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BrainChip Holdings Ltd
Annual Report
2020
Corporate Directory
Board of Directors
Emmanuel Hernandez
Non-Executive Director and Chair
Louis DiNardo
Executive Director, Chief Executive Officer
Peter van der Made
Christa Steele
Geoffrey Carrick
Executive Director, Chief Technical Officer
Non-Executive Director
Non-Executive Director
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Company Secretary
Kim Clark
Registered Office
Level 12, 225 George St. Sydney NSW 2000 Australia
Telephone: +61 2 9290 9606
Facsimile: +61 2 9279 0664
Postal Address
PO Box 3993, Sydney NSW 2001 Australia
Website
http://www.brainchipinc.com
Auditors
Ernst & Young
Ernst & Young Building, 11 Mounts Bay Road, Perth WA 6000
Telephone: +61 8 9429 2222 Facsimile: +61 8 9429 2436
Share Registry
Boardroom Pty Ltd
Level 12, 225 George St, Sydney NSW 2000
Telephone: +61 2 9290 9600
Facsimile: +61 2 9290 9664 Online: www.clientonline.com.au
Securities Exchange
Australian Securities Exchange Limited
Exchange Centre, 20 Bridge St, Sydney NSW 2000
Code: BRN
ABN: 64 151 159 812
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Contents
Letter from the Chair
Directors’ Report
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Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year
ended 31 December 2020
Consolidated Statement of Financial Position as at 31 December 2020
Consolidated Statement of Cash Flows for the Year ended 31 December 2020
Consolidated Statement of Changes in Equity for the Year ended 31 December 2020
Notes to the Consolidated Financial Statements for the Year ended 31 December 2020
Directors’ Declaration
Independent Audit Report
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Additional Shareholder Information as at 31 January 2021
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Letter from the Chair
To our Valued Shareholders,
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Throughout the financial year of 2020 BrainChip demonstrated great success in advancing AI at the Edge and
the commercialization of the AkidaTM device and intellectual property. This success has included partnerships
with industry leaders and expansion of the Company’s presence with investors, editors and analysts that follow
trends in the artificial intelligence area.
We concluded 2020 having made significant strides in the development of our technology and
commercialisation of Akida with the launch of our Early Access Program and the availability of Akida evaluation
boards, new partnerships, expansion of our leadership team and global facilities. In December we signed an
agreement to license the Akida intellectual property to a major Japanese semiconductor company and we look
forward to continuing this momentum throughout the upcoming year.
Our Early Access Program was launched in June 2020 and targeted specific customers in a diverse set of end
markets in order to ensure availability of initial devices and evaluation boards for key applications. Multiple
customers have committed to the advanced purchase of evaluation boards for a range of strategic AI Edge
applications including Advanced Driver Assistance Systems (ADAS) and Autonomous Vehicles (AV),
Unmanned Aerial Vehicles (UAV), Edge vision systems and factory automation. Among those joining the
program are VORAGO Technologies in a collaboration intended to support a Phase I NASA program for a
neuromorphic processor that meets spaceflight requirements. We are also collaborating with Tier-1
Automotive Supplier Valeo Corporation to develop neural network processing solutions for ADAS and AV.
This year, we partnered with Socionext, a leader in advanced System-on-Chip (SoC) solutions for video and
imaging systems, to provide a complete low-power AI Edge network for vision, audio and smart transducers
without the need for a host processor or external memory. Our partnership with Magik Eye Inc., developers of
revolutionary 3D sensors that change how machines see the world, combines the best of AI with 3D sensing
to provide a total 3D vision solution to manufacturers for fast 3D object detection and recognition in applications
including robotics, automotive and emerging consumer products, such as AR/VR and others.
We began shipments of the Akida Neuromorphic System-on-Chip (NSoC) evaluation boards in November
2020. The evaluation board complements our Akida Development Environment (ADE), a robust development
environment that allows potential customers to design a neural network as a Convolutional Neural Network
and utilize the ADE workflow to convert the network to an Event-Based network or develop a native Spiking
Neural Network.
