Announcement PDF Adisyn Ltd (ASX: AI1) ABN 30 155 473 304 ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2024 Adisyn Ltd and its controlled entities Letter from the Chairman 30 June 2024 Dear Shareholders, As we reflect on the 2023/24 fiscal year, it is clear that this has been a period of significant transformation for Adisyn. Over the past twelve months, we have undergone a comprehensive rebranding and redefined our approach to business, embracing a new name and a refreshed strategic vision. The journey of change has been marked by several positive developments. We have successfully implemented cost-saving measures, divested non-core assets, and shifted our focus from traditional infrastructure to a more agile, opportunity-driven model. This strategic pivot is designed to align with the rapidly evolving landscape of technology and the dynamic nature of today's market. Our commitment to innovation is exemplified by our strategic investment in the defence sector and the establishment of our own Defence Strategic Advisory Board. This innovation positions us to effectively leverage the substantial financial investments being made in this sector. Additionally, we are advancing our involvement in artificial intelligence, both in software and hardware, to capitalise on the opportunities presented by this transformative field. Transitioning to this new focus has required considerable effort and investment from our board. While the shift has been challenging, it is both necessary and prudent to adapt in order to enhance shareholder value. Remaining static in a time of such rapid change would have been irresponsible. Looking forward, we are enthusiastic about the future. Our next chapter will emphasise agility and flexibility, with a strong focus on generating shareholder value through advancements in AI, defence contracts, and an expanded presence in the technology sector. Thank you for your continued support and trust as we navigate this exciting new phase in our company's journey. Yours Sincerely Shane Wee Chairman Adisyn Ltd and its controlled entities ABN 30 155 473 304 Annual Report - 30 June 2024 Adisyn Ltd and its controlled entities Corporate directory 30 June 2024 Directors Shane Wee (Non-Executive Chairman) Blake Burton (Managing Director) Justin Thomas (Non-Executive Director) Company secretary Kyla Garic Registered office/ Principal place of business 27 Aspiration Circuit Bibra Lake WA 6163 Telephone: Email: Website: +1300 331 888 investors@adisyn.com.au www.adisyn.com.au Share register Xcend Pty Ltd Level 2, 477 Pitt Street Haymarket NSW 2000 Auditor Hall Chadwick WA Audit Pty Ltd 283, Rokeby Road Subiaco WA 6008 Solicitors Nova Legal 50 Kings Park Road Perth WA 6005 Stock exchange listing Adisyn Ltd shares are listed on the Australian Securities Exchange (ASX code: AI1) 1 Adisyn Ltd and its controlled entities Contents 30 June 2024 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 consolidated financial statements Consolidated entity disclosure statement Directors' declaration Independent auditor's report to the members of Adisyn Ltd ASX Additional Information 3 17 18 20 21 22 23 62 63 64 69 General information The financial statements cover Adisyn Ltd as a Group consisting of Adisyn Ltd and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Adisyn Ltd's functional and presentation currency. Adisyn Ltd is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Registered office/Principal place of business 27 Aspiration Circuit Bibra Lake WA 6163 A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 September 2024. 2 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Adisyn Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2024. 1. Directors The following persons were directors of Adisyn Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Name Position Appointment date Resignation date Shane Wee Blake Burton Justin Thomas Non-Executive Chairman Managing Director Non-Executive Director Executive Director Chief Technology Officer 31 August 2021 1 July 2022 9 July 2024 2 February 2012 1 July 2022 9 July 2024 9 July 2024 Information on directors Name: Title: Experience and expertise: Other current directorships: Former directorships (last 3 years): Interests in shares: Interests in options: Interests in rights: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Interests in shares: Interests in options: Interests in rights: Shane Wee Non-Executive Chairman Mr Wee retired as a founding director of Alto Capital after 28 years in the financial services industry in July 2021 to take on the role of CEO of The Magic Coat for Kids and other opportunities. Over the years, he has built close relationships with a number of business leaders in Perth's business community. His focus has always been on building long term relationships with strategic partners and continuously value add to his local network and contacts throughout South-East Asia. My Foodie Box Limited (ASX:MBX) resigned 17 November 2022 2,525,000 fully paid ordinary shares 1,000,000 unlisted options, exercisable at $0.60 per option, expiring 20 December 2025 Blake Burton Managing Director BCom (Accounting and Corporate Finance) Mr Burton possesses extensive experience in the IT industry. He was co-founder of web hosting company, Netorigin in 2011. Mr Burton grew Netorigin from inception and took the Company to successful trade sale in 2019 to Australia's largest privately owned web host VentraIP. At completion of the sale to Netorigin Mr Burton focused on Attained Group. Mr Burton has previously worked as an auditor at PwC, which included working with a number of ASX listed and international companies. 