ANNUAL
REPORT
2021
AROA BIOSURGERY LIMITED | ASX: ARX
NZCN: 1980577 ARBN: 638 867 473
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Annual Report 2021 | AROA Unlocking regenerative
healing for everybody
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Annual Report 2021 | AROA
CONTENTS
Chairman’s Review
CEO’s Report
About AROA
Directors’ Report
Remuneration Report
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Additional Information
Glossary
Corporate Directory
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6
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12
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73
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This Annual Report covers the financial year ended 31 March 2021 and is
dated 21 June 2021. The Annual Report has been approved by the Board and
is signed on behalf of Aroa Biosurgery Limited by:
Jim McLean
Independent Chair of
the Board of Directors
Brian Ward
Managing Director
and CEO
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Annual Report 2021 | AROA CHAIRMAN’S REVIEW
Dear Shareholders,
On behalf of the Board, I am pleased to present AROA’s Annual Report for the financial year ended 31 March 2021, the
first since AROA’s successful admission to the ASX’s official list in July 2020, following its initial public offering.
AROA has realised several strategic achievements
in the last year. These achievements have advanced
our founding purpose to develop, manufacture
and distribute medical and surgical products to
improve healing in complex wounds and soft tissue
reconstruction.
IPO AND ADMISSION
AROA’s IPO and Admission was a key milestone for
the business. It raised A$45 million, comprising of $30
million of primary capital through the issue of 40 million
shares, with the remaining $15 million allocated to a
limited sell down by early investors in the Company. The
IPO received extraordinary support from institutional
investors across Australia, New Zealand and other
overseas markets. It also reflected a strong vote of
confidence from existing shareholders who subscribed
for approximately half of the funds raised. AROA was
valued at A$225 million upon Admission, and was added
to the S&P/ASX All Ordinaries Index effective from 22
March 2021.
In the Prospectus, AROA stated that the raised funds
would be used to facilitate the next steps in executing
its growth strategy. The Company has materially
advanced that growth strategy in the last year.
SALES
As outlined in the Prospectus AROA’s primary growth
strategies are focused on the US, being AROA’s current
principal market. AROA has, in the last year, taken
notable steps in line with these strategies. In February
2021, the Company announced a plan to significantly
expand its US direct sales capability and capacity, and
to dissolve Appulse, the Company’s shared sales force
joint venture arrangement with Hydrofera, LLC. The shift
to a larger dedicated field sales team has been a pivotal
move for AROA as it has expanded and simplified
AROA’s sales structure. This will enable AROA’s sales
efforts to be increasingly focused on hospital accounts
and ambulatory surgical centres, where AROA expects
its sales force to drive growth of AROA’s Myriad™
products.
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In the last year, AROA has obtained regulatory approval
to sell its products in a further six countries. Regulatory
approvals received during the year included approval
for Myriad Matrix™ in the European Union. At the end
of the financial year, AROA had regulatory approval to
distribute and sell products in 49 countries globally,
including the European Union and the United Kingdom.
CLINICAL VALIDATION
The Company received further clinical validation for its
AROA ECM™ platform products during the year. A pre-
clinical study published in the leading scientific journal
PLOS One demonstrated the ability of components in
the AROA ECM platform technology to recruit stem
cells. This has significant implications, as stem cells
are known to play a critical role during soft tissue
regeneration. Myriad Matrix was used across a range
of procedures in four peer-reviewed publications
during the period, with a fifth manuscript accepted for
publication. Finally, the Ovitex™ range was subject to a
peer-reviewed retrospective analysis published in the
journal “Surgical Endoscopy”. As AROA continues to
build a database of clinical evidence for its products,
common themes are starting to emerge across a wide
range of soft tissue repair procedures. These include
a rapid rate of well vascularized soft tissue formation,
resolution of underlying tissue inflammation and
tolerance of contaminated fields that typically exist in
these complex cases.
PRODUCTS AND PIPELINE
AROA has continued to expand its product portfolio,
both with line extensions to existing products and with
new products based on extensions to the use of its
proprietary AROA ECM platform technology. In the last
year, AROA received FDA clearance for Symphony™, a
new AROA product designed to support healing during
the proliferative phase to reduce the time to wound
closure, particularly in patients where their healing is
severely impaired or compromised due to disease.
Annual Report 2021 | AROA
Superior regenerative
healing performance at a
significantly lower price
Shortly after the end of this year, AROA also received
FDA clearance for Myriad Morcells™ and commercially
launched that product in the US. Myriad Morcells is a
morcellized (powdered) format of Myriad Matrix for
soft tissue repair and complex wounds. The morcellized
format increases the AROA ECM surface area to
maximise delivery. It also easily conforms, to optimise
contact with irregular wound beds.
As outlined in the Prospectus, AROA is developing a new
platform technology to address an unmet need within
dead space management. Dead space is a cavity that
remains within soft tissues following surgical dissection
between tissue plains, trauma or after tissue removal. It
may result in seroma formation (a collection of fluid) and
may be associated with an increased risk of infection and
breakdown of the surgical site. Dead space management
devices therefore aim to reduce the occurrence of
seroma formation and improve healing. During the year,
AROA observed positive pre-clinical outcomes with its
dead space management platform technology. In view
of this, and following further assessment of the potential
market opportunities of these product categories,
AROA has decided to prioritise and accelerate
commercialisation of the dead space management
platform technology.
INTELLECTUAL PROPERTY
AROA continued to build out its intellectual property
portfolio during the year, with a new provisional patent
application in the US for a novel treatment system for
the prevention of seroma, and to approximate surgically
created tissue planes linked to dead space. This patent
complements existing filings for a fluid drainage and
delivery device, and for a negative pressure wound
dressing. The Company was also granted patents
for a laminated tissue graft product in several more
jurisdictions including Australia, China, and Europe.
MANUFACTURING
During the year, the Company commenced the expansion
of its manufacturing facility as outlined in the Prospectus.
AROA intends the expansion to achieve a three-fold
increase in capacity to meet the growing demand for its
products. It will also provide scaled up capacity for new
products and additional laboratory space to support the
Company’s developmental activities.
CONCLUDING REMARKS
AROA has achieved these outcomes despite the
challenges presented by COVID-19. On behalf of the
Board, I would like to acknowledge the impact COVID-19
has had on many people around the world, including
our shareholders, employees, customers and partners. In
particular, we recognise AROA employees’ and partners’
dedication and initiative through the last year, and their
continued commitment to AROA in the face of these
challenges. On behalf of the Board, I would also like
to thank AROA’s Executive team for their exceptional
efforts in the Company’s IPO and Admission. Finally, I
would like to thank my fellow Directors for their valuable
and continued counsel.
Looking ahead, the Board considers that AROA is
well placed to grow in the emerging post COVID-19
healthcare environment, where clinical performance and
value will come under increasing scrutiny. The Board
remains committed to investing in AROA’s growth, and
we would like to extend our sincere gratitude to AROA’s
shareholders, employees, customers and partners for
continuing to support AROA’s vision.
Jim McLean
Independent Chair of
the Board of Directors
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Annual Report 2021 | AROA
CEO’S REPORT
Dear Shareholders,
I would like to begin by expressing how heartened I’ve been to see the pragmatic and solutions-focused manner in
which AROA’s employees and partners have responded to this unprecedented period of global uncertainty and public
health crises. They have worked with AROA to embrace the challenges presented, and in doing so, have showcased
their continued support for the Company.
STRATEGIC PROGRESS
As Jim McLean outlined in the Chairman’s Review,
AROA has, despite the challenges presented by
COVID-19, realised several strategic achievements in the
last year. The Company believes there is a significant
global growth opportunity for its products and has a
targeted strategy to increase utilisation of its products
in the US and its other markets globally. These strategic
achievements have materially advanced that growth
strategy.
IMPACT OF COVID-19
COVID-19 significantly impacted procedure volumes
in the US during the year, due to the lockdowns and
resulting postponement of surgeries. This affected
AROA’s results for FY21, with product sales for the first
half of FY21 down 10% (being 8% in constant currency)
compared to the same period in FY20. Despite foreign
exchange headwinds and a COVID-19 surge in the US in
January 2021, sales recovered strongly in the second half
of FY21, resulting in full year product sales of NZ$21.6
million. This represents a 5% increase over FY20 in
constant currency.
OUTLOOK
Over the next two years, AROA is going to focus on
building out its US commercial operations to drive
revenue growth and take advantage of the opportunities
presented from its expanded product portfolio.
AROA expects that its Myriad family of products will
help deliver strong growth in FY22 and underpin growth
in the medium term. The Company received regulatory
clearance for Myriad Matrix in Europe and India during
the year, and is targeting commercial launch in the
coming financial year. As previously disclosed in AROA’s
results announcement for the year, AROA has forecasted
product sales of between NZ$30 million to NZ$33
million in FY22. This represents a 39% to 53% increase
on FY21. AROA’s expanded dedicated field sales team
in the US is a key factor expected to contribute towards
that growth. AROA anticipates that its sales team will
ramp up Myriad sales and penetrate additional accounts.
The growth forecast also reflects AROA’s expectation
that TELA Bio, the Company’s US sales and marketing
distributor for hernia and breast reconstruction products,
will deliver strong growth. TELA Bio published revenue
guidance in March 2021 of 48% to 65% growth in the 2021
calendar year compared to the same period in 2020.
Finally, US medical procedure numbers also continue to
reflect a positive trend, demonstrating month-on-month
improvement. Although these numbers are yet to return
to pre-COVID levels, there has been strong improvement
over the past two quarters, supporting improved
sales momentum. AROA has provided this guidance
on the basis of the assumptions outlined above, no
resurgence of COVID-19 in the US and an average NZD/
USD exchange rate of US$0.72. Given the demonstrable
increase in US medical procedure numbers since the
rapid roll-out of COVID-19 vaccinations there, AROA
maintains its guidance.
Growing clinical validation
and products used in over
4 million procedures
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Annual Report 2021 | AROA
CONCLUDING REMARKS
I want to take this opportunity to acknowledge and thank
AROA’s employees, who have gone above and beyond to
deliver this year in spite of the difficulties presented by
COVID-19. The Company appreciates the commitment,
passion and resilience they have demonstrated over the
year, in executing AROA’s strategic goals whilst managing
the physical, mental and social challenges of life during a
global pandemic.
AROA is pleased with its progress in the last year under
challenging conditions and expects to continue into the
new year with strong momentum. AROA’s products are
designed to improve clinical outcomes at a cost that
improves patients’ access to the benefits of biologics,
and to drive better healing. We are focused on unlocking
regenerative healing for everybody.
Brian Ward
Managing Director
and CEO
AROA’s Symphony product, which received FDA
clearance in July 2020, requires a unique re-imbursement
code within the US health system. AROA anticipates
this to be issued during the 2021 calendar year, and
is targeting a limited commercial launch in the 2021
calendar year, with a full launch in the 2022 calendar year
following completion of clinical studies. Symphony has
an estimated market size in the US of US$1.15 billion, so
dramatically increases the total addressable market in the
US for AROA’s product portfolio from US$1.5 billion to
more than US$2.5 billion.
AROA will continue to build a database of clinical
evidence for its products in FY22, focusing on Myriad
Matrix and Myriad Morcells. In particular, the Company
intends to continue undertaking case study series across
a range of soft tissue repair procedures. Additional
planned clinical activities include a pilot study utilising
AROA’s Endoform™ and Symphony products in the
treatment of diabetic foot ulcers (followed, in due
course, by a pivotal clinical study in relation to the
same) and commencement of a Phase IV clinical study
in India involving Endoform and Myriad. The Company
anticipates publication in the current financial year of a
large retrospective analysis of Endoform in the treatment
of diabetic foot ulcer, and expects the BRAVO
multi-centre study on Ovitex to conclude in FY22.
Finally, the Company is targeting completion of its
expanded manufacturing facility by the end of FY22.
Operating capacity from the expansion will come on-line
in phases as necessary, based on demand requirements
for AROA’s products. AROA anticipates that
following completion, it will have sufficient aggregate
manufacturing facilities to support approximately
NZ$100 million in sales per annum.
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Annual Report 2021 | AROA ABOUT AROA
AROA is a soft-tissue regeneration company that develops, manufactures and distributes medical and surgical
products to improve healing in complex wounds and soft tissue reconstruction.
The Company commenced operations in 2008, and has its headquarters and manufacturing facilities in Auckland,
New Zealand. AROA has an additional sales office and distribution function in the US.
AROA ECM PLATFORM TECHNOLOGY
The Company has developed AROA ECM, a proprietary soft tissue regeneration platform technology, which is based
on the benefits of applying a unique ECM to wounds and soft tissue repair and reconstruction.
AROA ECM is derived from sheep (Ovine) forestomach and contains a rich and complex mix of important biological
molecules. AROA ECM can temporarily replace damaged tissue by acting as a scaffold to grow new tissue, and is
used where tissue has been lost or damaged by disease or injury. The patient’s own cells grow into the AROA ECM
product, re-establish a blood supply, and then form new tissue. Over time, the implanted AROA ECM is completely
replaced by new patient tissue. AROA has extended this platform technology to also incorporate synthetic polymer
reinforcement, antimicrobials, and other actives.
Figure 1: AROA ECM’s source, structure and products
AROA believes that its products based on the AROA ECM platform technology offer superior healing performance
in complex wounds, soft tissue reconstruction and, when combined with synthetic fibres, reduce complications and
reoccurrence rates in hernia1.
COMPETITIVE ADVANTAGE OF THE AROA ECM PLATFORM TECHNOLOGY
The AROA ECM platform technology affects tissue regeneration and healing in the same way and through the
same general mechanisms in all products. The competitive advantage of AROA’s products are firstly, based on the
advantages of the AROA ECM platform technology, and secondly, based on design features of each product which
consider the specific requirements for each particular use case.
The AROA ECM platform technology’s competitive advantage is based on the inherent regenerative properties
of ovine forestomach tissue, the proprietary manufacturing process and a pricing strategy that makes products
affordable and accessible.
1Bohn, G. A. (2019). Endoform: A Simple Tool to Assess Wound Proteases. Wound Management and Prevention, 65(3), 18-20 & Overbeck, N. et al. (2020). In-vivo
evaluation of a reinforced ovine biologic: a comparative study to available hernia mesh repair materials. Hernia.
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Unique tissue – ovine forestomach matrix
Proprietary manufacturing process
Annual Report 2021 | AROA
• A rapidly growing and regenerating organ during
normal development;
•
Immature tissue source with naturally high levels of
secondary ECM molecules;
• Native intact porous ECM which enables rapid cell
infiltration and proliferation;
Basement membrane layer to support epithelial
attachment;
Unusually dense network of blood vessels which are
retained as vascular channels;
• Gentle process that retains the innate biology of the
ECM while removing components which can lead to
an inappropriate immune response;
• Avoids structural damage to the ECM and protein
denaturation which affects function and immune
response;
•
Retains the high levels of native secondary
molecules; and
• Deliberately designed (e.g. modular design) to allow
large scale, high-volume and low-cost production.
Excellent strength and handling characteristics;
Pricing strategy
Favourable “M2” immune response which directs
regenerative healing, enabling dynamic reciprocity
and a constructive remodelling; and
Continually being remodelled and replaced over
time.
AROA’s products are typically 20%-40% less expensive
than competing biological products and in many cases
only a small premium over synthetic products.
•
•
•
•
•
AROA ECM OFFERS DISRUPTIVE VALUE
Currently, the regenerative use of ECM technology is restricted because of its high cost. ECM technology tends to be
used in more complex cases or where patients’ healing is impaired. A wider group of patients could benefit from this
technology but cost constraints limit access. Instead, health care providers and surgeons use less expensive products
that have poorer outcomes.
Figure 2: AROA ECM offers disruptive value
Note: AROA Management compilation based on peer reviewed publications
The AROA ECM platform technology offers a leading ECM that is more affordable and accessible to a wider group of
patients. For less complex conditions, this allows more patients to have earlier access to advanced treatments which
may lead to earlier healing and fewer complications.
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Annual Report 2021 | AROA PRODUCT PORTFOLIO
AROA sells products in two broad categories: complex wounds and soft tissue reconstruction. All products are based
on the AROA ECM platform technology and are specifically engineered for each use case.
Figure 3: Commercial products and product pipeline
AROA’s product range addresses a wide range of applications and large addressable markets.
Figure 4: Phases of healing and AROA product use
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SALES CHANNELS
AROA sells and distributes its products through three sales and distribution channels to maximise operating leverage.
Figure 5: AROA’s sales channels
Channel
Description
Products
Target Specialties
Call point
Sales force (FTE)
US Commercial
operations based
in San Diego, with
sales professionals
across US
Endoform
Myriad
Symphony
Physicians,
WOCN’s/ RN’s
Podiatric, Plastic,
Trauma &
Orthopaedic
surgeons
Outpatient Wound
Centres & Inpatient
Operating Rooms
20 field, 8 Inside
& 20 Independent
Sales
Representatives
NASDAQ listed
~US$233 Market
Cap exclusively
sell Aroalicensed
products
Ovitex®
Ovitex PRS TM
(US and European
Rights)
General Surgeons
Plastic Surgeons
Operating Room
46 sales territories
as at 30 March 2021
•
•
Aroa is appointing distributors for the countries outside the US in which it has received regulatory
approvals.
Aroa has the rights for Ovitex and Ovitex PRS outside of US and Europe
International
(Ex-USA)
Direct sales
AROA’s direct sales team is located throughout the US and is supported from AROA’s San Diego office. AROA
expects this focused direct sales function to accelerate the growth of Myriad sales and, once launched, sales of
AROA’s Symphony product.
TELA Bio
AROA licenses its AROA ECM platform technology to TELA Bio for abdominal wall reconstruction/hernia and plastics
and reconstructive surgery (licensed to TELA Bio solely for breast reconstruction). Through the relationship, AROA
is responsible for process development, product realisation, regulatory submissions and manufacture. TELA Bio is a
co-development partner for reinforced bioscaffolds and has responsibility for commercialisation in the US and Europe
and for clinical development. AROA receives 27% of net product sales generated by TELA Bio.
International (ex-US)
AROA pursues international sales outside the US through distribution agreements with local distributors in the
relevant jurisdictions. AROA has regulatory approval to distribute and sell products in 49 countries and has
agreements in place with over 20 local distributors.
AROA believes there is a significant global growth opportunity for its products.
Fully dedicated US
field sales team and
regulatory approvals
in 49 countries
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Annual Report 2021 | AROA DIRECTORS’ REPORT
The Directors present their report on the Group during and at the end of the financial year ended 31 March 2021.
DIRECTORS
The following persons held offices as Directors of the Company during the financial year:
•
•
•
James McLean
Brian Ward
Steven Engle
•
•
•
Philip McCaw
John Pinion
John Diddams
James McLean
Chair, Independent Non-executive Director
First appointed 10 August 2011
James (Jim) is a resident of New Zealand. For 25 years he has served as either Chair, Director,
or an executive of research and technology businesses for both commercial and New Zealand
Government organisations. In addition to AROA, current appointments include Chair of Prevar
Limited, R J Hill Laboratories Limited and Information Tools Limited.
He was Chair of the New Zealand Institute of Plant & Food Research and Chair of its
predecessor HortResearch, as well as several private businesses and start-up companies.
He served on the board of the then Foundation for Research, Science, and Technology
including five years as deputy Chair. Jim was an executive and director of Genesis Research &
Development Corporation Limited during its early stages through public listing.
Before specialising in science and technology businesses, Jim held management positions with
an international manufacturing business and spent thirteen years as a partner at chartered
accountants, EY. His time at EY was focused on business strategy and included two years’
secondment to EY’s Washington DC office.
Jim has a BSc (Hons) in Chemistry from University of Otago and a Post Graduate Diploma in
Accounting from Victoria University of Wellington.
Committee responsibilities: Member Audit Committee, Member Risk Committee, Member
Remuneration and Nomination Committee
Brian Ward
Managing Director and CEO
First appointed 21 Sep 2007
Brian is the founder of AROA and he is a resident of New Zealand. He has held senior corporate
roles in life sciences and health care companies over the last 25 years. He has extensive
management experience in life science companies spanning clinical, technical, sales, marketing,
corporate development and strategy having worked for a number of multinationals including
Baxter, Beecham and SmithKline Beecham throughout the world. He has managed investments
into New Zealand technology companies for the Foundation for Research Science and
Technology, served as the founding CEO of NZBio, and has sat on a number of government and
industry expert panels.
Brian has been responsible for leading the Company’s growth from start-up through to
becoming a vertically integrated medical device business with substantial US sales and a
developing international presence.
As founder, Managing Director and CEO of the Company, and a substantial shareholder in the
Company, he is considered by the Board to not be an independent Director.
He is a graduate from Massey University with a Bachelor’s degree in Veterinary Science, a
Member of the Royal College of Veterinary Surgeons (UK), and holds a Masters degree in
Business Administration graduating with distinction.
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Committee responsibilities: Member IPO Due Diligence Committee
Steven Engle
Independent Non-executive Director
First appointed 1 April 2015
Steven Engle is a resident of the US. He has over 20 years of executive leadership experience
with public biotech companies developing breakthrough products in metabolic, autoimmune,
oncologic and infectious disease areas. He was previously the CEO of CohBar, a clinical stage
biotechnology company developing mitochondria-based therapeutics to treat age-related
diseases and extend healthy lifespan. Before joining CohBar, Steven served as CEO of Averigon
Consulting, an advisory firm to the life science industry. Prior to that, he held roles as Chairman
and CEO of XOMA Corporation, a leader in the development of therapeutic antibodies and
antibody technologies, and La Jolla Pharmaceutical Company, which discovered the biology
of B cell tolerance, developed the first B cell toleragen for lupus patients, and received an
approvable letter from the FDA. Earlier, he served as Vice President of Marketing for Cygnus, a
drug delivery systems company, where he helped to gain FDA approval and to launch Nicotrol
for smoking cessation.
Steven is the non-executive Chairman of the Board of Prescient Therapeutics Ltd., an ASX listed
clinical stage oncology company, and Executive Chairman of Author-it Software Corporation, a
developer of authoring information solutions for pharmaceutical and biotechnology companies.
He is a former director of industry associations, BIO, BayBio and BIOCOM, and was a member of
the board of the Lupus Foundation of America.
Steven holds M.S.E.E. and B.S.E.E. degrees from the University of Texas with a focus in
biomedical engineering.
Committee responsibilities: Chair Remuneration and Nomination Committee, Member Risk
Committe
Philip McCaw
Non-executive Director
First appointed 5 March 2008
Philip (Phil) McCaw is a resident of New Zealand and is the Founding Partner of Movac, one of
New Zealand’s leading Venture Capital funds. Phil led the original investment round into AROA
in 2008, has worked closely with the Company and has served on the Board since then. Phil has
over 20-years’ experience investing into New Zealand technology companies and helping to
guide their growth. Phil was an early investor in Trade Me, New Zealand’s leading on-line trading
community, which was sold to Fairfax in 2006. He was also an early investor into PowerByProxi,
a wireless power technology spin-out from Auckland University, which was sold to Apple in
2018.
Outside of Movac, Phil remains an active angel investor and maintains a personal angel
investment portfolio. He is a strong advocate for the development of the entrepreneurial
and early-stage investment eco-system in New Zealand and was the past Chair of the Angel
Association of New Zealand; a founding investor in the Lightning Lab technology accelerator;
and a founding investor in the Kiwi Landing Pad in San Francisco.
Prior to starting Movac Phil spent 10 years with Deloitte Consulting working in New Zealand and
the US.
Due to his relationship with ongoing substantial shareholders in AROA, Phil is considered by the
Board to not be an independent Director.
Phil has a Bachelor of Business Studies (Senior Scholar) from Massey University.
