying the entity’s accounting policies The following are the critical judgements (apart from those involving estimations, which are dealt with below), that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. It is noted that directors have considered the impact of the COVID-19 pandemic on accounting policies, judgements and estimates where appropriate. Unrecognised deferred tax assets As disclosed in Note 5, the Group recognises deferred tax assets relating to temporary differences, capital losses or operating losses when it is probable that they will be able to be utilised in future reporting periods. Due to the continuing operating losses, the Directors have determined it is not appropriate to recognise deferred tax assets until a point in time where it is probable that future taxable income is going to be available to utilise the assets. The tax benefit of deferred tax assets not recognised is $10,349,969 (2020: $10,018,203). Refer to Note 5 for further details. Revenue recognition In web development and web hosting business operations, management assesses stage of completion of each project and recognises revenue in the period in which development work is undertaken. In making its judgement, management considered the standard duration of such contracts, stage of progress in contracts and commencement date of such contracts. Accordingly, management has deferred recognising some web development and web hosting revenue of an estimated value of services to be rendered in the future. Key sources of estimation uncertainty The following are the key assumptions concerning the future and other key estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Impairment of goodwill and intangible assets Determining whether goodwill and intangible assets are impaired requires an estimation of the fair value less costs to sell of the cash-generating units to which goodwill and intangible assets have been allocated. Under the market-based approach for fair value less costs to sell calculations, the entity is required to estimate the amount obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. The Group’s shares are traded on the Australian Stock Exchange, and in the absence of a binding sale agreement, the year-end share price is used to calculate the asset’s market value. In the event the share price falls, an impairment of the related intangible assets may result. At 30 June 2021 an assessment of impairment was performed and the Group considered if there was an impairment to goodwill and intangible assets. The impacts of COVID-19 on the business was taken into consideration in the assessment. It was noted that a non cash after tax impairment loss of $10.0 million had been recognised in the financial results for the year ended 30 June 2020. Following a review of the carrying value of its intangible assets and in accordance with relevant accounting standards, goodwill and other intangible assets was assessed not to be impaired. The carrying amount of goodwill and intangible assets at the reporting date was $12,694,084 (2020: $13,184,940). Refer to Note 10 for further details. Capitalisation of internally developed software Distinguishing the research and development phases of software projects and determining whether the recognition requirements for the capitalisation of development costs are met, requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. The capitalisation of internally developed software amount for the year was $2,401,649 (2020: $3,112,875). Refer to Note 10 for further details. Share-based payments The calculation of the fair value of options issued requires significant estimates to be made in regards to several variables such as volatility and the probability of options reaching their vesting period. The estimations made are subject to variability that may alter the overall fair value determined. The share-based payment expense for the year was $537,168 (2020: $207,270). Research and development tax concessions A receivable of $1,123,520 (2020: $1,888,385) has been recognised in relation to a research and development tax concession for the 2021 financial year. Refer to Note 8 for further details. The actual claim is yet to be submitted with the Australian Tax Office and therefore there remains some uncertainty in regards to the quantum of the concession to be received. The financial statements reflect the Directors’ estimate of the receivable after taking into account the likelihood of each component of the claim being received. 44 Adslot 2021 Annual Report Adslot 2021 Annual Report 45 Adslot 2021 Annual Report 45 Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) New standards and interpretations issued but not effective The following agenda decision to existing standards has been published and are mandatory for accounting periods beginning on or after 1 July 2021 but have not yet been adopted by the Group. IFRIC agenda decision on configuration or customisation costs in a cloud computing arrangement The IFRS Interpretations Committee (IFRIC) published an agenda decision clarifying how arrangements in relation to configuration and customisation costs of cloud technology, Software-as-a-Service (SaaS), should be accounted for. • • In in limited circumstances, certain configuration and customisation activities undertaken implementing SaaS arrangements may give rise to a separate asset where the customer controls the IP of the underlying software code. In all other instances, configuration and customisation costs will be an operating expense. They are generally recognised in profit or loss as the customisation and configuration services are performed or, in certain circumstances, over the SaaS contract term when access to the cloud application software is provided The IFRIC Agenda decision will necessitate a change in the Group’s accounting policy in relation to upfront configuration and customisation costs incurred in implementing SaaS arrangements. The Group intends to implement this policy change for reporting periods starting 1 July 2021. The Group has not assessed the impact of the policy change in full. However, on initial assessment the Group believes that the change would not have any impact on the Group’s consolidated financial statements for the period ending 30 June 2021. The Group does not recognise any current SaaS arrangements as assets and cost of all current SaaS arrangements are expensed as operational expenses as services are received over the contract term. Other Standards and interpretations There are no other standards, amendments or interpretations that are not yet effective and that are expected to have a material impact on the Group in the current or future accounting periods. 46 46 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 1. Summary of Significant Accounting Policies (Continued) New standards and interpretations issued but not effective The following agenda decision to existing standards has been published and are mandatory for accounting periods beginning on or after 1 July 2021 but have not yet been adopted by the Group. IFRIC agenda decision on configuration or customisation costs in a cloud computing arrangement The IFRS Interpretations Committee (IFRIC) published an agenda decision clarifying how arrangements in relation to configuration and customisation costs of cloud technology, Software-as-a-Service (SaaS), should be accounted for. • • In limited circumstances, certain configuration and customisation activities undertaken in implementing SaaS arrangements may give rise to a separate asset where the customer controls the IP of the underlying software code. In all other instances, configuration and customisation costs will be an operating expense. They are generally recognised in profit or loss as the customisation and configuration services are performed or, in certain circumstances, over the SaaS contract term when access to the cloud application software is provided The IFRIC Agenda decision will necessitate a change in the Group’s accounting policy in relation to upfront configuration and customisation costs incurred in implementing SaaS arrangements. The Group intends to implement this policy change for reporting periods starting 1 July 2021. The Group has not assessed the impact of the policy change in full. However, on initial assessment the Group believes that the change would not have any impact on the Group’s consolidated financial statements for the period ending 30 June 2021. The Group does not recognise any current SaaS arrangements as assets and cost of all current SaaS arrangements are expensed as operational expenses as services are received over the contract term. Other Standards and interpretations Segment Information The Group’s Total Revenue and Other Income (Note 3) and its non-current assets (other than financial instruments) are divided into the following geographical areas: Australia (Domicile) EMEA The Americas Other countries Total 2021 $ Revenue 5,874,238 1,424,883 373,466 1,950,016 9,622,603 Non-Current Assets 14,471,392 - 3,654 - 2020 $ Revenue 7,355,744 834,232 213,482 2,169,492 Non-Current Assets 15,022,072 1,445 3,343 3,816 14,475,046 10,572,950 15,030,676 Revenues from external customers in the Group’s domicile, Australia, as well as other major geographical areas have been attributed on the basis of the customer’s geographical location. There is no individual foreign country where 10% or more of the Group’s revenue from services rendered could be attributed to. Major customers The Group provides services to and derives revenue from a number of customers across all the divisions. The Group had certain customers whose revenue individually represented 10% or more of the Group’s total revenue from services rendered. There are no other standards, amendments or interpretations that are not yet effective and that are expected to have a material impact on the Group in the current or future accounting periods. For the year to 30 June 2021, one customer accounted for 10% or more of revenue from services rendered (2020: one). 46 Adslot 2021 Annual Report Adslot 2021 Annual Report 47 Adslot 2021 Annual Report 47 Notes to the Financial Statements (Continued) Revenue and Other Income Revenue Revenue from Trading Technology Revenue from Services Total revenue for services rendered Interest revenue Total revenue from continuing operations Other income Grant income Total other Income Total revenue and other income 2021 $ 6,434,298 1,790,976 8,225,274 7,873 8,233,147 1,389,456 1,389,456 9,622,603 2020 $ 8,115,100 1,672,767 9,787,867 48,039 9,835,906 737,044 737,044 10,572,950 Revenue derived from the two product lines are described as follows: Trading Technology Comprises Adslot Media, a leading global media trading technology, and Symphony, market-leading workflow automation technology, purpose built for digital media agencies. Services Comprising marketing services that are provided by the Group’s Webfirm division to SME clients and project- based customisation of Trading Technology. The Group’s revenue disaggregated by pattern of revenue recognition is as follows: 2021 Services transferred over time Services transferred at a point in time 2020 Services transferred over time Services transferred at a point in time Trading Technology Services $ 6,434,298 - 6,434,298 $ 1,476,001 314,975 1,790,976 Trading Technology Services $ 8,115,100 - 8,115,100 $ 1,584,078 88,689 1,672,767 Total $ 7,910,299 314,975 8,225,274 Total $ 9,699,178 88,689 9,787,867 48 48 Adslot 2021 Annual Report Adslot 2021 Annual Report Grant Income JobKeeper - Australian Taxation Office R&D Tax Incentive - AusIndustry Paycheck protection program - US Government Business Support Grant - Victorian Government Export Market Development Grants - Austrade Short time work allowance - Germany Government Cashflow Boost Grant - Australian Taxation Office Small Business Grant - UK Government Total Grant Income 2021 $ 949,100 256,449 141,260 20,000 18,558 4,089 - - 1,389,456 2020 $ 97,500 407,336 - - 14,251 - 200,000 17,957 737,044 For the financial year 2021, the Group qualified for Job Keeper 1.0 from July 2020 to September 2020 and part of the Group qualified for JobKeeper 2.0 from October 2020 to March 2021. The $949,100 recognised as grant income was received in full during the year financial year 2021. As outlined in note 12, under the US government’s Paycheck Protection Program stimulus package, two tranches of cash were received in the form of loans in financial years 2020 and 2021. The Group received full forgiveness of the first loan in the financial year 2021. The forgiveness amount of $141,260 was recognised as grant income in the year financial year 2021. The Group expects full forgiveness of the second tranche of $171,974 in the financial year 2022. Notes to the Financial Statements (Continued) Revenue and Other Income Revenue Revenue from Trading Technology Revenue from Services Total revenue for services rendered Interest revenue Total revenue from continuing operations Other income Grant income Total other Income