2,504,846 fully paid ordinary shares 13,911,182 fully paid ordinary shares, escrowed until 31 March 2025 1,000,000 unlisted options, exercisable at $0.25 per option, expiring 6 November 2024 5,000,000 performance rights 3 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 Name: Title: Experience and expertise: Justin Thomas Non-Executive Director (appointed: 9 July 2024) Executive Director and Chief Technology Officer (resigned: 9 July 2024) Mr Thomas is a solutions-oriented professional IT developer that excels in identification, development, management and commercialisation of projects with broad reaching team collaboration, interfacing with clients and deployment of technology to ensure successful solutions for clients. During his career, Mr Thomas has successfully managed large project teams of over 15 people. From the initial need’s identification and requirement analysis through to implementation, Mr Thomas has supported the processes to commercialisation by remaining deeply involved and always with a hands-on approach. He was also the Lead Project Manager who successfully compiled and sourced the commercial, technical and planning information, including identifying suitable consultants needed, to undertake both the HPC Data Centres Henderson facility build as well as Global Networks Australia International Cable and Data Centre project located in Australia and Indonesia. Other current directorships: Former directorships (last 3 years): Interests in shares: Interests in options: Interests in rights: A previous business venture of Justin’s saw the successful development of an industry specific niche software application for the real estate/property industry which grew to over 300 monthly subscription clients and the business sold for over $1 million in 2007. 14,578,396 fully paid ordinary shares - 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 2. Company secretary Name Qualifications Experiences Kyla Garic B Com, MAcc, CA, FGIA, FGIS Ms Garic is a Chartered Accountant and Director of Onyx Corporate. Onyx Corporate provides financial reporting, accounting, company secretarial and other services primarily to ASX listed companies. Ms Garic acts as Company Secretary for a number of ASX listed companies. 3. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2024, and the number of meetings attended by each director were: Board Meeting Eligible to Attend Attended Shane Wee Blake Burton Justin Thomas 11 11 11 10 11 10 The Board also approved fourteen (14) circular resolutions during the year ended 30 June 2024 which were signed by all eligible Directors of the Company. 4 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 3. Principal activities The Group is a provider of managed technology services and solutions and aims to be the preferred sovereign provider for SMEs in the Australian defence industry supply chain. The Group’s offerings include a range of solutions tailored to this growing market segment, leveraging internal capabilities and strategic partnerships, particularly in cybersecurity and AI. The Group has a dual track strategy of focusing on AI enablement and advanced data centre and cyber security solutions, focusing on opportunities that cutting edge AI hardware and software offer to the future of data centres and cyber security. Refer to Section 5. Significant changes in the state of affairs for the recent changes. 4. Operating and financial review The loss for the Group after providing for income tax amounted to $1,698,495 (30 June 2023: $1,740,563). Review of Results During the period, the name of the group changed to Adisyn Ltd (ASX: AI1) to provide a new corporate identity as the Group moves away from being a provider predominately focused on data centre and cloud services. Under the Group’s new strategy, Adisyn has concentrated its attention on providing managed technology services and solutions and aims to be the preferred sovereign provider for SMEs in the Australian defence industry supply chain. The Group continues to develop solutions focused on cybersecurity and AI and is confident that these two verticals will provide strong growth avenues moving forward as the data centre and cloud markets evolve. The Group has continued working on integrating various functions between its business divisions, consolidating several suppliers and terminating duplicate services as the Group moves towards a capital-lite model, providing scalable, service-based solutions. As part of this strategy, on 1 May 2024 the Group announced the sale of its VMware Cloud Platform to Zettagrid Pty Ltd for up to $1.4m in cash consideration. Under the terms of the agreement, the Group will continue to offer cloud services to new customers and will white-label Zettagrid’s Australian cloud services as part of its service offering, allowing Adisyn to focus on providing scalable, service-based solutions while substantially decreasing the Company’s requirement for significant capital expenditure. Key terms for the sale were outlined in the announcement on 1 May 2024. On 19 