Committee responsibilities: Member Remuneration and Nomination Committee
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Annual Report 2021 | AROA John Pinion
Independent Non-executive Director
First appointed 1 February 2015
John is a resident of the US. He has over 26 years of global experience leading biologic,
small molecule pharmaceutical, gene therapy and device operations across Asia, Europe
and the Americas. His expertise and leadership spans engineering, quality, manufacturing
and translational sciences. He joined Ultragenyx in July 2015 and currently holds the role of
EVP, Translational Sciences and Chief Quality Operations Officer. He provides leadership for
Ultragenyx’s translational sciences functions which includes Pharmacology and Toxicology,
Research and Bioanalytical Development, as well as GxP Quality and Compliance and CMC
Analytical Development and QC.
As a key member of Ultragenyx’s executive leadership team reporting directly to the
organization’s CEO, he also contributes to ongoing business development, clinical development,
commercial and strategic planning activities.
In the ten years prior to joining Ultragenyx, John has held roles of increasing responsibility
at Genentech (subsequently Roche post Genentech acquisition), departing the organization
as Senior Vice President and Global Head of Quality and Compliance for Pharma Technical
Operations based in Basel, Switzerland.
Previous to Genentech, John spent 17 years in operational and senior leadership roles in Baxter
International’s Renal, Bioscience, Parenterals and Device divisions.
He holds a B.S. in Mechanical Engineering from West Virginia University.
Committee responsibilities: Chair Risk Committee, Member Audit Committee
John Diddams
Independent Non-executive Director
First appointed 21 November 2019
John is a resident of Australia and has over forty years’ experience as a CFO, CEO and director
of both private and publicly listed companies. John is currently a non-executive director of New
Zealand based Volpara Health Technologies Limited (ASX:VHT), Surf Lakes Holdings Limited
and DIT AgTech Limited.
John has extensive knowledge and experience in the practical application of ASX Listing Rules,
Australian corporations’ law, international accounting standards and corporate governance
principles. He heads a CPA firm providing corporate advisory services to SME and mid-cap
companies and has managed the listing process, secondary capital raisings and ASX listings in
a number of diverse industry sectors, including oil and gas, food and retail, telecommunications,
adventure tourism, biotechnology, and the dental and medical sectors.
John holds a Bachelor of Commerce from the University of NSW, is a Fellow of the Australian
Society of CPAs and a Fellow of the Australian Institute of Company Directors.
Committee responsibilities: Chair Audit Committee, Chair IPO Due Diligence Committee
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Annual Report 2021 | AROA
Successful IPO
and ASX listing
BOARD AND COMMITTEE MEETINGS
In addition to its usual Committees, the Board established an IPO Due Diligence Committee during the year to
consider matters relating to the Company’s IPO and Admission, and provide the Board with recommendations on
the same.
Name
Board of Directors
Audit Committee2
Risk Committee2
Remuneration
and Nomination
Committee
IPO Due Diligence
Committee
Eligible
Attended
Eligible*
Attended
Eligible*
Attended
Eligible*
Attended Eligible* Attended
Jim McLean
Brian Ward
Steven Engle
Phil McCaw
John Pinion
John Diddams
9
9
9
9
9
9
9
9
9
9
9
9
4
4
4
4
4
4
4
3
3
3
3
3
3
3
2
2
2
2
2
2
2
3
11
2
11
11
11
*To attend as a member of that Committee
With the exception of the IPO Due Diligence Committee, the Committees’ charters are available on the Company’s
website.
PRINCIPAL ACTIVITIES
AROA is a soft tissue regeneration company. During the year, the Group’s principal activity was the development,
manufacture and distribution of products to improve the healing in complex wounds and soft tissue reconstruction.
2 Previously called the Audit and Risk Committee. The Audit and Risk Committee had 3 meetings before separating into an Audit Committee and a Risk Committee
in December 2020. Post separation, the Audit Committee had 1 meeting in the relevant period whilst the Risk Committee had yet to meet as its first meeting was
scheduled for June 2021. The Board has oversight of all risk matters.
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Annual Report 2021 | AROA REVIEW OF OPERATIONS AND ACTIVITIES
Commentary on the Group’s operations and activities during the year is set out in the Chairman’s Review and CEO’s
Report.
FINANCIAL RESULTS FOR THE YEAR
Normalised profit or loss3
Product sales
Other revenue
Total revenue
Gross profit
Reported
Reported
Reported
2021
2020
YOY %
CC4
2021
CC4
YOY %
NZ$000
NZ$000
NZ$000
21,575
21,924
(2)
23,123
5
767
3,152
(76)
822
(74)
22,342
25,076
(11)
23,945
15,524
18,737
(17)
17,127
(5)
(9)
Product gross margin %
Other income
68%
2,682
71%
(3) bps
71%
0 bps
1,137
136
2,722
Normalised selling and administrative expenses5
(18,142)
(15,401)
Research and development
(6,425)
(5,042)
18
27
(18,900)
(6,425)
Total normalised operating expenses
(24,567)
(20,443)
20
(25,325)
Normalised EBIT
(6,361)
(568)
1,018
(5,476)
Add back: Depreciation & amortisation
Normalised EBITDA
Net finance expenses
3,078
(3,283)
2,741
2,173
(1,111)
(3,317)
Normalised loss before income tax
(7,472)
(3,886)
12
3,078
(251)
(2,398)
(210)
67
92
(1,753)
(7,229)
47
86
139
23
27
24
862
12
PRODUCT SALES
(REPORTED)
up 17% YoY
13.9m
PRODUCT SALES
(CONSTANT CURRENCY4)
up 6% YoY
13.9m
$11.9m
$10.0m
down 10% YoY
$9.0m
$10.0m
$11.9m
down 8% YoY
$9.2m
H1 FY20
H2 FY20
H1 FY21
H2 FY21
H1 FY20
H2 FY20
H1 FY21
H2 FY21
3The following Profit or Loss is non-GAAP financial information, as defined by the NZ Financial Markets Authority, and has been provided to assist users of
financial information to better understand and assess the Group’s comparative financial performance without any distortion from NZ GAAP accounting treatment
specific to one-off, non-cash fair value adjustment of pre-offer shares issued in February and May 2020 and the one-off transaction costs associated with the IPO.
The impact of non-cash share based payments expense has also been removed from the Profit or loss. This approach is used by management and the Board to
assess the Group’s comparative financial performance.
4Constant currency (CC) removes the impact of exchange rate movements. This approach is used to assess the Group’s underlying comparative financial
performance without any distortion from changes in foreign exchange rates, specifically the USD. The NZD/USD exchange rate of 0.64 has been used in the
constant currency analysis, representing the average rate for FY20.
5These items have been normalised by the amounts outlined within the ‘Reconciliation to NZ GAAP Profit or Loss’.
16
Product sales
Product sales for the year were $21.6 million ($23.1 million in constant currency) which is down 2% on last year,
but a 5% increase on a constant currency basis. Product sales for H1 FY21 of $9.0 million were down 10% (8% in
constant currency) compared to H1 FY20, driven by the impact of the COVID-19 pandemic. Despite foreign exchange
headwinds and a COVID-19 surge in the US in January, sales recovered strongly in H2 FY21 reaching $12.6 million. This
represents an increase of 6% on H2 FY20 or 17% in constant currency.
Other revenue
Other revenue represents royalties, received under the Company’s licensing agreement with TELA Bio and project
fee income, received for product development undertaken with TELA Bio. No royalties were received under the TELA
Bio licensing agreement for the year, compared to the $3.0 million received in FY20.
Product gross margin %
Product gross margin decreased to 65% (66% in constant currency) in H1 FY21 compared to FY20 as a result of
lower product sales, relative to the level of fixed indirect costs required to support higher sales volumes. Product
gross margins recovered strongly in H2 FY21 to 71%, despite foreign exchange headwinds (74% in constant currency),
resulting in a full year product gross margin of 68% (71% in constant currency) compared to 71% in FY20.
Other income
Other income represents government grants and subsidies.
Normalised operating expenses
Selling and administrative expenses increased (from $15.4 million in FY20) to $18.1 million for FY21, representing a
18% change (23% in constant currency). This reflects the increased investment into the Company’s US based sales
operations and the increase in expenses from becoming a publicly listed entity.
Research and development expenses increased (from $5.0 million in FY20) to $6.4 million for FY21, being a 27%
change (no currency impact), reflecting the increase in staffing on pipeline products.
Reconciliation to NZ GAAP profit or loss
Normalised loss before income tax
Share based payments
Transaction costs
Other losses
Loss before income tax (NZ GAAP)
Share based payments
Reported
Reported
2021
NZ$000
(7,472)
(2,011)
(1,606)
(8,013)
(19,102)
2020
NZ$000
(3,886)
(418)
(850)
(1,006)
(6,160)
Share based payments of $2.0 million relate to the vesting of the share options issued to Directors and employees of
the Company on IPO and certain employees in September.
Transaction costs
Transaction costs of $1.6 million relate to the costs associated with the IPO including lead manager fees, legal fees,
accounting and audit fees, ASX listing fees and road show expenses. Out of the total costs of $3.0 million incurred
during the year ended 31 March 2021, $1.6 million was recognised against share capital, with the remaining $1.6
million recorded within operating expenses.
17
17
Annual Report 2021 | AROA Other losses
Other losses of $8.0 million are a non-cash, one-off expense attributable to the fair value adjustment of pre-offer
shares issued in February and May 2020, which were classified as financial liabilities as opposed to equity in
accordance with NZ IAS 32. During the reporting period, these financial liabilities at fair value through profit or loss
were fully reclassified as equity, following the IPO.
Cashflows
Net cash outflow from operating activities of $5.0 million for FY21 compared to a net cash inflow from operating
activities of $1.7 million in FY20, reflecting the increased investment in operating expenses.
Cash on hand and term deposits, increased to $35.4 million as at 31 March 2021 from $3.9 million as at 31 March 2020,
resulting from the successful pre-IPO and IPO placements netting $50.4 million.
Repayment of borrowings totalled $12.6 million during the year with purchases of property, plant and equipment
remaining modest at $1.3 million compared to $1.7 million in FY20.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Commentary on significant changes in the Group’s state of affairs during the financial year is set out in the Chairman’s
Review.
Other than as set out in the Chairman’s Review and CEO’s Report, the Directors are not aware of any matters
or circumstances that have arisen since the end of the financial year which have significantly affected, or may
significantly affect, AROA’s operations, the results of those operations, or the state of affairs of the Group in
subsequent financial years.
DIVIDENDS
No dividends were paid, declared or recommended during the financial year.
Clinical outcomes
with clear economic
benefits are driving
uptake
18
18
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has arranged, as provided for under its Constitution, insurance policies for Directors’ and Officers’
liability which, with a deed of indemnity entered into with each Director, are intended to ensure (to the extent
permitted by applicable law) that the Directors and Officers will not incur monetary losses as a result of actions
undertaken by them as a director or officer (as applicable) of any Group company. Certain actions are specifically
excluded, for example the incurring of penalties and fines which may be imposed in respect of breaches of the law.
Under the deeds of indemnity with the Directors, AROA must (subject to its Constitution and the Companies Act)
maintain such insurance during the Director’s directorship and for such period of time following the directorship as
determined by the Board.
CORPORATE GOVERNANCE STATEMENT
The Board is responsible for corporate governance. The Board has prepared a Corporate Governance Statement in
accordance with the fourth edition of the ASX Corporate Governance Council’s Principles and Recommendations.
A copy of AROA’s Corporate Governance Statement is available on it’s website at www.aroabio.com under the
Investors/Corporate Governance section.
NON-AUDIT SERVICES
AROA’s auditor is BDO Auckland Limited. The Group’s statutory audit fee for the financial year ended 31 March 2021
was NZ$128,000.
During the year ended 31 March 2021, BDO Auckland Limited, or entities associated to it, provided the following non-
audit services to the Group.
Description of services
Investigating accountant’s review of the IPO Prospectus
Review of interim consolidated financial statements
Review of certain eligibility declarations by AROA for
research and development grant funding
Assistance with the preparation and review of financial models for valuing certain
pre-existing shares in AROA disclosed in the IPO Prospectus
Fees (NZ$)
238,000
46,500
5,000
7,500
The Board is satisfied that the services noted above do not impair BDO’s independence as auditor on the basis
that such services were not in conflict with BDO’s audit procedures or adequate safeguards were put into place to
mitigate any independence risks.
19
Annual Report 2021 | AROA REMUNERATION REPORT
(UNAUDITED)
This Remuneration Report, which forms part of the Directors’ Report, sets out the remuneration information for
AROA’s Directors and other key management personnel for the financial year ended 31 March 2021.
KEY MANAGEMENT PERSONNEL
Key management personnel of the Group are those persons having authority and responsibility for planning, directing
and controlling the Group’s major activities, whether directly or indirectly.
The Board has determined that the Key Management of the Group are the individuals whose details are set out below.
Except as noted below, the named persons held their stated position for the whole of the financial year ended 31
March 2021 and since the end of that financial year.
Name
Non-Executive Directors:
Position
James (Jim) McLean
Chair, Independent Non-executive Director
Steven Engle
Philip McCaw
John Pinion
John Diddams
Executives
Brian Ward
James Agnew
Independent Non-executive Director
Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Managing Director and CEO
CFO & Joint Company Secretary
(appointed Company Secretary in February 2020 and
Joint Company Secretary from 23 July 2020)
REMUNERATION FRAMEWORK
The key objective of AROA’s remuneration policies and practices is to attract, retain, motivate and reward talent.
To achieve this, AROA offers compensation and benefits that embody the following:
•
competitive within the industry;
• motivate management to pursue AROA’s business objectives and pursue AROA’s growth and success;
•
•
encourage a high level of performance; and
align the interests of management with the interests of shareholders.
REMUNERATION GOVERNANCE
The Remuneration and Nomination Committee assists the Board in establishing remuneration and nomination
policies and practices which satisfy the remuneration framework outlined above, as well as ensuring that the Board is
appropriately structured and comprised of individuals who are best able to discharge the responsibilities of directors.
To achieve this, the Remuneration and Nomination Committee’s responsibilities include (amongst others):
reviewing the structure of remuneration to be paid to Non-Executive Directors and any changes to the same;
reviewing the performance and remuneration of the CEO and executive managers and providing the Board with
recommendations on the same;
overseeing succession planning reviews and selection processes (as required from time to time) for the CEO and
executive managers;
•
•
•
20
•
•
•
•
providing the Board with recommendations in relation to the terms of any issue of equity based remuneration to
Executives or employees as part of their individual package or a wider staff incentive and retention scheme;
regularly assessing the structure, size, composition, skills, experience, independence and diversity required by
the Board to fulfil its responsibilities and duties to shareholders having regard to AROA’s strategic direction, and
reporting the outcome of that assessment to the Board;
developing a process for evaluating the performance of individual Directors, Board committees and the Board as
a whole; and
establishing processes for identification of suitable candidates for appointment as new directors to the Board
having regard to the skills required and skills represented on the Board.
Where appropriate, the Remuneration and Nomination Committee engages external consultants to provide
independent advice.
In accordance with corporate governance best practice, the structure of Non-Executive Director remuneration is
separate and distinct from that for the CEO and executive managers.
NON-EXECUTIVE DIRECTOR REMUNERATION STRUCTURE
Under the Company’s Constitution, the Board may decide the remuneration to which each Non-Executive Director
is entitled for their services as a Director of the Company (subject to shareholder approval where applicable under
the Companies Act or the ASX Listing Rules). The Board has determined that Non-Executive Directors shall be
compensated by way of cash fees and share options, but that no performance-based compensation shall be offered
in order to ensure that objectivity in decision making is not compromised. The Remuneration and Nomination
Committee assesses and reviews each Non-Executive Director’s compensation annually having regard to the time
commitment and responsibilities of that Director (and having regard to market comparatives every two years).
The total amount of fees paid to all Non-Executive Directors for their services as Directors (including for any
committee roles) must not exceed in aggregate in any financial year the amount fixed by AROA in a general meeting.
At the date of this Annual Report, this amount is fixed at NZ$465,000. Remuneration (if any) in the form of shares or
options in AROA granted to Non-Executive Directors is not included in this amount. The remuneration of
Non-Executive Directors for the year ended 31 March 2021 is detailed later in this Remuneration Report.
There are no retirement benefit schemes for the Non-Executive Directors, or termination gratuity on ceasing to
hold office. Each Non-Executive Director is entitled to be paid for all reasonable travel, accommodation and other
expenses incurred by that Director in connection with his attendance at meetings or otherwise in connection with
AROA’s business.
EXECUTIVES’ REMUNERATION STRUCTURE
AROA aims to reward the Executives and senior management with a level and mix of remuneration commensurate
with their position and responsibilities within AROA. The remuneration package consists of three components;
•
•
•
fixed annual remuneration comprising salary and legislative superannuation;
cash based short term incentives; and
long term incentives.
Fixed annual remuneration
The fixed annual remuneration of the Executives and senior management is reviewed annually, with any increases to
remuneration being subject to individual, Company and market conditions. These include the following:
•
size, nature and responsibilities of the role;
• market pay levels benchmarked against comparative roles in the industry;
•
•
•
•
locality of role, relative to market benchmarks;
individual experience, skill and performance;
increases for employees across the company taking into account the Company’s financial performance and
position; and
annual inflation.
21
Annual Report 2021 | AROA Cash based short term incentives
Cash based short term incentives are paid in the form of bonuses for achievement of AROA’s annual performance
targets. These incentives are aimed at rewarding the achievement of predetermined annual financial, strategic or
business performance targets. There is a minimum financial performance hurdle which must be achieved before the
cash bonus is payable.
The cash bonus is calculated as a percentage for fixed remuneration. For the Executives, this bonus is between 25%-
40% of annual salary.
In addition to short term incentive cash bonuses, in consideration for their performance and efforts during the IPO
process, the Executives were entitled to a share in a one-off IPO cash bonus pool of NZ$200,000. This bonus pool
was distributed among the Executives and other AROA employees at the Board’s discretion.
Long term incentives
During the financial year ended 31 March 2021, AROA operated two employee and executive incentive plans; the
AROA Employee Incentive Share Plan and the AROA Biosurgery Share Option Plan.
1. Share Plan
AROA operated the Share Plan from 2014, with a view to align the interests of employees with the interests of
shareholders through the grant of equity in the Company. Employees who were offered the opportunity to participate
in the Share Plan were offered unpaid ordinary shares in the Company that then vested in tranches over a specified
timeframe set out in the offer letter (usually three years). Subject to the Board’s right to make an earlier call on the
shares offered pursuant to the Share Plan, any such shares offered and vested had to be paid up by the shareholder
by the 10th anniversary of their issue. No grants were made under the Share Plan since 2018 and, apart from the
terms of the loan arrangement outlined below, the Share Plan was wound up prior to Admission. Any shares offered
pursuant to the Share Plan which were not fully paid up at Admission (whether by the loan arrangement outlined
below or otherwise) were forfeited.
The Board offered employees (but not Directors) who held shares offered pursuant to the Share Plan the opportunity
to take out an interest free loan from AROA to pay up such shares. The maximum amount of the loan from AROA was
NZ$0.8 million and until a shareholder fully repays their Share Plan shares, legal title in such shares will continue to be
held by Mesynthes Nominee Limited and any dividends paid out will first be applied to repayment of their loan. This
loan facility will expire on 31 March 2022.
2. Option Plan
From time to time, AROA offers certain Directors, Executives and employees the opportunity to participate in the
Option Plan. The Option Plan is intended to retain Executives and employees, and may also be used as equity-based
compensation for Non-Executive Directors.
Each option is issued for nil consideration and entitles the participant to subscribe for one ordinary share in the
Company at a specified exercise price once the option has vested. Any shares issued on exercise of an option are fully
paid and rank pari passu with existing ordinary shares in the Company. The vesting dates are determined by the Board
and specified in the option offer letter, but they have typically vested in three tranches of 33% each over a period
of up to three years. An option may be exercised at any time from its vesting date up until the expiry date specified
in the option offer letter. For grants made prior to Admission, the expiry date is ten years after the grant date whilst
grants made on or after Admission expire five years after the grant date.
Should a Non-Executive Director, Executive or employee cease to be employed by AROA, all options which have not
yet vested will automatically lapse unless the Board determines otherwise. Any options that have vested with that
person must be exercised within 90 days of ceasing employment, or those vested options will also lapse, unless the
Board determines otherwise.
The exercise price for options is determined by the Board and specified in the option offer letter, but typically, for
grants made:
•
•
at the time of Admission, the exercise price for each option was A$0.75 per share, being the price offered for each
ordinary share in AROA pursuant to the IPO; and
after Admission, the exercise price for each option is the higher of the share price at the last capital raise and
the volume weighted average price of ordinary shares in AROA on the ASX for the five trading days immediately
preceding the grant date.
For further details relating to the options, refer to Note 22 to the Consolidated Financial Statements.
22
CEO AND MANAGING DIRECTOR
Brian Ward is employed by AROA in the role of both CEO and Managing Director. A summary of the key terms
relating to his remuneration is outlined below.
•
•
•
Brian is entitled to a fixed remuneration, plus (subject to achievement of certain financial and product milestones)
cash based short term incentives as well as long term incentives. Further details on his remuneration during the
financial year ended 31 March 2021 are set out in this Remuneration Report.
Brian does not receive any additional payments for his performance as Managing Director of AROA.
The Remuneration and Nomination Committee assesses the level and composition of his remuneration and
performance, annually, and makes recommendations to the Board on any changes to his remuneration package.
DETAILS OF REMUNERATION OF KEY MANAGEMENT
Key Management’s remuneration (in NZ$) for the year ended 31 March 2021 is set out below.
Short term benefits
Post employment
benefits
Long term incentives
Cash
salaries
and fees
Cash
bonus
Shares
Superannuation
Options6
Loan
funding
Total
$
$
$
$
$
$
$
$84,784
$85,517
$65,833
$85,517
$68,641
-
-
-
-
-
$483,333
$75,000
-
-
-
-
-
-
-
-
-
-
-
$152,293
$121,842
$121,842
$121,842
-
$16,750
$1,140,128
-
-
-
-
-
-
$237,077
$207,359
$187,675
$207,359
$68,641
$1,715,211
Non-Executive Directors
Jim McLean
Steven Engle
Philip McCaw
John Pinion
John Diddams
Executives
Brian Ward
James Agnew
$245,517
$68,360
$7,6507
$8,498
$238,142
$58,8398
$627,006
TOTAL
$1,119,144
$143,360
$7,650
$25,248
$1,896,088
$58,839
$3,250,329
SHARE BASED COMPENSATION
Options granted to Key Management during the financial year ended 31 March 2021 are set out below. These options
were issued pursuant to the Option Plan.
As outlined in the Chairman’s Review, AROA sees significant opportunity in accelerating its product development
targeting dead space management. This is a refinement of the position disclosed in the Prospectus and as a
consequence, it has resulted in the Board resolving to re-align the performance condition attaching to certain
options granted as compensation to Brian Ward and James Agnew (detailed further below); so that the performance
condition for those options are more closely aligned to the revised product development strategy. The expiry date
for these options remains unchanged. Accordingly, the vesting date and performance condition now attaching to
1,044,175 of the 3,132,525 options granted to Brian Ward in FY21, and 218,100 of the 654,300 options granted to James
Agnew in FY21, are as follows:
•
•
Vesting date: upon satisfaction of the performance condition on or after 31 March 2022
Performance condition: 510k Clearance of first iteration of “dead space management” product, and completion of
first “in human” study with the 2nd iteration of the “dead space management” product.
6These amounts reflect the non-cash accounting cost of the share options granted based on NZ IFRS 2 – Share-based Payment. No cash payments are made in
relation to these.
7This reflects shares issued in lieu of cash salary prior to Admission.
8This reflects the outstanding amount owed for shares issued under the Share Plan following the wind-up of that plan prior to Admission.