Total revenue and other income 2021 $ 6,434,298 1,790,976 8,225,274 7,873 8,233,147 1,389,456 1,389,456 9,622,603 2020 $ 8,115,100 1,672,767 9,787,867 48,039 9,835,906 737,044 737,044 10,572,950 Revenue derived from the two product lines are described as follows: Trading Technology Comprises Adslot Media, a leading global media trading technology, and Symphony, market-leading workflow automation technology, purpose built for digital media agencies. Comprising marketing services that are provided by the Group’s Webfirm division to SME clients and project- based customisation of Trading Technology. The Group’s revenue disaggregated by pattern of revenue recognition is as follows: Services 2021 2020 Services transferred over time Services transferred at a point in time Services transferred over time Services transferred at a point in time Trading Technology Services 6,434,298 $ - 6,434,298 8,115,100 $ - 8,115,100 $ 1,476,001 314,975 1,790,976 $ 1,584,078 88,689 1,672,767 Trading Technology Services Total $ 7,910,299 314,975 8,225,274 Total $ 9,699,178 88,689 9,787,867 48 Adslot 2021 Annual Report Adslot 2021 Annual Report 49 Adslot 2021 Annual Report 49 Notes to the Financial Statements (Continued) Expenses Loss before income tax includes the following specific expenses: Other operating expenses Recruitment fees Directors' fees Marketing costs Lease - rental premises Listing & registrar fees Legal fees Travel expenses Consultancy fees Audit and accountancy fees Foreign exchange loss Insurance expenses Other expenses Total other operating expenses Depreciation and amortisation Amortisation – Software development costs Amortisation – Right of use assets Depreciation – Computer & equipment Depreciation – Plant & equipment Total depreciation and amortisation Other charges against assets Impairment of trade receivables/(reversal) Provision for R&D Claim for Financial Year 2015/2016 Impairment of Goodwill 8 10 Employee benefits expense Total capitalised development wages Employee benefits included in share-based payment expense 2021 $ 2020 $ (16,671) (49,778) (187,500) (203,939) (31,894) (204,018) (231,258) (419,386) (70,574) (603,149) (22,046) (304,501) (225,805) (79,858) (174,754) (155,546) (183,270) (189,819) (200,192) (28,549) (174,200) (458,949) (169,364) (692,611) (2,526,739) (2,550,892) 2,892,505 685,018 16,663 2,608 2,814,369 799,168 48,237 4,018 3,596,794 3,665,792 (19,085) - - 7,629,008 3,105,558 490,663 19,565 1,527,734 10,000,000 7,654,417 4,562,586 202,861 Total employee benefits 11,225,229 12,419,865 Defined contribution superannuation expense included in Employee benefit expense 752,418 806,565 Capitalised development wages (net of related grants) Capitalised development wages included in the R&D grant Total capitalised development wages Rental expense Foreign currency (gain)/loss included in other expenses 2,401,649 703,909 3,105,558 231,258 200,192 3,112,875 1,449,711 4,562,586 419,386 28,549 50 50 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) Expenses Income Tax Expense Loss before income tax includes the following specific expenses: a) Numerical reconciliation of income tax expense to prima facie tax benefit Loss before income tax Prima facie tax benefit on loss before income tax at 26% (2020: 27.5%) Tax effect of: Other non-allowable items Share-based expensed during year Research and development tax concession Income tax benefit attributable to entity Deferred tax income relating to utilisation of unused tax losses Deferred tax assets relating to tax losses not recognised Other – adjustments and net foreign exchange differences Income tax benefit/(expense) attributable to entity 2021 $ 2020 $ (6,116,869) (16,491,142) (1,590,386) (4,535,064) 2,912 139,664 6,340 56,999 671,530 1,191,220 (776,280) (3,280,505) - 331,766 280,609 - 417,440 2,736,482 (163,905) (126,583) b) Movement in deferred tax balances Trade and other receivables Property, plant and equipment Intangible assets Unused tax losses Balance at 1 July 2020 $ (115,461) 182 151,649 (36,370) Net tax (assets) / liabilities - - Balance at 30 June 2021 Recognised in Profit & Loss $ Acquired in Business combination $ Net $ Deferred tax assets $ Deferred tax liabilities $ 6,298 (10) (8,272) 1,984 10,496 (17) (13,786) 3,307 Trade and other receivables Property, plant and equipment Intangible assets Unused tax losses Balance at 1 July 2019 $ (125,957) 199 165,435 (39,677) Recognised in Profit & Loss $ Acquired in Business combination $ Net tax (assets) / liabilities - - - - - - - (109,163) 172 143,377 - - - (109,163) 172 143,377 (34,386) (34,386) - - (34,386) 34,386 - - - - - Balance at 30 June 2020 Net $ Deferred tax assets $ Deferred tax liabilities $ (115,461) 182 151,649 - - - (36,370) (36,370) (115,461) 182 151,649 - - (36,370) 36,370 Adslot 2021 Annual Report 51 Adslot 2021 Annual Report 51 Other operating expenses Recruitment fees Directors' fees Marketing costs Lease - rental premises Listing & registrar fees Legal fees Travel expenses Consultancy fees Audit and accountancy fees Foreign exchange loss Insurance expenses Other expenses Total other operating expenses Depreciation and amortisation Amortisation – Software development costs Amortisation – Right of use assets Depreciation – Computer & equipment Depreciation – Plant & equipment Total depreciation and amortisation 2021 $ 2020 $ (16,671) (49,778) (187,500) (203,939) (31,894) (204,018) (231,258) (419,386) (70,574) (603,149) (22,046) (304,501) (225,805) (174,200) (458,949) (79,858) (174,754) (155,546) (183,270) (189,819) (169,364) (692,611) (200,192) (28,549) (2,526,739) (2,550,892) 3,596,794 3,665,792 2,892,505 685,018 16,663 2,608 (19,085) - - 7,629,008 3,105,558 490,663 2,401,649 703,909 3,105,558 231,258 200,192 2,814,369 799,168 48,237 4,018 19,565 1,527,734 10,000,000 7,654,417 4,562,586 202,861 3,112,875 1,449,711 4,562,586 419,386 28,549 Other charges against assets Impairment of trade receivables/(reversal) Provision for R&D Claim for Financial Year 2015/2016 Impairment of Goodwill 8 10 Employee benefits expense Total capitalised development wages Employee benefits included in share-based payment expense Total employee benefits 11,225,229 12,419,865 Defined contribution superannuation expense included in Employee 752,418 806,565 benefit expense Capitalised development wages (net of related grants) Capitalised development wages included in the R&D grant Total capitalised development wages Rental expense Foreign currency (gain)/loss included in other expenses 50 Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 5. Income Tax Expense (Continued) c) Deferred tax assets not brought to account Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for deductibility set out on Note 1(k) occur. Temporary differences Tax Losses: Operating losses Capital losses Potential tax benefit (26% 2020: 27.5%) 2021 $ 2020 $ (5,542,747) (4,714,903) 45,112,061 40,906,473 238,258 238,258 39,807,571 10,349,969 36,429,828 10,018,203 The Group and its wholly owned Australian resident entities have formed a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax-consolidated group is Adslot Ltd. The operating losses above includes all estimated losses available to the Group including from overseas jurisdictions. Deferred tax liabilities from temporary differences of $1,441,114 (2020: $1,296,568) have not been recognised as they have been offset with deferred tax assets of the same value. Dividends The Group did not declare any dividends in the current year or prior year. There are no franking credits available to shareholders of the Group. Cash and Cash Equivalents Cash at bank and on hand Cash held on behalf of Publishers 2021 $ 2020 $ 4,933,289 4,972,001 1,893,564 6,826,853 1,188,439 6,160,440 Included in the Cash at Bank is $414,988 (2020: $528,801) of funds held on term deposit as guarantee for our corporate credit card facilities and for the benefit of landlords under office lease agreements. Trade and Other Receivables Current: Trade debtors Less: Allowance for impairment Trade debtors not impaired Research and Development grant receivable Provision for R&D Claim for Financial Year 2015/2016 (i) Other receivables 52 52 Adslot 2021 Annual Report Adslot 2021 Annual Report 2021 $ 2,865,120 - 2,865,120 2,651,254 2020 $ 2,639,552 (19,085) 2,620,467 3,416,119 (1,527,734) (1,527,734) 52,245 313,859 4,040,885 4,822,711 Notes to the Financial Statements (Continued) 5. Income Tax Expense (Continued) c) Deferred tax assets not brought to account Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for deductibility set out on Note 1(k) occur. (i) In December 2019 the Group was advised by Innovation & Science Australia that the preliminary decision regarding ineligible activities within the FY16 R&D claim was upheld. The Group has appealed these findings and is defending the legitimacy of its claim. A review of the findings is currently before the Administrative Appeals Tribunal (AAT). Based on the findings made by Innovation and Science Australia in relation to the FY16 R&D activities, the R&D Tax Incentive Offset for FY16 was offset against the FY19 R&D refund of $2.0 million, with the net balance of the FY19 R&D refund paid in April 2020. During FY20 the Group made a one-off provision of $1,527,734 for the part repayment of the FY16 R&D claim. In the event the Group is successful in overturning the AusIndustry decision, this provision will be reversed. The $2.7 million R&D grant receivable includes $1.5 million of the FY19 R&D receivable (offsetting the FY16 R&D provision) and $1.1 million for the FY21 R&D grant receivable. The average age of the Group’s trade debtors is 46 days (2020: 50 days). The Group and its wholly owned Australian resident entities have formed a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax-consolidated group is Adslot Ltd. The operating losses above includes all estimated losses available to the Group including from overseas (a) Ageing of trade debtors not impaired 0 – 30 days 31 – 60 days 61 – 90 days Over 91 days Deferred tax liabilities from temporary differences of $1,441,114 (2020: $1,296,568) have not been recognised as they have been offset with deferred tax assets of the same value. (b) Movement in the provision for impairment The Group did not declare any dividends in the current year or prior year. There are no franking credits available to shareholders of the Group. Balance at beginning of the year Impairment recognised during the year Amounts recovered during the year Amounts written off as uncollectible Balance at the end of the year 2021 $ 1,419,983 746,261 360,898 337,978 2020 $ 1,178,253 623,060 363,769 455,385 2,865,120 2,620,467 2021 $ 19,085 - (19,085) - - 2020 $ 2,782 19,085 - (2,782) 19,085 Included in the Cash at Bank is $414,988 (2020: $528,801) of funds held on term deposit as guarantee for our corporate credit card facilities and for the benefit of landlords under office lease agreements. Accordingly, the directors believe that there is no further provision required in excess of the allowance for impairment. Fair value of receivables Fair value of receivables at year end is measured to be the same as receivables net of the allowance for impairment. In determining the recoverability of a trade receivable, the Group considers any recent history of payments and the status of the projects to which the debt relates. No payment terms have been renegotiated. The concentration of credit risk is limited due to the customer base being large and unrelated. While collection delays have been experienced, there has not been an increase in defaults resulting from COVID-19 disruptions to date. Temporary differences Tax Losses: Operating losses Capital losses Potential tax benefit (26% 2020: 27.5%) jurisdictions. Dividends Cash and Cash Equivalents Cash at bank and on hand Cash held on behalf of Publishers Trade and Other Receivables Current: Trade debtors Less: Allowance for impairment Trade debtors not impaired Research and Development grant receivable Provision for R&D Claim for Financial Year 2015/2016 (i) Other receivables 2021 $ 2020 $ (5,542,747) (4,714,903) 45,112,061 40,906,473 238,258 238,258 39,807,571 10,349,969 36,429,828 10,018,203 2021 $ 2020 $ 4,933,289 4,972,001 1,893,564 6,826,853 1,188,439 6,160,440 2021 $ 2,865,120 - 2,865,120 2,651,254 2020 $ 2,639,552 (19,085) 2,620,467 3,416,119 (1,527,734) (1,527,734) 52,245 313,859 4,040,885 4,822,711 52 Adslot 2021 Annual Report Adslot 2021 Annual Report 53 Adslot 2021 Annual Report 53 Notes to the Financial Statements (Continued) Property, Plant and Equipment Leasehold improvements – at cost Less: Accumulated amortisation Right of use asset – at cost Less: Accumulated depreciation Plant and equipment – at cost Less: Accumulated depreciation Computer equipment – at cost Less: Accumulated depreciation Total carrying amount of property, plant and equipment 2021 $ 7,799 (7,799) - 2,511,504 (745,990) 1,765,514 59,383 (57,151) 2,232 447,066 (433,850) 13,216 1,780,962 2020 $ 7,746 (7,746) - 2,616,195 (799,168) 1,817,027 95,151 (88,435) 6,716 450,125 (428,132) 21,993 1,845,736 Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below: 2021 Carrying amount at 1 July 2020 Additions Disposal/ write -off Depreciation/ amortisation expense Net foreign exchange differences Carrying amount at 30 June 2021 2020 Carrying amount at 1 July 2019 AASB 16 Adjustment (note 1(a)) Additions Lease modifications Depreciation / amortisation expense Net foreign exchange differences Carrying amount at 30 June 2020 Right of Use Assets Plant and Equipment Computer Equipment $ 1,817,027 1,766,422 (1,132,917) (685,018) - 1,765,514 $ 6,716 - (1,845) (2,608) (31) 2,232 $ 21,993 8,608 (76) (16,663) (646) 13,216 Total $ 1,845,736 1,775,030 (1,134,838) (704,289) (677) 1,780,962 Right of Use Assets Leasehold Improvements Plant and Equipment Computer Equipment $ - 2,629,244 - (13,049) (799,168) - 1,817,027 $ 526,145 (526,145) - - - - - $ 8,593 - 2,009 - (4,018) 132 6,716 $ 66,501 - 3,835 - (48,237) (106) 21,993 Total $ 601,239 2,103,099 5,844 (13,049) (851,423) 26 1,845,736 54 54 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) Property, Plant and Equipment 2020 7,746 (7,746) $ - 2,616,195 (799,168) 1,817,027 95,151 (88,435) 6,716 450,125 (428,132) 21,993 1,845,736 2021 7,799 (7,799) $ - 2,511,504 (745,990) 1,765,514 59,383 (57,151) 2,232 447,066 (433,850) 13,216 1,780,962 Total $ 1,845,736 1,775,030 (1,134,838) (704,289) (677) 1,780,962 Leasehold improvements – at cost Less: Accumulated amortisation Right of use asset – at cost Less: Accumulated depreciation Plant and equipment – at cost Less: Accumulated depreciation Computer equipment – at cost Less: Accumulated depreciation Total carrying amount of property, plant and equipment 2021 2020 Carrying amount at 1 July 2020 Additions Disposal/ write -off Depreciation/ amortisation expense Net foreign exchange differences 1,817,027 1,766,422 (1,132,917) (685,018) Carrying amount at 30 June 2021 1,765,514 Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below: Right of Use Assets Plant and Equipment Computer Equipment $ - $ - - - 6,716 $ - (1,845) (2,608) (31) 2,232 $ - - - - - $ 21,993 8,608 (76) (16,663) (646) 13,216 $ - - (4,018) 132 6,716 Right of Use Leasehold Assets Improvements Plant and Equipment Computer Equipment 8,593 66,501 2,009 3,835 $ - - (48,237) (106) 21,993 Total $ 601,239 2,103,099 5,844 (13,049) (851,423) 26 1,845,736 Carrying amount at 1 July 2019 AASB 16 Adjustment (note 1(a)) 2,629,244 526,145 (526,145) Additions Lease modifications Depreciation / amortisation expense Net foreign exchange differences (13,049) (799,168) Carrying amount at 30 June 2020 1,817,027 Intangible Assets Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Year ended 30 June 2021 Opening net book amount Additions Amortisation 7,984,734 2,401,649 (2,892,505) 38,267 - - Carrying amount at 30 June 2021 7,493,878 38,267 - - - - 5,161,939 13,184,940 - - 2,401,649 (2,892,505) 5,161,939 12,694,084 At 30 June 2021 Cost Accumulated amortisation and impairment 20,914,713 38,267 29,045,251 15,161,939 65,160,170 (13,420,835) - (29,045,251) (10,000,000) (52,466,086) Carrying amount at 30 June 2021 7,493,878 38,267 - 5,161,939 12,694,084 Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Year ended 30 June 2020 Opening net book amount 7,686,228 38,267 Additions Amortisation Impairment 3,112,875 (2,814,369) - - - - Carrying amount at 30 June 2020 7,984,734 38,267 - - - - - 15,161,939 22,886,434 - - 3,112,875 (2,814,369) (10,000,000) (10,000,000) 5,161,939 13,184,940 At 30 June 2020 Cost Accumulated amortisation and impairment 18,513,064 38,267 29,045,251 15,161,939 62,758,521 (10,528,330) - (29,045,251) (10,000,000) (49,573,581) Carrying amount at 30 June 2020 7,984,734 38,267 - 5,161,939 13,184,940 54 Adslot 2021 Annual Report Adslot 2021 Annual Report 55 Adslot 2021 Annual Report 55 Notes to the Financial Statements (Continued) 10. Intangible Assets (Continued) Internally Developed Software Internally developed software represents a number of software platforms developed within the Group. The following table shows the portion of platform development costs that are capitalised and expensed for the current financial year, 2021: Platform Adslot Symphony Capitalised Wages R&D grants offsetting capitalised wages Net Capitalised Wages $ 1,475,629 1,629,929 3,105,558 $ (313,402) (390,507) (703,909) $ 1,162,227 1,239,422 2,401,649 The following table shows the portion of platform development costs that are capitalised and expensed for the prior financial year, 2020: Platform Adslot Symphony Capitalised Wages R&D grants offsetting capitalised wages Net Capitalised Wages $ 1,534,726 3,027,860 4,562,586 $ (624,144) (825,567) (1,449,711) $ 910,582 2,202,293 3,112,875 The Directors have assessed the accounting useful life of these internally developed software systems, for accounting purposes, to be five years. This assessment has given regard to the expected financial benefits of the technology. Domain names Domain names opening carrying value of $38,267 (2020: $38,267) relates to the various domain names held by Webfirm and Adslot. The Directors have assessed that this intellectual property has an indefinite useful life on the basis that the Directors do not believe that there is a foreseeable limit on the period over which this asset is expected to generate cash inflows for the entity. Intellectual property Adslot Technologies Pty Ltd holds copyright and patent licences in respect of Combinatorial Auction Platform Technology. The fair value attributable to the intellectual property was $5,932,006 (2020: $5,932,006). Accumulated amortisation of this asset as at 30 June 2021 was $5,932,006 (2020: $5,932,006). This asset has been fully amortised. QDC IP Technology (“QDC”) is creative ad building and video advertising technology valued at $6,466,517 (2020: $6,466,517). Accumulated amortisation of this asset as at 30 June 2021 was $6,466,517 (2020: $6,466,517). This asset has been fully amortised. The Symphony platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition. The fair value attributable to the Symphony technology platform intellectual property was $16,191,496 (2020: $16,191,496). Accumulated amortisation of this asset at 30 June 2021 was $16,191,496 (2020: $16,191,496). This asset has been fully amortised. The Facilitate for Agencies (“FFA”) platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition. The fair value attributable to the FFA technology platform intellectual property was $455,231 (2020: $455,231). Accumulated amortisation of this asset at 30 June 2021 was $455,231 (2020: $455,231). This asset has been fully amortised. The Directors have assessed the accounting useful life of all of the above technologies for accounting purposes to be five years. This assessment has given regard to the expected financial benefits of the technologies to be potentially well beyond a five year period, together with the risk that competitors could replicate these technologies. 56 56 Adslot 2021 Annual Report Adslot 2021 Annual Report Adslot Symphony Adslot Symphony the technology. Domain names Notes to the Financial Statements (Continued) 10. Intangible Assets (Continued) Internally Developed Software Internally developed software represents a number of software platforms developed within the Group. The following table shows the portion of platform development costs that are capitalised and expensed for the current financial year, 2021: Platform Capitalised Wages R&D grants offsetting Net Capitalised The following table shows the portion of platform development costs that are capitalised and expensed for the prior financial year, 2020: Platform Capitalised Wages R&D grants offsetting Net Capitalised $ 1,475,629 1,629,929 3,105,558 $ 1,534,726 3,027,860 4,562,586 capitalised wages $ (313,402) (390,507) (703,909) capitalised wages $ (624,144) (825,567) (1,449,711) Wages $ 1,162,227 1,239,422 2,401,649 Wages $ 910,582 2,202,293 3,112,875 The Directors have assessed the accounting useful life of these internally developed software systems, for accounting purposes, to be five years. This assessment has given regard to the expected financial benefits of Domain names opening carrying value of $38,267 (2020: $38,267) relates to the various domain names held by Webfirm and Adslot. The Directors have assessed that this intellectual property has an indefinite useful life on the basis that the Directors do not believe that there is a foreseeable limit on the period over which this asset is expected to generate cash inflows for the entity. Intellectual property Adslot Technologies Pty Ltd holds copyright and patent licences in respect of Combinatorial Auction Platform Technology. The fair value attributable to the intellectual property was $5,932,006 (2020: $5,932,006). Accumulated amortisation of this asset as at 30 June 2021 was $5,932,006 (2020: $5,932,006). This asset has been fully amortised. QDC IP Technology (“QDC”) is creative ad building and video advertising technology valued at $6,466,517 (2020: $6,466,517). Accumulated amortisation of this asset as at 30 June 2021 was $6,466,517 (2020: $6,466,517). This asset has been fully amortised. The Symphony platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition. The fair value attributable to the Symphony technology platform intellectual property was $16,191,496 (2020: $16,191,496). Accumulated amortisation of this asset at 30 June 2021 was $16,191,496 (2020: $16,191,496). This asset has been fully amortised. The Facilitate for Agencies (“FFA”) platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition. The fair value attributable to the FFA technology platform intellectual property was $455,231 (2020: $455,231). Accumulated amortisation of this asset at 30 June 2021 was $455,231 (2020: $455,231). This asset has been fully amortised. The Directors have assessed the accounting useful life of all of the above technologies for accounting purposes to be five years. This assessment has given regard to the expected financial benefits of the technologies to be potentially well beyond a five year period, together with the risk that competitors could replicate these technologies. 56 Adslot 2021 Annual Report Goodwill The Goodwill balance relating to the acquisition of Facilitate has a carrying value of $5,161,939 (2020: $5,161,939) and has not been impaired during the year. (a) Cash Generating Units (CGUs) For the purpose of impairment testing, goodwill has been allocated to the group of CGUs that are expected to benefit from the acquisition, being both the Adslot and Symphony CGUs. A summary of the carrying amount of goodwill and intangible assets with indefinite useful lives is detailed below: CGU Adslot and Symphony CGUs 2021 2020 Intangible assets with indefinite useful lives $ - Goodwill $ 5,161,939 Goodwill $ 5,161,939 Intangible assets with indefinite useful lives $ - (b) Impairment testing and key assumptions The Group tests whether goodwill and other intangible assets have suffered any impairment in accordance with the Group’s accounting policies. In addition, directors have considered the impact on accounting policies, judgements and estimates in light of the ongoing COVID-19 pandemic. The recoverable amounts of assets and CGUs have been determined using a fair value less costs to sell approach. The directors’ determination of fair value using a market-based approach is the market capitalisation of the Group, less the value attributed to business units that are not part of the group of CGUs attributed to goodwill, less other net assets. The directors have assessed the fair value having regard to a market-based approach and have determined the goodwill is not impaired. The most significant judgements and key assumptions pertaining to the calculation are: the Group’s share price (ASX: ADS) as at 30 June 2021 ($0.028); • • a 4x valuation multiple on EBITDA to estimate the value of the business unit (Webfirm) that is not part of • the group of CGUs attributed to goodwill; and costs to sell including a transaction fee (3.5% of total value) plus estimate of legal, account and other consultant costs ($0.25 million). The Group’s directors appointed an independent expert to review the approach adopted by management in assessing the carrying value of the intangible assets of the Group as at 30 June 2018. The review supported the selection of methodology and the assessment of the value of the Group under the primary quoted security price approach. The director’s determined the same methodology be adopted for the tests at 30 June 2021. (c) Sensitivity analysis The Group’s share price forms the basis of the market-based approach. A material adverse change in the Group’s share price would likely result in the carrying amount exceeding the recoverable amount. While the COVID-19 pandemic continued in the 2021 financial year, the global economy and financial markets have been more stable. Adslot’s share price started low in the new financial year ($0.018 in July 2020) with an average of $0.028 across the year. Sensitivity Analysis has been performed using the