February 2024, the Group announced the appointment of Mr. Harry Karelis as a strategic advisor and chair of the Groups newly formed industry advisory board (IAB). The experience and depth of the IAB was expanded significantly with the appointments of Mr. Oscar Leslie, Mr Jesse Gane and Dr Craig Valli on 16 May 2024. The IAB serves to expand Adisyn’s profile, networks and service capabilities in a cost-effective manner. The appointments also provide the Group with personnel holding national security clearances, potentially opening new opportunities and further differentiating Adisyn from other managed IT services companies in the marketplace. As announced on 12 October 2023, the Group terminated the sale agreement with DComm for the sale of the Group's DC Modular assets. During the year, the Group has worked to streamline the operations of the DC Modular business to create a separate operational division within the Group under the banner ‘Miner Hosting Australia’. The Group continues to explore options for a sale of the division and is also exploring strategic partnerships utilising the Group owned intellectual property built within the division. As disclosed in the financial statements, the Group incurred a loss of $1,698,495 (30 June 2023: $1,740,563) and had net cash outflows from operating of $749,391 (30 June 2023: $1,039,479) and investing activities inflows of $801,221 (30 June 2023: $305,208) respectively for the year ended 30 June 2023. As at that date, the Group had net assets of $2,073,472 (30 June 2023: $2,483,861). The ability of the Group to continue as a going concern is principally dependent upon the ability of the Group to secure funds by raising additional capital from equity markets and managing cash flows in line with available funds. The Group confirms that during the financial year ended 30 June 2024, it used its cash and assets in a form readily convertible to cash, in a manner consistent with its business objectives. 5 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 5. Significant changes in the state of affairs On 27 February 2023, the Group announced to the market it had entered into an agreement to dispose of its Modular Business to D Comm Infrastructure Pty Ltd, a subsidiary of D Comm Ventures Pty Ltd, a leading Web 3.0 technology company (D Comm) for a total consideration of $3m in cash. On 8 June 2023, the Group announced to the market that the agreement achieved satisfaction of buyer's due diligence but remained subject to the satisfaction of the remaining conditions precedent. On 31 July 2023 the Group announced to the market that the Group provided DComm with continued exclusivity and an extension to the completion date. In exchange for the continued exclusivity and completion date extension the total non-refundable deposit increased from $20,000 to $100,000. On 12 October 2023, the Group announced to the market that it provided DComm with notice terminating the sale agreement on the basis that the remaining conditions precedent to completion have not been satisfied in a reasonable timeframe. On 23 October 2023, the Group announced to the market that, following shareholder approval obtained at the shareholder meeting held on 10 October 2023, the name of the Group changed to Adisyn Ltd, with trading under the new name and ticket code “AI1” commencing from 24 October 2023. On 26 October 2023, the Group announced that it had restricted ~$736k of deferred consideration to unrelated parties from the acquisition of Attained. As part of the agreement, the Company agreed to issue up to 8,831,950 shares at a deemed issued price of $0.02 per share to Esidium Group and Aviso IT to offset $176,639 of cash consideration, with the remaining cash consideration deemed a loan payable over twelve to twenty-four months. On 1 May 2024, the Company signed a binding agreement with Zettagrid Pty Ltd to dispose of its VMware cloud platform for a total consideration of up to $1.4 million in cash. Subject to completion of the transaction, the Company will receive cash consideration of up to $1.4 million in cash (before costs and adjustments), which will be payable into 2 tranches: The first tranche of $850,000 will be payable on the settlement date 1 May 2024. The second tranche will be payable 9 months from the Settlement Date (Completion Date - estimated to be 28th February 2025) and is subject to various adjustments determined by the annualised revenue of the VMware Customers at the Completion Date. Reconciliation of the Annual Report to the Appendix 4E In the process of preparing the financial statements a variance to the “Loss after income tax for the year” between the financial statements and the previously lodged Appendix 4E of $118,268 (reduction of loss) was identified. The variance is specified below: Reported Loss after income tax for the year in Appendix 4E: Reported Loss after income tax for the year in Appendix 4E Share-based payment expense Amortisation of customer contracts Amortisation of intellectual property Reversal of annual leave expense Miscellaneous (1,442,629) 88,928 (281,039) (20,890) 95,677 (944) Reported Loss after income tax for the year in Financial Statements (1,560,897) There were no other significant changes in the state of affairs of the Group during the financial year. 6 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 