ANNUAL
REPORT 2022
AROA BIOSURGERY LIMITED
ASX: ARX
2
We are passionate about our
mission to unlock regenerative
healing for everybody.
It drives everything we do.
2022 HIGHLIGHTS
81% in product
revenue
NZ$39.7
million
total revenue
8% in product
gross margin,
to 76%
2 new
products
commercialised
Annual Report AROA 3
CONTENTS
About AROA
Chair’s Review
CEO’s Report
AROA’s Leadership
Directors’ Report
Remuneration Report
Independent Auditor’s Report
Consolidated Financial Statements
Notes to Consolidated Financial Statements
Additional Information
Glossary and Other Information
References
Corporate Directory
KEY DATES
4
8
10
12
17
21
26
31
35
65
70
71
73
10 August 2022
Annual Shareholders Meeting
30 September 2022
Financial Half Year End
30 November 2022*
Half Year Results Announcement
31 March 2023
Financial Year End
*Indicative date
This Annual Report is dated 27 June 2022 and is signed on behalf of Aroa
Biosurgery Limited by Jim McLean (Independent Chair of the Board) and
Brian Ward (Founder, CEO and Managing Director).
Jim McLean
Independent Chair of
the Board of Directors
Brian Ward
Founder, CEO and
Managing Director
AROA Annual Report
4
OUR BUSINESS
> five million AROA
devices applied in
treating patients
> US$2.5b1 potential US
total addressable market
for existing products
6 patented product
families selling
in the US
33 US field sales
representatives &
7 US inside sales
representatives
Key partnership
with TELA Bio
Regulatory approval
in >50 countries
> 20 distributors
(ex US)
> 220 employees
worldwide
Pipeline products
(including line extensions
& AROA’s Dead Space
Management platform)
19 registered patents,
38 pending applications
and 10 applications filed
Annual Report AROA 5
AROA Annual Report 6
RESULTS IN BRIEF
NZ
$39.7m
total revenue
( 78% on FY21)
81%
product revenue
( 84% in constant
currency)
8%
improvement
in product
gross margin
NZ
$56.2 m
cash balance
as at end of FY22
TOTAL PRODUCT REVENUE
ENDOFORM™ SALES
M
$
Z
N
45
40
35
30
25
20
15
10
5
0
81% YoY
GROWTH
M
$
Z
N
11.50
11.00
10.50
10.00
9.50
76%*
MYRIAD™ SALES
FY20
FY21
FY22
M
$
Z
N
4.00
3.00
2.00
1.00
0.00
FY20
FY21
FY22
71%*
68%*
SALES TO TELA BIO™
M
$
Z
N
30.00
20.00
10.00
0.00
FY20
FY21
FY22
FY20
FY21
FY22
*Product gross margin
Annual Report AROA 7
US SALESPEOPLE
MYRIAD ACTIVE* ACCOUNTS
30
25
20
15
10
5
0
M
$
Z
N
80
60
40
20
0
FY20
FY21
FY22
ENDOFORM
MYRIAD
FY20
FY21
FY22
*Represents accounts to which sales were
made in Q4 of the relevant financial year
R&D SPEND
FY20
FY21
FY22
NZ$2.4M
NZ$2.6M
NZ$4.4M
NZ$2M
NZ$6.5M
NZ$1.9M
DEAD SPACE MANAGEMENT
EXISTING PRODUCT IMPROVEMENTS
AROA Annual Report 8
On behalf of the Board,
I would like to acknowledge the
exceptional efforts of our people
and partners in delivering these
outstanding results. This was despite
another year of COVID-19 outbreaks
and associated disruptions, and their
continued impact on hospital access
and procedure volumes in the US.
Whilst we look ahead to the 2023
financial year with optimism, it is
important to recognize the impact
successive years of public health crises
and lockdowns have had.
CHAIR’S REVIEW
We are delighted to present AROA’s Annual Report for the 2022
financial year. As outlined in Brian’s CEO Report, we undertook a
number of steps this year to accelerate our growth. AROA’s FY22
.
performance validated those actions, and we are pleased to have
delivered on our goals.
AROA’s product revenue for the year was NZ$39,154,000
(NZ$37.7 million in constant currency), representing 81% growth
over the previous year. This result also exceeds AROA’s constant
currency guidance of NZ$30-33 million and then upgraded to
NZ$34-37 million.
We remain focused on improving earnings growth into the future.
With that goal in mind, AROA implemented several strategies to
grow our product gross margins by 8% compared to the prior
year. These included introducing higher-margin products and
increasing operational efficiency. We are pleased to report that
our FY22 product gross margin was 76%, exceeding our published
guidance (initially 70%, and then upgraded to 73%-75%). AROA
reported a loss before tax of NZ$8.3 million (normalised EBITDA
loss of NZ$1.5 million) for FY22, despite substantially increasing
investment in our US commercial operations and products
pipeline.
AROA ended FY22 with a strong cash balance of NZ$56.2 million.
These funds include proceeds remaining from our institutional
placement and share purchase plan capital raisings in July/
August 2021 which raised approximately A$47.4 million. AROA is
now debt-free, having used part of the capital raising proceeds
to repay Hollister Inc. for the remaining debt relating to the 2018
re-acquisition of global rights for wound care products.
We are also proud to report that Myriad Matrix™ was awarded
the Gold Award for “Most Innovative Dressing or Device” at
the Journal of Wound Care’s World Union of Wound Healing
Societies Awards 2022.
Annual Report AROA 9
Looking ahead, we believe the Company is well-positioned for
We are continuing to extend the body of clinical evidence to
strong growth in FY23 and beyond. Total revenue has grown from
demonstrate that our products can improve healing outcomes.
approximately NZ$22.3 million in FY21 to approximately NZ$39.7
Coupled with our accessible pricing structure, we consider that
million in FY22. As outlined in Brian’s CEO Report, AROA has also
our products represent an attractive offering for clinicians and
successfully implemented strategic and operational objectives
healthcare providers around the world.
designed to further accelerate growth. We expect these objectives
to continue delivering results as the effects of COVID-19 wane.
Over five million AROA devices have been applied in treating
patients to date. We expect that this is the start and that our
The AROA ECM™ platform technology, which underpins our
products have the potential to unlock regenerative healing for
range of products, offers disruptive value. As countries encounter
every body. Thank you for your continued support as we continue
increasingly ageing populations, obesity rates and incidence of
working towards that mission.
diabetes, the growing pressure on healthcare dollars is fuelling
demand for products that improve the efficiency and effectiveness
of care. Our platform technology is well placed in this environment
and has unique features which have been shown to aid the healing
process and help reduce wound closure times.2,3,4
Jim McLean
Independent Chair of the
Board of Directors
Myriad Matrix™ was
awarded the Gold
Award for “Most
Innovative Dressing
or Device”
AROA Annual Report 10
CEO’S REPORT
The strategic re-alignments we initiated
in the previous financial year have
delivered results. As Jim outlined, we
have exceeded our financial goals for the
2022 financial year. I am pleased to report
that we have also successfully executed
our strategic and operational objectives
for FY22.
Myriad Morcells™
Expanding salesforce and US opportunities
TELA Bio performance
In our FY21 Annual Report, we signalled that sales of our Myriad
TELA Bio, our sales and distribution partner licensed for
products would underpin AROA’s medium-term growth. These
abdominal wall reconstruction/hernia and breast reconstruction,
products are typically used in an inpatient and operating
performed strongly in CY21 reporting a full year total revenue of
room setting, and our key focus in FY22 was on growing our
US$29.5 million (a 62% increase on CY20).
US direct field sales team to target hospital accounts and
ambulatory surgical centres. We now have 33 direct field sales
representatives in the US, expanding our overall US commercial
operations resource by 54% to 54.
This result followed positive results from TELA Bio’s prospective,
single-arm, multicentre, post-market BRAVO study.8 The study
evaluated 75 patients at 12 months and found that only two (2.7%)
patients had a recurrence, both adjacent to the original hernia
This investment has begun delivering returns. The direct field
repair and with the OviTex repairs remaining intact. The 12-month
salesforce has furnished a strong pipeline of clinical evaluations,
analysis showed low surgical site occurrence and surgical site
value committee approvals and hospital conversions for our
infection rates, and the 24-month follow-up assessed hernia
Myriad Matrix and Myriad Morcells™ products (commercially
recurrence rates of below 5%. In comparison, a large prospective
launched in the US in the 2020 and 2021 calendar years
respectively). We are pleased to report that in FY22, the US
team delivered a 350% year-on-year increase in the number
of active accounts5 purchasing our Myriad products, to 72.
During the year, the Company also signed a contract extension
adding Myriad Matrix and Myriad Morcells products to our pre-
existing purchase agreement with HealthTrust. Healthtrust is the
study of porcine acellular dermal matrix reported recurrence
rates of 19% and 28% at 12- and 24-months respectively,9 while
studies of resorbable synthetic meshes have reported recurrence
rates of up to 21%.10,11,12
Clinical studies building confidence
third largest group purchasing organization in the US, and this
Clinical evidence is an important element to drive the adoption of
extension enables HealthTrust’s members to access our Myriad
products.6
our products. We are pleased to report that several studies were
published or commenced during the year to demonstrate that our
AROA also commenced a limited US commercial launch of our
Symphony™ products during the year, focused on US Department
of Veterans Affairs hospitals and clinics. Symphony has an
estimated US market size of US$1.15 billion7 and so it represents
significant potential value within our product portfolio.
Symphony requires a unique reimbursement code within the US
health system, so a key area of focus over the next 18 months will
be to execute our reimbursement strategy and secure coding
coverage and payment to support a full commercial launch in
the US.
products can improve healing outcomes.
In August 2021, a positive study of real-world data was published
in the prestigious ‘International Wound Journal’.13 The study
retrospectively analysed data from 2,222 diabetic foot ulcer
wounds from 1,590 US patients. It is the first large analysis of
its kind comparing the healing efficacy of AROA’s Endoform
product to traditional collagen/oxidized regenerated cellulose.
The study found that wounds treated with AROA’s Endoform
Natural product showed a significantly improved probability of
wound closure (18% to 38%) and wound closure rate (11.3% to
21.4% reduction in time to closure) compared to wounds treated
with a traditional collagen dressing.
Annual Report AROA 11
AROA currently has four clinical studies underway, assessing our
Endoform, Myriad and Symphony products.
Product pipeline
We continued to grow our product portfolio during the year, with
work on line extensions to existing products and new products
utilising our AROA ECM platform technology for different
procedures and stages of healing.
In particular, AROA sees significant potential14 in our Dead Space
Management platform technology (ENIVO™) which we previewed
during the year. We increased our investment in ENIVO during the
year to accelerate commercialization. Further investment into this
new range is planned for FY23, with AROA targeting FDA 510(k)
submission and publication of a peer-reviewed pre-clinical study
in the coming year.
Manufacturing
We are pleased to report that AROA is well placed to meet the
growing demand for our products. We completed construction of
our second manufacturing facility during the year, and commercial
manufacturing is now underway there. Our two manufacturing
facilities are designed to support approximately NZ$100 million
AROA's newly completed additional manufacturing facility.
Our key area of focus for FY23 will be to continue expanding our
US commercial operations, with plans to add up to 15 direct field
sales representatives to the US team. Our US direct field sales
representatives have established a strong foundation for Myriad
sales and we expect to build further momentum throughout FY23.
We are also encouraged by TELA Bio’s strong results for the
first quarter of the current calendar year, as well as their full-year
revenue projections.
in aggregate annual sales, with operating capacity for the second
We are forecasting strong growth in FY23 with product revenue
facility coming online in phases as necessary to support demand.
guidance of NZ$51-55 million, reflecting a 30-40% increase on
Acknowledgments
FY22. AROA also expects product gross margins to improve to
77% due to increased sales of higher-margin Myriad products and
improving manufacturing efficiencies (despite increased indirect
As we reflect on our FY22 achievements, I want to re-iterate AROA’s
overheads from the new manufacturing facility). Given the dynamic
appreciation to our people and partners for their commitment,
and evolving impact of COVID-19, this guidance is subject to there
resilience and agility in another gruelling year of COVID-19. In
being no material decline in US medical procedure numbers or
particular, our NZ staff persevered through almost four months of
sustained disruption to AROA’s manufacturing or transportation
lockdown in Auckland and our manufacturing and other critical
activities and TELA Bio delivering on its own revenue guidance
staff continued coming to work amid a community outbreak. We
could not have delivered our FY22 outcomes without your hard
work and dedication. Our US sales team also went above and
of US$40-45 million in CY22 (representing 36- 53% growth on
CY21).15 It also assumes an average NZD/USD exchange rate
of 0.70.
beyond to ensure that patients continued to receive our existing
products and to uncover new sales opportunities.
Concluding remarks
I would also like to take this opportunity to thank our outgoing
Chief Operations Officer, Simone von Fircks. Simone has been
with AROA for over eight years and was instrumental to the
Company’s development. She has decided to step away from
AROA to focus on other ventures, and we wish her the very best
in this next chapter of her journey.
Rod Stanley, our VP – Manufacturing, has joined AROA’s Executive
Team and will be taking over Simone’s responsibilities. Rod has
been with the Company for over nine years and was previously
our Director of Manufacturing.
At its core, AROA’s strategy is to drive better patient healing by
offering products that improve the effectiveness and efficiency of
care at a price that expands access. We believe this delivers on
the values driving healthcare spending decisions and progresses
our mission to unlock regenerative healing for every body.
FY23 Outlook
AROA is cognisant of the global economic outlook for FY23
Brian Ward
and associated increasing inflationary pressures, and is actively
managing these risks. We are instituting measures to safeguard
our operations to meet the growing demand for our products in
the coming year and limit our exposure to global supply chain
disruptions. The Company also expects a larger proportion
of higher-value Myriad products in the sales mix to mitigate
exposure to inflationary pricing pressures.