2323
Annual Report 2021 | AROA Number
granted
Fair value
per option
granted
($)9
Exercise
price per
share ($)
Final vesting
date
First exercise
date
Last exercise
date
Fair value
of options
granted during
the year ($)9
Non-Executive Directors
Jim McLean
Steven Engle
Philip McCaw
John Pinion
307,200
A$0.466
A$0.75
31 March 2023
31 March 2021 23 July 2025
A$0.466
245,775
A$0.466
A$0.75
31 March 2023
31 March 2021 23 July 2025
A$0.466
245,775
A$0.466
A$0.75
31 March 2023
31 March 2021 23 July 2025
A$0.466
245,775
A$0.466
A$0.75
31 March 2023
31 March 2021 23 July 2025
A$0.466
John Diddams
-
-
-
-
-
-
-
Executives
Brian Ward
James Agnew
3,132,525
(3 tranches
of 1,044,195)
A$0.34
A$0.75 upon
satisfaction
of the performance
condition on or
after 31 March 2022
654,300
(3 tranches
of 218,100)
A$0.34
A$0.75 upon
satisfaction
of the performance
condition on or
after 31 March 2022
31 March 2021 23 July 2025
A$0.34
31 March 2021 23 July 2025
A$0.34
9The fair value of the options has been measured using the Revenue Ruling 59-60 and standard practice. Revenue Ruling 59-60 outlines the standard of value,
approach, methods, and factors to be considered in valuing shares of the stock of a closely held entity similar to the Company. Revenue rulings are public
administrative rulings by the US Internal Revenue Service.
24
EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT
Options holdings
The number of options in ordinary shares in the Company held during the financial year ended 31 March 2021 by each
Key Management personnel, including their personally related parties, are set out below.
Balance as at
1 April 2020
Granted as
compensation
Exercised
Other
changes10
Balance at the
end of the year
Vested and
exercisable
Unvested
Non-Executive Directors
Jim McLean
Steven Engle
Philip McCaw
John Pinion
John Diddams
Executives
Brian Ward
2,800
307,200
(2,800)
-
307,200
-
307,200
8,443
245,775
624,782
879,000
633,225
245,775
-
245,775
-
245,775
-
245,775
8,443
245,775
624,782
879,000
633,225
245,775
12,464
-
(8,064)
325,600
330,000
330,000
James Agnew
14,293
654,300
(14,293)
14,669
3,132,525
(14,669)
-
-
3,132,525
654,300
-
-
3,132,525
654,300
TOTAL
61,112
4,831,350
(39,826)
1,575,164
6,427,800
1,266,450
5,161,350
Shareholdings
The number of ordinary shares in the Company held during the financial year ended 31 March 2021 by each Key
Management personnel, including their personally related parties, are set out below.
Non-Executive Directors
Jim McLean11
Steven Engle
Philip McCaw13
John Pinion
John Diddams14
Executives
Brian Ward15
James Agnew
Balance as at 1
April 2020
Received during
the year on
exercise of options
or warrants
Purchases or, as
specified, other
additions
Sale
Balance at the end
of the year
2,480,625
226,500
11,85012
(146,667)
2,572,308
411,600
-
-
(185,067)
226,553
16,944,150
524,850
475,42512
(1,240,000)
16,704,425
457,875
6,300
8,32512
-
472,500
150,000
604,800
257,750 12
(200,000)
812,550
34,003,350
1,122,450
(2,000,000)
33,125,800
1,029,525
1,071,975
9,22516
(33,333)
2,077,392
10This reflects the split of share options held immediately prior to Admission at the ratio of 75:1, with effect on IPO.
11As a director of Mesynthes Nominee Limited, Jim McLean also has an interest in 4,794,300 shares held by Mesynthes Nominee Limited on bare trust for certain
AROA employees until payment is received for such shares.
12Received on re-pricing of series C2 shares, which involved a split of shares held immediately prior to Admission at the ratio of 75:1.
13Phil McCaw holds his interest through McSyth Capital Investment Trust, of which he is one of 3 trustees and a beneficiary. Mr McCaw is also a principal of Movac,
a substantial shareholder in the Company. Mr McCaw sits as one member of an investment committee of 6 with respect to the Movac Funds, however Mr McCaw
has withdrawn from the investment committee with respect to decisions regarding any shares in the Company held by the Movac Funds. Accordingly, Mr McCaw
does not control the voting or disposal of those shares and does not have a relevant interest in those shares. As a director of Mesynthes Nominee Limited, Mr
McCaw also has an interest in 4,794,300 shares held by Mesynthes Nominee Limited on bare trust for certain AROA employees until payment is received for such
shares.
14This includes interests in shares held by John Diddams’ related parties; Whitfield Investments Pty Ltd and Galdarn Pty Ltd.
15Brian Ward holds his interest through Arawai No. 2 Trust, of which he is one of 3 trustees and a beneficiary.
16This reflects shares issued in lieu of cash salary prior to Admission
25
Annual Report 2021 | AROA END OF REMUNERATION REPORT
This Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the
Board.
Jim McLean
Independent Chair of the Board of Directors
21 June 2021
26
INDEPENDENT AUDITOR’S REPORT
BDO Auckland
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF AROA BIOSURGERY LIMITED
Opinion
We have audited the consolidated financial statements of Aroa Biosurgery Limited (“the Company”)
and its subsidiaries (together, “the Group”), which comprise the consolidated statement of
financial position as at 31 March 2021, and the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at 31 March 2021, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance with
New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand)
(“ISAs (NZ)”). Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We
are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance
Standards Board, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Our network firm was the Investigating Accountant in relation to the Company’s listing on the ASX.
The firm has no other relationship with, or interests in, the Company or any of its subsidiaries.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the consolidated financial statements of the current period. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Recognition of revenue – TELA Bio revenue share
Key Audit Matter
How The Matter Was Addressed in Our Audit
The Group's largest customer is TELA Bio who is
the Group’s USA sales and distribution partner
for abdominal wall reconstruction and hernia
repair and breast reconstruction in North
America and Europe. The contract with TELA
Bio entitles the Group to an agreed percentage
of TELA Bio’s net sales. This revenue is
considered to be variable consideration
(“revenue share”). The consideration is
variable since the quantum of TELA Bio’s
inventory that is eventually sold and the price
that it is sold at are uncertain.
3
Our audit procedures comprised the following:
• We have obtained Management’s
calculations prepared for the revenue
share accrual and evaluated the
reasonableness of key inputs and
assumptions, including those impacted by
Covid-19. The key inputs included sales
history, expiry dates of inventory held,
average selling prices achieved by TELA Bio
and independent research papers which
cover TELA Bio
• We have obtained confirmation from TELA
Bio, confirming the actual revenue share
27
Annual Report 2021 | AROA BDO Auckland
Recognition of revenue – TELA Bio revenue share
Key Audit Matter
How The Matter Was Addressed in Our Audit
for their sales made in the year ended 31
March 2021.
• We have compared the key inputs and
assumptions with those used by
Management last year and considered if
these are indicative of Management bias.
• We considered if that the amount of
variable consideration estimated is only
recorded by the Group to the extent that it
is highly probable that a significant
reversal in the amount of the cumulative
revenue recognised will not occur.
• We have reviewed disclosures in the
consolidated financial statements,
including the revenue recognition policy,
and the requirements of the accounting
standard.
Variable consideration to be recognised is
estimated by using the expected value method.
The estimation is based on information that is
reasonably available to the Group which
incorporates key factors including sales history,
expiry date of inventory held, and average
selling prices achieved by TELA Bio. The
amount of variable consideration is only
recorded by the Group to the extent that it is
highly probable that a significant reversal in
the amount of the cumulative revenue
recognised will not occur when the uncertainty
associated with the variable consideration is
subsequently resolved.
We consider this to be a key audit matter
because of the judgement involved in
determining the variable consideration and the
quantum of the accrued revenue of $3.116m.
Refer to note 3 revenue and segment
information and note 12 trade and other
receivables of the consolidated financial
statements.
Recognition and measurement of Series C preference shares
Key Audit Matter
How The Matter Was Addressed in Our Audit
Our audit procedures comprised the following:
• We reviewed and evaluated the
characteristics of the Series C Preference
Shares offered in accordance with NZ IAS
32 – Financial Instruments: Presentation.
• We have reviewed, in conjunction with our
valuation specialists, Management’s fair
value of the instruments that required fair
value to be determined in accordance with
NZ IFRS 13 Fair Value Measurement.
• We have assessed the disclosures in note
11 in respect of Series C preference shares
to the requirements of the accounting
standard.
The Group completed a pre-IPO capital raise in
February 2020, raising $5.821m and May 2020,
raising $19.804m. The securities issued were
Series C(2) and C(3) Preference Shares,
respectively.
As stated in note 11 these securities had the
attributes of both debt and equity instruments.
Management elected that the entire
instrument was designated as fair value
through profit or loss (“FVTPL”), through the
designation exemption as allowed in IFRS 9
Financial Instruments. Note 4 discloses there
was a charge of $8.013m in profit or loss in the
current year. Both instruments required fair
value to be determined in accordance with
IFRS 13 Fair Value Measurement.
The valuation of the instruments required
Management judgements in estimating: the
probabilities of different scenarios allowed for
in terms of the offers to determine the period
over which the fair value adjustments would be
28
4
BDO Auckland
Recognition and measurement of Series C preference shares
Key Audit Matter
How The Matter Was Addressed in Our Audit
recognised in profit or loss; the conversion
rate; and the AUD/NZD foreign exchange rate.
As a result of the subjective nature of the
judgements and given the magnitude of the
expense in the current year, this was
considered to be a key audit matter.
Goodwill impairment test
Key Audit Matter
How The Matter Was Addressed in Our Audit
The Group has recognised goodwill on a
historical acquisition. The goodwill balance of
$5.538 million at 31 March 2021 is subject to
an annual impairment test in accordance with
NZ IAS 36 - Impairment of Assets.
The Directors performed their impairment test,
with reference to COVID-19, by considering the
recoverable amount of the Group's goodwill
using a value in use calculation. This
calculation is complex and subject to key
inputs and assumptions such as discount rates
and future cash flows, which inherently include
a degree of estimation uncertainty and are
prone to potential bias and inconsistent
application and therefore considered to be a
key audit matter
Refer to note 15 intangible assets of the
consolidated financial statements.
Our audit procedures comprised the following:
• We obtained Management’s value in use
calculations prepared for the Cash
Generating Unit (‘CGU’). We evaluated and
challenged the key inputs and assumptions
including those impacted by Covid-19. The
key inputs included revenue growth rates,
terminal growth rate, gross margins and
discount rate.
• We engaged our internal valuation experts
to review the mechanics of the value in use
calculation against the valuation
methodology, and the discount rate used.
• We reviewed Management's sensitivity
analysis performed on key inputs and
assumptions to determine the extent to
which any changes would affect the
recoverable amount of the assets. We also
considered and tested alternate
sensitivities.
• We compared the carrying value of the
CGU’s assets to the recoverable amount
determined by the impairment test to
identify any impairment losses.
• We have reviewed disclosures in the
consolidated financial statements,
including impairment and sensitivity
analysis, to the requirements of the
accounting standard.
Accounting for share based payment arrangements
Key Audit Matter
How The Matter Was Addressed in Our Audit
During the year, the Group issued options to
certain employees, including Directors, under
the share based payment arrangements. The
share based payment arrangements included
both market based and non-market based
vesting conditions. In determining the value of
Our audit procedures comprised the following:
•
Agreed the terms of the share based
payment arrangements issued during the
year to contracts.
• We have assessed, in conjunction with our
valuation specialists, the appropriateness
5
29
Annual Report 2021 | AROA BDO Auckland
Accounting for share based payment arrangements
Key Audit Matter
How The Matter Was Addressed in Our Audit
of the valuation methodology used by
management's specialist and the key input
assumptions such as volatility rates,
expected life and probability of achieving
the market-based performance condition.
• We have assessed the Group's judgements
in relation to the probability of achieving
non-market based vesting conditions.
• We recalculated the share based payments
expense recorded in the Statement of
Profit or Loss and Other Comprehensive
Income over the relevant vesting periods
• We reviewed the disclosures in note 5 and
22 in relation to the share based payment
arrangements.
the new arrangements, the Group used the
services of a third-party valuation specialist.
The Group also had existing share based
payment arrangements that were exercised
during the year.
The share based payments expense recorded
for the year ended 31 March 2021 is $1.985m.
Details of these share based payment
arrangements are disclosed in note 5 employee
benefit expenses and note 22 share based
payments reserve of the consolidated financial
statements.
There is judgement involved in determining the
value of share based payment arrangements
and subsequent recording of the fair value as
an expense over the estimated vesting period.
As a result and given the magnitude of the
expense in the current year, the audit of the
share based payment arrangements was
considered a key audit matter.
Other Information
The directors are responsible for the other information. The other information comprises the Aroa
Biosurgery FY21 Results and FY22 Outlook – Commentary, and Appendix 4E – ASX Listing Rule 4.2A
(but does not include the consolidated financial statements and our auditor’s report thereon),
which we obtained prior to the date of this auditor’s report, and the Annual Report, which is
expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we
do not and will not express any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information identified above and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the
date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we
are required to communicate the matter to the directors.
30
6
BDO Auckland
Directors’ Responsibilities for the Consolidated Financial Statements
The directors are responsible on behalf of the Group for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS, and for such internal control as
the directors determine is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the
Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at
the External Reporting Board’s website at: https://www.xrb.govt.nz/assurance-standards/auditors-
responsibilities/audit-report-1/.
This description forms part of our auditor’s report.
Who we Report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company and the Company’s shareholders, as a
body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Chris Neves.
BDO Auckland
Auckland
New Zealand
24 May 2021
7
31
Annual Report 2021 | AROA CONSOLIDATED STATEMENT OF PROFIT AND
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 March 2021
NNootteess
3
3
7
4,5
6
6
8
Revenue
Cost of sales
GGrroossss pprrooffiitt
Other income
Selling and administrative expenses
Research and development expenses
Other losses
OOppeerraattiinngg iinnccoommee//((lloossss)) bbeeffoorree nneett ffiinnaanncciinngg ccoossttss
Finance income
Finance expenses
NNeett ffiinnaannccee eexxppeennsseess
LLoossss bbeeffoorree iinnccoommee ttaaxx
Income tax (expense)/credit
LLoossss ffoorr tthhee yyeeaarr aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee
IItteemmss tthhaatt wwiillll oorr mmaayybbee rreeccllaassssiiffiieedd ttoo pprrooffiitt oorr lloossss
Exchange loss arising on translation of foreign operations
IItteemmss tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo pprrooffiitt oorr lloossss
Changes in the fair value of equity investments at fair value
through other comprehensive income
10
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee
TToottaall ccoommpprreehheennssiivvee lloossss ffoorr tthhee yyeeaarr aattttrriibbuuttaabbllee ttoo
sshhaarreehhoollddeerrss
Earnings per share during the year:
22002211
$$000000
22,342
(6,818)
1155,,552244
2,682
(21,759)
(6,425)
(8,013)
((1177,,999911))
796
(1,907)
((11,,111111))
((1199,,110022))
(107)
((1199,,220099))
332
615
994477
22002200
$$000000
25,076
(6,339)
1188,,773377
1,137
(16,669)
(5,042)
(1,006)
((22,,884433))
3
(3,320)
((33,,331177))
((66,,116600))
202
((55,,995588))
(118)
969
885511
((1188,,226622))
((55,,110077))
Basic earnings per share (cents)
Diluted earnings per share (cents)
23
23
(6.39)
(6.39)
(212.63)
(212.63)
The above consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.
32
CONSOLIDATED STATEMENT OF PROFIT AND
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 March 2021
Revenue
Cost of sales
GGrroossss pprrooffiitt
Other income
Selling and administrative expenses
Research and development expenses
Other losses
Finance income
Finance expenses
NNeett ffiinnaannccee eexxppeennsseess
LLoossss bbeeffoorree iinnccoommee ttaaxx
Income tax (expense)/credit
OOppeerraattiinngg iinnccoommee//((lloossss)) bbeeffoorree nneett ffiinnaanncciinngg ccoossttss
NNootteess
3
3
7
4,5
6
6
8
LLoossss ffoorr tthhee yyeeaarr aattttrriibbuuttaabbllee ttoo sshhaarreehhoollddeerrss
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee
IItteemmss tthhaatt wwiillll oorr mmaayybbee rreeccllaassssiiffiieedd ttoo pprrooffiitt oorr lloossss
Exchange loss arising on translation of foreign operations
IItteemmss tthhaatt wwiillll nnoott bbee rreeccllaassssiiffiieedd ttoo pprrooffiitt oorr lloossss
Changes in the fair value of equity investments at fair value
through other comprehensive income
10
TToottaall ootthheerr ccoommpprreehheennssiivvee iinnccoommee
TToottaall ccoommpprreehheennssiivvee lloossss ffoorr tthhee yyeeaarr aattttrriibbuuttaabbllee ttoo
sshhaarreehhoollddeerrss
Earnings per share during the year:
22002211
$$000000
22,342
(6,818)
1155,,552244
2,682
(21,759)
(6,425)
(8,013)
((1177,,999911))
796
(1,907)
((11,,111111))
((1199,,110022))
(107)
((1199,,220099))
332
615
994477
22002200
$$000000
25,076
(6,339)
1188,,773377
1,137
(16,669)
(5,042)
(1,006)
((22,,884433))
3
(3,320)
((33,,331177))
((66,,116600))
202
((55,,995588))
(118)
969
885511
((1188,,226622))
((55,,110077))
Basic earnings per share (cents)
Diluted earnings per share (cents)
23
23
(6.39)
(6.39)
(212.63)
(212.63)
The above consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2021
CCuurrrreenntt aasssseettss
Cash and cash equivalents
Term deposits
Derivative assets
Trade and other receivables
Inventories
Tax receivable
Financial assets at fair value through other comprehensive
income
TToottaall ccuurrrreenntt aasssseettss
NNoonn--ccuurrrreenntt aasssseettss
Property, plant and equipment
Prepayments
Right of use assets
Intangible assets
TToottaall nnoonn--ccuurrrreenntt aasssseettss
TToottaall aasssseettss
CCuurrrreenntt lliiaabbiilliittiieess
Trade and other payables
Derivative liabilities
Employee benefits
Interest-bearing loans and borrowings
Lease liabilities
Financial liabilities at fair value through profit or loss
TToottaall ccuurrrreenntt lliiaabbiilliittiieess
NNoonn--ccuurrrreenntt LLiiaabbiilliittiieess
Provisions
Interest-bearing loans and borrowings
Lease liabilities
TToottaall nnoonn--ccuurrrreenntt lliiaabbiilliittiieess
TToottaall lliiaabbiilliittiieess
NNeett aasssseettss
EEqquuiittyy
Share capital
Share based payment reserve
Foreign currency translation reserve
Equity investment reserve
Accumulated losses
TToottaall eeqquuiittyy
On behalf of the Board
24 May 2021
NNootteess
9
9
26
12
13
10
14
12
19
15
16
26
17
18
20
11
18
20
21
22
22002211
$$000000
15,381
20,000
31
8,106
3,608
39
1,584
4488,,774499
6,707
171
5,951
18,077
3300,,990066
22002200
$$000000
3,850
-
1,188
7,516
4,005
451
969
1177,,997799
6,559
193
2,175
19,057
2277,,998844
7799,,665555
4455,,996633
2,744
-
2,030
9,952
566
-
1155,,229922
161
-
5,716
55,,887777
2211,,116699
5588,,448866
97,316
2,130
198
1,584
(42,742)
5588,,448866
4,310
386
949
22,523
215
6,827
3355,,221100
158
1,119
1,870
33,,114477
3388,,335577
77,,660066
29,353
951
(134)
969
(23,533)
77,,660066
Jim McLean - Chairman
Brian Ward – CEO
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
33
Annual Report 2021 | AROA
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
For the year ended 31 March 2021
SShhaarree
CCaappiittaall
AAccccuummuullaatteedd
LLoosssseess
FFoorreeiiggnn
CCuurrrreennccyy
TTrraannssllaattiioonn
RReesseerrvvee
EEqquuiittyy
iinnvveessttmmeenntt
rreesseerrvvee
SShhaarree BBaasseedd
PPaayymmeenntt
RReesseerrvvee
TToottaall EEqquuiittyy
NNootteess
$$000000
$$000000
$$000000
$$000000
$$000000
$$000000
BBaallaannccee aass aatt 11 AApprriill 22001199
CCoommpprreehheennssiivvee iinnccoommee
Loss for the year
Other comprehensive income for
the year
TToottaall ccoommpprreehheennssiivvee iinnccoommee ffoorr
tthhee yyeeaarr
2288,,888899
((1177,,557755))
((1166))
-
-
--
(5,958)
-
-
(118)
((55,,995588))
((111188))
TTrraannssaaccttiioonnss wwiitthh sshhaarreehhoollddeerrss
Employee shares exercised
Share based payments
TToottaall ttrraannssaaccttiioonnss wwiitthh
sshhaarreehhoollddeerrss
21,22
22
464
-
446644
-
-
--
-
-
--
--
-
969
996699
-
-
--
770022
1122,,000000
-
-
--
(5,958)
851
((55,,110077))
(169)
418
224499
295
418
771133
BBaallaannccee aass aatt 3311 MMaarrcchh 22002200
2299,,335533
((2233,,553333))
((113344))
996699
995511
77,,660066
BBaallaannccee aass aatt 11 AApprriill 22002200
CCoommpprreehheennssiivvee iinnccoommee
Loss for the year
Foreign Currency Translation
Reserve
Other comprehensive income for
the year
TToottaall ccoommpprreehheennssiivvee iinnccoommee
ffoorr tthhee yyeeaarr
TTrraannssaaccttiioonnss wwiitthh sshhaarreehhoollddeerrss
Issue of Series C3 preference
shares
Issue of equity securities
Employee shares exercised
Employee shares forfeited
Share based payments
TToottaall ttrraannssaaccttiioonnss wwiitthh
sshhaarreehhoollddeerrss
2299,,335533
((2233,,553333))
((113344))
996699
995511
77,,660066
-
-
-
(19,209)
-
-
-
332
-
--
((1199,,220099))
333322
11
21
21
22
22
33,833
30,554
2,601
-
975
6677,,996633
-
-
-
-
-
--
-
-
-
-
-
-
-
615
661155
-
-
-
-
-
-
-
-
--
(19,209)
332
615
((1188,,226622))
-
33,833
-
(807)
(25)
2,011
30,554
1,794
(25)
2,986
--
--
11,,117799
6699,,114422
BBaallaannccee aass aatt 3311 MMaarrcchh 22002211
9977,,331166
((4422,,774422))
119988
11,,558844
22,,113300
5588,,448866
The above consolidated statement of movements in equity should be read in conjunction with the accompanying notes.
