Aurora Labs Limited
Annual Report 2018

Plain-text annual report

Aurora Labs Limited ABN 44 601 164 505 Annual Financial Report 30 June 2018 CONTENTS Corporate Directory Chairman’s Review Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Additional ASX Information PAGE 3 4 5 22 23 24 25 26 27 52 53 57 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 2 CORPORATE DIRECTORY ABN 44 601 164 505 Directors David Budge Nathan Henry Paul Kristensen Mel Ashton Mathew Whyte Company secretary Mathew Whyte Registered Address and Principal Place of business Unit 2, 79 Bushland Ridge Bibra Lake WA 6163 Telephone: +61 (08) 9434 1934 Email: enquiries@auroralabs3d.com Solicitors Jackson McDonald Level 17, 225 St Georges Terrace Perth WA 6000 Bankers ANZ Bank Riseley Centre 1/35 Riseley Street Booragoon WA 6154 Auditors HLB Mann Judd (WA Partnership) Level 4, 130 Stirling Street Perth WA 6000 Share Registry Security Transfer Australia 770 Canning Highway, Applecross WA 6153 Stock Exchange Listed on Australian Securities Exchange The home exchange is Perth, Western Australia ASX Code A3D Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 3 CHAIRMANS REVIEW Dear Shareholder, As Chairman of the Board of Aurora Labs, newly appointed in January of this year, I take great pleasure in presenting the Company’s 2018 Annual Financial Report. The Company has made substantial progress on several fronts during the reporting year. I am confident that the intrinsic value of this progress greatly overshadows the simple bottom line result that may disappoint some of you. The separate ‘Review of Operations’ in the Directors Report provides you with details of the Company’s activities and ongoing initiatives. Working with the Aurora team, I have been impressed by the quality of the Company’s directors, executives and staff as well as by its advanced technology. Aurora Labs is built on very strong foundations and the company shows tremendous commercial potential. Every effort is being made to turn this potential into hard earnings as soon as possible. All successful companies need capital to grow, and in April 2018 the company successfully closed an equity raising of $5 million (before costs), subsequently ratified at a general meeting of shareholders. Pleasingly, this meeting gave me the first opportunity to meet some of the Company’s valued shareholders. During the year, with my full support, the Company’s powder production innovation (patent pending) has become the subject of intensified development and testing. When fully developed, it promises a relatively short path towards securing a substantial, reliable and rapidly increasing cash-flow, in addition to the more fluctuating revenues from the sale of 3D printers. The new process has already generated considerable interest from potential business partners as well as the investment community. This letter to shareholders cannot adequately detail the inventiveness, initiative and hard work that has been demonstrated by the entire team of Aurora Labs. On behalf of the Board, I offer them and my fellow directors my sincere thanks. A special thanks goes to you, our shareholders, for your continuing support for which I am confident you will be well rewarded in due course. Paul Kristensen Chairman Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 4 DIRECTORS’ REPORT The Board of Directors of Aurora Labs Limited (“Aurora “or “the Company”) present their report together with the financial report on the Company for the financial year ended 30 June 2018 (FY 2018) and the independent auditor’s report thereon. PRINCIPAL ACTIVITIES The principal activities of the Company during the year included the design and development of 3D metal printers, metal powder manufacturing plant, digital parts and their associated intellectual property. OPERATING RESULTS AND REVIEW OF OPERATIONS FOR THE YEAR Operating Results and Financial Position Aurora reported a statutory after- tax loss for the year ended 30 June 2018 of $ 5,531,257 (2017: $3,398,989). At the end of the financial year the Company had net assets of $6,446,642 (2017: $6,775,662) and $3,790,081 in cash and cash equivalents (2017: $5,249,614). Review of Operations Aurora is an Australian-based industrial technology and innovation company based in Perth that specialises in the development of 3D metal printers, metal powder manufacturing plant, digital parts and their associated intellectual property. During the year the Company made significant progress on the development of its proprietary 3D printer and powder technologies in pursuit of Aurora’s aim to transform how metal parts and products are manufactured. Highlights during the year in review were as follows: • • Progress made with Aurora’s Large Format Technology with the prototype being able to print simple parts at market speed. The signing of a binding term sheet with WorleyParsons in November 2017 to establish a 50/50 joint venture AdditiveNow to service the mining, oil and gas and major infrastructure industries around the world. Completion of a capital raising of $5,000,000 (before costs) by way of a placement to institutional and sophisticated investors in February 2018. Enhancement of the Board with the appointment of new Board members Mr Paul Kristensen as non-executive Chairman and Mr Mel Ashton as non-executive director. Roll out of the Company’s Industry Partner Program including signing of non-binding term sheets with: • • VEEM Ltd. Aurora’s prototype Powder Production Unit successfully producing laboratory scale powder in June 2018. Expansion of Small Format Printer distribution network into South Korea, Russia and Africa. DNV GL; and • • • • • Large Format Technology (LFT) The Company reached a critical milestone during the year announcing the ability for its prototype to print simple parts at market speed. Market speed is at a rate comparable to existing technology in the market, but at a fraction of the ultimate speed of the Large Format Technology, approximately 100 times faster than existing 3D-printers. This achievement signifies that the key components of the Large Format Technology have been proven at a fundamental level and will lead the way for the development of the Medium and Large Format Printer (MFP / LFP). The Company continues to deliver on the key milestones outlined in the timeline below. These milestones will demonstrate the progress in the development and ultimate commercialisation of the Medium and Large Format Printers. Ti6Al4V DMLM Print - Turbine stator Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 5 Estimated Large Format Technology Development Timeline Powder production prototype (PPU) Aurora’s prototype Powder Production Unit (PPU) successfully produced laboratory test scale powder in June, which was a significant achievement in the process to commercial powder production. The development of the PPU has potential to open considerable new markets for Aurora and be a source of ongoing revenue for the Company. The powder from the test samples has demonstrated a very tight size distribution, and this is a positive indication of the very high yields that Aurora is targeting. The primary advantage the Company is aiming to achieve is to produce a higher quality product at a lower cost of production. It is intended that the powders will support part of the projected high utilisation of consumables from the Company’s Large Format Printer which is currently under development. Currently, the international powdered metals market, e.g. Metal Injection Moulding (MIM) powders, is valued in the billions of dollars. Advancing Aurora’s PPU technology is intended to develop significant synergies between metal powder production and the anticipated demand created by additive manufacturing. Aurora will also be exploring business models and commercial opportunities internationally where there is a large demand for metal powders in markets not related to 3D printing. The Company continues to deliver on the key milestones outlined in the timeline below. Estimated Powder Production Unit Development Timeline Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 6 Expansion of distribution network for S Titanum Pro (STP) During the year, Aurora signed several distribution agreements to advance the marketing and commercialisation of the STP: • with Partner Labs Co Ltd for exclusive distribution rights in South Korea; • with Nissa Digispace for exclusive distribution rights in Russia and certain other CIS regions; and • with Weartech Pty Ltd for exclusive distribution rights in South Africa and non-exclusive distribution license in the 14-member countries of the Southern African Development Community. Aurora continues to work with a view to developing its overseas distributor network in order to generate indirect sales of its STP. Sales will assist with funding the development of the Large Format Technology. Aurora Labs’ latest distrubtor network Expansion of the Company’s Industry Partner Program During the year the Company made significant breakthroughs with the rollout of its Industry Partner Program by the signing of: • • • a binding term sheet with WorleyParsons to establish a 50/50 incorporated joint venture to be called AdditiveNow Pty Ltd. AdditiveNow will provide a 3D printing solutions centre to major infrastructure, mining and other resource companies globally to provide those companies with a competitive advantage over the general market through expert use of key 3D printing technologies; of a non-binding term sheet with DNV GL, which allows for the independent certification of Aurora’s 3D-printed parts as fit for their intended purpose and meeting global certification requirements. DNV GL is a leading global quality assurance and risk management company, providing classification, technical assurance, software and independent expert advisory services to the maritime, oil & gas, power and renewables industries. a non-binding term sheet signed with VEEM Ltd which outlines the opportunity for Aurora to work directly with VEEM for early access to the Company’s technology, the potential for the purchase of the Company’s 3D-printing machines and the ability to do R&D on areas that are appropriate for VEEM’s business. VEEM is an ASX-listed company (ASX:VEE) that specialises in high-technology propellers and gyrostabilisers. Aurora will continue to grow the Industry Partner Program, and the agreements achieved to date are a validation of Aurora’s business and acknowledge the potential that 3D printing has in how parts are created and optimised. FUTURE DEVELOPMENTS AND EXPECTED RESULTS The objective of the Company is to create long-term shareholder value through the design and development of metal 3D printers and associated products and services. The activities outlined in the Review of Operations are inherently risky and the Board is unable to provide certainty of the expected timing and financial results of these activities, or that any or all of these likely developments will be achieved. All future activities are subject to various risks and there are no assurances that these targeted milestones will be reached or that the stated timeframes will be met. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 7 SIGNIFICANT CHANGES IN STATE OF AFFAIRS Other than reported above in the Review of Results and Operations, there were no significant changes in the state of affairs of the Company during the reporting period. LOSS PER SHARE Basic loss per share DIVIDENDS OR DISTRIBUTIONS 2018 $ 0.091 2017 $ 0.063 No dividends were paid during the financial year and the Directors do not recommend the payment of a dividend. EMPLOYEES The Company had 36 employees as at the 30 June 2018 (2017: 40). SUBSEQUENT EVENTS AFTER THE REPORTING DATE On 12 July 2018, 7,087,500 Class B Performance Shares were automatically redeemed and cancelled as the relevant milestone for their conversion was not satisfied by 30 June 2018. Refer Aurora’s announcement to ASX dated 12 July 2018 ‘Changes to Company Securities’. On 16 August 2018 32,260,696 Shares and 9,092,500 Unquoted options (exercisable at $0.20 and expiring 31 December 2018) were released from escrow. Other than the above there have been no other matters or circumstances which have arisen since 30 June 2018 that have significantly affected or may significantly affect: a) Aurora Labs operations in future financial years; or b) The results of those operations in future financial years; or c) Aurora Labs state of affairs in future financial years. ENVIRONMENTAL LAWS AND REGULATIONS Aurora Labs operations are subject to various environmental laws and regulations under the relevant government's legislation. The Company adheres to these laws and regulations. There have been no known breaches of environmental laws and regulations by the Company during the financial year. INFORMATION ON THE DIRECTORS The Directors of the Company at any time during or since the end of the financial year are as follows. David Budge Managing Director Director since incorporation Nathan Henry Executive Director Appointed 23 November 2015 Mathew Whyte Non-Executive Director and Company Secretary Appointed 26 July 2017 Appointed 13 October 2016 Paul Kristensen Non-Executive Chairman Appointed 22 January 2018 Mel Ashton Non-Executive Director Appointed 22 January 2018 Samantha Tough Non-Executive Chairman Appointed 12 June 2017, resigned 25 July 2017 Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 8 CURRENT DIRECTORS AND OFFICERS David Budge Managing Director Qualifications: Bachelor of Science (Chemistry) from University of Western Australia Term of office: Since incorporation. Mr Budge has extensive