Founder, CEO and Managing Director
AROA Annual Report 12
OUR BOARD
James McLean
Chairman and Independent, Non-Executive Director, Member
(Audit Committee, Risk Committee and Remuneration & Nomination Committee)
First appointed 10 August 2011
James (Jim) is a resident of New Zealand. He has over 25
Before specialising
in science and technology businesses,
years’ experience serving as Chair, Director, or an executive of
Jim held management positions with an
international
research and technology businesses for both commercial and
manufacturing business and spent thirteen years as a partner
New Zealand Government organisations. In addition to AROA,
at chartered accountants, EY. His time at EY was focused
current appointments include Chair of Prevar Limited and R J Hill
on business strategy and included two years’ secondment
Laboratories Limited.
to EY’s Washington DC office.
He was Chair of the New Zealand Institute of Plant & Food
Jim has a BSc (Hons) in Chemistry from University of Otago and
Research and Chair of its predecessor HortResearch, as well as
a Post Graduate Diploma in Accounting from Victoria University
several private businesses and start-up companies. He served
of Wellington.
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.
Brian Ward
Managing Director (and Founder & CEO)
First appointed 21 September 2007
Brian is the founder of AROA and a resident of New Zealand. He
As Founder, CEO and Managing Director of the Company, and a
has held senior corporate roles in life sciences and health care
substantial shareholder in the Company, he is considered by the
companies for more than 25 years. He has extensive management
Board to not be an independent Director.
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 the present.
Brian is a graduate of 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.
Annual Report AROA
13
Steven Engle
Independent, Non-Executive Director, Chair (Remuneration &
Nomination Committee), Member (Risk Committee)
First appointed 1 April 2015
Steve is a resident of the US. He has over 20 years of executive
He was previously the CEO of CohBar, a clinical stage biotechnology
leadership experience with public biotech companies developing
company developing mitochondria-based therapeutics to treat
breakthrough products in metabolic, autoimmune, oncologic and
age-related diseases and extend healthy lifespan. Prior to that,
infectious disease areas.
Steve is the CEO and an Executive Director of Gradalis Inc., a late-
stage biopharmaceutical company focused on the development
and commercialization of novel personalized therapeutics to treat
cancer. He is also 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. Steve also runs
Averigon, an advisory firm to the life sciences industry on matters
ranging from business development to management team
coaching.
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.
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.
Steve holds M.S.E.E. and B.S.E.E. degrees from the University of
Texas with a focus in biomedical engineering.
Philip McCaw
Non-Executive Director, Member (Remuneration
& Nomination Committee)
First appointed 5 March 2008, last re-elected 20 July 2021
Phil is a resident of New Zealand and is the Founding Partner
Outside of Movac, Phil remains an active angel investor and
of Movac, one of New Zealand’s leading Venture Capital funds.
maintains a personal angel investment portfolio. He is a strong
He led the original investment round into AROA in 2008, has
advocate for the development of the entrepreneurial and early-
worked closely with the Company and has served on the Board
stage investment eco-system in New Zealand and was the past
since then. Phil has also been appointed Chair of the New Zealand
Chair of the Angel Association of New Zealand.
Government’s recently established Startup Advisors’ Council, to
help identify and address the opportunities and challenges facing
high growth start-up businesses.
Phil has over 20-years’ experience investing into New Zealand
technology companies and helping to guide their growth. He
was an early investor in Trade Me, New Zealand’s leading on-
line trading community, which was sold to Fairfax in 2006. Phil
was also an early investor into PowerByProxi, a wireless power
technology spin-out from Auckland University, which was sold to
Apple in 2018.
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.
AROA Annual Report 14
John Pinion
Independent, Non-Executive Director, Chair (Risk Committee),
Member (Audit Committee)
First appointed 1 February 2015, last re-elected 20 July 2021
John is a resident of the US. He has over 30 years of global
John
is also an Advisory Board Member
for Celestial
experience leading biologic, small molecule pharmaceutical,
Therapeutics, Inc., a biopharmaceutical company focused on the
gene therapy and device operations across Asia, Europe and
development and commercialization of next-generation novel
the Americas. His expertise and leadership spans engineering,
and groundbreaking mRNA vaccines and therapeutics for the
quality, manufacturing and translational sciences. He joined
treatment and prevention of a variety of infectious diseases, rare
Ultragenyx in July 2015 and currently holds the role of EVP,
diseases and cancers.
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 QC. As a key member of
Ultragenyx’s executive leadership team reporting directly to the
organization’s CEO, he also contributes to ongoing business
John has previously held operational and senior leadership roles
in Genentech (subsequently Roche post Genentech acquisition, as
Senior Vice President and Global Head of Quality and Compliance
for Pharma Technical Operations) and Baxter International’s
Renal, Bioscience, Parenterals and Device divisions.
He holds a B.S. in Mechanical Engineering from West Virginia
development, clinical development, commercial and strategic
University.
planning activities.
John Diddams
Independent, Non-Executive Director, Chair (Audit Committee)
First appointed 21 November 2019
John is a resident of Australia and has over forty years’ experience
and retail, telecommunications, adventure tourism, biotechnology,
as a CFO, CEO and director of both private and publicly listed
and the dental and medical sectors.
companies. John is currently Chairman of the Board of xReality
Group Limited (ASX:XRG) as well as 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
John holds a Bachelor of Commerce from University of NSW,
is a Fellow of the Australian Society of CPAs and a Fellow of the
Australian Institute of Company Directors.
Annual Report AROA 15
OUR EXECUTIVE MANAGEMENT TEAM
Brian Ward
Founder and Chief Executive
Officer, Managing Director
See previous section.
James Agnew
Chief Financial Officer and
Joint Company Secretary
James joined AROA’s management team over 8 years ago.
He has over 20 years’ experience in business and finance. He
brings extensive experience in corporate finance, investment
management, M&A, strategic and operational planning,
contractual management and negotiation,
international
taxation and compliance, including US GAAP.
Prior to this role he was the VP of Finance & Operations
for MXM Mobile (a division of the Meredith Corporation)
based in New York, overseeing all international subsidiaries
following the acquisition of The Hyperfactory Ltd (NZ
high growth technology company) where he held the role
of Group Financial Controller. In his earlier career, James
worked in public practice providing accounting and business
advisory services to a diverse range of successful New
Zealand companies. In 2011 James was a finalist in the Young
Financial Manager of the year at the Annual CFO Awards.
Brad Adams
VP – Commercial
(USA)
Brad joined AROA in November 2019. He has over 20 years
of experience in the strategic sales and marketing of medical
devices within the United States medical system and in other
jurisdictions. Prior to AROA, he served as Vice President, Sales
at ACell Inc., a Columbia, Maryland based regenerative medicine
company. Brad also has more than 15 years within both the
Smith+Nephew, and, Johnson & Johnson families of companies,
much of the time spent in senior global commercial roles. Brad
has a proven record of accelerating revenue growth across
multiple platforms including medical device, pharmaceutical,
biologic, wound/tissue repair and regenerative medicine.
Brad holds a Master of Health Administration (Medical College
of Virginia), a Bachelor of Arts in Economics with distinction
(Virginia Military Institute) and has undertaken professional
courses at Harvard Business School and The Wharton School,
University of Pennsylvania. He is a long-standing member of
the American College of Healthcare Executives.
Rod Stanley
VP – Manufacturing
James holds a Bachelor of Laws and Bachelor of Commerce
Rod Stanley joined AROA 9 years ago and has 15 years’
from Auckland University.
Dr. Barnaby May
Chief Scientific Officer
Barnaby joined AROA’s management team over 13 years
ago. He completed his doctoral thesis on the design and
synthesis of novel HIV protease inhibitors at the University
of Canterbury, New Zealand. He subsequently undertook
postdoctoral studies in 2000 at the University of California San
Francisco (UCSF). During this time, he established and led a
drug discovery program targeting human prion diseases, and
experience in medical device design and manufacturing.
Prior to joining AROA, Rod worked in development of novel
polymer coatings for microfluidic devices at
Industrial
Research Limited. Rod’s professional expertise
includes
chemical processing of biomaterials, and implementation
of sterilization processes. During his time at AROA,
Rod’s focus has been on process design and transfer into
manufacturing, redevelopment and scale-up activities for
the Auckland site, as well as overseeing routine production
activities. Rod holds Master of Science and Bachelor of Science
degrees in Chemistry from the University of Otago.
Simone
von
Fircks,
AROA’s
Chief Operations
Officer, has resigned and her
last day with AROA
is 30 June 2022. Rod Stanley will be taking over Simone’s
successfully identified a compound that underwent immediate
responsibilities.
clinical studies. Barnaby developed additional related research
programs in the areas of protein misfolding diseases, parasitic
diseases, computational and structural biology. In 2003, he
accepted an invitation to a faculty role at UCSF where he built
and led a drug discovery program. This program spanned target
and lead identification, high-throughput screening, medicinal
chemistry, and pre-clinical pharmacokinetics. In 2004, Barnaby
joined InPro Biotechnology as Scientific Director to lead
product development of prion-related medical devices and
diagnostics. After 8 years abroad, he returned to New Zealand in
2008 and joined AROA.
AROA Annual Report
16
Annual Report AROA 17
DIRECTORS’ REPORT
The Directors present their report on the Group for the financial year ended 31 March 2022.
Principal activities
AROA is in the business of soft tissue regeneration. During the year, the Group’s principal activity was the development, manufacture
and distribution of products to improve healing in complex wounds and soft tissue reconstruction.
Review of operations and activities
Commentary on the Group’s operations and activities during the year is set out in the Chair’s Review and CEO’s Report.
Other than as set out there, 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, the Group’s operations, the results of
those operations, or the Group’s state of affairs in subsequent financial years.
Financial results for the year
Normalised Profit or Loss1
Product revenue
Other revenue
Total revenue
Gross profit
Product gross margin %
Other income
Reported
Reported
Reported
2022
2021
YoY %
NZ$000
NZ$000
39,154
21,575
526
767
39,680
22,342
30,303
15,524
81
(31)
78
95
76%
1,116
68%
800 bps
2,682
(58)
Normalised selling and administrative expenses2
Research and development
(27,693)
(8,354)
(18,142)
(6,425)
Total normalised operating expenses
(36,047)
(24,567)
Normalised EBIT
Add back: Depreciation & amortisation
Normalised EBITDA
Net finance expenses
Normalised loss before income tax
(4,628)
3,131
(1,497)
(618)
(5,246)
(6,361)
3,071
(3,290)
(1,111)
(7,472)
53
30
47
27
2
55
(44)
(30)
CC
2022
NZ$000
37,731
507
38,238
28,861
75%
1,116
(27,032)
(8,354)
(35,386)
(5,409)
3,131
(2,278)
(749)
(6,158)
CC
YoY %
84
(30)
80
100
800 bps
(58)
53
30
47
22
2
41
(57)
(29)
1.
The normalised profit or
loss
is non-conforming 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 AROA 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 one-off
transaction costs
associated with AROA’s successful
IPO on the ASX
in July 2020 and capital raise
in August 2021. 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.
2.
These
items have been normalised by
the amounts outlined within
the
section headed
‘Reconciliation of Normalised
Profit or Loss to NZ GAAP Profit or Loss’.
Product Revenue
Product revenue for the year was NZ$39.2 million (NZ$37.7 million in constant currency) representing growth of 81% on the previous
year (84% in constant currency). Myriad™, OviTex™16 and OviTex PRS products were the major contributors to the growth whereas
Endoform™ grew modestly as expected. Endoform and Myriad sales contributed 27% and 10% respectively to total product sales, with
sales of OviTex and OviTex PRS contributing to the balance.
AROA Annual Report
18
Other Revenue
Other revenue represents project fees income received for product development projects undertaken with TELA Bio. TELA Bio is
AROA’s sales and distribution partner licensed for abdominal wall reconstruction/hernia and breast reconstruction.
Gross Margin %
Product gross margin % increased by 8% to 76% (75% in constant currency) in the current year, as a result of increasing economies of
scale, manufacturing efficiency improvements and the growth in sales of high margin Myriad products.
Other Income
Other income represents government grants, subsidies, rent and other sundry income. In the current year, the Group recognised a tax
credit of NZ$1.0 million under the Research & Development Tax Incentive program, which is expected to be received during FY23. In
FY21, the Group received NZ and US Government wage subsidies of NZ$1.3 million and Government research & development grants
of NZ$1.2 million.
Normalised Operating Expenses
Selling and administrative expenses were NZ$27.7 million, representing a 53% increase (53% in constant currency) from NZ$18.1 million
in FY21. This reflects the increased investment into the Company’s US-based sales operations.
Research and development expenses increased (from NZ$6.4 million in FY21) to NZ$8.4 million, representing a 30% change (no
currency impact). This was largely attributable to the increased investment into the Company’s Dead Space Management platform.
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
2022
NZ$000
(5,246)
(2,965)
(50)
-
(8,261)
Reported
2021
NZ$000
(7,472)
(2,010)
(1,607)
(8,013)
(19,102)
Share based payments of NZ$3.0 million relate to the vesting of share options issued to employees and Directors of the Company on
IPO and to the vesting of “one-off” grants to certain employees, including the US based sales team.
Transaction Costs
Transaction costs of NZ$0.1 million in the current year relate to the costs associated with the capital raise in August 2021. Transaction
costs in FY21 of NZ$1.6 million relate to the IPO on ASX in July 2020 and include lead manager fees, legal fees, accounting and audit
fees, ASX listing fees and road show expenses.
Other Losses
Other losses of NZ$8.0 million in FY21 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 FY21, these financial liabilities at fair value through profit or loss were fully reclassified as equity, following the successful IPO.
Annual Report AROA
19
Cashflows
Despite a decrease in the Normalised EBITDA loss in FY22 compared to FY21, net cash outflow from operating activities in FY22 was
NZ$11.5 million compared to NZ$5.0 million in FY21. This increase in net cash outflow from operations is primarily the result of the
timing of OviTex and OviTex PRS sales during the final quarter and the respective receipts of those sales falling in Q1 FY23. Investment
in working capital also increased during the current year as a result of the year-on-year sales growth.