34
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
For the year ended 31 March 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2021
SShhaarree
CCaappiittaall
AAccccuummuullaatteedd
LLoosssseess
TTrraannssllaattiioonn
FFoorreeiiggnn
CCuurrrreennccyy
RReesseerrvvee
EEqquuiittyy
iinnvveessttmmeenntt
rreesseerrvvee
SShhaarree BBaasseedd
PPaayymmeenntt
RReesseerrvvee
TToottaall EEqquuiittyy
CCaasshh fflloowwss ffrroomm ooppeerraattiinngg aaccttiivviittiieess
Cash receipts from sales revenue
NNootteess
NNootteess
$$000000
$$000000
$$000000
$$000000
$$000000
$$000000
Cash receipts from license fees, project fees, and grant income
Cash paid to suppliers and employees
Interest received
Dividends received
Interest paid
Income tax received
Income tax paid
22002211
$$000000
21,044
2,552
(28,115)
134
-
(853)
231
-
NNeett ccaasshh ((oouuttffllooww))//iinnffllooww ffrroomm ooppeerraattiinngg aaccttiivviittiieess
30a
((55,,000077))
CCaasshh fflloowwss ffrroomm iinnvveessttiinngg aaccttiivviittiieess
Purchase of property, plant and equipment
Purchase of intangible assets
Term deposits
NNeett ccaasshh ((oouuttffllooww)) ffrroomm iinnvveessttiinngg aaccttiivviittiieess
CCaasshh fflloowwss ffrroomm ffiinnaanncciinngg aaccttiivviittiieess
Proceeds from issue of shares
Proceeds from financial liabilities at FVTPL
Transaction costs related to issues of equity securities or
convertible debt securities
Proceeds from borrowings
Repayment of borrowings/deferred consideration
Lease liability – Principal payments
Lease liability – Interest payments
9
30b
30b
NNeett ccaasshh iinnffllooww//((oouuttffllooww)) ffrroomm ffiinnaanncciinngg aaccttiivviittiieess
30b
NNeett iinnccrreeaassee//((ddeeccrreeaassee)) iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss
Effect of exchange rate fluctuations on cash and cash equivalents
Cash and cash equivalents at beginning of year
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt eenndd ooff yyeeaarr
9
(1,265)
(235)
(20,000)
((2211,,550000))
34,951
19,804
(4,329)
-
(12,596)
(322)
(409)
3377,,009999
1100,,559922
939
3,850
1155,,338811
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
BBaallaannccee aass aatt 3311 MMaarrcchh 22002200
2299,,335533
((2233,,553333))
((113344))
996699
77,,660066
2288,,888899
((1177,,557755))
((1166))
770022
1122,,000000
(5,958)
((55,,995588))
(118)
((111188))
969
996699
-
-
--
-
-
-
-
--
BBaallaannccee aass aatt 11 AApprriill 22001199
CCoommpprreehheennssiivvee iinnccoommee
Loss for the year
Other comprehensive income for
the year
tthhee yyeeaarr
TToottaall ccoommpprreehheennssiivvee iinnccoommee ffoorr
TTrraannssaaccttiioonnss wwiitthh sshhaarreehhoollddeerrss
Employee shares exercised
Share based payments
TToottaall ttrraannssaaccttiioonnss wwiitthh
sshhaarreehhoollddeerrss
21,22
22
464
446644
BBaallaannccee aass aatt 11 AApprriill 22002200
CCoommpprreehheennssiivvee iinnccoommee
Loss for the year
Foreign Currency Translation
Reserve
the year
Other comprehensive income for
TToottaall ccoommpprreehheennssiivvee iinnccoommee
ffoorr tthhee yyeeaarr
TTrraannssaaccttiioonnss wwiitthh sshhaarreehhoollddeerrss
Issue of Series C3 preference
shares
Issue of equity securities
Employee shares exercised
Employee shares forfeited
Share based payments
TToottaall ttrraannssaaccttiioonnss wwiitthh
sshhaarreehhoollddeerrss
11
21
21
22
22
33,833
30,554
2,601
-
975
6677,,996633
-
-
-
--
-
-
-
-
-
-
-
--
-
-
-
--
-
-
-
-
-
-
-
--
--
-
-
-
--
-
-
-
-
-
-
-
--
(169)
418
224499
995511
-
-
--
-
-
-
--
-
-
(807)
(25)
2,011
11,,117799
(5,958)
851
((55,,110077))
295
418
771133
(19,209)
332
615
((1188,,226622))
33,833
30,554
1,794
(25)
2,986
6699,,114422
2299,,335533
((2233,,553333))
((113344))
996699
995511
77,,660066
(19,209)
332
((1199,,220099))
333322
615
661155
BBaallaannccee aass aatt 3311 MMaarrcchh 22002211
9977,,331166
((4422,,774422))
119988
11,,558844
22,,113300
5588,,448866
The above consolidated statement of movements in equity should be read in conjunction with the accompanying notes.
22002200
$$000000
22,373
3,865
(24,239)
3
1
(182)
-
(161)
11,,666600
(1,691)
(179)
-
((11,,887700))
296
5,821
-
1,775
(7,730)
(147)
(399)
((338844))
((559944))
(13)
4,457
33,,885500
35
Annual Report 2021 | AROA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
11.. CCoorrppoorraattee iinnffoorrmmaattiioonn
Aroa Biosurgery Limited ("the Company") together with its subsidiaries (the “Group”) is a leading regenerative
medicine company which develops and manufactures medical devices for wound and tissue repair using its
proprietary extracellular matrix (ECM) technology.
The Company is a limited liability company incorporated and domiciled in New Zealand. The address of its
registered office is 64 Richard Pearse Drive, Airport Oaks, Auckland.
Aroa Biosurgery Incorporated is a subsidiary of Aroa Biosurgery Limited and is incorporated and domiciled in the
United States. The address of its registered office is 7220 Trade St, Suite 306, San Diego, California 92121.
The consolidated financial statements of Aroa Biosurgery Limited and its subsidiaries (the "Group") for the year
ended 31 March 2021 comprise the Company and its two subsidiaries, Aroa Biosurgery Incorporated and Mesynthes
Nominee Limited. All subsidiary entities have a balance date of 31 March.
EEqquuiittyy hhoollddiinngg
PPrriinncciippaall AAccttiivviittyy
PPllaaccee ooff
BBuussiinneessss
Aroa Biosurgery Incorporated
Sales & Distribution US
Mesynthes Nominee Limited
Nominee Shareholder NZ
22002211
%%
100
100
22002200
%%
100
100
The consolidated financial statements have been prepared in accordance with the requirements of the Financial
Reporting Act 2013 and the Companies Act 1993. These consolidated financial statements were authorised for issue
by the Board of Directors on 24 May 2021.
22.. SSuummmmaarryy ooff ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess
Statement of compliance and basis of preparation
The consolidated financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (“NZ GAAP”). They comply with New Zealand equivalents to International Financial Reporting
Standards (“NZ IFRS”), other New Zealand accounting standards and authoritative notices that are applicable to
entities that apply NZ IFRS, as appropriate for-profit orientated entities. The consolidated financial statements also
comply with International Financial Reporting Standards (“IFRS”).
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except for the following items
(refer to individual accounting policies for details):
-
-
-
Financial assets at fair value through other comprehensive income;
Financial liabilities at fair value through profit or loss; and
Derivative assets and liabilities
Functional and presentation currency
The consolidated financial statements are presented in New Zealand dollars ($) which is the Company’s functional
and Group’s presentation currency. All financial information is presented in New Zealand dollars rounded to the
nearest thousands, except where otherwise indicated.
Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with NZ IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts
of assets, liabilities, income and expenses. Actual results may differ from those estimates.
Significant estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Estimates and judgements were made in respect of the value of development expenditure capitalised (refer to Note
4), the likely term of leased premises, which impacts leasehold improvements assets and right of use assets capitalised
(refer to Notes 14 and 20), TELA Bio Incorporated (“TELA Bio”) accrued revenue (refer to Note 12), the value of share-
based payments (refer to Note 22), the impairment of intangible assets (refer to Note 15), and the estimated fair value
of financial liabilities at fair value through profit or loss (refer to Note 11).
36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
22.. SSuummmmaarryy ooff ssiiggnniiffiiccaanntt aaccccoouunnttiinngg ppoolliicciieess ((ccoonnttiinnuueedd))
Use of estimates and judgements (Continued)
As a result of the ongoing COVID-19 pandemic, the Group has experienced reduced demand during the year due to
the overall reduction in economic activity. The pandemic has also impacted a number of financial statement areas, as
outlined below.
- Going concern: The Directors have concluded that the Company is a going concern. Refer below.
-
-
-
Inventory: Despite reduced trading levels, management considers any extra risk caused by COVID-19 as of
reporting date is not material given the average remaining shelf life for inventories on hand being significantly
more than 12 months and a strong recovery in sales activities noted in the second half of the year. Refer to Note
13.
Investments: The Group’s financial assets include listed equities. Management is satisfied that there is no
impairment to the value as of reporting date as the quoted price in the active market has improved post reporting
date. Refer to Note 10.
Intangible assets: The Group measured the recoverable amounts of assets by assessing the recoverable amount
based on value in use calculations for goodwill. No impairment was noted. Refer to Note 15.
To date the Company has undertaken the following steps to reduce the impact of COVID-19 on its operations:
-
-
Reduced expenditure in non-critical business areas.
Received wage subsidies and other business support measures made available by the New Zealand and US
Governments. Refer to Note 3.
Going concern
The Group posted a net loss before tax of $19,102,000 for the year (2020: loss before tax of $6,160,000). The Group
posted total operating cash outflow of $5,007,000 (2020: inflow of $1,660,000).
The Directors have continued to apply the going concern assumption as the basis of the preparation of the
consolidated financial statements.
In reaching their conclusion that the going concern assumption is appropriate, the Directors have considered the
ability to achieve financial performance and cash flow forecasts prepared by management, the ability to repay the
outstanding deferred consideration to Hollister Incorporated (“Hollister”) in accordance with the extended
contractual terms (refer to Note 18), and the sufficiency of the cash on hand as at the reporting date.
In addition, management considers that the impact of COVID-19 pandemic does not cast significant doubt on the
Group’s ability to continue as a going concern. This is in line with the product revenue recovering strongly, in excess
of management’s internal expectations, in the second half of the reporting period. Management is not aware of any
other event or condition that may cast significant doubt on its going concern assumptions.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at the
reporting date and the results of all subsidiaries for the year then ended.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group 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.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated
from the date that control ceases.
Intercompany transactions and balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the
asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group.
Changes in accounting policies
New standards that have been adopted in the annual financial statements for the year ended 31 March 2021,
but have not had a significant effect on the Group are:
- NZ IAS 1 Presentation of Financial Statements and NZ IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors (Amendment – Disclosure Initiative - Definition of Material);
- Going Concern Disclosures (Amendments to FRS-44); and
- Revisions to the Conceptual Framework for Financial Reporting.
37
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
33.. RReevveennuuee aanndd sseeggmmeenntt iinnffoorrmmaattiioonn
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
33.. RReevveennuuee aanndd sseeggmmeenntt iinnffoorrmmaattiioonn ((ccoonnttiinnuueedd))
Sales of goods (USA)
Sales of goods (Rest of the
world)
Royalties (USA)
Project fees (USA)
TToottaall rreevveennuuee
Revenue recognised point in time
Revenue recognised over time
TToottaall rreevveennuuee
Segment information
22002211
$$000000
20,617
958
-
767
22002200
$$000000
21,017
907
2,992
160
2222,,334422
2255,,007766
21,575
767
2222,,334422
24,916
160
2255,,007766
Revenues from external customers are from sales of goods, royalties and project fees as reflected above.
The Group sells its products and services to external customers who are largely located in the United States of
America (the “USA”) as reflected in the sales above. Sales to the global market outside of the USA are growing.
For the purpose of the internal reporting provided to the chief operating decision makers, business activities,
performances and any associated assets and liabilities are reviewed as a consolidated group.
Revenues of approximately $11,811,000 (2020: $13,576,000) are derived from a single external customer, being sales
of products and services to TELA Bio, which is the Group’s USA sales and distribution partner.
The Group held all of its non-current assets in New Zealand with an exception of the right-of-use assets of
approximately $0.2m for the leasehold property in the USA.
Other income
The Group received subsidies and business support measures from the New Zealand and USA governments during
the reporting period totalling $1.3 million (2020: $nil).
The Group is in the business of developing, manufacturing and selling soft tissue repair products. Revenue from
contracts with customers is recognised when performance obligations pursuant to that contract are satisfied by the
Group.
The Group has identified the following main categories of revenue:
Sales of goods
The Group’s revenue primarily consists of the sale of its products. Revenue is recorded when the customer takes
possession of the product. All contracts with customers are standardised and satisfy the criteria of transaction
approval, identification of each party’s rights, payment terms, commercial substance, and probable collection based
on the customer’s ability and intention to pay. Revenue is recognised at a point in time when control over the product
transfers to the customer, which is assessed to be at the time of receipt of goods by the customer.
The Group also sells its products via a distributor model whereby the sales are made direct to a distributor being the
customer of the Group, with the distributor permitted to resell the Aroa products to an end user. The Group has
assessed these arrangements to consider that control passes to the distributor at the point the distributor takes
possession of the products. The Group considers itself to be acting as principal in the sale of goods to distributors
and recognise revenue on a gross basis.
All contracts with distributors are standardised and satisfy the criteria of transaction approval, identification of each
party’s rights, payment terms, commercial substance, and probable collection based on the customer’s ability and
intention to pay. Revenue is recognised at a point in time when control over the product transfers to the distributor
as the customer, which is assessed to be at the time of receipt of goods by the distributor.
Revenue share
The Group's largest customer is TELA Bio who is the Group’s USA sales and distribution partner for abdominal wall
reconstruction and hernia repair and breast reconstruction in North America and Europe. The contract with TELA Bio
entitles the Group to an agreed percentage of TELA Bio’s net sales. This revenue is considered to be variable
consideration (“revenue share”). The consideration is variable since the quantum of TELA Bio’s inventory that is
eventually sold and the price that it is sold at are uncertain.
The consideration from TELA Bio is received from a transfer price for the products shipped to TELA Bio, with the
balance of the consideration received on quarterly true up to the agreed percentage based on TELA Bio’s net sales.
The Group estimates the true up on TELA Bio’s inventory at the reporting date by using the expected value method.
The estimation is based on information that is reasonably available to the Group which incorporates key factors
including sales history, expiry date of inventory held and average selling prices achieved by TELA Bio. The amount of
variable consideration estimated is only recorded by the Group to the extent that it is highly probable that a significant
amount of the cumulative revenue recognised will be received in the future.
Royalties
Royalties received are recognised at a point in time when the operational and revenue milestones are completed
under the royalty agreement. In 2020, $3.0 million revenue related to a one-off licence fee, which did not recur during
the reporting period.
Project fees
Project fees received are recognised over time when the performance obligations are fulfilled pursuant to the project
development agreement. Any project fees received, for which the requirements under the project agreement have
not been completed, are carried as income in advance (liability) until all applicable performance obligations have
been fulfilled.
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
33.. RReevveennuuee aanndd sseeggmmeenntt iinnffoorrmmaattiioonn ((ccoonnttiinnuueedd))
Sales of goods (USA)
Sales of goods (Rest of the
world)
Royalties (USA)
Project fees (USA)
TToottaall rreevveennuuee
Revenue recognised point in time
Revenue recognised over time
TToottaall rreevveennuuee
Segment information
22002211
$$000000
20,617
958
-
767
2222,,334422
21,575
767
2222,,334422
22002200
$$000000
21,017
907
2,992
160
2255,,007766
24,916
160
2255,,007766
Revenues from external customers are from sales of goods, royalties and project fees as reflected above.
The Group sells its products and services to external customers who are largely located in the United States of
America (the “USA”) as reflected in the sales above. Sales to the global market outside of the USA are growing.
For the purpose of the internal reporting provided to the chief operating decision makers, business activities,
performances and any associated assets and liabilities are reviewed as a consolidated group.
Revenues of approximately $11,811,000 (2020: $13,576,000) are derived from a single external customer, being sales
of products and services to TELA Bio, which is the Group’s USA sales and distribution partner.
The Group held all of its non-current assets in New Zealand with an exception of the right-of-use assets of
approximately $0.2m for the leasehold property in the USA.
Other income
The Group received subsidies and business support measures from the New Zealand and USA governments during
the reporting period totalling $1.3 million (2020: $nil).
39
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
44.. OOppeerraattiinngg lloossss bbeeffoorree nneett ffiinnaanncciinngg ccoossttss
Operating loss before net financing costs includes the following:
Fair value adjustments to financial liabilities at FVTPL
11
Transaction costs relating to IPO
Auditor's fees:
Statutory audit
Other assurance engagements:
Half-year review
Research and development review
Raw materials and consumables
Depreciation:
Research and development
Right of use assets
Other
Directors' fees
Insurance
Rental lease costs – low value and short-term leases
Amortisation:
Patents
Customer relationships and reacquired rights
Research and development *
22002211
$$000000
8,013
1,607
128
54
5
22002200
$$000000
1,006
850
84
45
5
2,865
2,959
14,20
24
15
15
451
666
747
389
756
121
54
1,161
5,974
323
438
776
295
356
118
45
1,161
4,719
* Total research & development expenditure is $6,425,000 (2020: $5,042,000). It includes an amount of $271,000
(2020: $101,000) funded by third parties outside of the Group. The balance of $6,154,000 (2020: $4,941,000) has
been recognised in accordance with the Ministerial Direction/New Zealand Gazette, No 146. All research &
development has been expensed in accordance with New Zealand Equivalent to International Accounting Standard
38 – Intangible Assets (‘NZ IAS 38’).
77.. OOtthheerr lloosssseess
77.. OOtthheerr lloosssseess
55.. EEmmppllooyyeeee bbeenneeffiitt eexxppeennsseess
Salaries & wages (including bonuses)
Employer contributions defined contribution Superannuation scheme
inclusive of tax
Share based payments - employee share ownership plan
Share based payments - share options plan
TToottaall eemmppllooyyeeee bbeenneeffiitt eexxppeennsseess
22002211
$$000000
16,166
652
96
1,889
1188,,880033
22002200
$$000000
10,015
218
4
414
1100,,665511
Employee entitlements includes an amount of $3,070,600 (2020: $2,256,820) disclosed as part of research and
development expenditures in Note 4 and includes an amount of $304,846 (2020: $57,264) relating to share-based
payments for shares issued to the Directors as disclosed in Note 22.
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Continued)
For the year ended 31 March 2021
For the year ended 31 March 2021
66.. NNeett ffiinnaannccee iinnccoommee//((eexxppeennsseess))
66.. NNeett ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Finance income and finance expenses have been accrued to reporting date using the effective interest method.
Finance income and finance expenses have been accrued to reporting date using the effective interest method.
NNoottee
NNoottee
20
20
22002211
22002211
$$000000
$$000000
154
115544
154
115544
(23)
(1,478)
(23)
(406)
(1,478)
((11,,990077))
(406)
((11,,990077))
(1,096)
(1,096)
1,742
1,742
(4)
664422
(4)
664422
((11,,111111))
((11,,111111))
22002200
22002200
$$000000
$$000000
3
33
3
33
(112)
(2,729)
(112)
(2,729)
(128)
((22,,996699))
(128)
((22,,996699))
2,288
(2,635)
2,288
(2,635)
(4)
((335511))
(4)
((335511))
((33,,331177))
((33,,331177))
22002211
$$000000
22002211
$$000000
(8,013)
(8,013)
((88,,001133))
((88,,001133))
22002200
22002200
$$000000
$$000000
(1,006)
(1,006)
((11,,000066))
((11,,000066))
FFiinnaannccee iinnccoommee –– aasssseettss aatt aammoorrttiisseedd ccoosstt
Interest received on bank balances
FFiinnaannccee iinnccoommee –– aasssseettss aatt aammoorrttiisseedd ccoosstt
TToottaall ffiinnaannccee iinnccoommee
Interest received on bank balances
TToottaall ffiinnaannccee iinnccoommee
FFiinnaannccee eexxppeennsseess –– lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt
Interest expenses – borrowings
FFiinnaannccee eexxppeennsseess –– lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt
Interest expenses – deferred consideration
Interest expenses – borrowings
Interest expenses – lease liabilities
Interest expenses – deferred consideration
TToottaall ffiinnaannccee eexxppeennsseess
Interest expenses – lease liabilities
TToottaall ffiinnaannccee eexxppeennsseess
OOtthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Foreign currency (losses)/gains
OOtthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Foreign currency gains/(losses) on deferred consideration
Foreign currency (losses)/gains
Finance cost – make good provision
Foreign currency gains/(losses) on deferred consideration
TToottaall ootthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Finance cost – make good provision
TToottaall ootthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
NNeett ffiinnaannccee eexxppeennsseess
NNeett ffiinnaannccee eexxppeennsseess
Interest expenses on deferred consideration relates to the deferred consideration of $1,478,000 (2020: $2,729,000)
owing to Hollister for the purchase of the Wound Care business. Refer to Note 18.
Interest expenses on deferred consideration relates to the deferred consideration of $1,478,000 (2020: $2,729,000)
owing to Hollister for the purchase of the Wound Care business. Refer to Note 18.
Foreign currency gains on deferred consideration of $1,742,000 (2020: losses of $2,635,000) relates to the loan
from Hollister for the purchase of the Wound Care business. Refer to Note 18.
Foreign currency gains on deferred consideration of $1,742,000 (2020: losses of $2,635,000) relates to the loan
from Hollister for the purchase of the Wound Care business. Refer to Note 18.
Fair value adjustment on financial liabilities at FVTPL (refer to
Fair value adjustment on financial liabilities at FVTPL (refer to
Note 11)
TToottaall ootthheerr lloosssseess
Note 11)
TToottaall ootthheerr lloosssseess
88..
88..
IInnccoommee ttaaxxeess
IInnccoommee ttaaxxeess
income.
income.
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except
to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except
to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
years. Current tax includes any tax liability arising from the declaration of dividends.
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years. Current tax includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
•
combination and that affects neither accounting nor taxable profit or loss;
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss;
temporary differences arising on the initial recognition of goodwill; and
temporary differences arising on the initial recognition of goodwill; and
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is
probable that they will not reverse in the foreseeable future.
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
probable that they will not reverse in the foreseeable future.
using tax rates enacted or substantively enacted at the reporting date.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the reporting date.
•
•
•
•
•
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Continued)
For the year ended 31 March 2021
For the year ended 31 March 2021
66.. NNeett ffiinnaannccee iinnccoommee//((eexxppeennsseess))
66.. NNeett ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Finance income and finance expenses have been accrued to reporting date using the effective interest method.
Finance income and finance expenses have been accrued to reporting date using the effective interest method.
22002200
22002211
NNoottee
NNoottee
FFiinnaannccee iinnccoommee –– aasssseettss aatt aammoorrttiisseedd ccoosstt
Interest received on bank balances
FFiinnaannccee iinnccoommee –– aasssseettss aatt aammoorrttiisseedd ccoosstt
TToottaall ffiinnaannccee iinnccoommee
Interest received on bank balances
TToottaall ffiinnaannccee iinnccoommee
FFiinnaannccee eexxppeennsseess –– lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt
Interest expenses – borrowings
FFiinnaannccee eexxppeennsseess –– lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt
Interest expenses – deferred consideration
Interest expenses – borrowings
Interest expenses – lease liabilities
Interest expenses – deferred consideration
TToottaall ffiinnaannccee eexxppeennsseess
Interest expenses – lease liabilities
TToottaall ffiinnaannccee eexxppeennsseess
OOtthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Foreign currency (losses)/gains
OOtthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Foreign currency gains/(losses) on deferred consideration
Foreign currency (losses)/gains
Finance cost – make good provision
Foreign currency gains/(losses) on deferred consideration
TToottaall ootthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
Finance cost – make good provision
TToottaall ootthheerr ffiinnaannccee iinnccoommee//((eexxppeennsseess))
NNeett ffiinnaannccee eexxppeennsseess
NNeett ffiinnaannccee eexxppeennsseess
20
20
22002211
$$000000
$$000000
154
115544
154
115544
(23)
(1,478)
(23)
(406)
(1,478)
((11,,990077))
(406)
((11,,990077))
(1,096)
1,742
(1,096)
(4)
1,742
664422
(4)
664422
((11,,111111))
((11,,111111))
22002200
$$000000
$$000000
3
33
3
33
(112)
(2,729)
(112)
(128)
(2,729)
((22,,996699))
(128)
((22,,996699))
2,288
(2,635)
2,288
(4)
(2,635)
((335511))
(4)
((335511))
((33,,331177))
((33,,331177))
Interest expenses on deferred consideration relates to the deferred consideration of $1,478,000 (2020: $2,729,000)
owing to Hollister for the purchase of the Wound Care business. Refer to Note 18.
Interest expenses on deferred consideration relates to the deferred consideration of $1,478,000 (2020: $2,729,000)
owing to Hollister for the purchase of the Wound Care business. Refer to Note 18.
Foreign currency gains on deferred consideration of $1,742,000 (2020: losses of $2,635,000) relates to the loan
from Hollister for the purchase of the Wound Care business. Refer to Note 18.