July 2020 low price of $0.018, a recalculation of the Costs to Sell and all other elements of the 30 June calculation remaining equal. The result also shows a surplus fair value over carrying value of the intangible assets at a share price of $0.018, albeit with less headroom. Calculations show that only when the share price falls below $0.010, and all other variables remain constant, does a deficit occur. There are no other material sensitivities involved in the directors’ determination of fair value using a market- based approach. Adslot 2021 Annual Report 57 Adslot 2021 Annual Report 57 Notes to the Financial Statements (Continued) Trade and Other Payables Trade creditors Publisher creditors (i) Accrued expenses Other creditors (i) Refer to Note 1(p) for further information on publisher creditors. Other Liabilities Current: Contract liabilities (i) Current: Short term loan (ii) 2021 $ 484,416 2020 $ 218,716 3,339,459 2,381,870 543,249 148,932 348,849 149,269 4,516,056 3,098,704 2021 $ 469,167 171,974 641,141 2020 $ 527,258 158,352 685,610 (i) Contract liabilities relates to website development and hosting invoices that are rendered based on full contract terms at the contracts’ inception, however performed over stages which straddle the reporting date, licence fees billed in advance and advertising campaigns that have been purchased but whose delivery will occur after the reporting date. During the financial year 2021, $391,363 of the contract liabilities at the start of the year of $527,258 was recognised as revenue. (ii) The Group’s US subsidiary Adslot Inc applied for and received two tranches of Paycheck Protection Program loan through HSBC USA. They are no fee loan provided by the US Federal Government for businesses impacted by COVID-19. The loans are for a two-year period, at 1.00% fixed interest rate and the loan payments deferred for the first six months. No collateral or guarantees were required. The full loan amounts are available for forgiveness provided the loans were utilised for allowable expenditure. The Group applied and received full forgiveness on the first tranche of the loan in the 2021 financial year. The Group intends to apply for full forgiveness of the second tranche in the financial year 2022. The 2020 figure represents the balance of the first tranche and the 2021 figure represents the balance of the second tranche at respective balance sheet date. The proceeds from borrowings $163,732 disclosed in the Consolidated Statement of Cash Flows is at historical exchange rate at the day of the receipt of loan, while the amount included in the Consolidated Statement of Financial Position $171,974 is at the exchange rate as at balance sheet dates. The amounts forgiven were recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as grant income. Lease Liabilities Current: Lease liability Non-current: Lease liability 2021 $ 594,101 1,161,470 2020 $ 886,952 960,915 1,755,571 1,847,867 The leases for the office premises in Sydney and Melbourne are classified as leases under AASB 16. Lease payments not recognised as a liability The Group has elected not to recognise a lease liability for short term leases (leases of expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight-line basis. At 30 June 2021 short term and low value leases that were not recognised as a liability represented a total commitment of $38,655 (2020: $176,483) for the Group. 58 58 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) Trade and Other Payables (i) Refer to Note 1(p) for further information on publisher creditors. Trade creditors Publisher creditors (i) Accrued expenses Other creditors Other Liabilities Current: Contract liabilities (i) Current: Short term loan (ii) 2021 $ 484,416 543,249 148,932 2020 $ 218,716 348,849 149,269 4,516,056 3,098,704 2021 $ 469,167 171,974 641,141 2020 $ 527,258 158,352 685,610 (i) Contract liabilities relates to website development and hosting invoices that are rendered based on full contract terms at the contracts’ inception, however performed over stages which straddle the reporting date, licence fees billed in advance and advertising campaigns that have been purchased but whose delivery will occur after the reporting date. During the financial year 2021, $391,363 of the contract liabilities at the start of the year of $527,258 was recognised as revenue. (ii) The Group’s US subsidiary Adslot Inc applied for and received two tranches of Paycheck Protection Program loan through HSBC USA. They are no fee loan provided by the US Federal Government for businesses impacted by COVID-19. The loans are for a two-year period, at 1.00% fixed interest rate and the loan payments deferred for the first six months. No collateral or guarantees were required. The full loan amounts are available for forgiveness provided the loans were utilised for allowable expenditure. The Group applied and received full forgiveness on the first tranche of the loan in the 2021 financial year. The Group intends to apply for full forgiveness of the second tranche in the financial year 2022. The 2020 figure represents the balance of the first tranche and the 2021 figure represents the balance of the second tranche at respective balance sheet date. The proceeds from borrowings $163,732 disclosed in the Consolidated Statement of Cash Flows is at historical exchange rate at the day of the receipt of loan, while the amount included in the Consolidated Statement of Financial Position $171,974 is at the exchange rate as at balance sheet dates. The amounts forgiven were recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income as grant income. Lease Liabilities Current: Lease liability Non-current: Lease liability 2021 $ 594,101 1,161,470 2020 $ 886,952 960,915 1,755,571 1,847,867 The leases for the office premises in Sydney and Melbourne are classified as leases under AASB 16. Lease payments not recognised as a liability The Group has elected not to recognise a lease liability for short term leases (leases of expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a At 30 June 2021 short term and low value leases that were not recognised as a liability represented a total commitment of $38,655 (2020: $176,483) for the Group. straight-line basis. 58 Adslot 2021 Annual Report Provisions 3,339,459 2,381,870 Current: Employee benefits Non-current: Employee benefits Non-current: Provision for make good costs (i) 2021 $ 720,720 564,544 118,938 683,482 2020 $ 634,916 500,051 175,095 675,146 (i) present value of estimated make good costs for lease liabilities classified as leases under AASB 16. Contributed equity Ordinary Shares – Fully Paid 1,981,875,995 1,843,875,994 155,607,845 151,866,361 2021 Number 2020 Number 2021 $ 2020 $ Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the numbers of shares. At the shareholders meeting each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Movements in Paid-Up Capital Date Details 01-Jul-19 Balance (including Treasury shares) 10-Dec-19 Share Placement 29-Jan-20 Share Placement 30-Jun-20 Less: Treasury shares 30-Jun-20 Balance 01-Jul-20 Balance (including Treasury shares) 17-Dec-20 Share Placement 02-Feb-21 Share Placement 30-Jun-21 Less: Treasury shares 30-Jun-21 Balance Number of shares Number 1,588,006,269 226,000,000 30,000,000 1,844,006,269 (130,275) 1,843,875,994 1,844,006,269 126,689,656 11,310,345 1,982,006,270 (130,275) 1,981,875,995 Issue price $ Capital raising costs $ Value $ (2,970,764) 145,850,683 $0.025 $0.025 (347,127) (24,728) 5,302,573 725,772 (3,342,619) 151,878,828 - (12,467) (3,342,619) 151,866,361 (3,342,619) 151,878,828 $0.029 $0.029 (241,434) (19,082) 3,432,566 308,918 (3,603,135) 155,620,312 - (12,467) (3,603,135) 155,607,845 Adslot 2021 Annual Report 59 Adslot 2021 Annual Report 59 Notes to the Financial Statements (Continued) 15. Contributed Equity (Continued) Treasury Shares Treasury shares are shares in Adslot Ltd that are held by the Adslot Employee Share Trust, which administered the Adslot Employee Share Ownership Plan (ESOP). This Trust has been consolidated in accordance with Note 1(d). Shares held by the Trust on behalf of eligible employees are shown as treasury shares in the financial statements. The Employee Share Ownership Plan (ESOP) has now been discontinued and the balance shares held by the Trust is an excess balance. Treasury Shares movements during the financial year are summarised below: Issue Type Issue or Acquisition Date Employee ESOP 01/05/15 Issue Price $ 0.090 Balance at beginning of the year (Number) Issued during the year (Number) Transfers during the year (Number) 130,275 130,275 - - - - Balance at end of the year (Number) 130,275 130,275 Options movements during the financial year are summarised below: Issue Type Expiry Date Exercise Price $ Balance at beginning of the year (Number) Issued during the year (Number) Forfeited during the year (Number) Exercised during the year (Number) Ordinary options 04/10/2021 0.073 3,000,000 Ordinary options 25/11/2021 0.060 5,600,000 Ordinary options 25/02/2022 0.035 23,500,000 Ordinary options 15/05/2022 0.034 11,400,000 Ordinary options 27/05/2022 0.036 4,000,000 Ordinary options 30/01/2023 0.060 5,050,000 Ordinary options 02/09/2023 0.041 11,700,000 Ordinary options 12/12/2023 0.045 4,000,000 Ordinary options 15/12/2022 0.044 8,000,000 Ordinary options 29/01/2024 0.032 8,000,000 Ordinary options 12/07/2024 0.028 Ordinary options 06/08/2024 0.034 Ordinary options 16/12/2024 0.043 - - - Balance at end of the year (Number) 3,000,000 5,600,000 23,500,000 11,400,000 4,000,000 5,050,000 11,150,000 4,000,000 8,000,000 8,000,000 - - - - - - - - - - - - - - - - (550,000) - - - - - - - - - - - - - 25,625,000 (2,250,000) - 23,375,000 18,000,000 2,500,000 - - - - - 18,000,000 2,500,000 127,575,000 84,250,000 46,125,000 (2,800,000) 60 60 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 15. Contributed Equity (Continued) Treasury Shares Treasury shares are shares in Adslot Ltd that are held by the Adslot Employee Share Trust, which administered the Adslot Employee Share Ownership Plan (ESOP). This Trust has been consolidated in accordance with Note 1(d). Shares held by the Trust on behalf of eligible employees are shown as treasury shares in the financial statements. The Employee Share Ownership Plan (ESOP) has now been discontinued and the balance shares held by the Trust is an excess balance. Treasury Shares movements during the financial year are summarised below: Issue Type Issue or Acquisition Date Employee ESOP 01/05/15 Issue Price $ 0.090 Balance at beginning of the year (Number) Issued during the year (Number) Transfers during the year (Number) 130,275 130,275 - - - - Balance at end of the year (Number) 130,275 130,275 Options movements during the financial year are summarised below: Issue Type Expiry Date Exercise Price $ Balance at beginning of the year (Number) Issued during the year (Number) Forfeited during the year (Number) Exercised during the year (Number) Ordinary options 04/10/2021 0.073 3,000,000 Ordinary options 25/11/2021 0.060 5,600,000 Ordinary options 25/02/2022 0.035 23,500,000 Ordinary options 15/05/2022 0.034 11,400,000 Ordinary options 27/05/2022 0.036 4,000,000 Ordinary options 30/01/2023 0.060 5,050,000 Ordinary options 12/12/2023 0.045 4,000,000 Ordinary options 15/12/2022 0.044 8,000,000 Ordinary options 29/01/2024 0.032 8,000,000 - - - - - - - - - - Ordinary options 02/09/2023 0.041 11,700,000 (550,000) Balance at end of the year (Number) 3,000,000 5,600,000 23,500,000 11,400,000 4,000,000 5,050,000 11,150,000 4,000,000 8,000,000 8,000,000 18,000,000 2,500,000 127,575,000 - - - - - - - - - - - - - - - - - - - - - - - - Ordinary options 12/07/2024 0.028 25,625,000 (2,250,000) - 23,375,000 Ordinary options 06/08/2024 0.034 Ordinary options 16/12/2024 0.043 - - - 18,000,000 2,500,000 84,250,000 46,125,000 (2,800,000) Reserves Reserves Share–based payments reserve Foreign currency translation reserve Share–based payments reserve Opening balance Share-based payment expense - employees Share-based payment expenses - directors (i) Share-based payment expenses - third party (i) Closing balance Foreign currency translation reserve Opening balance Movement on currency translation Closing balance (i) Refer Equity Based Payments on Note 21 2021 $ 1,230,787 242,472 1,473,259 693,619 490,663 46,505 - 1,230,787 2020 $ 693,619 245,855 939,474 434,882 207,270 - 51,467 693,619 245,855 (3,383) 242,472 214,267 31,588 245,855 The Share-based payments reserve is used to record the value of options accounted for in accordance with AASB 2: Share-Based Payments. The foreign currency translation reserve is used to record the value of aggregate movements in the translation of foreign currency in accordance with AASB 121: The Effects of Changes in Foreign Exchange Rates. 