Cash on hand and term deposits increased to NZ$56.2 million as at 31 March 2022 (from NZ$35.4 million as at 31 March 2021), largely
as a result of the Company’s successful capital raising in July/August 2021 which netted NZ$47.7 million. Repayment of borrowings
totalled NZ$10.8 million (inclusive of NZ$1.3 million in interest) during the year, leaving the Company debt-free at the end of FY22.
Purchases of property, plant and equipment of NZ$4.5 million compared to NZ$1.3 million in FY21, reflects the investment during the
current year into expanding the Company’s manufacturing facility.
Dividends
No dividends were paid, declared or recommended during the financial year.
Corporate Governance Statement
While the Board is ultimately responsible for AROA’s corporate governance, the Audit Committee, Risk Committee and Remuneration
& Nomination Committee support the Board by working with management on relevant issues at a suitably detailed level and
then reporting back to the Board. Please refer to AROA’s Corporate Governance Statement (available at https://aroabio.com/nz/
investors/) for a summary of each Committee’s responsibilities and functions. A copy of each Committee’s charter is also available at
https://aroabio.com/nz/investors/.
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.
Director re-elections
Phil McCaw and John Pinion offered themselves up for re-election, and were re-elected, at the Company’s annual general meeting on
20 July 2021.
Jim McLean and Steve Engle are offering themselves up for re-election at the Company’s annual general meeting on 10 August 2022.
Board and Committee meetings
The table below shows attendances by each Director at Board and Committee meetings during the year.
Name
Board of Directors
Audit Committee
Risk Committee
Remuneration &
Nomination Committee
Eligible
Attended
Eligible*
Attended
Eligible*
Attended
Eligible*
Attended
Jim McLean
Brian Ward
Steve Engle
Phil McCaw
John Pinion
John Diddams
8
8
8
8
8
8
8
8
8
8
8
8
3
-
-
-
3
3
*To attend as a member of that Committee
3
3
-
-
3
3
4
-
4
-
4
-
4
4
3
-
4
-
3
-
3
3
-
-
3
3
3
3
-
-
AROA Annual Report 20
Environmental and social risks
AROA’s manufacturing activities involve the controlled storage, use and disposal of hazardous materials. The Company has in place
policies and procedures designed to facilitate compliance with applicable environmental regulations and to mitigate the risks associated
with the Company’s handling of such materials.
For more information on the Company’s assessment of environmental and social risks, please refer to our Corporate Government
Statement.
The Company is cognisant of its environmental and social impact as reflected in two of its five business objectives for FY23 (being (1)
mitigating AROA’s impact on the planet, and (2) ensuring a safe, healthy and productive workplace).
AROA is actively assessing its environmental and social sustainability footprint and intends to commence a comprehensive review of
its exposure to environmental and social risks in the current financial year.
Non-audit services
AROA’s auditor is BDO Auckland Limited. The Group’s statutory audit fee for the financial year ended 31 March 2022 was NZ$113,000.
During the year ended 31 March 2022, BDO Auckland Limited, or entities associated to it, provided the following non-audit services
to the Group.
Description of services
Fees (NZ$)
Review of interim consolidated financial statements
55,000
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.
Annual Report AROA
21
REMUNERATION REPORT (UNAUDITED)
This Remuneration Report, which forms part of the Directors’ Report, outlines the Group’s approach to remuneration for the financial
year ended 31 March 2022.
Overview
AROA’s remuneration policies and practices are designed to attract, retain, motivate and reward talent by offering compensation and
benefits which are (amongst others) competitive within industry, motivate management to pursue the Group’s business objectives,
growth and success and which align management’s interests with the interests of shareholders.
AROA’s remuneration programme comprises of:
•
a fixed wage or salary, and legislative superannuation. This is set at a level to attract and retain high calibre employees and is
reviewed annually taking into account individual, Company and market conditions;
•
a discretionary component providing the potential for an annual cash or share-based bonus based on predetermined corporate
and individual performance targets; and
•
discretionary long term variable remuneration in the form of share options. The Group operated two employee and executive
incentive plans during the financial year ended 31 March 2022; the NZ Option Plan and the US Option Plan. For further details
relating to share options issued during the year, refer to note 21 to the consolidated financial statements.
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 Management.
For completeness, AROA operated an employee incentive share plan from 2014 which was wound up prior to AROA’s admission to the
ASX in July 2020. Under this plan, to maintain incentive alignment, employees (but not Directors) who held such shares were offered
an interest-free loan from AROA to pay up their shares prior to the plan being wound-up. The loan facility was for a maximum amount
of NZ$0.8 million and was initially due to expire on 31 March 2022. Following consideration of a range of factors including employee
retention, the Board approved an extension to the loan repayment date but only for individuals who remained employed by AROA as
at 31 March 2022. Employees who are entitled to the loan extension must repay their loan by the earlier of (a) 28 February 2024, (b) the
last date of their employment with AROA or (c) upon sale of the relevant shares. As at 1 April 2022, the aggregate amount outstanding
under the loan facility was NZ$408,000 (compared to NZ$654,000 as at 1 April 2021).
Employee remuneration
Outlined below is remuneration (inclusive of the value of other benefits) totalling NZ$100,000 or more received by employees or
former employees of the Group during the financial year ended 31 March 2022. This does not include the CEO, who is also a Director
of the Company.
Offshore remuneration amounts have been converted into New Zealand dollars.
The table includes salary, wages and discretionary annual variable remuneration paid during the 2022 financial year. It also includes the
fair value of long-term variable remuneration as expensed in this period.
Remuneration range (NZ$)
Number of employees
100,000
110,001
120,001
130,001
140,001
150,001
160,001
170001
to
to
to
to
to
to
to
to
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
7
5
4
6
7
3
4
3
AROA Annual Report
22
Remuneration range (NZ$)
Number of employees
180,001
190,001
200,001
210,001
230,001
240,001
250,001
260,001
270,001
280,001
300,001
330,001
350,001
370,001
410,001
to
to
to
to
to
to
190,000
200,000
210,000
220,000
240,000
250,000
to
260,000
to
to
to
to
to
to
to
to
270,000
280,000
290,000
310,000
340,000
360,000
380,000
420,000
4
5
2
1
1
1
1
1
1
1
4
1
1
1
1
Overview of Non-Executive Director remuneration
The Remuneration & Nomination Committee assists the Board in establishing remuneration and nomination policies and practices that
satisfy AROA’s remuneration framework.
To achieve this, the Remuneration & Nomination Committee’s responsibilities include reviewing and recommending to the Board the
structure of remuneration to be paid to the Company’s Non-Executive Directors and any changes to the structure of such payments.
The 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). Where appropriate, the Committee
engages external consultants to provide independent advice.
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.
As approved by shareholders at AROA’s 2021 Annual General Meeting, the maximum aggregate annual cash-based remuneration
payable to all of the Company’s Non-Executive Directors for their services as a Director is NZ$650,000. The Company may also grant
its Non-Executive Directors equity-based compensation in the form of share options.
Please
refer
to section headed
‘Director
remuneration details’
for
information on
the Non-Executive Directors’
remuneration for the 2022 financial year. AROA does not provide superannuation arrangements or retirement allowances
to its Non-Executive Directors. Each Non-Executive Director is entitled to be paid for all reasonable travel, accommodation and other
expenses incurred by that Director in connection with their attendance at meetings or otherwise in connection with AROA’s business.
No share options were issued to the Company’s Non-Executive Directors during the year. Please refer to the section
headed ‘Equity instrument disclosures; FY22 option vestings’ for information relating to share options previously granted
to the Non-Executive Directors which vested in the 2022 financial year.
Overview of Executive Management remuneration
The Remuneration & Nomination Committee reviews the performance and remuneration of Executive Management annually, and
provides the Board with recommendations on the same. In designing its recommendations, the Committee reviews market remuneration
levels for comparable roles.
Annual Report AROA
Please refer to the table below for an overview of the remuneration components provided to the Company’s Executive Management.
Component
Description
Link to strategy & performance
Fixed
remuneration
•
•
Base salary
Legislative superannuation
Annual reviews take into account individual factors
such as performance and behaviours
23
Discretionary
annual variable
remuneration
Discretionary
long term variable
remuneration
• At-risk component set at between 25% - 40%
Rewards delivery of key strategic and financial
objectives in line with AROA’s annual business plan
of base salary
•
Paid in cash
• Designed to remunerate Executive
Management relative to AROA’s performance
targets and individual performance targets
that are aligned with AROA’s performance
objectives
• Company performance targets comprise both
financial targets and non-financial objectives
•
The targets are set at the beginning of each
financial year and are approved by the Board
•
Performance against targets is determined
by the Board at the end of each financial year
after review by the Remuneration & Nomination
Committee
• At-risk component in the form of share options
Rewards delivery against longer term strategy
and provides alignment between shareholder and
Executive Management outcomes
• Designed to align Executive Management with
shareholder interests over the longer term
• Vesting is subject to continuing employment
(unless the Board determines otherwise), so
provides a longer-term employee benefit
•
Subject to the terms of the grant, vesting may
also be subject to satisfaction of specified
performance conditions
As noted previously, members of the Executive Management team (other than the CEO, who is also a Director) may
choose to utilise the loan provided by AROA in connection with the 2014 employee incentive share plan which was
wound up in 2020.
Overview of CEO and Managing Director remuneration
Brian Ward’s remuneration structure is consistent with the Executive Management structure outlined above. Please refer
to the section headed ‘Director remuneration details’ for information on Brian’s remuneration for the 2022 financial year. Brian does
not receive additional remuneration in his capacity as a Director of the Company or any other Group company.
Brian was not granted share options in the year ended 31 March 2022. Please refer to the section headed ‘Equity instrument disclosures;
FY22 option vestings’ for information relating to share options previously granted to Brian which vested in the 2022 financial year.
AROA Annual Report 24
Director remuneration details
The Directors’ remuneration (in NZ$) for the year ended 31 March 2022 is set out below.
Short term
benefits
Cash salaries and
fees (NZ$)
Discretionary
annual variable
remuneration (cash
bonus) (NZ$)
Post-employment
benefits
Long term
incentives
Total (NZ$)
Superannuation
(NZ$)
Options* (NZ$)
Jim McLean
Steven Engle
Philip McCaw
John Pinion
John Diddams
$95,000
$85,887
$70,000
$85,887
$74,316
-
-
-
-
-
-
-
-
-
-
$49,035
$144,035
$39,123
$39,123
$39,123
$6,666
$125,010
$109,123
$125,010
$80,982
Brian Ward
$541,688
$206,850**
TOTAL
$952,778
$206,850
$22,456
$22,456
$331,362
$1,102,356
$504,432
$1,686,516
* These amounts reflect the non-cash accounting cost of share options granted prior to FY22 based on NZ IFRS 2 – Share-based Payment. No cash
payments are made in relation to these.
** Brian achieved 98.5% against target for AROA’s FY22 performance. Brian had received discretionary annual variable remuneration of NZ$140,000
for AROA’s performance in the previous financial year (representing 100% achievement against target).17
Equity instrument disclosures
Options holdings
The number of share options held by each Director during FY22 is set out below.
Balance as at 1
April 2021
Exercised
Balance at the
end of the year
Vested and
exercisable
Unvested
Jim McLean
Steven Engle
Philip McCaw
John Pinion
John Diddams
307,200
879,000
245,775
879,000
330,000
(102,400)
204,800
-
(81,925)
-
879,000
163,850
879,000
102,400
797,075
81,925
797,075
102,400
81,925
81,925
81,925
(165,000)
165,000
-
165,000
Brian Ward
3,132,525
-
3,132,525
2,088,350
1,044,175
TOTAL
5,773,500
(349,325)
5,424,175
3,866,825
1,557,350
FY22 option vestings
The following share options previously granted to the Directors vested in FY22:
Financial year in
which granted
Number of options
vested
Exercise price (A$)
Option expiry
Jim McLean
Steven Engle
Philip McCaw
John Pinion
FY21
FY21
FY21
FY21
John Diddams
FY20
Brian Ward
FY21
102,400
81,925
81,925
81,925
165,000
1,044,175
0.75
0.75
0.75
0.75
0.11
0.75
23 July 2025
23 July 2025
23 July 2025
23 July 2025
30 November 2029
23 July 2025
Annual Report AROA
25
Shareholdings
The number of Shares held during FY22 by each Director, including their personally related parties, is set out below.
Balance as at
1 April 2021
Received during
the year on exercise
of options
Purchases or, as
specified, other
additions
Balance at the
end of the year
Jim McLean18
2,572,308
102,400*
Steven Engle
226,553
-
-
-
2,674,708
226,553
Philip McCaw19
16,722,425
81,925*
2,864,879**
19,669,229
John Pinion
472,500
-
John Diddams20
812,550
165,000*
Brian Ward21
33,125,800
-
-
-
-
472,500
977,550
33,125,800
* Shares issued to Jim McLean, Philip McCaw and John Diddams upon the exercise of 102,400 share options (exercise price of A$0.75 each), 163,850
share options (exercise price of A$0.75 each) and 165,000 share options (exercise price of A$0.1075 each) respectively. The shares were issued in
accordance with the exception under ASX Listing Rule 10.16(c) as the share options were issued prior to AROA’s listing on the ASX and the requisite
information was disclosed in AROA’s IPO Prospectus.
***Received pursuant to an in-specie distribution of existing AROA shares by Movac Fund 3 LP to McSyth Capital Investment Trust and the McSyth
Charitable Foundation Trust.
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
AROA Annual Report 26
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 2022, 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 2022, 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 International
Code of Ethics for Assurance Practitioners (including International Independence Standards) (New
Zealand) 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.
Other than in our capacity as auditor we have no 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
Our audit procedures comprised the following:
• We have obtained and evaluated
Management’s TELA Bio revenue share
accrual assessment as at 31 March 2022.