Foreign currency gains on deferred consideration of $1,742,000 (2020: losses of $2,635,000) relates to the loan
from Hollister for the purchase of the Wound Care business. Refer to Note 18.
77.. OOtthheerr lloosssseess
77.. OOtthheerr lloosssseess
Fair value adjustment on financial liabilities at FVTPL (refer to
Note 11)
Fair value adjustment on financial liabilities at FVTPL (refer to
TToottaall ootthheerr lloosssseess
Note 11)
TToottaall ootthheerr lloosssseess
22002211
22002211
$$000000
$$000000
(8,013)
(8,013)
((88,,001133))
((88,,001133))
22002200
22002200
$$000000
$$000000
(1,006)
(1,006)
((11,,000066))
((11,,000066))
88..
88..
IInnccoommee ttaaxxeess
IInnccoommee ttaaxxeess
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except
to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except
income.
to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive
income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
years. Current tax includes any tax liability arising from the declaration of dividends.
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years. Current tax includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss;
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss;
•
temporary differences arising on the initial recognition of goodwill; and
•
temporary differences arising on the initial recognition of goodwill; and
•
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is
probable that they will not reverse in the foreseeable future.
•
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is
probable that they will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the reporting date.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse,
using tax rates enacted or substantively enacted at the reporting date.
41
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
88..
IInnccoommee ttaaxxeess ((ccoonnttiinnuueedd))
In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax
positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities
are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and
prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about
future events. New information may become available that causes the Group to change its judgement regarding the
adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a
determination is made.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different
tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities
will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realised, such reductions are reversed when the probability of future taxable profits improves.
Income tax recognised in profit or loss and other comprehensive income
Reconciliation of income tax expense
Accounting loss before income tax
Income Tax @ 28%
Impact of tax rates in overseas jurisdictions
Expenses not deductible for tax purposes
Foreign tax credits forfeited
Income not subject to tax
Recognition/derecognition of previously unrecognised deferred tax on
temporary differences and tax losses
Tax losses not recognised in current year
IInnccoommee TTaaxx ((CCrreeddiitt))
Major components of tax expense/(income)
CCuurrrreenntt ttaaxx eexxppeennssee//((ccrreeddiitt))
Current period
R&D tax credit
TToottaall ccuurrrreenntt ttaaxx bbeenneeffiitt
Deferred tax (income)
TToottaall ttaaxx eexxppeennssee//((iinnccoommee))
22002211
$$000000
(19,102)
(5,349)
110
3,225
-
-
2,121
-
110077
22002211
$$000000
107
-
--
-
110077
22002200
$$000000
(6,160)
(1,725)
(13)
1,159
150
(700)
74
853
((220022))
22002200
$$000000
274
(476)
((220022))
-
((220022))
As at 31 March 2021, the Company had tax losses of $14,587,081 (2020: $12,412,226). Utilisation of these tax losses is
dependent upon the Group meeting the continuity of ownership provisions of the Income Tax Act 2007 and carrying forward
and offsetting the net losses against net taxable income earned in subsequent years by the Group.
The Group has elected to defer expenditure relating to research and development allowed under section DB34 of the Income
Tax Act 2007. As at 31 March 2021, the Group had $12,100,040 (2020: $7,202,587) of expenditure available to offset against
subsequent years income subject to section EJ23 of the Income Tax Act 2007.
Deferred tax assets have been recognised to the extent they offset deferred tax liabilities. No additional deferred tax has
been recognised on tax losses or deferred research and development expenditure in 2021 on the basis that large tax profits
are not foreseeable in the year ending 31 March 2022.
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
88..
IInnccoommee ttaaxxeess ((ccoonnttiinnuueedd))
Deferred tax assets/(liabilities) recognised:
Accrued revenue
Deferred R&D expenditure
Intangible assets
Other
Provision
Unused tax losses
TToottaall ddeeffeerrrreedd ttaaxx aasssseett//((lliiaabbiilliittyy)) rreeccooggnniisseedd
Movement in deferred tax assets/(liabilities) recognised
Opening balance
Arising on acquisitions
Credited to profit or loss for previously unrecognised temporary difference
and tax losses
TToottaall ddeeffeerrrreedd ttaaxx aasssseett//((lliiaabbiilliittyy)) uunnrreeccooggnniisseedd ((ttaaxx eeffffeecctteedd))
Deferred tax assets/(liabilities) unrecognised (tax effected)
Temporary differences
Deferred R&D expenditure
Unused tax losses
TToottaall ddeeffeerrrreedd ttaaxx aasssseett//((lliiaabbiilliittyy)) uunnrreeccooggnniisseedd ((ttaaxx eeffffeecctteedd))
99.. CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss && tteerrmm ddeeppoossiittss
22002211
$$000000
(872)
2,870
(3,319)
856
465
-
-
22002211
$$000000
-
-
-
-
22002211
$$000000
531
519
4,084
55,,113344
22002200
$$000000
(458)
2,017
(3,644)
(462)
277
2,270
-
22002200
$$000000
-
-
-
-
22002200
$$000000
384
-
1,206
11,,559900
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions and other short-term
deposits with maturities of three months or less and bank overdrafts.
Bank balances
Total cash and cash equivalents
22002211
$$000000
15,381
1155,,338811
22002200
$$000000
3,850
33,,885500
Prior to 1 May 2020, the cash balances included an amount held within a Deposit Control Account where the Group
is permitted to withdraw 70% of the value of the deposits to such account, leaving 30% of the deposit value to serve
as security for the payment toward deferred consideration.
On 1 May 2020, the Group renegotiated the terms of its existing borrowing with Hollister. As a result, the 30% deposit
value is no longer required to be escrowed as a security to Hollister. Refer to Note 18.
During the year, the Group entered into short-term deposit arrangements with the Bank of New Zealand and ASB
Bank for $10 million each at the average rate of 1.09% per annum. These deposits have a maturity of 6 months from
February 2021.
Term deposits
Total term deposits
22002211
$$000000
20,000
2200,,000000
22002200
$$000000
-
--
43
Annual Report 2021 | AROA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1100.. FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
The Group classifies the following financial assets at fair value through other comprehensive income (“FVTOCI”):
-
Equity investments for which the Group has elected to recognise fair value gains or losses through other
comprehensive income.
Financial assets measured at FVTOCI include the following:
US listed equity securities
TToottaall ffiinnaanncciiaall aasssseettss aatt FFVVTTOOCCII
22002211
$$000000
1,584
11,,558844
22002200
$$000000
969
996699
The USA listed equity securities comprise of the Group’s investment in TELA Bio. In November 2019, TELA Bio listed
on the NASDAQ. The Group held 74,316 shares at a value of US$14.90 per share as at the reporting date (2020:
US$7.82).
The fair value of the listed equity securities is based on published market price (level 1 in the fair value hierarchy)
and is revalued at reporting date.
1111.. FFiinnaanncciiaall lliiaabbiilliittiieess aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
The Group issued Series C (3) Preference shares during the reporting period and received $19,804,000 as
consideration for the shares issued. Whilst these Preference shares can only convert into share capital, the terms of
the offer include multiple embedded derivatives (variable number of shares to be issued) and as a result, these shares
do not meet the definition of equity per NZ IAS 32. Management elected that the entire instrument was designated
as fair value through profit or loss (“FVTPL”), through the designation exemption as allowed in NZ IFRS 9. With the
exception of conversion rights, all other rights attached to these shares are consistent with Series C Preference shares
(refer to Note 21).
At initial recognition, the instrument was measured at transaction price, represented by the fair value of consideration
given or received in exchange for the financial instrument. Its transaction costs were immediately recognised in profit
or loss as the instrument is carried at FVTPL. The fair value is determined in accordance with NZ IFRS 13 Fair Value
Measurement.
The Group does not recognise a gain or loss on initial recognition of the financial liabilities because the fair value is
neither evidenced by a quoted price in an active market for an identical liability (i.e. a level 1 input) nor based on a
valuation technique that uses only data from observable markets. The difference between the fair value at initial
recognition and the transaction price is recognised in profit or loss on a straight-line basis over the estimated life of
the liability, with the aggregate difference yet to be recognised in profit or loss being held off the consolidated
statement of financial position.
The change between the initial fair value and fair value at reporting date is recognised in profit or loss (refer to Note
7).
When valuing the instrument, management exercised judgement to estimate the probabilities of different scenarios
allowed for in the terms of the offer to determine the period over which the fair value adjustments would be
recognised in profit or loss on a straight-line basis.
OOppeenniinngg ffiinnaanncciiaall lliiaabbiilliittiieess aatt FFVVTTPPLL aatt 11 AApprriill 22002200
Transaction price
Transaction price - Series C(3)
Transaction costs - Series C(3)
Fair value change during the period
Reclassification to equity
CClloossiinngg ffiinnaanncciiaall lliiaabbiilliittiieess aatt FFVVTTPPLL aatt 3311 MMaarrcchh 22002211
NNootteess
22002211
$$000000
66,,882277
-
19,804
(811)
8,013
21
(33,833)
--
22002200
$$000000
--
5,821
-
-
1,006
-
66,,882277
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1100.. FFiinnaanncciiaall aasssseettss aatt ffaaiirr vvaalluuee tthhrroouugghh ootthheerr ccoommpprreehheennssiivvee iinnccoommee
1122.. TTrraaddee aanndd ootthheerr rreecceeiivvaabblleess
The Group classifies the following financial assets at fair value through other comprehensive income (“FVTOCI”):
-
Equity investments for which the Group has elected to recognise fair value gains or losses through other
comprehensive income.
Financial assets measured at FVTOCI include the following:
US listed equity securities
TToottaall ffiinnaanncciiaall aasssseettss aatt FFVVTTOOCCII
US$7.82).
and is revalued at reporting date.
The USA listed equity securities comprise of the Group’s investment in TELA Bio. In November 2019, TELA Bio listed
on the NASDAQ. The Group held 74,316 shares at a value of US$14.90 per share as at the reporting date (2020:
The fair value of the listed equity securities is based on published market price (level 1 in the fair value hierarchy)
22002211
$$000000
1,584
11,,558844
22002200
$$000000
969
996699
1111.. FFiinnaanncciiaall lliiaabbiilliittiieess aatt ffaaiirr vvaalluuee tthhrroouugghh pprrooffiitt oorr lloossss
The Group issued Series C (3) Preference shares during the reporting period and received $19,804,000 as
consideration for the shares issued. Whilst these Preference shares can only convert into share capital, the terms of
the offer include multiple embedded derivatives (variable number of shares to be issued) and as a result, these shares
do not meet the definition of equity per NZ IAS 32. Management elected that the entire instrument was designated
as fair value through profit or loss (“FVTPL”), through the designation exemption as allowed in NZ IFRS 9. With the
exception of conversion rights, all other rights attached to these shares are consistent with Series C Preference shares
(refer to Note 21).
Measurement.
At initial recognition, the instrument was measured at transaction price, represented by the fair value of consideration
given or received in exchange for the financial instrument. Its transaction costs were immediately recognised in profit
or loss as the instrument is carried at FVTPL. The fair value is determined in accordance with NZ IFRS 13 Fair Value
The Group does not recognise a gain or loss on initial recognition of the financial liabilities because the fair value is
neither evidenced by a quoted price in an active market for an identical liability (i.e. a level 1 input) nor based on a
valuation technique that uses only data from observable markets. The difference between the fair value at initial
recognition and the transaction price is recognised in profit or loss on a straight-line basis over the estimated life of
the liability, with the aggregate difference yet to be recognised in profit or loss being held off the consolidated
statement of financial position.
7).
The change between the initial fair value and fair value at reporting date is recognised in profit or loss (refer to Note
When valuing the instrument, management exercised judgement to estimate the probabilities of different scenarios
allowed for in the terms of the offer to determine the period over which the fair value adjustments would be
recognised in profit or loss on a straight-line basis.
OOppeenniinngg ffiinnaanncciiaall lliiaabbiilliittiieess aatt FFVVTTPPLL aatt 11 AApprriill 22002200
Transaction price
Transaction price - Series C(3)
Transaction costs - Series C(3)
Fair value change during the period
Reclassification to equity
NNootteess
22002211
$$000000
66,,882277
-
19,804
(811)
8,013
22002200
$$000000
5,821
1,006
--
-
-
-
21
(33,833)
CClloossiinngg ffiinnaanncciiaall lliiaabbiilliittiieess aatt FFVVTTPPLL aatt 3311 MMaarrcchh 22002211
--
66,,882277
Trade and other receivables are recognised initially at fair value plus directly attributable transaction costs and
subsequently measured at amortised cost using the effective interest method less provision for impairment.
The Group applies the NZ IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected
credit loss provision for trade receivables. To measure expected credit losses on a collective basis, trade receivables
are grouped based on similar credit risk and aging. The expected loss rates are based on the Group’s historical credit
losses experienced over the three-year period prior to the period end. The historical loss rates are then adjusted for
current and forward-looking information on macroeconomic factors affecting the Group’s customers.
Trade receivables
Less provision for impairment of trade receivables
NNeett ttrraaddee rreecceeiivvaabblleess
Prepayments
Other receivables
Other receivables – Revenue share
Other receivables – Grant accrual
TToottaall ccuurrrreenntt ttrraaddee aanndd ootthheerr rreecceeiivvaabblleess
Prepayments
TToottaall nnoonn--ccuurrrreenntt pprreeppaayymmeennttss
22002211
$$000000
2,790
(10)
22,,778800
918
573
3,116
719
88,,110066
22002211
$$000000
171
117711
22002200
$$000000
4,443
(20)
44,,442233
576
49
2,090
378
77,,551166
22002200
$$000000
193
119933
Trade receivables amounting to $2,780,000 (2020: $4,423,000) are shown net of impairment losses. Provisions have
been made appropriately after considering the impact of COVID-19. Trade receivables are interest free. Trade
receivables of a short-term duration are not discounted. Other receivables include Callaghan Innovation grant
accrual, accrued revenue share from TELA
Bio which is based on the historical performance and trends. The Group has a high probability of receiving this
revenue share.
The non-current portion of prepayment relates to the Group’s contract with Watercare for its access to water and
associated investments made in its premises. The prepayment is amortised over the same period that the premises
are leased by the Group.
(i)
Impaired receivables
As at 31 March 2021, current trade receivables with a nominal value of $10,000 (2020: $19,568) were impaired and
provided for.
(ii) Past due but not impaired receivables
As at 31 March 2021, trade receivables of $135,000 (2020: $1,307,420) were past due but not impaired.
The ageing analysis of trade receivables is as follows:
Current
1 - 30 days overdue
30 - 60 days overdue
60 - 90 days overdue
90+ days overdue
TToottaall ttrraaddee rreecceeiivvaabblleess
22002211
$$000000
2,645
88
49
2
6
22002200
$$000000
3,116
1,249
52
6
20
22,,779900
44,,444433
45
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1133..
IInnvveennttoorriieess
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the
weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured
inventories and work in progress, cost includes an appropriate share of production overheads based on normal
operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and costs to sell. An inventory provision is created to reflect instances where the estimated selling price
is lower than costs.
Raw materials
Work in progress
Finished goods
Provision for obsolescence
TToottaall iinnvveennttoorriieess
22002211
$$000000
539
1,436
1,913
(280)
33,,660088
22002200
$$000000
576
1,433
2,167
(171)
44,,000055
As at 31 March 2021, inventories of $279,832 (2020: $170,632) value were impaired and provided for.
1144.. PPrrooppeerrttyy,, ppllaanntt && eeqquuiippmmeenntt
(i) Recognition and measurement
Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that
equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between
the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Group.
(iii) Depreciation
For plant and equipment, depreciation is based on the cost of an asset less its residual value. Where significant
components of individual assets that have a useful life that is different from the remainder of those assets, those
components are depreciated separately.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each
component of an item of property, plant and equipment. Assets under construction are not subject to
depreciation.
The useful life estimate for the current year of significant items of property, plant and equipment are as follows:
10 years
Leasehold improvements
4 - 11 years
Plant & equipment
Fixtures & fittings
3 - 10 years
Computer equipment & software 3 - 4 years
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1144.. PPrrooppeerrttyy,, ppllaanntt && eeqquuiippmmeenntt ((ccoonnttiinnuueedd))
Depreciation methods, rates and residual values are reviewed at reporting date and adjusted if appropriate.
Certain plant and equipment were pledged as collateral to secure a loan facility with the Bank of New Zealand. The
facility had a limit of $1,326,121 of which $nil was drawn as of 31 March 2021 (2020: $1,718,982). Refer Note 18.
LLeeaassee--hhoolldd
IImmpprroovvee--
mmeennttss
CCaappiittaall WWoorrkk
IInn PPrrooggrreessss
PPllaanntt aanndd
EEqquuiippmmeenntt
FFiixxttuurree &&
FFiittttiinngg
CCoommppuutteerr
EEqquuiippmmeenntt &&
SSooffttwwaarree
$$000000
$$000000
$$000000
$$000000
$$000000
1,472
114
-
-
11,,558866
(945)
(54)
-
((999999))
527
558877
807
458
(808)
-
445577
7,506
249
808
(4)
88,,555599
-
-
-
--
(2,738)
(825)
4
((33,,555599))
807
445577
4,768
55,,000000
436
149
-
-
558855
(161)
(46)
-
((220077))
275
337788
698
270
-
-
996688
(516)
(167)
-
((668833))
182
228855
TToottaall
$$000000
10,919
1,240
-
(4)
1122,,115555
(4,360)
(1,092)
4
((55,,444488))
6,559
66,,770077
CCoosstt
Balance 1 April 2020
Additions
Transfers in/ (out)
Disposals
BBaallaannccee 3311 MMaarrcchh 22002211
AAccccuummuullaatteedd
DDeepprreecciiaattiioonn
Balance 1 April 2020
Depreciation
Disposals
BBaallaannccee 3311 MMaarrcchh 22002211
NNeett BBooookk VVaalluuee
Balance 1 April 2020
BBaallaannccee 3311 MMaarrcchh 22002211
LLeeaassee--hhoolldd
IImmpprroovvee--
mmeennttss
CCaappiittaall WWoorrkk
IInn PPrrooggrreessss
PPllaanntt aanndd
EEqquuiippmmeenntt
FFiixxttuurree &&
FFiittttiinngg
CCoommppuutteerr
EEqquuiippmmeenntt &&
SSooffttwwaarree
TToottaall
$$000000
$$000000
$$000000
$$000000
$$000000
$$000000
1,590
28
(146)
--
11,,447722
(821)
(124)
((994455))
667
897
(757)
--
880077
6,283
504
757
(38)
77,,550066
-
-
--
(1,985)
(753)
((22,,773388))
769
552277
667
880077
4,298
44,,776688
229
207
--
--
443366
(75)
(86)
((116611))
154
227755
569
129
--
--
669988
9,338
1,765
(146)
(38)
1100,,991199
(370)
(146)
(3,251)
(1,109)
((551166))
((44,,336600))
199
118822
6,087
66,,555599
CCoosstt
Balance 1 April 2019
Additions
Transfer in/(out)
Disposals
BBaallaannccee 3311 MMaarrcchh
22002200
AAccccuummuullaatteedd
DDeepprreecciiaattiioonn
Balance 1 April 2019
Depreciation
BBaallaannccee 3311 MMaarrcchh
22002200
NNeett BBooookk VVaalluuee
Balance 1 April 2019
BBaallaannccee 3311 MMaarrcchh
22002200
47
Annual Report 2021 | AROA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1155.. IInnttaannggiibbllee aasssseettss
Patents that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation
and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or
loss as incurred.
Trademarks have finite useful lives and are measured at cost less accumulated amortisation and accumulated
impairment losses.
Patent and trademark costs are amortised on a straight-line basis over the useful life.
Goodwill, customer relationships and reacquired rights are attributable to the purchase of the wound care business
entered into between the Group and Hollister Incorporated. Goodwill is not amortised.
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually
at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset
exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written
down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out
on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash
generating units (“CGUs”). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected
to benefit from a business combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in
other comprehensive income. An impairment loss recognised for goodwill is not reversed.
Customer relationships and reacquired rights are amortised on a straight-line basis in profit or loss over their
estimated useful lives, from the date that they are available for use.
The estimated useful lives for the current period are as follows:
Patents and trademarks
8 - 17 years
Customer relationships
Reacquired rights
9 years
18 years
Amortisation methods, rates and residual values are reviewed at reporting date and adjusted if appropriate.
Currently no development expenditure is capitalised (refer to Note 4)
PPaatteenntt &&
TTrraaddeemmaarrkk
$$000000
CCuussttoommeerr
RReellaattiioonnsshhiippss
$$000000
RReeaaccqquuiirreedd
rriigghhttss
$$000000
5,563
-
55,,556633
9,772
-
99,,777722
GGooooddwwiillll
$$000000
5,538
-
55,,553388
TToottaall
$$000000
21,576
235
2211,,881111
CCoosstt
Balance 1 April 2020
Additions
BBaallaannccee 3311 MMaarrcchh
22002211
AAccccuummuullaatteedd
AAmmoorrttiissaattiioonn
Balance 1 April 2020
Amortisation
BBaallaannccee 3311 MMaarrcchh
22002211
NNeett BBooookk VVaalluuee
Balance 1 April 2020
BBaallaannccee 3311 MMaarrcchh
22002211
703
235
993388
(197)
(54)
((225511))
506
668877
48
(1,236)
(618)
((11,,885544))
(1,086)
(543)
((11,,662299))
-
-
--
(2,519)
(1,215)
((33,,773344))
4,327
33,,770099
8,686
88,,114433
5,538
55,,553388
19,057
1188,,007777
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1155.. IInnttaannggiibbllee aasssseettss ((ccoonnttiinnuueedd))
CCoosstt
Balance 1 April 2019
Additions
BBaallaannccee 3311 MMaarrcchh
22002200
AAccccuummuullaatteedd
AAmmoorrttiissaattiioonn
Balance 1 April 2019
Amortisation
BBaallaannccee 3311 MMaarrcchh
22002200
NNeett BBooookk VVaalluuee
Balance 1 April 2019
BBaallaannccee 3311 MMaarrcchh
22002200
524
179
770033
(152)
(45)
((119977))
372
550066
PPaatteenntt &&
TTrraaddeemmaarrkk
$$000000
CCuussttoommeerr
rreellaattiioonnsshhiippss
$$000000
RReeaaccqquuiirreedd
rriigghhttss
$$000000
5,563
-
55,,556633
9,772
-
99,,777722
GGooooddwwiillll
$$000000
5,538
-
55,,553388
TToottaall
$$000000
21,397
179
2211,,557766
(618)
(618)
(543)
(543)
((11,,223366))
((11,,008866))
-
-
--
(1,313)
(1,206)
((22,,551199))
4,945
44,,332277
9,229
88,,668866
5,538
55,,553388
20,084
1199,,005577
On 31 March 2021, the Group tested whether goodwill has suffered any impairment. For the purpose of impairment
testing, goodwill is allocated to the Group’s Wound Care business, at which goodwill is monitored for internal
management purposes.
The recoverable amount is determined based on value in use calculations using the method of estimating future cash
flows and determining a discount rate in order to calculate the present value of the cash flows (2020: the recoverable
amount was determined by using fair value less cost of disposal).
A discounted cash flow (“DCF”) model has been based on five-year forecast cash flow projections. The budget for
the year ending 31 March 2022 was the basis for the first year’s projections and projections for subsequent years have
been based on the Group’s long-term outlook. Other key assumptions are as follows:
Discount rate post tax
Terminal growth rate
Revenue growth rate p.a.
Gross margin %
22002211
10.0%
2.5%
25%-64%
72%-82%
No impairment was identified for the Wound Care business as a result of this review, nor under any reasonable
possible change, in any of the key assumptions described above.
The estimated recoverable amount of the Wound Care business exceeds its carrying value of $17.4 million. The
projected EBITDA for the Wound Care business is forecast to become positive and increase significantly over the
forecast period.