60 Adslot 2021 Annual Report Adslot 2021 Annual Report 61 Adslot 2021 Annual Report 61 Notes to the Financial Statements (Continued) Earnings Per Share (a) Basic earnings per share Loss attributable to the ordinary equity holders of the Group (0.33) (0.96) (b) Diluted earnings per share Loss attributable to the ordinary equity holders of the Group (0.33) (0.96) 2021 Cents 2020 Cents (c) Reconciliation of earnings used on calculating earnings per share (i) Loss from continuing operations attributable to the members of the Group used on calculating basic and diluted earnings per share (6,280,774) (16,617,725) 2021 $ 2020 $ 2021 Number 2020 Number (d) Weighted average number of shares used as the denominator Weighted average number of shares on issue used in the calculation of basic EPS 1,916,523,704 1,725,848,672 (e) Weighted average number of shares used as the denominator Weighted average number of shares on issue used in the calculation of diluted EPS 1,916,523,704 1,725,848,672 (i) During 2021 and 2020 there were no discontinued operations or values attributable to minority interests. Weighted average number of rights and options that could potentially dilute basic earnings per share in the future, but are not included in the calculation of diluted EPS because they are anti-dilutive for the period presented. 125,438,425 72,438,525 2021 Number 2020 Number Contingencies No contingent assets and liabilities are noted. Remuneration of auditors During the year the following fees were paid/payable to the auditor of the Group: Audit services Audit and review of financial reports During the year the following fees were paid/payable to a related entity of the auditor of the Group: Other services Taxation compliance, GroupM compliance audit and taxation advice (JobKeeper grant and transfer pricing) 2021 $ 2020 $ 122,500 109,000 112,085 93,911 234,585 202,911 62 62 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) Earnings Per Share Loss attributable to the ordinary equity holders of the Group (0.33) (0.96) (a) Basic earnings per share (b) Diluted earnings per share Loss attributable to the ordinary equity holders of the Group (0.33) (0.96) (c) Reconciliation of earnings used on calculating earnings per share (i) Loss from continuing operations attributable to the members of the Group used on (6,280,774) (16,617,725) calculating basic and diluted earnings per share 2021 $ 2020 $ 2021 Number 2020 Number (d) Weighted average number of shares used as the denominator Weighted average number of shares on issue used in the calculation of basic EPS 1,916,523,704 1,725,848,672 Weighted average number of shares on issue used in the calculation of diluted 1,916,523,704 1,725,848,672 EPS (i) During 2021 and 2020 there were no discontinued operations or values attributable to minority interests. Weighted average number of rights and options that could potentially dilute basic earnings per share in the future, but are not included in the calculation of diluted EPS because they are anti-dilutive for the period presented. 125,438,425 72,438,525 2021 Number 2020 Number Contingencies No contingent assets and liabilities are noted. Remuneration of auditors During the year the following fees were paid/payable to the auditor of the Group: During the year the following fees were paid/payable to a related entity of the auditor Audit services Audit and review of financial reports of the Group: Other services grant and transfer pricing) 62 Adslot 2021 Annual Report Taxation compliance, GroupM compliance audit and taxation advice (JobKeeper 112,085 93,911 2021 $ 2020 $ 122,500 109,000 234,585 202,911 2021 Cents 2020 Cents Key Management Personnel Disclosures Directors The following persons were directors of the Group during the financial year: Mr Andrew Barlow (Non-Executive Chairman) (i) Mr Adrian Giles (Non-Executive Director) Ms Sarah Morgan (Non-Executive Director) Mr Andrew Dyer (Non-Executive Director) Mr Ben Dixon (Executive Director & CEO) (i) Mr Barlow was the Executive Chairman until 28 July 2020 Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year: Name Ms Felicity Conlan Mr Tom Peacock Position Chief Financial Officer and Company Secretary Chief Commercial Officer (e) Weighted average number of shares used as the denominator Key management personnel compensation Short-term employee benefits Post-employment benefits Other long-term employee benefits Share-based payments Total compensation 2021 $ 956,202 80,892 11,183 314,530 2020 $ 933,089 71,194 11,586 12,924 1,362,807 1,028,793 There were 7 key management personnel throughout 2021 (2020: 8 some of whom have a part year of service). Business Acquisitions: There were no related party transactions during the year ended 30 June 2021. Transactions with Directors and their personally related entities: During the year the Company earned revenue of $25,888 (2020: $28,242) from a company requiring web development, hosting and marketing services related to Mr Adrian Giles on normal commercial terms and conditions. There were no other transactions with Directors and their personally related entities for the financial years ending 30 June 2021 and 30 June 2020. Adslot 2021 Annual Report 63 Adslot 2021 Annual Report 63 Notes to the Financial Statements (Continued) Share-Based Payments Employee Option Plan Shareholders re-approved the Incentive Option Plan at the January 2021 Annual General Meeting. The Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which can be exercised to shares subject to the certain vesting criteria as long as they remain an eligible participant. The objective of the Option Plan is to attract, motivate and retain key employees and it is considered by the Group that the adoption of the Option Plan and the future issue of Options under the Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. In July 2020 all staff were awarded 250,000 options under the Plan in recognition of salary reductions and other impacts of the COVID-19 pandemic. No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director or the Group. The following table shows grants and movements of share-based compensation to employees under the Employee Option Plan during the current financial year: 2021 Exercise Price Balance at start of the year Granted during the year Exercised during the year Lapsed during the year Forfeited during the year Balance at end of the year Vested and exercisable at the end of the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) Grant Date Expiry Date 05/10/17 04/10/21 0.073 3,000,000 26/11/17 25/11/21 0.060 5,600,000 26/02/18 25/02/22 0.035 23,500,000 16/05/18 15/05/22 0.034 11,400,000 28/05/18 27/05/22 0.036 4,000,000 30/01/19 30/01/23 0.060 5,050,000 03/09/19 02/09/23 0.041 11,700,000 13/12/19 12/12/23 30/01/20 29/01/24 0.045 0.032 4,000,000 8,000,000 - - - - - - - - - 13/07/20 12/07/24 0.028 07/08/20 06/08/24 0.034 - 25,625,000 - 18,000,000 Total 76,250,000 43,625,000 Weighted average exercise price $0.042 $0.030 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,000,000 3,000,000 5,600,000 5,600,000 23,500,000 23,500,000 11,400,000 11,400,000 4,000,000 4,000,000 5,050,000 5,050,000 (550,000) 11,150,000 3,716,679 - - 4,000,000 4,000,000 8,000,000 4,000,000 (2,250,000) 23,375,000 - - 18,000,000 12,000,000 (2,800,000) 117,075,000 76,266,679 $0.031 $0.037 $0.040 The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2021 included: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value$ OP # 21-1 OP # 21-2 13/07/20 12/07/24 07/08/20 06/08/24 0.028 0.019 0.034 0.023 Expected Volatility 126.55% 129.74% Risk Free Interest rate 0.25% 0.25% 64 64 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) Share-Based Payments Employee Option Plan Shareholders re-approved the Incentive Option Plan at the January 2021 Annual General Meeting. The Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which can be exercised to shares subject to the certain vesting criteria as long as they remain an eligible participant. The objective of the Option Plan is to attract, motivate and retain key employees and it is considered by the Group that the adoption of the Option Plan and the future issue of Options under the Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. In July 2020 all staff were awarded 250,000 options under the Plan in recognition of salary reductions and other impacts of the COVID-19 pandemic. No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director The following table shows grants and movements of share-based compensation to employees under the Employee Option Plan during the current financial year: or the Group. 2021 Grant Date Expiry Date Balance at Granted Exercised Lapsed Forfeited Balance at Exercise start of the during during the during the during the end of the at the end of Price year the year year year year year the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) Vested and exercisable 05/10/17 04/10/21 0.073 3,000,000 26/11/17 25/11/21 0.060 5,600,000 26/02/18 25/02/22 0.035 23,500,000 16/05/18 15/05/22 0.034 11,400,000 28/05/18 27/05/22 0.036 4,000,000 30/01/19 30/01/23 0.060 5,050,000 03/09/19 02/09/23 0.041 11,700,000 13/12/19 12/12/23 30/01/20 29/01/24 0.045 0.032 4,000,000 8,000,000 - - - - - - - - - 13/07/20 12/07/24 0.028 07/08/20 06/08/24 0.034 - 25,625,000 - 18,000,000 - - - - - - - - - - - - - - - - - - - - - 3,000,000 3,000,000 5,600,000 5,600,000 23,500,000 23,500,000 11,400,000 11,400,000 4,000,000 4,000,000 5,050,000 5,050,000 (550,000) 11,150,000 3,716,679 4,000,000 4,000,000 8,000,000 4,000,000 (2,250,000) 23,375,000 - - 18,000,000 12,000,000 - - - - - - - - - - - - - Total 76,250,000 43,625,000 (2,800,000) 117,075,000 76,266,679 Weighted average exercise price $0.042 $0.030 $0.031 $0.037 $0.040 The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2021 included: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value$ OP # 21-1 OP # 21-2 13/07/20 07/08/20 12/07/24 06/08/24 0.028 0.019 0.034 0.023 Expected Volatility 126.55% 129.74% Risk Free Interest rate 0.25% 0.25% 64 Adslot 2021 Annual Report 2020 Exercise Price Balance at start of the year Granted during the year Exercised during the year Lapsed during the year Forfeited during the year Balance at end of the year Vested and exercisable at the end of the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) Grant Date Expiry Date 05/10/17 04/10/21 0.073 3,000,000 26/11/17 25/11/21 0.060 5,600,000 26/02/18 25/02/22 0.035 23,500,000 16/05/18 15/05/22 0.034 11,400,000 28/05/18 27/05/22 0.036 4,000,000 30/01/19 30/01/23 0.060 5,800,000 - - - - - - 03/09/19 02/09/23 0.041 13/12/19 12/12/23 30/01/20 29/01/24 0.045 0.032 - 11,900,000 - - 4,000,000 8,000,000 Total 53,300,000 23,900,000 Weighted average exercise price $0.042 $0.039 - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,000,000 3,000,000 5,600,000 5,600,000 23,500,000 23,500,000 11,400,000 11,400,000 4,000,000 4,000,000 (750,000) 5,050,000 2,650,000 (200,000) 11,700,000 - - - 4,000,000 2,000,000 8,000,000 - (950,000) 76,250,000 52,150,000 $0.056 $0.041 $0.041 The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2020 included: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value$ Expected Volatility Risk Free Interest rate OP # 20-1 OP # 20-2 OP # 20-3 03/09/19 02/09/23 0.041 0.028 62.60% 0.99% 13/12/19 12/12/23 0.045 0.031 61.60% 0.88% 30/01/20 29/01/24 0.032 0.032 63.79% 0.88% Equity Based Payments On 30 January 2020 the Group granted 8,000,000 new Options under mandate to Peloton Capital Pty Ltd as consideration for corporate advisory services provided. The Options were vested on issue and have an expiry date of 15 December 2022. Exercise Price Balance at start of the year Granted during the year Exercised during the year Lapsed during the year Forfeited during the year Balance at end of the year Vested and exercisable at the end of the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) Grant Date Expiry Date 30/01/20 15/12/22 0.044 - 8,000,000 - - - 8,000,000 8,000,000 The options are valued using the Black-Scholes pricing model. The model inputs for options granted were: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value $ Expected Volatility Risk Free Interest rate EOP # 20-1 30/01/20 15/12/22 0.044 0.032 63.79% 0.88% Adslot 2021 Annual Report 65 Adslot 2021 Annual Report 65 Notes to the Financial Statements (Continued) 21. Share-Based Payments (Continued) Non-Executive Director Options The issue of 2,500,000 Options to a director under LR 10.11 was approved at the AGM that was held on 28 January 2021. Options are to acquire fully paid ordinary shares, at an exercise price of $0.043 with an expiry date of 16 December 2024. 