Allterco : Quarterly Report on Business Activities

REPORT ON BUSINESS ACTIVITIES of ALLTERCO JSCo

THIRD QUARTER OF 2021

consolidated basis

Pursuant to Art. 100o, Para 7 in conjunction with Para 4of the Public Offering of Securities Act and Art. Art. 33 and Art. 33а of Ordinance No. 2 dated 17.09.2003 on the prospectuses for public offering and admission to trading on a regulated securities market and on the disclosure of information

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These Notes to the Interim Report on the Business Activities of Allterco JSCo on an consolidated basis present information about the company, relevant to the end of third quarter of 2021 for the period 01.01.2021 - 30.09.2021 (the "reporting period').

1. INFROMATION ABOUT THE GROUP

Allterco JSCo is a public listed joint stock company, established in 2010 in the city of Sofia and entered in the Commercial Register at the Registry Agency on 11.02.2010 under UIC (unified identification code): 201047670 and LEI code (identification code of the legal entity) 8945007IDGKD0KZ4HD95 and is established for an unlimited period. Its name is written in Latin: ALLTERCO JSCo.

The company has its registered office and address of management: Republic of Bulgaria, Sofia County, Sofia

Municipality, Sofia 1407, 103CherniVrah Blvd. The address for correspondence is the same; Tel: [phone]. The website of the Company iswww.allterco.com.

The Company is public listed within the meaning of the Public Offering of Securities Act and is registered as a public company in the register kept by the FSC with Decision 774 - PD of November 14, 2016 as a result of successfully completed initial public offering of shares from the Company's capital increase.

The company operates according to Bulgarian legislation.

Allterco is part of an economic group, which consists of the parent company Allterco JSCo and its subsidiaries:

1.1.Structure of the economic group at the end of the reporting quarter for 2021

During the reporting period Allterco JSCo has participated in the establishment of a company (associated company) in China, Allterco Asia Ltd. with headquarters and registered office in Shenzhen, Guangdong Province. The capital of the new company is CNY 100 000, as the participation of Allterco JSCo is 30% with an option to acquire additional up to 50% and reach a controlling stake of up to 80% in case of good development of the project.

During the reporting period the Board of Directors of Allterco JSCo has decided on the establishment of a subsidiary company in Germany - Allterco Europe GmbH. The German company will have its seat and registered office in Munich, Germany and registered capital EUR 500 000, 100 % owned by Allterco JSCo.

During the reporting period there was a change in the economic group of Allterco JSCo. On September 27,2021 the Board of Directors of Allterco JSCo has approved and the Company, as a seller, has signed with Skylight Venture Capital Pte. Ltd., as a buyer, an agreement for the sale of the participations of Allterco JSCo in the subsidiaries ALLTERCO PTE (Singapore), ALLTERCO SDN (Malaysia) and ALLTERCO Co., Ltd. (Thailand) (Share Purchase

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Agreement (SPA). The transfer of the share ownership is a subject to registration procedures in accordance with applicable laws in each country where each company is registered as a legal entity.

The scope of business of the Allterco JSCo, according to Art. 4 of its Articles of Association is: Acquisition, management, evaluation and sale of share participations in Bulgarian and foreign companies; acquisition, management and sale of bonds; acquisition, evaluation, sale and assignment of licenses for the use of patents and other intellectual and industrial property rights; financing of companies in which Allterco JSCo participates; purchase of goods and other items for resale in their original, manufactured or processed form; sale of goods of own production; foreign trade transactions; commission, forwarding, warehousing and leasing transactions; transport transactions in the country and abroad; transactions of commercial representation and intermediation of local and foreign individuals and legal entities; consulting and marketing transactions; providing management and administration services to local and foreign legal entities; as well as any other commercial transactions not prohibited by law.

As a result of strategic deals, corporate changes and decisions in 2019 and 2021, the core business of the Issuer's Group remains the development, production and sale of IoT devices.

Since 2015, the Group has grown organically in the IoT sector through the development and implementation of two main product categories - tracking devices under the brand MyKi and home automation systems under the brand Shelly.

1.2.Management

During the reporting period no changes were made in the Board of Directors of the company.

As of 30.09.2021 members of the Board of Directors are:

• Dimitar Stoyanov Dimitrov;
• Svetlin Iliev Todorov;
• Nikolay Angelov Martinov;

1.3.Capital structure

As of the end of the reporting period the issued, subscribed, paid-in and registered capital of Allterco JSCo amounts to BGN 17 999 999 (seventeen million nine hundred ninety-nine thousand nine hundred ninety-nine), and is divided into 17 999 999 (seventeen million nine hundred ninety-nine thousand nine hundred ninety-nine) dematerialized ordinary registered voting shares, with a par value of 1 (one) BGN each.