To support our growth, we have invested in our sales and marketing team. We added a Vice President of
Worldwide Sales to lead commercialization efforts of the Akida technology. We are also building an
applications engineering team to best support customers and augment our worldwide design, development
and research groups. Additionally, we added a Director of Technical Sales, focusing on strategic customer
adoption and implementation of the Akida neuromorphic processor in industries including Smart Home, Smart
City, Smart Healthcare and Smart Transportation. These personnel moves complement our expansion with a
Software Development Centre in Hyderabad, India and the BrainChip Research Institute in Perth, Australia.
In August 2020 we entered into an equity financing arrangement with LDA Capital. This facility has allowed us
to raise approximately US$15.1 million at share prices significantly above the prevailing price at the time the
arrangement commenced. The Review of Operations and Notes 19 and 22 within the Financial Report
explain the operation and the accounting treatment of this arrangement.
We are pleased with the success of the funding arrangement which has placed us in a strong cash position;
with US$19.1 million at year end and access to an additional A$34 million. Shareholders should note that the
treatment of this arrangement as a financial derivative related to the improved share price and the stronger
AUD$ created a US$15.6 million non-cash accounting loss.
We are proud of our progress in 2020 in terms of both market readiness and an increase in market possibilities.
From adding partners to opening up our Akida Development Environment and Early Access Program, we are
making consistent, measurable progress in bringing AI to the Edge in a way that existing technologies are not
capable.
Thank you for your continuing support,
Emmanuel Hernandez
Chair
BrainChip Holdings Ltd
2020 Annual Report
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Directors’ Report
The directors submit their report of the consolidated entity, being BrainChip Holdings Ltd (“BrainChip
Holdings” or the “Company” or “BrainChip”) and its controlled entities (“Group” or “Consolidated Entity”), for
the year ended 31 December 2020.
DIRECTORS
The names and details of the Company’s directors in office during the financial period and until the date of
this report are as follows:
Emmanuel Hernandez
Louis DiNardo
Peter van der Made
Steve Liebeskind
Christa Steele
Geoffrey Carrick
Adam Osseiran
Non-Executive Director and Chair
Executive Director, Chief Executive Officer
Executive Director (appointed 29 January 2020), Chief Technical Officer
Non-Executive Director (resigned 31 December 2020)
Non-Executive Director (appointed 14 September 2020)
Non-Executive Director (appointed 23 November 2020)
Non-Executive Director (resigned 29 January 2020)
The name of the Company’s Secretary in office during the financial period and until the date of this report is
as follows:
Kim Clark
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the period, the COVID-19 outbreak was declared a pandemic by the World Health Organization
(March 2020). The outbreak and the response of Governments in dealing with the pandemic is affecting
general activity levels within the community, the economy and the operations of our business. The scale and
duration of these developments remain uncertain as at the date of this report, however, whilst there appears
to be minimal impact on our business to date, including consideration of key judgements and estimates used
in presenting the financial report, there is a possibility of an impact on our future earnings, cash flow and
financial condition. It is not possible to estimate the impact of the near-term and longer effects of
Governments’ varying efforts to combat the outbreak and support businesses. This being the case, we do
not consider it practicable to provide a quantitative or qualitative estimate of the potential impact of this
outbreak on the Group at this time. The financial statements have been prepared based upon conditions
existing at 31 December 2020, including those which are evidenced by events occurring subsequent to that
date.
On 14 February 2020, the Company officially received an EAR99 classification for its Akida™ Neuromorphic
System-on-Chip (“NSoC”), Akida Software Development Environment (ADE) and related technologies from
the U.S. Government. The U.S. Department of Commerce Bureau of Industry and Security (BIS) also
established Akida as not being classified as identified technology for the purposes of the Committee on
Foreign Investment (CFIUS), which could otherwise limit investment. The BIS ruling now allows BrainChip to
export its AI technology, without additional U.S. government license, to non-restricted customers, including
to high-growth customers in countries such as Japan, Korea, China and Taiwan.