• We have obtained Management’s
calculations prepared for the revenue
share accrual and evaluated the
reasonableness of key inputs and
assumptions. The key inputs included sales
history, expiry dates of inventory held, and
average selling prices achieved by TELA
3
Annual Report AROA
27
BDO Auckland
Recognition of revenue – TELA Bio revenue share
Key Audit Matter
How The Matter Was Addressed in Our Audit
inventory that is eventually sold and the price
that it is sold at are uncertain.
Variable consideration 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 $4.770m.
Bio. We considered an independent
research paper which covered TELA Bio.
• We have obtained confirmation from TELA
Bio, confirming the actual revenue share
for their sales made in the year ended 31
March 2022.
• 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 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 the disclosures in note 3
and 11 to the consolidated financial
statements, including the revenue
recognition policy, to the requirements of
the accounting standard.
Refer to note 3 revenue and segment
information and note 11 trade and other
receivables of the consolidated financial
statements.
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
$5.538m at 31 March 2022 is subject to an
annual impairment test in accordance with NZ
IAS 36 - Impairment of Assets.
The Directors performed their impairment test,
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 14 intangible assets of the
consolidated financial statements.
Our audit procedures comprised the following:
• We have obtained and evaluated
Management’s goodwill impairment
assessment as at 31 March 2022.
• We obtained Management’s value in use
calculations prepared for the Cash
Generating Unit (‘CGU’). We evaluated and
challenged the key inputs and assumptions.
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
4
AROA Annual Report
28
Goodwill impairment test
BDO Auckland
considered and tested alternate
sensitivities.
• We compared the carrying value of the
CGU to the recoverable amount
determined by the impairment test to
identify any impairment losses.
• We have reviewed the disclosures in note
14 to 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
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 and one arrangement where
the vesting conditions were modified which
altered the estimate of the number of options
expected to vest.
The share based payments expense recorded
for the year ended 31 March 2022 is $2.965m.
Details of these share based payment
arrangements are disclosed in note 5 employee
benefit expenses and note 21 share based
payments reserve of the consolidated financial
statements.
Our audit procedures comprised the following:
• We have obtained and evaluated
Management’s Treatment of share based
payment arrangements Assessment as at 31
March 2022.
• We 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
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
including those related to the modified
option.
• We recalculated the share based payments
expense recorded in the Statement of
Profit or Loss and Other Comprehensive
Income over the relevant vesting periods
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.
• We reviewed the disclosures in note 5 and
21 in relation to the share based payment
arrangements.
5
Annual Report AROA
BDO Auckland
BDO Auckland
29
Goodwill impairment test
Other Information
considered and tested alternate
sensitivities.
• We compared the carrying value of the
CGU to the recoverable amount
determined by the impairment test to
identify any impairment losses.
• We have reviewed the disclosures in note
14 to 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
Our audit procedures comprised the following:
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
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 and one arrangement where
the vesting conditions were modified which
altered the estimate of the number of options
expected to vest.
The share based payments expense recorded
for the year ended 31 March 2022 is $2.965m.
Details of these share based payment
arrangements are disclosed in note 5 employee
benefit expenses and note 21 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
• We have obtained and evaluated
Management’s Treatment of share based
payment arrangements Assessment as at 31
March 2022.
• We 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
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
including those related to the modified
option.
• 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
21 in relation to the share based payment
arrangements.
considered a key audit matter.
The directors are responsible for the other information. The other information comprises the Aroa
Biosurgery FY22 Results and FY23 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.
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.
5
6
AROA Annual Report
30
Who we Report to
BDO Auckland
CONSOLIDATED STATEMENT OF PROFIT AND
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 March 2022
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
23 May 2022
Revenue
Cost of sales
Gross profit
Other income
Selling and administrative expenses
Research and development expenses
Other losses
Operating loss before net financing costs
Finance income
Finance expenses
Net finance expenses
Loss before income tax
Income tax expense
Loss for the year attributable to shareholders
Other comprehensive income
Items that will or maybe reclassified to profit or loss
Exchange (loss)/income arising on translation of foreign operations
Items that will not be reclassified to profit or loss
Changes in the fair value of equity investments at fair value through
other comprehensive income
Total other comprehensive income
Total comprehensive loss for the year attributable to
shareholders
Notes
2022
$000
2021
$000
3
3
7
4,5
6
6
8
10
39,680
(9,377)
30,303
1,116
(30,708)
(8,354)
-
(7,643)
535
(1,153)
(618)
(8,261)
(125)
(8,386)
(385)
(345)
(730)
(9,116)
22,342
(6,818)
15,524
2,682
(21,759)
(6,425)
(8,013)
(17,991)
800
(1,911)
(1,111)
(19,102)
(107)
(19,209)
332
615
947
(18,262)
Earnings per share during the year:
Basic earnings per share (cents)
Diluted earnings per share (cents)
22
22
(2.45)
(2.45)
(6.39)
(6.39)
The above consolidated statement of profit and loss and other comprehensive income
should be read in conjunction with the accompanying notes.
7
Annual Report AROA
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
23 May 2022
BDO Auckland
CONSOLIDATED STATEMENT OF PROFIT AND
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 March 2022
CONSOLIDATED STATEMENT OF PROFIT AND
LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
For the year ended 31 March 2022
Cost of sales
Notes
3
2022
$000
39,680
(9,377)
31
2021
$000
22,342
(6,818)
15,524
2,682
2021
$000
(21,759)
(6,425)
22,342
(8,013)
(6,818)
(17,991)
15,524
800
2,682
(1,911)
(21,759)
(1,111)
(6,425)
(19,102)
(8,013)
(107)
(17,991)
(19,209)
800
30,303
1,116
2022
(30,708)
$000
(8,354)
39,680
-
(9,377)
(7,643)
30,303
535
1,116
(1,153)
(30,708)
(618)
(8,354)
(8,261)
-
(125)
(7,643)
(8,386)
535
(1,153)
(618)
(8,261)
(385)
(125)
(8,386)
(345)
(730)
(9,116)
(385)
(345)
(2.45)
(730)
(2.45)
(9,116)
(1,911)
(1,111)
(19,102)
332
(107)
(19,209)
615
947
(18,262)
332
615
(6.39)
947
(6.39)
(18,262)
(2.45)
(2.45)
(6.39)
(6.39)
Gross profit
Other income
Selling and administrative expenses
Research and development expenses
Revenue
Other losses
Cost of sales
Operating loss before net financing costs
Gross profit
Finance income
Other income
Finance expenses
Selling and administrative expenses
Net finance expenses
Research and development expenses
Loss before income tax
Other losses
Income tax expense
Operating loss before net financing costs
Loss for the year attributable to shareholders
Finance income
Finance expenses
Other comprehensive income
Net finance expenses
Items that will or maybe reclassified to profit or loss
Loss before income tax
Exchange (loss)/income arising on translation of foreign operations
Income tax expense
Items that will not be reclassified to profit or loss
Loss for the year attributable to shareholders
Changes in the fair value of equity investments at fair value through
other comprehensive income
Other comprehensive income
Total other comprehensive income
Items that will or maybe reclassified to profit or loss
Total comprehensive loss for the year attributable to
shareholders
Exchange (loss)/income arising on translation of foreign operations
Items that will not be reclassified to profit or loss
Earnings per share during the year:
Changes in the fair value of equity investments at fair value through
other comprehensive income
Basic earnings per share (cents)
Total other comprehensive income
Total comprehensive loss for the year attributable to
Diluted earnings per share (cents)
shareholders
Earnings per share during the year:
Basic earnings per share (cents)
Diluted earnings per share (cents)
3
Notes
3
7
4,5
6
3
6
7
8
4,5
6
6
8
10
10
22
22
22
22
The above consolidated statement of profit and loss and other comprehensive income
should be read in conjunction with the accompanying notes.
The above consolidated statement of profit and loss and other comprehensive income
should be read in conjunction with the accompanying notes.
7
AROA Annual Report
32
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2022
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2022
2022
Notes
Current assets
Cash and cash equivalents
Current assets
Term deposits
Derivative assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Derivative assets
Inventories
Inventories
Trade and other receivables
Tax receivable
Financial assets at fair value through other comprehensive
income
Total current assets
Tax receivable
Financial assets at fair value through other comprehensive
income
Total current assets
Property, plant and equipment
Non-current assets
Non-current assets
Prepayments
Property, plant and equipment
Right of use assets
Prepayments
Intangible assets
Right of use assets
Total non-current assets
Intangible assets
Total assets
Total non-current assets
Current liabilities
Total assets
Trade and other payables
Employee benefits
Current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Lease liabilities
Employee benefits
Tax payables
Interest-bearing loans and borrowings
Lease liabilities
Total current liabilities
Tax payables
Non-current Liabilities
Total current liabilities
Provisions
Non-current Liabilities
Lease liabilities
Provisions
Total non-current liabilities
Lease liabilities
Total liabilities
Total non-current liabilities
Net assets
Total liabilities
Equity
Net assets
Share capital
Share based payment reserve
Equity
Foreign currency translation reserve
Share capital
Equity investment reserve
Share based payment reserve
Accumulated losses
Foreign currency translation reserve
Total equity
Equity investment reserve
Accumulated losses
On behalf of the Board
23 May 2022
Total equity
On behalf of the Board
23 May 2022
Notes
9
9
25
11
12
10
13
11
18
14
15
16
17
19
19
9
9
25
11
12
10
13
11
18
14
15
16
17
19
19
20
21
20
21
8,106
15,381
$000
$000
2021
31
20,000
2021
15,381
$000
20,000
3,608
31
8,106
39
3,608
1,584
39
48,749
1,584
2022
6,165
$000
50,000
6,165
-
18,494
50,000
3,981
-
18,494
-
3,981
1,239
-
79,879
1,239
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
For the year ended 31 March 2022
Share
Capital
Accumu-
lated
Losses
Foreign
Currency
Translatio
n Reserve
Equity
Investment
Reserve
Share
Based
Payment
Reserve
Total
Equity
Notes
$000
$000
$000
$000
$000
$000
97,316
(42,742)
198
1,584
2,130
58,486
-
-
-
(8,386)
-
-
-
(385)
(345)
(8,386)
(385)
(345)
-
-
-
(8,386)
(730)
(9,116)
Balance as at 1 April 2021
Comprehensive income
Loss for the year
Other comprehensive income
for the year
for the year
Transactions with shareholders
Employee shares exercised
Employee shares forfeited
Share based payments
20/21
21
21
457
-
242
Total transactions with shareholders
48,439
Issue of equity securities
20
47,740
-
47,740
Balance as at 31 March 2022
145,755
(51,128)
(187)
1,239
4,812
100,491
29,353
(23,533)
(134)
969
951
7,606
Balance as at 1 April 2020
Comprehensive income
Loss for the year
Other comprehensive income
for the year
for the year
Total comprehensive income
-
-
(19,209)
-
-
(19,209)
-
332
332
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(283)
(162)
3,127
-
2,682
174
(162)
3,369
51,121
-
615
615
-
-
-
-
-
-
-
-
(19,209)
947
-
(18,262)
-
-
(807)
(25)
2,011
1,179
33,833
30,554
1,794
(25)
2,986
69,142
Transactions with shareholders
Issue of Series C3 preference shares
Issue of equity securities
Employee shares exercised
Employee shares forfeited
Share based payments
33,833
30,554
2,601
-
975
20
20
21
21
Total transactions with shareholders
67,963
Balance as at 31 March 2021
97,316
(42,742)
198
1,584
2,130
58,486
The above consolidated statement of movements in equity should be read in conjunction with the accompanying notes.