49
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1166.. TTrraaddee aanndd ootthheerr ppaayyaabblleess
1188.. IInntteerreesstt bbeeaarriinngg llooaannss aanndd bboorrrroowwiinnggss ((ccoonnttiinnuueedd))
Trade and other payables are initially recognised at fair value plus directly attributable transaction costs and
subsequently at amortised cost. Trade and other payables represent liabilities for goods and services provided to
the Group prior to the end of financial year which are unpaid.
Bank Loan
Trade payables
Accrued expenses
Other payables
TToottaall ttrraaddee aanndd ootthheerr ppaayyaabblleess
22002211
$$000000
740
1,977
27
22,,774444
22002200
$$000000
1,201
3,079
30
44,,331100
Trade payables generally have terms of 30 days and are interest free. Trade payables of a short-term duration are not
discounted. The accrued expenses include chargeback and rebates accrual and distribution charges.
Carrying amounts of interest-bearing liabilities are equivalent to their fair values, as they are at floating rates.
1177.. EEmmppllooyyeeee bbeenneeffiittss
(i) Short term employee benefits
Liabilities for wages and salaries, including non-monetary benefits and accumulating annual leave that is expected
to be settled wholly within 12 months after the end of the period in which the employees render the related service
are recognised in respect of employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled.
The obligations are presented as other payables and accruals in the statement of financial position if the entity
does not have an unconditional right to defer settlement for at least 12 months after the reporting date, regardless
of when the actual settlement is expected to occur.
(ii) Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided.
1188.. IInntteerreesstt bbeeaarriinngg llooaannss aanndd bboorrrroowwiinnggss
Interest bearing liabilities are initially recognised at fair value, net of transaction costs incurred. Interest bearing
liabilities are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in profit and loss over the period of the borrowings using the
effective interest method.
Interest bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting date.
Interest-bearing loans and borrowings
Deferred consideration
TToottaall iinntteerreesstt bbeeaarriinngg lliiaabbiilliittiieess –– ccuurrrreenntt
Interest-bearing loans and borrowings
Deferred consideration
TToottaall iinntteerreesstt bbeeaarriinngg lliiaabbiilliittiieess –– nnoonn--ccuurrrreenntt
22002211
$$000000
-
9,952
99,,995522
-
-
--
22002200
$$000000
841
21,682
2222,,552233
1,119
-
11,,111199
At the reporting date, the weighted average interest rate of interest-bearing loan is 6.50% p.a. (2020: 6.06% p.a.).
The balance of the deferred consideration incurs interest compounding annually from 1 July 2020 at a rate equal to
the Wall Street Journal prime rate plus 3%.
On 1 May 2020, the Group renegotiated the terms of its existing borrowing with Hollister. As a result, the final
repayment date has been moved to 31 March 2022 and the Group repaid approximately $10 million being 50% of the
balance outstanding as at 30 April 2020 including the accrued interest. Additionally, the Group was released from its
obligation to maintain 30% of its Wound Care customer receipts on escrow, as security to Hollister.
50
Total interest-bearing loans and borrowings included secured liabilities of $1,718,982 in 2020, which is no longer
utilised as of 31 March 2021. The bank facility is secured by all present and after acquired property of the Group.
As at 31 March 2021, the Group’s Credit Plus facility had a limit of $1,326,121 (2020: $1,761,468), of which $1,326,121
(2020: $42,486) was unused and $nil (2020: $1,718,982) was used, secured by assets owned by the Group. Refer
The Group cancelled its overdraft facility of $2,000,000 and its committed cash advance facility of $4,000,000
during the reporting period, as these were no longer required.
i) Unused lines of credit
to Note 14.
ii) Fair value
1199.. RRiigghhtt ooff uussee aasssseettss
As at 1 April 2020
Additions
Depreciation
Modification adjustment
AAss aatt 3311 MMaarrcchh 22002211
Balance 1 April 2019
Addition
Modification adjustment*
Depreciation
Rent incentives
Make good provision (refer to Note 14)
BBaallaannccee 3311 MMaarrcchh 22002200
2200.. LLeeaassee lliiaabbiilliittiieess
As at 1 April 2020
Additions
Modification Adjustment
Interest expenses
Lease payments
AAss aatt 3311 MMaarrcchh 22002211
Current
Non-current
TToottaall
PPrrooppeerrttiieess
EEqquuiippmmeenntt
PPrrooppeerrttiieess
EEqquuiippmmeenntt
PPrrooppeerrttiieess
EEqquuiippmmeenntt
$$000000
2,154
4,431
(721)
87
55,,995511
$$000000
2,411
285
(244)
(409)
(35)
146
22,,115544
$$000000
2,063
4,431
87
409
(708)
66,,228822
566
5,716
66,,228822
$$
000000
21
(21)
-
-
--
-
1
-
-
-
-
1
--
-
-
--
$$000000
49
(29)
2211
$$000000
22
(23)
TToottaall
$$000000
2,175
4,431
(742)
87
55,,995511
TToottaall
$$000000
2,460
285
(243)
(438)
(35)
146
22,,117755
TToottaall
$$000000
2,085
4,431
87
410
(731)
66,,228822
566
5,716
66,,228822
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1166.. TTrraaddee aanndd ootthheerr ppaayyaabblleess
Trade and other payables are initially recognised at fair value plus directly attributable transaction costs and
subsequently at amortised cost. Trade and other payables represent liabilities for goods and services provided to
the Group prior to the end of financial year which are unpaid.
22002211
$$000000
740
1,977
27
22,,774444
22002200
$$000000
1,201
3,079
30
44,,331100
Trade payables
Accrued expenses
Other payables
TToottaall ttrraaddee aanndd ootthheerr ppaayyaabblleess
1177.. EEmmppllooyyeeee bbeenneeffiittss
(i) Short term employee benefits
Trade payables generally have terms of 30 days and are interest free. Trade payables of a short-term duration are not
discounted. The accrued expenses include chargeback and rebates accrual and distribution charges.
Liabilities for wages and salaries, including non-monetary benefits and accumulating annual leave that is expected
to be settled wholly within 12 months after the end of the period in which the employees render the related service
are recognised in respect of employees’ services up to the end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are settled.
The obligations are presented as other payables and accruals in the statement of financial position if the entity
does not have an unconditional right to defer settlement for at least 12 months after the reporting date, regardless
of when the actual settlement is expected to occur.
(ii) Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided.
1188.. IInntteerreesstt bbeeaarriinngg llooaannss aanndd bboorrrroowwiinnggss
Interest bearing liabilities are initially recognised at fair value, net of transaction costs incurred. Interest bearing
liabilities are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in profit and loss over the period of the borrowings using the
effective interest method.
Interest bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting date.
Interest-bearing loans and borrowings
Deferred consideration
TToottaall iinntteerreesstt bbeeaarriinngg lliiaabbiilliittiieess –– ccuurrrreenntt
Interest-bearing loans and borrowings
Deferred consideration
TToottaall iinntteerreesstt bbeeaarriinngg lliiaabbiilliittiieess –– nnoonn--ccuurrrreenntt
22002211
$$000000
-
9,952
99,,995522
22002200
$$000000
841
21,682
2222,,552233
-
-
--
-
1,119
11,,111199
At the reporting date, the weighted average interest rate of interest-bearing loan is 6.50% p.a. (2020: 6.06% p.a.).
The balance of the deferred consideration incurs interest compounding annually from 1 July 2020 at a rate equal to
the Wall Street Journal prime rate plus 3%.
On 1 May 2020, the Group renegotiated the terms of its existing borrowing with Hollister. As a result, the final
repayment date has been moved to 31 March 2022 and the Group repaid approximately $10 million being 50% of the
balance outstanding as at 30 April 2020 including the accrued interest. Additionally, the Group was released from its
obligation to maintain 30% of its Wound Care customer receipts on escrow, as security to Hollister.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
1188.. IInntteerreesstt bbeeaarriinngg llooaannss aanndd bboorrrroowwiinnggss ((ccoonnttiinnuueedd))
Bank Loan
Total interest-bearing loans and borrowings included secured liabilities of $1,718,982 in 2020, which is no longer
utilised as of 31 March 2021. The bank facility is secured by all present and after acquired property of the Group.
i) Unused lines of credit
As at 31 March 2021, the Group’s Credit Plus facility had a limit of $1,326,121 (2020: $1,761,468), of which $1,326,121
(2020: $42,486) was unused and $nil (2020: $1,718,982) was used, secured by assets owned by the Group. Refer
to Note 14.
The Group cancelled its overdraft facility of $2,000,000 and its committed cash advance facility of $4,000,000
during the reporting period, as these were no longer required.
ii) Fair value
Carrying amounts of interest-bearing liabilities are equivalent to their fair values, as they are at floating rates.
1199.. RRiigghhtt ooff uussee aasssseettss
As at 1 April 2020
Additions
Depreciation
Modification adjustment
AAss aatt 3311 MMaarrcchh 22002211
Balance 1 April 2019
Addition
Modification adjustment*
Depreciation
Rent incentives
Make good provision (refer to Note 14)
BBaallaannccee 3311 MMaarrcchh 22002200
2200.. LLeeaassee lliiaabbiilliittiieess
As at 1 April 2020
Additions
Modification Adjustment
Interest expenses
Lease payments
AAss aatt 3311 MMaarrcchh 22002211
Current
Non-current
TToottaall
PPrrooppeerrttiieess
$$000000
EEqquuiippmmeenntt
$$
000000
2,154
4,431
(721)
87
55,,995511
21
-
(21)
-
--
PPrrooppeerrttiieess
$$000000
EEqquuiippmmeenntt
$$000000
2,411
285
(244)
(409)
(35)
146
22,,115544
49
-
1
(29)
-
-
2211
PPrrooppeerrttiieess
$$000000
EEqquuiippmmeenntt
$$000000
2,063
4,431
87
409
(708)
66,,228822
566
5,716
66,,228822
22
-
-
1
(23)
--
-
-
--
TToottaall
$$000000
2,175
4,431
(742)
87
55,,995511
TToottaall
$$000000
2,460
285
(243)
(438)
(35)
146
22,,117755
TToottaall
$$000000
2,085
4,431
87
410
(731)
66,,228822
566
5,716
66,,228822
51
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2200.. LLeeaassee lliiaabbiilliittiieess ((ccoonnttiinnuueedd))
As at 1 April 2019
Addition
Modification adjustment
Interests
Lease payments
AAss aatt 3311 MMaarrcchh 22002200
Current
Non-current
TToottaall
PPrrooppeerrttiieess
$$000000
EEqquuiippmmeenntt
$$000000
2,411
285
(244)
126
(515)
22,,006633
193
1,870
22,,006633
49
1
2
(30)
2222
22
-
2222
TToottaall
$$000000
2,460
285
(243)
128
(545)
22,,008855
215
1,870
22,,008855
NZ IFRS 16 distinguishes between leases and service contracts on the basis of whether the use of an identified asset
is controlled by the customer. Control is considered to exist if the customer has the right to obtain substantially all of
the economic benefits from the use of an identified asset and the right to direct the use of that asset.
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a term of 12 months or less.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term,
with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this
is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is
used. Variable lease payments are only included in the measurement of the lease liability if they are dependent on an
index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability may also include:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to exercise that
option;
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of
termination option being exercised.
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received,
and increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore
the leased asset.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to
be shorter than the lease term.
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2200.. LLeeaassee lliiaabbiilliittiieess ((ccoonnttiinnuueedd))
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of
a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect
the payments to make over the revised term, which are discounted at a revised discount rate. The carrying value of
lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index
is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the
revised carrying amount being amortised over the remaining (revised) lease term.
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the nature
of the modification:
• if the renegotiation results in one or more additional assets being leased for an amount commensurate with the
standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in
accordance with the above policy.
• in all other cases where the renegotiated increases the scope of the lease (whether that is an extension to the lease
term, or one or more additional assets being leased), the lease liability is remeasured using the discount rate
applicable on the modification date, with the right-of-use asset being adjusted by the same amount.
• if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the lease liability and
right-of-use asset are reduced by the same proportion to reflect the partial of full termination of the lease with any
difference recognised in profit or loss. The lease liability is then further adjusted to ensure its carrying amount reflects
the amount of the renegotiated payments over the renegotiated term, with the modified lease payments discounted
at the rate applicable on the modification date. The right-of-use asset is adjusted by the same amount.
For contracts that both convey a right to the Group to use an identified asset and require services to be provided to
the Group by the lessor, the Group has elected to account for the entire contract as a lease, i.e. it does allocate any
amount of the contractual payments to, and account separately for, any services provided by the supplier as part of
the contract.
Nature of leasing activities (in the capacity as lessee)
The Group leases two properties in the jurisdictions in which it operates. In some jurisdictions it is customary for lease
contracts to provide for payments to increase each year by inflation and in others to be reset periodically to market
rental rates. The Group also leases certain items of plant and equipment.
As standard industry practice, the Group’s property leases are subject to market rent reviews. A 1% increase in these
payments would result an additional $5,000 outflow compared to the current period’s cash outflow.
For short term or low-value leases, payments made are recognised in profit or loss on a straight-line basis over the
term of the lease. These leases are not recognised in the Group’s consolidated statement of financial position.
NNoonn--ccaanncceellllaabbllee ooppeerraattiinngg lleeaassee rreennttaallss aarree ppaayyaabbllee aass ffoolllloowwss::
Less than one year
Between one and five years
22002211
$$000000
22002200
$$000000
8
12
28
-
2211.. SShhaarree ccaappiittaall
(i) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and
share options are recognised as a deduction from equity, net of any tax effects.
(ii) Preference share capital
Preference share capital is classified as equity if it is non-redeemable, or redeemable only at the Group’s option,
and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval
by the Group’s shareholders.
Preference share capital is classified as a financial liability if it is redeemable on a specific date or at the option of
the shareholders, or if dividend payments are not discretionary. Dividends thereon are recognised as an interest
expense in profit or loss as accrued.
53
Annual Report 2021 | AROA 22002200
$$000000
2288,,888899
-
464
--
2299,,335533
TToottaall
2,753,314
32,332
22,,778855,,664466
602,407
366,474
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2211.. SShhaarree ccaappiittaall ((ccoonnttiinnuueedd))
(ii) Preference share capital (continued)
SShhaarree ccaappiittaall aatt bbeeggiinnnniinngg ooff tthhee yyeeaarr
Reclassification of financial liabilities at FVTPL to equity
Shares issued from IPO
Shares issued from Share Plan and Option Plan
SShhaarree ccaappiittaall aatt eenndd ooff tthhee yyeeaarr
22002211
$$000000
2299,,335533
33,833
30,554
3,576
9977,,331166
## ooff sshhaarreess
AAtt 11 AApprriill 22002200
Issue of share capital
BBaallaannccee 3311 MMaarrcchh 22002211
Issue of share capital
Conversion of Series
C(2) & C(3) shares
Converted to ordinary
shares
Impact of share split
Issue of share capital
post IPO
BBaallaannccee 3311 MMaarrcchh 22002211
SSeerriieess CC
pprreeffeerreennccee
sshhaarreess
SSeerriieess BB
pprreeffeerreennccee
sshhaarreess
257,715
-
225577,,771155
798,088
-
779988,,008888
SSeerriieess AA
pprreeffeerreennccee
sshhaarreess
1,079,610
-
11,,007799,,661100
-
-
-
-
-
-
OOrrddiinnaarryy
sshhaarreess
617,901
32,332
665500,,223333
602,407
366,474
(257,715)
(798,088)
(1,079,610)
2,135,413
-
-
-
--
-
-
--
-
-
--
296,320,398
296,320,398
651,489
651,489
330000,,772266,,441144
330000,,772266,,441144
Ordinary shares
During the reporting period, 602,407 (2020: 32,332) ordinary shares were on issue prior to IPO in July 2020 (i.e. pre-
split shares). Upon IPO, all preference shares were converted to ordinary shares and all shares were split at the ratio
of 75:1. The impact of splitting upon IPO was an increase in the number of ordinary shares by 296,320,398. Post IPO,
additional 651,489 ordinary shares were issued as a result of options being exercised during the year.
Unissued and unpaid ordinary shares reserved for issue under the employee share ownership plan is nil shares (2020:
140,095 shares).
All classes of shares
All ordinary, Series A preference and Series B preference shares carry equal voting rights and have the right to an
equal share in dividends authorised by the board (except for unpaid or partially paid ordinary shares issued under
the employee share ownership plan).
All preference shares
All preference shares were converted to ordinary shares during the reporting period.
Warrants
There are no share warrants outstanding as of the reporting date.
Options
There are 3,488,750 vested options and 8,381,025 unvested options as of the reporting date. Refer to Note 22.
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2222.. SShhaarree bbaasseedd ppaayymmeennttss rreesseerrvvee
Share ownership plan
The Group offered selected employees in 2014 the opportunity to participate in an employee share ownership plan
(ESOP).
During the reporting period, all shares were fully exercised or forfeited. No shares remained unvested or outstanding
as of 31 March 2021.
Share option plan
During the year ended 31 March 2019 the Group offered selected employees the opportunity to participate in a Share
Option Plan. This is an offer of options to acquire ordinary shares. Under the terms of the plan, a parcel of options
were issued to employees with an weighted average exercise price. The grant of share options is split into four
tranches, with the first tranche vesting immediately on the date of grant. The Company’s board has discretion to allow
employees to exercise all or part of the options if a) the employee is no longer employed on a vesting date; or b) the
employee ceases to be employed before the termination date but the employee has not yet exercised the options.
The fair value of the options has been measured using the Revenue Ruling 59-60 and standard practice. Revenue
Ruling 59-60 outlines the standard of value, approach, methods, and factors to be considered in valuing shares of the
stock of the closely held entity similar to the Company. Revenue rulings are public administrative rulings by the
Internal Revenue Service in the United States Department of the Treasury of the United States federal government.
See Note 5 for the expenses recognised in profit or loss.
The share based payments reserve comprises the fair value of the employee share purchase plan before its
classifications to share capital upon settlement.
The grant date fair value of equity-settled share-based payment awards granted to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that the employees unconditionally
become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of awards that do meet the related service and non-
market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions,
the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up
for differences between expected and actual outcomes.
Key valuation assumptions for the share option plan are:
Share Option issued on 24 July 2020
PPaarraammeetteerrss
AAssssuummppttiioonnss
Valuation date
Grant date
Beginning stock
price
The Group's stock price was assumed to be $0.75 at the Valuation Date
per management’s guidance
Risk free rate
Volatility
The risk-free rate was based on the rate of treasury securities with the
same term as the estimated time for the projection period.
The volatility (standard deviation) was estimated based on an analysis of
the historical and implied volatility for the Group’s guideline publicly
traded competitors.
Dividend yield
The dividend yield was assumed to be nil.
55
Annual Report 2021 | AROA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2222.. SShhaarree bbaasseedd ppaayymmeennttss rreesseerrvvee ((ccoonnttiinnuueedd))
2222.. SShhaarree bbaasseedd ppaayymmeennttss rreesseerrvvee ((ccoonnttiinnuueedd))
Share option plan (continued)
Share Option issued on 28 September 2020
PPaarraammeetteerrss
AAssssuummppttiioonnss
Valuation date
Grant date
Beginning stock
price
The Group's stock price was based on the publicly traded share price at the
valuation date.
Risk free rate
Volatility
The risk-free rate was based on the rate of treasury securities with the same
term as the estimated time for the projection period.
The volatility (standard deviation) was estimated based on an analysis of the
historical and implied volatility for the Group’s guideline publicly traded
competitors.
Dividend yield
The dividend yield was assumed to be nil.
Balance as at 1 April
Share based payment expense
Employee shares exercised
Forfeiture of shares
BBaallaannccee aass aatt 3311 MMaarrcchh
a) Share ownership plan
Summary of shares granted under the share ownership plan
22002211
$$000000
995511
2,011
(807)
(25)
22,,113300
22002200
$$000000
770022
418
(169)
--
995511
Opening balance
Granted during the period
Exercised during the period
Impact of share split
Forfeited during the period
CClloossiinngg bbaallaannccee
Vested and exercisable as at 31
March
Balance as at 1 April
Granted during the year
Exercised during the year
Forfeited during the year
AAss aatt 3311 MMaarrcchh
Vested and exercisable as at 31 March
22002211
22002211
22002200
22002200
AAvveerraaggee
eexxeerrcciissee
pprriiccee ppeerr
ooppttiioonn
11.86
-
11.56
13.15
--
--
## ooff
ooppttiioonnss
100,296
-
(99,188)
(1,108)
--
AAvveerraaggee
eexxeerrcciissee
pprriiccee ppeerr
ooppttiioonn
11.83
-
11.27
-
1111..8866
## ooff
ooppttiioonnss
105,470
-
(5,174)
-
110000,,229966
--
1111..8866
110000,,229966
Shares outstanding at the end of the year have the following expiry dates:
GGrraanntt ddaattee
EExxppiirryy ddaattee
1 April 2014
1 October 2014
1 April 2015
1 October 2015
1 April 2016
1 October 2016
TToottaall
31 March 2024
30 September 2024
31 March 2025
30 September 2025
31 March 2026
30 September 2026
SShhaarree
ooppttiioonnss
22002211
-
-
-
-
-
-
--
SShhaarree
ooppttiioonnss
22002200
48,123
6,281
12,450
20,316
6,820
6,306
110000,,229966
56
b) Aroa Biosurgery share option plan (the “Option Plan”) – prior to IPO
Under the Option Plan prior to IPO, the Company granted directors, key management and certain employees, options
to subscribe for ordinary shares since 2017.
The opening balance of share options and the share options exercised during the period are prior to the 75:1 share
split, which took effect upon the initial public offering.
Summary of options granted under the Option Plan – prior to IPO
22002211
22002200
22002211
AAvveerraaggee
eexxeerrcciissee
pprriiccee ppeerr
ooppttiioonn
NNZZ$$
7.42
7.47
-
-
-
## ooff
ooppttiioonnss
131,695
(79,434)
3,867,314
-
-
00..1100
33,,991199,,557755
22002200
AAvveerraaggee
eexxeerrcciissee
pprriiccee ppeerr
ooppttiioonn
NNZZ$$
7.34
7.63
7.34
-
7.34
77..4422
SShhaarree
ooppttiioonnss
3311 MMaarrcchh
22002211
2,009,275
472,500
1,437,800
-
33,,991199,,557755
## ooff
ooppttiioonnss
128,211
40,016
(32,332)
-
(4,200)
113311,,669955
SShhaarree
ooppttiioonnss
3311 MMaarrcchh
22002200
91,679
9,450
25,064
5,502
113311,,669955
0.10
1,660,200
7.42
49,112
Share options outstanding at the end of the year have the following expiry dates:
GGrraanntt ddaattee
EExxppiirryy ddaattee
1 October 2018
1 July 2019
1 December 2019
14 February 2020
TToottaall
30 September 2028
30 June 2029
30 November 2029
13 February 2030
c) Aroa Biosurgery share option plan (the “Option Plan”) – on and after IPO
During the reporting period, the Group offered the executive employees and directors new share options upon the
listing of the Group in July 2020. Additionally, certain employees received share options on 29 September 2020.
Grants under the Option Plan comprised 8 million share options with various vesting conditions including non-market
service conditions, market conditions and non-market performance conditions.
The exercise price and the number of share options referred below represent amounts and numbers post the 75:1
share split, which took effect upon the initial public offering.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2222.. SShhaarree bbaasseedd ppaayymmeennttss rreesseerrvvee ((ccoonnttiinnuueedd))
b) Aroa Biosurgery share option plan (the “Option Plan”) – prior to IPO
Under the Option Plan prior to IPO, the Company granted directors, key management and certain employees, options
to subscribe for ordinary shares since 2017.
The opening balance of share options and the share options exercised during the period are prior to the 75:1 share
split, which took effect upon the initial public offering.
