Aurora Labs Limited
Annual Report 2020

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Aurora Labs Limited ABN 44 601 164 505 Annual Financial Report 30 June 2020 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 61 62 66 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 2 CORPORATE DIRECTORY ABN 44 601 164 505 Directors Grant Mooney Terry Stinson Ashley Zimpel Mel Ashton Company secretary Grant Mooney 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 Blackwall Legal LLP Level 26, 140 St Georges Terrace Perth WA 6000 Patent Attorneys Lord & Company 4 Douro Place West Perth WA 6005 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 Automic Group Level 5, 126 Phillip Street, Sydney NSW 2000 Securities Exchange Listed on Australian Securities Exchange The home exchange is Perth, Western Australia ASX Code A3D Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 3 CHAIRMAN’S REVIEW Dear Shareholder, I am pleased to be able to present to you the 2020 Annual Report. The past 12 months have covered a critical period in A3D’s journey to commercialisation of its 3D metal printing technology. After 4 years of technology development, active business and product marketing and printing demands, your Company has taken the opportunity provided to us under the current COVID-19 crisis, to refocus our attention on getting our technology ready for commercialisation, without the distractions which are inevitably thrown at an emerging company with leading technology. In March of this year, the then Board of Directors took the initiative of refreshing the Board with new directors and restructuring the management team. At Board level, Terry Stinson, Ashley Zimpel and myself replaced Paul Kristensen, David Budge and Nathan Henry, while management and staff were restructured and headcount reduced to align with the change in economic conditions. Changes such as this are often difficult to undertake and result in upsetting the equilibrium. However, these measures have had the positive impact of reducing overheads, resetting strategic objectives and bringing together a reduced and reinvigorated technical team ably led by our newly appointed and well credentialed CEO Peter Snowsill. This significant strategic realignment has one common goal; to advance the RMP-1 printer to be commercially ready over the coming 12 months. Once we have achieved our goal of delivering the RMP-1 Printer to commercial readiness, we will continue to further MCP Printing technology and its application in large format printing. This sequential process is essential, as the MCP Printing technology requires completion of activities necessary to achieve commercial readiness in order to progress it and places significantly higher demands on our time and resources, potentially compromising our ability to deliver the RMP- 1 on time. In order to deliver on this commercialisation readiness target, it has been necessary for the Board, management and team to reconstruct the technology development pathway into a cogent delivery schedule with well mapped out technology milestones. These milestones are now the sole focus of the technology team, where the main obstacles to commercialisation are identified as priority work packages in order to ensure that a continuous ‘lily pad’ approach of stepping from one milestone to the next is achieved. An example of one of these potential challenges is the fume extraction challenge, required to be resolved if a ramp up in speed and volume is going to be achieved. The team are currently advancing towards this milestone and we hope to achieve this in coming months. Our technology collaborations and partnerships have been, and will continue to be, an important part of progressing the technology and establishing commercial opportunities as the technology matures. We enjoy a productive working relationship with Advisian (Worley Parsons Group member) under the AdditiveNow Joint Venture and we continue to produce test parts for a number of major mining and oil and gas players. Our proposed RMP-1 Printer lease agreement with AdditiveNow executed in 2019 was mutually terminated in April, allowing A3D to focus its attention on delivery of the technology over a more realistic timetable. In addition, we continue to work with Leading Aluminium Manufacturer, Gränges of Sweden, utilising their by-products to manufacture aluminium parts with our printers. This work has the potential to create a large value add for A3D in the metal powders sector of 3D printing. Heading into FY21, the Board will continue to proactively manage the Company’s capital requirements in order to progress these technology collaborations and partnerships. We are confident that expanding our 3rd party commercial opportunities in conjunction with lowering our cost base will forge a pathway for us to achieve commercial success. On behalf of my fellow directors, I would like to thank the former Chairman Paul Kristensen and former directors and founder David Budge and Nathan Henry for their service as directors over recent years. While David continues as the Company’s Chief Technology Officer, we wish Nathan well in his future endeavours. I would also like to take this opportunity to thank the staff that were made redundant earlier this year, enabling us to preserve funds and streamline the business. These decisions are never easy and we thank you for your excellent service, understanding and wish you every success. In closing, I would like to thank our loyal shareholders who have stayed with us, in the belief we have a leading technology that is ripe for commercialisation. We will take every opportunity over the coming 12 months to deliver the outcomes that take us to the ultimate goal of commercial success. Grant Mooney Chairman Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 4 DIRECTORS’ REPORT The Board of Directors of Aurora Labs Ltd (“Aurora“ or “the Company”) and its subsidiaries (the “Group”) present their report together with the financial report on the Company for the financial year ended 30 June 2020 (FY 2020) 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, 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 2020 of $8,155,859 (2019: $7,643,073). At the end of the financial year the Company had net assets of $3,500,547 (2019: $5,735,996) and $1,323,766 in cash and cash equivalents (2019: $3,604,293). Review of Operations Aurora is an Australian-based industrial technology and innovation Company based in Perth that specialises in the development and commercialisation of 3D metal printers, digital parts and their associated intellectual property. During the year the Company made significant progress on the development of its proprietary 3D printers in pursuit of Aurora’s aim to lead industrial innovation and disruption through additive manufacturing. Highlights during and since the year in review were as follows: • • • COVID-19 the catalyst for the implementation of a major cost control programme and personnel restructure with the Company on target to achieve $6 million in annualised savings Exhaustive revision of technologies and establishment of 12-month technology pathway under the guidance of a refreshed Board of Directors and newly appointed CEO (former COO Peter Snowsill) Strategic shift from ‘manufacture and distribute’ RMP-1 printers to ‘partnership, license and royalty’ business model. Ongoing engagement with global manufacturers including the execution of research project contract with Gränges AB, setting the tone for the Company’s revised customer-centric and partnership focused commercial strategy. • Major steps towards Multi-layer Concurrent Printing (MCP) printing process validation and ongoing development of the suite of technologies The COVID-19 pandemic presented financial and logistical challenges during FY20 that Aurora proactively responded to, underpinned by swift and decisive cost reductions, as part of the implementation of a broader comprehensive review of the business. The comprehensive review resulted in the creation of a revitalised long-term strategy that centres on a more operationally efficient and agile Aurora enhancing its focus on developing the flagship RMP-1 technology for commercial readiness and securing strategic partners for this technology. As part of this long-term strategy, we have refreshed our Board and Executive team, who subsequently recalibrated the company to develop a more pragmatic pathway to progress our innovative technology to commercial readiness. They are supported by newly appointed CEO Peter Snowsill and an experienced team of 3D printing experts to execute this technology pathway. As a result, we now have targeted technology pathway with a customer-centric approach that is led by experienced and highly capable Board and Management team, which will drive long-term growth in shareholder value. The Company’s commercial strategy has been refined to a partnership, licence and royalty model. Aurora has cultivated and continues to develop partnerships and joint ventures with Original Equipment Manufacturers and industrial giants. This is demonstrated by the ongoing relationship and contract with Gränges AB and its significance to the customer-centric approach the technology pathway takes. Printer development and customer printing is ongoing and aligned with the renewed technology pathway. Various client focused and test sample prints were completed on the RMP-1 Beta and Alpha-2 machines throughout the year. The mutually agreed termination of the Beta lease agreement with Aurora’s 50% owned JV AdditiveNow has increased Aurora’s access to the printer for parameter testing. In February, Aurora made a major step towards the MCP process validation, through third party metallurgical test demonstrating compliance with ASTM A479/276 and f1384-16. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 5 During the period, Aurora completed a $4 million capital raising and a $1.8 million strategic placement to bolster its balance sheet and provide working capital. COVID-19: Impact and Response The Company undertook a review of business operations involving prudent cost reduction measures in light of COVID-19. Aurora’s goal is on target to reduce monthly cash burn to $0.25 million. Measures implemented during the period include Executive salary cuts and up a 60% reduction in Aurora’s staffing numbers. Aurora’s operations practices and business continuity measures have developed over the course of pandemic with adherence to Government health advice. The Company has implemented its cost-saving programme and continues to conduct customer, partner, and investor relations communications using video conferencing and other forms of communication. A3D is capable of reverting to lockdown status with minimal impact on its day to day business should it be required. The Company is monitoring international trade and shipping lead times, however influence on program timing could be a consequence of unavoidable Covid-19 related delays. A Revised Focus: 12-month Technology Pathway At the end of the period, A3D announced it had completed a thorough technology review resulting in a focused 12-month plan to achieve commercial readiness and a broader renewed commercial strategy. The review included analysis of A3D’s competitive advantages, the current status of the technology, obstacles impairing development, and the specific steps required to achieving a commercially proven RMP-1 printer. The A3D Technology Pathway adopts a ‘Lily Pad’ approach, splitting the 12-month period into quarterly milestones, each milestone representing a key performance achievement or technical deliverable. The customer-centric approach is based on demonstrating performance on specific customer printing projects, primarily in stainless steel, with key benchmarks for success determined by achieving specified material quality, functional requirements and cost of production targets for industrial parts. The Company is deliberately focusing on difficult parts to print, with the goal of accelerating the development of A3D’s unique offering in the metal 3D printing space. Diagram 1: A3D Technology Pathway Milestones The review process included a shift of the Company’s RMP-1 commercial strategy. Previously based on the manufacture and distribution of printers, the new model is strongly targeted at securing partnerships with Original Equipment Manufacturers and major industry players, licensing of technologies and the associated royalties. This avenue allows A3D to reduce a large part of its operational cost base and seeks to share those responsibilities with potential partners who are in the market, or interested in entering the market, through mutually beneficial, long-term, interlocking collaborations. