Interim Report January-March 2021 Adverty AB

Adverty's Programmatic Channel Gains Momentum And Increases Global Reach.

Significant events during the period

• The Company and mobile game developer Gold Town Games enter into strategic partnership.
• The Company raises proceeds of approximately SEK 10 million from exercise of series 2020/2021 warrants.
• The Company is awarded TAG Brand Safety Certified Seal validated by ABC audit.
• The Board of Directors approves changes to terms for series 2020/2021 warrants.
• The Company enters next phase of growth and global expansion by focusing founder Niklas Bakos on product strategy and promoting Tobias Knutsson to CEO.
• Adverty and Verizon Media announce new deal to enable a huge range of brands and audiences to access Adverty's innovative ad formats within gaming.
• The Company continues rapid expansion with appointment of Chief Financial Officer.
• The Company is granted second US patent for in-game ad viewability technology.

Significant events after the end of the period

• Adverty and InMobi launch in-game advertising for global brands and agencies.
• The Company announces collaboration with Oracle Moat to enhance measurement across its in-game advertising platform.
• The Company enters into exclusive partnership with Dutch hyper-casual publisher Lucky Kat Studios.

A message from the CEO

According to Adverty and many players in the industry, 2021 will be the year in which in-game advertising launches in earnest, with several signals indicating that this is the case.

Looking at some of the world's largest media agency networks, we see that many have recently launched completely new departments focusing on in-game advertising. One example is Dentsu UK & Ireland , which recently launched DGame, a specialist department dedicated to helping brands reach and engage their audiences through gaming. Another is MediaCom, which recently announced a brand-new full-service division called MediaCom Play, which, like Dentsu Aegis' new venture, helps clients invest in, and carry out promotions in, games and esports. Today, these and other media agencies around the world, large and small, are contacting us to find out more about in-game technology, how our solution works and how this can benefit their customers.

Our integration with Verizon Media (soon to be renamed Yahoo) is now complete, with cooperation fully under way with pilot campaigns planned for activation in multiple geographies in the current and upcoming quarters. Yahoo and other partners, such as InMobi, have broad future plans for in-game advertising and will be investing heavily in this format in the future.

The biggest step of the quarter involved the truly scalable component of Adverty's advertising platform, the programmatic channel, where sales rose by 34 percent from the preceding quarter, with growth of 1,091 percent on the corresponding period in 2020. During the first quarter of the year, 17,450 unique brands advertised their messages programmatically on our platform, compared to 7,500 in the previous quarter. With the advertising method remaining relatively unknown to many media buyers and because the advertising space generates brand exposure rather than clicks, most purchases are still made on a limited budget and only for brief intervals As brand advertising in mobile gaming becomes more accepted and standardised in the industry, these tens of thousands of advertisers will focus much more on gaming as a media channel, and with significantly larger budgets.

Despite the growth in programmatic business during the period, we did not reach our own revenue targets. This was primarily due to several direct campaigns not being launched during the quarter. However, with an increasing number of customers showing an interest in our product, the trend is moving in the right direction, with a clear growth in programmatic sales expected in the second quarter. Alongside a number of direct campaigns that have been activated, including that by Activision, which is continuing its involvement in Adverty, the second quarter appears considerably more favourable.

The first quarter largely involved expanding our advertising inventory. Over the period January to March, we increased our global reach by 125 percent and now actively reach close to 20 million players every month. Our ambition is to multiply that figure during 2021.

We have progressed far in negotiations with the world's largest hyper-casual publisher and with one of the world's largest gaming publishers, on integrating our technology into their gaming portfolios. With partners of this size, longer testing periods are usually required, and these are expected to last until the latter part of the year.

The integration of both of our formats into Lucky Kat's Magic Finger 3D and into Gold Town Games' World Hockey Manager 2021 is fully under way and we are already envisioning a sneak launch of the In-Play format in World Hockey Manager 2021.

MADFINGER Games is continuing to optimise Shadowgun War Games and still does not permit any advertising in that game. Although the launch date is currently unknown, we are maintaining a close dialogue with MADFINGER and hope that the situation will change in the future.

Our announced competition for game developers generated some interesting contributions, but nothing of the quality we hoped for. The purpose of the competition and the prize money was to find exciting new partners and we have chosen to continue our discussions with the contributors that could have future potential.