Summary of options granted under the Option Plan – prior to IPO
Opening balance
Granted during the period
Exercised during the period
Impact of share split
Forfeited during the period
CClloossiinngg bbaallaannccee
Vested and exercisable as at 31
March
22002211
AAvveerraaggee
eexxeerrcciissee
pprriiccee ppeerr
ooppttiioonn
NNZZ$$
7.42
-
7.47
-
-
00..1100
22002211
## ooff
ooppttiioonnss
131,695
-
(79,434)
3,867,314
-
33,,991199,,557755
22002200
AAvveerraaggee
eexxeerrcciissee
pprriiccee ppeerr
ooppttiioonn
NNZZ$$
7.34
7.63
7.34
-
7.34
77..4422
22002200
## ooff
ooppttiioonnss
128,211
40,016
(32,332)
-
(4,200)
113311,,669955
0.10
1,660,200
7.42
49,112
Share options outstanding at the end of the year have the following expiry dates:
GGrraanntt ddaattee
EExxppiirryy ddaattee
1 October 2018
1 July 2019
1 December 2019
14 February 2020
TToottaall
30 September 2028
30 June 2029
30 November 2029
13 February 2030
SShhaarree
ooppttiioonnss
3311 MMaarrcchh
22002211
2,009,275
472,500
1,437,800
-
33,,991199,,557755
SShhaarree
ooppttiioonnss
3311 MMaarrcchh
22002200
91,679
9,450
25,064
5,502
113311,,669955
c) Aroa Biosurgery share option plan (the “Option Plan”) – on and after IPO
During the reporting period, the Group offered the executive employees and directors new share options upon the
listing of the Group in July 2020. Additionally, certain employees received share options on 29 September 2020.
Grants under the Option Plan comprised 8 million share options with various vesting conditions including non-market
service conditions, market conditions and non-market performance conditions.
The exercise price and the number of share options referred below represent amounts and numbers post the 75:1
share split, which took effect upon the initial public offering.
57
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2222.. SShhaarree bbaasseedd ppaayymmeennttss rreesseerrvvee ((ccoonnttiinnuueedd))
Summary of options granted under the Option Plan – on and after IPO
Opening balance
Granted during the period – 24 July grant
Granted during the period – 29 September grant
Forfeited during the period
CClloossiinngg bbaallaannccee
Vested and exercisable at 31 March
22002211
22002200 22002200
22002211
AAvveerraaggee
eexxeerrcciissee pprriiccee
ppeerr ooppttiioonn
NNZZ$$
-
## ooff
ooppttiioonnss
-
0.81 6,177,000
1.45 1,873,200
1.45 (100,000)
00..9933 77,,995500,,220000
0.82 1,828,550
AAvveerraaggee
eexxeerrcciissee pprriiccee
ppeerr ooppttiioonn
NNZZ$$
-
-
-
-
--
--
## ooff
ooppttiioonnss
-
-
-
-
--
--
Share options – on and after IPO outstanding at the end of the year have the following expiry dates:
2255.. FFiinnaanncciiaall rriisskk mmaannaaggeemmeenntt
GGrraanntt ddaattee
EExxppiirryy ddaattee
24 July 2020
29 September 2020
TToottaall
2233.. EEaarrnniinnggss ppeerr sshhaarree
23 July 2025
28 September 2025
SShhaarree ooppttiioonnss
SShhaarree ooppttiioonnss
3311 MMaarrcchh 22002211
6,177,000
1,773,200
77,,995500,,220000
3311 MMaarrcchh
22002200
-
-
--
Earnings per share has been calculated based on shares and share options issued at the respective measurement
dates.
NNuummeerraattoorr
Loss for the year after tax (“N”) in $000
DDeennoommiinnaattoorr
Weighted average number of ordinary shares used in basic EPS
(“D1”)
Effects of:
Employee share options *
Preference shares
Period end number of shares used in diluted EPS
(“D2”)
Basic earnings per share (N/D1 x 100)
Diluted earnings per share (N/D2 x 100)
22002211
22002200
(19,209)
(5,958)
300,401
2,802
functional currency, expressed in NZ dollars.
12,563
-
300,401
CCeennttss
(6.39)
(6.39)
159
2,164
2,802
CCeennttss
(212.63)
(212.63)
* As employee share options are anti-dilutive, these were not included in the calculation of diluted earnings per
share above.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2244.. RReellaatteedd ppaarrttiieess
(iii) Subsidiaries
Interests in subsidiaries are set out in Note 1.
(iv) Key management compensation
Key management includes Directors (Executive and Non-Executive) and the senior leadership team. The
compensation paid for and payable to key management for directorship services is disclosed within the Corporate
Governance & Statutory section of the Annual Report. The total key management compensation excluding
Director fees is $4,394,656 (2020: $1,490,262) (inclusive of the value of all benefits). The total Director fees
excluding share based payments are $389,001 (2020: $295,135). The share based payment expense relating to
the Directors is $304,846 (2020: $57,264)
The compensation paid for key management includes share based payment of $1,255,278 (2020: $238,073).
(v) Year end balances
There were no related party receivables and related party payables at year end (2020: $nil).
(vi) Transactions with related parties
There were no other related party transactions during the year.
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate
risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The
Group uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate and foreign exchange risks and aging analysis for credit risk.
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the
Group's income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control risk exposures within acceptable parameters whilst optimising the return on risk.
Market risk
Foreign exchange risk
The Group is exposed to currency risk on sales, purchases and liabilities that are denominated in a currency other
than the respective functional currency of the Company, being NZ dollars (NZD). The currency risk arises primarily
with respect to sales, expenses and the deferred consideration due to Hollister in US dollars (USD).
After allowing for natural hedges for exposure in USD and retention of USD proceeds with the bank account, the
Group uses forward foreign exchange contracts to manage its estimated foreign currency exposure in respect of
forecasted revenue receipts from international customers. Refer to Note 26 (i) and (ii).
The Group has certain net monetary assets/(liabilities) that are exposed to foreign currency risk. As at the reporting
date, the Group had forward foreign exchange contracts in place to reduce its foreign exchange risk exposure. The
table below summarises the Group’s net exposure at reporting date to foreign currency risk, against its respective
Exposure to foreign currency risk
22002211
Cash and cash equivalents
Trade and other receivables
Financial assets at FVTOCI
Trade and other payables
Interest-bearing loans and borrowings
Foreign currency forwards (sell foreign currency)
Foreign currency swaps (buy foreign currency)
NNeett eexxppoossuurree
UUSSDD
$$000000
4,809
1,457
1,107
(861)
(6,956)
-
2,300
11,,885566
AAUUDD
$$000000
EEUURR
$$000000
(55)
-
-
-
-
-
-
46
-
-
-
-
-
-
((5555))
4466
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2244.. RReellaatteedd ppaarrttiieess
(iii) Subsidiaries
Interests in subsidiaries are set out in Note 1.
(iv) Key management compensation
Key management includes Directors (Executive and Non-Executive) and the senior leadership team. The
compensation paid for and payable to key management for directorship services is disclosed within the Corporate
Governance & Statutory section of the Annual Report. The total key management compensation excluding
Director fees is $4,394,656 (2020: $1,490,262) (inclusive of the value of all benefits). The total Director fees
excluding share based payments are $389,001 (2020: $295,135). The share based payment expense relating to
the Directors is $304,846 (2020: $57,264)
The compensation paid for key management includes share based payment of $1,255,278 (2020: $238,073).
(v) Year end balances
There were no related party receivables and related party payables at year end (2020: $nil).
(vi) Transactions with related parties
There were no other related party transactions during the year.
2255.. FFiinnaanncciiaall rriisskk mmaannaaggeemmeenntt
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate
risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The
Group uses different methods to measure different types of risk to which it is exposed. These methods include
sensitivity analysis in the case of interest rate and foreign exchange risks and aging analysis for credit risk.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the
Group's income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control risk exposures within acceptable parameters whilst optimising the return on risk.
Foreign exchange risk
The Group is exposed to currency risk on sales, purchases and liabilities that are denominated in a currency other
than the respective functional currency of the Company, being NZ dollars (NZD). The currency risk arises primarily
with respect to sales, expenses and the deferred consideration due to Hollister in US dollars (USD).
After allowing for natural hedges for exposure in USD and retention of USD proceeds with the bank account, the
Group uses forward foreign exchange contracts to manage its estimated foreign currency exposure in respect of
forecasted revenue receipts from international customers. Refer to Note 26 (i) and (ii).
The Group has certain net monetary assets/(liabilities) that are exposed to foreign currency risk. As at the reporting
date, the Group had forward foreign exchange contracts in place to reduce its foreign exchange risk exposure. The
table below summarises the Group’s net exposure at reporting date to foreign currency risk, against its respective
functional currency, expressed in NZ dollars.
Exposure to foreign currency risk
22002211
Cash and cash equivalents
Trade and other receivables
Financial assets at FVTOCI
Trade and other payables
Interest-bearing loans and borrowings
Foreign currency forwards (sell foreign currency)
Foreign currency swaps (buy foreign currency)
NNeett eexxppoossuurree
UUSSDD
$$000000
4,809
1,457
1,107
(861)
(6,956)
-
2,300
11,,885566
AAUUDD
$$000000
EEUURR
$$000000
-
-
-
(55)
-
-
-
((5555))
-
46
-
-
-
-
-
4466
59
Annual Report 2021 | AROA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2255.. FFiinnaanncciiaall rriisskk mmaannaaggeemmeenntt ((ccoonnttiinnuueedd))
22002200
Cash and cash equivalents
Trade and other receivables
Financial assets at FVTOCI
Trade and other payables
Interest-bearing loans and borrowings
Foreign currency forwards (sell foreign currency)
Foreign currency swaps (buy foreign currency)
NNeett eexxppoossuurree
UUSSDD
$$000000
895
2,332
581
(1,451)
(13,003)
4,350
11,950
55,,665544
AAUUDD
$$000000
-
-
-
(110)
-
-
-
((111100))
EEUURR
$$000000
-
24
-
-
-
-
-
2244
The following significant exchange rates applied during the year:
NZD/USD
AAvveerraaggee
rraattee
22002211
0.6711
AAvveerraaggee
rraattee
22002200
0.6477
CClloossiinngg
rraattee
22002211
0.6989
CClloossiinngg
rraattee
22002200
0.5997
Sensitivity analysis – underlying exposures
A 5% weakening/strengthening of the NZ dollar against the US dollar at 31 March 2021 would have
increased/decreased equity and the net result for the period by the amounts shown below. Based on historical
movements a 5% increase or decrease in the NZ dollar is considered to be a reasonable estimate. This analysis
assumes that all other variables remain constant.
US dollar
The Group’s net result and equity for the period would have been $140,000 lower on a 5% weakening of the NZ
dollar (2020: $159,000 lower), and $126,000 higher on a 5% strengthening of the NZ dollar as at 31 March 2021
(2020: $144,000 higher).
Interest rate risk
The Group’s cash flow interest rate risk arises from borrowings at floating rates and/or fixed rates as at the
reporting date.
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the
reporting date are as follows:
3 months or less
3 - 12 months
1 - 2 years
TToottaall iinntteerreesstt bbeeaarriinngg llooaannss aanndd bboorrrroowwiinnggss
22002211
$$000000
-
9,952
-
99,,995522
22002200
$$000000
252
22,271
1,119
2233,,664422
Sensitivity analysis
If interest rates on borrowings had been 100 basis points higher during the year, the Group’s net result and equity
would have been $109,346 lower (2020: $183,666 lower).
A 100 basis points decrease in interest rates would have an equal but opposite effect.
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2255.. FFiinnaanncciiaall rriisskk mmaannaaggeemmeenntt ((ccoonnttiinnuueedd))
22002200
Cash and cash equivalents
Trade and other receivables
Financial assets at FVTOCI
Trade and other payables
Interest-bearing loans and borrowings
Foreign currency forwards (sell foreign currency)
Foreign currency swaps (buy foreign currency)
NNeett eexxppoossuurree
UUSSDD
$$000000
895
2,332
581
(1,451)
(13,003)
4,350
11,950
55,,665544
AAUUDD
$$000000
-
-
-
-
-
-
(110)
((111100))
EEUURR
$$000000
24
-
-
-
-
-
-
2244
The following significant exchange rates applied during the year:
NZD/USD
AAvveerraaggee
AAvveerraaggee
rraattee
22002211
0.6711
rraattee
22002200
0.6477
CClloossiinngg
rraattee
22002211
0.6989
CClloossiinngg
rraattee
22002200
0.5997
Sensitivity analysis – underlying exposures
A 5% weakening/strengthening of the NZ dollar against the US dollar at 31 March 2021 would have
increased/decreased equity and the net result for the period by the amounts shown below. Based on historical
movements a 5% increase or decrease in the NZ dollar is considered to be a reasonable estimate. This analysis
assumes that all other variables remain constant.
The Group’s net result and equity for the period would have been $140,000 lower on a 5% weakening of the NZ
dollar (2020: $159,000 lower), and $126,000 higher on a 5% strengthening of the NZ dollar as at 31 March 2021
US dollar
(2020: $144,000 higher).
Interest rate risk
reporting date.
The Group’s cash flow interest rate risk arises from borrowings at floating rates and/or fixed rates as at the
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the
reporting date are as follows:
3 months or less
3 - 12 months
1 - 2 years
Sensitivity analysis
TToottaall iinntteerreesstt bbeeaarriinngg llooaannss aanndd bboorrrroowwiinnggss
22002211
$$000000
9,952
-
-
99,,995522
22002200
$$000000
252
22,271
1,119
2233,,664422
If interest rates on borrowings had been 100 basis points higher during the year, the Group’s net result and equity
would have been $109,346 lower (2020: $183,666 lower).
A 100 basis points decrease in interest rates would have an equal but opposite effect.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2255.. FFiinnaanncciiaall rriisskk mmaannaaggeemmeenntt ((ccoonnttiinnuueedd))
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions,
as well as from the Group's receivables due from customers. Only major banks are accepted for cash and deposit balances.
Payment and delivery terms are agreed to within each of the respective customers licensing and distribution agreements.
Aging of payments due from customers are monitored on a regular basis, with any overdue amounts being settled
immediately after notification.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in
Note 26. The Group does not see any foreseeable losses on trade receivables over the next 12 months. The Group does not
hold any collateral as security.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's
reputation.
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.
The tables below analyse the Group's financial liabilities into relevant maturity groupings based on the remaining period at
the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted
cash flows, including interest payments in respect of financial liabilities.
LLeessss tthhaann 33
mmoonntthhss
33--1122
mmoonntthhss
BBeettwweeeenn 11
aanndd 22 yyeeaarrss
OOvveerr 22
yyeeaarrss
TToottaall
ccoonnttrraaccttuuaall
ccaasshh fflloowwss
TToottaall
CCaarrrryyiinngg
aammoouunnttss
AAtt 3311 MMaarrcchh 22002211
NNoottee
$$000000
$$000000
$$000000
$$000000
$$000000
$$000000
FFiinnaanncciiaall lliiaabbiilliittiieess
Trade and other payables
Lease liabilities
Interest bearing liabilities
TToottaall
16
20
18
2,744
158
205
33,,110077
-
792
9,952
1100,,774444
-
931
-
993311
-
6,395
-
66,,339955
2,744
8,276
10,157
2211,,117777
2,744
6,282
9,952
1188,,997788
LLeessss tthhaann 33
mmoonntthhss
33--1122
mmoonntthhss
BBeettwweeeenn 11
aanndd 22 yyeeaarrss
OOvveerr 22
yyeeaarrss
TToottaall
ccoonnttrraaccttuuaall
ccaasshh fflloowwss
TToottaall
CCaarrrryyiinngg
aammoouunnttss
AAtt 3311 MMaarrcchh 22002200
NNoottee
$$000000
$$000000
$$000000
$$000000
$$000000
$$000000
FFiinnaanncciiaall lliiaabbiilliittiieess
Trade and other payables
Lease liabilities
Interest bearing liabilities
Derivative financial
liabilities
Financial liabilities at
FVTPL
TToottaall
16
20
18
27
11
4,310
56
1,020
80
-
55,,446666
-
284
24,534
306
-
349
1,179
-
-
2255,,112244
-
11,,552288
-
2,199
-
-
-
22,,119999
4,310
2,888
26,733
386
-
3344,,331177
4,310
2,085
23,642
386
6,827
3377,,225500
Capital adequacy
The Board’s aim is to maintain a strong capital base to sustain future development of the business and to maintain investor
and creditor confidence. The shareholder funds raised to date including IPO gives the Group a sufficient capital base to
continue to grow the business.
61
Annual Report 2021 | AROA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2266.. FFiinnaanncciiaall iinnssttrruummeennttss bbyy ccaatteeggoorryy
(i) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are
recognised initially on the trade date, which is the date that the Group become a party to the contractual
provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into the other financial liability category. Such financial
liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management, are
included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash
flows.
(ii) Non-derivative financial assets
The Group initially recognises financial assets at amortised cost on the date that they are originated.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is
created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets into the following categories: financial assets at fair value
through profit or loss, assets at amortised cost.
AAtt 3311 MMaarrcchh 22002211
AAsssseettss aass ppeerr ccoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff FFiinnaanncciiaall PPoossiittiioonn
Cash and cash equivalents
Term Deposit
Trade and other receivables
Financial assets at FVTOCI
TToottaall aasssseettss aatt aammoorrttiisseedd ccoosstt//FFVVTTOOCCII
AAtt 3311 MMaarrcchh 22002211
LLiiaabbiilliittiieess aass ppeerr ccoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff FFiinnaanncciiaall PPoossiittiioonn
Trade and other payables
Lease liabilities
Interest-bearing loans and borrowings
TToottaall lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt//FFVVTTPPLL
AAsssseettss aatt
aammoorrttiisseedd ccoosstt
NNoottee
$$000000
AAsssseettss aatt
FFaaiirr vvaalluuee
tthhrroouugghh ootthheerr
ccoommpprreehheennssiivvee
iinnccoommee
$$000000
9
9
12
10
15,381
20,000
7,188
-
4422,,556699
-
-
-
1,584
11,,558844
LLiiaabbiilliittiieess aatt
aammoorrttiisseedd
ccoosstt
NNoottee
$$000000
LLiiaabbiilliittiieess aatt
ffaaiirr vvaalluuee
tthhrroouugghh pprrooffiitt
oorr lloossss
$$000000
16
20
18
2,744
6,282
9,952
1188,,997788
-
-
-
--
TToottaall
$$000000
15,381
20,000
7,188
1,584
4444,,115533
TToottaall
$$000000
2,744
6,282
9,952
1188,,997788
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2266.. FFiinnaanncciiaall iinnssttrruummeennttss bbyy ccaatteeggoorryy
(i) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are
recognised initially on the trade date, which is the date that the Group become a party to the contractual
provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into the other financial liability category. Such financial
liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest method.
Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management, are
included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash
flows.
(ii) Non-derivative financial assets
The Group initially recognises financial assets at amortised cost on the date that they are originated.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is
created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets into the following categories: financial assets at fair value
through profit or loss, assets at amortised cost.
AAtt 3311 MMaarrcchh 22002211
AAsssseettss aass ppeerr ccoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff FFiinnaanncciiaall PPoossiittiioonn
Cash and cash equivalents
Term Deposit
Trade and other receivables
Financial assets at FVTOCI
TToottaall aasssseettss aatt aammoorrttiisseedd ccoosstt//FFVVTTOOCCII
AAtt 3311 MMaarrcchh 22002211
LLiiaabbiilliittiieess aass ppeerr ccoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff FFiinnaanncciiaall PPoossiittiioonn
Trade and other payables
Lease liabilities
Interest-bearing loans and borrowings
TToottaall lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt//FFVVTTPPLL
AAsssseettss aatt
aammoorrttiisseedd ccoosstt
NNoottee
$$000000
AAsssseettss aatt
FFaaiirr vvaalluuee
tthhrroouugghh ootthheerr
ccoommpprreehheennssiivvee
iinnccoommee
$$000000
9
9
12
10
NNoottee
16
20
18
15,381
20,000
7,188
-
4422,,556699
2,744
6,282
9,952
1188,,997788
LLiiaabbiilliittiieess aatt
aammoorrttiisseedd
ccoosstt
$$000000
LLiiaabbiilliittiieess aatt
ffaaiirr vvaalluuee
tthhrroouugghh pprrooffiitt
oorr lloossss
$$000000
1,584
11,,558844
-
-
-
-
-
-
--
TToottaall
$$000000
15,381
20,000
7,188
1,584
4444,,115533
TToottaall
$$000000
2,744
6,282
9,952
1188,,997788
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2266.. FFiinnaanncciiaall iinnssttrruummeennttss bbyy ccaatteeggoorryy ((ccoonnttiinnuueedd))
AAtt 3311 MMaarrcchh 22002200
NNoottee
$$000000
AAsssseettss aatt
aammoorrttiisseedd
ccoosstt
AAsssseettss aatt
FFaaiirr vvaalluuee
tthhrroouugghh ootthheerr
ccoommpprreehheennssiivvee
iinnccoommee
$$000000
AAsssseettss aass ppeerr ccoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff FFiinnaanncciiaall PPoossiittiioonn
Cash and cash equivalents
Trade and other receivables
Financial assets at FVTOCI
TToottaall aasssseettss aatt aammoorrttiisseedd ccoosstt//FFVVTTOOCCII
9
12
10
3,850
6,940
-
1100,,779900
-
-
969
996699
LLiiaabbiilliittiieess aatt
aammoorrttiisseedd
ccoosstt
LLiiaabbiilliittiieess aatt
ffaaiirr vvaalluuee
tthhrroouugghh pprrooffiitt
oorr lloossss
TToottaall
$$000000
3,850
6,940
969
1111,,775599
TToottaall
AAtt 3311 MMaarrcchh 22002200
LLiiaabbiilliittiieess aass ppeerr ccoonnssoolliiddaatteedd SSttaatteemmeenntt
ooff FFiinnaanncciiaall PPoossiittiioonn
Trade and other payables
Lease liabilities
Interest-bearing loans and borrowings - current
Interest-bearing loans and borrowings - non current
Financial liabilities at fair value through profit or loss
TToottaall lliiaabbiilliittiieess aatt aammoorrttiisseedd ccoosstt//FFVVTTPPLL
(i) Derivative financial assets
NNoottee
$$000000
$$000000
$$000000
16
20
18
18
11
4,310
2,085
22,523
1,119
-
3300,,003377
-
-
-
-
6,827
66,,882277
4,310
2,085
22,523
1,119
6,827
3366,,886644
The Group had foreign exchange swaps contracts of $2,300,000 (2020:$11,950,000) with the following amounts
recognised in the Statement of Financial Position in relation to foreign exchange currency contracts.
DDeerriivvaattiivvee ffiinnaanncciiaall aasssseettss
Derivatives not designated as hedging instruments
Swap foreign exchange contracts
DDeerriivvaattiivvee aasssseettss aatt eenndd ooff tthhee yyeeaarr
(ii) Derivative financial liability
22002211
$$000000
22002200
$$000000
31
3311
1,188
11,,118888
The Group had no foreign exchange forward contracts as at March 2021 (2020: $4,350,000). The following amount
was recognised in Statement of Financial Position in relation to foreign exchange currency contracts.
Derivative financial liability
Derivatives not designated as hedging instruments
Forward foreign exchange contracts
DDeerriivvaattiivvee lliiaabbiilliittyy aatt eenndd ooff tthhee yyeeaarr
22002211
$$000000
22002200
$$000000
-
--
386
338866
63
Annual Report 2021 | AROA NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
2277.. IInntteerreesstt iinn JJooiinntt OOppeerraattiioonn
In March 2019, the Group and Hydrofera LLC entered into an unincorporated agreement to promote, market and sell
the parties' wound care products to customers in North America. The principal place of business of the joint operation
is in the United States and the joint operation brand name is “Appulse”.