In May 2020, the Company incorporated a new Australian subsidiary, BrainChip Research Institute Pty Ltd,
to pursue the further innovative and develop the next generation of the Akida technology. Mr Peter van der
Made, Chief Technical Officer, relocated to Perth, Western Australia in January 2020 to lead the research
team.
In July 2020, the Group incorporated a new subsidiary in India, BrainChip Systems India Private Limited,
employing and expanding the engineering development team.
On 24 June 2020, the Company announced the final conversion of Convertible Securities issued in
accordance with the Convertible Securities Agreement (“CSA”) was completed and the retirement of all
associated Collateral Shares, signifying the Company had successfully repaid the US$2.85 million debt 12
months after it was entered into with CST Capital Pty Ltd (“CST”) as trustee of the CST Investment Fund.
BrainChip Holdings Ltd
2020 Annual Report
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Directors’ Report
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS (Continued)
On 13 August 2020, the Company announced it had entered into a Put Option Agreement (“POA”) with LDA
Capital Limited and LDA Capital LLC (together “LDA Capital”), a United States based investment group, to
provide the Company with up to A$29 million in committed equity capital over the next 12 months which may
be extended by the parties for a further 12 months. The Company would control the timing and maximum
amount of the draw down under this facility subject only to the minimum draw down commitment of A$10
million with in the first 12 months.
Under the POA, the subscription price for the shares is set at 90% of the higher of the average VWAP of
shares in the 30 trading day period after the issue of the capital call notice, and the minimum price notified
to LDA Capital by the Company upon exercise of the put option. The VWAP calculation and the number of
subscription shares is subject to adjustment as a result of certain events occurring including trading volumes
falling below an agreed threshold level or a material adverse event occurring in relation to the Company.
As part consideration for entering into POA, the Company issued 75,000,000 unlisted options to LDA Capital
comprising 37,500,000 unlisted options exercisable at A$0.15 and 37,500,000 unlisted options exercisable
at A$0.20, expiring on 13 August 2023. The Company is also required to pay a commitment fee of A$580,000,
comprising A$290,000 due and payable at the closing of the Company’s first capital call and the remaining
A$290,000 due and payable at closing of the second capital call. The commitment fee may be paid in shares
at the Company’s discretion.
On 24 August 2020, the Company issued a capital call notice to LDA Capital and issued LDA Capital with
35,000,000 shares (“Collateral Shares”) which LDA Capital was entitled to sell on-market (subject to certain
terms). Under the POA, unused Collateral Shares may be used for a subsequent call, bought back by the
Company for nominal consideration or transferred to a trustee or nominee of the Company.
The POA was amended effective 22 October 2020, noting that BrainChip had fulfilled its obligation under the
original agreement and that LDA Capital had agreed to increase the available funding to A$45 million along
with an increase in BrainChip’s minimum obligation to A$20 million, inclusive of any funds received under
the first Capital call noted issued prior to the amendment.
The capital call notice issued on 24 August 2020 was settled during October and LDA Capital subscribed for
26,250,000 shares. As at 31 December 2020, LDA Capital holds 8,750,000 collateral shares.
On 14 September 2020, BrainChip announced the validation of the Akida Neuromorphic System-on-Chip
(NSoC) design with functional silicon resulting in a complete neural network with no external components
required.
On 23 December 2020, BrainChip announced the signing of the first Akida™ Intellectual Property License
Agreement.
Board changes during the year comprised the resignations of Mr Adam Osseiran effective 29 January 2020,
in order to assume a new role as the Chair of the Company’s Scientific Advisory Board and Mr Steve
Liebeskind effective 31 December 2020, and the appointments of Mr Peter van der Made on 29 January
2020, Ms Christa Steele on 14 September 2020 and Mr Geoffrey Carrick on 23 November 2020. Mr
Emmanuel Hernandez assumed the role of Chair of the Board of Directors effective 1 January 2020.
There have been no other significant changes in the state of affairs of the Group.