Adverty was first out in the second wave of seamless in-game advertising technology (see Massive Inc 2002-2010) when we started developing our platform in late 2016. Today, we are seeing some signs of being rewarded for getting off to an early start. Technically, we have an edge on our competitors, which has proven beneficial for us, including during testing phases with game developers. In-game advertising, and the critical viewability verification in particular, is slowly being accepted in the industry and key initial steps are now being taken for a future attempt at standardization, with such attempts often being headed by leading players in the industry. Adverty is working closely with world-leading Moat by Oracle Cloud to develop third-party verification of in-game viewability, where our now multi-patented viewability technology may play an important role in the basic framework of how this should be defined and verified.

Interest in Adverty has never been greater – from customers and suppliers to the media and investors. With a packed roadmap for both technological development and partnerships, we therefore chose to bring forward the redemption of options from our latest new issue – with our refreshed cash balance, we will be able to accelerate development in areas that are currently particularly important. Operations are progressing as planned and we feel secure with the course ahead.

In-game advertising is here to stay and Adverty is well equipped to meet the growing demand.

Tobias Knutsson
CEO
Adverty AB (publ)

Adverty in brief

Swedish advertising technology company Adverty has launched the world's first programmatic platform for automated, seamless in-game advertising.

The platform is based on patented technology which, among other things, is based on studies of the eye, its field of vision and perceptual capacity. The advertising platform is available on some of the world's largest trading venues for automated trading of digital ads and Adverty was launched in the commercial market late last year.

The operations are conducted from the Company's own offices in Stockholm , with technological development also being performed in Ukraine . Sales and business development also take place in the UK, Spain , Singapore , Russia and the US.

This report pertains to the Company's operations during the period 1 January to 31 March 2021 .

Sales and earnings

Net sales amounted to SEK 101 thousand (312) for the first quarter. The reported loss for the first quarter amounted to SEK 5,395 thousand (3,419), which was essentially in line with the budget and plan.

Earnings per share for the first quarter amounted to a loss of SEK 0.26 (0.17) with a comparable number of shares.

Investments

Advertising's investments in the first quarter amounted to SEK 1,207 thousand (1,618). The investments pertain mostly to intangible assets in the form of capitalized development expenses.

Depreciation/amortisation

First quarter earnings were burdened by SEK 52 thousand (45) in depreciation/amortisation. These items pertain primarily to the amortization of intangible assets.

Liquidity and financing

At the end of the period, the Company held SEK 11,528 thousand (14,397) in cash and cash equivalents. As of the reporting date, the Company held interest-bearing liabilities of SEK 0 thousand (219).

Equity, share capital and number of shares

As of 31 March 2021 , Adverty's equity amounted to SEK 25,358 thousand (23,349). The share capital is divided between 20,641,771 shares with a quotient value of SEK 0.047 per share. All shares are of a single series, conveying equal entitlement to vote and participate in the Company's earnings.

The share

Adverty's shares are traded on NGM Nordic SME under the symbol ADVT and bear the ISIN code SE0011724889.

Employees

As of 31 March 2021 , Adverty had a total of 21 employees, of whom 9 were directly employed by the Company and 12 of whom were full-time consultants based in Stockholm , London , Lviv, Madrid, New York , St. Petersburg , Helsinki and Singapore . Of the 21 employees, 3 are women and 18 are men. Adverty's objective is to increase the number of women.

Related-party transactions

No transactions with related parties occurred during the reporting period.

Accounting policies

This interim report has been prepared in accordance with the Swedish Accounting Standards Board's guideline BFNAR 2012:1 Annual and Consolidated Financial Statements, K3. The Company's assets and liabilities are stated at cost and nominal value, respectively, unless otherwise stated.

Review

This report has been reviewed by the company's auditors.

Mentor

Corpura Fondkommission AB is the Company's mentor and can be contacted at +46 (0)72-252 34 51.

Future report dates

Adverty will publish recurring financial information in accordance with the following schedule:

10 June 2021                         Annual General Meeting, to be held in Stockholm

18 August 2021                     Interim report, January – June 2021

18 November 2021                Interim report, January – September 2021

22 January 2022                   Year-end report, January – December 2021

Adverty AB (publ), 18 May 2021

Board of Directors

For further information, please contact:

Anders Rössel, CFO
Telephone: +46 (0)70-867 00 20
e-mail: ar@adverty.com

Tobias Knutsson , CEO
Telephone: +46 (0)70-686 06 66
e-mail: tk@adverty.com

Publication

This is information such that Adverty AB (publ) is required to publish under the EU Market Abuse Regulation. The information was submitted for publication under the auspices of the aforementioned contact, for publication on 18 May 2021 .

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SOURCE Adverty AB