industry experience in robotics, robotic welding, surfacing engineering, product development and manufacturing processes. He has become recognised for his experience in solving difficult fabrication and surface engineering problems for clients. He is the primary inventor of the large majority of Aurora’s inventions that are the subject of its patent applications. Mr Budge has experience developing and manufacturing a range of products for Australian and international markets. He has previously worked for a number of engineering companies overseeing several departments, product development and R&D. More recently Mr Budge established and ran Advanced Industrial Manufacturing Pty Ltd, a company that specialised in providing robotic welding and specialised technology solutions to the mining and oil and gas sectors. Mr Budge is a founding director and significant shareholder in Aurora. During the three- year period to the end of the financial year, Mr Budge has not been a director of any other listed company. John (Nathan) Henry Executive Director (Business Development) Term of office: Since 23 November 2015. Mr Henry has held senior management roles over the last 25 years. He has been involved in every level of strategic planning, divisional financial reporting and senior corporate accountability up to Board level. His roles have covered the full spectrum of responsibility including process and business model development, new business development, technology implementation and roll out through distributed networks, market research and writing of business plans. He has experience with ISO certification, equipment purchases recommendations, workflow planning, skilled employee hires, securing AVL status and marketing plans. He has previously developed and led sales teams for market leading companies both in Australia and in the USA. Mr Henry is responsible for developing the strategy and processes required for branding and marketing the Company’s products and services. These include, but are not limited to, 3D printers, consumables, services and licensing. He is responsible for developing advertising materials, overseeing web design and social media campaigns as well as monitoring metrics for these modes of communication and marketing. During the three- year period to the end of the financial year, Mr Henry has not been a director of any other listed company. Paul Kristensen Non-Executive Chairman Qualifications: Bachelor of Science (Mech.Eng.(Hons.)) from the Technical University of Denmark and Member of the Institution of Engineers Australia (Engineers Australia) Term of office: Since 22 January 2018 Mr Kristensen is a veteran angel investor and serial entrepreneur with a passion for turning exceptional technology into great business. Based on initial expertise gained during a career in nuclear science R&D, he combines vision and enthusiasm with innovative strategy development and in-depth corporate and commercial knowledge, acquired over subsequent decades of activity as a technology investor and serial entrepreneur. Paul is a highly experienced company chair and director who has taken IP-based companies to IPOs both in Australia and on overseas stock exchanges. He has previously served as a Chairman of a London AIM -listed Group for 11 years. During the three-year period to the end of the financial year, Mr Kristensen has not been a director of any other listed company. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 9 Mel Ashton Non-Executive Director Qualifications: Bachelor of Commerce from the University of Western Australia, Fellow of Chartered Accountants Australia and New Zealand. Term of office: Since 22 January 2018 Mr Ashton has over 35 years' experience as a Chartered Accountant and leverages his strategic approach and business network in his role as a specialist in Corporate Restructuring and Finance and as a Professional Company Director. Mel is the independent Chair of the Finance and Risk Committee at the Hawaiian Group, the Western Australian based property group. During the three- year period to the end of the financial year Mr Ashton served as Chairman of the Board of Venture Minerals Ltd (May 2006 to Current), Credit Intelligence Ltd (May 2018 to current), Gryphon Minerals Ltd (May 2004 until October 2016) and Empired Ltd (December 2005 to November 2016). Mathew Whyte Non-Executive Director and Company Secretary Qualifications: Bachelor of Business (Accounting) from Curtin University, CPA and a Fellow of Institute of Chartered Secretaries and Administrators (Governance Institute of Australia). Term of office: Company Secretary since 13 October 2016. Non -Executive Director since 26 July 2017. Mr Whyte is a professional executive with over 25 years’ experience in corporate administration and financial management of small to medium ASX listed entities. He has specific and hands on Board, Company Secretarial and CFO experience for WA based ASX Listed Mining, Mining Services, Biotech, Oleochemical and Renewable fuel generation industries with overseas operations experience in USA, South East Asia, Africa, Eurozone and the UK. During the three- year period to the end of the financial year, Mr Whyte has served as a Company Secretary for Novo Litio Ltd (November 2011 – Current), Galileo Mining Ltd (October 2017 – Current) and Tiger Resources Ltd (July 2018 – Current). Samantha Tough Non-Executive Chairman Qualifications: Fellow of the AICD and completed a Bachelor of Laws and Bachelor of Jurisprudence at University of WA. Term of office: 12 June 2017 to 25 July 2017 DIRECTORS’ INTERESTS As at the date of this report the relevant interests of each of the Directors, held either directly or indirectly through their associates, in the securities of Aurora are as follows: Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Number of fully paid ordinary shares Number of unquoted options over ordinary shares Number of performance shares (Class C) 23,946,785 982,151 - - - 1,020,0001 1,973,3342 165,0003 100,0004 100,0004 3,358,334 5,341,975 185,624 - - - 5,527,599 Total 28,928,936 1 Unquoted options: 725,000 Ex $0.20/ Exp 31 December 2018; 115,000 Ex $2.23/Exp 30 November 2019; 165,000 Ex $3.00/Exp 31 March 2020; & 15,000 Ex $0.79/Exp 31 August 2020 2 Unquoted options: 1,693,334 Ex $0.20/ Exp 31 December 2018; 140,000 Ex $2.23/Exp 30 November 2019; 125,000 Ex $3.00/Exp 31 March 2020; & 15,000 Ex $0.79/Exp 31 August 2020 3 Unquoted options: 50,000 Ex $3.00/Exp 31 March 2020; 15,000 Ex $0.79/Exp 31 August 2020 & 100,000 EX $0.92/ Exp 31 July 2020 4 Unquoted options 100,000 Ex $1.08/Exp 31 January 2021 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 10 MEETINGS OF DIRECTORS The following table sets out the number of meetings of Directors held during the year ended 30 June 2018 and the number of meetings attended by each Director. There was a total of nine (9) Directors’ meetings for the financial year. 2018 David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Directors’ meetings Audit Committee meetings Directors’ meetings held while a director 9 9 9 6 6 Number attended Audit meetings held Audit meetings attended 9 9 9 6 6 1 1 1 1 1 - - 1 1 1 In addition, throughout the course of the year there were 12 resolutions of directors which were made by unanimous written resolution. The Audit Committee was re-established on 17 May 2018 and one (1) Audit Committee meetings was held during the year. REMUNERATION REPORT (AUDITED) This remuneration report, which forms part of the Directors’ report, outlines the remuneration arrangements in place for the key management personnel (“KMP”) of Aurora for the financial year ended 30 June 2018. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001. Key Management Personnel (a) The remuneration report details the remuneration arrangements for key management personnel (“KMP”) of the Company who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company. The KMP of the Company during or since the end of the financial year were as follows: KMP David Budge Nathan Henry Position Managing Director Executive Director Mathew Whyte Company Secretary ; and Paul Kristensen Mel Ashton Non-Executive Director Non-Executive Chairman Non-Executive Director Samantha Tough Non-Executive Chairman (b) Remuneration Philosophy and Policy Period of Employment 1 November 2015 to current 23 November 2015 to current 13 October 2016 to current 26 July 2017 to current 22 January 2018 to current 22 January 2018 to current 12 June 2017 to 25 July 2017 The Board has adopted Remuneration and Nomination Policy dated May 2016 (Refer http://auroralabs3d.com/corporate-compliance/ ). The Company’s remuneration policy for its KMP’s is administered by the Board taking into account the size of the Company, the size of the management team, the nature and stage of development of the Company’s current operations, and market conditions and comparable salary levels for companies of a similar size and operating in similar sectors. Independent external advice is sought from remuneration consultants when required, however no advice has been sought during the period ended 30 June 2018. The Corporate Governance Statement provides further information on the Company’s remuneration governance. Due to the Company’s size and current stage of development, the Board has not established a separate nomination and remuneration committee at this stage. This function (Remuneration Function) is performed by the Board. Therefore, the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the Managing Director, the Directors and the executive team. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 11 In addition, all matters of remuneration will continue to be in accordance with the Corporations Act requirements, especially with regard to related party transactions. That is, none of the directors participate in any deliberations regarding their own remuneration or related issues. In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive remuneration is separate and distinct. (c) Non-Executive Director remuneration On appointment to the Board, all Non-Executive Directors enter into service agreements with the Company in the form of a Non- Executive deed of Engagement. The Deed of Engagement summarises the Board policies and terms of engagement including remuneration relevant to the office of director. The maximum aggregate amount of fees that can be paid to Non-Executive Directors was set by shareholders at General Meeting held on 8 June 2016 at $250,000 per annum. Total Non–Executive remuneration fees paid during the year ended 30 June 2018 were $212,784 (including Superannuation contributions). The Board considers that the aggregate remuneration available for payment will provide the ability to attract and retain Directors of the highest calibre to meet the Company’s growth in market capitalisation and complexity, at a cost that is acceptable to shareholders. Within that maximum aggregate the Board seeks to remunerate Non-Executive Directors at commercial market rates for comparable companies for their time, commitment and responsibilities. Fees may also be paid to Non-Executive Directors for additional consulting services provided to the Company. Fees for Non-Executive Directors are not linked to the performance of the Company. Non-Executive Directors’ remuneration may also include an incentive portion consisting of options, subject to shareholder approval. Non-Executive Directors are considered Eligible Employees for the purposes of participation in the Company’s Employee Incentive Plan. Executive Director Remuneration (d) In determining Executive Director remuneration, the Board aims to ensure that remuneration practices are: • Competitive and reasonable, enabling the Company to attract and retain key talent; • Aligned to the Company’s strategic and business objectives and the creation of shareholder value; • Transparent and easily understood; and • Acceptable to shareholders. The Company’s remuneration policy is to provide a fixed remuneration component and a short and long-term performance-based component. The Board believes that this remuneration policy is appropriate given the considerations discussed in the section above and is appropriate in aligning executives’ objectives with shareholder and business objectives. Fixed Remuneration Fixed remuneration consists of base salaries, statutory superannuation contributions and other non-cash benefits. Fixed remuneration is reviewed annually by the Board in accordance with the Remuneration and Nomination Policy. Performance Based Remuneration – Short Term Incentive No Short-Term Incentives were paid or are payable in relation to FY 2018 or FY 2017. The Board intends to implement a system where Executives may be entitled to an annual cash bonus upon achieving various key performance indicators (“KPI’s”), as set by the Board. Having regard to the operations of the Company, the Board may determine these KPI’s, including measures such as successful commercialisation of the Company’s products and services, production and sales levels, operational cash flows, corporate activities and business development activities. Performance Based Remuneration – Long Term Incentive The Board seeks to align the interests of its Directors and Employees with those of its shareholders and accordingly has adopted an Employee Incentive Share Plan (“Plan”) which provides for the issue of Options or Performance Rights (Awards) as a key component of the Long-Term Incentive portion of remuneration. Awards under the Plan are based on the following three categories: 1. Package Awards – As part of their employment package with Aurora Labs to attract and retain quality Executives and Employees. 