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 6 Board and Executive Refreshed and Peter Snowsill Appointed CEO In March, Aurora announced the finalisation of its Board Refresh Strategy. The changes are aimed at enhancing the Company’s capability to deliver the final stages of commercialisation of Aurora’s 3D metal printing technology under the 12-month technology pathway plan and include a reduction and reorganisation of the Executive team in order to focus skills and strengthen current and new expertise toward successful commercialisation. Summary of changes; CHIEF EXECUTIVE OFFICER (CEO) The Company has appointed Peter Snowsill as CEO. Foundational CEO David Budge has taken up the new role of Chief Technology Officer to focus his technical and innovation expertise on the continuing development of Aurora’s unique 3D printing technology. Peter Snowsill, previously Chief Operating Officer (COO), is an experienced business manager with specific experience in technology and joint venture projects and engineering management. RETIREMENTS Non-Executive Chairman Paul Kristensen, Executive Directors David Budge and Nathan Henry and Non-Executive Director and Company Secretary Mathew Whyte agreed to retire from the Board to support the Board Refresh Strategy and ensure the appropriate Board makeup for a Company of Aurora’s size and stage of development. The refreshed Aurora Board is non-executive in makeup and in keeping with best practice for ASX-listed companies. Mr Budge remains an Executive in the business focused on delivering on key technical initiatives and achievement of technical milestones. Mr Henry has accepted a redundancy and will serve out his 6-month notice period working closely with Peter Snowsill and the Board on special projects. REFRESHED NON-EXECUTIVE BOARD Three new non-executives joined the Board in February and March - Grant Mooney as Non-Executive Chairman, and Terry Stinson and Ashley Zimpel as Non-Executive Directors. Together with Non-Executive Director Mel Ashton, the refreshed Board comprises a variety of specialised skills in extensive global commercialisation, raising capital, corporate compliance administration, strategic planning, sales and marketing, technology development and international collaborations. Mr Mooney assumed the role of Company Secretary, effective 1 May 2020. Strategic and Industry Partners AdditiveNowTM The Company and Additive Now mutually agreed to not proceed with the proposed lease agreement for RMP-1 Beta which enables the Company to fully utilise the RMP-1 Beta for printer development activities including internal testing and customer specified printing. The Company has continued to print parts for confidential AdditiveNow clients and is actively managing these print requirements within the Technology Pathway. Gränges AB A binding contract with Gränges AB for a Non-Recurring Engineering Research Project (NRE-1) was executed at the end of the second quarter. The research project explores the material properties the parties can develop using their combined expertise in Aluminium alloys and Additive Manufacturing, with a particular focus on alloys for the automotive sector. The project has a maximum value of USD $250,000. Aurora has received the machinery required for the NRE-1 project that been held up overseas due to the ongoing COVID-19. The arrival of the equipment will allow A3D’s technical team to formally kickstart the NRE-1 project within the technology pathway plan. MCP Process Validation A series of independent tests were carried out on samples printed in Stainless Steel 316L, using Aurora’s patented MCP™ technology. The tests delivered results exceeding ASTM Standard A479/276 and f3184-16 in Ultimate Tensile Strength and Yield Strength. This clearly demonstrates that the process meets or exceeds the relevant engineering standards. Unlike traditional laser bed fusion printers, the MCP technology prints multiple layers in a single pass which increases the production speeds. The very positive test results play a critical role in highlighting to customers that the MCP technology is a viable method of metal 3D printing. Our technology development pathway incorporates the development of our suite of technologies which will enable us to achieve commercial readiness of RMP-1 without the MCP feature and will form the foundation for ongoing development of MCP technology. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 7 Finance and Cash Position On 30 October 2019, Aurora announced that it has successfully completed a bookbuild for a placement of 15,384,616 shares at an issue price of $0.26 per share to professional and sophisticated investors to raise $4 million before costs. In February 2020, the Company successfully completed a $1.82 million Placement through the issue of 13,000,000 shares at an issue price of $0.14 per share to a new unrelated cornerstone investor, Dutch entrepreneur Mr Tjeerd Barthen. In May 2020, Aurora received an advance payment of $723,167 from Radium Capital (Radium) against future research and development (R&D) tax incentive funds. The advance from Radium representing up to 80% per cent of anticipated R&D Refund resulting from expenditure on R&D programs during the current financial year. The Company will repay the funds advanced once received from the Australian Government. Prior to the end of the financial year, the Company made significant progress with its applications for both the R&D tax claim and Export Market Development Grant (EDMG). Claims have since been submitted and Aurora is expecting the first instalment of the EMDG during the month of September 2020. Aurora continues to assess the market for any further grants it may be eligible for and will update the market should any financially material applications be successful. As at 30 June 2020, cash at bank and on deposit was approximately $1.3 million. 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. 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 2020 cents 7.85 2019 cents 10.02 No dividends were paid during the financial year and the Directors do not recommend the payment of a dividend. EMPLOYEES The Company had 19 employees as at the 30 June 2020 (2019: 40). SUBSEQUENT EVENTS AFTER THE REPORTING DATE There have been no matters or circumstances which have arisen since 30 June 2020 that have significantly affected or may significantly affect: a) Group operations in future financial years; or b) The results of those operations in future financial years; or c) Group state of affairs in future financial years. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 8 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. Grant Mooney Non-Executive Chairman Appointed 25 March 2020 Company Secretary Appointed 1 May 2020 Terry Stinson Non-Executive Director Appointed 26 February 2020 Ashley Zimpel Non-Executive Director Appointed 25 March 2020 David Budge Managing Director Director since incorporation, resigned 25 March 2020 Nathan Henry Executive Director Appointed 23 November 2015, resigned 25 March 2020 Mathew Whyte Non-Executive Director and Appointed 26 July 2017, resigned 26 February 2020 Company Secretary Appointed 13 October 2016, resigned 11 March 2020 Paul Kristensen Non-Executive Chairman Appointed 22 January 2018, resigned 25 March 2020 Mel Ashton Non-Executive Director Appointed 22 January 2018 Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Company Secretary Steven Wood Company Secretary Appointed 11 March 2020, resigned 1 May 2020 CURRENT DIRECTORS AND OFFICERS Grant Mooney Independent Non-Executive Chairman Qualifications: Member of the Institute of Chartered Accountants in Australia Term of office: Since 25 March 2020 Mr Mooney is the principal of Perth-based corporate advisory firm Mooney & Partners, specialising in corporate compliance administration to public companies. Mr Mooney has gained extensive experience in the areas of corporate and project management since commencing Mooney & Partners in 1999. His experience extends to advice on capital raisings, mergers and acquisitions and corporate governance. Currently, Mr Mooney serves as a Director to several ASX listed companies across a variety of industries including technology and resources including Carnegie Clean Energy Limited, Talga Resources Limited, Barra Resources Limited, Gibb River Diamonds Limited, Accelerate Resources Limited and Riedel Resources Limited. Mr Mooney is also a member of the Chartered Accountants Australia and New Zealand. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 9 Terry Stinson Independent Non-Executive Director Qualifications: Fellow of the Australian Institute of Company Directors Term of office: Since 26 February 2020 Mr Stinson has over 35 years of international experience in engineering and technology commercialisation and management across the automotive, aerospace, defence, maritime, industrial products, mining and manufacturing sectors. Previous roles include Vice-President and General Manager Siemens VDO, former CEO and Board Member Synerject LLC and Vice-President Manufacturing for Outboard Marine. Mr Stinson has a Bachelor of Business Administration, majoring in Operations Management from Marian University in Wisconsin, US and is a former National Young Manufacturing Engineer of the Year for the North American-based Society of Manufacturing Engineers. He is a Fellow of the Australian Institute of Company Directors and currently serves as Non-Executive Chairman of Talga Resources Ltd and Carnegie Clean Energy Ltd. Ashley Zimpel Independent Non-Executive Director Qualifications: Bachelor of Arts from the University of Western Australia Term of office: Since 25 March 2020 Mr Zimpel is a Perth based investment banker with broad financial markets and corporate experience. Mr Zimpel has a strong record of capital raising in both equity, debt and structured financial products for start-ups, SMEs, ASX listed public companies and government agencies both in Australia and internationally. His extensive stockbroking and investment banking experience spans over 30 years across capital markets, corporate finance and public company businesses, including partner at stockbroker Hattersley Maxwell Noall, Executive Director at Australian Gilt Securities, Senior Banker at Bankers Trust and Macquarie Bank, co-founding partner of Rand Merchant Bank Australia, and Executive Chairman of Marine Produce Australia. Mr Zimpel has had no listed company directorships in the last three years. Mel Ashton Independent 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 40 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 During the three- year period to the end of the financial year Mr Ashton in respect to ASX listed companies served as Chairman of the Board of Venture Minerals Ltd (May 2006 to Current), Credit Intelligence Ltd (May 2018 to May 2020), and Donaco International Ltd (December 2019 to Current. 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 Grant Mooney Terry Stinson Ashley Zimpel Mel Ashton Total Number of fully paid ordinary shares - 166,644 300,000 736,323 1,202,967 Number of unquoted options over ordinary shares 2,000,0004 2,000,0003 2,000,0004 100,0001 6,100,000 Number of unquoted performance rights5 - - - 50,0002 50,000 1 Unquoted options 100,000 Ex $1.08/Exp 31 January 2021 2 Unquoted performance rights Exp 31 January 2023 (Refer Note 6) 3 Unquoted options: 2,000,000 Ex $0.14 / Exp 30 April 2023 4 Unquoted options: 4,000,000 Ex $0.14 / Exp 25 March 2023 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 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 2020 and the number of meetings attended by each Director. There was a total of 11 Directors’ meetings for the financial year. Directors’ meetings Audit Committee meetings Directors’ meetings held while a director 2 3 2 10 10 7 10 11 2020 Grant Mooney Terry Stinson Ashley Zimpel David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Number attended Audit meetings held Audit meetings attended 2 3 2 10 10 7 10 11 2 2 2 2 2 2 2 2 Not a member Not a member - Not a member Not a member 2 2 2 Remuneration Committee meetings Remuneration meetings held Remuneration meetings attended 1 1 1 1 1 1 1 1 Not a member Not a member Not a member Not a member Not a member 1 1 1 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 2020. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001. (a) Key Management Personnel 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 Grant Mooney Terry Stinson Ashley Zimpel David Budge Nathan Henry Position Non-Executive Chairman Non-Executive Director Non-Executive Director Managing Director Executive Director Mathew Whyte Company Secretary ; and Paul Kristensen Mel Ashton Peter Snowsil Non-Executive Director Non-Executive Chairman Non-Executive Director Chief Executive Officer (b) Remuneration Philosophy and Policy Period of Employment 25 March 2020 to current 26 February 2020 to current 25 March 2020 to current 1 November 2015 to 25 March 2020 23 November 2015 to 25 March 2020 13 October 2016 to 26 February 2020 26 July 2017 to 11 March 2020 22 January 2018 to 25 March 2020 22 January 2018 to current 1 July 2019 to current 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. During the year, the company established a Remuneration Committee, with the company’s three non-executive directors being the initial members. Consequently, the independent non-executive members of the Board are responsible for determining and reviewing compensation arrangements for the Managing Director and the executive team. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 11 Use of Remuneration Consultants: Independent external advice is sought from remuneration consultants when required. During the year the Company engaged Guerdon Associates to provide a review of executive director remuneration and an executive remuneration framework. As at the date of this report no recommendations received from Guerdons have been implemented. The Board is satisfied that the draft recommendations were made free from undue influence from any members of Key Management Personnel. 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. The Corporate Governance Statement provides further information on the Company’s remuneration governance. 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 2020 were $293,938 (including Superannuation contributions) (FY2019: $217,802). The Non-Executive remuneration fees has exceeded the amount set by shareholders at General Meeting held on 8 June 2016. The services rendered were mainly for services relating to A3D promotion to potential investors and customers domestically and internationally. They were approved by the board and will not be recurring for at least during Covid affected times. 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 or performance rights, subject to shareholder approval. Non-Executive Directors are considered Eligible Employees for the purposes of participation in the Company’s Employee Incentive Plan. (d) Executive Director Remuneration 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 2020 or FY 2019. 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. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 12 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. 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 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 2020 the Company granted a total of 1,160,634 Performance Rights (2019: 867,159). (e) Relationship between Remuneration of KMP and the Company’s Performance 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. (f) Voting and comments made at the Company’s 2019 Annual General Meeting Aurora received 39.99% of “Yes“ votes on its remuneration report for the 2020 financial year. The outcome constitutes a “first strike” under section 250U of the Corporations Act. (g) Executive Director Engagement Deeds 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 was remunerated to the date of resignation 25 March 2020 pursuant to the terms and conditions of his Engagement Deed dated 3 May 2016, as varied on 10 January 2017. Mr Budge was paid an annual salary of $320,000 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 $Nil. Nathan Henry Mr Henry was remunerated to the date of resignation 25 March 2020 pursuant to the terms and conditions of his Engagement Deed dated 4 May 2016, as varied on 15 March 2017. 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 Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 13 (h) Additional disclosures The earnings of the consolidated entity for the five years to 30 June 2020 are summarised below: 2020 2019 $ $ 2018 $ 2017 $ 2016 $ Financial year ended Sales revenue EBITDA EBIT Loss after tax 414,860 (8,787,592) 841,620 (9,327,129) 329,970 (6,905,075) 237,995 (4,774,497) - (1,203,037) (9,175,064) (9,503,253) (7,063,974) (4,802,916) (1,205,429) (8,045,540) (7,643,073) (5,531,257) (3,398,989) (1,118,866) The factors that are considered to affect total shareholder return (‘TSR’) are summarised below: 2020 2019 2018 2017 2016 Financial year ended Share price at financial year end ($) Total dividends declared (cents per share) Basic Loss per share (cents per share) 0.06 - 7.85 0.32 - 10.02 0.50 - 9.13 1.07 - 6.30 Not listed - 1.5 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 $ Options1 and Performance Rights5 $ Total $ Superannuation $ Percentage performance related % 21,306 17,308 12,500 312,845 234,423 120,246 57,488 154,633 286,442 1,217,191 - - - - - - - - - - - 1,644 - 29,720 22,270 3,215 - - 27,212 84,061 17,633 19,302 17,633 - - - - - 38,939 38,254 30,133 342,565 256,693 123,461 57,488 154,633 9,810 64,378 323,464 1,365,630 - - - - - - - - - - FY 2020 Directors Grant Mooney1&3 Terry Stinson2 Ashley Zimpel1 David Budge Nathan Henry Mathew Whyte4 Paul Kristensen Mel Ashton Other KMP Peter Snowsil5 Total 1 The KMP detailed above were granted 2,000,000 Options each, as approved by shareholders at General Meeting held on 13 December 2019 which were value at $0.03 each. Vesting conditions are detailed in Note 6. 2 The KMP detailed above were granted 2,000,000 Options, as approved by shareholders at General Meeting held on 13 December 2019 which were value at $0.05 each. Vesting conditions are detailed in Note 6. 3 Grant Mooney’s fees comprised company secretarial services totalling: $8,000 and non-executive director’s fee of $13,306. 4 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 2020 totalled: $86,400. Mr Whyte also received a non-executive fee of $33,846 (plus superannuation of $3,215). 5 Peter Snowsill was granted 30,000 Performance Rights 11 July 2019. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 14 FY 2019: Performance Rights were issued pursuant to the Employee Share Plan and with shareholder approval where required. The table below details all performance rights issued during FY 2019, noting some performance rights have been issued to employees or consultants that are not KMPs. For details on the valuation of the Performance Rights, including models and assumptions used, please refer to Note 6. There were no material alterations to the terms and conditions of Performance Rights granted as remuneration since their grant date. Short-term benefits Share- based payments Post- employment benefits Salary & fees $ Motor vehicle payments Superannuation Options $ $ Percentage performance related Total $ % 250,000 230,000 163,758 76,650 88,100 808,508 3,000 - - - - 3,000 23,750 21,850 4,494 - - 50,094 24,150 24,150 24,150 24,150 24,150 120,750 300,900 276,000 192,402 100,800 112,250 982,352 - - - - - - FY 2019 Directors David Budge1 Nathan Henry1 Mathew Whyte1&2 Paul Kristensen1 Mel Ashton1 Total 1 All KMP detailed above were granted 50,000 Performance Rights each, as approved by shareholders at General Meeting held on 30 November 2018 which were value at $0.483 each. Performance Rights were issued free of charge. Each Performance Right entitles the holder to subscribe for one (1) fully paid ordinary share in the Company based on achieving vesting conditions at a nil exercise price. The terms and conditions including the service and performance criteria that must be met are as follows: (a) Subject to the below paragraph (b) each Performance Right will only vest and become exercisable when the 10 day volume weighed average market price (as defined in the ASX Listing Rules) of the Company’s quoted Shares first exceeds $0.90 per Share (Vesting Condition). (b) Maintain a minimum of 12 months continuous service with the Company. (c) Each Performance Right will automatically be cancelled and will be redeemed by the Company for nil consideration if employment with the Company is terminated for any reason before the Vesting Condition is met. 2 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 2019 totalled: $115,000 (excluding superannuation). Mr Whyte also received a non- executive fee of $48,758 (plus superannuation of $4,494). Cash bonuses granted as compensation for the current financial year No cash bonuses were granted during the year ended 2020 (2019: nil). Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 15 Performance Rights and Options Details of Performance rights and Options granted as compensation pursuant to the Aurora Employee Incentive Plan for the current financial year FY 2020: Performance Rights were issued pursuant to the Employee Share Plan and with shareholder approval where required. The table below details all performance rights issued during FY 2020, noting some performance rights have been issued to employees or consultants During FY2020 30,000 Performance Rights were granted to Peter Snowsil, a KMP’s, or the entities they controlled. For details on the valuation of the Performance Rights, including models and assumptions used, please refer to Note 6. There were no material alterations to the terms and conditions of Performance Rights granted as remuneration since their grant date. FY 2020 Date Performance Rights granted 11 Jul 19 Total FY 2019 Date Performance Rights granted 30 Aug 18 30 Nov 18 Total Number Granted 1,160,634 1,160,634 Number Granted 617,159 250,000 867,159 Vesting Price $ Expiry date 0.47 11 Jul 24 Vesting Price $ 0.90 0.90 Expiry date 31 Jan 23 31 Jan 23 Fair Value of Performance Right at grant date $ 0.327 Fair Value of Performance Right at grant date $ 0.233 0.483 FY 2020: Unquoted Options were issued pursuant to the Employee Share Plan and with shareholder approval where required. The table below details all Unquoted Options issued during FY 2020. For details on the valuation of the Unquoted Options, including models and assumptions used, please refer to Note 6. There were no material alterations to the terms and conditions of Unquoted Options granted as remuneration since their grant date. FY 2020 Date options granted 25 Mar 20 23 Apr 20 Number of Options 4,000,000 2,000,000 Exercise price of option $ Expiry date of option Fair Value of Options at grant date $ 0.14 0.14 25 Mar 23 30 Apr 23 35,266 19,302 Total 6,000,000 No Unquoted options were issued FY2019. Company Performance Rights and Options granted to KMP During FY2020 30,000 Performance Rights were granted to KMP’s, or the entities they controlled. PERFORMANCE RIGHTS FY 2020 Other KPMs Peter Snowsill $ 0.47 Vesting price Expiry date Number Granted during year Total number of shares under Performance Rights at the end of the year 31 Jan 23 30,000 30,000 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 16 PERFORMANCE RIGHTS FY 2019 Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Total $ 0.90 0.90 0.90 0.90 0.90 Vesting price Expiry date Number Granted during year Total number of shares under Performance Rights at the end of the year 31 Jan 23 31 Jan 23 31 Jan 23 31 Jan 23 31 Jan 23 50,000 50,000 50,000 50,000 50,000 250,000 50,000 50,000 50,000 50,000 50,000 250,000 OPTIONS During the financial year 2020 the following Options were granted to the following KMP or the entities they controlled pursuant to the Employee Incentive Plan as part of their renumeration. Exercise price Expiry date Number of options granted during year Total number of shares under option at the end of the year FY 2020 Directors Grant Mooney Ashley Zimpel Terry Stinson Total $ 0.14 0.14 0.14 25 Mar 23 25 Mar 23 30 Apr 23 2,000,000 2,000,000 2,000,000 6,000,000 2,000,000 2,000,000 2,000,000 6,000,000 During the financial year 2019 no Options were granted to KMP’s or the entities they controlled pursuant to the Employee Incentive Plan. There were no alterations to the terms and conditions of Performance Rights or 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. On 24 December 2018 Options (Ex $0.20/EXP 31/12/2018) held by KMP were exercised for cash and 993,334 Shares were issued. (Refer ASX Appendix 3Y 24 December 2018) Other than the above there were no shares issued during FY 2020 or FY 2019 as a result of the exercise of a Performance Rights or Options by KMP. FY 2020 5,137,000 Options lapsed (Refer Note 19 for grant date) FY2019 5,000 Options expired. These Options were granted 10 May 2018. Shares and performance shares issued to KMP During FY 2020 or FY 2019 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 2020 or FY 2019 and there are no loans outstanding from KMP at the date of this report. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 17 KMP equity holdings Fully paid ordinary shares Balance at beginning of year Number Granted as compensation Number Received on exercise of options Number Net change other Number Balance at end of year Number Balance held nominally Number1 - - - 23,946,785 1,975,485 70,000 170,000 - - - - - - - - - - - - - - - - - - - - - 30,000 300,000 (8,000,000) (1,825,485) - 375,000 - - 30,000 300,000 15,946,7852 150,0002 260,0002 545,000 - - - 300,000 - 150,000 260,000 545,000 - - - - FY 2020 Directors Grant Mooney Terry Stinson Ashley Zimpel David Budge Nathan Henry Paul Kristensen Mel Ashton Mathew Whyte Other KMPs Peter Snowsil 1 Shares held nominally by the Director are included in the Balance at the end of the year. 2 Balance held at date of resignation 25 March 2020. Fully paid ordinary shares 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 Number1 23,946,785 982,151 - - - - - - - - - 993,334 - - - - - 70,000 170,000 - 23,946,785 1,975,485 70,000 170,000 - - 150,000 70,000 170,000 - FY 2019 Directors David Budge Nathan Henry Paul Kristensen Mel Ashton Mathew Whyte 1 Shares held nominally by the Director are included in the Balance at the end of the year. Options Balance at beginning of year Number Granted as compensation Number Exercised Number Net change other Number Balance at end of year Number - - - 295,000 280,000 165,000 100,000 100,000 2,000,0001 2,000,0002 2,000,0001 - - - - - - - - - - - - - - - - 280,000 265,000 - - - 2,000,000 2,000,000 2,000,000 15,0003 15,0003 165,0004 100,000 100,000 FY 2020 Directors Grant Mooney Terry Stinson Ashley Zimpel David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton 1 Options (Ex $0.14/ Exp 25 March 23) 2 Options (Ex $0.14/EXP 30 April 23) 3 Balance held at date of resignation 25 March 20 4 Balance held at date of resignation 29 February 20 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 18 Options FY 2019 Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Balance at beginning of year Number 1,020,000 1,973,334 165,000 100,000 100,000 Granted as compensation Number Exercised Number Net change other Number2 Balance at end of year Number - - - - - - (993,334)2 - - - (725,000)1 (700,000)1 - - - 295,000 280,000 165,000 100,000 100,000 1 Options (Ex $0.20/ Exp 31/12/2018) were transferred off- market @ $0.30 per Option (Refer ASX Release Appendix 3Y 12/12/2018). 2 Options (Ex $0.20/EXP 31/12/2018) were exercised for cash on 24/12/2018 and 993,334 Shares were issued. (Refer ASX Appendix 3Y 24 December 2018) 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 Rights FY 2020 Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Other KPM,s Peter Snowsil Balance at beginning of year Number 50,000 50,000 50,000 50,000 50,000 - Granted as compensation Number Exercised /Cancelled Number Net change other Number Balance at end of year Number - - - - - - - 50,000 50,000 - - - - - - 30,000 50,0001 50,0001 - - 50,000 30,000 1 Balance held at date of resignation 25 March 2020. Balance at beginning of year Number Granted as compensation Number Exercised Number Net change other Number Balance at end of year Number - - - - - 50,000 50,000 50,000 50,000 50,000 - - - - - - - - - - 50,000 50,000 50,000 50,000 50,000 FY 2019 Directors David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 19 Performance Shares Class B Balance at beginning of year Number Granted as compensation for services Number Issued pursuant to pro-rata bonus issue Number Redeemed and cancelled Balance at end of year Number Balance held nominally Number 4,973,945 172,832 - - - - - - - - - - - - - 4,973,945 172,832 - - - - - - - - - - FY 2019 Directors David Budge1 Nathan Henry1 Mathew Whyte Paul Kristensen Mel Ashton 1 On 12 July 2018 all Class B Performance shares were redeemed and cancelled. Performance Shares Class C1 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 5,341,975 185,624 - - - - - - - - - - - - - 5,341,975 185,624 - - - - - - - - FY 2019 Directors David Budge1 Nathan Henry1 Mathew Whyte Paul Kristensen Mel Ashton 1 Subsequent to the end of the year, 11 July 2019 all Class C Performance shares were redeemed and cancelled. END OF AUDITED REMUNERATION REPORT Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 20 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: a) b) Maintain directors’ and officers’ insurance cover (if available) in favour of each Director whilst that person maintains such office and Indemnify each Director from certain liabilities incurred from acting in that position under specified circumstances; 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. 