PRINCIPAL ACTIVITIES
The principal activity of the Group is the development of software and hardware accelerated solutions for
advanced artificial intelligence (“AI”) and machine learning applications with a primary focus on the
development of its Akida Neuromorphic Processor to provide a complete ultra-low power and fast AI Edge
Network for vision, audio, olfactory and smart transducer applications.
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EMPLOYEES
The Group employed 42 employees at 31 December 2020 (2019: 33).
BrainChip Holdings Ltd
2020 Annual Report
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Directors’ Report
DIVIDENDS
No dividends have been paid or declared by the Company during the financial year or up to the date of this
report.
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REVIEW OF OPERATIONS
The financial results of the Group are presented in US dollars, unless otherwise referenced.
The Company responded to the COVID-19 pandemic, as declared by the World Health Organisation in March
2020, in accordance with all Governments advice and restrictions, and where possible, took advantage of
Government financial assistance provided.
As the pandemic has continued to the date of this report, there appears to be minimal impact on our business,
other than the inability to meet and work with our customers face-to-face. Operations were expanded with a
new innovation and research centre established in Perth, Australia, and a development and design centre in
Hyderabad, India to absorb current contracted software development services.
Wafer fabrication of the Akida device was completed by 30 June 2020, cost savings initiatives implemented
in late 2019 were further enhanced by the worldwide travel ban and the Group has been able to support all
employees during the period.
The Company entered into various Early Access Programs (“EAP”) with select customers to evaluate the
use of the Akida NSoC and signed its first commercial agreement for an Akida Intellectual Property license
in late December 2020.
Overview
The Group made a net loss after income tax for the year ended 31 December 2020 of $26,822,049 (2019:
$11,310,062). The current year loss included non-cash losses of $10,137,774 of which $10,014,541 resulted
from the fair valuation of the LDA financial liabilities (derivatives) recognised due to the agreed pricing
mechanism. Current year loss also included $5,085,464 related to the amortisation of the deferred day one
loss on recognition of the LDA Capital put option premium, being the difference between the total
consideration payable and the derivative asset recognised.
Revenues for the year ended 31 December 2020 of $120,829 increased 60% from $75,574 in 2019 resulting
from the recognition of EAP product sales and engineering support and development revenues.
Total operating expenses for the year ended 31 December 2020 of $11,242,032 increased 2% from
$11,004,318 incurred in the year ended 31 December 2019. This increase was attributable to:
1) Research & development (R&D) expenses of $5,152,239 for the current period increased 14%, or
$640,829 from a year ago. R&D costs comprise employee expense, contractor and other research and
development costs, and amortisation of capitalised R&D intangible assets. Movements in R&D costs are
summarised as follows:
a) 3% increase in employee expenses reflecting the expansion of headcount into both Australia (2
additional) and India (5 additional), offset by increased credits received or receivable from
government authorities; and
b) Recognition of $1,928,651 of third-party pre-development services, including $1,050,000 (2019:
$700,000) paid to Socionext as part of the progressive payments related to the fabrication of the
AkidaTM device;
2) Selling & marketing (S&M) expenses of $1,426,501 for the current period increased 34%, or $364,906
from a year ago. The increase reflects management’s decision to engage external marketing consultants
and rebuild the S&M headcount to target potential customers as development of Akida progressed during
2020;
3) General & administrative (G&A) expenses of $3,227,647 for the current period decreased 15% overall,
or $567,553 from the same period a year ago as a result of:
a) The appointment of a new CFO in March 2019 and additional headcount in the administrative team
resulted in higher employee related expenses;
BrainChip Holdings Ltd
2020 Annual Report
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Directors’ Report
REVIEW OF OPERATIONS (Continued)
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b) A reduction in Director remuneration in the current period due to a reduced number of board
members following the 2019 resignations of Mr Stephe Wilks and Ms Julie Stein without replacement
until September 2020 (Ms Steele) and November 2020 (Mr Carrick);
Increased cost saving initiatives implemented in late 2019 and extended into 2020 (as a result of
COVID-19) specifically focussed on a reduction in travel expenses, legal and other consultants; and
c)
d)
increased listing related expenses as a result of increased shareholder activities during the current
year; and
4) Share-based payment expense of $1,435,645 for the current period decreased 12%, or $200,468 from
the same period a year ago. Share-based payments expense represents the current period expense for
options, restricted stock units and performance rights issued to directors, employees and consultants,
offset by the value of options that have been forfeited during the year.