2. Performance Awards – As a reward for Executives and Employees exceeding Company deliverables. 3. Innovation Awards – As a reward for Executives and Employees who have come up with innovative ideas that are deemed to be beneficial to Aurora and its business operations, usually by reference to whether the idea is likely to be patented or otherwise, form the basis for potentially valuable proprietary technology of Aurora. Since the balance date, on 26 July 2018, the Company amended its Plan to provide that any Performance Rights issued under the Plan in the future will be exercisable Awards and will therefore only be converted into fully paid ordinary shares in the Company (Shares) upon Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 12 receipt by the Company of a notice of exercise from the holder of the Performance Rights. Prior to these amendments, any Performance Rights issued under the Plan were required to be immediately converted into Shares by the Company upon vesting. The purpose of these amendments is to allow participants in the Plan to defer the taxing point applicable to the issue of Shares upon the conversion of performance rights, and therefore make the issue of Performance Rights to participants under the Plan more efficient. A copy of the Plan is available on the Company’s Website. During the financial year ended 30 June 2018 the Company granted a total of 867,000 Unquoted Options pursuant to the Plan (2017: 1,411,000). Of these, 345,000 Unquoted Options were granted to Directors with the approval of shareholders at General Meeting. The remaining 522,000 Unquoted Options were granted to Eligible Employees under the Plan. Relationship between Remuneration of KMP and the Company’s Performance (e) Director’s remuneration is set by reference to payments made by other companies of similar size and industry, and by reference to the skills and experience of Directors. Fees paid to Directors are not currently linked to the performance of the Company. This policy may change once the Company’s design, development and commercialisation phases of its business is complete and the Company is generating revenue and profits. The Board anticipates that the Company will retain earnings (if any) and other cash resources for the development of its metal 3D printing and associated products and services activities. During the current and previous financial period the Company’s remuneration policy is not impacted by the Company’s performance including earnings and changes in shareholder wealth (dividends, changes in share price or returns of capital to shareholders), however this will be reviewed on an annual basis. Voting and comments made at the Company’s 2017 Annual General Meeting (f) Aurora received 92.6% of “Yes“ votes on its remuneration report for the 2017 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. Executive Director Engagement Deeds (g) Remuneration and other terms of employment for KMP are formalised in Engagement Deeds which specify the components of remuneration, benefits and notice period. David Budge Mr Budge is remunerated pursuant to the terms and conditions of his Engagement Deed dated 3 May 2016, as varied on 10 January 2017 following a review of his employment conditions conducted by the Board. Mr Budge was paid an annual salary of $250,000 plus superannuation. Mr Budge is also paid (by way of reimbursement) a vehicle allowance comprising business fuel costs, reasonable servicing costs, comprehensive insurance premiums, registration and third-party insurance costs, and finance payments of between $350 and $400 per month. Nathan Henry Mr Henry is remunerated pursuant to the terms and conditions of his Engagement Deed dated 4 May 2016, as varied on 15 March 2017 following a review of his employment conditions conducted by the Board. Mr Henry was paid an annual salary of $230,000 plus superannuation. The material terms of both the Deeds for the Executive Directors are as follows: (i) The employment of each Director may be terminated without cause by the Director or Aurora giving 6 months’ notice. Aurora may otherwise terminate a Director’s employment immediately for cause (e.g. serious misconduct). (ii) Each Director is subject to a post-employment restraint on engaging in a business of the same or substantially similar nature to Aurora or soliciting Aurora’s employees, suppliers or clients within the Asia Pacific region for up to 6 months. The Deeds otherwise contain terms and conditions considered standard for deeds of this nature. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 13 Remuneration of KMP Details of the nature and amount of each element of the emoluments of each of the KMP of Aurora during the financial year were as follows: Short-term benefits Post- employment benefits Share-based payments Salary & fees $ Motor vehicle payments $ Superannuation $ Options $ Total $ Percentage performance related % 250,000 230,000 147,508 33,794 24,029 5,385 690,716 4,795 - - - - - 4,795 23,750 21,850 1,171 - - 512 47,283 7,169 7,169 52,369 23,810 23,810 - 114,327 285,714 259,019 201,048 57,604 47,839 5,897 857,121 - - - - - - - FY 2018 Directors David Budge1 Nathan Henry2 Mathew Whyte3 Paul Kristensen4 Mel Ashton4 Samantha Tough Total 1 David Budge was granted 15,000 Unquoted Options, as approved by shareholders at General Meeting held on 29 November 2017, exercisable at $0.79 and expiring on 31 August 2020 pursuant to Aurora Employee Incentive Plan which were valued using Black-Scholes pricing model at $0.4779 each: 2 Nathan Henry was granted 15,000 Unquoted Options, as approved by shareholders at General Meeting held on 29 November 2017, exercisable at $0.79 and expiring on 31 August 2020 pursuant to Aurora Employee Incentive Plan which were valued using Black-Scholes pricing model at $0.4779 each: 3 Mathew Whyte provided company secretarial services through his controlled entity WhyPro Corporate Services ABN 53 844 654 790. Payments for company secretarial services during FY 2018 totalled: $115,200 (excluding superannuation). Mr Whyte also received a non- executive fee of $32,508 (plus superannuation of $1,117). Mr Whyte was granted 115,000 Unquoted Options, as approved by shareholders at General Meeting held on 29 November 2017, pursuant to Aurora Employee Incentive Plan of which: • 15,000 Options Exercisable at $0.79 and Expiring 31 August 2020 were valued using Black-Scholes pricing model at $0.4779 each; and • 100,000 Options Exercisable at $0.95 and Expiring 31 July 2020 were valued using Black-Scholes pricing model at $0.4520 each. 4 Paul Kristensen and Mel Ashton were each granted 100,000 Unquoted Options, as approved by shareholders at General Meeting held on 17 April 2018, pursuant to Aurora’s Employee Incentive Plan, Exercisable at $1.08 and Expiring 31 January 2021 which were valued using Black-Scholes pricing model at $0.2381 each. Short-term benefits FY 2017 Directors David Budge1 Nathan Henry2 Mathew Whyte3 Paul Kehoe David Parker4 Hendrikus Herman Samantha Tough Total Salary & fees $ 201,538 172,462 70,400 43,654 29,365 26,250 3,231 546,900 Share- based payments Post- employment benefits Superannuation Options $ $ Percentage performance related Total $ % 6,550 - - - - - - 6,550 19,146 16,384 - 4,147 985 2,494 307 43,463 79,302 75,544 58,380 - - - - 213,226 306,536 264,390 128,780 47,801 30,350 28,744 3,538 810,139 - - - - - - - - 1 David Budge was granted 280,000 Unquoted Options pursuant to Aurora Employee Incentive Plan as approved by shareholders at General Meeting held on 12 Jun 2017 of which: Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 14 • 115,000 Options Exercisable at $2.23 and Expiring 30 November 2019 were valued using Black-Scholes pricing model at $0.2925 each; and • 165,000 Options Exercisable at $3.00 and Expiring 31 March 2020 were valued using Black-Scholes pricing model at $0.2768 each. 2 Nathan Henry was granted 265,000 Unquoted Options pursuant to Aurora Employee Incentive Plan as approved by shareholders at General Meeting held on 12 June 2017 of which: • 140,000 Options Exercisable at $2.23 and Expiring 30 November 2019 were valued using Black-Scholes pricing model at $0.2925 each; and • 125,000 Options Exercisable at $3.00 and Expiring 31 March 2020 were valued using Black-Scholes pricing model at $0.2768 each. 3 Mathew Whyte provided company secretarial services commencing on 13 Oct 2016 through his controlled entity WhyPro Corporate Services ABN 53 844 654 790. Payments for company secretarial services during FY 2017 totalled: $70,400. Mr Whyte was also granted 50,000 Unquoted Options on 14 Mar 2017, pursuant to Aurora’s Employee Incentive Plan, Exercisable at $3.00 and Expiring 31 Mar 2020 which were valued using Black-Scholes pricing model at $1.1676 each. 4 David Parker provided company secretarial services through a controlled entity Cobblestones Corporate Pty Ltd. Payments for company secretarial services during FY 2017 year totalled: $19,000. David Parker is also an employee of Alto Capital who provided Lead Manager and capital raising services to the Company. Alto Capital was paid $222,452 for services during FY 2017. David Parker was also issued 363,333 ordinary shares as consideration for services from Alto Capital through the Lead Manager mandate agreement during FY 2017. Cash bonuses granted as compensation for the current financial year. No cash bonuses were granted during the year ended 2018 (2017: nil) Options Details of Options granted as compensation pursuant to the Aurora Employee Incentive Plan for the current financial year For details on the valuation of the options, including models and assumptions used, please refer to Note 20. There were no material alterations to the terms and conditions of options granted as remuneration since their grant date. During FY 2018 KMP were issued Company Options, pursuant to the Employee Share Plan, and with shareholder approval where required. The table below details all options issued during FY 2018, noting some options have been issued to employees or consultants that are not KMPs. FY 2018 Date options granted Number of Options Exercise price of option $ Expiry date of option 1.17 0.79 0.95 0.72 1.08 30 June 20 31 Aug 20 31 Jul 20 30 Sept 20 31 Jan 21 Value of Options at grant date $ 0.26 0.30 0.48 0.23 0.24 12 July 17 29 Nov 17 29 Nov 17 3 Oct 2017 17 Apr 18 Total FY 2017 Date options granted 22 Nov 16 14 Mar 17 10 May 17 12 Jun 17 Total 40,000 477,000 100,000 50,000 200,000 867,000 Number of Options 225,000 641,000 290,000 255,000 1,411,000 Exercise price of option $ Expiry date of option 2.23 3.00 3.00 2.23 30 Nov 19 31 Mar 20 31 Mar 20 30 Nov 19 Value of Options at grant date $ 0.29 1.17 0.28 0.29 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 15 Company Options granted to KMP During the financial year, Unquoted Options were granted to the following KMP, or the entities they controlled, pursuant to the Employee Incentive Plan as part of their remuneration. Exercise price Expiry date Number of options granted Total number of shares under option at the end of the year FY 2018 Directors David Budge Nathan Henry Mathew Whyte Mathew Whyte Paul Kristensen Mel Ashton Total FY 2017 Directors David Budge David Budge Nathan Henry Nathan Henry Mathew Whyte Paul Kehoe Samantha Tough Hendrikus Herman David Parker Total $ 0.79 0.79 0.79 0.95 1.08 1.08 $ 2.23 3.00 2.23 3.00 3.00 - - - - Exercise price Expiry date Number of options granted Total number of shares under option at the end of the year 31 Aug 20 31 Aug 20 31 Aug 20 31 Jul 20 31 Jan 21 31 Jan 21 15,000 15,000 15,000 100,000 100,000 100,000 345,000 15,000 15,000 15,000 100,000 100,000 100,000 345,000 30 Nov 19 31 Mar 20 30 Nov 19 31 Mar 20 31 Mar 20 - - - - 115,000 165,000 140,000 125,000 50,000 - - - - 115,000 165,000 140,000 125,000 50,000 - - - - 595,000 595,000 There were no alterations to the terms and conditions of Options granted as remuneration since their grant date, other than minor amendments to the term relating to transferability of the Options which was approved by shareholders at a general meeting on 13 June 2016. There were no shares issued during FY 2018 or FY 2017 as a result of the exercise of an Option by KMP. No Options lapsed during FY 2018 or FY 2017. Shares and performance shares issued to KMP During FY 2018 no shares or performance shares were issued to KMP as part of their remuneration. During FY 2017 no shares or performance shares were issued to KMP as part of their remuneration. Loans to and from KMP There were no loans made to or from KMP during FY 2018 and there are no loans outstanding from KMP at the date of this report. There were no loans made to or from KMP during FY 2017 and there are no loans outstanding from KMP at the date of this report. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 16 KMP equity holdings Fully paid ordinary shares Balance at beginning of year Number Granted as compensation Number3 Received on exercise of options Number Net change other Number2 Balance at end of year Number Balance held nominally Number 23,946,785 982,151 - - - - - - - - - - - - - - - - - - - - - - 23,946,785 982,151 - - - - - 150,000 - - - - Balance at beginning of period Number Granted as compensation Number3 Received on exercise of options Number Net change other Number2 Balance at end of year Number Balance held nominally Number 23,946,785 832,151 - 1,093,750 246,667 782,151 - - - - - 363,333 - - - - - - - - - - 150,000 - 1,000,000 250,000 150,000 - 23,946,785 982,151 - 2,093,750 860,000 932,151 - - 150,000 - 2,093,750 400,000 932,151 - FY 2018 Directors David Budge Nathan Henry Paul Kristensen Mel Ashton Mathew Whyte Samantha Tough FY 2017 Directors David Budge Nathan Henry Mathew Whyte Paul Kehoe1 David Parker1 Hendrikus Herman1 Samantha Tough1 1 Held as at date of resignation. 