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 Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 27 to the financial statements. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit services have been reviewed to ensure that they do not impact the impartiality and objectivity of the auditor and none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board. 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 22 and forms part of this Directors’ report for the year ended 30 June 2020. Signed in accordance with a resolution of the Directors. Mr Grant Mooney Chairman Dated this 31 August 2020 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 21 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Aurora Labs Limited for the year ended 30 June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 31 August 2020 B G McVeigh Partner Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 22 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 Continuing operations Revenue Cost of sales Other income Advertising Consolidated Consolidated Notes 30 June 20 30 June 19 $ $ 3(a) 3(c) 414,860 (241,840) 198,074 (295,478) 841,620 (340,326) 145,917 (483,268) Research and development expenses 3(d) (1,255,816) (2,297,536) Rent Corporate expenses Depreciation Employee benefits Employee share based payments (non-cash) Finance expenses Other expenses (126,136) (397,194) (1,436,487) (1,137,887) 3(f) (387,472) (176,124) (4,594,032) (4,001,911) (303,029) (113,910) (297,448) (2,813) 3(e) (1,258,027) (1,359,096) Loss before income tax benefit (9,399,293) (9,506,066) Income tax benefit Loss for the year 4 1,243,434 1,862,993 (8,155,859) (7,643,073) Loss attributable to members of the Company (8,155,859) (7,643,073) Other comprehensive income, net of income tax - - Total comprehensive loss for the year (8,155,859) (7,643,073) Basic loss per share Diluted loss per share 5(d) 5(d) cents 7.85 7.85 cents 10.02 10.02 The accompanying notes form part of these financial statements. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 Assets Current Assets Cash and cash equivalents Trade and other receivables Inventories Total Current Assets Non-Current Assets Investments accounted for using the equity method Property, plant and equipment Right-of-Use lease assets Intangible assets Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Lease liabilities Borrowings Other liabilities Accrued annual leave Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Net Equity Consolidated Consolidated Notes 30 June 20 30 June 19 $ $ 7 8 9 10 11 12 13 14 15 16 14 14 1,323,766 1,762,590 458,103 3,544,459 - 720,916 242,013 533,436 1,496,365 5,040,824 440,075 269,238 724,167 44,905 172,211 1,650,596 3,390,228 3,604,293 2,370,804 648,642 6,623,739 195,310 472,633 - 733,265 1,401,208 8,024,947 686,101 - 1,350,000 52,534 200,316 2,288,951 5,735,996 5(a) 5(c) 27,218,305 2,269,440 21,793,469 1,884,185 (26,097,517) (17,941,658) 3,390,228 5,735,996 The accompanying notes form part of these financial statements. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 Consolidated Issued Capital $ Option Reserve $ Accumulated Losses $ Total Equity $ Balance at 1 July 2019 21,793,469 1,884,185 (17,941,658) 5,735,996 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 5,424,836 385,255 - 5,810,091 - - - - - - (8,155,859) (8,155,859) - - (8,155,859) (8,155,859) Balance as at 30 June 2020 27,218,305 2,269,440 (26,097,517) 3,390,228 Consolidated Issued Capital Option Reserve $ $ Accumulated Losses $ Total Equity $ Balance at 1 July 2018 15,232,021 1,513,206 (10,298,585) 6,446,642 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 6,561,448 370,979 - 6,932,427 - - - - - - (7,643,073) (7,643,073) - - (7,643,073) (7,643,073) Balance as at 30 June 2019 21,793,469 1,884,185 (17,941,658) 5,735,996 The accompanying notes form part of these financial statements. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 25 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 Consolidated Consolidated 30 June 20 30 June 19 Note $ $ Cash flows from operating activities Payments to suppliers and employees (8,936,969) (9,989,245) Receipts from customers Interest received Interest and other costs of finance paid Receipts from export development grant Income tax benefit Receipts from cash flow boost 522,134 17,371 (63,712) 150,000 731,017 43,832 - 67,057 1,971,827 1,384,270 50,000 - Net cash (used in) operating activities 7 (6,289,349) (7,763,069) 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 borrowings Repayment of lease liabilities Repayment of borrowings Proceeds from issue of shares (net of capital raising costs) Net cash provided by financing activities (368,259) (226,355) (594,614) 724,167 (263,468) (1,350,000) 5,503,753 4,614,452 (163,906) (257,326) (421,232) 1,350,000 - - 6,650,833 8,000,833 Net decrease in cash held (2,269,511) (183,468) Cash and cash equivalents at the beginning of the year Exchange rate adjustments 3,604,293 3,790,081 (11,016) (2,320) Cash and cash equivalents at the end of the year 7 1,323,766 3,604,293 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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 consolidated financial statements comprise the financial statements for the Group. For the purposes of preparing the financial statements, the Group 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”) and its subsidiaries (the “Group”). 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 Group 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 2020 In the year ended 30 June 2020, 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. AASB 16 Leases AASB 16 replaces AASB 117 Leases. AASB 16 removes the classification of leases as either operating leases of finance leases-for the lessee – effectively treating all leases as finance leases. The Group has applied AASB 16 retrospectively with the effect of initially applying this standard recognised at the date of initial application, being 1 July 2019 and has elected not to restate comparative information. Accordingly, the information presented for 30 June 2019 has not been restated. The impact on the financial performance and position of the Group from the adoption of this Accounting Standards is detailed in note 19. Other than the above, 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 2020. As a result of this review the Directors have determined that there is no material impact of the Standards and Interpretations in issue not yet adopted on the Group and, therefore, no change is necessary to Group accounting policies. Statement of compliance (c) The financial report was authorised for issue in accordance with a resolution of the Directors on 31 August 2020. 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. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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. Share-based payment transactions: The Group 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 Group operating segment disclosure 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 2019 and the year ended 30 June 2018. The revenues and results of this segment are those of the Group as set out in the statement of comprehensive income and the assets and liabilities of the Group 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. 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. (g) Revenue from Contracts with Customers Revenue arises mainly from the sale of 3D metal printers. The Group generates revenue largely in the USA, through distributors or directly with customers. To determine whether to recognise revenue, the Group follows a 5-step process: Identifying the contract with a customer Identifying the performance obligations 1. 2. 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied. The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 28 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) In determining the amount of revenue and profits to record, and related statement of financial position items (such as contract fulfilment assets, capitalisation of costs to obtain a contract, trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions. This includes an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised. Revenue is recognised either when the performance obligation in the contract has been performed, so 'point in time' recognition or 'over time' as control of the performance obligation is transferred to the customer. For contracts with multiple components to be delivered such as 3D metal printers, powder and the installation of 3D metal printers management applies judgement to consider whether those promised goods and services are (i) distinct - to be accounted for as separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer. Transaction price At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the present contract. The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are agreed. Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied. For each performance obligation, the Group determines if revenue will be recognised over time or at a point in time. Where the Group recognises revenue over time for long term contracts, this is in general due to the Group performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract. For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group’s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts. When using the output method the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. Where the output method is used, in particular for long term service contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain long term contracts use output methods based upon estimation of number of users, level of service activity or fees collected. If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point in time. This may be at the point of physical delivery of goods and acceptance by a customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria. Disaggregation of revenue The Group disaggregates revenue from contracts with customers by contract type, which includes (i) Directly to customers and (ii) through distributers as management believe this best depicts how the nature, amount, timing and uncertainty of the Group’s revenue and cash flows. Performance obligations The nature of contracts or performance obligations categorised within this revenue type includes (i) delivery of printers and (ii) installation and training. The service contracts in this category include contracts with either a single or multiple performance obligations. The Group considers that the services provided meet the definition of a series of distinct goods and services as they are (i) substantially the same and (ii) have the same pattern of transfer (as the series constitutes services provided in distinct time increments (e.g., monthly or annual services)) and therefore treats the series as one performance obligation. (i) Sale of printers Revenues are recognised when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods . This occurs upon pick up of printers by transport company from Aurora warehouse. (ii) Training and Installation Revenues are recognised as training and installation has been completed. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 29 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Contract assets and contract liabilities The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. As a result of the contracts which the Group enters into with its customers, a number of different assets and liabilities are recognised on the Group’s balance sheet. These include but are not limited to: • • • Trade receivables* Accrued income* Deferred income* * No change in the accounting policies for these assets as a result of the adoption of AASB 15 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. (h) Leases The Group has adopted AASB 16 from 1 July 2019 which has resulted in changes classification, measurement and recognition leases. All leases where the Company is the lessee are recognised on the Condensed Statement of Financial Position and removes the former distinction between ‘operating and ‘finance leases’. The new standard requires recognition of a right-of-use asset (the leased item) and a financial liability (to pay rentals). The exceptions are short-term, and low value leases. (Refer Note 19) 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. 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 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 30 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) • 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. 