The Company also recognised $268,522 of interest expense and $137,525 of fair value losses recognised
through profit and loss related to the valuation and finalisation of the Convertible Securities.
Balance Sheet and Cashflows
At the end of the year the Group had consolidated net assets of $17,729,336 (2019: $9,096,350), including
cash and cash equivalents of $19,136,425 (2019: $7,622,178).
Cash outflows used in operating activities increased to $10,028,976 (2019: $9,001,435) as noted in the
Consolidated Statement of Cash Flows is reflective of the growth in the Company through achieving
production of the Akida device during the year and continuing to develop the next generation of the device
during a global pandemic.
In addition to Cash from Financing Activities from the LDA Capital and CST Agreements noted below, the
Company received $1,989,898 from the issue of shares and $412,300 received from the U.S. Small Business
Administration, “SBA”, Payroll Protection Program which is part of a program created by the USA Coronavirus
Aid, Relief, and Economic Security Act, “CARES Act”, which provides financial relief from the COVID-19
emergency.
LDA Agreement
On entering the POA, the Company recognised the purchased put option as a derivative asset with a fair
value of $1,153,781. The consideration payable comprised 75,000,000 unlisted options, recognised as a
derivative liability totalling $5,800,734, and a commitment fee payable of $415,361. The difference between
the total consideration payable and the derivative asset recognised, referred to as the day one loss, was
deferred on the balance sheet and amortised to profit or loss in accordance with the Group’s accounting
policy.
On 24 August 2020, the Company issued a Capital Call Notice under the POA to LDA Capital for 35,000,000
shares which triggered the POA pricing mechanism. The settlement of this Capital Call Notice in October
2020 resulted in LDA Capital subscribing for 26,250,000 ordinary shares. The net subscription proceeds
received amounted to US$7,536,236 (A$10,538,125). The settlement of this Capital Call Notice also released
the deferred day one loss to profit and loss of $5,085,464.
The derivative liability relating to the unlisted options issued to LDA Capital as part consideration was
revalued during the period for exercised options and at the year end for the unexercised options. The
remeasurement of the derivative liability resulted in a fair value loss of $10,014,541. Unlisted options
exercised by LDA Capital contributed to cash inflows of $7,570,156 to the Company.
The amendment of the POA on 22 October 2020 resulted in the recognition of an additional purchased put
option and a deferred day one gain of $635,049.
At the balance sheet date, other than cash, the assets and liabilities recognised relating to the POA are as
follows: -
-
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-
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a derivative asset for the unexercised portion of the purchased puts held by the Company in the amount
of $1,470,275;
a derivative liability relating to the unexercised unlisted options held by LDA Capital amounting to
$3,179,756;
a payable for the balance of the commitment fee payable to LDA Capital amounting to $223,400; and
a deferred day one gain of $635,049 arising from the amended POA.
BrainChip Holdings Ltd
2020 Annual Report
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Directors’ Report
REVIEW OF OPERATIONS (Continued)
CST Agreement
At 31 December 2019, the Company recognised a receivable at fair value of $766,818 related to the sale of
collateral shares tradeable by CST and financial liabilities related to the Convertible Securities valued at
$736,932. These balances were valued in accordance with the CSA at the lower of $0.079 or 92% of the
average 5 day VWAP during the 20 actual trading days prior to conversion.