As per the "Shared Sales Force Agreement", the property held in Appulse will be owned and held by the Group and
Hydrofera in the proportion of their participating interest. The Group has 42% participating interest. Both parties are
responsible only for its liabilities and obligation as set out in the agreement. Therefore, the parties have a joint operation
as they have rights to the assets and obligations for the liabilities relating to the arrangement.
During the reporting period, the Group and Hydrofera agreed to dissolve the joint operation.
The Group has recognised all expenses and associated liabilities in the consolidated accounts as they relate to the
reporting period.
2288.. EEvveennttss aafftteerr tthhee rreeppoorrttiinngg ddaattee
There have been no significant events subsequent to reporting date which required disclosure in or adjustment to the
consolidated financial statements.
2299.. RReessttaatteemmeennttss ffoorr rreeccllaassssiiffiiccaattiioonn
No material restatements for reclassification for the reporting period.
3300.. OOtthheerr DDiisscclloossuurreess
a. Reconciliation of loss after income tax to cash flow from operating activities
PPrrooffiitt//((lloossss)) aafftteerr ttaaxx
AAdddd ((ddeedduucctt)) nnoonn--ccaasshh iitteemmss::
Depreciation of property, plant and equipment
Depreciation of lease
(Gain)/loss on disposal of assets
Amortisation of intangibles
Share based payments
Foreign exchange loss - deferred consideration
Interest - deferred consideration
Interest – lease liabilities
Foreign currency translation
Fair value adjustment on financial liabilities at FVTPL
Non-Capitalised IPO costs
MMoovveemmeenntt iinn wwoorrkkiinngg ccaappiittaall::
Movement in provisions
Movement in tax receivable
Movement in trade and other receivables
Movement in inventory
Movement in trade and other payables
Movement in right of use assets
Movement in interest payables
NNeett ccaasshh fflloowwss ffrroomm ooppeerraattiinngg aaccttiivviittiieess
64
22002211
$$000000
(19,209)
1,092
742
4
1,215
1,985
(1,742)
1,478
406
(30)
8,014
1,607
4
412
(489)
632
(298)
(830)
((55,,000077))
22002200
$$000000
((55,,995588))
11,,008800
443388
((2255))
11,,220066
441188
22,,663355
22,,772299
112288
((887788))
11,,000066
44
((336633))
((11,,667755))
((11,,332277))
22,,227722
3366
((6666))
11,,666600
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
3300.. OOtthheerr DDiisscclloossuurreess ((ccoonnttiinnuueedd))
b. Reconciliation cashflow from financing activities
Interest
bearing
Interest
Financial
Deferred
Lease
Paid up
Transaction
Total
bearing
liabilities at
consideration
liabilities
Cost
share
capital
loans and
loans and
borrowings
borrowings-
– Current
Non current
fair value
through
profit or
loss
Note 18
$000
Note 18
$000
Note 11
$000
Note 18
$000
Note 20
$000
Note 21
$000
$000
$000
(840)
840
(1,119)
(6,827)
(21,682)
(2,084) (29,353)
(61,905)
1,119
(19,804)
10,637
731 (34,951)
4,329
(37,099)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,833
(8,030)
828
-
-
-
-
-
-
(33,833)
(807)
(4,518)
(411)
-
-
-
-
-
-
1,241
(148)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,241
(148)
-
(807)
(4,518)
(411)
(8,030)
-
1,629
(4,329)
(1,873)
((99,,995522))
((66,,228822))
((9977,,331166))
--
((111133,,555500))
Deferred
consideration
Lease
liabilities
Paid up
share
capital
Total
Note 11
$000
Note 18
$000
Note 20
$000
Note 21
$000
$000
(23,183)
-
(28,889)
(53,187)
(5,821)
6,799
546
(296)
384
Interest
bearing
loans and
borrowings –
Interest
bearing
loans and
borrowings-
Non current
Financial
liabilities at
fair value
through
profit or loss
Current
Note 18
$000
(684)
(156)
Note 18
$000
(431)
(688)
-
-
-
-
-
-
(1,006)
-
-
-
-
-
-
(2,635)
(2,663)
-
-
-
-
-
-
-
-
(2,533)
(97)
(168)
(168)
-
-
-
-
-
(2,635)
(2,663)
(2,533)
(97)
(1,006)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
AAtt 11 AApprriill 22002200
Cash flow
Non-cash flow:
FX on deferred
consideration
Interest - deferred
consideration
Conversion of liability to
Share based payments
equity
Lease
Interest on lease payments
Fair value adjustment on
financial liabilities at FVTPL
Allocation of Transaction
cost
AAtt 3311 MMaarrcchh 22002211
AAtt 11 AApprriill 22001199
Cash flow
Non-cash flow:
FX on deferred
consideration
Interest - deferred
consideration
Share based payments
Lease
Interest on lease payments
Fair value adjustment on
financial liabilities at FVTPL
AAtt 3311 MMaarrcchh 22002200
((884400))
((11,,111199))
((66,,882277))
((2211,,668822))
((22,,008844))
((2299,,335533))
((6611,,990055))
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
3300.. OOtthheerr DDiisscclloossuurreess ((ccoonnttiinnuueedd))
b. Reconciliation cashflow from financing activities
Interest
bearing
loans and
borrowings
– Current
Interest
bearing
loans and
borrowings-
Non current
Financial
liabilities at
fair value
through
profit or
loss
Deferred
consideration
Lease
liabilities
Paid up
share
capital
Transaction
Cost
Total
Note 18
$000
Note 18
$000
Note 11
$000
Note 18
$000
Note 20
$000
Note 21
$000
$000
$000
(840)
840
(1,119)
1,119
(6,827)
(19,804)
(21,682)
10,637
(2,084) (29,353)
731 (34,951)
-
4,329
(61,905)
(37,099)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,833
-
-
-
(8,030)
828
-
-
1,241
(148)
-
-
-
-
-
-
-
-
-
-
-
(4,518)
(411)
-
-
-
-
-
(33,833)
(807)
-
-
-
-
1,241
(148)
-
(807)
(4,518)
(411)
(8,030)
-
-
-
-
-
-
-
1,629
(4,329)
(1,873)
((99,,995522))
((66,,228822))
((9977,,331166))
--
((111133,,555500))
Interest
bearing
loans and
borrowings –
Current
Interest
bearing
loans and
borrowings-
Non current
Financial
liabilities at
fair value
through
profit or loss
Deferred
consideration
Lease
liabilities
Paid up
share
capital
Total
Note 18
$000
Note 18
$000
Note 11
$000
Note 18
$000
Note 20
$000
Note 21
$000
$000
(684)
(156)
(431)
(688)
-
(23,183)
-
(28,889)
(53,187)
(5,821)
6,799
546
(296)
384
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,006)
(2,635)
(2,663)
-
-
-
-
-
-
-
(2,533)
(97)
-
-
-
(2,635)
(2,663)
(168)
(168)
-
-
-
(2,533)
(97)
(1,006)
((884400))
((11,,111199))
((66,,882277))
((2211,,668822))
((22,,008844))
((2299,,335533))
((6611,,990055))
AAtt 11 AApprriill 22002200
Cash flow
Non-cash flow:
FX on deferred
consideration
Interest - deferred
consideration
Conversion of liability to
equity
Share based payments
Lease
Interest on lease payments
Fair value adjustment on
financial liabilities at FVTPL
Allocation of Transaction
cost
AAtt 3311 MMaarrcchh 22002211
AAtt 11 AApprriill 22001199
Cash flow
Non-cash flow:
FX on deferred
consideration
Interest - deferred
consideration
Share based payments
Lease
Interest on lease payments
Fair value adjustment on
financial liabilities at FVTPL
AAtt 3311 MMaarrcchh 22002200
65
Annual Report 2021 | AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2021
3300.. OOtthheerr DDiisscclloossuurreess ((ccoonnttiinnuueedd))
c. Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at
the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies at reporting date exchange rates are recognised
profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined and are recognised in Other Comprehensive Income (except on
impairment in which case foreign currency differences that have been recognised in Other Comprehensive Income
are reclassified to profit or loss).
d. Goods and services tax (GST)
Revenues and expenses have been recognised in the financial statements exclusive of GST except that
irrecoverable GST input tax has been recognised in association with the expense to which it relates. All items in
the Statement of Financial Position are stated exclusive of GST except for receivables and payables which are
stated inclusive of GST.
e. Capital commitments
As at 31 March 2021, the Group had equipment capital commitments of $611,000 (2020: $261,000).
f. Contingent liabilities
As at 31 March 2021, the Group had no significant contingent liabilities (2020: $nil).
66
ADDITIONAL INFORMATION
AROA BIOSURGERY LIMITED
(NZ Company no. 1980577 / ARBN 638 867 473)
AROA BIOSURGERY IS A NEW ZEALAND COMPANY
Aroa Biosurgery Limited is a company incorporated in New Zealand and principally governed by New Zealand
law, rather than Australian Law. In Australia the Company is registered with ASIC as a foreign company with the
Australian Registered Body Number 638 867 473. As the Company is not established in Australia, its general
corporate activities (apart from any offering of securities in Australia and certain reporting and disclosure
obligations) are not regulated under the Corporations Act by ASIC but instead are regulated in New Zealand by
New Zealand law including the Companies Act, Financial Markets Conduct Act 2013, Financial Markets Conduct
Regulations 2014 and by the New Zealand Financial Markets Authority and Registrar of Companies.
ORDINARY SHARES
On 31 March 2021 and as at the date of this Annual Report, the Company only has one class of shares on issue, being
ordinary shares in the Company, each conferring to the registered holder the right to one vote on any resolution.
These shares are listed on the ASX (ASX Code: ARX).
The total number of ordinary shares in the Company on issue as at 31 March 2021 was 300,726,414 shares and the
total number of ordinary shares in the Company on issue as at 10 June 2021 was 300,726,414 shares.
The distribution of shareholdings as at 10 June 2021 was as shown in the table below:
Size of shareholding
Number of holders
%
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
TOTAL
970
1,380
603
755
135
3,843
Number of
ordinary shares
626,621
3,947,223
4,858,869
20,968,086
270,325,615
25.24
35.91
15.69
19.65
3.51
100.00
300,726,414
%
0.210
1.310
1.620
6.970
89.890
100.00
The number of shareholdings held in less than marketable parcels is 279, representing 90,972 shares.
UNISSUED SHARES
As at 31 March 2021, there were 11,869,775 options (representing the same number of unissued ordinary shares) held
by 42 holders under the Option Plan. Refer to the Remuneration Report and Note 22 to the Consolidated Financial
Statements for further details of the employee options outstanding. Options do not carry a right to vote.
SHARES ISSUED ON EXERCISE OF OPTIONS
The following ordinary shares of the Company were issued during the year ended 31 March 2021 on the exercise of
options granted under the Option Plan.
Date options exercised
May 2020
June 2020
December 2020
Average exercise
price (NZ$)
Number of
shares issued17
$0.10
$0.10
$0.10
4,837,425
206,325
693,900
17Shares issued prior to Admission have been reflected on a post split basis at the ratio of 75:1
67
Annual Report 2021 | AROA TWENTY LARGEST SHAREHOLDERS
The names and holdings of the 20 largest registered shareholders in the Company as at 10 June 2021 were:
Total units
ordinary shares on issue as
Holding as a % of total
at the date above
Shareholder name
Mr Brian Ward & Mrs Tracey Ward 18
Movac Fund 3 LP
Citicorp Nominees Pty Limited
Phil McCaw 19
National Nominees Limited
J P Morgan Nominees Australia Pty Limited
Richard Abbott
HSBC Custody Nominees (Australia) Limited
Washington H Soul Pattinson and Company Limited
Aspire NZ Seed Fund Ltd
Sparkbox Investments Ltd
K One W One (No 3) Ltd
33,125,800
18,679,050
17,856,411
16,722,425
16,075,659
13,774,374
11,579,775
8,293,333
7,499,800
7,491,000
7,312,050
5,882,550
BNP Paribas Nominees Pty Ltd
5,051,704
BNP Paribas Noms Pty Ltd
BNP Paribas Noms Pty Ltd
Sharon Bryant
Mesynthes Nominees Ltd20
Custodial Services Limited
Mark Ritcher
Nancy Yopp
Total Top 20 Holders
Total Securities
4,835,542
4,819,950
4,815,198
4,580,250
4,120,200
4,120,200
3,913,842
200,890,889
300,726,414
11.02%
6.21%
5.94%
5.56%
5.35%
4.58%
3.85%
2.76%
2.49%
2.49%
2.43%
1.96%
1.68%
1.61%
1.60%
1.60%
1.52%
1.37%
1.37%
1.30%
66.802%
18Brian Ward holds his interest through Arawai No. 2 Trust, of which he is one of 3 trustees and a beneficiary.
19Phil McCaw holds his interest through McSyth Capital Investment Trust, of which he is one of 3 trustees and a beneficiary. Mr McCaw is also a principal of Movac, a
substantial shareholder in the Company. Mr McCaw sits as one member of an investment committee of 6 with respect to the Movac Funds, however Mr McCaw has
withdrawn from the investment committee with respect to decisions regarding any shares in the Company held by the Movac Funds. Accordingly, Mr McCaw does
not control the voting or disposal of those shares and does not have a relevant interest in those shares.
20As Directors of Mesynthes Nominee Limited, Jim McLean and Phil McCaw have an interest in the shares held by Mesynthes Nominee Limited on bare trust for
certain AROA employees until payment is received for such shares.
68
TAKEOVERS AND SUBSTANTIAL HOLDINGS
While the ASX Listing Rules apply to the Company, certain provisions of the Corporations Act do not. The Company
is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the acquisition of its shares
(including takeovers and substantial holdings). The New Zealand position under the Takeovers Code (as set out
in the Takeovers Regulations 2000) and the Financial Markets Conduct Act 2013 is broadly comparable to the
Australian position in relation to the regulation of takeovers. The New Zealand takeovers regime, not the Australian
takeovers regime, will apply to the Company as a foreign company. A 20% threshold applies (under which a person
is prevented from increasing the percentage of voting rights held or controlled by them in excess of that threshold
or from becoming the holder or controller of an increased percentage of voting rights if they already hold or control
more than 20% of the voting rights), subject to certain “compliance options” (including full and partial offers, 5%
creep over 12 months in the 50% to 90% range, and acquisitions with shareholder approval). Compulsory acquisitions
are permitted by persons who hold or control 90% or more voting rights in a company.
Under New Zealand law, there is no requirement for a shareholder of the Company to issue a substantial holding
notice of holdings above 5%, and because the Company is a New Zealand company the Corporations Act provisions
regarding substantial shareholder notices do not apply to the Company. However, a shareholder may voluntarily
disclose such information if it chooses to do so and a number of New Zealand companies listed on ASX experience
shareholders lodging notices similar to a substantial shareholder notice that is required under the Corporations Act
notwithstanding there is no requirement to do so. Separately, the Company has undertaken to ASX that it will inform
the market immediately on becoming aware of a person becoming a Substantial Holder, a movement of at least 1% of
shares in which the Substantial Holder has a relevant interest and a person ceasing to be a Substantial Holder.
SUBSTANTIAL SHAREHOLDERS
Set out below is, to the best of the Company’s knowledge, details relating to all Substantial Holders in the Company
as at 10 June 2021.
Shareholder name
Total units
ordinary shares on issue as
Holding as a % of total
at 10 June 2021
Mr Brian Ward & Mrs Tracey Ward 21
33,125,800
Movac Fund 3 LP
Citicorp Nominees Pty Limited
Phil McCaw 22
National Nominees Limited
18,679,050
17,856,411
16,722,425
16,075,659
11.02%
6.21%
5.94%
5.56%
5.35%
RESTRICTED SECURITIES AS AT 10 JUNE 2021
Information relating to restricted securities, or securities subject to voluntary escrow, as at 10 June 2021 is set out
below:
Number of securities
Class of securities
Date the escrow period ends
118,047,131
21,393,225
13,250,325
Fully paid ordinary shares (12 months voluntary escrow)
23 July 2021
Fully paid ordinary shares (24 months voluntary escrow)
23 July 2022
Fully paid ordinary shares (36 months voluntary escrow)
23 July 2023
21Brian Ward holds his interest through Arawai No. 2 Trust, of which he is one of 3 trustees and a beneficiary.
22Phil McCaw holds his interest through McSyth Capital Investment Trust, of which he is one of 3 trustees and a beneficiary. Mr McCaw is also a principal of Movac, a
substantial shareholder in the Company. Mr McCaw sits as one member of an investment committee of 6 with respect to the Movac Funds, however Mr McCaw has
withdrawn from the investment committee with respect to decisions regarding any shares in the Company held by the Movac Funds. Accordingly, Mr McCaw does
not control the voting or disposal of those shares and does not have a relevant interest in those shares.
69
Annual Report 2021 | AROA EMPLOYEE REMUNERATION
Remuneration and other benefits (excluding non-cash share based payments) of NZ$100,000 or more received by
employees of the Group (excluding Non-Executive Directors) in their capacity as employees during the financial year
ended 31 March 2021 were as follows:
Remuneration range (NZ$)
Number of employees
100,000
110,001
120,001
150,001
160,001
170001
180,001
190,001
250,001
260,001
300,001
410,001
540,001
to
to
to
to
to
to
to
to
to
to
to
to
to
110,000
120,000
130,000
160,000
170,000
180,000
190,000
200,000
260,000
270,000
310,000
420,000
550,000
6
3
3
3
2
2
2
2
1
2
1
1
1
19 granted patents, 18
pending applications &
3 applications filed
70
70
GENERAL DISCLOSURE OF INTERESTS BY DIRECTORS
AROA maintains an interests register in accordance with the Companies Act. The following are general
disclosures of interest (pursuant to section 140(2) of the Companies Act) noted in the interests register for
the period 1 April 2020 to 31 March 2021. Details on share dealings in the Company by the Directors during
that period are set out in the Remuneration Report.
Name
James McClean
Brian Ward
Steven Engle
Interest
Director, Mesynthes Nominees Limited
Director, Information Tools Limited
Director, Prevar Limited
Director, R J Hill Laboratories Limited
Director, Green Edge Limited
Non-Executive Chairman, Prescient Therapeutics Limited (ASX: PTX)
Director, Author-IT Labs Limited, Author-IT Holdings Limited, Authorit
Software Corporation Limited and Author-IT Software Corporation
Resigned as CEO of Cohbar Inc
Sole Proprietor, Averigon
Philip McCaw
Director, Mesynthes Nominee Limited
Director, Toha Foundry Limited
Director, Author-IT Limited and Authorit Software Corporation Limited
Director, Kaynemaile Ltd
Director, Shift72 Limited
Director, Nutcracker Limited
Director, Movac Limited
Director, Movac Fund 4 Custodial Limited
Director, Movac Fund 5 Custodial Limited
Director, Movac Fund 5 General Partner Limited
Director, Movac Fund 4 General Partner Limited
Director, CAVOM Nominee No 1 Limited
Director, Movac Fund 4 Custodial Limited
Director, Calcium Investments Limited
Director, Calcium Investment Trustee Limited
Director, PJM Management Limited
None
Director, Volpara Health Technologies Limited (ASX: VHT)
Director, Surf Lakes Holdings Limited
Director, DIT AgTech Limited
John Pinion
John Diddams
USE OF COMPANY INFORMATION
AROA did not receive notice from any Director, requesting to use company information received in his capacity as
a director of any Group company, which would not otherwise have been available to him.
71
Annual Report 2021 | AROA ON-MARKET BUY-BACK
There is no current on-market buy-back for the Company’s shares.
USE OF CASH AND READILY CONVERTIBLE ASSETS
The Company confirms that in the period from Admission to 31 March 2021, it used the cash and assets (in a form
readily convertible to cash) that it had at the time of Admission in a manner consistent with the Company’s business
objectives.
Use of funds
Prospectus
Estimate
NZ$m
Actual Funds
Used
NZ$m
Actual as
a % of
Estimate
Notes
Investment in sales and marketing
$5.0
$1.8
36%
Investment in additional manufacturing capacity,
investment in new products, plant and equipment
and other general corporate capital expenditure
Working capital, other operating costs
Repayment of borrowings
Offer costs
Total
Notes
$5.0
$0.8
16%
$5.0
$13.1
$3.8
$31.9
$2.1
$0.0
$3.9
$8.6
42%
0%
103%
27%
1
2
3
4
5
1.
2.
3.
4.
5.
Commencement of new sales and marketing initiatives including the hire of over 20 direct sales personnel in Q4 FY21.
Preliminary costs of manufacturing expansion in H2 FY21.
Net operating cash outflows for Q2, Q3 & Q4 FY21, excluding cash outflows relating to the investment in sales & marketing.
Maturing 31 March 2022. Remains unchanged from Q3 FY21.
Includes cash outflows prior to IPO. Remains unchanged from Q3 FY21.
DONATIONS
No Group company made any donations during in the year ended 31 March 2021.
SUBSIDIARY COMPANY INFORMATION
The persons listed below held office as directors of the Company’s subsidiaries as at 31 March 2021. None of those
persons receives any remuneration or other benefits for their role as a director of a Company subsidiary.
No entries were made in the interests register of any Company subsidiary during the year ended 31 March 2021.
Company
Directors
Mesynthes Nominee Limited (NZBN 9429 041 350 003)
Jim McLean, Phil McCaw
Aroa Biosurgery Incorporated (Delaware File number 6560549)
Brian Ward, John Pinion
72
GLOSSARY
Term
Description
Admission
Admission of the Company to the ASX’s official list
AROA or the Company
Aroa Biosurgery Limited NZCN 1980577, ARBN 638 867 473
ASIC
ASX
CEO
CFO
Australian Securities and Investments Commission
Australian Securities Exchange
Chief Executive Officer
Chief Financial Officer
Companies Act
Companies Act 1993 (NZ)
Corporations Act
Corporations Act 2001 (Cth, Australia)
EBIT
EBITDA
ECM
Executives
FDA
FY
Group
IPO
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortisation
Extracellular matrix
Brian Ward (Managing Director and CEO) and James Agnew (CFO and Joint
Company Secretary)
The Food and Drug Administration of the US
Financial Year
The group of companies comprising AROA, Aroa Biosurgery Incorporated
(Delaware File number 6560549) and Mesynthes Nominee Limited (NZBN
9429 041 350 003)
The Company’s initial public offering in July 2020 of 60,000,000
shares in the Company at a price of A$0.75 per share
Key Management
The Board has determined that the key management personnel of the Group
are the Directors and James Agnew (CFO and Joint Company Secretary)
NZD
NZ GAAP
NZ IFRS
Option Plan
Prospectus
Share Plan
New Zealand Dollar
New Zealand Generally Accepted Accounting Practice
New Zealand Equivalents to International Financial Reporting Standards
The AROA Share Option Plan
Prospectus dated 22 June 2020 in respect of the IPO
The AROA Employee Incentive Share Plan
Substantial Holder
Has the meaning given to it in the Corporations Act
TELA Bio
TELA Bio, Inc
US
USD
The United States of America
United States Dollar
73
Annual Report 2021 | AROA CORPORATE DIRECTORY
ARBN 638 867 473
NZCN: 1980577
Chairman and
Non-Executive Director
Jim McLean
Non-Executive Directors
Steve Engle
Phil McCaw
John Pinion
John F Diddams
Chief Executive Officer
and Managing Director
Brian Ward
Company Secretaries
James Agnew
Tracy Weimar
Registered Office and
Address for Service
64 Richard Pearse Drive
Mangere
Auckland 2022
Telephone: +64 9 869 3035
Auditor
BDO Auckland
Level 4, BDO Centre
4 Graham Street
Auckland 1010
Banker
Bank of New Zealand
Deloitte Centre
80 Queen Street
Auckland 1010
Share Registry
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
74
74
Unlocking regenerative
healing for everybody
AROA BIOSURGERY LIMITED | ASX: ARX
WWW.AROABIO.COM
75
Annual Report 2021 | AROA