OpenLearning Limited
Annual Report 2022

Plain-text annual report

ABN 18 635 890 390 OpenLearning Limited and Controlled Entities Audited Annual Financial Statements 31 December 2022 OpenLearning Limited and Controlled Entities Corporate Directory Directors Spiro Pappas Adam Brimo John Merakovsky Rupesh Singh - Non-Executive Chairman - Managing Director and Group CEO - Non-Executive Director - Non-Executive Director Joint Company Secretaries Nova Taylor Robyn Slaughter Registered Office Suite 1803, 227 Elizabeth Street Sydney NSW 2000 Auditors Hall Chadwick Level 40, 2 Park Street Sydney NSW 2000 Share Registrar Automic Pty Ltd Level 5, 126 Phillip Street Sydney NSW 2000 Stock Exchange Listing Australian Securities Exchange Code: OLL OpenLearning Limited and Controlled Entities General information Index Directors' report Auditor’s independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report Shareholder information Page 1 20 21 22 23 25 26 61 62 67 OpenLearning Limited and Controlled Entities Directors’ report Your directors present their report on the Consolidated Entity (referred to herein as the Group) consisting of OpenLearning Limited and its controlled entities for the financial year ended 31 December 2022. Directors The following persons were directors of OpenLearning Limited during or since the end of the financial year up to the date of this report: Spiro Pappas Kevin Barry Adam Brimo John Merakovsky Rupesh Singh David Buckingham Professor Beverley Oliver Maya Hari Benjamin Shields - Non-Executive Director and Chairman (appointed as Chairman on 25 May 2022) - Non-Executive Director (resigned on 30 June 2022) and Chairman (resigned as Chairman on 25 May 2022) - Managing Director and Group CEO - Non-Executive Director (appointed on 30 June 2022) - Non-Executive Director (appointed on 14 October 2022) - Non-Executive Director (resigned on 27 May 2022) - Non-Executive Director (resigned on 22 March 2022) - Non-Executive Director (resigned on 26 April 2022) - Non-Executive Director (resigned on 27 January 2023) Particulars of each director’s experience and qualifications are set out later in this report. Principal Activities The principal activities of the Group during the financial year were: • providing a cloud-hosted social learning platform for delivering short courses, blended learning and online degrees; • online program management serving direct-entry programs that enable students to enter universities; • providing learning design services; and • promotion and sale of educational courses through a global marketplace. Review of operations and financial position Results for financial year 2022 (“FY2022”): • gross sales of $3,628,025, a decrease of 12.9% year-on-year (“YoY”); • revenue of $3,167,310, a decrease of 9.7% YoY; • loss after tax of $(5,648,308), a decrease in losses of 16.0% YoY. - 1 - OpenLearning Limited and Controlled Entities Directors’ report 2022 $ 2021 $ Inc / (Dec) % Revenue from ordinary activities 3,167,310 3,507,542 (9.7) Revenue comprises of the following: Platform SaaS fees Program delivery Marketplace sales Services sales Gross sales Less: Sharing of revenue with course creators Revenue Strategy 1,644,233 1,035,951 552,217 395,624 3,628,025 (460,715) 3,167,310 1,433,206 1,611,386 726,822 393,516 4,164,930 (657,388) 3,507,542 14.7 (35.7) (24.0) 0.5 (12.9) (29.9) (9.7) OpenLearning offers a unique lifelong learning platform, encompassing short courses, micro- credentials and qualifications. OpenLearning is building its client base by empowering education providers to enter and operate the online lifelong learning market with a suite of products, including: • Platform Subscription: Providing an innovative learning platform and tools on a Software-as-a-service (SaaS) model to enable education providers to deliver courses online. • Program Delivery: Partnering with top institutions to deliver programs on the OpenLearning platform with capabilities across full spectrum of program delivery. • Value-added services: Providing a marketplace and learning design services to clients to drive network effects and accelerate platform adoption. The Group has positioned itself to capitalise on the shift towards online education that began before COVID-19 and has since accelerated. OpenLearning ended FY2022 with 245 Platform Subscription customers and over 3 million learners, making it one of Australia and Southeast Asia’s largest lifelong learning platforms. Financial highlights for FY2022 The Group is pleased to report that revenue from its core Platform Subscription division continued to grow. In FY2022, SaaS annual recurring revenue (ARR)1 grew by 15.6% and SaaS revenue grew by 14.7% while the number of SaaS customers expanded by 19.5% to 245 by the end of the year. 1 Annualised recurring SaaS revenue, calculated by utilising the generally accepted industry standard, which involves multiplying the monthly accrued SaaS revenue in the month at the end of the quarter by 12 (months). The ARR calculation does not take into account the future expiry of the term of any contract under which SaaS revenue is generated or any customer lost during the relevant month. - 2 - OpenLearning Limited and Controlled Entities Directors’ report The Group’s Program Delivery division, which launched in FY2021 with the UNSW Transition Program Online, was impacted by lower demand for Australian international education from its partner’s target markets in FY2022, resulting in revenue declining by 35.7% YoY in the division. SaaS ARR ($m) SaaS Customers $2.0 $1.5 1.345 1.715 1.484 245 205 167 $1.0 $0.5 $0.0 $2.0 $1.5 $1.0 $0.5 $0.0 FY20 FY21 FY22 FY20 FY21 FY22 SaaS Revenue ($m) Program Delivery Revenue ($m) 1.644 1.433 1.127 1.611 1.036 $2.0 $1.5 $1.0 $0.5 $0.0 0.000 FY20 FY21 FY22 FY20 FY21 FY22 The Group’s gross sales, which includes all divisions, decreased by 12.9% YoY to $3,628,025. After deducting revenue shared with education providers, revenue declined by 9.7% YoY to $3,167,310. Gross Sales (AUD, $m) Group Revenue (AUD, $m) 4.165 3.628 2.868 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 3.508 3.167 1.889 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 FY20 FY21 FY22 FY20 FY21 FY22 - 3 - OpenLearning Limited and Controlled Entities Directors’ report Strategic review complete, working towards break-even The Company commenced a strategic review of its business in May 2022, which generated interest from multiple parties and a number of opportunities for the Company. This review has now been completed and led to the following outcomes: • Focus on growing the Platform SaaS business in new and existing geographies with a more streamlined global sales and marketing operation and product-led growth initiatives. • Strategic investment from the Education Centre of Australia, a leading international education group that will utilise OpenLearning’s platform and support its growth into new markets. • Cost optimisation exercise resulting in annualised savings of circa $3.3 million 1 by reorganising teams, expanding operations in Southeast Asia and optimising cloud hosting usage. • Restructure the Program Delivery division and the Transition Program Online (TPO), resulting in reduced operating and delivery costs and a lower break-even point for the TPO from FY2023 onwards. • Target to establish OpenLearning in a substantial new geography through a capital-light reseller and distribution model in which the Company provides its technology and a partner takes it to market. The impact of these initiatives on the Group’s results were not immediately evident in FY2022; however, the Group has already begun to see an improvement in Q4 FY2022 and in early FY2023. In particular, the Group implemented a higher-value usage-based SaaS model for platform subscription, resulting in the discontinuation of lower-value educator plans and personal plans. The subscription plan now starts from c.$1,000 per year. The Company also adjusted pricing for new customers and created new usage-based tiers. The change of pricing model resulted in a shift in customer mix, with some upgrading their plans while others cancelled, leading to an improvement in revenue per customer. With these initiatives in place, the Company is confident that it will be able to reach break-even by growing revenue while closely controlling its costs. Investment in platform, products and brand in FY2022 The Group continued to invest in developing and marketing its lifelong learning platform and in ensuring the operational success of its Program Delivery segment which began generating revenue in FY2021. The Group’s core product offering consists of: 1. OpenLearning SaaS, which enables self-service payment and onboarding for education providers to utilise OpenLearning’s lifelong learning platform; 2. Biomedical Education Skills and Training (BEST) Network, which enables medical education to be delivered online with a library of 21,000 medical images from leading universities; 3. UNSW Transition Program Online, a four-month direct entry program for prospective international students delivered by OpenLearning in partnership with UNSW Global; 4. CS101, a micro-credential in computer science and programming designed by leading tech companies and industry experts that the Group is working to license to education providers; and 1 Based on the annualised difference between Q4 2021 actual and Q4 2022 actual operating expenses and cost of sales associated with platform subscription. - 4 - OpenLearning Limited and Controlled Entities Directors’ report 5. OpenCreds, a lifelong learning micro-credentialling framework that has been adopted by education providers in Australia and Malaysia, resulting in over 100 OpenCreds launched on the platform. The upfront development costs for the UNSW TPO, CS101 and OpenCreds are now complete and the Group does not expect any further capital expenditure for these products. As previously highlighted, the Group’s focus is on developing and promoting its core lifelong learning platform to ensure that OpenLearning is recognised as a leader in its field and attracts customers across its key markets. The Group’s main operating expenses by function and investments spent were: Operating expenses Sales and marketing Platform design and development Program and service delivery Year ended 31 December 2022 Year ended 31 December 2021 $ 1,440,199 1,136,356 1,820,268 $ 1,906,077 1,510,779 2,697,846 Total 4,396,823 6,114,702 As a result of the cost optimisation exercise, which only began to yield results towards the end of FY2022, the Group’s loss after tax for FY2022 decreased by 16.0% YoY to $5,648,308. The Group’s cash position ended with $2,204,639 as of 31 December 2022. Conclusion The Group successfully executed against a number of key contracts during FY2022 thanks to the hard work and dedication of employees and the support of its partners. The directors are grateful for the support of the Group’s shareholders and have made substantial changes to the Group’s operations to reduce costs, improve margins and position the Group to sustainably grow revenue. With the completion of the Group’s strategic review in FY2022, the Group is focusing its efforts on achieving break-even. - 5 - OpenLearning Limited and Controlled Entities Directors’ report Events after the reporting period - The Company signed an exclusive Distribution and SaaS Reseller Agreement with the Education Centre of Australia (‘ECA’) in March 2023 to expand OpenLearning to India. The Agreement is ongoing (i.e. no fixed term) and is subject to performance thresholds after the first 3-years that ECA must meet in order to maintain the Agreement and exclusivity. - OpenLearning India will encompass the Company’s SaaS Platform and a marketplace of short courses, micro-credentials and online degrees primarily from Indian and Australian universities. - Under the Agreement, ECA will actively promote the marketplace to learners and the OpenLearning’s SaaS Platform to universities in India, Nepal, Sri Lanka and Pakistan (the Platform Region), while OpenLearning will establish, operate and provide technical support for the OpenLearning SaaS Platform that will be hosted on Microsoft Azure in India. - The Company will receive 5% of the gross course sales from the OpenLearning India’s marketplace and 50% revenue from the SaaS Platform subscription from the Platform Region. - The economic materiality of the Agreement is not known at this time as the revenue generated is dependent on the number of learners who choose to purchase courses through the OpenLearning India marketplace and the number of universities in the Platform Region that subscribe to the OpenLearning SaaS Platform. However, the Company views the Agreement as strategically important as it allows the Company to expand into a new market in partnership