50% of the options vest six months after the grant date and the balance vest on the first anniversary of the grant date. Exercise Price Balance at start of the year Granted during the year Exercised during the year Lapsed during the year Forfeited during the year Balance at end of the year Vested and exercisable at the end of the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) Grant Date Expiry Date 17/12/20 16/12/24 0.043 - 2,500,000 - - - 2,500,000 1,250,000 The options are valued using the Black-Scholes pricing model. The model inputs for options granted were: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value $ Expected Volatility Risk Free Interest rate DOP # 21-1 17/12/20 16/12/24 0.043 0.029 137.18% 0.09% Cash Flow reconciliation Reconciliation of Net Cash Flows from Operating Activities to Loss for the year Loss for the year after income tax Add/(less) non-cash and other items Depreciation and amortisation Accounting gain on lease modifications and make good provision Impairment of Goodwill Share-based payment Provision for impairment of FY16 R&D receivables Impairment of receivables (Profit)/Loss on asset write off Unrealised foreign currency loss/(gain) Movements in receivables relating to investing activities Changes in assets and liabilities (net of effects of acquisition and disposal of entities) (Increase)/Decrease in receivables (Decrease)/Increase in payables and other provisions Net cash outflow from operating activities 2021 $ 2020 $ (6,280,774) (16,617,725) 3,596,794 3,665,792 (78,542) - - 10,000,000 537,168 207,270 - 1,527,734 (19,085) 1,920 106,925 (633,774) 19,565 - 3,009 1,171,950 760,646 (151,812) 1,715,535 (3,208,191) (293,187) (3,382,408) 66 66 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 21. Share-Based Payments (Continued) Non-Executive Director Options The issue of 2,500,000 Options to a director under LR 10.11 was approved at the AGM that was held on 28 January 2021. Options are to acquire fully paid ordinary shares, at an exercise price of $0.043 with an expiry date of 16 December 2024. 50% of the options vest six months after the grant date and the balance vest on the first anniversary of the grant date. Grant Date Expiry Date Balance at Granted Exercised Lapsed Forfeited Balance at Exercise start of the during during the during the during the end of the at the end of Price year the year year year year year the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) 17/12/20 16/12/24 0.043 - 2,500,000 - - - 2,500,000 1,250,000 The options are valued using the Black-Scholes pricing model. The model inputs for options granted were: Model Input Grant Date Expiry Date Exercise Price $ Grant date share value $ Expected Volatility Risk Free Interest rate DOP # 21-1 17/12/20 16/12/24 0.043 0.029 137.18% 0.09% Cash Flow reconciliation Reconciliation of Net Cash Flows from Operating Activities to Loss for the year Loss for the year after income tax Add/(less) non-cash and other items Depreciation and amortisation Impairment of Goodwill Share-based payment Accounting gain on lease modifications and make good provision Provision for impairment of FY16 R&D receivables Impairment of receivables (Profit)/Loss on asset write off Unrealised foreign currency loss/(gain) Movements in receivables relating to investing activities (Increase)/Decrease in receivables (Decrease)/Increase in payables and other provisions Net cash outflow from operating activities Changes in assets and liabilities (net of effects of acquisition and disposal of entities) 2021 $ 2020 $ (6,280,774) (16,617,725) 3,596,794 3,665,792 (78,542) - 537,168 - - (19,085) 1,920 106,925 (633,774) 10,000,000 207,270 1,527,734 19,565 - 3,009 1,171,950 760,646 (151,812) 1,715,535 (3,208,191) (293,187) (3,382,408) Financial Risk Management The Group’s operations expose it to various financial risks including market, credit, liquidity and cash flow risks. Risk management programmes and policies are employed to mitigate the potential adverse effects of these exposures on the results of the Group. Financial risk management is carried out by the Chief Financial Officer with oversight provided by the Audit & Risk Committee and Board. Vested and exercisable (a) Market risks Market risks include foreign exchange risk, interest rate risk and other price risk. The Group’s activities expose it to the financial risks of changes in foreign currency, interest rate risk relating to interest earned on cash and cash equivalents. Disclosures relating to foreign currency risks are covered in Note 23(d) and interest rate risk is covered in Note 23. The Group does not have formal policies that address the risks associated with changes in interest rates or changes in fair values on available-for-sale financial assets. (b) Credit risk Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The credit risk on financial assets, other than investments, of the Group which have been recognised in the Consolidated Statement of Financial Position is the carrying amount net of any provision for doubtful debts. The Group has no significant concentrations of credit risk. As disclosed in Note 8(b), ‘Impairment of receivables’, the Group has policies in place to ensure that sales of services are made to customers with appropriate credit history. Before accepting any new customers, the Group internally reviews the potential customer’s credit quality. A substantial deposit on contract in website development and hosting segment of the Group mitigates initial credit risk. The Group held the following financial assets with potential credit risk exposure: Financial assets Cash and cash equivalents Trade debtors and other receivables (Note 8) Prepayments 2021 $ 6,826,853 2020 $ 6,160,440 4,040,885 4,822,711 249,988 209,723 11,117,726 11,192,874 66 Adslot 2021 Annual Report Adslot 2021 Annual Report 67 Adslot 2021 Annual Report 67 Notes to the Financial Statements (Continued) 23. Financial Risk Management (Continued) (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. Due to the dynamic nature of the underlying business, the Board aims at maintaining flexibility in funding by keeping sufficient cash available to settle financial liabilities as per the contractual terms of the obligations. The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group’s existing cash resources (see Note 7) and trade receivables (see Note 8) significantly exceed the current cash outflow requirements. As at 30 June 2021, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: Contractual maturities of financial liabilities Due within 12 months Trade and other payables Current: Lease liability Due after 12 months Non-current: Lease liability Total (d) Foreign currency risk 2021 $ 4,516,056 594,101 5,110,157 1,161,470 6,271,627 2020 $ 3,098,704 886,952 3,985,656 960,915 4,946,571 Most of the Group’s financial assets and liabilities are in Australian Dollars (AUD) and US dollars (USD). Exposures to currency exchange rates arise from the Group’s overseas operations which are primarily denominated in US dollars (USD), Pound Sterling (GBP), Euros (EUR), New Zealand dollars (NZD), Chinese Yuan (CNY) and Malaysian Ringgit (MYR). Foreign currency exposure is monitored by the Board on a periodic basis. Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into AUD at the closing rate: USD A$ GBP A$ EUR A$ 30 June 2021 Financial Assets 7,096,216 329,778 501,342 Financial Liabilities (3,004,410) (419,207) (236,732) Total Exposure 30 June 2020 4,091,806 (89,429) 264,610 NZD A$ 5,436 (1,905) 3,531 CNY A$ MYR A$ 32,770 (32,863) 3,089 - (93) 3,089 Financial Assets 5,093,083 342,619 332,667 27,660 54,587 2,035 Financial Liabilities (3,013,410) (594,247) (175,353) (3,655) (28,754) - Total Exposure 2,079,673 (251,628) 157,314 24,005 25,833 2,035 68 68 Adslot 2021 Annual Report Adslot 2021 Annual Report Notes to the Financial Statements (Continued) 23. Financial Risk Management (Continued) (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. Due to the dynamic nature of the underlying business, the Board aims at maintaining flexibility in funding by keeping sufficient cash available to settle financial liabilities as per the contractual terms of the obligations. The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group’s existing cash resources (see Note 7) and trade receivables (see Note 8) significantly exceed the current cash outflow requirements. As at 30 June 2021, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: Contractual maturities of financial liabilities Due within 12 months Trade and other payables Current: Lease liability Due after 12 months Non-current: Lease liability Total (d) Foreign currency risk 2021 $ 4,516,056 594,101 5,110,157 1,161,470 6,271,627 2020 $ 3,098,704 886,952 3,985,656 960,915 4,946,571 Most of the Group’s financial assets and liabilities are in Australian Dollars (AUD) and US dollars (USD). Exposures to currency exchange rates arise from the Group’s overseas operations which are primarily denominated in US dollars (USD), Pound Sterling (GBP), Euros (EUR), New Zealand dollars (NZD), Chinese Yuan (CNY) and Malaysian Ringgit (MYR). Foreign currency exposure is monitored by the Board on a periodic basis. Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into AUD at the closing rate: 30 June 2021 Total Exposure 30 June 2020 USD A$ GBP A$ EUR A$ CNY A$ MYR A$ Financial Assets 7,096,216 329,778 501,342 Financial Liabilities (3,004,410) (419,207) (236,732) 32,770 (32,863) 3,089 - 4,091,806 (89,429) 264,610 (93) 3,089 NZD A$ 5,436 (1,905) 3,531 Financial Assets 5,093,083 342,619 332,667 27,660 54,587 2,035 Financial Liabilities (3,013,410) (594,247) (175,353) (3,655) (28,754) - Total Exposure 2,079,673 (251,628) 157,314 24,005 25,833 2,035 The following table illustrates the sensitivity on profit and equity in relation to the Group’s financial assets and liabilities and the USD/AUD exchange rate, GBP/AUD exchange rate, EUR/AUD exchange rate, NZD/AUD exchange rate and CNY/AUD exchange rate ‘all other things being equal’. It assumes a +/- 10% change of the following exchange rates for the year ended 30 June 2021 (30 June 2020:10%). These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. There is no Equity exposure to foreign currency risk. 30 June 2021 USD A$ GBP A$ EUR A$ Impact on Profit (345,915) 22,853 (26,459) Impact on Reserves (26,067) (14,723) 2,403 Impact on Equity (371,982) 8,130 (24,056) +10% NZD A$ - (321) (321) CNY A$ - 8 8 MYR A$ (281) Total A$ (349,802) - (38,700) (281) (388,502) 30 June 2020 Impact on Profit (174,825) 38,265 (13,666) - - (185) (150,411) Impact on Reserves (14,236) (15,390) (635) Impact on Equity (189,061) 22,875 (14,301) 30 June 2021 Impact on Profit USD A$ GBP A$ EUR A$ 422,786 (27,932) 32,339 Impact on Reserves 31,859 17,995 (2,938) Impact on Equity 454,645 (9,937) 29,401 (2,182) (2,182) -10% NZD A$ - 392 392 (2,348) (2,348) - (34,791) (185) (185,202) CNY A$ - (10) (10) MYR A$ 343 Total A$ 427,536 - 47,298 343 474,834 30 June 2020 Impact on Profit 213,675 (46,768) 16,703 - - 226 183,836 Impact on Reserves 17,400 18,809 776 Impact on Equity 231,075 (27,959) 17,479 2,667 2,667 2,870 2,870 - 42,522 226 226,358 68 Adslot 2021 Annual Report Adslot 2021 Annual Report 69 Adslot 2021 Annual Report 69 Notes to the Financial Statements (Continued) 23. Financial Risk Management (Continued) (e) Cash flow and interest rate risk As the Group has no significant interest-bearing assets or liabilities (except cash), the Group’s income and operating cash flows are not materially exposed to changes in market interest rates. Interest rate sensitivity analysis The sensitivity analysis below has been determined based on exposure to interest rates on interest bearing bank balances throughout the reporting period. A 100-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates (also comparable to movement in interest rates during the reporting year). At reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group’s net profit would: 30 June 2021 +1% $ 24,397 -1% $ (7,460) 30 June 2020 34,017 (29,447) This is mainly attributable to the Group’s exposure to interest rate on its bank balances bearing interest. (f) Net fair value of financial assets and liabilities The net fair value of cash and cash equivalents and other short-term financial assets and financial liabilities of the Group approximates their carrying value. The net fair value of other financial assets and financial liabilities is based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar risk profiles. Parent Entity Information The following details of information are related to the parent entity, Adslot Ltd, at 30 June 2021. This information has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Share-based payments reserve Retained losses Total equity Loss for the year Total comprehensive loss for the year 70 70 Adslot 2021 Annual Report Adslot 2021 Annual Report 2021 $ 1,010,899 2020 $ 2,081,735 45,694,374 45,750,149 46,705,273 47,831,884 849,460 962,435 1,280,407 1,136,010 2,129,867 2,098,445 155,620,312 151,878,829 1,230,785 693,617 (112,275,691) (106,839,007) 44,575,406 45,733,439 (5,436,684) (8,000,943) (5,436,684) (8,000,943) Notes to the Financial Statements (Continued) 23. Financial Risk Management (Continued) (e) Cash flow and interest rate risk As the Group has no significant interest-bearing assets or liabilities (except cash), the Group’s income and operating cash flows are not materially exposed to changes in market interest rates. Interest rate sensitivity analysis The sensitivity analysis below has been determined based on exposure to interest rates on interest bearing bank balances throughout the reporting period. A 100-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates (also comparable to movement in interest rates during the reporting year). At reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group’s net profit would: 30 June 2021 +1% $ 24,397 -1% $ (7,460) 30 June 2020 34,017 (29,447) (f) Net fair value of financial assets and liabilities The net fair value of cash and cash equivalents and other short-term financial assets and financial liabilities of the Group approximates their carrying value. The net fair value of other financial assets and financial liabilities is based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar risk profiles. Parent Entity Information The following details of information are related to the parent entity, Adslot Ltd, at 30 June 2021. This information has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Share-based payments reserve Retained losses Total equity Loss for the year Total comprehensive loss for the year 70 Adslot 2021 Annual Report 2021 $ 2020 $ 1,010,899 2,081,735 45,694,374 45,750,149 46,705,273 47,831,884 849,460 962,435 1,280,407 1,136,010 2,129,867 2,098,445 155,620,312 151,878,829 1,230,785 693,617 (112,275,691) (106,839,007) 44,575,406 45,733,439 (5,436,684) (8,000,943) (5,436,684) (8,000,943) Related Party Transactions Other than the transactions disclosed in Note 20 relating to key management personnel, there have been no related party transactions that have occurred during the current or prior financial year. Events Subsequent to Reporting Date On 9 August 2021 Mr Tom Triscari was appointed as a US-based Non-Executive Director, as outlined in the ASX release lodged on 10 August 2021. The Company granted the following unlisted share options: • 9,500,000 options issued to employees as outlined in the Appendix 3G lodged on 4 August 2021; • 6,250,000 options issued to a third party as outlined in the Appendix 3G lodged on 4 August 2021; and • 6,000,000 options issued to Non-Executive Director as outlined in Appendix 3X lodged on 10 August 2021. On 30 August 2021, Adslot announced the extension of its global Symphony contract with GroupM. This is mainly attributable to the Group’s exposure to interest rate on its bank balances bearing interest. Consolidated Entities Name Parent entity Adslot Ltd Controlled entities Adslot Technologies Pty Ltd Ansearch.com.au Pty Ltd Ansearch Group Services Pty Ltd Webfirm Pty Ltd QDC IP Technologies Pty Ltd Adslot UK Limited Adslot Inc. Symphony International Solutions Limited Symphony Workflow Pty Ltd Symphony Media Pty Ltd Facilitate Digital (Shanghai) Software Service Co., Ltd Facilitate Digital Limited Facilitate Digital Trust Facilitate Digital, LLC Facilitate Digital UK Limited Facilitate Digital Deutschland GmbH Country of Incorporation Ordinary Share Consolidated Equity Interest 2021 % 2020 % Australia Australia Australia Australia Australia Australia United Kingdom United States Australia Australia Australia China New Zealand New Zealand United States United Kingdom Germany 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Equity interests in all controlled entities are by way of ordinary shares. Adslot 2021 Annual Report 71 Adslot 2021 Annual Report 71 Directors’ Declaration The directors declare that the financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and accompanying notes, as set out on pages 32 to 71 are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements in Australia; (b) give a true and fair view of the Company’s financial position as at 30 June 2021 and of its performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date; and (c) the Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. In the directors’ opinion: (a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (b) the audited remuneration disclosures set out on pages 18 to 25 of the Directors’ Report comply with section 300A of the Corporations Act 2001. The directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Andrew Barlow Chairman Adslot Ltd 30 August 2021 72 72 Adslot 2021 Annual Report Adslot 2021 Annual Report Directors’ Declaration The directors declare that the financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and accompanying notes, as set out on pages 32 to 71 are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements in Australia; (b) give a true and fair view of the Company’s financial position as at 30 June 2021 and of its performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date; and In the directors’ opinion: (a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (b) the audited remuneration disclosures set out on pages 18 to 25 of the Directors’ Report comply with section 300A of the Corporations Act 2001. The directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Andrew Barlow Chairman Adslot Ltd 30 August 2021 72 Adslot 2021 Annual Report (c) the Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. Opinion Independent Auditor’s Report To the Members of Adslot Limited Report on the audit of the financial report Collins Square, Tower 5 727 Collins Street Melbourne Victoria 3008 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au We have audited the financial report of Adslot Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the 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 (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1 (c) in the financial statements, which indicates that the Group incurred a net loss of $6.2 million during the year ended 30 June 2021, and management anticipate incurring further net losses from operations until such time as sufficient revenue growth is achieved. As stated in Note 1 (c), these events or conditions, along with other matters as set forth in Note 1 (c), indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. 70 Adslot 2021 Annual Report 73 In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Intangible assets and goodwill impairment testing Note 10 Goodwill and other intangibles included within the Group’s statement of financial position amounted to $12.7 million At 30 June 2021. An entity is required, per AASB 136 Impairment of Assets, to assess at the end of each reporting period whether there is any indication that an asset may be impaired. Should any indication of impairment exist, the entity shall estimate the recoverable amount of the asset. Further, goodwill is required to be tested annually for impairment. Impairment testing of goodwill and intangible assets requires a high degree of estimation and judgement by management and there is subjectivity involved relating to assumptions and key inputs. This area is a key audit matter as impairment testing of goodwill and intangible assets requires a high degree of estimation and judgement by management and there is subjectivity involved relating to assumptions and key inputs. Research and development grants and capitalised wages Note 8 and Note 10 During the year ended 30 June 2021, the Group has recognised $2.4 million relating to capitalised developments costs as intangible assets. The Group has also claimed associated research and development (R&D) grants to the value of $1.1 million under the R&D Tax Incentive Scheme from Aus. Industry, for estimated and submitted R&D claims at year end. A high level of judgement is required in determining whether the criteria for capitalising R&D costs are met and as such there is a risk that the criteria for capitalisation in accordance with AASB 138 Intangible Assets costs are not achieved. Under AASB 120 Accounting for Government Grants and Disclosure of Government Assistance, grants received relating to costs that are capitalised are required to be offset against the capitalised amount, while grants relating to costs that are not capitalised are to be recognised as income. Estimated R&D grant claims pertaining to costs incurred during the 2021 financial year as well as R&D grant claims submitted but not yet received relating to costs incurred in the previous financial year, are to be recognised as a receivable. This area is a key audit matter given the subjectivity and management judgement applied in assessing whether costs meet the recognition criteria of AASB 138. Our procedures included, amongst others: Reviewing the impairment model for compliance with AASB 136; Assessing management's determination of the Group's cash generating units based on our understanding of the nature of the Group's business, the economic environment in which segments operate and the Group's internal reporting structure; Testing the mathematical accuracy and appropriateness of the methodology of the underlying model calculations; Assessing the reasonableness of inputs and assumptions used in the model prepared by management; Performing a sensitivity analysis of the key assumptions in model; and Reviewing relevant disclosures for adequacy in the financial statements. Our procedures included, amongst others: Obtaining an understanding of the capitalisation process and how costs are allocated to the project; Reviewing compliance with criteria for capitalisation of costs under AASB; Assessing the reasonableness of total development costs against expectations, having regard to prior year costs and current year budgeted costs; Testing on a sample basis, capitalised development costs incurred to underlying supporting documentation; Ensuring the above sample meets the recognition requirements of accounting standing AASB 138; Tracing the R&D receivable to submitted claims and where applicable, subsequent cash receipt; Testing the mathematical accuracy of R&D grant claims accrued for; Obtaining an understanding of the current status of discussions with AusIndustry in relation to R&D claims; Utilising Grant Thornton’s internal R&D expert to review the FY21 receivable for compliance with the tax legislation; and Assessing the appropriateness of the disclosures in the financial statements. 74 Adslot 2021 Annual Report 71 In addition to the matter described in the Material uncertainty related to going concern section, we have determined the Revenue Recognition matters described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Intangible assets and goodwill impairment testing Note 10 June 2021. Goodwill and other intangibles included within the Group’s statement of financial position amounted to $12.7 million At 30 Our procedures included, amongst others: An entity is required, per AASB 136 Impairment of Assets, to assess at the end of each reporting period whether there is any indication that an asset may be impaired. Should any indication of impairment exist, the entity shall estimate the recoverable amount of the asset. Further, goodwill is required to be tested annually for impairment. Reviewing the impairment model for compliance with AASB 136; Assessing management's determination of the Group's cash generating units based on our understanding of the nature of the Group's business, the economic environment in which segments operate and the Group's internal reporting structure; Impairment testing of goodwill and intangible assets requires a Testing the mathematical accuracy and appropriateness of high degree of estimation and judgement by management and there is subjectivity involved relating to assumptions and key inputs. This area is a key audit matter as impairment testing of goodwill and intangible assets requires a high degree of estimation and judgement by management and there is the methodology of the underlying model calculations; Assessing the reasonableness of inputs and assumptions used in the model prepared by management; Performing a sensitivity analysis of the key assumptions in subjectivity involved relating to assumptions and key inputs. Reviewing relevant disclosures for adequacy in the model; and financial statements. Research and development grants and capitalised wages Note 8 and Note 10 During the year ended 30 June 2021, the Group has recognised $2.4 million relating to capitalised developments costs as intangible assets. The Group has also claimed associated research and development (R&D) grants to the value of $1.1 million under the R&D Tax Incentive Scheme Our procedures included, amongst others: Obtaining an understanding of the capitalisation process and how costs are allocated to the project; Reviewing compliance with criteria for capitalisation of from Aus. Industry, for estimated and submitted R&D claims at costs under AASB; year end. A high level of judgement is required in determining whether the criteria for capitalising R&D costs are met and as such there is a risk that the criteria for capitalisation in accordance Assessing the reasonableness of total development costs against expectations, having regard to prior year costs and current year budgeted costs; with AASB 138 Intangible Assets costs are not achieved. Testing on a sample basis, capitalised development costs Under AASB 120 Accounting for Government Grants and Disclosure of Government Assistance, grants received relating to costs that are capitalised are required to be offset against the capitalised amount, while grants relating to costs that are not capitalised are to be recognised as income. Estimated R&D grant claims pertaining to costs incurred during the 2021 financial year as well as R&D grant claims submitted but not yet received relating to costs incurred in the previous financial year, are to be recognised as a receivable. This area is a key audit matter given the subjectivity and management judgement applied in assessing whether costs meet the recognition criteria of AASB 138. incurred to underlying supporting documentation; Ensuring the above sample meets the recognition requirements of accounting standing AASB 138; Tracing the R&D receivable to submitted claims and where applicable, subsequent cash receipt; Testing the mathematical accuracy of R&D grant claims accrued for; Obtaining an understanding of the current status of discussions with AusIndustry in relation to R&D claims; Utilising Grant Thornton’s internal R&D expert to review the FY21 receivable for compliance with the tax legislation; and Assessing the appropriateness of the disclosures in the financial statements. 