79,879
48,749
Total comprehensive income
10,023
149
5,333
10,023
17,269
149
32,774
5,333
17,269
6,707
171
5,951
6,707
18,077
171
30,906
5,951
18,077
112,653
32,774
79,655
30,906
112,653
79,655
3,089
2,982
3,089
-
2,982
589
51
-
6,711
589
51
6,711
164
5,287
5,451
164
5,287
12,162
5,451
2,744
2,030
9,952
2,744
2,030
566
9,952
-
15,292
566
-
15,292
161
5,716
5,877
161
5,716
21,169
5,877
100,491
12,162
58,486
21,169
100,491
58,486
145,755
4,812
145,755
(187)
1,239
4,812
(51,128)
(187)
100,491
1,239
(51,128)
100,491
97,316
2,130
97,316
198
1,584
2,130
(42,742)
198
58,486
1,584
(42,742)
58,486
Jim McLean - Chairman
Brian Ward CEO
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Jim McLean - Chairman
Brian Ward CEO
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Annual Report AROA
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
For the year ended 31 March 2022
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
For the year ended 31 March 2022
33
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
For the year ended 31 March 2022
Notes
$000
$000
$000
$000
$000
$000
Share
Capital
Share
Capital
Accumu-
lated
Losses
Accumu-
lated
Losses
Foreign
Currency
Translatio
n Reserve
Foreign
Currency
Translatio
n Reserve
Equity
Investment
Equity
Reserve
Investment
Reserve
Share
Based
Payment
Reserve
Share
Based
Payment
Reserve
Total
Equity
Total
Equity
Notes
$000
$000
$000
$000
$000
$000
Notes
20
Balance as at 1 April 2021
Balance as at 1 April 2021
Comprehensive income
Comprehensive income
Loss for the year
Loss for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Issue of equity securities
Transactions with shareholders
Balance as at 1 April 2021
Transactions with shareholders
Comprehensive income
Issue of equity securities
Loss for the year
Employee shares exercised
Other comprehensive income
Employee shares forfeited
for the year
Total comprehensive income
Share based payments
for the year
Share based payments
Total transactions with shareholders
Total transactions with shareholders
Employee shares exercised
Employee shares forfeited
20
20/21
21
21
Transactions with shareholders
Balance as at 31 March 2022
Issue of equity securities
Balance as at 31 March 2022
Employee shares exercised
Comprehensive income
Employee shares forfeited
Balance as at 1 April 2020
Balance as at 1 April 2020
Share based payments
Comprehensive income
Total transactions with shareholders
Loss for the year
Loss for the year
Other comprehensive income
for the year
Balance as at 31 March 2022
Total comprehensive income
for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Transactions with shareholders
Balance as at 1 April 2020
Transactions with shareholders
Comprehensive income
Issue of Series C3 preference shares
Loss for the year
Issue of Series C3 preference shares
Issue of equity securities
Other comprehensive income
Employee shares exercised
for the year
Total comprehensive income
Employee shares forfeited
for the year
Share based payments
Employee shares exercised
Employee shares forfeited
Issue of equity securities
20
20
21
Share based payments
21
Total transactions with shareholders
Transactions with shareholders
Total transactions with shareholders
Issue of Series C3 preference shares
Balance as at 31 March 2021
Issue of equity securities
Balance as at 31 March 2021
Employee shares exercised
Employee shares forfeited
21
21
21
21
20
20
21
21
20
20
21
97,316
(42,742)
97,316
(42,742)
Accumu-
lated
(8,386)
Losses
-
(8,386)
-
-
Share
Capital
-
-
$000
-
-
1,584
2,130
58,486
198
198
Foreign
Currency
-
Translatio
n Reserve
-
(385)
1,584
Equity
Investment
-
Reserve
-
(345)
2,130
Share
Based
Payment
-
Reserve
-
-
58,486
Total
(8,386)
Equity
(8,386)
(730)
(730)
$000
(9,116)
(9,116)
-
$000
(8,386)
(385)
(345)
$000
(385)
$000
(345)
(8,386)
(385)
(345)
-
$000
-
-
97,316
(42,742)
198
1,584
2,130
58,486
47,740
47,740
20/21
457
457
-
-
-
-
242
-
242
48,439
48,439
-
-
(8,386)
-
-
-
-
-
(8,386)
-
-
-
-
-
-
-
-
(385)
-
-
-
-
(385)
-
-
-
-
-
-
-
(345)
-
-
-
-
-
(283)
(283)
-
(162)
47,740
47,740
(8,386)
174
(730)
(162)
174
-
-
(345)
-
-
(162)
3,127
-
3,127
2,682
(162)
3,369
(9,116)
3,369
51,121
-
2,682
51,121
145,755
47,740
(51,128)
-
145,755
(51,128)
20
20/21
457
-
29,353
242
-
(23,533)
-
29,353
(23,533)
-
(187)
1,239
4,812
100,491
1,239
-
-
4,812
-
(283)
100,491
47,740
174
(187)
-
-
-
(134)
-
(134)
-
969
-
969
(162)
951
3,127
951
(162)
7,606
3,369
7,606
(19,209)
-
-
-
-
-
48,439
-
-
-
-
145,755
-
(19,209)
-
(51,128)
(19,209)
-
-
332
(187)
332
332
-
615
615
1,239
615
2,682
-
-
-
-
4,812
-
(19,209)
51,121
(19,209)
947
947
100,491
(18,262)
-
(19,209)
332
615
-
(18,262)
29,353
(23,533)
(134)
969
951
7,606
33,833
33,833
30,554
30,554
2,601
-
-
2,601
-
-
-
975
975
67,963
-
-
(19,209)
-
-
-
-
-
-
(19,209)
-
-
-
-
-
-
-
332
-
-
332
-
-
-
-
-
-
-
-
-
-
615
-
-
615
-
-
-
-
-
-
-
67,963
33,833
97,316
30,554
-
-
(42,742)
-
97,316
(42,742)
198
-
-
198
-
-
-
1,584
-
1,584
-
33,833
-
(807)
30,554
33,833
(19,209)
30,554
947
1,794
-
-
-
-
(807)
(25)
(25)
-
2,011
1,794
(25)
(18,262)
(25)
2,986
2,011
1,179
2,986
69,142
1,179
69,142
-
2,130
-
33,833
58,486
30,554
2,130
58,486
2,601
-
-
-
-
-
-
-
(807)
(25)
1,794
(25)
Share based payments
The above consolidated statement of movements in equity should be read in conjunction with the accompanying notes.
2,011
975
-
-
21
2,986
-
The above consolidated statement of movements in equity should be read in conjunction with the accompanying notes.
Total transactions with shareholders
67,963
-
-
-
1,179
69,142
Balance as at 31 March 2021
97,316
(42,742)
198
1,584
2,130
58,486
The above consolidated statement of movements in equity should be read in conjunction with the accompanying notes.
AROA Annual Report
34
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 31 March 2022
As at 31 March 2022
Note
Notes
s
2022
2022
2021
2021
$000
$000
$000
$000
Cash flows from operating activities
Current assets
Cash receipts from sales revenue
Cash and cash equivalents
Cash receipts from license fees, project fees, and grant income
Term deposits
Derivative assets
Cash paid to suppliers and employees
Trade and other receivables
Interest received
Interest paid
Inventories
Income tax received
Tax receivable
Financial assets at fair value through other comprehensive
income
Total current assets
Net cash outflow from operating activities
Income tax paid
Cash flows from investing activities
Non-current assets
Purchase of property, plant and equipment
Property, plant and equipment
Prepayments
Purchase of intangible assets
Right of use assets
Term deposits
Intangible assets
Net cash outflow from investing activities
Total non-current assets
9
9
25
11
12
10
13
13
11
14
9
18
14
Cash flows from financing activities
Total assets
Proceeds from issue of shares
Current liabilities
Trade and other payables
Proceeds from financial liabilities at FVTPL
Transaction costs related to issues of equity securities or
convertible debt securities
Repayment of borrowings/deferred consideration
Interest-bearing loans and borrowings
Employee benefits
Lease liability Principal payments
Lease liabilities
Lease liability Interest payments
Tax payables
Net cash inflow from financing activities
Total current liabilities
Net (decrease)/increase in cash and cash equivalents
Non-current Liabilities
Effect of exchange rate fluctuations on cash and cash equivalents
Provisions
Cash and cash equivalents at beginning of year
Lease liabilities
Cash and cash equivalents at end of year
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share based payment reserve
Foreign currency translation reserve
Equity investment reserve
Accumulated losses
Total equity
On behalf of the Board
23 May 2022
27b
27b
15
16
17
19
27b
19
9
20
21
27a
(11,522)
79,879
(5,007)
48,749
-
(1,340)
(41,329)
6,165
29,376
50,000
1,654
18,494
136
3,981
-
-
1,239
(19)
21,044
2,552
(28,115)
134
(853)
231
-
15,381
20,000
31
8,106
3,608
39
1,584
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
1. Corporate information
Aroa Biosurgery Limited ("the Company") together with its subsidiaries
is a leading
regenerative medicine company which develops, manufactures and distributes 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 2022 comprise the Company and its two subsidiaries, Aroa Biosurgery Incorporated
and Mesynthes Nominee Limited. All subsidiary entities have a balance date of 31 March.
Equity holding
Principal
Activity
Place of
Busines
s
Aroa Biosurgery Incorporated
Sales & Distribution US
Mesynthes Nominee Limited
Nominee Shareholder NZ
2022
2021
%
100
100
%
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 23 May 2022.
2. Summary of significant accounting policies
Statement of compliance and basis of preparation
The consolidated financial statements have been prepared in accordance with New Zealand Generally
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 ).
and accounting standards and authoritative
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except for the
following item (refer to individual accounting policies for details):
-
Financial assets at fair value through other comprehensive income
The consolidated financial statements are presented in New Zealand dollars ($) which is the
functional and
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 13 and 18),
accrued revenue (refer
to Notes 3 and 11), the value of share-based payments (refer to Note 21), and the impairment of intangible
assets (refer to Note 14).
10,023
(4,455)
(416)
(30,000)
(34,871)
149
5,333
17,269
32,774
112,653
50,324
-
3,089
(2,214)
2,982
(9,514)
-
(575)
(388)
589
51
(1,265)
(235)
(20,000)
(21,500)
34,951
19,804
(4,329)
(12,596)
(322)
(409)
6,707
171
5,951
18,077
30,906
79,655
2,744
2,030
9,952
566
-
37,633
6,711
37,099
15,292
(8,760)
(456)
164
15,381
5,287
6,165
5,451
10,592
939
3,850
15,381
161
5,716
5,877
12,162
21,169
Functional and presentation currency
100,491
58,486
145,755
4,812
(187)
1,239
(51,128)
100,491
97,316
2,130
198
1,584
(42,742)
58,486
Jim McLean - Chairman
Brian Ward CEO
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Annual Report AROA
35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
1. Corporate information
Aroa Biosurgery Limited ("the Company") together with its subsidiaries
is a leading
regenerative medicine company which develops, manufactures and distributes 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 2022 comprise the Company and its two subsidiaries, Aroa Biosurgery Incorporated
and Mesynthes Nominee Limited. All subsidiary entities have a balance date of 31 March.
Equity holding
Principal
Activity
Place of
Busines
s
Aroa Biosurgery Incorporated
Sales & Distribution US
Mesynthes Nominee Limited
Nominee Shareholder NZ
2022
2021
%
100
100
%
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 23 May 2022.
2. Summary of significant accounting policies
Statement of compliance and basis of preparation
The consolidated financial statements have been prepared in accordance with New Zealand Generally
and 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 item (refer to individual accounting policies for details):
-
Financial assets at fair value through other comprehensive income
Functional and presentation currency
The consolidated financial statements are presented in New Zealand dollars ($) which is the
functional and
rounded to the nearest thousands, except where otherwise indicated.
presentation currency. All financial information is presented in New Zealand dollars
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
accrued revenue (refer
use assets capitalised (refer to Notes 13 and 18),
to Notes 3 and 11), the value of share-based payments (refer to Note 21), and the impairment of intangible
assets (refer to Note 14).
AROA Annual Report
36
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
For the year ended 31 March 2022
2. Summary of significant accounting policies (continued)
Use of estimates and judgements (Continued)
As a result of the ongoing COVID-19 pandemic, management assessed its impact on financial statement areas as
outlined below.
-
-
-
-
Going concern: The Directors have concluded that the Company is a going concern. Refer below.
Inventory: 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 year. Refer to Note 12.
impairment to the value as of 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 14.
ets include listed equities. Management is satisfied that there is no
approval, identification of eac
Going concern
The Group posted a net loss before tax of $8,261,000 for the year (2021: loss before tax of $19,102,000). The Group
posted total operating cash outflow of $11,522,000 (2021: outflow of $5,007,000).
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, 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
condition that may cast significant doubt on its going concern assumptions.
contract with TELA Bio entitles the Group to an agreed
al expectations, in the reporting period. Management is not aware of any other event or
wall reconstruction and hernia repair and breast reconstruction in North America and Europe. The
The consideration is variable since the
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
No new standards have been adopted in the annual financial statements for the year ended 31 March 2022.
New standards, interpretations and amendments not yet effective
The following amendments are effective for the period beginning 1 January 2022:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
3. Revenue and segment information
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 has identified the following main categories of revenue:
the Group.
Sales of goods
possession of the product. All contracts with customers are standardised and satisfy the criteria of transaction
omer takes
the product transfers to the customer, which is assessed to be at the time of receipt of goods by the customer.
s ability and intention to pay. Revenue is recognised at a point in time when control over
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
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.
a. Revenue share
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
The Group estimates the tru
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.
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.
- Onerous Contracts Cost of Fulfilling a Contract (Amendments to IAS 37);
-
-
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41);
and
References to Conceptual Framework (Amendments to IFRS 3).
-
The following amendments are effective for the period beginning 1 January 2023:
-
-
-
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
Definition of Accounting Estimates (Amendments to IAS 8); and
Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
The Group does not expect these amendments issued by the IASB, but not yet effective, to have a material
impact on its consolidated financial statements when applied in the future.
Annual Report AROA
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
3. Revenue and segment information
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
omer takes
possession of the product. All contracts with customers are standardised and satisfy the criteria of transaction
approval, identification of eac
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
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.
a. Revenue share
wall reconstruction and hernia repair and breast reconstruction in North America and Europe. The
contract with TELA Bio entitles the Group to an agreed
The consideration is variable since the
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
The Group estimates the tru
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.
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.
AROA Annual Report
38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
3. Revenue and segment information (continued)
Sales of goods (USA)
Sales of goods (Rest of the world)
Project fees (USA)
Total revenue
Revenue recognised point in time
Revenue recognised over time
Total revenue
Segment information
2022
$000
38,077
1,077
526
2021
$000
20,617
958
767
39,680
22,342
39,154
526
39,680
21,575
767
22,342
Revenues from external customers are from sales of goods 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
as reflected in the sales above.
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 $25,336,000 (2021: $11,811,000) are derived from a single external customer, being
sales of products and services to
The Group held all of its non-current assets in New Zealand with an exception of the right-of-use assets of
approximately $0.1m for the leasehold property in the USA.
Other income
Other income includes research and development related grants and rent income. The Group expects to receive
a tax credit payment of $965,000 under the Research and Development Tax Incentive program. (2021: $1.2
million under Callaghan Innovation grant). The Group received no COVID-19 related subsidies or business support
measures from New Zealand and US governments during the reporting period. (2021: $1.3 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
4. Operating loss before net financing costs
Operating loss before net financing costs includes the following:
Fair value adjustments to financial liabilities at FVTPL
7
Transaction costs relating to issue of securities
Note
2022
$000
Auditor's fees:
Statutory audit
Other assurance engagements:
Half-year review
Research and development review
Raw materials and consumables
Depreciation:
Property, Plant & Equipment - Research and development *
Property, Plant & Equipment - Other
Right of use assets Research and development *
Right of use assets Other
Non-executive directors' fees
Insurance
Amortisation:
Patents
Rental lease costs low value and short-term leases
Customer relationships and reacquired rights
Write-down of inventory to net realisable value
Research and development *
13/18
18
18
23
14
14
-
50
113
55
-
369
765
115
658
411
817
110
63
1,161
118
7,847
4,269
2,865
2021
$000
8,013
1,607
128
54
5
367
747
84
658
389
756
121
54
1,161
70
5,974
* Total research & development expenditure is $8,354,000 (2021: $6,425,000). It includes an amount of $515,000
(2021: $660,000) funded by third parties outside of the Group. All research & development has been expensed in
accordance with New Zealand Equivalent to International Accounting Standard 38
5. Employee benefit expenses
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
Total employee benefit expenses
Note
21
21
2022
$000
24,071
2,032
30
2,935
29,068
2021
$000
16,166
652
96
1,889
18,803
Employee entitlements includes an amount of $4,461,000 (2021: $3,070,600) disclosed as part of research and
development expenditures in Note 4 and includes an amount of $173,000 (2021: $305,000) relating to share-based
payments for shares issued to the Directors as disclosed in Note 23.