with a well-established international education group. Environmental issues The Group’s operations are not regulated by any significant environmental regulations under the laws of the countries where the Group operates in. Dividends No dividends were paid or declared during or since the end of the financial year and there were no declared dividends unpaid at the date of this report. Indemnification and insurance of directors and officers During the year, the Group has paid a premium in respect of an insurance contract insuring all directors and officers of the Group against liabilities incurred in the capacity as a director or officer of the Group. Indemnification and insurance of auditor During the year, the Group has not indemnified or agreed to indemnify the auditor of the Company. Proceedings on behalf of the Company No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. - 6 - OpenLearning Limited and Controlled Entities Directors’ report Non-audit Services The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. No other fees were paid or payable to the auditors for non-audit services performed during the year ended 31 December 2022. Auditor’s Independence Declaration The lead auditor’s independence declaration for the year ended 31 December 2022 has been received and can be found on page 20 of the financial report. Options At the date of this report, the unissued ordinary shares of OpenLearning Limited under option are as follows: Grant Date Date of Expiry Exercise Price per share Number under Option 28 October 2021 31 August 2024 28 October 2021 27 April 2025 $0.30 $0.30 250,000 1,000,000 Option holders do not have any rights to participate in any issues of shares or other interests of the Company or any other entity. For details of options issued to directors and executives as remuneration, refer to the remuneration report. Other than the above, there have been no options granted over unissued shares or interests of any controlled entity within the Group during or since the end of the reporting period. Performance rights As at the date of this report there are 350,000 performance rights convertible to shares on 1:1 basis on issue (2021: 935,000). These 350,000 performance rights shall vest over 3 years with 1/3 vesting annually on the condition that the Company’s volume weighted average share price over any 30 consecutive trading days is equal to or higher than 55 cents. None of these performance rights vested during FY2022. Information Relating to Directors and Company Secretary Spiro Pappas – Non-Executive Director and Chairman (appointed as Chairman on 25 May Qualifications Experience 2022) – B.Comm (Merit), AICD – Spiro Pappas is a business leader with over 30 years of experience predominantly in the financial services industry. Since leaving NAB in July 2018, Spiro has served on a number of boards. In addition to his role at Open Learning, Spiro is currently the Chairman of - 7 - OpenLearning Limited and Controlled Entities Directors’ report Atlas Iron and OpenInvest (Wealthtech). Spiro is also an NED of DataMesh Group (Payment Fintech) and Cognian Technologies (IoT Proptech). At NAB, Spiro performed several leadership roles including Executive General Manager of Global Institutional Banking, CEO of Asia and Executive General Manager of International and Innovation. Prior to NAB, Spiro worked in Sydney, London and New York with Deutsche Bank and then over 11 years in London with ABN AMRO/RBS where he managed a number of global businesses including Debt Capital Markets, Client Coverage for Financial Institutions and Corporate Finance and Advisory. Spiro has also served on the Advisory Board of both the Australia China Business Council and the Australia Japan Business Cooperation Council and was a Board Member of the European Australian Business Council. Spiro was also a member of a taskforce advising the Federal Government on how to enable the SME sector for the digital age. Interest in Shares and Options – 3,679,091 fully paid ordinary shares Special Responsibilities – Member of Audit Committee Directorships held in other listed entities during the three years prior to the current year – Splitit Payments Ltd (Appointed 20 January 2019; Resigned 8 February 2021) Kevin Barry – Non-Executive Director (Resigned 30 June 2022) and Chairman (resigned Qualifications Experience 25 May 2022) – B.Comm, LLB – Kevin Barry is a director of TCAP Australia and Thakral Capital Holdings. His responsibilities include execution of investment opportunities, oversight and management of development projects, origination of senior construction and investment finance. Kevin is also the TCAP group representative director for the GemLife retirement business. Kevin has over 24 years’ experience in law, property finance and funds management. Initially he started as a structured finance lawyer in Sydney with KPMG & Blake Dawson, and then London with Norton Rose. In 2001, he moved to investment banking at Zurich Capital Markets Asia where he was Senior Vice President responsible for the structuring and execution of their principal finance business. He subsequently managed CHOPIN structured finance business whose primary activities included originating fixed income products across various asset classes. Prior to joining the TCAP group, Kevin was involved in setting up the credit strategies funds management business at Pengana Capital. Since 2010, Kevin has been on the Board as Chairman of the ASX-listed ICS Global Limited (ASX: ICS). Interest in Shares and Options* – 2,110,806 fully paid ordinary shares 1,000,000 options (which expired on 9 December 2022) Special Responsibilities – Member of Audit Committee and Remuneration Committee Directorships held in other listed entities during the three years prior to the current year *as at resignation date, as outlined in Mr Barry’s Appendix 3Z dated 6 July 2022 – Current director of ICS Global Limited (since 23 July 2010) - 8 - OpenLearning Limited and Controlled Entities Directors’ report Adam Brimo Qualifications Experience – Managing Director and Group CEO – B.Eng (Software), B.Arts (Politics) – Adam Brimo is listed in the 2017 Forbes 30 Under 30 Asia for Consumer Technology, The Pearcey Foundation’s 2018 NSW Tech Entrepreneur Hall of Fame and is a recipient of the 2011 UNSW Alumni Graduand Award. Adam previously worked at Macquarie Bank as a Software Engineer in the Fixed Income, Currencies and Commodities Group and at Westpac Institutional Bank as a Senior Software Engineer. In 2010-2011, Adam led the successful Vodafail consumer activist campaign, which resulted in nationwide media coverage, an ACMA inquiry and a $1bn network upgrade for Vodafone’s Australian business. Adam was named the Consumer Activist of the Year in 2011 by Choice Magazine for his transformative impact on the telecommunications sector in Australia. In 2012, Adam joined UNSW Professor Richard Buckland and David Collien to found OpenLearning.com, a lifelong learning platform. Since that time, over 3 million students have joined courses, including the first massive open online courses (MOOCs) from Australia and Malaysia. Interest in Shares and Options – 6,967,475 fully paid ordinary shares Special Responsibilities – Group CEO Directorships held in other listed entities during the three years prior to the current year – None John Merakovsky – Non-Executive Director Qualifications Experience – BSc (Hons), PhD – John Merakovsky is a veteran of the technology industry having previously been the CEO of leading loyalty and data company Flybuys, and previously the CEO and Managing Director of ASX-listed Integrated Research Ltd. He was previously General Manager of SEEK Learning, part of leading Australian online employment platform SEEK, and before that Managing Director and CEO Australia and New Zealand for global marketing and credit services provider Experian. Mr Merakovsky started his career in the education technology sector as the founder and CEO of Southrock Corporation, a leading provider of enterprise Learning and Performance Management Solutions that was acquired by Talent2 in 2005. Having originally trained as a molecular biologist and neurogeneticist at the University of Melbourne, Mr Merakovsky is passionate about building a better future through sustainable investment in science and technology. Interest in Shares and Options – None Special Responsibilities Directorships held in other listed entities during the three years prior to the current year – TBA – TBA Rupesh Singh Qualifications Experience – Non-Executive Director – GradDip (IT) – Founder and Chief Executive Officer of Education Centre of Australia (ECA). ECA group partners and invest with universities to open campuses - 9 - OpenLearning Limited and Controlled Entities Directors’ report so that Universities have access to new markets, ECA takes care of all legal processes and investment requirement to setup campus operation. ECA currently partners with Australian, UK and Indian Universities. Victoria university, Swinburne, University of Canberra, Charles Stuart university and London met university are currently partnering with ECA to offer courses to students in different locations. ECA has established a strong network of representatives in 40+ countries to recruit quality students for its university partners. ECA group also has job ready program and currently offers 2000 plus internship to its students every year. ECA group has its own English school, 3 vocational institutes and 3 post graduate institutes which awards its own qualification at post graduate level. One of the speciality ECA group offers to its university partners is that ECA de risk subcontinent for universities as ECA has deployed a large team in India and been working in the region for more than 15 years. Interest in Shares and Options – 53,305,946 fully paid ordinary shares Special Responsibilities Directorships held in other listed entities during the three years prior to the current year – TBA – TBA Professor Beverley Oliver – Non-Executive Director (resigned 22 March 2022) Qualifications Experience – BA( (Hons), M.Phil PhD W.Aust, GradDipEd Murdoch, GAICD PFHEA – Emeritus Professor Beverley Oliver is an education change leader, a Principal Fellow of the Higher Education Academy, and an Australian National Teaching Fellow. She works as a higher education consultant and researcher in areas such as digital education, micro-credentials, curriculum transformation, quality assurance and graduate employability. Beverley was Deputy Vice-Chancellor Education at Deakin University (2013-2018), Deputy Chair of Universities Australia’s Deputy Vice- Chancellors (Academic) (2018) and Deputy Chair of the Board of EduGrowth, a not-for-profit entity and Australia’s acceleration network for high-growth, scalable, borderless education (2016-18). Beverley's leadership has been recognised through two national Citations for Outstanding Contributions to Student Learning and several nationally funded grants and two fellowships. In 2017, she was awarded Deakin University’s highest honour, the title of Alfred Deakin Professor, for her outstanding and sustained contribution to conceptualising the strategic enhancement of courses in the digital economy and furthering Deakin University’s research and scholarship in the field of higher education. Interest in Shares and Options* – 1,000,000 options (which expired on 9 December 2022) Special Responsibilities – Member of Remuneration Committee Directorships held in other listed entities during the three years prior to the current year *as at resignation date, as outlined in Professor Beverly’s Appendix 3Z dated 28 March 2022 – None Maya Hari Qualifications Experience – Non-Executive Director (resigned 26 April 2022) – MBA, MS Engineering – Maya Hari is a global leader in technology as well most recently having spent 7+ years in Twitter serving as VP, Global Strategy & Operations and the VP & Managing Director, Asia Pacific at Twitter. Asia Pacific has been the growth engine for Twitter in recent years. Maya's focus has been to fuel - 10 - OpenLearning Limited and Controlled Entities Directors’ report Twitter strategy and rapid growth in key markets such as China, India, Australia and Indonesia. Maya brings diverse business experience having led functions in Sales, Marketing & Product Management. She serves as a director of the following entities in Singapore: TIE Singapore (a Non-Profit focused on fuelling the entrepreneurial ecosystem), Aviva Singlife Holdings Pte Ltd, Aviva Ltd and Singapore Life Pte Ltd. Prior to Twitter, Maya spent 16+ years in the digital media, mobile and eCommerce in the US and in Asia Pacific region for brands such as Google, Samsung, Microsoft & Cisco. She was also responsible for the digital transformation & re-engineering of media