6. Business risks The Groups risk management framework assesses the key financial and non-financial risks that have the potential, should they occur, to materially impact the Group and its ability to achieve its strategic and operational objectives. The framework is integrated into the daily management of the business to ensure the oversight and management of business risks, with systems and processes implemented to identify risks at an early stage. Further details of the risk management framework and processes are detailed in the Group’s Corporate Governance Statement. Listed below are key risks for the business identified in the risk management framework: Key Customer Relationships The growth of the Group depends in part on increasing the number of its customers, and the number of services offered to those customers. There is a risk that one or more key customers may terminate their contracts early or that, upon expiration of their existing contracts, they may choose not to renew arrangements with Adisyn or that the subsequent terms may be less favourable to Adisyn. Financial Performance The Group requires sufficient cash to guarantee the continuation of its strategic initiatives. The Group may encounter challenges in implementing its strategy along with potential difficulties such as liquidity or financial deficits, from any failings in the planning and implementation of its capital management. Adequate funding is essential for the Group to continue to invest in its products and innovate in the coming years. Failure to secure necessary funding could force the Company to limit operations, materially impacting its activities and challenging continued operation. Technological Developments The Group operates in a competitive industry. Failure to adapt to the latest technological changes in a timely manner could result in reduced customer demand for the products and services which the Group develops. This in turn could result in customer churn, and/or a reduction in revenues and margins. Cyber Security Potential cyber incidents resulting in the Groups data being compromised could negatively impact the operations of the Group and its reputation. Infrastructure Downtime A catastrophic failure or interruption of either the Groups or suppliers cloud platform or data centre could result in the Group not being able to provide access to critical systems for customers. This would lead to the Group being in breach of its service level agreements with customers and the Group would incur contractual liabilities. Ability to source and retain key personnel The Company employs or engages as consultants, a number of key members of its team. Attracting and retaining talent underpins the groups successful delivery of strategic objectives. A shortage in labour and the inability to attract qualified personnel could adversely affect the Group and may impede on its ability to achieve its strategic objectives. 7. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. 8. Matters subsequent to the end of the financial year Board and Management changes: ● ● ● ● Mr. Thomas resigned from his executive role effective from 9 July 2024. Mr. Thomas remains on the Board in a Non-Executive Director capacity and will receive an annual salary of $36,000 plus superannuation. Mr. Sentow became a permanent part-time Chief Financial Officer (CFO) effective from 9 July 2024. Mr. Gale resigned from his position as Chief Information Officer (CIO) effective 31 July 2024. Mr. Gane appointed as Chief Technology Officer (CTO) effective from 19 August 2024. On 8 July 2024, the Company appointed Sandton Capital Advisory to advise and assist the Board on the strategic review outcomes including execution of the key findings and will be paid a fee of $7,500 per month over a 12-month term. 7 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 On 12 July 2024, the Company entered into a binding collaboration agreement with 2D Generation Ltd, a prominent international semiconductor IP business incorporated in Israel to generate transformational opportunities in the AI space, leveraging Adisyn's expertise in data centre management, managed IT services, and cybersecurity, alongside 2D Generations' industry-leading capabilities in developing next-generation AI semiconductor solutions. On 4 September 2024, the Company signed a surrender of lease agreement of its Bibra Lake lease to exit from the lease on 18 October 2024. The Company will undertake the decommissioning and sale of plant and equipment at the Bibra Lake site, the cost of which it expects will be offset by proceeds of sales of the decommissioned plant and equipment. No other matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. 9. Likely developments and expected results of operations Information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Group. 10. Environmental regulation Adisyn’s operations are not subject to any particular or significant environmental regulation under a law of the Commonwealth or of a State or Territory in Australia. The Group confirms that during the year it has not breached any state, territory or federal environmental regulations. 