In accordance with the CSA, at CST’s election, the collateral shares could be used to offset the company’s
obligation to issue shares upon a conversion notice, otherwise the collateral shares would be returned to the
Company. In February 2020, CST elected to purchase one parcel of collateral shares at an agreed price
resulting in a gain on settlement of $87,832, The receivable at fair value related to the sale of collateral shares
and financial liabilities related to the Convertible Securities were extinguished in the current period resulting
in cash inflows before costs of $910,971. In August 2020, 21,868,796 options were issued on the exercise
of options held by CST raising $1,845,133.
Operational Highlights
In addition to the highlights noted previously as Significant Changes in the State of Affairs, BrainChip
commenced with preparations for a production version of the chip following the success of the Multi-Project-
Wafer and Early Access Program. The company’s first Intellectual Property License order was received in
December for which proceeds were received subsequent to the financial year. As a result of the progress
made in 2020, the company expects to begin manufacturing production devices in 2021 while intellectual
property licenses remain a key focus.
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Other key highlights throughout the year, as announced to the market, were as follows:
16 February 2020 – a new export classification issued from the U.S. Government’s Bureau of Industry and
Security (BIS). The Export Administration Regulations (EAR) classification of EAR99, which BrainChip has
formally received, is a classification under the EAR which removes barriers for exporting AkidaTM to non-
U.S. countries, and to non-restricted customers and use cases.
22 March 2020 – Socionext Inc., a leader in advanced SoC solutions for video and imaging systems, will
offer customers an Artificial Intelligence Platform that includes the Akida SoC, an ultra-low power high
performance AI technology.
4 May 2020 – the appointment of Dr Simon J. Thorpe to its Scientific Advisor Board. Dr Thorpe provides
decades of insight in the area of event-based processing and hardware implementation.
24 May 2020 – the signing of a joint agreement for evaluation of the Akida neural network System-on-Chip
(SoC) for Advanced Driver Assistance Systems (ADAS) and Autonomous Vehicle (AV) applications with a
prominent Tier-1 automotive manufacturer.
2 July 2020 – in conjunction with Socionext and Taiwan Semiconductor Manufacturing Company (TSMC)
wafer fabrication of the Akida device was completed as planned and the Company moved to complete
assembly and test operations.
23 July 2020 – Professor Barry J. Marshall, a Nobel Prize laureate in Physiology and Medicine has joined
the Company’s Scientific Advisory Board.
17 August 2020 – a partnership with Magik Eye Inc., developers of revolutionary 3D sensors that change
how machines see the world, to market a breakthrough solution for object detection, object classification and
gesture recognition based on MagikEye’s Invertible LightTM 3D depth sensing technology and the AkidaTM
neuromorphic processor.
01 September 2020 – VORAGO Technologies signed the Akida Early Access Program Agreement. The
collaboration is intended to support a Phase I NASA program for a neuromorphic processor that meets
spaceflight requirements.
01 December 2020 – the commencement of a podcast series providing insight on the Company’s strategy
and progress for the engineering community in target markets as well as analysts, technical and financial
press and investors.
2 December 2020 – confirmation that the Register-Transfer Level (RTL) design has been completed and
transferred to the Company’s manufacturing partner, Socionext America (SNA). SNA will complete the
physical design of the device and all related engineering tasks required to transfer the full device files (tape-
out) to Taiwan Semiconductor Manufacturing Company (TSMC) for mask creation and wafer fabrication.
BrainChip Holdings Ltd
2020 Annual Report
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Risk
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Directors’ Report
REVIEW OF OPERATIONS (Continued)
7 December 2020 – commencement of shipping of the Company’s evaluation boards for the Akida
Neuromorphic System-on-Chip (NSoC) on 30 November 2020.
23 December 2020 – the U.S. National Aeronautics and Space Administration (NASA) had ordered the Akida
Early Access Evaluation Kit for use by the NASA Shared Service Center (NSSC) at the NASA/Ames
Research Center (ARC) at Moffett Field in California. The kit will enable NASA to evaluate the Akida
technology for use in programs with a neuromorphic processor that meets spaceflight requirements.