powerhouse Conde Nast in Asia. Interest in Shares and Options* – 1,000,000 optiones (expired 9 December 2022) Special Responsibilities – Member of Remuneration Committee Directorships held in other listed entities during the three years prior to the current year *as at resignation date, as outlined in Ms Hari’s Appendix 3Z dated 28 April 2022 – None Benjamin Shields – Non-Executive Director (resigned 27 January 2023) Qualifications Experience – B.Bus, MBA – Ben is a senior-level professional with twenty years of corporate strategy, strategy execution and transformation experience. In his corporate career and as a consultant, Ben has worked throughout Asia (China, Singapore, Hong Kong, Indonesia, Korea, Japan), the US and UK, primarily in the areas of growth strategy, mergers and acquisitions strategy, commercial & operational due diligence and strategy execution and organisational transformation. Ben is Managing Director of Alchemy Growth, a boutique strategy advisory firm and is a Founding Partner of Alchemy Tribridge, the global investment firm. Ben was previously a Partner at Deloitte for more than twelve years. In his community role, Ben is Chair of headspace National Youth Mental Health Foundation and is a Board member of PCYC NSW. Ben has a Master of Business Administration from the University of Western Australia and is a member of the Australian Institute of Company Directors. Interest in Shares and Options* – 334,903 fully paid ordinary shares Special Responsibilities – None Directorships held in other listed entities during the three years prior to the current year *as at resignation date, as outlined in Mr Sheild’s Appendix 3Z dated 31 January 2023 – None Nova Taylor Qualifications Experience – Joint Company Secretary (appointed 14 March 2022) – BA Laws, BA Science – Deakin University – Ms Taylor has approximately 7 years’ experience working in Company Secretary and Assistant Company Secretary roles with listed companies. She previously worked for Computershare Investor Services Pty Limited in various roles for over 10 years - 11 - OpenLearning Limited and Controlled Entities Directors’ report Robyn Slaughter – Joint Company Secretary (appointed 14 March 2022) Qualifications – MSc Corporate Governance with Graduate ICSA - London South Bank Experience Justyn Stedwell Qualifications University BA (Hons) Accounting and Finance - University of Lincoln – Ms Slaughter is a qualified Governance Professional (CGI) and Associate of the Governance Institute of Australia (GIA), who holds a Masters degree in Corporate Governance and a Bachelors degree in Accounting and Finance. Ms Slaughter has 5 years’ experience working in Company Secretarial roles and is currently a Company Secretary of and provides company secretarial support to various ASX listed, unlisted public and private companies across a range of Industries including financial services, biotechnology and healthcare, technology, mining, cyber security and manufacturing. – Company Secretary (resigned 14 March 2022) – Bachelor of Business and Commerce (Management and Economics) – Monash University, Graduate Diploma of Accounting – Deakin University, Graduate Diploma of Applied Corporate Governance – Governance Institute of Australia, Graduate Certificate of Applied Finance – Kaplan Professional Experience – Company Secretary with over 15 years’ experience as a Company Secretary of ASX listed companies in various industries including IT and telecommunications, mining and exploration, biotechnology and agriculture. Meetings of Directors During the financial year 2022, 10 meetings of directors (including committees of directors) were held. Attendances by each director during the year was as follows: Directors’ Meetings Audit Committee Remuneration Committee Number Number Number eligible to Number eligible to Number eligible to Number attend attended attend attended attend attended Kevin Barry* Adam Brimo Spiro Pappas David Buckingham** Professor Beverley Oliver*** Maya Hari**** Benjamin Shields John Merakovsky***** Rupesh Singh****** 7 11 11 5 2 3 11 4 2 7 10 10 5 2 3 11 4 1 - - - - - - - - - *Kevin Barry resigned 30 June 2022 **David Buckingham resigned 27 May 2022 ***Professor Beverly Oliver resigned 22 March 2022 ****Maya Hari resigned 26 April 2022 *****John Merakovsky was appointed to the Board on 30 June 2022 ******Rupesh Singh was appointed to the Board on 14 October 2022 - 12 - - - - - - - - - - - - - - - - - - - - - - - - - - - - OpenLearning Limited and Controlled Entities Directors’ report - 13 - OpenLearning Limited and Controlled Entities Directors’ report Remuneration Report The Remuneration Report for Non-Executive Directors, Executive Director and other Key Management Personnel have been prepared under the following main headings: (i) Remuneration policy (ii) Details of remuneration (iii) Service agreements (iv) Share-based remuneration (v) Other information (i) Remuneration Policy The remuneration policy of the Group has been designed: - - - to align rewards to business outcomes that deliver value to shareholders to create a high performance culture by setting challenging objectives and rewarding individuals based on performance targets met to ensure remuneration is competitive in line with market to motivate and retain executive talent The Board has established a Remuneration Committee which is responsible for determining and reviewing remuneration arrangements for the Directors and the executive team. The remuneration structure adopted by the Group consists of the following components: fixed remuneration being annual salary; and - - short term incentives, being employee share schemes and bonuses for selected executives. The payment of bonuses, share options, performance rights and other incentive payments are reviewed by the Remuneration Committee annually and a recommendation is put to the Board for approval. All bonuses, options, performance rights and incentives are linked to pre-determined performance criteria. - 14 - OpenLearning Limited and Controlled Entities Directors’ report (ii) Details of remuneration The remuneration for key management personnel (KMP) of the Group during the year was as follows: Short-term Benefits Salary and Fees Profit Share and Bonuses Non- monetary Leave and Other Post-employment Benefits Pension and Super- annuation Other Long-term Benefits Equity-settled Share- based Payments Incentive Plans LSL Shares/ Units Options/ Rights Cash- settled Share- based Pay- ments Termin- ation Benefits Total $ $ $ $ $ $ $ $ $ $ $ $ $ Executive Director Adam Brimo 2022 250,000 2021 250,000 Non-Executive Directors Spiro Pappas 2022 44,823 2021 98,853 Kevin Barry* 2022 32,083 2021 70,000 John Merakovsky 2022 17,500 Rupesh Singh 2021 2022 2021 - - - David Buckingham* 2022 18,939 2021 45,558 Prof. Beverley Oliver* 2022 11,364 2021 45,558 Maya Hari* 2022 19,950 2021 56,131 Benjamin Shields 2022 41,216 2021 3,788 Other KMP - - - - - - - - - - - - - - - - - - Cherie Diaz* 2022 195,351 46,580 2021 249,769 Sarveen Kandiah* 2022 81,324 2021 104,681 David Collien 2022 180,000 2021 180,000 Huat Koh* 2022 116,814 2021 180,000 Christina He 2022 111,484 2021 175,000 - - - - - - - - - Total KMP 2022 1,120,848 46,580 2021 1,459,338 - * Resigned part way through FY2022 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,438 24,664 20,029 22,989 - - - - - - - - - - - - - - - - 4,442 8,446 - - - - - - 1,894 4,442 1,136 4,442 - - 4,201 379 - 19,704 10,817 22,989 1,720 10,464 2,237 16,129 3,789 18,450 11,087 17,221 - 9,364 6,376 17,273 1,957 11,498 3,836 17,062 14,904 105,817 54,382 131,372 - 15 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 45,564 - - - - - - - - - - - - - - - - - - - - - - - - - - - 45,564 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 327,666 293,018 49,265 107,299 32,083 70,000 17,500 - - - 20,833 50,000 12,500 50,000 19,950 56,131 45,417 4,167 261,635 283,575 93,508 123,047 202,239 208,308 126,178 203,649 124,939 195,898 1,333,713 1,645,092 OpenLearning Limited and Controlled Entities Directors’ report (iii) Service agreements Remuneration and other terms of employment for the Executive Director and other key management personnel are formalised in a Service Agreement. The major provisions of the agreements relating to remuneration for the financial year are set out below: (a) Adam Brimo - Managing Director and Group CEO Adam is paid a base salary of $250,000 per annum (plus superannuation). Adam is also entitled to an incentive bonus of up to $80,000 payable based on achieving selected and verified performance criteria. (b) Cherie Diaz - Managing Director, Australia (resigned on 5 August 2022) Cherie is paid a base salary of $250,000 per annum (plus superannuation). Cherie is also entitled to an incentive bonus of up to $80,000 payable based on achieving selected and verified performance criteria and 200,000 performance rights. (c) Sarveen Kandiah - Managing Director, Malaysia (resigned on 30 September 2022) Sarveen is paid a base salary of MYR330,000 per annum (plus superannuation). Sarveen is also entitled to an incentive bonus of up to MYR120,000 payable based on achieving selected and verified performance criteria and 200,000 performance rights. (d) David Collien - Chief Technology Officer David is paid a base salary of $180,000 per annum (plus superannuation). David is also entitled to an incentive bonus of up to $40,000 payable based on achieving selected and verified performance criteria and 200,000 performance rights. (e) Huat Koh - Chief Financial Officer (resigned on 30 June 2022) Huat is paid a base salary of $180,000 per annum (plus superannuation). Huat is also entitled to an incentive bonus of up to $20,000 payable based on achieving selected and verified performance criteria and 200,000 performance rights. (f) Christina He - Strategy Director Christina is paid a base salary of $175,000 per annum (plus superannuation). Christina is also entitled to an incentive bonus of up to $25,000 payable based on achieving selected and verified performance criteria and 150,000 performance rights. All the above service agreements otherwise contain customary terms for an agreement of such nature, including in relation to intellectual property being the property of the Group, restraint of trade and confidentially. The service agreements stipulate a range of two to three-month resignation periods. (iv) Share-based remuneration Options All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the terms of the agreements. 5,000,000 options were granted to the Directors as disclosed in the table below in FY2019, with the following key conditions: - 16 - OpenLearning Limited and Controlled Entities Directors’ report - amount payable upon exercise of each option is $0.30 - option will expire three (3) years following their date of issue - an option not exercised before the expiry date will automatically lapse on the expiry date. Performance rights 950,000 performance rights were issued in FY2020 to the key management personnel comprising of Cherie Diaz, David Collien, Sarveen Kandiah, Huat Koh and Christina He, as disclosed in the table below. These performance rights shall vest over 3 years with 1/3 vesting annually on the condition that the Company’s volume weighted average share price over any 30 consecutive trading days is equal to or higher than 55 cents. Options and rights granted as remuneration Grant Details Exercised Lapsed Balance at Beginning Balance at of Year Issue Date No. Value No. Value No. End of Year $ (Note 1) $ No. Directors Options Kevin Barry 1,000,000 9/12/2019 1,000,000 31,632 Spiro Pappas 1,000,000 9/12/2019 1,000,000 31,632 David Buckingham 1,000,000 9/12/2109 1,000,000 31,632 Professor Beverley Oliver 1,000,000 9/12/2019 1,000,000 31,632 Maya Hari 1,000,000 9/12/2019 1,000,000 31,632 5,000,000 5,000,000 158,160 Other KMP Performance rights Cherie Diaz 200,000 1/10/2020 200,000 27,714 Sarveen Kandiah 200,000 1/10/2020 200,000 27,714 David Collien 200,000 1/10/2020 200,000 27,714 Huat Koh 200,000 1/10/2020 200,000 27,714 Christina He 150,000 1/10/2020 150,000 20,786 950,000 950,000 131,642 - - - - - - - - - - - - - - - - - - - - - - - - 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 5,000,000 200,000 200,000 - - - - - - - 200,000 200,000 - - 150,000 600,000 350,000 - 17 - OpenLearning Limited and Controlled Entities Directors’ report Vested Unvested Balance at End Total at End of Total at End of of Year Exercisable Unexercisable No. No. No. Year No. Year No. (Note 2) Other KMP Performance rights David Collien Christina He 200,000 150,000 350,000 - - - - - - - - - 200,000 150,000 350,000 Note 1 The fair value of performance rights granted to Other KMP as remuneration as shown in the above table has been determined in accordance with Australian Accounting Standards and will be recognised as an