71 Note 3 The Group derives revenue through the rendering of service which are performed under the terms of the contractual agreements. Determining the appropriate revenue recognition methods for multiple contractual agreements can be complex and involves management judgment, which include determination of each performance obligation within contracts, allocation of consideration to individual performance obligations and identifying when performance obligations are satisfied so revenue can be recognised. The area is a key audit matter due to the application of judgement to the arrangements in the contracts with customers. Our procedures included, amongst others: Reviewing the revenue recognition policies to assess for compliance with AASB 15 Revenues from Contracts with Customers; Performing analytical procedures over revenue balances; Reviewing significant customer contracts to assess accounting treatment for compliance with AASB 15; Selecting a statistical sample of revenue transactions to ensure transactions exist and receipts were appropriately recognised; Evaluating the appropriateness of contract liability and publisher creditor accounts; and Assessing the adequacy of the Group’s disclosures within the financial statements. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. 72 Adslot 2021 Annual Report 75 Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 18 to 25 of the Directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Adslot Limited, for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants M J Climpson Partner – Audit & Assurance Melbourne, 30 August 2021 Corporate Governance Statement In accordance with Listing Rule 4.10.3, Adslot’s Corporate Governance Statement can be found at http://www.adslot.com/investor-relations/governance/ Shareholder Information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The information is current as at 13 August 2021. Distribution of equity securities The number of shareholders by size of shareholding are: Ordinary Shares Number of Holders Number of Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 + TOTAL The number of shareholders holding less than a marketable parcel of $500 (17,857 shares): Twenty largest shareholders The names of the twenty largest holders of quoted shares are: NATIONAL NOMINEES LIMITED MR PETER DIAMOND + MRS DIANA DIAMOND J P MORGAN NOMINEES AUSTRALIA PTY LIMITED DAWNIE DIXON PTY LTD MR ANDREW BARLOW J & M BARLOW PENSION FUND INVIA CUSTODIAN PTY LIMITED CAPITAL ACCRETION PTY LTD MR KEITH KNOWLES ZERO NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD AMBLESIDE VENTURES PTY LTD SAPEAME PTY LTD 14 MR PETER STANKOVIC PARKS AUSTRALIA PTY LTD STOCK RANGE PTY LTD CHARMED5 PTY LTD 1 2 3 4 5 6 7 8 9 10 11 12 13 15 16 17 18 20 G & D DIXON INVESTMENTS PTY LTD 19 MR DAVID WILLIAM HOLZWORTH + MRS JANE ELIZABETH HOLZWORTH SISUG PTY LTD Total Top 20 holders of Ordinary Shares Remaining holders balance 206 300 421 1,087 868 2,882 1,222 21,873 983,767 3,353,102 42,066,539 1,935,580,989 1,982,006,270 8,328,529 Listed Ordinary Shares Number of Shares % of Shares 261,161,021 205,000,000 144,225,094 86,046,522 67,702,668 63,991,724 60,252,850 43,068,966 40,579,799 37,382,304 35,535,638 33,091,710 32,941,379 24,017,150 21,740,000 21,144,014 20,000,000 12,302,184 12,000,000 11,434,561 13.18 10.34 7.28 4.34 3.42 3.23 3.04 2.17 2.05 1.89 1.79 1.67 1.66 1.21 1.10 1.07 1.01 0.62 0.61 0.58 1,233,617,584 748,388,686 62.24 37.76 Classes of Shares - Adslot Ltd has only one class of share on issue, being fully paid ordinary shares. Substantial Shareholders Peter Diamond Private Portfolio Managers Pty Ltd Jencay Capital Pty Ltd Geoff Dixon Shares 205,000,000 124,570,699 122,385,409 107,599,566 % Shares 10.34 6.29 6.17 5.43 Voting Rights - All ordinary shares carry one vote per share without restrictions. 76 76 Adslot 2021 Annual Report Adslot 2021 Annual Report 73 77 Adslot 2021 Annual Report Adslot 2021 Annual Report 77 We have audited the Remuneration Report included in pages 18 to 25 of the Directors’ report for the year ended The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Report on the remuneration report Opinion on the remuneration report 30 June 2021. of the Corporations Act 2001. Responsibilities Grant Thornton Audit Pty Ltd Chartered Accountants M J Climpson Partner – Audit & Assurance Melbourne, 30 August 2021 In our opinion, the Remuneration Report of Adslot Limited, for the year ended 30 June 2021 complies with section 300A The number of shareholders by size of shareholding are: The number of shareholders by size of shareholding are: Corporate Governance Statement Corporate Governance Statement In accordance with Listing Rule 4.10.3, Adslot’s Corporate Governance Statement can be found at In accordance with Listing Rule 4.10.3, Adslot’s Corporate Governance Statement can be found at http://www.adslot.com/investor-relations/governance/ http://www.adslot.com/investor-relations/governance/ Shareholder Information Shareholder Information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The information is current as at 13 August 2021. report is as follows. The information is current as at 13 August 2021. Distribution of equity securities Distribution of equity securities Ordinary Shares Ordinary Shares Number of Holders Number of Shares Number of Holders Number of Shares 1 – 1,000 1 – 1,000 1,001 – 5,000 1,001 – 5,000 5,001 – 10,000 5,001 – 10,000 10,001 – 100,000 10,001 – 100,000 100,001 + 100,001 + TOTAL TOTAL The number of shareholders holding less than a marketable parcel of $500 The number of shareholders holding less than a marketable parcel of $500 (17,857 shares): (17,857 shares): Twenty largest shareholders Twenty largest shareholders The names of the twenty largest holders of quoted shares are: The names of the twenty largest holders of quoted shares are: NATIONAL NOMINEES LIMITED NATIONAL NOMINEES LIMITED MR PETER DIAMOND + MRS DIANA DIAMOND MR PETER DIAMOND + MRS DIANA DIAMOND J P MORGAN NOMINEES AUSTRALIA PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED DAWNIE DIXON PTY LTD DAWNIE DIXON PTY LTD MR ANDREW BARLOW MR ANDREW BARLOW J & M BARLOW PENSION FUND J & M BARLOW PENSION FUND INVIA CUSTODIAN PTY LIMITED INVIA CUSTODIAN PTY LIMITED CAPITAL ACCRETION PTY LTD CAPITAL ACCRETION PTY LTD MR KEITH KNOWLES MR KEITH KNOWLES ZERO NOMINEES PTY LTD ZERO NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD AMBLESIDE VENTURES PTY LTD AMBLESIDE VENTURES PTY LTD SAPEAME PTY LTD SAPEAME PTY LTD 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 MR PETER STANKOVIC 14 MR PETER STANKOVIC 15 15 16 16 17 17 18 18 19 MR DAVID WILLIAM HOLZWORTH + MRS JANE ELIZABETH HOLZWORTH 19 MR DAVID WILLIAM HOLZWORTH + MRS JANE ELIZABETH HOLZWORTH 20 20 PARKS AUSTRALIA PTY LTD PARKS AUSTRALIA PTY LTD STOCK RANGE PTY LTD STOCK RANGE PTY LTD CHARMED5 PTY LTD CHARMED5 PTY LTD G & D DIXON INVESTMENTS PTY LTD G & D DIXON INVESTMENTS PTY LTD SISUG PTY LTD SISUG PTY LTD Total Top 20 holders of Ordinary Shares Total Top 20 holders of Ordinary Shares Remaining holders balance Remaining holders balance 206 206 300 300 421 421 1,087 1,087 868 868 2,882 2,882 1,222 1,222 21,873 21,873 983,767 983,767 3,353,102 3,353,102 42,066,539 42,066,539 1,935,580,989 1,935,580,989 1,982,006,270 1,982,006,270 8,328,529 8,328,529 Listed Ordinary Shares Listed Ordinary Shares Number of Number of Shares Shares % of % of Shares Shares 261,161,021 261,161,021 205,000,000 205,000,000 144,225,094 144,225,094 86,046,522 86,046,522 67,702,668 67,702,668 63,991,724 63,991,724 60,252,850 60,252,850 43,068,966 43,068,966 40,579,799 40,579,799 37,382,304 37,382,304 35,535,638 35,535,638 33,091,710 33,091,710 32,941,379 32,941,379 24,017,150 24,017,150 21,740,000 21,740,000 21,144,014 21,144,014 20,000,000 20,000,000 12,302,184 12,302,184 12,000,000 12,000,000 11,434,561 11,434,561 1,233,617,584 1,233,617,584 748,388,686 748,388,686 13.18 13.18 10.34 10.34 7.28 7.28 4.34 4.34 3.42 3.42 3.23 3.23 3.04 3.04 2.17 2.17 2.05 2.05 1.89 1.89 1.79 1.79 1.67 1.67 1.66 1.66 1.21 1.21 1.10 1.10 1.07 1.07 1.01 1.01 0.62 0.62 0.61 0.61 0.58 0.58 62.24 62.24 37.76 37.76 Classes of Shares - Adslot Ltd has only one class of share on issue, being fully paid ordinary shares. Classes of Shares - Adslot Ltd has only one class of share on issue, being fully paid ordinary shares. Substantial Shareholders Substantial Shareholders Peter Diamond Peter Diamond Private Portfolio Managers Pty Ltd Private Portfolio Managers Pty Ltd Jencay Capital Pty Ltd Jencay Capital Pty Ltd Geoff Dixon Geoff Dixon Shares Shares 205,000,000 205,000,000 124,570,699 124,570,699 122,385,409 122,385,409 107,599,566 107,599,566 % Shares % Shares 10.34 10.34 6.29 6.29 6.17 6.17 5.43 5.43 Voting Rights - All ordinary shares carry one vote per share without restrictions. Voting Rights - All ordinary shares carry one vote per share without restrictions. 76 Adslot 2021 Annual Report 73 77 Adslot 2021 Annual Report 77 Adslot 2021 Annual Report Adslot 2021 Annual Report Adslot 2021 Annual Report 77 77 Corporate Directory Directors Mr Andrew Barlow – Non-Executive Chairman Mr Ben Dixon – Executive Director Mr Adrian Giles – Non-Executive Director Ms Sarah Morgan – Non-Executive Director Mr Andrew Dyer – Non-Executive Director Mr Tom Triscari – Non-Executive Director Chief Executive Officer Mr Ben Dixon Company Secretary Ms Felicity Conlan Auditors Grant Thornton Australia Collins Square, Tower 5 727 Collins Street Melbourne, VIC 3008 Australia Bankers National Australia Bank Limited 330 Collins Street, Melbourne, VIC 3000 Australia Share Register Computershare Registry Services Pty Ltd Yarra Falls 452 Johnston Street Abbotsford, VIC 3001 Australia Home Stock Exchange Australian Securities Exchange Limited Level 45, South Tower Rialto, 525 Collins Street Melbourne, VIC 3000 Australia ASX Code: ADS Website www.adslot.com Registered Office Adslot Ltd Level 2, 419 Collins Street, Melbourne, VIC 3000 Australia Phone: + 61 3 8695 9100 Head Office Adslot Ltd Level 2, 419 Collins Street, Melbourne, VIC 3000 Australia Phone: + 61 3 8695 9100 Asia Pacific Offices Level 7, 10-14 Waterloo Street Surry Hills, NSW 2010 Australia 1-231, Shanghai 1933 No 10 Shajing Road Shanghai 200080 China 301S Botany Road Botany Downs, Auckland New Zealand North America Office 79 Madison Avenue New York, NY 10016 United States of America European Offices 10 John Street London, WCIN 2EB United Kingdom Poststraße 33, 20354 Hamburg, Germany 78 78 Adslot 2021 Annual Report Adslot 2021 Annual Report Corporate Directory Directors Mr Andrew Barlow – Non-Executive Chairman Mr Ben Dixon – Executive Director Mr Adrian Giles – Non-Executive Director Ms Sarah Morgan – Non-Executive Director Mr Andrew Dyer – Non-Executive Director Mr Tom Triscari – Non-Executive Director Chief Executive Officer Mr Ben Dixon Company Secretary Ms Felicity Conlan Auditors Grant Thornton Australia Collins Square, Tower 5 727 Collins Street Melbourne, VIC 3008 Australia Bankers National Australia Bank Limited 330 Collins Street, Melbourne, VIC 3000 Australia Share Register Computershare Registry Services Pty Ltd Yarra Falls 452 Johnston Street Abbotsford, VIC 3001 Australia Home Stock Exchange Australian Securities Exchange Limited Level 45, South Tower Rialto, 525 Collins Street Melbourne, VIC 3000 Australia ASX Code: ADS Website www.adslot.com Registered Office Adslot Ltd Level 2, 419 Collins Street, Melbourne, VIC 3000 Australia Phone: + 61 3 8695 9100 Head Office Adslot Ltd Level 2, 419 Collins Street, Melbourne, VIC 3000 Australia Phone: + 61 3 8695 9100 Asia Pacific Offices Level 7, 10-14 Waterloo Street Surry Hills, NSW 2010 Australia 1-231, Shanghai 1933 No 10 Shajing Road Shanghai 200080 China 301S Botany Road Botany Downs, Auckland New Zealand North America Office 79 Madison Avenue New York, NY 10016 United States of America European Offices 10 John Street London, WCIN 2EB United Kingdom Poststraße 33, 20354 Hamburg, Germany 78 Adslot 2021 Annual Report adslot.com
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