23 December 2020 - the signing of an intellectual property license agreement with Renesas Electronics
America Inc., a subsidiary of Japan-based Renesas Electronics Corp., a tier-one semiconductor
manufacturer that specialises in microcontroller and automotive SoC products.
Factors that may impact the Company’s performance include commercial viability and delays of new
products and technology, delays in the establishment of an effective sales organisation and the global
economy. Some of the risks related to this include:
• Risks of delays in new product development as the Company develops advanced products include:
internal development, development by partners and integration of the technology with third party
providers of intellectual property.
• Risks of delays in new product introduction as the Company commercialises advanced products include:
wafer fabrication, assembly of products and test operations.
• Risks of delays in sales and marketing of new products include: recruitment and retention of the highly
skilled and experienced human resources.
• Risks of delays in customer adoption of new products include: adequate training and education,
collateral materials, application engineering and customer support.
The Company’s performance and success is dependent upon the ability to effectively identify, protect and
defend its intellectual property through patents or trade secrets. Some of the risks related to this include:
• Risks of intellectual property or other claims, which are costly to defend, could result in significant
damage awards, and could limit the Company’s ability to use certain technologies in the future.
• Risks of successful intellectual property infringement claims that may have an adverse effect on our
business, consolidated financial position, results of operations, or cash flows.
• Risks of intellectual property infringement protection of the Company’s patents, trademarks, trade
secrets, copyrights may not be available or feasible in every country in which our products and services
could be distributed.
• Risks of intellectual property protection efforts to protect proprietary rights may not be sufficient or
effective. Risks of intellectual property that may not have adequate patent or copyright protection for
certain innovations, that the scope of the protection will be insufficient or that an issued patent may be
deemed invalid or unenforceable.
• Risks that intellectual property held as trade secrets could be compromised by outside parties, or by our
employees.
• Risks that changes in government rules governing export of artificial intelligence-related products and
technologies may prohibit the sale of our products or licensing of our technology in certain regions of the
world.
Other key risks the Company has identified include:
• Risks of an information technology breach that may result in litigation, and potential liability.
• Risks of international operations exposure that could harm our business, operating results, and financial
condition include: changes in local political, economic, regulatory, tax, social, labour conditions and
health and safety issues, may adversely harm our business.
• Risks of human resources recruitment and retention of skilled personnel, motivate and reward key
personnel, maintain the Company’s corporate culture to successfully execute the Company’s business.
• Risks of competition addressing the Company’s markets and customers with advanced products with
similar or better performance.
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2020 Annual Report
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Directors’ Report
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
Subsequent to the end of the year, LDA converted the remaining 13,145,556 options exercisable at A$0.20
by the end of January 2021, resulting in a cash injection of $2,031,235 (A$2,629,111). A further 4,125,000
options have been exercised under the LTIP.
No other matters or circumstances have arisen since the end of the financial year which significantly affected
or may significantly affect the operations of the Group, the results of those operations, or the state of affairs
of the Group in subsequent financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
It is expected that the Group will further develop the Akida Neuromorphic System-on-Chip (NSoC).
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is not subject to any significant environmental regulation under Australian Commonwealth of State
Law.
SECURITIES ON ISSUE
The Company has the following securities on issue as of the date of this report:
Ordinary shares
Options over ordinary shares
Restricted stock units
Performance rights
1,629,737,144
154,145,000
4,487,500
12,500
SHARE OPTIONS
As at the date of this report, there were 150,020,000 unissued ordinary shares under options (154,145,000
at the reporting date). Refer to the remuneration report for further details of the options outstanding for Key
Management Personnel (“KMP”).
Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company
or any related body corporate.
During the financial year 34,823,796 options were exercised and 15,625,000 were forfeited. A
further 4,125,000 options were exercised subsequent to the end of the year and to the date of this report.
There were 4,462,500 Restricted Stock Units (“RSU”) on issue at the reporting date and the date of this
report. 3,800,000 RSUs were converted during the year with none converted after the end of the year.