11. Shares under option Unissued ordinary shares of Adisyn Ltd under option at the date of this report are as follows: Grant date Expiry date Exercise price Number under option 15/09/2020 15/09/2020 20/12/2021 30/11/2022 14/05/2024 06/11/2024 10/11/2024 20/12/2025 30/11/2024 28/06/2025 $0.25 $0.25 $0.60 $0.11 $0.05 1,200,000 2,950,000 1,000,000 2,562,500 5,000,000 12,712,500 All unissued shares are ordinary shares of the Company. All options expire on the earlier of their expiry or termination of the employee's employment. No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options There were no ordinary shares of Adisyn Ltd issued on the exercise of options during the year ended 30 June 2024 and up to the date of this report. 8 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 12. Shares under performance rights Unissued ordinary shares of Adisyn Ltd under performance rights at the date of this report are as follows: Grant date Expiry date Number under rights 08/03/2023 08/03/2023 05/07/2023 05/07/2023 30/11/2023 14/05/2024 31/12/2025 31/12/2025 01/07/2026 01/07/2026 31/12/2025 01/08/2025 1,000,000 1,000,000 750,000 750,000 5,000,000 5,000,000 13,500,000 No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of performance rights There were no ordinary shares of Adisyn Ltd issued on the exercise of performance rights during the year ended 30 June 2024 and up to the date of this report. 13. Convertible Notes In May 2024 246,250 convertible notes were converted to fully paid ordinary shares 4,925,000 on redemption of outstanding Tranche 1 Convertible Notes at a price of $0.05.During the year 1,096,770 fully paid ordinary shares in settlement of interest payable on Tranche 1 Convertible notes were also issued. No options were issued. At the end of the annual reporting period all convertible notes were redeemed and there are nil securities remaining to be issued. Further information contained in Note 23 of the financial report. Additional information The earnings of the Group for the two years to 30 June 2024 are summarised below: Sales revenue from continuing operations EBITDA from continuing operations EBIT from continuing operations Loss after income tax from continuing operations 2024 $ 2023 $ 5,495,434 (87,537) (1,427,677) (1,427,677) 2,675,217 (1,398,642) (2,216,244) (2,216,244) 2024 2023 The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end ($) Total dividends declared (cents per share) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 0.02 (1.42) (1.42) 0.02 (2.19) (2.19) 14. Indemnification of Officers and Auditors The Company has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. 15. Non-audit services There was no non-audit services provided during the financial year by the auditor. 9 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 16. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to 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 part of those proceedings. 17. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 has been received and set out immediately after this Directors' report. 18. Rounding off The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 and in accordance with that Instrument, amounts in the consolidated financial statements and director's report have been rounded off to nearest dollars, unless otherwise stated. 10 Adisyn Ltd and its controlled entities Directors' report 30 June 2024 19. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the Adisyn Limited, in accordance with the requirements of the Corporations Act 2001 and the Corporation Regulations 2001. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including all directors. Key management personnel of Adisyn Limited for the financial year consist of: ● ● ● ● Blake Burton (Managing Director) Justin Thomas (Non-Executive Director, appointed 9 July 2024) (Executive Director, resigned 9 July 2024) Jesper Sentow (Chief Financial Officer, appointed 16 June 2023) Paul Arch (Chief Operating Officer, appointed 14 March 2023) The remuneration report is set out under the following main headings: ● 19.1 Principles used to determine the nature and amount of remuneration ● 19.2 Service agreements ● 19.3 Details of remuneration ● Additional information ● 19.4 Additional disclosures relating to key management personnel 19.1 Principles used to determine the nature and amount of remuneration The Board reviews and approves the remuneration policy to enable the Group to attract and retain executives and Directors who will create value for Shareholders having consideration to the amount considered to be commensurate for a Group of its size and level of activity as well as the relevant Directors’ time, commitment and responsibility. The Board is also responsible for reviewing any employee incentive and equity-based plans including the appropriateness of performance hurdles and total payments proposed. Fixed remuneration consists of base remuneration, as well as employer contributions to superannuation funds where applicable. The remuneration of an executive Director will be decided by the Board, without the affected executive Director participating in that decision- making process. The total maximum remuneration of non-executive Directors is initially set by the Constitution and subsequent variation is by ordinary resolution of Shareholders in general meeting in accordance with the Constitution, the Corporations Act and the ASX Listing Rules, as applicable. The determination of non-executive Directors’ remuneration within that maximum will be made by the Board havi