The capital is fully paid in five contributions:

• Non-monetarycontribution representing 100% of the shares of Teravoice EAD, with an appraised monetary value of BGN 50,000 (fifty thousand);
• Non-monetarycontribution representing 69.60% of the shares of Terra Communications JSCo, with an appraised monetary value of BGN 5,438,000 (five million four hundred and thirty-eight thousand);
• A combination of non-monetary and cash contributions amounting to BGN 8,012,000 (eight million and twelve thousand).
• Cash contributions at the amount of BGN 1,500,000 (one million and five hundred thousand) compared to 1,500,000 (one million and five hundred thousand) subscribed and fully paid-in dematerialized ordinary registered voting shares with a par value of BGN 1 each, as a result of a procedure for Initial Public Offering of a new issue of shares.
• Cash contributions at the amount of BGN 2,999,999 (two million nine hundred ninety-nine thousand nine 3

hundred ninety-nine) against 2,999,999 (two million nine hundred and ninety-nine thousand nine hundred and ninety-nine) subscribed and paid-in dematerialized ordinary registered voting shares with a nominal value of BGN 1 each, as a result of a procedure for Public Offering of a new issue of shares. The public offering of shares from the capital increase of Allterco JSCo was carried out in the period 28.09.2020 - 30.10.2020, on the basis of a Prospectus, together with the supplements thereto, confirmed by the Financial Supervision Commission with Decision № 148- F of 18.02.2020, Decision № 405-E of 11.06.2020, Decision № 601-E of 13.08.2020 and Decision № 791-E of 29.10.2020.

As of September 30, 2021 the capital structure of ALLTERCO JSCo is as follows:

	NAME OF SHAREHOLDER			CAPITAL
			PERCENTAGE
	Svetlin Todorov			32,48 %
	Dimitar Dimitrov			32,48 %
	Other individuals and legal entities			35,04 %

1.4.Development and research activities

Allterco JSCo has not carried out activities in the area of research and development and does not plan such in the near future. One of the subsidiaries of Allterco JSCo has carried out such activity during the reporting period, namely: Allterco Robotics Ltd.

2. IMPORTANT EVENTS FOR ALLTERCO JSCo

Detailed information about the important events that occurred during the reporting period for ALLTERCO JSCo, as well as other information that could be important for investors is regularly disclosed by the company in accordance with regulatory requirements. In compliance with the requirement of Art.43a et seq. of Ordinance No. 2 of FSC, in conjunction with Art. 100t, Para 3 of the POSA, the Company discloses the regulated information to the public through selected information media. All information provided to the media in fully unedited text is available at: http://www.x3news.com/. The required information is submitted to the FSC - through the unified system for submission of information electronically, developed and maintained by the FSC - e-Register. The information is also available on the Company's website at: https://allterco.com/en/INVESTORS.

The announced important events that occurred during the reporting period did not have a significant impact on the financial results of the company on an consolidated basis.

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3. FINANCIAL POSITION AND DEVELOPMENT OF THE BUSINESS ACTIVITIES DURING THE REPORTING PERIOD

3.1.Operating income

As of the end of the reporting period ALLTERCO JSCo reported on consolidated basis a profit at the amount of BGN 10 046 thousand, which is an increase by 64,0 % compared to the same reporting period of the previous year.

EBITDA for the 9 months of 2021 reached BGN 11 961 thousand (31.1% of sales revenue) compared to BGN 7 359 thousand (25.1% of sales revenue) for the same period of previous year.

The revenue from sale of devices (goods and won production) increased by 57,3% during the 9 months of 2021 compared to the same period of previous year. The revenue from services decreased by 99,6% during the period, which is due to the sale of the remaining daughter companies, which provided telco value-added services.

During the 9 months of 2021 the Company reported positive result from operations with financial instruments, which include:

• BGN 49 thousand from sale of shares of Link Mobility Group
• BGN 201 thousand from the sale of its participation in 3 subsidiaries;

REVENUE	9 months of 2020	Change	9 months of 2021
	BGN thousand	%	BGN thousand
Revenue from sale of devices	24 483	57.3%	38 500
Revenue from services and rents	4 881	-99.6%	21
Other operating revenue	54	927.8%	555
Total operating revenue	29 418	32.8%	39 076
Gain from operations with financial assets	0	-	250
Total financial income	0	-	250

3.2.Operating expenses

As of the end of the reporting period the total operating expenses of ALLTERCO JSCo increased by 21,3 % compared to the same reporting period of the previous year. This increase is mainly due to the increase of marketing and sales expenses, salary expenses and other administrative expenses.

At the end of the 9 months of 2021, the Company repots written off receivables in the amount of BGN 111 thousand and impairment of receivables in the amount of BGN 153 thousand.

The expenses for salaries and social security holds the biggest share in the total operating expenses for the period with 52,8 %, followed by marketing and sales expenses with 19,4%.

EXPENSES	9 months of 2020	Change	9 months of 2021
	BGN thousand	%	BGN thousand
Sales and marketing	1 236	48.1%	1 830
External services	569	-10.2%	511
Depreciation and amortization	828	-9.7%	748
Salaries and social security	4 162	19.6%	4 977
Impairments and written of receivables	4	6 500.0%	264
Other administrative expenses	723	20.1%	868
Other operating expenses	243	-9.1%	221
Total operating expenses	7 765	21.3%	9 419

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