Annual Report AROA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
4. Operating loss before net financing costs
39
Operating loss before net financing costs includes the following:
Fair value adjustments to financial liabilities at FVTPL
7
Transaction costs relating to issue of securities
Auditor's fees:
Statutory audit
Other assurance engagements:
Half-year review
Research and development review
Raw materials and consumables
Depreciation:
Property, Plant & Equipment - Research and development *
Property, Plant & Equipment - Other
Right of use assets Research and development *
Right of use assets Other
Non-executive directors' fees
Insurance
Rental lease costs low value and short-term leases
Amortisation:
Patents
Customer relationships and reacquired rights
Write-down of inventory to net realisable value
Research and development *
Note
2022
$000
-
50
113
55
-
2021
$000
8,013
1,607
128
54
5
4,269
2,865
13/18
18
18
23
14
14
369
765
115
658
411
817
110
63
1,161
118
7,847
367
747
84
658
389
756
121
54
1,161
70
5,974
* Total research & development expenditure is $8,354,000 (2021: $6,425,000). It includes an amount of $515,000
(2021: $660,000) funded by third parties outside of the Group. All research & development has been expensed in
accordance with New Zealand Equivalent to International Accounting Standard 38
5. Employee benefit expenses
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
Total employee benefit expenses
Note
21
21
2022
$000
24,071
2,032
30
2,935
29,068
2021
$000
16,166
652
96
1,889
18,803
Employee entitlements includes an amount of $4,461,000 (2021: $3,070,600) disclosed as part of research and
development expenditures in Note 4 and includes an amount of $173,000 (2021: $305,000) relating to share-based
payments for shares issued to the Directors as disclosed in Note 23.
AROA Annual Report
40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
6. Net finance income/(expenses)
Finance income and finance expenses have been accrued to reporting date using the effective interest method.
Finance income assets at amortised cost
Interest received on bank balances
Foreign currency gains
Total finance income
Finance expenses liabilities at amortised cost
Interest expenses borrowings
Interest expenses deferred consideration
Interest expenses lease liabilities
Finance cost make good provision
Total finance expenses
Note
19
2022
$000
403
132
535
-
(747)
(403)
(3)
(1,153)
2021
$000
154
646
800
(23)
(1,478)
(406)
(4)
(1,911)
Net finance expenses
(618)
(1,111)
Reconciliation of income tax expense
Interest expenses on deferred consideration relates to the deferred consideration of $747,000 (2021:
$1,478,000) owed to Hollister for the purchase of the Wound Care business. This balance was fully repaid in
August 2021. Refer to Note 17.
7. Other losses
Fair value adjustment on financial liabilities at FVTPL
Total other losses
2022
$000
-
-
2021
$000
(8,013)
(8,013)
The fair value adjustment on financial liabilities at FVTPL relates to Series C (3) Preference shares that were fully
reclassified to equity upon IPO in the year ended 31 March 2021.
8.
Income taxes
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 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
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:
- 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
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
(Continued)
For the year ended 31 March 2022
8.
Income taxes (continued)
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
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 deferred tax on temporary differences and tax losses
Tax losses not recognised in current year
Income Tax Expense
Major components of tax expense/(income)
Current tax expense
Current period
R&D tax credit
Total current tax benefit
Deferred tax (income)
Total tax expense
2022
$000
(8,261)
(2,313)
(30)
1,141
-
(270)
1,597
-
125
2022
$000
125
-
-
-
125
2021
$000
(19,102)
(5,349)
110
3,225
-
2,121
-
-
107
2021
$000
107
-
-
-
107
As at 31 March 2022, the Company had tax losses of $9,520,482 (2021: $14,587,081). 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 2022, the Group had $16,993,721 (2021: $12,100,040) 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 2022 on the basis that
large tax profits are not foreseeable in the year ending 31 March 2023.
Annual Report AROA
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
8.
Income taxes (continued)
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 deferred tax on temporary differences and tax losses
Tax losses not recognised in current year
Income Tax Expense
Major components of tax expense/(income)
Current tax expense
Current period
R&D tax credit
Total current tax benefit
Deferred tax (income)
Total tax expense
2022
$000
(8,261)
(2,313)
(30)
1,141
-
(270)
1,597
-
125
2022
$000
125
-
-
-
125
2021
$000
(19,102)
(5,349)
110
3,225
-
-
2,121
-
107
2021
$000
107
-
-
-
107
As at 31 March 2022, the Company had tax losses of $9,520,482 (2021: $14,587,081). 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 2022, the Group had $16,993,721 (2021: $12,100,040) 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 2022 on the basis that
large tax profits are not foreseeable in the year ending 31 March 2023.
AROA Annual Report
42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
8.
Income taxes (continued)
Deferred tax assets/(liabilities) recognised:
Accrued revenue
Deferred R&D expenditure
Intangible assets
Other
Provision
Unused tax losses
Total deferred tax asset/(liability) recognised
Deferred tax assets/(liabilities) unrecognised (tax effected)
Temporary differences
Deferred R&D expenditure
Unused tax losses
Total deferred tax asset/(liability) unrecognised (tax effected)
2022
$000
-
2,612
(2,993)
290
91
-
-
2022
$000
1,043
2,146
2,666
5,855
2021
$000
(872)
2,870
(3,319)
856
465
-
-
2021
$000
531
519
4,084
5,134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
9. Cash and cash equivalents & term deposits
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
During the year, the Group entered into short-term deposit arrangements with the Bank of New Zealand, ASB
Bank and Westpac. The term deposits not yet matured as of the reporting date had an average rate of 1.54%
(2021: 1.09%) per annum with a maturity of less than 6 months from the reporting date.
Term deposits
Total term deposits
10. Financial assets at fair value through other comprehensive income
The Group classifies the following financial assets at fair value through other comprehensive income (
TOCI
-
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
Total financial assets at FVTOCI
The USA
the reporting date (2021: US$14.90).
and is revalued at reporting date.
listed on the NASDAQ. The Group held 74,316 (2021: 74,316 shares) shares at a value of US$11.63 per share as at
The fair value of the listed equity securities is based on published market price (level 1 in the fair value hierarchy)
2022
$000
6,165
6,165
2021
$000
15,381
15,381
2022
$000
50,000
50,000
2021
$000
20,000
20,000
2022
$000
1,239
1,239
2021
$000
1,584
1,584
Annual Report AROA
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
9. Cash and cash equivalents & term deposits
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
2022
$000
6,165
6,165
2021
$000
15,381
15,381
During the year, the Group entered into short-term deposit arrangements with the Bank of New Zealand, ASB
Bank and Westpac. The term deposits not yet matured as of the reporting date had an average rate of 1.54%
(2021: 1.09%) per annum with a maturity of less than 6 months from the reporting date.
Term deposits
Total term deposits
2022
$000
50,000
50,000
2021
$000
20,000
20,000
10. Financial assets at fair value through other comprehensive income
The Group classifies the following financial assets at fair value through other comprehensive income (
TOCI
-
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
Total financial assets at FVTOCI
2022
$000
1,239
1,239
2021
$000
1,584
1,584
The USA
listed on the NASDAQ. The Group held 74,316 (2021: 74,316 shares) shares at a value of US$11.63 per share as at
the reporting date (2021: US$14.90).
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.
AROA Annual Report
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
11. Trade and other receivables
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 simi
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
customers.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
12. Inventories
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.
to expire before being sold.
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 product is expected
Trade receivables
Less provision for impairment of trade receivables
Net trade receivables
Prepayments
Total prepayment
Other receivables
Other receivables - GST
Other receivables Revenue share
Other receivables Grant accrual
Total current trade and other receivables
Prepayments
Total non-current prepayments
2022
$000
10,385
(28)
10,357
1,325
1,325
682
235
4,770
1,125
18,494
2022
$000
149
149
2021
$000
2,790
(10)
2,780
918
918
538
35
3,116
719
8,106
2021
$000
171
171
Trade receivables amounting to $10,357,000 (2021: $2,780,000) 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 an accrual of tax credit
income relating to the Research and Development Tax Incentive program, Callaghan Innovation grant accrual,
accrued revenue share from TELA Bio which is based on the historical performance and trends. Refer to Note 3.
The non-current portion of prepayment relates to the Grou
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 2022, current trade receivables with a nominal value of $28,000 (2021: $10,000) were impaired
and provided for.
(ii) Past due but not impaired receivables
As at 31 March 2022, trade receivables of $3,175,000 (2021: $135,000) were past due but not impaired.
Subsequent to the reporting date, the Group received over $2,100,000 of these past due trade receivables.
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
Total trade receivables
2022
$000
7,212
2,733
163
140
137
10,385
2021
$000
2,645
88
49
2
6
2,790
Raw materials
Work in progress
Finished goods
Provision for obsolescence
Total inventories
2022
$000
1,111
1,228
2,047
(405)
3,981
2021
$000
539
1,436
1,913
(280)
3,608
As at 31 March 2022, inventories of $404,518 (2021: $279,832) value were impaired and provided for.
13. Property, plant & equipment
(i) Recognition and measurement
losses.
equipment.
Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that
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.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with
(ii) Subsequent expenditure
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:
Leasehold improvements
Plant & equipment
Fixtures & fittings
10 years
4 - 11 years
3 - 10 years
Computer equipment & software
3 - 4 years
Annual Report AROA
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
12. Inventories
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 product is expected
to expire before being sold.
Raw materials
Work in progress
Finished goods
Provision for obsolescence
Total inventories
2022
$000
1,111
1,228
2,047
(405)
3,981
2021
$000
539
1,436
1,913
(280)
3,608
As at 31 March 2022, inventories of $404,518 (2021: $279,832) value were impaired and provided for.
13. Property, plant & equipment
(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:
Leasehold improvements
Plant & equipment
Fixtures & fittings
Computer equipment & software
10 years
4 - 11 years
3 - 10 years
3 - 4 years
AROA Annual Report
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
13. Property, plant & equipment (continued)
Depreciation methods, rates and residual values are reviewed at reporting date and adjusted if appropriate.
Lease-hold
Improve-
ments
Capital
Work In
Progress
Plant and
Equipment
Fixture &
Fitting
Computer
Equipment
& Software
Total
$000
$000
$000
$000
$000
$000
entered into between the Group and Hollister Incorporated. Goodwill is not amortised.
Cost
Balance 1 April 2021
Additions
Transfers in/ (out)
Disposals
1,586
-
45
-
Balance 31 March 2022
1,631
Accumulated
Depreciation
Balance 1 April 2021
Depreciation
Disposals
(999)
(77)
Balance 31 March 2022
(1,076)
457
3,936
(228)
-
4,165
8,559
134
42
(169)
8,566
-
-
-
-
(3,559)
(809)
164
(4,204)
Net Book Value
Balance 1 April 2021
Balance 31 March 2022
587
555
457
4,165
5,000
4,362
585
44
-
(5)
624
(207)
(54)
5
(256)
378
368
968
341
141
(163)
1,287
(683)
(194)
163
(714)
12,155
4,455
-
(337)
16,273
(5,448)
(1,134)
332
(6,250)
285
573
6,707
10,023
Lease-hold
Improve-
ments
Capital
Work In
Progress
Plant and
Equipment
Fixture &
Fitting
Computer
Equipment
& Software
Total
$000
$000
$000
$000
$000
$000
Cost
Balance 1 April 2020
Additions
Transfer in/(out)
Disposals
1,472
114
-
-
807
458
(808)
-
7,506
249
808
(4)
Balance 31 March 2021
1,586
457
8,559
436
149
-
-
585
698
270
-
-
968
10,919
1,240
-
(4)
12,155
Accumulated
Depreciation
Balance 1 April 2020
Depreciation
Disposal
Balance 31 March 2021
Net Book Value
Balance 1 April 2020
Balance 31 March 2021
(945)
(54)
-
(999)
-
(2,738)
-
-
(825)
4
(161)
(46)
-
(516)
(167)
-
(4,360)
(1,092)
4
-
(3,559)
(207)
(683)
(5,448)
527
587
807
457
4,768
5,000
275
378
182
285
6,559
6,707
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
14. Intangible assets
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
Trademarks have finite useful lives and are measured at cost less accumulated amortisation and accumulated
profit or loss as incurred.
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
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 carri ed
out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its
expected to benefit from a business combination that gives rise to the goodwill.
Impairment charges are included in profit or loss. 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
9 years
Reacquired rights
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)
Patents &
Customer
Reacquired
Trademarks
Relationships
$000
$000
rights
$000
9,772
-
9,772
Goodwill
$000
5,538
-
5,538
Total
$000
21,811
416
22,227
5,563
-
5,563
Cost
Balance 1 April 2021
Additions
Balance 31 March 2022
Accumulated
Amortisation
Balance 1 April 2021
Amortisation
Balance 31 March 2022
Net Book Value
Balance 1 April 2021
Balance 31 March 2022
938
416
1,354
(251)
(63)
(314)
(1,854)
(618)
(2,472)
(1,629)
(543)
(2,172)
-
-
-
(3,734)
(1,224)
(4,958)
687
1,040
3,709
3,091
8,143
7,600
5,538
5,538
18,077
17,269
Annual Report AROA
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
14. Intangible assets
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 carri ed
out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its
expected to benefit from a business combination that gives rise to the goodwill.