expense over the relevant vesting period to the extent that conditions necessary for vesting are satisfied. Note 2 The exercise period for the vested options is subject to escrow period imposed by the ASX. Description of Options/Rights Issued as Remuneration Details of the performance rights granted as remuneration to those KMP listed in the previous table are as follows: Entitlement on Value per Amount Paid/ Exercise Option at Payable by Price Grant Date Recipient Grant Date Issuer Exercise Dates Exercisable $ $ $ Within 3 years on the condition that the Company’s volume weighted average share price over any 30 1 October 2020 Company shares is higher than 55 cents - 0.139(1) - 350,000 ordinary consecutive trading days (1) Performance right values at grant date were determined using the Black-Scholes method. - 18 - OpenLearning Limited and Controlled Entities Directors’ report (v) Other information The number of ordinary shares in the Company during the year held by each of the Group’s key management personnel, including their related parties, is set out below: Balance at Beginning of Year Granted as Remuneration during the Year Issued on Exercise of Options during the Year Other Changes during the Year Balance at End of Year Adam Brimo 6,682,475 Spiro Pappas 3,679,091 Kevin Barry 1,839,788 John Merakovsky Rupesh Singh - - David Buckingham 416,666 Prof Beverley Oliver Maya Hari - - Benjamin Shields 334,903 Cherie Diaz 504,209 Sarveen Kandiah 177,945 David Collien 3,556,743 Huat Koh 152,523 Christina He - Total 17,344,343 - - - - - - - - - - - - - - - * Shared held by Education Centre of Australia Pty Ltd. - - - - - - - - - - - - - - - 285,000 - 271,018 - 6,967,475 3,679,091 2,110,806 - 53,305,946* 53,305,946 (416,666) - - - 84,036 - - (151,391) - - - - 334,903 588,245 177,945 3,556,743 1,132 - 53,377,943 70,722,286 There were no other transactions conducted between the Group and KMP or their related parties, apart from those disclosed above relating to equity and compensation, that were conducted other than in accordance with normal employee, customer or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons. This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors. Spiro Pappas Chairman Dated: 28 March 2023 - 19 - OpenLearning Limited and Controlled Entities Consolidated statement of profit or loss and other comprehensive income For the financial year ended 31 December 2022 Revenue Other income Items of expense Web-hosting and other direct costs Employee benefits expense Depreciation and amortisation Promotional and advertising Professional services General and administrative costs Capital Loss Finance income Finance expenses Loss before tax Income tax Loss for the year Note 2022 $ 2021 $ 3 4 5 6 3,167,310 3,507,542 104,424 157,784 (1,105,391) (5,137,120) (367,385) (234,886) (1,248,465) (764,119) (5,585,632) (58,222) 2,864 (7,318) (5,648,308) – (1,855,441) (5,846,226) (288,234) (495,897) (1,134,537) (791,316) (6,746,325) – 24,924 (4,679) (6,726,080) – (5,648,308) (6,726,080) Other comprehensive income: Item that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations 56,805 (20,797) Total comprehensive loss for the year (5,591,503) (6,746,877) Loss for the year attributable to: Owners of the Company Total comprehensive loss attributable to: Owners of the Company (5,597,249) (6,726,080) (5,591,503) (6,746,877) Losses per share attributable to owners of the Company Basic losses per share (cents) Diluted losses per share (cents) 9 9 (2.55) (4.02) (2.55) (4.02) This statement should be read in conjunction with the notes to the financial statements. - 21 - OpenLearning Limited and Controlled Entities Consolidated statement of financial position As at 31 December 2022 ASSETS Current assets Trade and other receivables Prepayments Cash and cash equivalents Non-current assets Furniture, fittings and equipment Intangible assets Right-of-use assets Total assets LIABILITIES Current liabilities Trade and other payables Provisions Lease liabilities Deferred revenue Non-current liabilities Lease liabilities Total liabilities Net assets EQUITY Note 2022 $ 2021 $ 10 11 12 13 14 15 16 533,649 170,883 2,204,639 316,154 297,509 4,588,563 2,909,171 5,202,226 35,413 1,636,762 – 64,294 1,145,666 110,134 1,672,175 1,320,094 4,581,346 6,522,320 690,656 363,984 – 1,109,300 1,061,200 342,757 124,998 867,724 2,163,940 2,396,679 – – 2,163,940 Ssfas 2,417,406 2,396,679 Ssfas 4,125,641 Equity attributable to the owners of the Company Share capital Accumulated losses Reserves Total equity 17 18 36,263,511 (35,572,287) 1,726,182 32,495,431 (30,444,116) 2,074,326 2,417,406 4,125,641 This statement should be read in conjunction with the notes to the financial statements. - 22 - OpenLearning Limited and Controlled Entities Consolidated statement of changes in equity For the financial year ended 31 December 2022 Share Capital (Note 17) $ Reserves (Note 18) $ Accumulated Losses $ Total $ Opening balance at 1 January 2022 32,495,431 2,074,326 (30,444,116) 4,125,641 Loss for the year Other comprehensive income Foreign currency translation, representing total other comprehensive loss for the year Total comprehensive loss for the year Issuance of ordinary shares : - new ordinary shares Equity issuance costs Transfer of fair value of expired options Transfer of fair value of lapsed performance rights – – – – (5,648,308) (5,648,308) 56,805 – 56,805 56,805 (5,648,308) (5,591,503) 3,883,268 – (115,188) 115,188 – – – – (436,993) 436,993 (83,144) 83,144 3,883,268 – – – Closing balance at 31 December 2022 36,263,511 1,726,182 (35,572,287) 2,417,406 This statement should be read in conjunction with the notes to the financial statements. - 23 - OpenLearning Limited and Controlled Entities Consolidated statement of changes in equity For the financial year ended 31 December 2022 Share Capital (Note 17) $ Reserves (Note 18) $ Accumulated Losses $ Total $ Opening balance at 1 January 2021 29,595,431 3,413,423 (25,037,705) 7,971,149 Loss for the year Other comprehensive income Foreign currency translation, representing total other comprehensive loss for the year Total comprehensive loss for the year Issuance of ordinary shares : - new ordinary shares Equity issuance costs Transfer of fair value of expired options Share-based payment – – – – (6,726,080) (6,726,080) (20,797) – (20,797) (20,797) (6,726,080) (6,746,877) 3,100,000 (200,000) – – – – 3,100,000 (200,000) – – (1,319,669) 1,319,669 – 1,369 – 1,369 Closing balance at 31 December 2021 32,495,431 2,074,326 (30,444,116) 4,125,641 This statement should be read in conjunction with the notes to the financial statements. - 24 - OpenLearning Limited and Controlled Entities Consolidated statement of cash flows For the financial year ended 31 December 2022 Operating activities Receipts from customers Payments to suppliers and employees Proceeds from other income Note 2022 $ 2021 $ 3,840,031 (9,359,075) 110,132 4,555,236 (10,722,518) 157,784 Net cash flows used in operating activities 22 (5,408,912) (6,009,498) Investing activities Purchase of furniture, fittings and equipment, net of disposal Purchase of intangible assets Net cash flows used in investing activities Financing activities Proceeds from issuance of equity shares Proceeds from exercise of share options Repayment of lease liabilities Repayment of borrowing Share issue expenses (12,194) (726,741) (28,140) (710,130) (738,935) (738,270) 3,883,268 – (123,598) – – 2,900,000 – (171,817) – – Net cash flows generated from financing activities 3,759,670 2,728,183 Net (decrease) / increase in cash and cash equivalents (2,388,177) (4,019,585) Effect of exchange rate changes on cash and cash equivalents 4,253 13,079 Cash and cash equivalents at beginning of the year 4,588,563 8,595,069 Cash and cash equivalents at end of the year 11 2,204,639 4,588,563 This statement should be read in conjunction with the notes to the financial statements. - 25 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 The consolidated financial statements and notes represent those of OpenLearning Limited and its Controlled Entities (the Group). The separate financial statements of the Parent Entity, OpenLearning Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements were authorised for issue on 28 March 2023 by the directors of the Company. 1. Summary of significant accounting policies 1.1 Basis of preparation These general purpose consolidated financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. 1.2 Going concern The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realization and the settlement of liabilities in the ordinary course of business. The Group incurred a net loss for the year of $5,648,308 (2021: $6,726,080) and net operating cash outflows of $5,408,912 (2021: $6,009,498). As at 31 December 2022, the Group had accumulated losses of $35,572,287 (31 December 2021: $30,444,116). As at 31 December 2022, the Group has net current assets of $745,231 (31 December 2021: $2,805,547) and cash and cash equivalents of $2,204,639 (31 December 2021: $4,588,563). The Group has prepared a cashflow forecast for the next 12 months that indicates a risk that the Group may not meet all its payment obligations. However, the directors believe that it is appropriate for the financial statements to be prepared on a going concern basis after consideration of the following factors: • increasing traction in revenue growth of the Platform Subscription segment with improved gross margins and increasing cash inflow from this segment; • completion of a strategic review in FY2022 that resulted in a cost reduction exercise that reduced annualised costs by circa $3.3 million; • active management of discretionary expenditure in line with funds availability; and • raising of additional working capital through the issuance of securities and/or other funding. - 26 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) Accordingly, the directors believe that the Group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial statements. In the event that the Group is unsuccessful in implementing the above stated objectives, a material uncertainty exists, that may cast significant doubt on the Group’s ability as a going concern and its ability to recover assets, and discharge liabilities in the normal course of business and at the amount shown in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern. 1.3 Principles of consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the Parent (OpenLearning Limited) and all of the subsidiaries (including any structured entities). Subsidiaries are entities the Parent controls. The Parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 20. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Where applicable, equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non- controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. The consolidated financial statements of the Group have been prepared in accordance with the pooling of interest method as the Group is a continuation of the existing business of OpenLearning Global Pte Ltd and its subsidiaries. The assets and liabilities of the combining entities are reflected at their carrying amounts as reported in the consolidated financial statements. Any difference between the consideration paid/transferred and the equity acquired is reflected within equity as a common control reserve. The consolidated income statements and consolidated statements of comprehensive income reflect the results of the combining entities for the entire periods under review, irrespective of when the combination took place. Apart from the above, subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. - 27 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.4 Functional and presentation currency The functional currency of each of the Group’s entities is the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the Parent Entity’s functional currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except exchange differences that arise from net investment hedges. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. Group companies The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation currency, are translated as follows: - assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; income and expenses are translated at exchange rates on the date of transaction; and - - all resulting exchange differences are recognised in other comprehensive income. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position and allocated to non-controlling interest where relevant. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of. 1.5 Furniture, fittings and equipment All items of furniture, fittings and equipment are initially recorded at cost. Subsequent to recognition, furniture, fittings and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows: Computer Office equipment Leasehold improvement 60 months 60 months 60 months The carrying values of furniture, fittings and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Summary of significant accounting policies (cont'd) 1. - 28 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1.5 Furniture, fittings and equipment (cont’d) The residual value, useful life and depreciation method are reviewed at each financial year- end, and adjusted prospectively, if appropriate. An item of furniture, fittings and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on de-recognition of the asset is included in profit or loss in the year the asset is derecognised. 1.6 Intangible assets Intangible assets acquired separately are measured initially at cost. Following initial acquisition, intangible assets are carried at cost and where applicable, less any accumulated amortisation and/or any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit or loss in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised. (i) Domain names and trademarks Domain names and trademarks are recognised at cost of acquisition. They are considered to have an indefinite life and are carried at cost less any impairment losses. (ii) Platform development Platform development is recorded at cost. It has a finite life and is carried at cost less accumulated amortisation and any impairment losses. Platform development has an estimated useful life of five years. It is assessed annually for impairment. (iii) Learning platform software Learning platform software is recorded at cost. It has a finite life and is carried at cost less accumulated amortisation and any impairment losses. Software has an estimated - 29 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.6 Intangible assets (cont’d) useful life of ten years. Any costs incurred to improve the software after acquisition is expensed to the profit or loss. It is assessed annually for impairment. (iv) Course design Course design is costs expended: - - to develop the study courses for the UNSW Transition Program Online, a direct entry program for students to enter UNSW; to develop the OpenCreds’ micro-credential courses with interested course creators, including cash grants given to the course creators to initiate the development of the courses; and - to develop a computer science program titled ‘CS101’. The costs incurred are capitalised up to the stage when the study courses are ready for commercial use. They have a finite life and are carried at cost less accumulated amortisation and any impairment losses. The estimated useful life is based on the period of contracts or expected obsolescence period. 1.7 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in profit or loss, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. - 30 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.8 Financial instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the Group commits itself to either the purchase or the sale of the asset (i.e. trade date accounting is adopted). Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified "at fair value through profit or loss", in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing component or if the practical expedient was applied as specified in paragraph 63 of AASB 15: Revenue from Contracts with Customers. Classification and subsequent measurement Financial liabilities are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense to profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition. Financial assets Financial assets are subsequently measured at: - amortised cost; - - fair value through other comprehensive income; or fair value through profit or loss. Measurement is on the basis of two primary criteria: - - the contractual cash flow characteristics of the financial asset; and the business model for managing the financial assets. A financial asset that meets the following conditions is subsequently measured at amortised cost: - - the financial asset is managed solely to collect contractual cash flows; and the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. - 31 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.8 Financial instruments (cont’d) A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income: - the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates; and the business model for managing the financial asset comprises both contractual cash flows collection and the selling of the financial asset. - By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other comprehensive income are subsequently measured at fair value through profit or loss. Derecognition Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position. Derecognition of financial liabilities A liability is derecognised when it is extinguished (ie when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability, is treated as an extinguishment of the existing liability and recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Derecognition of financial assets A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred. All the following criteria need to be satisfied for the derecognition of a financial asset: - the right to receive cash flows from the asset has expired or been transferred; - all risk and rewards of ownership of the asset have been substantially transferred; and - the Group no longer controls the asset (ie it has no practical ability to make unilateral decisions to sell the asset to a third party). - On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. - 32 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.9 Impairment The Group recognises a loss allowance for expected credit losses on financial assets that are measured at amortised cost or fair value through other comprehensive income. Loss allowance is not recognised for: - - equity instruments measured at fair value through other comprehensive income. financial assets measured at fair value through profit or loss; or Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected to be received, all discounted at the original effective interest rate of the financial instrument. The Group uses the following approaches to impairment, as applicable under AASB 9: Financial Instruments: - - the general approach; and the simplified approach; General approach Under the general approach, at each reporting period, the Group assesses whether the financial instruments are credit-impaired, and: - - if the credit risk of the financial instrument has increased significantly since initial recognition, the Group measures the loss allowance of the financial instruments at an amount equal to the lifetime expected credit losses; and if there has been no significant increase in credit risk since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. Simplified approach The simplified approach does not require tracking of changes in credit risk at every reporting period, but instead requires the recognition of lifetime expected credit loss at all times. This approach is applicable to: - trade receivables or contract assets that result from transactions that are within the scope of AASB 15: Revenue from Contracts with Customers, and which do not contain a significant financing component; and lease receivables. In measuring the expected credit loss, a provision matrix for trade receivables is used, taking into consideration various data to get to an expected credit loss (ie diversity of its customer base, appropriate groupings of its historical loss experience, etc). - - Recognition of expected credit losses in financial statements At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit or loss and other comprehensive income. The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset. - 33 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.9 Impairment (cont’d) Assets measured at fair value through other comprehensive income are recognised at fair value with changes in fair value recognised in other comprehensive income. The amount in relation to change in credit risk is transferred from other comprehensive income to profit or loss at every reporting period. 1.10 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and with online payment providers, cash on hand and short-term deposits that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. 1.11 Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. 1.12 Employee benefits Short-term employee benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave entitlements are recognised as provisions in the statement of financial position. Defined contribution benefits All employees of the Group receive defined contribution entitlements, for which the Group pays fixed contribution to the employee’s superannuation fund of choice for the employees in Australia and to a state pension fund for the employees in Malaysia. All contributions in respect of employees’ defined contribution entitlements are recognised as an expense when they become payable. The Group’s obligation with respect to employees’ defined contribution entitlements is limited to its obligation for any unpaid contributions at the end of the reporting period. All obligations for unpaid contributions are measured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as current liabilities in the Group’s statement of financial position. - 34 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.12 Employee benefits (cont’d) Termination benefits When applicable, the Group recognises a liability and expense for termination benefits at the earlier of: the date when the Group can no longer withdraw the offer for termination benefits; and - - when the Group recognises costs for restructuring pursuant to AASB 137: Provisions, Contingent Liabilities and Contingent Assets and the costs include termination benefits. In either case, unless the number of employees affected is known, the obligation for termination benefits is measured on the basis of the number of employees expected to be affected. Termination benefits that are expected to be settled wholly before 12 months after the annual reporting period in which the benefits are recognised are measured at the (undiscounted) amounts expected to be paid. Equity-settled compensation The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair value of the instruments at grant date and amortised over the vesting periods. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. 1.13 Revenue Revenue arises from Platform SaaS fees, Program delivery, Marketplace sales and Services sales. To determine recognition of revenue, the Group: (i) identifies the contract with a customer, (ii) identifies the performance obligations in the contract, (iii) determines the transaction price, (iv) allocates the transaction price to the performance obligations and (v) recognises revenue when or as each performance obligation is satisfied. Revenue is recognised either at a point in time or over time, when or as the Group satisfies performance obligations by transferring the promised goods or services to its customers. (a) Platform SaaS fees Revenue from platform SaaS subscription fees is recognised over the period during which customers are granted access to the platform. (b) Program delivery Revenue from program delivery is recognised over the period of the study program. (c) Marketplace sales Revenue from marketplace sales is recognised when customers subscribe for the courses and the course is delivered. For courses sold on behalf of third parties, revenue is recognised based on revenue sharing arrangements, if any. - 35 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.13 Revenue (cont’d) (d) Services sales Revenue from the provision of services is recognised over time reflecting the progress for the completion of a performance obligation for which the Group has an enforceable right to payment. Platform SaaS, Program delivery and Services sold to customers in advance, which are yet to be utilised, are recognised initially in the balance sheet as deferred income and released to revenue in line with the above recognition criteria. 1.14 Taxes (a) Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the end of the reporting period, in the countries where the Group operates and generates taxable income. Current income taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all temporary differences, except: – Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and – In respect of taxable temporary differences associated with investments in subsidiaries and associate, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: - 36 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.14 Taxes (cont'd) – Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and – In respect of deductible temporary differences associated with investments in subsidiaries and associate, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of each reporting period. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. (c) Sales tax The applicable sales taxes are the Goods and Services Tax (GST) and the Sales and Service Tax (SST), depending on the tax jurisdiction where the Group operates. Revenues, expenses and assets are recognised net of the amount of sales tax except: - Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and - Receivables and payables are stated with the amount of sales tax included. - 37 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.15 Borrowing Costs Borrowing costs are recognised in profit or loss in the period in which they are incurred. 1.16 Share capital and share issue expenses Proceeds from issuance of equity shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital. 1.17 Leases The Group as lessee At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability is recognised by the Group where the Group is a lessee. However, all contracts that are classified as short- term leases (i.e. a lease with a remaining lease term of 12 months or less) and leases of low- value assets are recognised as an operating expense on a straight-line basis over the term of the lease. Initially, the lease liability is measured at the present value of the lease payments still to be paid at commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: fixed lease payments less any lease incentives; - - variable lease payments that depend on an index or rate, initially measured using the - - - index or rate at the commencement date; the amount expected to be payable by the lessee under residual value guarantees; the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; lease payments under extension options, if lessee is reasonably certain to exercise the options; and - payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. - 38 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 1. Summary of significant accounting policies (cont'd) 1.17 Leases (cont’d) The right-of-use assets comprise the initial measurement of the corresponding lease liability as mentioned above, any lease payments made at or before the commencement date, as well as any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset, or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. 1.18 New and Amended Accounting Policies Adopted by the Group The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. - 39 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 2. Critical accounting judgements and estimates The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 2.1 Judgements made in applying accounting policies In the process of applying the Group’s accounting policies, management has made the following judgements which have the most significant effect on the amounts recognised in the consolidated financial statements: (a) Recognition of Services revenue The amounts of revenue recognised in the reporting period depends on the extent to which the performance obligations have been satisfied. Recognising Services revenue requires significant judgement in determining milestones, actual work performed and the estimated costs to complete the work. (b) Share-based payment transactions The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an internal valuation using a Black-Scholes option pricing model. (c) Capitalisation of learning platform software and course design Distinguishing the phases of a new customised software or course design project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. Post-capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. 2.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in assumptions when they occur. (a) Impairment of non-financial assets Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing the asset. The value in use calculation is based on a discounted cash flow model. - 40 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 2. Critical accounting judgements and estimates (cont’d) 2.2 Key sources of estimation uncertainty (cont’d) (b) Impairment of receivables The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. Factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments are objective evidence of impairment. In determining whether there is objective evidence of impairment, the Group considers whether there is observable data indicating that there have been significant changes in the debtor’s payment ability or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates in. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. 3. Revenue Revenue from contracts with customers Platform SaaS fees Program delivery Marketplace sales Services sales Group 2022 $ 1,644,233 1,035,951 91,502 395,624 2021 $ 1,433,206 1,611,386 69,434 393,516 3,167,310 3,507,542 - 41 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 3. Revenue (cont’d) 3.1 The Group has disaggregated revenue into various categories in the following table. The revenue is disaggregated by geographical market, product/service lines and timing of revenue recognition. Platform SaaS 2021 2022 $ $ Program delivery Year ended 31 December Services 2022 $ 2021 $ 2022 $ 2021 $ Marketplace 2021 $ 2022 $ Total 2022 $ 2021 $ Geographical markets Australia Malaysia Singapore Timing of revenue recognition Products and services transferred to customers: At a point in time Over time 1,153,617 489,051 1,565 977,922 1,035,951 1,611,386 305,094 298,188 87,133 2,137 - 453,325 2,232 - 1,959 1,644,233 1,433,206 1,035,951 1,611,386 395,624 393,516 91,502 90,530 95,328 - - - - - - 91,502 - 1,644,233 1,433,206 1,035,951 1,611,386 395,624 393,516 - 1,644,233 1,433,206 1,035,951 1,611,386 395,624 393,516 91,502 - - - 66,662 2,581,795 2,954,158 551,425 581,718 1,959 3,797 69,434 3,167,310 3,507,542 2,772 - 69,434 91,502 69,434 - 3,075,808 3,438,108 69,434 3,167,310 3,507,542 4. Other income Cash flow boost incentive / Government grant Gain on lease modification Others Group 2022 $ 97,106 1,005 6,313 2021 $ 139,122 15,241 3,421 104,424 157,784 - 42 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 5. Loss for the year Loss before income tax from continuing operations includes the following specific expenses: Web-hosting and other direct costs - web-hosting costs - program delivery licence fee Employee benefits expense - share-based payment Depreciation and amortisation - depreciation on furniture, fittings and equipment - depreciation on right-of-use assets - amortisation of intangible assets Professional services - contractors General and administrative costs - write-off / loss on disposal of furniture, fittings and equipment foreign currency translation losses impairment of trade receivables travelling costs - - - Group 2022 $ 2021 $ 609,688 963,224 469,700 729,050 – 1,369 19,885 18,721 110,199 164,648 237,801 104,865 663,814 593,325 20,691 11,090 15,940 46,385 – 1,962 17,973 9,841 6. Income tax 6.1 Income tax expense There are no income tax expenses for the current and previous financial years as the Group does not have taxable profits. At the end of the reporting period, the Group has tax losses of approximately $31,033,000 (2021: $28,123,000) that are available for offset against future taxable profits of the companies in which the losses arose, for which no deferred tax asset is recognised due to uncertainty of their recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate. - 43 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 6.2 The prima facie tax on losses from ordinary activities before income tax is reconciled to the income tax as follows Group 2022 $ 2021 $ Loss before tax from continuing operations (5,648,308) (6,726,080) Prima facie tax benefit on loss from ordinary activities before tax at the domestic tax rates where the Group operates (1,398,286) (1,729,125) Add/(subtract): Tax effect of: – – – – non-allowable items effect of tax losses not recognised tax benefit of deductible equity raising costs 15,903 (22,624) 724,619 1,952,454 - - movement in unrecognised temporary difference 657,764 (200,705) Income tax attributable to entity - - The above reconciliation is prepared by aggregating separate reconciliations for each tax jurisdiction where the Group operates. A summary of the domestic tax rates by country where the Group operates is as follows: Australia Singapore Malaysia 7. Key Management Personnel 2022 % 25.0 17.0 24.0 2021 % 26.0 17.0 24.0 Refer to the remuneration report contained in the directors’ report for details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 31 December 2022. The totals of remuneration paid to KMP of the Group during the year are as follows: Short-term employee benefits Post-employment benefits Long-term employee benefits Share-based payments Total KMP compensation - 44 - 2022 $ 2021 $ 1,182,332 1,513,720 105,817 131,372 45,564 - - - 1,333,713 1,645,092 OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 7. Key Management Personnel (cont’d) Short-term employee benefits These amounts include fees paid to the non-executive Chairman and non-executive directors as well as all salary, paid leave benefits and any cash bonuses awarded to executive directors and other KMP. Post-employment benefits These amounts are the current-year’s estimated costs of providing for the Group’s superannuation contributions made during the year. Share-based payments These amounts represent the expense related to the participation of KMP in equity-settled benefit schemes as measured by the fair value of the options, rights and shares granted on grant date. Further information in relation to KMP remuneration can be found in the directors’ report. 8. Auditors’ remuneration Group 2022 $ 2021 $ Remuneration of the auditor for: – - auditing or reviewing the financial statements 61,800 57,000 9. Losses per share Both the basic and diluted losses per share have been calculated by dividing the loss for the year attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year. The reconciliation of the weighted average number of ordinary shares for the purposes of calculating the diluted losses per share is as follows: Weighted average number of ordinary shares for basic losses per share computation Effects of dilution from: - share options issued to convertible note holders - share options issued to advisors Weighted average number of ordinary shares for diluted losses per share computation 31 December 2022 31 December 2021 221,217,695 167,203,638 – – – – 221,217,695 167,203,638 - 45 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 10. Trade and other receivables Note Group 2022 $ 2021 $ CURRENT Trade receivables Provision for impairment 10a(i) Other receivables Provision for impairment Total current trade and other receivables 513,757 - 513,757 19,892 - 19,892 533,649 299,783 (21,539) 278,244 37,910 - 37,910 316,154 All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value. The following table shows the movement in lifetime expected credit loss that has been recognised for trade and other receivables in accordance with the simplified approach set out in AASB 9: Financial Instruments. Group Net measure- Opening ment of loss Amounts Closing balance allowance written off balance 1 January 2021 $ 31 December 2021 $ $ $ a. Lifetime Expected Credit Loss: Credit Impaired (i) Current trade receivables 30,223 16,354 (25,038) 21,539 Group Net measure- Opening ment of loss Amounts Closing balance allowance written off balance 1 January 2022 $ 21,539 31 December 2022 $ - $ - $ (21,539) (i) Current trade receivables - 46 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 10. Trade and other receivables (cont’d) The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The loss allowance provision as at 31 December 2021 is determined as follows; the expected credit losses also incorporate forward-looking information The "amounts written off", if any, are all due to customers declaring bankruptcy, or term receivables that have now become unrecoverable. Current >30 days past due >60 days past due >90 days past due $ $ $ $ Total $ 0% 0% 0% 0% 0% 385,752 86,190 18,462 43,245 533,649 - - - - - Current >30 days past due >60 days past due >90 days past due $ $ $ $ Total $ 0% 0% 0% 25.5% 6.4% 149,573 103,669 - - - - 84,451 337,693 21,539 21,539 2022 Expected loss rate Gross carrying amount Loss allowing provision 2021 Expected loss rate Gross carrying amount Loss allowing provision Credit risk The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties other than those receivables specifically provided for and mentioned within this note. The class of assets described as "trade and other receivables" is considered to be the main source of credit risk related to the Group. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery; for example, when the debtor has been placed in liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. 