2 Shares acquired by subscription through IPO Prospectus for a consideration paid of $0.20 per share 3 David Parker was also an employee of Alto Capital who provided Lead Manager and capital raising services to the Company. David Parker was issued 363,333 ordinary shares as consideration for services from Alto Capital through the Lead Manager mandate agreement during FY 2017. Company Options Balance at beginning of year Number 1,005,000 1,958,334 50,000 - - Balance at beginning of year Number 725,000 1,693,334 - 500,000 - 1,693,333 - FY 2018 Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton FY 2017 Directors David Budge Nathan Henry Mathew Whyte Paul Kehoe1 David Parker1 Hendrikus Herman1 Samantha Tough1 Granted as compensation Number Exercised Number Net change other Number2 Balance at end of year Number 15,000 15,000 115,000 100,000 100,000 Granted as compensation Number Exercised Number 280,000 265,000 50,000 - - - - - - - - - - - - - - - - - - - - - 1,020,000 1,973,334 165,000 100,000 100,000 Net change other Number2 Balance at end of year Number - - - 1,000,000 1,000,000 - - 1,005,000 1,958,334 50,000 1,500,000 1,000,000 1,693,333 - Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 17 1 Held as at date of resignation. 2 Options acquired by subscription through IPO Prospectus for a consideration paid of $0.01 per share. All Company Options issued to KMP were made in accordance with the provisions of the Employee Incentive Plan. During the year, no options were exercised or sold. No amounts remain unpaid on the options during the financial year at year end. Performance Shares Class A Balance at beginning of year Number Granted as compensation for services Number Issued pursuant to pro-rata bonus issue Number 4,420,945 153,628 - - - - - - - - - - - - - - - - Redeemed and cancelled Number 4,420,9451 153,6281 - - - - Balance at end of year Number Balance held nominally Number - - - - - - - - - - - - FY 2018 Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Samantha Tough 1 Subsequent to beginning of year on 7 July 2017 all Class A Performance Shares were redeemed and cancelled. Balance at beginning of year Number Granted as compensation for services Number Issued pursuant to pro-rata bonus issue Number Redeemed and cancelled Number Balance at end of year Number Balance held nominally Number 4,420,945 153,628 - 75,000 80,192 144,397 - - - - - - - - - - - - - - - - - - - - - - 4,420,945 153,628 - 75,000 80,192 144,397 - - - - 75,000 27,692 46,154 - FY 2017 Directors David Budge Nathan Henry Mathew Whyte Paul Kehoe1 David Parker1 Hendrikus Herman1 Samantha Tough1 1 Held as at date of resignation. Performance Shares Class B Balance at beginning of year Number Granted as compensation for services Number Issued pursuant to pro-rata bonus issue Number Balance at end of year Number Balance held nominally Number 4,973,945 172,832 - - - - - - - - - - - - - - - - 4,973,945 172,832 - - - - - - - - - - FY 2018 Directors David Budge1 Nathan Henry1 Mathew Whyte Paul Kristensen Mel Ashton Samantha Tough 1 Subsequent to balance date all Class B Performance shares were redeemed and cancelled on 12 July 2018 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 18 Balance at beginning of year Number Granted as compensation for services Number Issued pursuant to pro-rata bonus issue Number Balance at end of year Number Balance held nominally Number Performance Shares Class B FY 2017 Directors David Budge Nathan Henry Mathew Whyte Paul Kehoe1 David Parker1 Hendrikus Herman1 Samantha Tough 4,973,945 172,832 - 84,375 90,216 162,448 - 1 Held as at date of resignation. Performance Shares Class C Balance at beginning of year Number Granted as compensation for services Number 5,341,975 185,624 - - - - FY 2018 Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Samantha Tough Performance Shares Class C Balance at beginning of year Number Granted as compensation for services Number 5,341,975 185,624 - 90,625 96,898 174,480 - FY 2017 Directors David Budge Nathan Henry Mathew Whyte Paul Kehoe David Parker Hendrikus Herman Samantha Tough END OF AUDITED REMUNERATION REPORT - - - - - - - - - - - - - - - - - - - - - - - - - 4,973,945 172,832 - 84,375 90,216 162,448 - - - - 84,375 31,154 51,924 - Issued pursuant to pro-rata bonus issue Number Balance at end of year Number Balance held nominally Number - - - - 5,341,975 185,624 - - - - - - Issued pursuant to pro-rata bonus issue Number Balance at end of year Number Balance held nominally Number 5,341,975 185,624 - 90,625 96,898 174,480 - - - - - - - - - - 90,625 33,461 55,769 - Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 19 SHARE OPTIONS At the date of this report the unissued ordinary shares of the Company under option are as follows: Grant Date 23 Nov 151 10 May 16 3 Aug 162 22 Nov 163 14 Mar 173 12 Jun 174 12 Jun 174 12 Jul 175 29 Aug 175 27 Sep 175 29 Nov 175 29 Nov 175 17 Apr 185 17 Apr 186 17 Apr 186 TOTAL Date of Expiry 31 Dec 18 31 Dec 18 31 Dec 18 30 Nov 19 31 Mar 20 30 Nov 19 31 Mar 20 30 Jun 20 31 Aug 20 30 Sep 20 31 Aug 20 31 Jul 20 31 Jan 21 17 Apr 20 17 Apr 20 Exercise Price $ 0.20 0.20 0.20 2.23 3.00 2.23 3.00 1.17 0.79 0.72 0.79 0.95 1.08 1.00 1.00 Outstanding at 1 Jul 17 1,400,000 4,250,000 5,500,000 225,000 641,000 255,000 290,000 - - - - - - - - 12,561,000 Lapsed/ Cancelled or Exercised (1,292,075)7 - - - - - - - (15,000) - - - - (1,307,075) Outstanding at Date of this Repot 107,925 4,250,000 5,500,000 225,000 641,000 255,000 290,000 40,000 417,000 50,000 45,000 100,000 200,000 500,000 3,186,000 15,806,925 1 Number of options issued on a post consolidation basis. 2 Options issued pursuant to the Initial Public Offering for $0.01 per option. 3 Options issued to eligible non- related parties pursuant to Aurora Employee Incentive Plan. 4 Options issued to eligible related parties pursuant to Aurora Employee Incentive Plan approved at General Meeting on 12 June 2017. 5 Options issued to eligible related parties pursuant to Aurora Employee Incentive Plan approved at General Meeting on 17 April 2018. 6 Options issued pursuant to the Placement and SPP for $0.01 per option. 71,292,075 fully paid ordinary shares were issued during the year (2017: 100,000) as a result of the exercise of Options. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. INDEMNITIES GIVEN AND INSURANCE PREMIUMS PAID TO OFFICERS AND AUDITORS The Company has entered into Deeds of Indemnity, Insurance and Access with each Director. Under these deeds, the Company has undertaken, subject to restrictions in the Corporations Act, to: Indemnify each Director from certain liabilities incurred from acting in that position under specified circumstances; a) b) Maintain directors’ and officers’ insurance cover (if available) in favour of each Director whilst that person maintains such office and for seven years after the Director has ceased to be a Director; c) Provide access to any Company records which are relevant to the Director’s holding of office with the Company, for a period of seven years after the Director has ceased to be a director. During the year, the Company paid a premium to insure officers of the Company. The officers of the Company covered by the insurance policy include all directors and the company secretary. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 20 The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be bought against the officers in their capacity as officers of the Company, and any payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Company. Details of the amount of the premium paid in respect of the insurance policies is not disclosed as such disclosure is prohibited under the terms of the contract. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer or auditor of the Company against any liability as such by an officer or auditor. NON-AUDIT SERVICES There were no non -audit services provided during the financial year by the auditor. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 21 and forms part of this Directors’ report for the year ended 30 June 2018. Signed in accordance with a resolution of the Directors. Mr David Budge Managing Director Dated this 21 August 2018 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 21 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Aurora Labs Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (a) (b) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Perth, Western Australia 21 August 2018 N G Neill Partner HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533 Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 22  CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 Notes 30 June 18 30 June 17 $ $ Continuing operations Revenue Cost of sales Other income Advertising 3(a) 3(b) 329,970 (116,692) 79,647 (213,877) Research and development expenses 3(c) (1,321,085) Rent Corporate expenses Depreciation Employee benefits Employee share based payments (non-cash) Other expenses Loss before income tax benefit Income tax benefit Loss for the year (347,794) (811,870) (158,899) 20 3(d) (3,184,438) (2,044,314) (265,722) (1,084,984) (1,053,214) (576,349) (7,063,974) (4,802,916) 4 1,532,717 1,403,927 (5,531,257) (3,398,989) 237,995 (154,062) 52,255 (155,232) (504,592) (113,177) (432,037) (28,419) Loss attributable to members of the Company (5,531,257) (3,398,989) Other comprehensive income, net of income tax - - Total comprehensive loss for the year (5,531,257) (3,398,989) Basic loss per share Diluted loss per share 5(d) 5(d) cents 9.13 9.13 cents 6.30 6.30 The accompanying notes form part of these financial statements. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 23 CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 Assets Current Assets Cash and cash equivalents Trade and other receivables Inventories Total Current Assets Non-Current Assets Property, plant and equipment Intangible assets Total Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Other liabilities Accrued annual leave Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Net Equity Notes 30 June 18 30 June 17 $ $ 7 8 9 10 11 12 12 12 5(a) 5(c) 3,790,081 1,807,024 656,437 6,253,542 475,162 510,137 985,299 5,249,614 1,433,179 509,402 7,192,195 357,081 225,545 582,626 7,238,841 7,774,821 555,184 52,534 184,481 792,199 632,908 242,108 124,143 999,159 6,446,642 6,775,662 15,232,021 1,513,206 (10,298,585) 6,446,642 10,345,506 1,197,484 (4,767,328) 6,775,662 The accompanying notes form part of these financial statements. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 24 CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 Issued Capital $ Option Reserve $ Accumulated Losses $ Total Equity $ Balance at 1 July 2017 10,345,506 1,197,484 (4,767,328) 6,775,662 Equity issued during the year (net of share issue costs) Loss for the year Other comprehensive income for the year, net of income tax Total comprehensive loss for the year 4,886,515 315,722 - 5,202,237 - - - - - - (5,531,257) (5,531,257) - - (5,531,257) (5,531,257) Balance as at 30 June 2018 15,232,021 1,513,206 (10,298,585) 6,446,642 Issued Capital Option Reserve $ $ Accumulated Losses $ Total Equity $ Balance at 1 July 2016 1,365,625 57,500 (1,368,339) 54,786 Equity issued during the year (net of share issue costs) Loss for the year Other comprehensive income for the year, net of income tax Total comprehensive loss for the year 8,979,881 1,139,984 - 10,119,865 - - - - - - (3,398,989) (3,398,989) - - (3,398,989) (3,398,989) Balance as at 30 June 2017 10,345,506 1,197,484 (4,767,328) 6,775,662 The accompanying notes form part of these financial statements. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 25  CONDENSED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 Cash flows from operating activities Payments to suppliers and employees (6,998,234) (4,130,484) 30 June 18 30 June 17 Note $ $ Receipts from customers Refunds to customers Interest Received Income tax benefit 306,050 (149,390) 89,839 1,052,717 112,000 - 41,639 323,927 Net cash (used in) operating activities 7 (5,699,018) (3,652,918) Cash flows from investing activities Property, plant and equipment Payments for intangible assets Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of shares (net of capital raising costs) Net cash provided by financing activities (283,629) (300,357) (583,986) (345,619) (161,775) (507,394) 4,825,309 4,825,309 7,056,521 7,056,521 Net decrease in cash held (1,457,695) (2,896,209) Cash and cash equivalents at the beginning of the year Exchange rate adjustments 5,249,614 2,353,226 (1,838) 179 Cash and cash equivalents at the end of the year 7 3,790,081 5,249,614 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation (a) These financial statements are general purpose financial statements, which have been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and comply with other requirements of the law. The financial statements comprise the financial statements for the Company. For the purposes of preparing the financial statements, the Company is a for-profit entity. The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise stated. The financial statements are for Aurora Labs Limited (“Aurora” or the “Company”) which has no subsidiaries. The financial statements have been prepared on a historical cost basis. Historical cost is based on the fair values of the consideration given in exchange for goods and services. The financial statements are presented in Australian dollars. The principal activities of the Company during the year included the design and development of 3D metal printers, powders, digital parts and their associated intellectual property. (b) Adoption of new and revised standards Standards and Interpretations applicable to 30 June 2018 In the year ended 30 June 2018, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and, therefore, no material change is necessary to Group accounting policies. Standards and Interpretations in issue not yet adopted The Directors have also reviewed all Standards and Interpretations issued but not yet adopted for the year ended 30 June 2018. As a result of this review the Directors have determined that the following Standards and Interpretations may have a material effect on Group accounting policies in future financial periods, namely: • • The Company has elected not to early adopt these Standards and Interpretations. AASB 15 Revenue from Contracts with Customers AASB 16 Leases AASB 15 Revenue from Contracts with Customers Rendering of services The Company provides installation services to customers. The Company recognises service revenue by reference to the stage of completion. Under AASB 15 the revenue allocated to the service will be recognised over time as the customer utilises the service. The impact to revenue and profit or loss for the current year is not material. AASB 16 Leases AASB 16 replaces the AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases-Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. AASB 16 removes the classification of leases as either operating leases or finance leases- for the lessee - effectively treating all leases as finance leases. Most leases will be capitalised on the balance sheet by recognising a lease liability for the present value obligation and a 'right-of- use' asset. The right of use assets is calculated based on the lease liability plus initial direct costs, prepaid lease payments and estimated restoration costs less lease incentives received. This will result in an increase in the recognised assets and liabilities in the statement of financial position as well as a change in expense recognition, with interest and deprecation replacing operating lease expense. There are exemptions for short-term leases and leases of low-value items. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Lessor accounting remains similar to current practice, i.e. lessors continue to classify leases as finance and operating leases. This standard will primarily affect the accounting for the Company’s operating leases. As at 30 June 2018, the Company has $267,493 of non-cancellable operating lease commitments relating to a property lease. The Company is considering the available options to account for this transition but the Company expects a change in reported earnings before interest, tax, depreciation and amortisation (EBITDA) and increase in lease assets and liabilities recognition. The lease standard is also expected a considerable impact on deferred tax balances. This will however be dependent on the lease arrangements in place when the new standard is effective. The Company has commenced the process of evaluating the impact of the new lease standard. AASB 16 is effective from annual reporting periods beginning on or after 1 January 2019, with early adoption permitted for entities that also adopt AASB 15. A lessee can choose to apply the standard using a full retrospective or a modified retrospective approach. Statement of compliance (c) The financial report was authorised for issue in accordance with a resolution of the Directors on 21 August 2018. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). Significant accounting estimates and judgements (d) The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Impairment of intangibles with indefinite useful lives: The Company determines whether intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the intangibles with indefinite useful lives are allocated. Share-based payment transactions: The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using internal valuation models in conjunction with the market price of the share-based payments. Segment reporting (e) The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Aurora Labs Limited. The Company operating segment has been determined with reference to the monthly management accounts used by the chief operating decision maker to make decisions regarding the Company operations and allocation of working capital. Based on the quantitative thresholds included in AASB 8, there is only one reportable segment, being the design, development and manufacture of 3D metal printers and associated products and services for the year ended 30 June 2018 and the year ended 30 June 2017. The revenues and results of this segment are those of the Company as set out in the statement of comprehensive income and the assets and liabilities of the Company are set out in the statement of financial position. Foreign currency translation (f) Both the functional and presentation currency of Aurora Labs Limited is Australian dollars. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance date. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 28 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued All exchange differences in the financial report are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. 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. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Revenue recognition (g) Revenue is measured at fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. Sale of goods Revenue is recognised when all the following conditions are satisfied: • • the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Company; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. • • • Interest income Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of revenue can be reliably measured. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assets’ net carrying amount on initial recognition. Leases (h) Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Income tax (i) The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary difference and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date. Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 29 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. • Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • • when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Other taxes (j) Revenues, expenses and assets are recognised net of the amount of GST except: • • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Deferred income tax liabilities are recognised for all taxable temporary differences except: • • when the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 30 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of tangible and intangible assets other than goodwill (k) The Company assesses at each balance date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or companies of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each balance date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Cash and cash equivalents (l) Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. (m) Trade and other receivables Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less any allowance for impairment. Trade receivables are generally due for settlement within periods ranging from 15 to 30 days. Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Company will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Company in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Company. The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables are short-term discounting is not applied in determining the allowance. The amount of the impairment loss is recognised in the statement of comprehensive income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of comprehensive income. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 31 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Inventories (n) Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition is accounted for as follows: • • Raw materials – purchase cost on a first-in, first-out basis; and Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Property, plant and equipment (o) Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. Depreciation is calculated on diminishing value basis using the following notes: Plant and equipment 10% to 30% Leasehold Improvements Over the term of the lease The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to approximate fair value. An impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. For plant and equipment, impairment losses are recognised in the statement of comprehensive income in the cost of sales line item. However, because land and buildings are measured at revalued amounts, impairment losses on land and buildings are treated as a revaluation decrement. Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (p) Intangible assets Intangible assets acquired separately Intangible assets acquired separately are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes in these accounting estimates being accounted for on a prospective basis. Internally generated intangible assets – research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated: • • • • • • The technical feasibility of completing the intangible asset so that it will be available for use or sale; The intention to complete the intangible asset and use or sell it; The ability to use or sell the intangible asset; How the intangible asset will generate probable future economic benefits; The availability of adequate technical, financial and other resources to complete development and to use or sell the intangible asset; and The ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. The following useful lives are used in the calculation of amortisation: Patents 20 years from application following grant of patent Trade and other payables (q) Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. Provisions (r) Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. When the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) (s) Employee leave benefits Wages, salaries, annual leave and sick leave Liabilities accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave expected to be settled within 12 months of the balance date are recognised in other payables in respect of employees’ services up to the balance date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. Liabilities accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave not expected to be settled within 12 months of the balance date are recognised in non-current other payables in respect of employees’ services up to the balance date. They are measured as the present value of the estimated future outflows to be made by the Company. Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the balance date. Consideration is given to expected future wage and salary levels, experience of employee departures, and period of service. Expected future payments are discounted using market yields at the balance date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. Share-based payment transactions (t) Equity settled transactions The Company provides benefits to employees (including senior executives) of the Company in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The Company has the following plan in place: • the Employee Incentive Plan (EIP), which provides benefits to Directors and senior executives and is governed by the Employee Incentive Plan Rules. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by internal valuation using a Black-Scholes model, further details of which are given in Note 20. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Company (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each balance date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Company’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 34 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share, refer Note 5. Cash settled transactions: The Company also provides benefits to employees in the form of cash-settled share-based payments, whereby employees render services in exchange for cash, the amounts of which are determined by reference to movements in the price of the shares of Company. The cost of cash-settled transactions is measured initially at fair value at the grant date using the Black-Scholes formula taking into account the terms and conditions upon which the instruments were granted, refer Note 20. This fair value is expensed over the period until vesting with recognition of a corresponding liability. The liability is remeasured to fair value at each balance date up to and including the settlement date with changes in fair value recognised in profit or loss. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration. Earnings per share (u) Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • • • costs of servicing equity (other than dividends) and preference share dividends; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (v) Going Concern The financial report has been prepared on a going concern basis which is based on the realisation of the future potential of the Company’s assets and discharge of its liabilities in the normal course of business. As disclosed in the financial statements, the Company has incurred a net loss after tax for the year ended 30 June 2018 of $5,531,257 (2017: $3,398,989) and had net cash outflows from operating activities of $5,699,018 (2017: $3,652,918). As at 30 June 2018, the Company has a net current asset position of $5,461,343 (2017: $6,193,036). The net current asset position as at 30 June 2018 includes the following: - cash at bank of $3,790,081 (2017: $5,249,614); - Income tax benefit receivable $1,560,000 (2017: $1,080,000); - inventories of $656,437 (2017: $509,402) The Directors consider that the Company is a going concern however current cash flow forecasts indicate that the Company will need to generate sufficient revenue from its operations or other sources to continue as a going concern. As the Company is in the formative stages of its business model there exists circumstances that give rise to a material uncertainty in relation to going concern. Should the Company be unsuccessful in generating sufficient revenue from operations or additional sources of funding, there is a material uncertainty that may cast significant doubt as to whether the company will able to continue as a going concern and be able to realise its assets and extinguish its liabilities in the normal course of business. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 35 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Notwithstanding the above, the Directors believe there are reasonable grounds to believe that the Company will be able to continue as a going concern after consideration of the following factors: - The current business development prospects show an increase in activity and should lead to increasing ongoing revenue and net cash flows which as has been documented in the Company’s cash flow forecast for the period ending 30 September 2019; - The Directors remain committed to the long-term business plan that is contributing to improved results as the business progresses; - The budgets and forecasts reviewed by the Directors for the next twelve months anticipate the business will continue to produce improved cash flow results, including proceeds from the expected exercise of existing options before their expiry at 31 December 2018; and - The Directors and the business have a successful track record of capital raising and have the option of seeking further funding to support working capital and the R& D activities of the Company by way of equity capital. The Directors are of the opinion that these factors will allow the Company to focus on growth areas and on improving profitability. The Directors continue to monitor the situation closely and are focused on taking all measures necessary to optimise the Company’s performance. The Directors believe that the above indicators demonstrate that the Company will be able to pay its debts as and when they become due and payable and to continue as a going concern and be in a position to realise its assets and settle its liabilities and commitments in the normal course of business and at the amounts stated in the financial report. Accordingly, the Directors also believe that it is appropriate to adopt the going concern basis in the preparation of the financial statements. No adjustments have been made to the recoverability and classification of recorded asset values and the amount and classification of liabilities that might be necessary should the company not continue as a going concern. NOTE 2: SEGMENT REPORTING The Company only operated in one segment, being design, development and manufacture of 3D metal printers and associated products and services for the year ended 30 June 2018 and the year ended 30 June 2017. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 36 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 3: REVENUE AND EXPENSES (a) Revenue Sale of Goods Total (b) Other Income Interest received Total (c) Research and Development expenses* Consultancy fees Consumables, design and engineering services Total (d) Other Expenses Freight and Courier Insurance Software Travel Bad debts written off Payroll Tax Other Total 30 June 18 30 June 17 $ $ 329,970 329,970 79,647 79,647 251,266 1,069,819 1,321,085 117,398 166,413 75,380 235,887 56,489 149,428 252,219 1,053,214 237,995 237,995 52,255 52,255 157,843 346,749 504,592 80,911 59,465 55,727 128,380 - 72,228 179,638 576,349 * Research and Development expenses relate to direct expenses only. It should be noted that a significant portion of Employee Benefits and Other Costs is considered eligible expenses for R&D tax claim purposes. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 37 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 4: INCOME TAX (a) Income tax benefit (b) Numerical reconciliation between tax-benefit and pre-tax net loss (Loss) from ordinary activities Income tax using the Company’s tax rate of 27.5% (27.5% 2017) Current period (loss) for which no deferred tax liability was recognised Income tax benefit relating to Research and Development claim Income tax benefit attributable to entity (c) Unrecognised deferred tax Tax losses for which no deferred tax asset has been recognised Losses available for offset against future taxable income Total Potential tax benefits of 27.5% (27.5% 2017) 30 June 18 $ 1,532,717 30 June 17 $ 1,403,927 (7,063,974) (1,942,593) 1,942,593 1,532,717 1,532,717 30 June 18 $ 10,391,043 10,391,043 2,857,537 (4,802,916) (1,320,801) 1,320,801 1,403,927 1,403,927 30 June 17 $ 4,859,786 4,859,786 1,336,441 The benefit of deferred tax assets not brought to account will only be brought to account if: • • • future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; the conditions for deductibility imposed by tax legislation continue to be complied with; and no changes in tax legislation adversely affect the Company in realising the benefit. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 38 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 5: ISSUED CAPITAL a) Ordinary Shares 30 Jun 18 30 Jun 18 30 Jun 17 30 Jun 17 Number $ Number $ Movements in ordinary shares on issue Balance at beginning of the year 57,900,000 10,345,506 Shares issued Sub total Less share issue costs Balance at end of year 7,699,271 5,389,803 65,599,271 15,735,309 40,000,000 17,900,000 57,900,000 1,365,625 10,020,000 11,385,625 - (503,288) - (1,040,119) 65,599,271 15,232,021 57,900,000 10,345,506 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. NOTE 5: ISSUED CAPITAL (continued) b) Performance Shares 2017 Movements in performance shares on issue Balance at beginning of year Performance Shares issued Total at end of year to 30 June 2017 Class A Number Class B Number Class C Number Total Number 6,300,000 - 6,300,000 7,087,500 - 7,087,500 7,612,500 - 7,612,500 21,000,000 - 21,000,000 2018 Class A Number Class B Number Class C Number Total Number Balance at beginning of year 6,300,000 7,087,500 7,612,500 21,000,000 Performance Shares redeemed and cancelled (6,300,000) - - - Total at end of year to 30 June 2018 - 7,087,500 7,612,500 14,700,000 Performance Shares were all issued for nil consideration. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 39 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Performance Shares hold no rights over ordinary shares and do not receive any dividends, however convert to Ordinary Shares based on Company Milestones being achieved: • • • A Class A Performance Share in the relevant class will convert into one Share upon achievement of Aurora (or an entity controlled by Aurora) having cumulative revenue of A$1,500,000 before 30 June 2017..On 7 July 2017, 6,300,000 Class A Performance Shares were automatically redeemed and cancelled as the relevant milestone for their conversion was not satisfied by 30 June 2017. Refer Aurora’s announcement to ASX dated 14 July 2017 (‘Release of Options from Escrow & other changes to Securities’). A Class B Performance Share in the relevant class will convert into one Share upon achievement of Aurora (or an entity controlled by Aurora) having cumulative revenue of A$5,000,000 before 30 June 2018..On 12 July 2018, 7,087,500 Class B Performance Shares were automatically redeemed and cancelled as the relevant milestone for their conversion was not satisfied by 30 June 2018. Refer Aurora’s announcement to ASX dated 12 July 2018 (‘Changes to Company Securities and Appendix 3Y’). A Class C Performance Share in the relevant class will convert into one Share upon achievement of Aurora (or an entity controlled by Aurora) having cumulative revenue of A$7,250,000 before 30 June 2019. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 40 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 5: ISSUED CAPITAL (continued) c) Reserves Reserves Balance at beginning of year Option Reserve Balance at the end of the year 30 June 18 $ 1,197,484 315,722 1,513,206 30 June 17 $ 57,500 1,139,984 1,197,484 This reserve is used to record the value of equity benefits provided to employees and Directors as part of their remuneration. Refer to Note 6 for further details. d) Loss per share 30 June 18 30 June 17 Total loss from continuing operations Weighted number of average shares $5,531,257 60,589,796 $3,398,989 54,013,973 Loss per share $0.091 $0.063 e) Dividends There were no dividends declared or paid in the year to 30 June 2018 or the period to 30 June 2017. NOTE 6: COMPANY OPTIONS Company Options 30 June 18 30 June 18 30 June 17 30 June 17 Number $ Number $ Balance at the beginning of the year Options issued Options exercised Balance at the end of year 12,561,000 4,553,000 (1,307,075) 15,806,925 1,197,484 315,722 - 5,750,000 6,911,000 (100,000) 57,500 1,139,984 - 1,513,206 12,561,000 1,197,484 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 41 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 The following options were in place during the current and prior periods: Number Grant date Expiry date Exercise price Fair value Vesting date at grant date Employee options Employee options Options issued under IPO prospectus Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Employee Incentive Plan Placement Placement 1,500,000 4,250,000 5,500,000 23 Nov 15 31 Dec 15 10 May 18 31 Dec 15 3 Aug 16 31 Dec 15 225,000 641,000 255,000 290,000 40,000 432,000 50,000 100,000 45,000 200,000 500,000 22 Nov 16 30 Nov 19 14 Mar 17 31 Mar 20 12 Jun 17 12 Jun 17 12 Jul 17 29 Aug 17 3 Oct 17 29 Nov 17 29 Nov 17 17 Apr 18 17 Apr 18 30 Nov 19 31 Mar 20 30 Jun 20 31 Aug 20 30 Sep 20 31 Jul 20 31 Aug 20 31 Jan 21 17 April 20 3,686,000 17 Apr 18 17 Apr 20 $ $0.20 $0.20 $0.20 $2.23 $3.00 $2.23 $3.00 $1.17 $0.79 $0.72 $0.95 $0.79 $1.08 $1.00 $1.00 $ $0.20 $0.20 $0.20 $0.29 $1.17 $0.29 $0.28 $0.26 $0.30 $0.23 $0.48 $0.45 $0.24 - - 23 Nov 15 31 Dec 15 31 Dec 15 22 Nov 16 14 Mar 17 12 Jun 17 12 Jun 17 12 Jul 17 29 Aug 17 3 Oct 17 29 Nov 17 29 Nov 17 17 Apr 18 17 Apr 18 17 Apr 18 The fair value of the equity-settled share options granted is estimated as at the date of grant using the Black-Scholes model taking into account the terms and conditions upon which the options were granted. Share options issued prior to listing on the ASX have not been valued using the Black Scholes model. NOTE 7: CASH AND CASH EQUIVALENTS Cash at hand and in bank Term Deposits Total 30 June 18 $ 1,990,081 1,800,000 3,790,081 30 June 17 $ 1,228,655 4,020,959 5,249,614 Cash at bank earns interest at floating rates based on daily deposit rates. The Company did not engage in any non-cash financing activities for the year ended 30 June 2018. Reconciliation to the Statement of Cash Flows: For the purposes of the statement of cash flows, cash and cash equivalents comprise cash on hand and at bank and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 42 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Cash and cash equivalents Total Reconciliation of loss after tax to net cash outflow from operating activities: Loss for the year/period Adjustment for non-cash income and expense items Depreciation Equity settled share-based payments Bad debt expenses Change in assets and liabilities Increase in trade and other receivables Increase in annual leave accrual Increase in inventories Decrease in trade and other payables Net cash outflow from operating activities 30 June 18 $ 3,790,081 3,790,081 30 June 18 $ (5,531,257) 158,899 265,722 56,489 (484,450) 60,338 (147,035) (77,724) (5,699,018) 30 June 17 $ 5,249,614 5,249,614 30 June 17 $ (3,398,989) 28,419 1,084,984 - (1,342,274) 107,726 (405,504) 272,720 (3,652,918) Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 43 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 8: TRADE AND OTHER RECEIVABLES Bank guarantee Accounts Receivable GST Advances to suppliers Interest receivable Other receivables Income tax benefit receivable Pre-paid expenses Total NOTE 9: INVENTORIES Stock on Hand Raw materials – Powders at cost Work in progress – Small Format Printers at cost Total Parts used in development were classified as research and development and expensed. NOTE 10: PROPERTY, PLANT AND EQUIPMENT (i)Carrying value 30 June 18 $ 92,959 - 33,712 15,203 2,702 57,777 1,560,000 44,671 1,806,024 30 June 18 $ 228,025 32,972 395,440 656,437 30 June 17 $ 117,959 61,361 86,678 10,979 11,075 - 1,080,000 65,127 1,433,179 30 June 17 $ 190,690 15,107 303,605 509,402 Cost Accumulated depreciation and impairment Plant and Equipment $ 206,115 (26,130) Computers and Cameras $ 202,686 (60,944) Office Equipment $ Leasehold Improvements $ Total $ 70,368 (9,780) 185,692 (92,845) 664,861 (189,699) Carrying value as at 30 June 2018 179,985 141,742 60,588 92,847 475,162 Cost Accumulated depreciation and impairment 131,656 (7,153) 125,220 (20,571) 34,538 (3,086) 96,477 - 387,891 (30,810) Carrying value as at 30 June 2017 124,503 104,649 31,452 96,477 357,081 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 44 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 10: PROPERTY, PLANT AND EQUIPMENT (continued) (ii)Reconciliation Plant and Equipment $ 124,503 74,475 (18,993) 179,985 6,550 124,606 (6,653) 124,503 Computers and Cameras $ 104,649 77,457 (40,364) 141,742 2,593 121,956 (19,900) 104,649 Office Equipment $ Leasehold Improvements $ 31,452 35,831 (6,695) 60,588 3,630 29,688 (1,866) 31,452 96,477 89,217 (92,847) 92,847 - 96,477 - 96,477 Total 357,081 276,980 (158,899) 475,162 12,773 372,727 (28,419) 357,081 Carrying value as at 1 July 2017 Additions Depreciation expense Balance at end of year Carrying value as at 1 July 2016 Cost Depreciation expense Balance at end of year NOTE 11: INTANGIBLES (i) Carrying amount Intangibles consist of patents lodged by the Company Cost Impairment (for lapsed or forfeited patents) Balance at end of year (ii) Reconciliation Intangibles consist of patents lodged by the Company Balance at the beginning of the year Capitalised payments for patent related costs Less impairment (for lapsed or forfeited patents) Balance at end of year 30 June 18 $ 513,467 (3,330) 510,137 30 June 18 $ 225,545 287,922 (3,330) 510,137 30 June 17 $ 225,545 - 225,545 30 June 17 $ 59,947 165,598 - 225,545 Patents that have lapsed or are forfeited and are not rolled into a new patents have been impaired and moved to an expense in the year the patents lapsed/expired. NOTE 12: FINANCIAL LIABILITIES Trade and other payables Accounts Payable Other payables Sub Total Deferred Revenue - Deposits / pre-payments for Small Format Printers Accrued annual leave Total 30 June 18 $ 30 June 17 $ 320,478 234,706 555,184 52,534 184,481 792,199 206,474 426,434 632,908 242,108 124,143 999,159 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 45 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 13: SIGNIFICANT EVENTS AFTER THE BALANCE DATE On 12 July 2018, 7,087,500 Class B Performance Shares were automatically redeemed and cancelled as the relevant milestone for their conversion was not satisfied by 30 June 2018. Refer Aurora’s announcement to ASX dated 12 July 2018 ‘Changes to Company Securities’. On 16 August 2018 32,260,696 Shares and 9,092,500 Unquoted options (exercisable at $0.20 and expiring 31 December 2018) were released from escrow. Other than the above, there have been no other matters or circumstances which has arisen since 30 June 2018 that has significantly affected or may significantly affect: a) Aurora Labs operations in future financial years; or b) The results of those operations in future financial years; or c) Aurora Labs state of affairs in future financial years. NOTE 14: DIVIDENDS The Directors of the Company have not declared any dividend for the year ended 30 June 2018 or the period ended 30 June 2017. NOTE 15: COMMITMENTS As at the balance date, the Company has a total of 7 Small Format Printers that were either: pre-sold at discount rates to various non- related parties as part of a crowd-funding initiative called “kickstarter”; or full price pre-sales in financial year ended June 2018. In total a liability of $52,534 is recognised on the statement of financial position which corresponds to funds received from these pre-sales. The Company has an obligation to either a) deliver a commercial version of the pre-sold Small Format Printer for each pre-sold machine or b) if the Company is unable to deliver commercial Small Format Printers to cover the pre-sold machines then the funds received will have to be returned to the customers. Lease Agreement The Company leased a warehouse and office space at Unit 2, 79 Bushland Ridge Bibra Lake, Western Australia: The rental agreement commenced 1 June 2017 with an initial 24-month period that can be extended, there is a payment of $24,318 per month plus standard outgoings. Lease commitments Not longer than 1 year Longer than 1 year and shorter than 5 years Total 30 June 18 30 June 17 $ $ 267,493 - 267,493 289,152 265,056 554,208 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 46 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 16: FINANCIAL INSTRUMENTS a) Overview The Company's principal financial instruments comprise receivables, payables and cash. The main risks arising from the Company's financial instruments are credit risk, liquidity risk, interest rate risk and foreign currency risk. This note presents information about the Company's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Other than as disclosed, there have been no significant changes since the previous financial year to the exposure or management of these risks. The Company manages its exposure to key financial risks in accordance with the Company's risk management policy. Key financial risks are identified and reviewed annually, and policies are revised as required. The overall objective of the Company's risk management policy is to recognise and manage risks that affect the Company and to provide a stable financial platform to enable the Company to operate efficiently. The Company does not enter into derivative transactions to mitigate the financial risks. In addition, the Company's policy is that no trading in financial instruments shall be undertaken for the purposes of making speculative gains. As the Company's operations change, the Directors will review this policy periodically going forward. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board reviews and agrees policies for managing the Company's financial risks as summarised below. b) Credit Risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Company uses publicly available financial information and its own trading record to rate its major customers. The Company does not have any significant credit risk exposure to any single counterparty or any Company of counterparties having similar characteristics. Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. This arises principally from cash and cash equivalents and trade and other receivables. There are no significant concentrations of credit risk within the Company. The carrying amount of the Company's financial assets represents the maximum credit risk exposure, as represented below: Cash and cash equivalents Trade and other receivables Total 30 Jun 18 $ 3,790,081 1,807,024 5,546,105 30 Jun 17 $ 5,249,614 1,433,179 6,682,793 Trade and other receivables are comprised primarily of advances to suppliers, bank guarantee, prepayments, interest receivable and GST refunds due. Where possible the Company trades only with recognised, creditworthy third parties. It is the Company's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. With respect to credit risk arising from cash and cash equivalents, the Company's exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 47 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 16: FINANCIAL INSTRUMENTS (continued) c) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Board's approach to managing liquidity is to ensure, as far as possible, that the Company will always have sufficient liquidity to meet its liabilities when due by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The contractual maturities of financial liabilities, including estimated interest payments, are provided below. There are no netting arrangements in respect of financial liabilities. 2018 Financial Liabilities Trade and other payables Deferred revenue Accrued annual leave Total 2017 Financial Liabilities Trade and other payables Deferred revenue Accrued annual leave Total d) Interest Rate Risk ≤6 Months $ 6-12 Months $ 1-5 Years $ ≥5 Years $ 555,184 52,534 184,481 792,199 - - - - - - - - - - ≤6 Months $ 6-12 Months $ 1-5 Years $ ≥5 Years $ 632,908 242,108 124,143 999,159 - - - - - - - - - - - - Total $ 555,184 52,534 184,481 792,199 Total $ 632,908 242,108 124,143 999,159 The Company's exposure to the risk of changes in market interest rates relates primarily to the cash and short-term deposits with a floating interest rate. These financial assets with variable rates expose the Company to cash flow interest rate risk. All other financial assets and liabilities, in the form of receivables and payables are non-interest bearing. At the reporting date, the interest rate profile of the Company's interest-bearing financial instruments was: Interest-bearing financial instruments Cash at bank and on hand Term Deposits Total 30 Jun 18 30 Jun 17 $ $ 1,990,081 1,800,000 3,790,081 1,228,655 4,020,959 5,249,614 The Company's cash at bank and on hand and short-term deposits had a weighted average floating interest rate at year end of 1.97% (2017: 1.68%). The Company currently does not engage in any hedging or derivative transactions to manage interest rate risk. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 48 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 16: FINANCIAL INSTRUMENTS (continued) Interest rate sensitivity The Company considers that a 1% movement in interest rates would result in an immaterial impact on equity and the profit and loss. e) Foreign Exchange Risk The Company's has an exposure to foreign exchange rates given that the Company purchases parts as part of the manufacture process of the SFP from international suppliers. A fluctuation in foreign exchange rates may affect the cost base of the SFP. The Company is actively marketing the SFP to international customers in USD. If foreign exchange rates change this may make the SFP more or less price competitive with competitor’s metal 3D printers. Given the Company is not yet in production it is too early to quantify the financial impact of foreign exchange risk. f) Fair values The net fair value of financial assets and financial liabilities approximates their carrying value. The methods for estimating fair value are outlined in the relevant notes to the financial statements. NOTE 17: CONTINGENT LIABILITIES / ASSETS The Company had no contingent liabilities or assets as at the reporting date. NOTE 18: KEY MANAGEMENT PERSONNEL a) Key Management Personnel The KMP of the Company during or since the end of the financial year were as follows: Directors Position KMP David Budge Nathan Henry Mathew Whyte Samantha Tough Paul Kristensen Mel Ashton Position Managing Director Executive Director Company Secretary ; and Non-Executive Director Non- Executive Chairman resigned 25 July 2017 Non- Executive Chairman appointed 22 January 2018 Non-Executive Director appointed 22 January 2018 b) Key Management Personnel Compensation Short-term employee benefits Post- employment benefits Share-based payments Total compensation 30 Jun 18 30 Jun 17 $ $ 695,896 47,283 114,337 857,516 553,450 43,463 213,226 810,139 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 49 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 19: KEY MANAGEMENT PERSONNEL (continued) c) Other Transactions Mathew Whyte provided company secretarial services through a controlled entity Whypro Corporate Services. Payments for company secretarial services during the year totalled: $115,200 (2017: $70,400). These items have been recognised as expenses in the Statement of Comprehensive Income. NOTE 20: SHARE-BASED PAYMENTS a) Recognised Share-based Payment Expense From time to time, the Company provides incentive options to officers, employees, consultants and other key advisors as part of remuneration and incentive arrangements. The number of options granted, and the terms of the options granted are determined by the Board. Shareholder approval is sought where required. During the past two years, the following equity-settled share-based payments have been recognised: Expense arising from equity-settled share-based payment transactions Net share based payment expense/(income) recognised in the profit or loss b) Remaining Contractual Life 30 June 18 Number 30 June 18 30 June 17 30 June 17 $ Number $ 867,000 265,722 1,411,000 1,084,984 867,000 265,722 1,411,000 1,084,984 All Incentive Options outstanding at 30 June 2018 are able to be exercised prior to 31 January 2021, so there is 2.5 years remaining contractual life on all options as at the balance date (2017: 1.5 years). c) Range of Exercise Prices The exercise price of Incentive Options outstanding at 30 June 2018 are detailed in Note 6. d) Weighted Average Fair Value The fair value of all options issued during the year was $0.01 per option. e) Option Pricing Model The fair value of the equity-settled Company Options granted is estimated as at the date of grant using an internal valuation methodology taking into account the terms and conditions upon which the options were granted. In conjunction to the internal valuation model, the Board gave consideration to the market price for options being issued at arm’s length during and since the end of the reporting date. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 50 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTE 21: AUDITORS REMUNERATION AUDITORS' REMUNERATION Amounts received or due and receivable by HLB Mann Judd for:  an audit or review of the financial report of the entity  other services in relation to the entity Total 30 Jun 18 30 Jun 17 $ $ 26,500 - 24,500 24,500 - 24,500 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 51 DIRECTORS DECLARATION 1. In the opinion of the Directors of Aurora Labs Limited (“Aurora” or the “Company”): a. the accompanying financial statements and notes are in accordance with the Corporations Act 2001 including: i. ii. giving a true and fair view of the Company’s financial position as at 30 June 2018 and of its performance for the year then ended; and complying with Australian Accounting Standards, the Corporations Regulations 2001, professional reporting requirements and other mandatory requirements. b. c. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board. 2. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2018. This declaration is signed in accordance with a resolution of the Board of Directors. ______________________________ David Budge Managing Director Dated this 21 August 2018 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 52 Independent Auditor’s Report to the Members of Aurora Labs Limited REPORT ON THE AUDIT OF THE FINANCIAL REPORT Opinion We have audited the financial report of Aurora Labs Limited (“the Company”) which comprises the statement of financial position as at 30 June 2018, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Company’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Regarding Going Concern We draw attention to Note 1 in the financial report, which indicates that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4 130 Stirling Street Perth WA 6000 | PO Box 8124 Perth BC WA 6849 | Telephone +61 (08) 9227 7500 | Fax +61 (08) 9227 7533 Email: mailbox@hlbwa.com.au | Website: www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 53 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter Share Based payments Refer to Note 20 During the financial year the Company issued unlisted options to Key Management Personnel and employees. We have considered this to be a key audit matter as where accounting for the transactions requires involving significant management estimates that require a degree of estimation. judgement Research and development expenditure Refer to Notes 1(p) and 3(c) During the current year, the Company incurred significant expenditure in relation to medium, large format printers and powder production unit. The Company is in the process of developing its 3D printer and powder production unit designs as it moves toward commercialisation of its various designs. We considered the accounting for this expenditure to be a key audit matter due to the complexity of determining an appropriate accounting policy and the high required by management in assessing the stage of the process. level of estimation How our audit addressed the key audit matter Our procedures included but were not limited to: - We evaluated management's process and key controls regarding share based payments; - Ensured that the treatment of the share-based payment arrangements entered into by the Company were consistent with the requirements of AASB 2 Share-based payment; and in calculation of the value of options. inputs used - Testing the the Our procedures included but were not limited to: - We evaluated management's process and key controls regarding research and development expenditure; and - We considered management’s assessment of whether or not various expenditures met the definition for deferral as development expenditure under AASB 138 Intangible asset. Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 54 Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, 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. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Company 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 Company or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is 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 Australian Auditing Standards 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 economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 55 going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 11 to 19 of the directors’ report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Aurora Labs Limited for the year ended 30 June 2018 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd Chartered Accountants Perth, Western Australia 21 August 2018 N G Neill Partner Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 56 ASX ADDITIONAL INFORMATION Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report. COMPANY SECURITIES The following information is based on share registry information processed up to 16 August 2018. Quoted Securities There are two classes of quoted securities, being: 1. 2. Fully paid ordinary shares (ASX: A3D); Listed Options exercisable at $1.00 and expiring 17 April 2020 (ASX: A3DO). 1) Fully Paid Ordinary Shares a) Distribution and spread of Ordinary shares Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Shares Shareholders 401 584 329 512 67 1,893 Shares 240,598 1,737,177 2,667,710 14,390,875 46,562,911 65,599,271 b) Marketable parcel There are 428 shareholders with less than a marketable parcel (basis price $0.42). c) Voting rights All ordinary shares carry one vote per share without restriction. Options and Performance Shares do not carry any voting rights. d) Substantial Shareholders There was one substantial shareholder who has provided a Substantial shareholder notice, being David Budge, holding 23,946,785 fully paid ordinary shares, being 36.5% of the fully paid ordinary shares on issue. e) On market buy-back There is no on-market buy-back scheme in operation for the Company’s quoted shares. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 57 ASX ADDITIONAL INFORMATION (continued) f) Top 20 security holders The names of the twenty largest holders of each class of quoted equity security, being fully paid ordinary shares, the number of equity security each holds and the percentage of capital each holds is as follows: Number Shareholder Name / Entity Number of Ordinary Shares % of Issued Capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 David James Budge Gasmere Pty Ltd William McKenzie Crisp Jessica C E Snelling Citicorp Nom Pty Ltd Peter Anthony John Nathan Henry Peterson MG & Wake SA Theodore Lionel Chatz Harry Hatch Pabasa Pty Ltd Kacha Pty Ltd David R Parker Anna Felicia Belton Rodney Alan Brack Anna Katherine Campbell J P Morgan Nom Aust Ltd Craig Ian Brown + JL Craig Martin James Daley Aileen & Arthur Budge 23,946,785 2,717,888 1,436,415 1,330,377 1,199,889 1,093,750 832,151 701,000 700,000 688,000 593,750 557,151 460,000 460,000 423,338 399,113 390,855 350,000 266,074 266,074 36.50 4.14 2.23 2.03 1.83 1.67 1.27 1.07 1.07 1.05 0.91 0.85 0.70 0.70 0.65 0.61 0.60 0.53 0.41 0.41 Total 38,839,610 59.23 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 58 ASX ADDITIONAL INFORMATION (continued) 2) Listed Options: Exercisable at $1.00 and expiring 17 April 2020 (ASX: A3DO) a) Distribution and spread of Listed Options Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Listed Options Option holders 1 26 19 69 6 121 Options 1,000 77,564 150,013 1,959,186 1,498,237 3,686,000 b) Marketable parcel There are 19 option holders with less than a marketable parcel (basis price $0.12). c) Top 20 security holders The names of the twenty largest holders of Listed Options, the number of Options each holds, and the percentage of total issued Listed Options each holds is as follows: Number Option Holders Name / Entity Number of Listed Options 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 LTL Cap Pty Ltd Rodney Alan Brack Harrison John Perkins Simon William Tritton Michael Benedict Cookson Luke Kukulj Shellcrest Holdings Pty Ltd D Super Pty Ltd Kim Barbara Dowling Ian Stuart Fisher JDDD Super PL Citicorp Nom PL Spider Cap Ltd HSBC Custody Nom Aust Ltd Michelle Annette Solty Lee Miller INV PL Feltrim Past Co PL Sunset River PL Feltrim Past CO PL Martin John Gardiner 440,625 408,987 214,375 158,000 150,000 126,250 100,000 91,272 88,000 80,000 68,586 65,105 62,500 62,500 45,000 43,750 42,500 40,000 36,875 35,625 % of Issued Options 11.95 11.10 5.82 4.29 4.07 3.43 2.71 2.48 2.39 2.17 1.86 1.77 1.70 1.70 1.22 1.19 1.51 1.09 1.00 0.97 Total 2,359,950 64.06 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 59 ASX ADDITIONAL INFORMATION (continued) Unquoted Securities – Company Options and Performance Shares There are two classes of unquoted securities, being: Company Options: and 1. 2. Performance Shares. 1a) Company Options – Exercisable $0.20/ Expiry 31 December 2018 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders 1 5 3 13 15 37 1b) Company Options – Exercisable $2.23/ Expiry 30 November 2019 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders - - 1 7 2 10 1c) Company Options – Exercisable $3.00/ Expiry 31 Mar 20 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders - - 1 17 2 20 Options 500 22,500 30,000 547,425 9,257,500 9,857,925 Options - - 10,000 215,000 255,000 480.000 Options - - 10,000 631,000 290,000 931,000 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 60 ASX ADDITIONAL INFORMATION (continued) 1d) Company Options – Exercisable $1.17/ Expiry 30 Jun 2020 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders Options - - 1 - 10 - - - 40,000 - 40,000 1e) Company Options – Exercisable $0.72/ Expiry 30 September 2020 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders Options - - 1 - 1 - - - 50,000 - 50,000 1f) Company Options – Exercisable $0.95/ Expiry 31 September 2020 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders Options - - 1 - 1 - - - 100,000 - 100,000 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 61 ASX ADDITIONAL INFORMATION (continued) 1f) Company Options – Exercisable $0.95/ Expiry 31 September 2020 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders Options - - 1 - 1 - - - 100,000 - 100,000 1g) Company Options – Exercisable $1.08/ Expiry 31 January 2021 Distribution & Spread of unquoted Options holder numbers Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Options Option holders Options - - 2 - 2 - - - 200,000 - 200,000 2. Performance Shares - Class C Distribution of unquoted Performance Shares Class C . Category (Size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Performance Shares Class C Shareholders Shares - 2 2 44 5 53 - 4,460 17,844 1,320,646 6,269,550 7,612,500 Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 62 ASX ADDITIONAL INFORMATION (continued) 2b) Holders of more than 20% of unquoted Performance Shares (Class B & Class C) Performance Shares Class C: David Budge owns 5,341,975 Performance Shares Class C which is equal to 70.2% of the Performance Shares Class C on issue. PERFORMANCE SHARES The Company provides the following information in relation to Performance Shares (ASX Code: A3DAJ): 1. 2. 3. 4. 5. 6. 7. Number of Performance Shares at the beginning of the financial year ended 30 June 2018 was 21,000,000, comprising: a) 6,300,000 Class A Performance Shares; b) 7,087,500 Class B Performance Shares; and c) 7,612,500 Class C Performance Shares. Each Performance Share will convert into a fully paid ordinary shares (Shares), on a one-for-one basis, upon the satisfaction of the following milestones (Milestones): a) for Class A Performance Shares – upon achievement of Aurora (or an entity controlled by Aurora) having cumulative revenue of A$1,500,000 before 30 June 2017; b) for Class B Performance Shares – upon achievement of Aurora (or an entity controlled by Aurora) having cumulative revenue c) of A$5,000,000 before 30 June 2018; and for Class C Performance Shares – upon achievement of Aurora (or an entity controlled by Aurora) having cumulative revenue of A$7,250,000 before 30 June 2019. If the relevant Milestone for a class of Performance Share is not achieved by the required date, then each Performance Share in that class will be automatically redeemed and cancelled by Aurora for the sum of $0.00001 within 10 business days of non- satisfaction of that Milestone. None of the Performance Shares in any class were converted or cancelled during the year. On 7 July 2017 6,300,000 Class A Performance Shares were automatically redeemed and cancelled as the relevant Milestone for their conversion was not satisfied by the required dated (i.e. by 30 June 2017). Refer Aurora’s announcement to ASX dated 14 July 2017 (‘Release of Options from Escrow & other changes to Securities’). Since the end of the financial year on 12 July 2018 7,087,500 Class B Performance Shares were automatically redeemed and cancelled as the relevant Milestone for their conversion was not satisfied by the required dated (i.e. by 30 June 2018). Refer Aurora’s announcement to ASX dated 12 July 2018 (‘Changes to Company Securities”). No Milestones were met during the financial year in review. OTHER ASX INFORMATION 1. Corporate Governance The Company’s Corporate Governance Statement as at 30 June 2018 as approved by the Board can be viewed at www.auroralabs3d.com 2. Company Secretary The name of the Company Secretary is Mathew Whyte. 3. Address and telephone details of the entity’s registered administrative office and principle place of business: Unit 2/ 79 Bushland Ridge Bibra Lake WA 6163 Telephone: +61 (08) 9434 1934 Email: enquiries@auroralabs3d.com Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 63 ASX ADDITIONAL INFORMATION (continued) 4. Address and telephone details of the office at which a registry of securities is kept: Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153 Telephone: Fax: (08) 9315 2333 (08) 9315 2233 5. Stock exchange on which the Company’s securities are quoted: The Company’s listed equity securities are quoted on the Australian Securities Exchange under the code (ASX: A3D). 6. Review of Operations A review of operations is contained in the Directors’ Report. 7. Consistency with business objectives - ASX Listing Rule 4.10.19 In accordance with Listing Rule 4.10.19, the Company states that it has used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with its business objectives. The business objective is primarily design, development and manufacture of metal 3D printers and associated products and services. The Company believes it has used its cash in a materially consistent manner to which was disclosed under the prospectus dated 9 June 2016. 8. Restricted Securities The Company has no restricted securities as at the date of this report. Aurora Labs Limited ANNUAL FINANCIAL REPORT 2018 P a g e | 64 

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