Impairment charges are included in profit or loss. 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
9 years
Reacquired rights
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)
Cost
Balance 1 April 2021
Additions
Balance 31 March 2022
Accumulated
Amortisation
Balance 1 April 2021
Amortisation
Balance 31 March 2022
Net Book Value
Balance 1 April 2021
Balance 31 March 2022
938
416
1,354
(251)
(63)
(314)
Patents &
Trademarks
$000
Customer
Relationships
$000
Reacquired
rights
$000
5,563
-
5,563
9,772
-
9,772
Goodwill
$000
5,538
-
5,538
Total
$000
21,811
416
22,227
(1,854)
(618)
(2,472)
(1,629)
(543)
(2,172)
-
-
-
(3,734)
(1,224)
(4,958)
687
1,040
3,709
3,091
8,143
7,600
5,538
5,538
18,077
17,269
AROA Annual Report
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
14. Intangible assets (continued)
Patents &
Trademarks
$000
Customer
relationships
$000
Reacquired
rights
$000
Goodwill
$000
Total
$000
Cost
Balance 1 April 2020
Additions
Balance 31 March 2021
Accumulated
Amortisation
Balance 1 April 2020
Amortisation
Balance 31 March 2021
Net Book Value
Balance 1 April 2020
Balance 31 March 2021
703
235
938
(197)
(54)
(251)
506
687
5,563
-
5,563
9,772
-
9,772
5,538
-
5,538
21,576
235
21,811
(1,236)
(618)
(1,854)
(1,086)
(543)
(1,629)
-
-
-
(2,519)
(1,215)
(3,734)
4,327
3,709
8,686
8,143
5,538
5,538
19,057
18,077
On 31 March 2022, the Group tested whether goodwill has suffered any impairment. For the purpose of impairment
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.
the year ending 31 March 2023 was the basis for
long-term outlook. Other key assumptions are as follows:
five-year forecast cash flow projections. The budget for
Discount rate post tax
Terminal growth rate
2022
10.2%
3.0%
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
15. Trade and other payables
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.
Trade payables
Accrued expenses
Other payables
Total trade and other payables
not discounted.
16. Employee benefits
(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
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
re
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.
Leave and wages accrual
Bonus accrual
Employee benefits
17. Interest bearing loans and borrowings
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.
2022
$000
1,333
1,707
49
3,089
2021
$000
740
1,977
27
2,744
2022
$000
1,452
1,530
2,982
2021
$000
1,000
1,030
2,030
2022
$000
-
-
-
-
-
-
2021
$000
-
9,952
9,952
-
-
-
Interest-bearing loans and borrowings
Deferred consideration
Total interest bearing liabilities
current
Interest-bearing loans and borrowings
Deferred consideration
Total interest bearing liabilities
non-current
At the reporting date, no interest bearing debt facilities remain in place.
Annual Report AROA
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
15. Trade and other payables
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.
Trade payables
Accrued expenses
Other payables
Total trade and other payables
2022
$000
1,333
1,707
49
3,089
2021
$000
740
1,977
27
2,744
Trade payables generally have terms of 30 days and are interest free. Trade payables of a short-term duration are
not discounted.
16. Employee benefits
(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
re
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.
Leave and wages accrual
Bonus accrual
Employee benefits
17. Interest bearing loans and borrowings
2022
$000
1,452
1,530
2,982
2021
$000
1,000
1,030
2,030
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 loans and borrowings
Deferred consideration
Total interest bearing liabilities
current
Interest-bearing loans and borrowings
Deferred consideration
Total interest bearing liabilities
non-current
At the reporting date, no interest bearing debt facilities remain in place.
2022
$000
-
-
-
-
-
-
2021
$000
-
9,952
9,952
-
-
-
AROA Annual Report
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
18. Right of use assets
As at 1 April 2021
Additions
Depreciation
Modification adjustment
As at 31 March 2022
Balance 1 April 2020
Addition
Depreciation
Modification adjustment
Balance 31 March 2021
19. Lease liabilities
As at 1 April 2021
Additions
Modification Adjustment
Interest expenses
Lease payments
As at 31 March 2022
Current
Non-current
Total
As at 1 April 2020
Addition
Modification adjustment
Interests
Lease payments
As at 31 March 2021
Current
Non-current
Total
Properties
Equipment
$000
$000
5,951
-
(773)
155
5,333
-
-
-
-
-
Properties
$000
Equipment
$000
2,154
4,431
(721)
87
5,951
21
-
(21)
-
-
Properties
$000
Equipment
$000
6,282
-
155
403
(964)
5,876
589
5,287
5,876
-
-
-
-
-
-
-
-
-
Properties
$000
Equipment
$000
2,063
4,431
87
409
(708)
6,282
566
5,716
6,282
22
-
-
1
(23)
-
-
-
-
Total
$000
5,951
-
(773)
155
5,333
Total
$000
2,175
4,431
(742)
87
5,951
Total
$000
6,282
-
155
403
(964)
5,876
589
5,287
5,876
Total
$000
2,085
4,431
87
410
(731)
6,282
566
5,716
6,282
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
19. Lease liabilities (continued)
•
•
Leases of low value assets; and
Leases with a term of 12 months or less
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
•
•
•
•
•
•
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
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
ncremental borrowing rate on commencement of
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;
termination option being exercised.
any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of
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
restore the leased asset.
the amount of any provision recognised where the Group is contractually required to dismantle, remove or
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.
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.
Annual Report AROA
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
19. Lease liabilities (continued)
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
ncremental 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.
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.
AROA Annual Report
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
19. Lease liabilities (continued)
When the Group renegotiates the contractual terms of a lease with the lessor, the accounting depends on the
nature of the modification:
standalone price for the additional rights-of-use obtained, the modification is accounted for as a separate lease in
accordance with the above policy
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
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 three 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.
these payments would result an additional $10
.
20. Share capital
(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.
Share capital at beginning of the year
Reclassification of financial liabilities at FVTPL to equity
Shares issued from capital raise / IPO
Shares issued from Share Plan and Option Plan
Share capital at end of the year
# of shares
At 1 April 2021
Issue of share capital
Balance 31 March 2022
2022
$000
97,316
-
47,740
699
145,755
2021
$000
29,353
33,833
30,554
3,576
97,316
Ordinary
shares
300,726,414
Total
300,726,414
41,734,719
342,461,133
41,734,719
342,461,133
In August 2021, the Group raised additional capital of AU$45,435,000 net of acquisition costs and issued
40,684,305 ordinary shares. During the reporting period, an additional 1,050,414 shares were issued under the
share purchase and share option scheme for $699,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
21. Share based payments reserve
Share option plan
The Group operates a share option plan for selected employees to provide an 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
was issued to employees with an exercise price equal to the market valuation of shares at the time of offer. The
grant of share options is split into three tranches vesting over a three year period.
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 admi nistrative rulings by
the Internal Revenue Service in the United States Department of the Treasury of the United States federal
government.
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:
Parameters
Issued on
April 2021
Issued on
August 2021
Assumptions for Share Options
Valuation date
Beginning stock price
Risk free rate
Volatility
The Group's stock price was based on the publicly traded share price at the
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
Issued on
June 2021
Grant date
valuation date.
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
Balance as at 31 March
2022
$000
2,130
3,127
(283)
(162)
4,812
2021
$000
951
2,011
(807)
(25)
2,130
Annual Report AROA
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
21. Share based payments reserve
Share option plan
The Group operates a share option plan for selected employees to provide an 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
was issued to employees with an exercise price equal to the market valuation of shares at the time of offer. The
grant of share options is split into three tranches vesting over a three year period.
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 admi nistrative rulings by
the Internal Revenue Service in the United States Department of the Treasury of the United States federal
government.
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:
Assumptions for Share Options
Parameters
Valuation date
Issued on
April 2021
Issued on
June 2021
Grant date
Issued on
August 2021
Beginning stock price
The Group's stock price was based on the publicly traded share price at the
valuation date.
Risk free rate
The risk-free rate was based on the rate of treasury securities with the same term
as the estimated time for the projection period.
Volatility
competitors.
The volatility (standard deviation) was estimated based on an analysis of the
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
Balance as at 31 March
2022
$000
2,130
3,127
(283)
(162)
4,812
2021
$000
951
2,011
(807)
(25)
2,130
AROA Annual Report
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
21. Share based payments reserve (continued)
a) Aroa
prior to IPO
Under the Option Plan prior to IPO, the Company granted directors, key management and certain employees,
options to subscribe for ordinary shares since 2017.
The opening balance of share options and the share options exercised during the prior year are prior to the 75:1
share split, which took effect upon the initial public offering in July 2020.
Summary of options granted under the Option Plan prior to IPO
Opening balance
Granted during the period
Exercised during the period
Impact of share split
Forfeited during the period
Closing balance
2022
Average
exercise
price per
option
NZ$
0.10
-
0.10
-
-
2022
# of
options
3,919,575
-
(834,375)
-
-
2021
Average
exercise
price per
option
NZ$
7.42
-
7.47
-
-
2021
# of
options
131,695
-
(79,434)
3,867,314
-
0.10
3,085,200
0.10
3,919,575
Vested and exercisable as at 31 March
0.10
1,896,450
0.10
1,660,200
Share options outstanding at the end of the year have the following expiry dates:
Grant date
Expiry date
Grant date
Expiry date
1 October 2018
1 July 2019
1 December 2019
Total
01 October 2028
01 October 2028
30 November 2029
Share
options
Share
options
31 March
2022
1,339,900
307,500
1,437,800
3,085,200
31 March
2021
2,009,275
472,500
1,437,800
3,919,575
b) Aroa
on and after IPO
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
21. Share based payments reserve (continued)
Summary of options granted under the Option Plan on and after IPO
Opening balance
Granted in July 2020
Granted in September 2020
Granted in April 2021
Granted in June 2021
Granted in August 2021
Exercised during the year
Forfeited during the period
Closing balance
2022
2021
option
# of options
option
# of options
2022
Average
exercise
price per
NZ$
0.93
-
-
1.23
1.14
1.24
0.50
1.07
1.07
7,950,200
-
-
350,000
2,535,000
3,525,000
(402,425)
(1,056,200)
12,901,575
2021
Average
exercise
price per
NZ$
-
0.81
1.45
-
-
-
-
6,177,000
1,873,200
-
-
-
-
-
1.45
0.93
(100,000)
7,950,200
Vested and exercisable at 31 March
0.99
7,620,050
0.82
1,828,550
Share options on and after IPO outstanding at the end of the year have the following expiry dates:
Earnings per share has been calculated based on shares and share options issued at the respective measurement
) in $000
(8,386)
(19,209)
23 July 2025
28 September 2025
31 March 2026
28 June 2026
8 August 2026
24 July 2020
29 September 2020
22 April 2021
28 June 2021
9 August 2021
Total
22. Earnings per share
dates.
Numerator
Denominator
Effects of:
Employee share options *
Weighted average numbe
Basic earnings per share (N/D1 x 100)
Diluted earnings per share (N/D2 x 100)
Share
options
31 March
2022
5,338,375
1,683,200
300,000
2,405,000
3,175,000
12,901,575
Share options
31 March
2021
6,177,000
1,773,200
-
-
-
7,950,200
2022
2021
342,162
300,401
17,142
342,162
Cents
(2.45)
(2.45)
12,563
300,401
Cents
(6.39)
(6.39)
* As employee share options are anti-dilutive, these were not included in the calculation of diluted earnings per
share above.
Annual Report AROA
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
21. Share based payments reserve (continued)
Summary of options granted under the Option Plan on and after IPO
Opening balance
Granted in July 2020
Granted in September 2020
Granted in April 2021
Granted in June 2021
Granted in August 2021
Exercised during the year
Forfeited during the period
Closing balance
2022
Average
exercise
price per
option
NZ$
0.93
-
-
1.23
1.14
1.24
0.50
1.07
1.07
2022
# of options
7,950,200
-
-
350,000
2,535,000
3,525,000
(402,425)
(1,056,200)
12,901,575
2021
Average
exercise
price per
option
NZ$
-
0.81
1.45
-
-
-
-
2021
# of options
-
6,177,000
1,873,200
-
-
-
-
1.45
0.93
(100,000)
7,950,200
Vested and exercisable at 31 March
0.99
7,620,050
0.82
1,828,550
Share options on and after IPO outstanding at the end of the year have the following expiry dates:
Grant date
Expiry date
24 July 2020
29 September 2020
22 April 2021
28 June 2021
9 August 2021
Total
22. Earnings per share
23 July 2025
28 September 2025
31 March 2026
28 June 2026
8 August 2026
Share
options
31 March
2022
5,338,375
1,683,200
300,000
2,405,000
3,175,000
12,901,575
Share options
31 March
2021
6,177,000
1,773,200
-
-
-
7,950,200
Earnings per share has been calculated based on shares and share options issued at the respective measurement
dates.
Numerator
Denominator
) in $000
(8,386)
(19,209)
2022
2021
Effects of:
Employee share options *
Weighted average numbe
Basic earnings per share (N/D1 x 100)
Diluted earnings per share (N/D2 x 100)
342,162
300,401
17,142
342,162
Cents
(2.45)
(2.45)
12,563
300,401
Cents
(6.39)
(6.39)
* As employee share options are anti-dilutive, these were not included in the calculation of diluted earnings per
share above.
AROA Annual Report
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
23. Related parties
(i) Subsidiaries
Interests in subsidiaries are set out in Note 1.
(ii) Key management compensation
Key management includes Directors (Executive and Non-Executive) and the executive management team.
The total compensation for the executive management team is $2,255,000 (FY21: $3,139,000). (excluding share
based payments of $594,000 (FY2021: $1,255,000)). The total compensation for Non-Executive Directors,
excluding share based payments of $173,000 (FY2021: $305,000), is $411,000 (FY2021: $389,000).
(iii) Year end balances
There were no related party receivables and related party payables at year end (2021: $nil).
(iv) Transactions with related parties
There were no other related party transactions during the year.
24. Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and i nterest 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 previously due to Hollister in US dollars (USD).