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 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 31 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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. (n) Investments in Joint Ventures Interests in joint arrangements – Joint Venture A joint venture is an arrangement where the parties have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Recognition The results and assets and liabilities of associates and joint ventures are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position and adjusted thereafter to recognise the Group’s share of the profit or loss in other comprehensive income of the associate if joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest the joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in associate or joint venture, the Group discontinues to recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) An investment in the joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in the joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The requirements of ASSB 139 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in the joint venture. When necessary, the entire carrying amount if the investment (including goodwill) is tested for impairment in accordance with AASB 136 ‘Impairment of Assets’ as a single asset by comparing its recoverable amount (higher of value in use less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be a joint venture, or when the investment is classified as held for sale. When the group retains an interest in the former joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with AASB 139. The difference between the carrying amount of the joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the joint venture is included in the determination of the gains or loss on disposal of the joint venture. In addition, the Group accounts for all amounts previously recognised other comprehensive income in relation to that joint venture on the same basis as would be required if that joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss recognised in other comprehensive income by that joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a Group entity transacts with a joint venture of the Group, profits and loss resulting from the transactions with the joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the joint venture that are not related to the Group. Inventories (o) 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. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Property, plant and equipment (p) 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. (q) 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. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 34 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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 (r) Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group 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. (s) Financial Instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 35 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) Provisions (t) Provisions are recognised when the Group 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 Group 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. Employee leave benefits (u) 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 (v) Equity settled transactions The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The Group 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 for Options is determined by internal valuation using a Black-Scholes model. The fair value for Performance Rights is determined by using a barrier up and in option pricing model. Further details are given in Note 6. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Group (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). Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 36 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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 Group 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. 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 Group 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 (w) 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. (x) 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. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 37 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued) As disclosed in the financial statements, the Group has incurred a net loss after tax for the year ended 30 June 2020 of $8,155,859 (2019: $7,643,073) and had net cash outflows from operating activities of $6,289,349 (2019: $7,763,069). As at 30 June 2020, the Company has a net current asset position of $1,893,863 (2019: $4,334,788). The net current asset position as at 30 June 2020 includes the following: - cash at bank of $1,323,766 (2019: $3,604,293); - Income tax benefit receivable $1,243,273 (2019: $1,862,993); - inventories of $458,103 (2019: $648,642) - short term borrowings of $724,167 (2019: $1,350,000) The Directors consider that the Group 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, including equity capital, to continue as a going concern. As the Group 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 Group 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. Notwithstanding the above, the Directors believe there are reasonable grounds to believe that the Group will be able to continue as a going concern after consideration of the following factors: - The Directors remain committed to the long-term business plan that is contributing to improved results as the business progresses; 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 Group by way of equity capital. The Directors are of the opinion that these factors will allow the Group 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 Group’s performance. The Directors believe that the above indicators demonstrate that the Group 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 2020 and the year ended 30 June 2019. Geographical segment Australia Europe Canada South America USA East Asia Total Consolidated 30 June 20 $ 40,000 31,790 112,455 97,006 124,853 8,756 414,860 Consolidated 30 June 19 $ 76,957 308,844 - - 365,837 89,982 841,620 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 38 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 3: REVENUE AND EXPENSES (a) Revenue from contracts with customers Sales at a point in time Directly to customers Through distributors Total (b) Revenue by product line Printers Powder Printer installations Other Total (c) Other Income Interest received Profit / (Loss) from joint venture Insurance claim Cash flow boost Payroll tax rebate Export marketing development grant Other Total (d) Research and Development expenses* Consultancy fees Consumables, design and engineering services (1) Total (e) Other Expenses Freight and courier Insurance Software Travel Bad debts written off Payroll Tax Other Total (f) Depreciation Depreciation – Right-of-use- leased assets Depreciation – Property, Plant and Equipment Consolidated 30 June 20 $ Consolidated 30 June 19 $ 414,860 - 414,860 263,822 26,004 66,466 58,568 414,860 16,330 (195,310) - 100,000 17,500 240,000 19,554 198,074 14,800 1,241,016 1,255,816 143,251 277,000 93,449 258,296 6,412 165,670 313,949 1,258,027 118,952 268,520 638,381 203,239 841,620 639,299 35,297 68,169 98,855 841,620 46,696 5,310 33,911 - - 60,000 - 145,917 111,922 2,185,614 2,297,536 254,465 193,955 85,388 363,477 - 189,771 252,219 1,359,096 - 176,124 Total * 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. 387,472 176,124 (1) Includes $455,819 of patents lapsed and written off. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 39 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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% 2019) Current period (loss) for which no deferred tax asset 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% 2019) Consolidated 30 June 20 $ 1,243,434 Consolidated 30 June 19 $ 1,862,993 (9,399,293) (2,584,806) 2,584,806 1,243,434 1,243,434 (9,506,066) (2,614,168) 2,614,168 1,862,993 1,862,993 Consolidated Consolidated 30 June 20 $ 26,189,975 26,189,975 7,202,243 30 June 19 $ 18,034,116 18,034,116 4,975,050 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. Progressive changes to the company tax rate is likely to result in a tax rate of 26% for the year ended 30 June 2021. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 40 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 5: ISSUED CAPITAL a) Ordinary Shares Movements in ordinary shares on issue Balance at beginning of the year Placement Advisor shares Options exercised Sub total Less share issue costs Balance at end of year Consolidated Consolidated Consolidated Consolidated 30 June 20 30 June 20 30 June 19 30 June 19 Number $ Number $ 88,635,091 28,074,616 570,000 21,793,469 5,739,400 117,000 - - 117,279,707 27,649,869 - (431,564) 65,599,271 13,157,895 25,000 9,852,925 88,635,091 - 15,232,021 5,000,000 9,375 1,970,585 22,211,981 (418,512) 117,279,707 27,218,305 88,635,091 21,793,469 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. b) Performance Shares 2020 Movements in performance shares on issue Balance at beginning of year Performance Shares redeemed and cancelled Total at end of year to 30 June 2020 Class B Number Class C Number Total Number - - - 7,612,500 7,612,500 (7,612,500) (7,612,500) - - 2019 Class B Number Class C Number Total Number Balance at beginning of year 7,087,500 7,612,500 14,700,000 Performance Shares redeemed and cancelled (7,087,500) - (7,087,500) Total at end of year to 30 June 2019 - 7,612,500 7,612,500 Performance Shares were all issued for nil consideration. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 41 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 5: ISSUED CAPITAL (continued) Performance Shares hold no rights over ordinary shares and do not receive any dividends, however were to convert to Ordinary Shares based on Company Milestones being achieved: • A Class C Performance Share in the relevant class were to 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. On 11 July 2019, 7,612,500 Class C Performance Shares were automatically redeemed and cancelled as the relevant milestone for their conversion was not satisfied by 30 June 2019. Refer Aurora’s announcement to ASX dated 12 July 2019 (‘Changes to Company Securities and Appendix 3Y’). c) Reserves Reserves Balance at beginning of year Option reserve 1 Performance rights reserve 1 Balance at the end of the year Consolidated Consolidated 30 June 20 $ 1,884,185 136,794 248,461 2,269,440 30 June 19 $ 1,513,206 106,431 264,548 1,884,185 1 These reserves are 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 Total loss from continuing operations Weighted number of average shares Loss per share e) Dividends Consolidated Consolidated 30 June 20 30 June 19 8,155,859 103,890,135 Cents 7.85 7,643,073 76,256,018 Cents 10.02 There were no dividends declared or paid in the year to 30 June 2020 or the period to 30 June 2019. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 42 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 6: COMPANY OPTIONS AND PERFORMANCE RIGHTS Company Options Balance at the beginning of the year Options issued Options expired Options exercised Consolidated Consolidated Consolidated Consolidated 30 June 20 30 June 20 30 June 19 30 June 19 Number $ Number $ 6,566,107 7,000,000 (5,137,000) - 1,619,637 295,683 - - 15,806,925 617,107 (5,000) (9,852,925) 1,513,206 106,431 - - Balance at the end of year 8,429,107 1,810,295 6,566,107 1,619,637 At the date of this report the unissued ordinary shares of the Company under option are as follows: Grant Date 22 Nov 161 14 Mar 171 12 Jun 172 12 Jun 172 12 Jul 171 17 Apr 185 29 Aug 171 27 Sep 171 29 Nov 173 29 Nov 173 17 Apr 184 30 Aug 186 14 Feb 197 13 Dec 198 25 Mar 209 23 Apr 2010 TOTAL Date of Expiry 30 Nov 19 31 Mar 20 30 Nov 19 31 Mar 20 30 Jun 20 17 Apr 20 31 Aug 20 30 Sep 20 31 Aug 20 31 Jul 20 31 Jan 21 31 Dec 20 15 Feb 22 13 Dec 22 25 Mar 23 30 Apr 23 Exercise Price $ 2.23 3.00 2.23 3.00 1.17 1.00 0.79 0.72 0.79 0.95 1.08 0.50 0.57 0.39 0.14 0.14 Outstanding at 1 July 19 225,000 641,000 255,000 290,000 40,000 3,686,000 417,000 50,000 45,000 100,000 200,000 250,000 367,107 - - - Lapsed/ Cancelled or Exercised (225,000) (641,000) (255,000) (290,000) (40,000) (3,686,000) - - - - - - - - - - Outstanding at 30 June 20 - - - - - - 417,000 50,000 45,000 100,000 200,000 250,000 367,107 1,000,000 4,000,000 2,000,000 6,566,107 (5,137,000) 8,429,107 1 Unquoted (ULO) Options issued to eligible non- related parties pursuant to Aurora Employee Incentive Plan. 2 ULO issued to eligible related parties pursuant to Aurora Employee Incentive Plan approved at General Meeting on 12 June 2017. 3 ULO issued to eligible related parties pursuant to Aurora Employee Incentive Plan approved at General Meeting on 29 Nov 2017. 4 ULO issued to eligible related parties pursuant to Aurora Employee Incentive Plan approved at General Meeting on 17 April 2018. 5 Quoted Options issued pursuant to Placement and SPP for $0.01 per option. 6 ULO issued to corporate Advisor and ratified by shareholders at AGM on 30 November 2018. 7 ULO issued pursuant to Placement and ratified by shareholders at EGM on 17 June 2019. 8 ULO issued pursuant to Placement and ratified by shareholders at AGM on 13 December 2019. 9 ULO issued pursuant to its issuing capacity under Listing Rule 7.1 and ratified by shareholders at AGM on 23 April 2020. 10 ULO issued to eligible related parties pursuant to Aurora Employee Incentive Plan approved at AGM on 23 April 2020. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 43 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 6: COMPANY OPTIONS AND PERFORMANCE RIGHTS (continued) Company Performance Rights Balance at the beginning of the year Performance Rights Issued Performance Rights Earnt Performance Rights Cancelled Balance at the end of year Consolidated Consolidated Consolidated Consolidated 30 June 20 30 June 20 30 June 19 30 June 19 Number $ Number $ 755,826 1,160,634 - (945,723) 970,737 264,548 379,527 126,906 (257,972) 513,009 - 867,159 - (111,333) 755,826 - 264,548 - - 264,548 The following options and performance rights were in place during the current and prior periods: Number Grant date Expiry date Exercise price Fair value Vesting date at grant date Employee Incentive Plan 225,000 22 Nov 16 30 Nov 19 Employee Incentive Plan 641,000 14 Mar 17 31 Mar 20 Employee Incentive Plan 255,000 12 Jun 17 30 Nov 19 Employee Incentive Plan 290,000 12 Jun 17 31 Mar 20 Employee Incentive Plan 40,000 12 Jul 17 30 Jun 20 Employee Incentive Plan 432,000 29 Aug 17 31 Aug 20 Employee Incentive Plan 50,000 27 Sep 17 30 Sep 20 Employee Incentive Plan 100,000 29 Nov 17 31 Jul 20 Employee Incentive Plan 45,000 29 Nov 17 31 Aug 20 Employee Incentive Plan 200,000 17 Apr 18 500,000 17 Apr 18 3,686,000 17 Apr 18 250,000 30 Aug 18 367,107 14 Feb 19 617,159 30 Aug 18 250,000 30 Nov 18 1,160,634 11 Jul 19 31 Jan 21 17 Apr 20 17 Apr 20 31 Dec 20 15 Feb 22 31 Jan 23 31 Jan 23 11 Jul 19 Placement Placement Options issued to corporate advisor Placement Performance Rights1 Performance Rights1 Performance Rights1 Placement Placement 1,000,000 13 Dec 19 13 Dec 22 4,000,000 25 Mar 20 25 Mar 23 Employee Incentive Plan 2,000,000 30 Apr 20 30 Apr 23 $ $2.23 $3.00 $2.23 $3.00 $1.17 $0.79 $0.72 $0.95 $0.79 $1.08 $1.00 $1.00 $0.50 $0.57 $0.90 $0.90 $0.47 $0.39 $0.14 $0.14 $ $0.29 $1.17 $0.29 $0.28 $0.26 $0.30 $0.23 $0.48 $0.45 $0.24 - - $0.13 $0.20 $0.23 $0.48 $0.33 $0.26 $0.03 $0.05 22 Nov 16 14 Mar 17 12 Jun 17 12 Jun 17 12 Jul 17 29 Aug 17 03 Oct 17 29 Nov 17 29 Nov 17 17 Apr 18 17 Apr 18 17 Apr 18 30 Aug 18 14 Feb 19 30 Aug 18 30 Nov 18 - 13 Dec 19 25 Mar 20 30 Apr 20 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 44 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 6: COMPANY OPTIONS AND PERFORMANCE RIGHTS (continued) 1 Performance Rights were issued under the Employee Incentive Plan. The fair value of the equity-settled performance rights granted is estimated as at the date of grant using a barrier up and in option pricing model taking into account the terms and conditions upon which the performance rights were granted. 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. No options were exercised during FY2020. The following options were exercised during FY2019: 30 June 19 Exercised Number Exercise date Share price at exercise date Employee options 50,000 29 Aug 18 Employee options 278,000 28 Sep 18 Employee options 1,830,500 8 Oct 18 Employee options 660,000 29 Oct 18 Employee options Employee options Employee options Options issued under IPO prospectus Employee options Employee options Employee options 220,000 283,333 45,000 31 Oct 18 27 Nov 18 3 Dec 18 5,000,000 12 Dec 18 474,167 369,500 142,425 9,852,925 27 Dec 18 28 Dec 18 31 Dec 18 $ $0.42 $0.90 $0.87 $0.70 $0.68 $0.56 $0.61 $0.52 $0.52 $0.50 $0.48 During FY2020 5,137,000 options expired (FY2019 5,000). During FY2020 945,723 performance rights were cancelled (FY2019 111,333) No performance rights were exercised during the year or FY2019. The following share-based payment arrangements were entered into during the period Options Number Grant date Expiry date Exercise price Fair value at grant date Vesting date Corporate advisory fees Series 1 1,000,000 13 Dec 19 13 Dec 22 0.39 82,226 13 Dec 19 Director options Series 4 4,000,000 25 Mar 20 25 Mar 23 0.14 35,266 25 Mar 20 Director options Series 3 2,000,000 23 Apr 20 30 Apr 23 0.14 19,302 30 Apr 23 7,000,000 136,794 $ $ Performance Rights Employee Incentive plan Series 2 1,160,634 11 Jul 19 11 Jul 24 0.47 379,527 - Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 45 1,160,634 379,527 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 6: COMPANY OPTIONS AND PERFORMANCE RIGHTS (continued) Performance Rights were issued free of charge. Each Performance Right entitles the holder to subscribe for one (1) fully paid ordinary share in the Company based on achieving vesting conditions at a nil exercise price. The terms and conditions including the service and performance criteria that must be met are as follows: (d) Subject to the below paragraph (b) each Performance Right will only vest and become exercisable when the 10 day volume weighed average market price (as defined in the ASX Listing Rules) of the Company’s quoted Shares first exceeds $0.47 per Share (Vesting Condition). (e) (f) in respect of 50% of the Awards, that you have been employed or engaged (as applicable) by the Company or any other of its related bodies corporate for continuous period of at least 12 months; and in respect of 50% of the Awards, that you continue to be employed or engaged (as applicable) by the Company or any other of its related bodies corporate for at least 12 months from the date that the Awards are granted or the satisfaction of the other Vesting Condition under (b) above, whichever is the later in time. (g) These conditions must be satisfied in order for the Awards to vest, unless the Board waives such conditions (or either of them), at its absolute discretion. (h) Each Performance Right will automatically be cancelled and will be redeemed by the Company for nil consideration if employment with the Company is terminated for any reason before the Vesting Condition is met. The fair value of the equity-settled share options granted is estimated as at the date of grant using the Black and Scholes model taking into account the terms and conditions upon which the options were granted. The fair value of the equity-settled performance rights granted is estimated as at the date of grant using a barrier up and in option pricing model taking into account the terms and conditions upon which the performance rights were granted. Series 3 and 4 Three directors received 2,000,000 options each with the following vesting conditions: 500,000 Options will vest if the Director is in office for at least 6 months from date of grant; 500,000 Options will vest if the Director is in office for at least 12 months from date of grant; and 1,000,000 Options will vest if the Director is in office for at least 24 months from date of grant. Equity series Dividend yield (%) Expected volatility (%) 1 - 71% 2 - 45% Risk-free interest rate (%) 0.85% 1.01% Expected life of option (years) 3 Exercise price (cents) Grant date share price VWAP barrier (cents) 0.39 0.29 - 5 Nil 0.365 0.47 3 - 100% 0.26% 3 0.14 0.096 - 4 - 100% 0.32% 3 0.14 0.070 - The expected life of the options and performance shares is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options and performance rights granted were incorporated into the measurement of fair value. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 46 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 7: CASH AND CASH EQUIVALENTS Cash at hand and in bank Term Deposits Total Consolidated Consolidated 30 June 20 $ 1,323,766 - 1,323,766 30 June 19 $ 3,604,293 - 3,604,293 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 2020. 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: Cash and cash equivalents Total Reconciliation of loss after tax to net cash outflow from operating activities: Loss for the year Adjustment for non-cash income and expense items Depreciation Equity settled share-based payments Lapsed patents Share of joint venture loss Bad debt expenses Change in assets and liabilities (Increase) / decrease in trade and other receivables Increase / (decrease) in annual leave accrual (Increase) / decrease in inventories Decrease in trade and other payables Net cash outflow from operating activities Consolidated Consolidated 30 June 20 $ 1,323,766 1,323,766 30 June 19 $ 3,604,293 3,604,293 Consolidated Consolidated 30 June 20 $ (8,155,859) 387,472 303,029 492,799 195,310 6,412 565,080 (28,105) 190,539 (246,026) (6,289,349) 30 June 19 $ (7,643,073) 176,124 297,448 - - - (748,115) 15,835 7,795 130,917 (7,763,069) Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 47 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 7: CASH AND CASH EQUIVALENTS (Continued) Cash Flows from Financing activities On 1 May 2020 Aurora Labs borrowed $724,167 secured against the R&D claim for the year ended 30 June 2020. The term of the loan is up to 31 October 2020 with an annual interest rate of 14%. The loan will be repaid with the receipt of the expected R&D income tax claim. Refer note 4. On 25 June 19 Aurora Labs borrowed $1,350,000 secured against the R&D claim for the year ended 30 June 2019. The term of the loan is up to 31 October 2019 with an annual interest rate of 15%. The loan will be repaid with the receipt of the expected R&D income tax claim. Refer note 4. Changes in liabilities arising from financing activities 2020 Opening balance Repayment of R&D funding R&D funding Lease liabilities Commercial Loan $ 1,350,000 (1,350,000) 724,167 Lease Liability $ Total $ - - - 508,350 1,350,000 (1,350,000) 724,167 508,350 Principal and interest repayments (239,112) (239,112) Closing balance 724,167 269,238 993,405 2019 Opening balance R&D funding Closing balance Commercial Loan $ - 1,350,000 1,350,000 Lease Liability $ - - - Total $ - 1,350,000 1,350,000 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 Expected credit losses Consolidated 30 June 20 $ 92,959 121,214 21,647 - 16 273,775 1,243,273 9,706 1,762,590 Consolidated 30 June 19 $ 92,959 121,215 30,737 15,203 1,058 62,016 1,971,666 75,950 2,370,804 The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. They have been grouped based on the days past due and also according to the geographical location of customers. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 48 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 8: TRADE AND OTHER RECEIVABLES (Continued) The expected loss rates are based on the payment profile for sales over the past 48 months before 30 June 2020 and 30 June 2019 respectively as well as the corresponding historical credit losses during that period. The historical rates are adjusted to reflect current and forwarding looking macroeconomic factors affecting the customer’s ability to settle the amount outstanding. There are no expected credit losses for trade receivables FY2020 or FY2019. NOTE 9: INVENTORIES Stock on Hand Raw materials – Powders at cost Work in progress – Small Format Printers at cost Total Consolidated Consolidated 30 June 2020 $ 168,505 138,470 151,128 458,103 30 June 2019 $ 234,165 167,278 247,199 648,642 Parts used in research and development were classified as research and development and expensed. NOTE 10: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Investment in Joint venture Details of the Group’s material joint venture at the end of the reporting period is as follows: Principal Activity Country of incorporation Ownership interest Ownership interest Published fair value Published fair value 2020 2019 2020 2019 AdditiveNow Pty Ltd Sale of 3D printers Australia 50% % % 50% $ - $ 195,310 Material joint venture Statement of Profit or Loss and other comprehensive income Revenue Profit (Loss) for the year - Continuing operations Other comprehensive income for the year Dividends received during the year 30 June 2020 $ 204,128 (386,569) - - 30 June 2019 $ 185,138 10,620 - - Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 49 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 10: INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (Continued) Statement of financial position Current Assets Non-Current Assets Current Liabilities Non-Current Liabilities Net Assets 30 June 2020 $ 771,158 - 767,106 - 4,052 Reconciliation of summarised financial information to the carrying amount of the interest in joint venture Net assets of the joint venture Portion of the Group’s ownership interest in the joint venture 30 June 2020 $ 4,052 50% Carrying value of the Group’s interest in the joint venture - NOTE 11: PROPERTY, PLANT AND EQUIPMENT (i)Carrying value 30 June 2019 $ 565,138 - 174,518 - 390,620 30 June 2019 $ 390,620 50% - 195,310 Cost Accumulated depreciation and impairment Plant and Equipment $ 430,339 (89,939) Computers and Cameras $ 307,632 (163,567) Office Equipment $ Leasehold Improvements $ Total $ 254,657 (36,371) 213,100 (194,935) 1,205,728 (484,812) Carrying value as at 30 June 2020 340,400 144,065 218,286 18,165 720,916 Cost Accumulated depreciation and impairment 331,923 (53,656) 245,021 (108,492) 75,821 (17,984) 185,692 (92,845) 838,457 (365,824) Carrying value as at 30 June 2019 278,267 136,529 57,837 - 472,633 (ii)Reconciliation Carrying value as at 1 July 2019 Additions Depreciation expense Balance at end of year Carrying value as at 1 July 2018 Cost Depreciation expense Balance at end of year Plant and Equipment $ 278,267 98,390 (36,257) 340,400 179,985 125,802 (27,520) 278,267 Computers and Cameras $ 136,529 62,606 (55,070) 144,065 141,742 42,328 (47,541) 136,529 Leasehold Improvements Total Office Equipment $ 57,837 $ - 178,832 27,407 (18,383) (9,242) (118,952) 218,286 18,165 472,633 367,235 720,916 475,162 173,595 92,847 - (92,847) (176,124) - 472,633 60,588 5,465 (8,216) 57,837 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 50 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 12: RIGHT-OF-USE LEASED ASSETS Cost Accumulated depreciation Carrying value as at 30 June 2020 Reconciliation Recognised on 1 Jul 2019 on adoption of AASB 16 Depreciation expense Carrying value as at 30 June 2020 AASB 16 has been adopted during the period, refer note 19 for details. NOTE 13: INTANGIBLES (i) Carrying amount Intangibles consist of patents lodged by the Group Cost Impairment (for lapsed or forfeited patents) (1) Balance at end of year (ii) Reconciliation Intangibles consist of patents lodged by the Group Balance at the beginning of the year Capitalised payments for patent related costs Less impairment (for lapsed or forfeited patents) (1) Balance at end of year Carrying Value Consolidated 30 June 20 $ 510,533 (268,520) 242,013 510,533 (268,520) 242,013 Consolidated 30 June 20 $ 989,255 (455,819) 533,436 Consolidated 30 June 20 $ 733,265 255,990 (455,019) 533,436 Consolidated 30 June 19 $ 735,965 (2,700) 733,265 Consolidated 30 June 19 $ 510,137 225,828 (2,700) 733,265 (1)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 14: TRADE AND OTHER PAYABLES Trade and other payables Accounts Payable Other payables Sub Total Deferred Revenue - Deposits / pre-payments for small format printers Accrued annual leave Total Consolidated 30 June 20 $ Consolidated 30 June 19 $ 47,729 392,346 440,075 44,905 172,211 657,191 218,122 467,979 686,101 52,534 200,316 938,951 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 51 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 15: LEASE LIABILITIES Fair Value Current liabilities Non-current liabilities Consolidated 30 June 20 $ 269,238 - 269,238 Reconciliation Recognised on 1 Jul 2019 on adoption of AASB 16 Less Principal repayments Less Interest repayments 508,350 202,282 36,830 Closing balance AASB 16 has been adopted during the period, refer note 19 for details. Underlying assets serve as security for the related lease liabilities. A maturity analysis of future minimum lease payments is presented below: 269,238 30 June 20 Lease payments Interest Net present values NOTE 16: BORROWINGS Current Secured Other Loans Sub Total <1 year $ 282,567 (13,329) 269,238 1-2 years $ - - - Total $ 282,567 (13,329) 269,238 Consolidated 30 June 20 $ Consolidated 30 June 19 $ 724,167 724,167 1,350,000 1,350,000 On 1 May 2020 Aurora Labs borrowed $724,167 secured against the R&D claim for the year ended 30 June 2020. The term of the loan is up to 31 October 2020 with an annual interest rate of 14%. The loan will be repaid with the receipt of the expected R&D income tax claim. Refer note 4. NOTE 17: SIGNIFICANT EVENTS AFTER THE BALANCE DATE There have been no matters or circumstances which has arisen since 30 June 2020 that has significantly affected or may significantly affect: a) Group operations in future financial years; or b) The results of those operations in future financial years; or c) Group state of affairs in future financial years. NOTE 18: DIVIDENDS The Directors of the Group have not declared any dividend for the year ended 30 June 2020 or the period ended 30 June 2019. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 52 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 19: NEW STANDARDS ADOPTED AASB 16 Leases Impact on operating leases AASB 16 Leases supersedes AASB 117 Leases. The Group has adopted AASB 16 from 1 July 2019 which has resulted in changes classification, measurement and recognition leases. The changes result in almost all leases where the Company is the lessee being recognised on the Condensed Statement of Financial Position and removes the former distinction between ‘operating and ‘finance leases’. The new standard requires recognition of a right-of-use asset (the leased item) and a financial liability (to pay rentals). The exceptions are short-term, and low value leases. The Group has adopted AASB 16 using the modified retrospective approach under which the reclassifications and the adjustments arising from the new leasing rules are recognised in the opening Condensed Statement of Financial Position on 1 July 2019. There is no initial Impact on retained earnings under this approach. The Group has not restated comparatives for the 2019 reporting period. As at 30 June 2019, the Group had non-cancellable operating lease commitments of $565,404. Refer note 17. The Group leases premises as at 30 June 2019 these leases were classified as operating leases. Payments made under operating leases were charged to profit or loss on a straight-line basis over the period of the lease. From 1 July 2019, where the Company is a lessee, the Group recognised a right-of-use asset and a corresponding liability at the date which the lease asset is available for use by the Group. Each lease payment is allocated between the liability and the finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a consistent period rate of interest on the remaining balance of the liability for each period. The lease liability is initially recognised at the present value of the lease payments that are not paid at commencement date, discounted using an interest rate implicit in the lease, If that rate cannot be determined, the Company’s incremental borrowing rate is used, being the rate the lessee would have to pay to borrow funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. A extension option is included in the property leases. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain to be extended. Subsequent to initial recognition, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The lease liability is remeasured (with a corresponding adjustment to the right-of-use asset) whenever there us a change in the lease term (including assessments relating to extension and termination options), lease payments due to changes in an index or rate, or expected payments under guaranteed residual values Right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before commencement date, less any lease incentives received and any initial direct costs. These right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses. Where the terms of a lease require the Group to restore the underlying asset, or the Group has an obligation to dismantle and remove a leased asset, a provision is recognised and measured in accordance with AASB 137. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset. Right-of-use assets are depreciated on a straight-line basis over the term of the lease (or the useful life of the leased asset if this is shorter). Depreciation starts on commencement date of the lease. Where leases have a term of less than 12 months or relate to low value assets, the Group has applied the optional exemptions to not capitalise these leases and instead account for the lease expense on a straight-line basis over the lease term. Impact on adoption of AASB 16 On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been classified as operating leases under the principles of AASB 117. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 July 2019. The incremental borrowing rate applied to lease liabilities on 1 July 2019 was 10%. On initial application right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised ln the Statement of Financial Position as at 30 June 2019. In the Condensed Statement of Cash Flows, the Group has recognised cash payments for the principal portion of the lease liability within financing activities, cash payments for the interest portion of the lease liability as interest paid within operating activities and short-term lease payments and payments for lease of low-value assets within operating activities. The adoption of AASB 16 resulted in the recognition of right-of-use assets of $508,350 and lease liabilities of $508,350 in respect of all operating leases, other than short-term leases and leases of low-value assets. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 53 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 19: NEW STANDARDS ADOPTED (Continued) The net impact on accumulated losses on 1 July 2019 was $nil. Operating lease commitments disclosed as at 30 June 2019 Discounted using the lessee’s incremental borrowing rate at the date of initial application Lease liability as at 1 July 2019 Right-of-use asset The recognised right-of-use asset relate to the following types of assets: Property leases Lease liability Current lease liabilities Non-current lease liabilities Impact Consolidated 1 Jul 19 $ 565,404 (57,054) 508,350 30 June 19 $ 508,350 508,350 30 June 19 $ 257,579 250,771 508,350 The change in accounting policy resulted in an increase of a right-of-use asset of $508,350 and a corresponding lease liability of $508,350 in respect of all these leases, other than short-term leases and leases of low-value assets. The net impact on retained earnings on 1 July 2019 was $nil. Practical expedients applied In applying AASB 16 for the first time, the Aggregated Group has used the following practical expedients permitted by the standard: The accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases, with no right-of-use asset nor lease liability recognised; and The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease. Impact on finance leases Based on an analysis of the Aggregated Group’s finance leases as at 30 June 2019 on the basis of the facts and circumstances that exist at that date, the directors of the Company have assessed that the impact of this change will not have an impact on the amounts recognised in the Aggregated Group’s interim financial statements. Impact on lessor accounting Based on an analysis of the Aggregated Group’s leases as at 30 June 2019 on the basis of the facts and circumstances that exist at that date, the directors of the Company have assessed that the impact of this change will not have an impact on the amounts recognised in the Aggregated Group’s interim interim financial statements. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 54 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 20: COMMITMENTS As at the balance date, the Group has a total of 6 Small Format Printers that were pre-sold at discount rates to various non-related parties as part of a crowd-funding initiative called “kickstarter”. A liability of $44,905 is recognised on the statement of financial position which corresponds to funds received from these pre-sales. The Group 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 Group 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. This arrangement is now reflected under right of use asset in Note 12. There are no other lease commitments in the current year. 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 period was extended for a further 24 months to 31 May 2021 of $24,583 per month plus standard outgoings. Lease commitments Not longer than 1 year Longer than 1 year and shorter than 5 years Total NOTE 21: FINANCIAL INSTRUMENTS a) Overview Consolidated Consolidated 30 June 20 30 June 19 $ - - - $ 294,994 270,410 565,404 The Group principal financial instruments comprise receivables, payables and cash. The main risks arising from the Group financial instruments are credit risk, liquidity risk, interest rate risk and foreign currency risk. This note presents information about the Group 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 Group manages its exposure to key financial risks in accordance with the Group risk management policy. Key financial risks are identified and reviewed annually, and policies are revised as required. The overall objective of the Group risk management policy is to recognise and manage risks that affect the Group and to provide a stable financial platform to enable the Group to operate efficiently. The Group does not enter into derivative transactions to mitigate the financial risks. In addition, the Group policy is that no trading in financial instruments shall be undertaken for the purposes of making speculative gains. As the Group 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 Group 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 Group. The Group 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 Group 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 Group uses publicly available financial information and its own trading record to rate its major customers. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 55 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 21: FINANCIAL INSTRUMENTS (continued) The Group does not have any significant credit risk exposure to any single counterparty or any Group of counterparties having similar characteristics. Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. This arises principally from cash and cash equivalents and trade and other receivables. There are no significant concentrations of credit risk within the Group. The carrying amount of the Group financial assets represents the maximum credit risk exposure, as represented below: Cash and cash equivalents Trade and other receivables Total Consolidated Consolidated 30 June 20 $ 1,323,766 1,762,590 3,086,356 30 June 19 $ 3,604,293 2,370,804 5,975,097 Trade and other receivables are comprised primarily of advances to suppliers, bank guarantee, prepayments, interest receivable and GST refunds due. Where possible the Group trades only with recognised, creditworthy third parties. It is the Group 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 Group exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. c) Liquidity risk Liquidity risk is the risk that the Group 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 Group 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. 2020 Financial Liabilities Trade and other payables Deferred revenue Borrowings Accrued annual leave Total 2019 Financial Liabilities Trade and other payables Deferred revenue Borrowings Accrued annual leave Total ≤6 Months $ 6-12 Months $ 1-5 Years $ ≥5 Years $ Total $ 440,075 44,905 724,167 172,211 1,381,358 - - - - - - - - - - - - - - ≤6 Months $ 6-12 Months $ 1-5 Years $ ≥5 Years $ 686,101 52,534 1,350,000 200,316 2,288,951 - - - - - - - - - - - - 440,075 44,905 724,167 172,211 1,381,358 Total $ 686,101 52,534 1,350,000 200,316 2,288,951 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 56 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 21: FINANCIAL INSTRUMENTS (continued) d) Interest Rate Risk The Groups 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 Group 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 Group interest-bearing financial instruments was: Interest-bearing financial instruments Cash at bank and on hand Term Deposits Borrowings Total Consolidated Consolidated 30 June 20 30 June 19 $ $ 1,323,766 - (724,167) 599,599 3,604,293 - (1,350,000) 2,254,293 The Group's cash at bank and on hand and short-term deposits had a weighted average floating interest rate at year end of 0.26% (2019: 0.96%). The Group currently does not engage in any hedging or derivative transactions to manage interest rate risk. Interest rate sensitivity The Group 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 Group has an exposure to foreign exchange rates given that the Group 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 Group 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 Group 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. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 57 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 22: CONTINGENT LIABILITIES / ASSETS The Company had no contingent liabilities or assets as at the reporting date. NOTE 23: 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 Grant Mooney Terry Stinson Ashley Zimpel David Budge Nathan Henry Mathew Whyte Paul Kristensen Mel Ashton Peter Snowsil Position Non-Executive Chairman; and Company Secretary Non-Executive Director Non-Executive Director Chief Technical Officer Marketing Manager Company Secretary ; and Non-Executive Director Non-Executive Chairman Non-Executive Director Chief Executive Officer b) Key Management Personnel Compensation Short-term employee benefits Post- employment benefits Share-based payments Total compensation c) Other Transactions Consolidated Consolidated 30 June 20 30 June 19 $ $ 1,217,191 84,061 64,378 1,365,630 811,508 50,094 120,750 982,352 Grant Mooney has provided company secretarial services during the year which totalled: $8,000 (2019: $Nil) Mathew Whyte provided company secretarial services through a controlled entity Whypro Corporate Services. Payments for company secretarial services during the year totalled: $86,400 (2019: $115,200). These amounts are included in the table above. These items have been recognised as expenses in the Statement of Profit or Loss and Other Comprehensive Income. d) Key Management Personal Payables There were no amounts payable to KMP’s as at 30 June 2020. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 58 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 24: TRANSATIONS WITH SUBSIDIARIES The consolidated financial statements include the financial statements of Aurora Labs Limited and its subsidiaries listed in the following table. Country of incorporation Equity Interest A3D Operations Pty Ltd A3D Holdings Pty Ltd Aurora Labs 3D (US) LLC Australia Australia USA 30 June 20 % 100 100 100 30 June 19 % 100 100 100 Aurora Labs Limited is the ultimate Australian parent entity and ultimate parent of the Group. Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation. NOTE 25: SHARE-BASED PAYMENTS a) Recognised Share-based Payment Expense From time to time, the Company provides incentive options and performance rights to officers, employees, consultants and other key advisors as part of remuneration and incentive arrangements. The number of options and performance rights granted, and the terms of the options and performance rights 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 in the Statement of Profit or Loss and Other Comprehensive Income. Expense arising from equity-settled share-based payment transactions Net share based payment expense/(income) recognised in the profit or loss Consolidated Consolidated Consolidated Consolidated 30 June 20 Number 30 June 20 30 June 19 30 June 19 $ Number $ 7,160,634 303,029 1,117,159 297,448 7,160,634 303,029 1,117,159 297,448 During FY2020. 1,000,000 options were issued to settle share issue costs $82,226. (2019: 367,107 options were issued to settle share issue costs $73,506). b) Remaining Contractual Life All Incentive Options and Performance rights outstanding at 30 June 2020 are able to be exercised prior to 11 July 2024, so there is 4.0 years remaining contractual life on all options and Performance shares as at the balance date (2019: 4.5 years). c) Range of Exercise Prices The exercise price of Incentive Options outstanding at 30 June 2020 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 Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 59 NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTE 26: Parent entity Statement of financial position Current assets Non-current assets Current liabilities Non-current liabilities Net assets Equity Issued capital Option reserve Retained earnings Total equity Statement of profit or loss and other comprehensive income Loss for the year Other comprehensive income Total comprehensive loss 30 June 20 $ 2,201,754 2,137,944 949,470 - 3,390,228 27,218,305 2,269,439 (26,097,516) 3,390,228 30 June 20 $ 8,095,858 - 8,095,858 30 June 19 $ 5,153,260 2,113,194 1,530,458 - 5,735,996 21,793,469 1,884,185 (18,001,658) 5,735,996 30 June 19 $ 1,464,174 - 1,464,174 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries As at 30 June 2020, Aurora Labs Limited has not entered into any deed of cross guarantee with its three of its wholly-owned subsidiaries, A3D Operations Pty Ltd, A3D Holdings Pty Ltd and Aurora Labs 3D (US) LLC. Contingent liabilities of the parent entity As at 30 June 2020 Aurora Labs Limited has no contingent liabilities (2019: $Nil) NOTE 27: 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 – Export Marketing Development Grant preparation and lodgement Total Consolidated Consolidated 30 June 20 30 June 19 $ $ 30,725 5,250 35,975 29,000 4,250 33,250 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 60 DIRECTORS DECLARATION 1. In the opinion of the Directors of Aurora Labs Limited (“Aurora” or the “Group”): 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 Group’s financial position as at 30 June 2020 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 2020. This declaration is signed in accordance with a resolution of the Board of Directors. ______________________________ Grant Mooney Chairman Dated this 31 August 2020 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 61 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”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit and loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated 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 Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s financial position as at 30 June 2020 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 Group 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to 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 Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 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, we have determined the matters described below to be the key audit matters to be communicated in our report. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 62         Key Audit Matter Share Based Payments Refer to Note 21 How our audit addressed the key audit matter During the financial year the Company issued unlisted options to performance rights to Key Management Personnel and employees. We have considered this to be a key audit matter as accounting for the transactions required significant management involving a degree of estimation. Furthermore, external valuer was engaged to undertake valuation of performance rights which included market based vesting conditions. judgement Our procedures included but were not limited to: - Ensured that the accounting treatment of the share-based payment arrangements by the Company were consistent with the requirements of AASB 2 Share-based payment; and - Testing the inputs used in the calculation of the value of options and performance rights. Intangible assets Refer to Note 13 The Group has a significant intangible asset balance which relates to patents in relation to 3D printing technology. Our procedures included but were not limited to: - Obtaining external confirmation of patent We considered this to be a key audit matter as it is determined to be important to the users of the financial statements and from external required consultants. input it status; - Agreeing expenditure incurred to supporting documentation; - Ensuring compliance of patents costs for recognition and continued capitalisation under AASB 138 Intangible Assets; and - Considered existence of any impairment indicators under AASB 136 Impairment of Assets. 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 Group’s annual financial report the year ended 30 June 2020, but does not include the financial report and our auditor’s report thereon. 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 Group to continue as a going concern, disclosing, as applicable, matters related to going concern and Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020  P a g e  | 63        using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the 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 Group’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 Group’s ability to continue as a 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 Group 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. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020  P a g e  | 64      Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Aurora Labs Limited for the year ended 30 June 2020 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 31 August 2020 B G McVeigh Partner Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 65     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 21 August 2020. Quoted Securities There is one class of quoted securities, being: 1. Fully paid ordinary shares (ASX: A3D); 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 361 552 360 769 172 2,214 Shares 187,337 1,590,292 2,890,508 27,891,834 84,719,736 117,279,707 b) Marketable parcel There are 1,000 shareholders with less than a marketable parcel (basis price $0.08). 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 are two substantial shareholder, being Mr David Budge, holding 15,946,785 fully paid ordinary shares, being 13.60% of the fully paid ordinary shares on issue and Bartheer Beheer BV, holding 13,000,000 fully paid ordinary shares, being 11.08% of the fully 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 Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 66 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 MR DAVID JAMES BUDGE BARTHEN BEHEER BV HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED MR JOHN NATHAN HENRY MCROD INVESTMENTS PTY LIMITED GASMERE PTY LTD MRS JESSICA C E SNELLING LEE MILLER INVESTMENTS PTY LTD MR TERRY STEPHEN ROMARO J P MORGAN NOMINEES AUSTRALIA PTY LIMITED ZWECS PTY LTD MR ANTHONY PELLEGROM MR PETER WAYNE ROGERS MR RODNEY ALAN BRACK ONMELL PTY LTD MARRAHCAPITAL INVESTMENT PTY LTD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 MR WAYNE JOHN HOGAN & MRS ANGELA PATRICE HOGAN 700,000 DR THEODORE LIONEL CHATZ MR JOHN CLIFFORD GRANT & MRS TRACY LYNNE GRANT Total 700,000 600,800 52,035,40 7 Number of Ordinary Shares 15,946,78 5 13,000,00 0 2,721,842 2,263,855 1,825,485 1,666,153 1,583,009 1,330,377 1,327,500 1,250,000 1,236,280 1,142,671 1,050,000 841,062 775,096 763,169 750,000 % of Issued Capital 13.60% 11.08% 2.32% 1.93% 1.56% 1.42% 1.35% 1.13% 1.13% 1.07% 1.05% 0.97% 0.90% 0.72% 0.66% 0.65% 0.64% 0.60% 0.60% 0.51% 44.37% Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 67 ASX ADDITIONAL INFORMATION (continued) Unquoted Securities – Company Options and Performance Shares There are three classes of unquoted securities, being: 1. Company Options: 2. Company Performance Rights 1a) Company Options – Exercisable $0.79/ Expiry 31 August 2020 Distribution & Spread of unquoted Options holder numbers Ordinary Options Ordinary 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 Holders - - 1 22 - 23 1b) 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 Holders - - 1 - 1 Number - - 7,000 455,000 - 462,000 Number - - - 50,000 - 50,000 1c) 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 Holders Number - - 1 - 1 - - - 100,000 - 100,000 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 68 ASX ADDITIONAL INFORMATION (continued) 1d) Company Options – Exercisable $0.50/ Expiry 31 December 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 Holders Number - - - - 1 1 - - - - 250,000 250,000 1e) 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 Holders Number - - 2 - 2 - - - 200,000 - 200,000 1f) Company Options – Exercisable $0.57/ Expiry 15 February 2022 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 Holders Number - - - - 1 1 - - - - 367,107 367,107 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 69 ASX ADDITIONAL INFORMATION (continued) 1g) Company Options – Exercisable $0.39/ Expiry 13 January 2022 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 Holders Number - - - - 2 2 - - - - 1,000,000 1,000,000 1h) Company Options – Exercisable $0.14/ Expiry 25 March 2023 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 1i) Company Options – Exercisable $0.14/ Expiry 30 April 2023 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 Holders Number - - - - 2 2 - - - - 4,000,000 4,000,000 Ordinary Options Holders Number - - - - 1 1 - - - - 2,000,000 2,000,000 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 70 ASX ADDITIONAL INFORMATION (continued) 1j) Company Options – Exercisable $0.14/ Expiry 14 August 2022 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 - - - - 1 1 Ordinary Options Holders Number 2a) Company Performance Rights – Exercisable $0.90/ Expiry 31 January 2023 Distribution & Spread of unquoted Performance Rights 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 Performance Rights Holders - - 2 12 - 14 - - - - 3,000,000 3,000,000 Number - - 17,500 401,055 - 418,555 2b) Company Performance Rights – Exercisable $0.47/ Expiry 11 July 2024 Distribution & Spread of unquoted Performance Rights 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 Performance Rights Holders Number - - - 17 - 17 - - - 552,182 - 552,182 Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 71 ASX ADDITIONAL INFORMATION (continued) OTHER ASX INFORMATION 1. Corporate Governance The Company’s Corporate Governance Statement as at 30 June 2020 as approved by the Board can be viewed at https://www.auroralabs3d.com/a3d/#/investors/corporate-compliance 2. Company Secretary The name of the Company Secretary is Grant Mooney. 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 4. Address and telephone details of the office at which a registry of securities is kept: Automic Group Level 5, 126 Phillip Street, Sydney NSW 2000 Telephone: +61 2 8072 1400 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. Restricted Securities The Company has no restricted securities as at the date of this report. Aurora Labs Ltd ANNUAL FINANCIAL REPORT 2020 P a g e | 72

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