11. Cash and cash equivalents Cash at bank and on hand Cash with online payment providers Short-terms deposits placed with banks - 47 - Group 2022 $ 2021 $ 2,186,905 17,734 – 4,559,050 29,513 – 2,204,639 4,588,563 OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 12. Furniture, fittings and equipment Group Computer $ Office equipment $ Leasehold Improvement $ Total $ 2022 Cost At 1 January 2022 Additions Disposals Exchange difference At 31 December 2022 Accumulated depreciation At 1 January 2022 Depreciation for the year Disposals Exchange difference At 31 December 2022 48,195 6,028 (1,366) 30 52,887 16,329 10,056 (369) 47 26,063 21,972 6,166 (9,351) 3 18,790 13,015 3,962 (6,779) 3 10,201 Net carrying amount 26,824 8,589 39,222 – (39,222) – 109,389 12,194 (49,939) 33 – 71,677 15,751 5,867 (21,618) – – – 45,095 19,885 (28,766) 50 36,264 35,413 Group Computer $ Office equipment $ Leasehold Improvement $ Total $ 23,171 24,870 154 48,195 9,635 6,574 120 16,329 31,866 21,952 – 20 21,972 8,638 4,361 16 13,015 8,957 35,949 3,273 – 39,222 7,965 7,786 – 15,751 23,471 81,072 28,143 174 109,389 26,238 18,721 136 45,095 64,294 2021 Cost At 1 January 2021 Additions Exchange difference At 31 December 2021 Accumulated depreciation At 1 January 2021 Depreciation for the year Exchange difference At 31 December 2021 Net carrying amount - 48 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 13. Intangible assets Domain names and trademarks Goodwill $ $ Group Platform develop- ment $ Learning platform software work-in- progress $ Learning platform software $ Course design $ Total $ 2022 Cost At 1 January 2022 Additions Exchange difference 44,220 22,367 – 24,500 – – 179,475 623,376 – At 31 December 2022 66,587 24,500 802,851 Accumulated amortisation At 1 January 2022 Amortisation for the year Exchange difference At 31 December 2022 – – – – – – – – – 84,677 – – Net carrying amount 66,587 24,500 718,174 2021 Cost At 1 January 2021 Additions Exchange difference 37,096 7,124 – 24,500 – – – 179,475 – At 31 December 2021 44,220 24,500 179,475 Accumulated amortisation At 1 January 2021 Amortisation for the year Exchange difference At 31 December 2021 – – – – – – – – – – – – Net carrying amount 44,220 24,500 179,475 – – – – – – – – – – – – – – – – – – 372,334 – 2,294 686,771 80,998 – 1,307,300 726,741 2,294 374,628 767,769 2,036,335 93,084 37,398 638 68,550 115,226 – 161,634 237,301 638 131,120 183,776 399,573 243,508 583,993 1,636,762 361,242 – 11,092 163,240 523,531 – 586,078 710,130 11,092 372,334 686,771 1,307,300 54,187 36,315 2,582 – 68,550 – 54,187 104,865 2,582 93,084 68,550 161,634 279,250 618,221 1,145,666 Domain names and trademarks are recognised at cost of acquisition. Goodwill represents premium paid for business assets. These are considered to have an indefinite life and are carried at cost less any impairment losses. Platform development is recorded at cost. It has a finite life and is carried at cost less accumulated amortisation and any impairment losses. Platform development has an estimated useful life of five years. Amortisation commences when the development is completed and ready for commercial use. Learning platform software is recorded at cost. It has a finite life and is carried at cost less accumulated amortisation and any impairment losses. Software has an estimated useful life of ten years. Amortisation commences when the software is ready for commercial use. - 49 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 13. Intangible assets (cont’d) Course design is costs expended to develop the OpenCreds’ micro-credential courses, the computer science program titled ‘CS101’ and the study courses for the UNSW Transition Program Online. It has a finite life based on the contract periods or expected obsolescence period and is carried at cost less accumulated amortisation and any impairment losses. Course design has an estimated useful life of between five and ten years. Amortisation commences when the courses are ready for commercial use. Domain names and trademarks and Goodwill are allocated to the cash-generating unit which is based on the Group’s reporting geographical segment in Australia. 14. Right-of-use assets The Group’s leases comprise of lease of office premises. These leases have lease terms of between 2 to 3 years. i) AASB 16 related amounts recognised in the balance sheet Right-of-use assets Leased office premises Accumulated depreciation Exchange difference Total right-of-use assets Movement in carrying amounts: Leased office premises: At 1 January Additions / (Lease modification) Depreciation expense Exchange difference Net carrying amount ii) AASB 16 related amounts recognised in the statement of profit or loss Depreciation charge related to right-of-use assets Interest expense on lease liabilities Short-term leases expense Low-value asset leases expense Total cash outflows for leases 2022 2021 $ $ 478,555 478,581 (478,646) (369,376) 91 – 929 110,134 110,134 283,561 (26) (9,708) (110,199) (164,648) 91 – 929 110,134 110,199 164,648 1,199 35,719 4,679 8,788 10,001 27,430 170,517 208,035 - 50 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 15 Trade and other payables CURRENT Trade payables Other payables and accrued expenses a. Financial liabilities at amortised cost classified as trade and other payables Trade and other payables: – total current Group 2022 $ 2021 $ 367,338 323,318 701,379 359,821 690,656 1,061,200 690,656 1,061,200 Financial liabilities as trade and other payables 690,656 1,061,200 Trade and other payables are non-interest bearing. 16 Provisions CURRENT Provision for annual leave Provision for long service leave Group 2022 $ 2021 $ 318,420 342,757 45,564 – 363,984 342,757 - 51 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 17 Share capital 267,869,075 (31 Dec 2021: 197,358,300) fully paid ordinary shares 17.1 Movements in ordinary shares 31 December 2022 $ 31 December 2021 $ 36,263,511 32,495,431 2022 2021 No. of shares $ No. of shares $ Group Issued and fully paid ordinary shares: At 1 January Issuance of shares during the year : - placement of shares 197,358,300 35,295,761 164,024,967 32,195,761 70,510,775 3,883,268 33,333,333 3,100,000 At 31 December 267,869,075 39,179,029 197,358,300 35,295,761 Equity issuance costs At 1 January Costs arising from equity issuance At 31 December – – – (2,800,330) (115,188) (2,915,518) – – – (2,600,330) (200,000) (2,800,330) Total ordinary shares at 31 December 267,869,075 36,263,511 197,358,300 32,495,431 - 52 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 17. Share capital (cont’d) 17.2 Movements in unquoted options over ordinary shares Exercise period Exercise price per share Number on issue at 1 Jan 2022 Issued / (Lapsed) Number on issue at 31 Dec 2022 On or before 9 December 2022* On or before 9 December 2022* On or before 31 August 2024 On or before 27 April 2025 On or before 30 September 2022* $0.20 $0.30 $0.30 $0.30 2,793,333 5,000,000 250,000 1,000,000 $0.093 – 2,793,333 5,000,000 – – 6,422,908/ (6,422,908) – – 250,000 1,000,000 – Total unquoted options 9,043,333 (7,793,333) 1,250,000 * exercise of the options is subject to escrow periods. 17.3 Performance rights 950,000 performance rights were granted on 1 October 2020 to key management personnel of the Company. These performance rights are exercisable to 950,000 ordinary shares in the Company with Nil consideration over 3 years with 1/3 vesting annually on the condition that the Company’s volume weighted average share price over any 30 consecutive trading days is equal to or higher than 55 cents. 600,000 of these performance rights have lapsed upon the leaving of a key management person of the Group. None of these performance rights vested during the financial year 2021. 18. Reserves Foreign currency translation reserve Common control reserve Share option reserve (i) Foreign currency translation reserve Group 2022 $ 2021 $ 25,838 1,650,477 49,867 (30,967) 1,650,477 454,816 1,726,182 2,074,326 Foreign currency translation reserve represents exchange differences arising from the translation of the financial statements of the Company and its subsidiaries whose functional currencies are different from that of the Group’s presentation currency. (ii) Common control reserve Common control reserve records difference between the fair value of net assets acquired and consideration paid. - 53 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 18. Reserves (cont’d) (iii) Share option reserve Share option reserve records items recognised as expenses on valuation of share options. 19. Financial risk management The Group’s principal financial instruments comprise of receivables, payables, cash at bank and short-term deposits. The Board of Directors has overall responsibility for the oversight and management of the Group’s exposure to a variety of financial risks (including credit risk, foreign currency risk, liquidity risk and interest rate risk). The overall risk management strategy seeks to assist the Group in meeting its financial targets, while minimising potential adverse effects on the financial performance including the review of future cash flow requirements. (a) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s exposure to liquidity risk arises primarily from cash outflows from current operating losses. The Group’s objective is to focus on maintaining an appropriate level of overheads in line with the Group’s business plan and available cash resources, with the objective of achieving a cashflow positive business within the budgeted timeline. The table below summarise the maturity profile of the Group’s financial assets and liabilities at the end of the reporting period based on contractual undiscounted repayment obligations. - 54 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 19. Financial risk management (cont’d) (a) Liquidity risk (cont’d) Within 1 Year 1 to 5 Years Over 5 Years 2022 2021 2022 2021 2022 2021 2022 Group $ $ $ $ $ $ $ Total 2021 $ 533,649 316,154 - - - - 533,649 316,154 2,204,639 4,588,563 - - - - 2,204,639 4,588,563 2,738,288 4,904,717 - - - - 2,738,288 4,904,717 Financial assets – cash flows realisable Trade and other receivables Cash and short- term deposits Total anticipated inflows Financial liabilities due for payment Trade and other payables 690,656 1,061,200 Lease liabilities - 124,998 Total expected outflows Net inflow/(outflow) on financial instruments 690,656 1,186,198 2,047,632 3,718,519 (b) Credit risk - - - - - - - - - - - - - - - 690,656 1,061,200 - 124,998 690,656 1,186,198 - 2,047,632 3,718,519 Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including cash and short-term deposits), the Group minimise credit risk by dealing with high credit rating counterparties. The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades with third parties that are considered creditworthy. In addition, receivable balances are monitored on an ongoing basis. Exposure to credit risk At the end of the reporting period, the Group’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised on the balance sheets. - 55 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 19 Financial risk management (cont’d) (b) Credit risk (cont’d) Credit risk concentration profile The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial instruments. Financial assets that are neither past due nor impaired Trade and other receivables that are neither past due nor impaired are with creditworthy debtors with good payment records within the Group. Cash and short-term deposits and investment securities that are neither past due nor impaired are placed with or entered into with reputable financial institutions. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 10. (c) Foreign currency risk Exposure to foreign currency risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. With instruments being held by overseas operations, fluctuations in the SGD Singapore dollar and USD United States dollar may impact on the Group’s financial results. The following table shows the foreign currency risk on the financial assets and liabilities of the Group’s operations denominated in currencies other than the functional currency of the operations. 