The Group has certain net monetary assets/(liabilities) that are exposed to foreign currency risk. The table below
ctional
currency, expressed in NZ dollars.
Exposure to foreign currency risk
2022
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)
USD
$000
2,473
7,367
864
(832)
-
-
AUD
$000
-
-
-
(148)
-
-
-
Net exposure
9,872
(148)
EUR
$000
-
-
-
-
-
-
-
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
24. Financial risk management (continued)
2021
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)
Net exposure
USD
$000
4,809
1,457
1,107
(861)
(6,956)
-
2,300
1,856
AUD
$000
EUR
$000
-
-
-
-
-
-
(55)
46
-
-
-
-
-
-
(55)
46
The following significant exchange rates applied during the year:
Average
Average
rate
2022
0.6966
rate
2021
0.6711
Closing
rate
2022
0.6975
Closing
rate
2021
0.6989
NZD/USD
US dollar
Sensitivity analysis underlying exposures
A 5% weakening/strengthening of the NZ dollar against the US dollar at 31 March 2022 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.
NZ dollar (2021: $140,000 higher), and $677,000 lower on a 5% strengthening of the NZ dollar as at 31 March
equity for the period would have been $744,000 higher on a 5% weakening of the
2022 (2021: $126,000 lower).
flow interest rate risk arises from borrowings at floating rates and/or fixed rates as at the
Interest rate risk
reporting date.
reporting date are as follows:
3 months or less
3 - 12 months
1-2 years
Total interest bearing loans and borrowings
2022
$000
-
-
-
-
2021
$000
9,952
-
-
9,952
Annual Report AROA
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
24. Financial risk management (continued)
2021
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)
Net exposure
USD
$000
4,809
1,457
1,107
(861)
(6,956)
-
2,300
1,856
AUD
$000
EUR
$000
-
-
-
(55)
-
-
-
(55)
-
46
-
-
-
-
-
46
The following significant exchange rates applied during the year:
NZD/USD
Average
rate
2022
0.6966
Average
rate
2021
0.6711
Closing
rate
2022
0.6975
Closing
rate
2021
0.6989
Sensitivity analysis underlying exposures
A 5% weakening/strengthening of the NZ dollar against the US dollar at 31 March 2022 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
equity for the period would have been $744,000 higher on a 5% weakening of the
NZ dollar (2021: $140,000 higher), and $677,000 lower on a 5% strengthening of the NZ dollar as at 31 March
2022 (2021: $126,000 lower).
Interest rate risk
flow interest rate risk arises from borrowings at floating rates and/or fixed rates as at the
reporting date.
reporting date are as follows:
3 months or less
3 - 12 months
1-2 years
Total interest bearing loans and borrowings
2022
$000
-
-
-
-
2021
$000
-
9,952
-
9,952
AROA Annual Report
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
24. Financial risk management (continued)
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 agreements. Aging of payments
due from customers are monitored on a regular basis.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as
summarised in Note 25. The Group does not foresee 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.
Less than 3
months
3-12
months
Between 1
and 2
years
Over 2
years
Total
contract-
ual cash
flows
Total
Carrying
amounts
At 31 March 2022
Note
$000
$000
$000
$000
$000
$000
Financial liabilities
Trade and other payables
Lease liabilities
Interest bearing liabilities
15
19
17
Total
3,089
164
-
3,253
-
781
-
781
-
884
-
884
Less than 3
months
3-12
months
Between 1
and 2
years
-
5,709
-
5,709
Over 2
years
3,089
7,538
-
10,627
3,089
5,876
-
8,965
Total
contract-
ual cash
flows
Total
Carrying
amounts
At 31 March 2021
Note
$000
$000
$000
$000
$000
$000
Financial liabilities
Trade and other payables
Lease liabilities
Interest bearing liabilities
Total
15
19
17
Capital adequacy
2,744
158
205
3,107
-
792
9,952
10,744
-
931
-
931
-
6,395
-
6,395
2,744
8,276
10,157
21,177
2,744
6,282
9,952
18,978
nd to maintain
investor and creditor confidence. The shareholder funds raised to date provide the Group a sufficient capital base
to continue to grow the business.
Annual Report AROA
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
25. Financial instruments by category
(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.
, are
Bank over
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.
At 31 March 2022
Assets as per consolidated Statement
of Financial Position
Cash and cash equivalents
Term Deposit
Trade and other receivables
Financial assets at FVTOCI
Total financial assets
Assets at
amortised
cost
Note
$000
9
9
11
10
6,165
50,000
16,934
-
73,099
Assets at
Fair value
through
other
comprehend
-sive
income
$000
-
1,239
1,239
At 31 March 2022
Liabilities as per consolidated Statement
of Financial Position
Trade and other payables
Lease liabilities
Interest-bearing loans and borrowings
Total financial liabilities
Note
15
19
17
Liabilities
at
amortised
cost
$000
Liabilities at
fair value
through
profit or
loss
$000
1,382
5,876
-
7,258
-
-
-
-
Total
$000
6,165
50,000
16,934
1,239
74,338
Total
$000
1,382
5,876
-
7,258
AROA Annual Report
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
(Continued)
For the year ended 31 March 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Financial instruments by category (continued)
At 31 March 2021
Assets as per consolidated Statement of Financial Position
Note
Cash and cash equivalents
Term Deposit
Trade and other receivables
Financial assets at FVTOCI
Total financial assets
9
9
11
10
Assets at
amortised
cost
$000
15,381
20,000
7,154
-
42,535
Assets at
Fair value
through
other
comprehens
ive income
$000
-
-
-
1,584
1,584
Liabilities
at
amortised
cost
Liabilities at
fair value
through
profit or
loss
Total
$000
15,381
20,000
7,154
1,584
44,119
Total
At 31 March 2021
Liabilities as per consolidated Statement of Financial Position
Note
$000
$000
$000
Trade and other payables
Lease liabilities
Interest-bearing loans and borrowings
Total financial liabilities
15
19
17
768
6,282
9,952
17,002
-
-
-
-
768
6,282
9,952
17,002
26. Events after the reporting date
There have been no significant events subsequent to reporting date which required disclosure in or adjustment
to the consolidated financial statements.
27. Other Disclosures
a. Reconciliation of loss after income tax to cash flow from operating activities
Loss after tax
Add (deduct) non-cash items:
Depreciation of property, plant and equipment
Depreciation of right of use assets
Foreign exchange loss - deferred consideration
Gain on disposal of assets
Amortisation of intangibles
Share based payments
Interest - deferred consideration
Interest lease liabilities
Foreign currency translation
Non-Capitalised IPO costs
Movement in working capital:
Movement in provisions
Movement in tax receivable
Movement in trade and other receivables
Movement in inventory
Movement in trade and other payables
Movement in interest payables
Net cash flows from operating activities
Fair value adjustment on financial liabilities at VTPL
2022
$000
(8,386)
2021
$000
(19,209)
1,134
773
4
1,224
2,966
(11)
747
403
212
-
50
3
90
(10,388)
(323)
1,320
(1,340)
(11,522)
(1,742)
1,092
742
4
1,215
1,985
1,478
406
(30)
8,014
1,607
4
412
(489)
632
(298)
(830)
(5,007)
Annual Report AROA
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
27. Other Disclosures
a. Reconciliation of loss after income tax to cash flow from operating activities
Loss after tax
Add (deduct) non-cash items:
Depreciation of property, plant and equipment
Depreciation of right of use assets
Gain 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 VTPL
Non-Capitalised IPO costs
Movement in working capital:
Movement in provisions
Movement in tax receivable
Movement in trade and other receivables
Movement in inventory
Movement in trade and other payables
Movement in interest payables
Net cash flows from operating activities
2022
$000
(8,386)
2021
$000
(19,209)
1,134
773
4
1,224
2,966
(11)
747
403
212
-
50
3
90
(10,388)
(323)
1,320
(1,340)
(11,522)
1,092
742
4
1,215
1,985
(1,742)
1,478
406
(30)
8,014
1,607
4
412
(489)
632
(298)
(830)
(5,007)
AROA Annual Report
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
27. Other Disclosures (continued)
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
considerat-
ion
Lease
liabilities
Paid up
share
capital
Transaction
Cost
Total
Note 17
$000
Note 17
$000
Note 10
$000
$000
Note 19
$000
Note 20
$000
$000
$000
At 1 April 2021
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
Allocation of Transaction cost
At 31 March 2022
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9,952)
(6,282)
(97,316)
-
(113,550)
-
-
9,514
963
(50,324)
2,214 (37,633)
-
-
-
-
-
-
(155)
593
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(154)
(403)
-
-
-
-
(283)
-
-
-
(155)
593
-
(283)
(154)
(403)
-
-
-
-
-
-
-
2,168
(2,214)
(46)
-
-
-
-
(5,876) (145,755)
- (151,631)
Interest
bearing
loans and
borrowings
Current
Interest
bearing
loans and
borrowings-
Non current
Financial
liabilities at
fair value
through
profit or loss
Deferred
considerati-
on
Lease
liabilities
Paid up
share
capital
Transaction
Cost
Total
Note 17
$000
Note 17
$000
Note 10
$000
$000
Note 19
$000
Note 20
$000
(840)
(1,119)
(6,827)
(21,682)
(2,084) (29,353)
$000
$000
-
-
(61,905)
-
840
1,119
(19,804)
10,637
731
(34,951)
4,329 (37,099)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,833
-
-
-
-
(8,030)
828
-
1,241
(148)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(33,833)
(807)
(4,518)
(411)
-
-
-
-
-
-
1,241
(148)
-
(807)
(4,518)
(411)
(8,030)
-
-
-
-
-
-
-
-
-
-
(9,952)
(6,282) (97,316)
- (113,550)
1,629
(4,329)
(1,873)
At 1 April 2020
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
At 31 March 2021
Annual Report AROA
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
For the year ended 31 March 2022
27. Other Disclosures (continued)
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 2022, the Group had equipment capital commitments of $337,000 (2021: $611,000).
f. Contingent liabilities
As at 31 March 2022, the Group had no significant contingent liabilities (2021: $nil).
AROA Annual Report
64
Annual Report AROA 65
ADDITIONAL INFORMATION
Aroa Biosurgery Limited
(NZ Company no. 1980577 / ARBN 638 867 473)
Aroa Biosurgery Limited is a New Zealand incorporated company and is registered with ASIC as a foreign company. The Company is
accordingly principally governed by New Zealand law, rather than Australian Law. This means that the Company’s 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. They are instead 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.
Stock exchange information and on-market buy-backs
The Company’s shares were officially quoted on the ASX on 24 July 2020 (ASX Code: ARX). During the year ended 31 March 2022, the
Company did not seek, or rely upon, any waivers from the ASX Listing Rules. There is no current on-market buy-back of the Company’s
shares and the Company did not undertake an on-market buy-back of its shares during the year ended 31 March 2022.
Ordinary shares
On 31 March 2022 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 rights set out in the Company’s constitution, including the right to vote
on any resolution at a meeting of shareholders. Holders of ordinary shares may vote at a meeting, in person or by proxy, representative
or attorney.
The total number of ordinary shares in the Company on issue as at 31 March 2022 was 342,461,133 shares and the total number of
ordinary shares in the Company on issue as at 31 May 2022 was 342,724,208 shares.
The distribution of shareholdings as at 31 May 2022 is 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
899
1,317
602
873
138
3,829
23.48
34.40
15.72
22.80
3.60
100
Number of ordinary
shares
570,337
3,771,553
4,813,818
26,028,913
307,539,590
342,724,208
%
0.17
1.10
1.45
7.59
89.73
100
The number of shareholdings held in less than marketable parcels is 278, representing 85,915 Shares. As at 31 May 2022, the Company
has not carried out any issues of securities approved for the purposes of Item 7 of section 611 of the Corporations Act.
Share options
As at 31 March 2022, there were 16,722,975 share options on issue (representing the same number of unissued ordinary shares) held
by 78 holders under the NZ Option Plan and US Option Plan. Share options do not carry voting rights.
The distribution of share option holdings as at 31 May 2022 is as shown in the table below:
Size of holding
Number of holders
%
Number of options
%
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
TOTAL
-
-
-
46
32
78
-
-
-
58.97
41.03
100
-
-
-
2,981,925
13,477,975
16,459,900
-
-
-
18.12
81.88
100
Please refer to the Remuneration Report and note 21 to the consolidated financial statements for further details of the share options
outstanding.
AROA Annual Report 66
Shares issued on exercise of options
The following ordinary Shares of the Company were issued during the year ended 31 March 2022 on the exercise of share options
granted under the NZ Option Plan. Please note that under the NZ Option Plan rules, at the Board’s discretion, options may be exercised
by cashless settlement. This involves issuing a reduced number of Shares to the participant equivalent to: (a) an amount equal to the
difference between the current value of the Company’s Shares (being the VWAP for the five trading days immediately preceding the
option exercise date) and the exercise price of the Shares, multiplied by the number of options being exercised, and divided by (b) the
current value of the Shares.
No share options issued under the US Option Plan were exercised during the year.
Date options exercised
Number of options
exercised
Average exercise price
Number of shares issued
11/06/2021
11/06/2021
19/08/2021
6/12/2021
25/03/2022
Other Share issues
196,875
300,025
102,400
472,500
165,000
NZ$0.0979
A$0.75
A$0.75
NZ$0.0979
NZ$0.1075
190,249
159,448
102,400
433,317
165,000
In addition to the Shares issued on exercise of share options noted above, the Company issued the following Shares during the year
ended 31 March 2022:
•
•
40,343,348 Shares were issued on 4 August 2021 pursuant to an institutional placement at an issue price of A$1.165 each; and
340,957 Shares were issued on 25 August 2021 pursuant to a share purchase plan at an issue price of A$1.165 each.
Twenty largest shareholders
The names and holdings of the 20 largest registered shareholders in the Company as at 31 May 2022 was as follows:
Shareholder name
Shareholding
Holding as a % of total ordinary
shares on issue as at the date above
Mr Brian Ward & Mrs Tracey Ward
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