2022 Group Functional currency of entity: Australian dollar Statement of financial position exposure 2021 Group Functional currency of entity: Australian dollar Statement of financial position exposure Net Financial Assets/(Liabilities) in AUD USD SGD Other Total AUD (11,668) (11,668) (821) (821) - - (12,489) (12,489) Net Financial Assets/(Liabilities) in AUD USD SGD Other Total AUD 30,135 30,135 1,398 1,398 - - 31,533 31,533 - 56 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 19 Financial risk management (cont’d) (c) Foreign currency risk (cont’d) Foreign currency risk concentration profile The Group does not have any significant exposure to any specific foreign currency grouping nor does it have any major concentration of foreign currency risk related to any financial instruments. (d) Interest rate risk The Group’s exposure to market interest rates relate to cash deposits held at variable rates. The management monitors its interest rate exposure and consideration is given to potential renewals of existing positions. Sensitivity analysis for interest rate risk The following table demonstrates the sensitivity of profit/(loss) and equity to a reasonably possible change in interest rates of +/- 50 basis points, with all other variables held constant. Year ended 31 December 2022 +0.5% in interest rates -0.5% in interest rates Year ended 31 December 2021 +0.5% in interest rates -0.5% in interest rates Group Profit $ Equity $ 11,023 (11,023) 22,943 (22,943) 11,023 (11,023) 22,943 (22,943) - 57 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 20 Interests in subsidiaries Name Principal activities Country of incorporation Proportion (%) of ownership interest 2021 % 2022 % Held by the Company OLG Australia Investors Pte Ltd OpenLearning Global Pte Ltd Held by OpenLearning Global Pte Ltd Open Learning Global Pty Ltd Investment holding Singapore –* 100 Investment holding and provision of online education platform and services Singapore 100 100** Provision of online Australia 100 100 program management, online education platform and services. OpenLearning Global (M) Sdn Bhd Provision of online education platform and services. * OLG Australia Investors Pte Ltd was stuck off on 3 October 2022. ** 63.89% held via OLG Australia Investors Pte Ltd Malaysia 100 100 21 Operating segments The Group has identified its operating segments based on the internal reports that are reviewed and used by management in assessing performance and determining the allocation of resources. The Group has in previous financial years reported its operating segments on the basis of geographical locations i.e. Australia, Malaysia, Singapore and Corporate (based in Australia). The Group has now revised its reportable operating segments on the basis of revenue and cost originations, as follows: (a) Australia (b) South East Asia (c) Global Platform (d) Global Services (e) Corporate Overheads - 58 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 21 Operating segments (cont’d) Australia $ South East Asia $ Global Platform $ Global Services $ Corporate Overheads $ Total $ 2,406,514 612,336 148,460 – – 3,167,310 (495,702) (2,396,162) (228,494) (226,253) (204,867) (123,532) (1,268,496) – (628,543) (54,214) (8,633) (122,106) (53,543) (254,703) – – – – – – 148,460 – – (609,689) (1,075,289) (84,677) – (515,479) (280,028) (2,565,162) – (1,037,126) – – (406,013) (265,268) (1,708,407) (1,105,391) (5,137,120) (367,385) (234,886) (1,248,465) (722,371) (5,648,308) – – 1,488,801 4,581,346 392,847 2,163,940 Segment assets 2,624,402 468,143 Segment liabilities 1,374,051 397,042 Australia $ South East Asia $ Global Platform $ Global Services $ Corporate Overheads $ Total $ 2,741,436 555,027 211,079 – – 3,507,542 (847,879) (2,429,197) (212,518) (445,945) (244,963) (136,761) (1,470,541) (15,568) (817,583) (38,675) (20,642) (37,248) (21,710) (381,107) – – – – – – 211,079 – – (991,994) (1,763,546) (36,744) (475) (539,913) (278,790) (3,736,151) – (835,900) (297) (28,835) (312,413) (354,055) (1,349,360) (1,855,441) (5,846,226) (288,234) (495,897) (1,134,537) (791,316) (6,726,080) – – 2,351,700 6,522,320 406,980 2,396,679 2022 Revenue: External sales Segment results: Web-hosting and other direct costs Employees benefit expenses Depreciation and amortisation Promotional and advertising Professional services General and administration Segment profit/(loss) 2021 Revenue: External sales Segment results: Web-hosting and other direct costs Employees benefit expenses Depreciation and amortisation Promotional and advertising Professional services General and administration Segment profit/(loss) Segment assets 3,592,693 577,927 Segment liabilities 1,435,977 553,722 - 59 - OpenLearning Limited and Controlled Entities Notes to the financial statements – 31 December 2022 22. Cash flow information Reconciliation of cash flows from operating activities with loss after income tax: Group 2022 $ 2021 $ Loss after tax (5,648,308) (6,726,080) Non-cash flows in loss for the year: Depreciation and amortisation Write-off / Loss on disposal of furniture, fittings and equipment Unrealised exchange (gain) / loss Gain on lease modification Share-based payment Changes in assets and liabilities: Decrease in trade and other receivables Increase in trade and other payables 367,385 288,234 21,173 50,823 (1,374) – – (43,355) (15,241) 1,369 (182,498) (16,113) 39,461 446,114 Net cash flows used in operating activities (5,408,912) (6,009,498) 23. Events after the reporting period - The Company signed an exclusive Distribution and SaaS Reseller Agreement with the Education Centre of Australia (‘ECA’) in March 2023 to expand OpenLearning to India. The Agreement is ongoing (i.e. no fixed term) and is subject to performance thresholds after the first 3-years that ECA must meet in order to maintain the Agreement and exclusivity. - OpenLearning India will encompass the Company’s SaaS Platform and a marketplace of short courses, micro-credentials and online degrees primarily from Indian and Australian universities. - Under the Agreement, ECA will actively promote the marketplace to learners and the OpenLearning’s SaaS Platform to universities in India, Nepal, Sri Lanka and Pakistan (the Platform Region), while OpenLearning will establish, operate and provide technical support for the OpenLearning SaaS Platform that will be hosted on Microsoft Azure in India. - The Company will receive 5% of the gross course sales from the Openlearning India’s marketplace and 50% revenue from the SaaS Platform subscription from the Platform Region. - The economic materiality of the Agreement is not known at this time as the revenue generated is dependent on the number of learners who choose to purchase courses through the OpenLearning India marketplace and the number of universities in the Platform Region that subscribe to the OpenLearning SaaS Platform. However, the Company views the Agreement as strategically important as it allows the Company to expand into a new market in partnership with a well-established international education group. - 60 - OpenLearning Limited and Controlled Entities Directors’ declaration In accordance with a resolution of the directors of OpenLearning Limited, the directors of the Company declare that: 1. the financial statements and notes, as set out, are in accordance with the Corporations Act 2001 and: a. b. comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards; and give a true and fair view of the financial position as at 31 December 2022 and of the performance for the year ended on that date of the consolidated group; 2. 3. in the directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and the directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer. On behalf of the Board of Directors Spiro Pappas Chairman Dated: 28 March 2023 - 61 - OPENLEARNING LIMITED ABN 18 635 890 390 AND CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF OPENLEARNING LIMITED AND CONTROLLED ENTITIES Opinion We have audited the financial report of OpenLearning Limited (the Company) and controlled entities (the Group), which comprises the consolidated statement of financial position as at 31 December 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of OpenLearning Limited and controlled entities is in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis of Opinion We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. Our responsibilities under those standards are further described in the Auditor’s responsibility section of our report. We are independent of the Company in accordance with 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the company, would be in the same terms if given to the directors as at the time of this auditor’s report. 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 in the financial report, which indicates that the Group incurred a net loss after tax of $5,648,308 and operating cash outflows of $5,408,912 during the year ended 31 December 2022. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Shareholder Information The shareholder information set out below was applicable as at 9 March 2023. A. Distribution of Equity Securities – Ordinary Shares Analysis of numbers of equity security holders by size of holding: SPREAD OF HOLDINGS 1 - 1,000 1,001 - 5,000 5,001 – 10,000 10,001 – 100,000 100,001 AND OVER TOTAL Marketable Parcels NUMBER OF HOLDERS 49 393 273 655 217 1,587 NUMBER OF UNITS 8,060 1,214,280 2,232,670 23,371,501 241,042,564 267,869,075 % OF TOTAL ISSUED CAPITAL 0.00% 0.45% 0.83% 8.73% 89.99% 100.00% Based on the price per security, number of holders with an unmarketable holding: 1,121 with total 11,515,308 amounting to 4.3% of Issued Capital. B. Distribution of Equity Securities – Unlisted Share Options Analysis of numbers of option holders by size of holding SPREAD OF HOLDINGS UNLISTED OPTIONS AT $0.30, EXP 27/04/25 100,001 AND OVER UNLISTED OPTIONS AT $0.30, EXP 31/08/24 10,001 – 100,000 NUMBER OF HOLDERS 1 5 NUMBER OF UNITS % OF TOTAL CAPITAL 1,000,000 100.00% 250,000 100.00% C. Distribution of Equity Securities – Performance Rights Analysis of numbers of Performance Rights holders by size of holding: SPREAD OF HOLDINGS 100,001 AND OVER NUMBER OF HOLDERS 2 NUMBER OF UNITS 350,000 % OF TOTAL ISSUED CAPITAL 100.00% D. Equity Security Holders – Ordinary Shares Twenty largest quoted equity security holders. The names of the twenty largest holders of quoted equity securities are listed below: NAME ECA INVESTMENTS GROUP PTY LTD ALCHEMY TRIBRIDGE SAPPHIRE PTY LTD MAGNA INTELLIGENT SDN BHD MR ADAM MAURICE BRIMO BNP PARIBAS NOMS(NZ) LTD RICHARD BUCKLAND AUSTRALIAN CATHOLIC UNIVERSITY LIMITED NARRON PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ORIENT GLOBAL HOLDINGS PTY LTD MS MEILIN MU NICOLETTE HARPER CLAPSY PTY LTD FRANK NOEL BEAUMONT MR NICK THEODORAKOPOULOS J P MORGAN NOMINEES AUSTRALIA PTY LIMITED BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD MR DAVID ANDREW COLLIEN MR CLIVE ALYN MAYHEW-BEGG REMB NOMINEES PTY LTD ORDINARY SHARES NUMBER HELD 53,305,946 36,379,929 12,294,595 6,631,117 5,787,121 5,094,288 5,000,000 3,981,809 3,855,101 3,205,444 2,899,891 2,720,758 2,500,000 2,367,021 2,342,858 2,333,333 2,332,357 2,133,161 2,132,871 2,061,887 % OF ISSUED SHARES 19.90% 13.58% 4.59% 2.48% 2.16% 1.90% 1.87% 1.49% 1.44% 1.20% 1.08% 1.02% 0.93% 0.88% 0.87% 0.87% 0.87% 0.80% 0.80% 0.77% As at 9 March 2023, the 20 largest shareholders held ordinary shares representing 59.49% of the issued share capital. Substantial Shareholders Substantial holders in the Company are set out below: As at 9 March 2023, the following shareholders have disclosed a substantial shareholder notice to the ASX: NAME ALCHEMY TRIBRIDGE SAPPHIRE PTY LTD AND ASSOCIATED ENTITIES CLIVE MAYHEW ECA INVESTMENTS GROUP PTY LIMITED ORDINARY SHARES HELD DATE OF NOTICE 36,379,929 25/01/22 8,288,754 53,305,946 19/12/19 08/12/22 E. Unquoted Equity Securities – Unlisted Options Holders of more than 20% of unlisted options security holders. UNLISTED OPTIONS AT $0.30, EXP 27/04/25 HIGH RESOLVES UNLISTED OPTIONS AT $0.30, EXP 31/08/24 PRASHANT VARANASI HANNAH BEDER ALEXANDER LAURANCE NORTH MIN’AN TAN MARTHA WINATA Partly Paid Shares The Company does not have any partly paid shares on issue. Voting Rights The voting rights attached to ordinary shares are set out below: NUMBER OF UNITS % OF TOTAL CAPITAL 1,000,000 100.00% 50,000 50,000 50,000 50,000 50,000 20.00% 20.00% 20.00% 20.00% 20.00% On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no voting rights attached to any other securities on issue. On-market buy-back The Company is not currently conducting an on-market buy-back. Other ASX Information Corporate Governance The Company’s Corporate Governance Statement as at 31 December 2022 as approved by the Board can be viewed at https://solutions.openlearning.com/investor-center Stock Exchange on which the Company’s Securities are Quoted The Company’s listed equity securities are quotes on the Australian Securities Exchange Review of Operations A review of operations is contained in the Directors Report. Annual General Meeting The Company advises that the Annual General Meeting ('AGM') of the company is scheduled for 31 May 2023. Further to Listing Rule 3.13.1, Listing Rule 14.3 and clause 14.3 of the Company's Constitution, nominations for election of directors at the AGM must be received not less than 30 Business Days before the meeting, being no later than Tuesday, 18 April 2023. 

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