RESTRICTED STOCK UNITS
PERFORMANCE RIGHTS
There were 25,000 Performance Rights (“PR”) on issue at the reporting date, of which 12,500 were converted
after year end. 12,500 PRs remain on issue at the date of this report.
CORPORATE GOVERNANCE
The directors of the Group support and adhere to the principles of corporate governance, recognising the
need for the highest standard of corporate behaviour and accountability. Please refer to the 2020 Corporate
Governance Statement dated 23 February 2021 released to the ASX and posted on the Company website
which outlines the Group’s approach to corporate governance and sets out the key charters and polices of
the Group.
BrainChip Holdings Ltd
2020 Annual Report
9
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Directors’ Report
INFORMATION ON DIRECTORS
Names, qualifications, experience and special responsibilities
Emmanuel Hernandez – BSC, CPA, MBA - Non-Executive Director (Appointed 7 Jul 2017); Chair
(Appointed 1 Jan 2020)
Mr. Hernandez is a highly regarded Silicon Valley technology executive with a broad experience of more than
40 years in the Semiconductor industry, and more than 10 years in the Renewable Energy industry and the
Communications and Networking industry, and cumulative public and private board experience of over 16
years.
His professional resume includes key roles with some of Silicon Valley's largest and most successful
technology companies including National Semiconductor (acquired by Texas Instruments in 2012), Cypress
Semiconductor (NASDAQ: CY) and ON Semiconductor (NASDAQ: ON). Mr. Hernandez served in various
finance capacities at National Semi between 1976-1993, then joined Cypress Semi where he served as Chief
Financial Officer (“CFO”) between 1993-2004. Mr. Hernandez then joined SunPower Corp where he served
as CFO between 2005-2008. Mr. Hernandez's executive successes have led him to be a highly sought-after
operating consultant and board member including serving as an operating Partner at Khosla Ventures, a
prominent Silicon Valley venture capital firm.
Mr. Hernandez’s public company directorships are noted below. His board service also includes Aruba
Networks, (enterprise networking) acquired by Hewlett Packard Enterprise in 2015, EnStorage, Inc., (flow
battery/storage technology) and Soraa, Inc., (LED and laser technology).
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Mr Hernandez is a member of the Company’s Remuneration & Nomination Committee and Audit &
Governance Committee.
Other directorships in the past 3 years:
- ON Semiconductor Corp.: Audit Committee Chair/member – 20 Nov 2002 to present
- SunEdison, Inc.: Executive Chair, Audit Committee member – 12 May 2009 to 29 Dec 2017
- Rodgers Silicon Valley Acquisition Corp: CFO and Executive director – 2 December 2020 to present.
Louis DiNardo, BA – Executive Director and Chief Executive Officer (Appointed 9 Dec 2016)
Mr DiNardo has a strong track record of growing publicly listed and privately owned technology businesses
and has worked in venture capital firms where he has successfully backed a number of emerging technology
companies. Some of his recent past roles include the President and Chief Executive Officer (CEO) of Exar
Corporation, where he was credited for turning around the underperforming NYSE-listed mid-cap
semiconductor company by revamping the management team, cutting operating expenses and growing
revenue and profit. His efforts helped Exar achieve 16 consecutive quarters of revenue and EPS growth.
Before Exar, Mr DiNardo was responsible for investing in and overseeing a portfolio of companies, including
programmable logic companies, while he served as a partner at Crosslink Capital from 2008 to 2012 and the
Managing Director at Vantage Point Venture Partners from 2007 to 2008.
Mr DiNardo also served as President and Chief Executive Officer, as well as Co-Chair of the Board of
Directors, at Xicor Corporation from January of 2001 until NASDAQ-listed Intersil Corp acquired the company
in July of 2004. He subsequently held senior executive positions at Intersil and became its President and
Chief Operating Officer.
Mr DiNardo has held no other public company directorships in the past three years.
Peter van der Made – Executive Director (Appointed 29 Jan 2020)
Mr van der Made has been at the forefront of computer innovation for 40 years. He is the inventor of a
computer immune system at vCIS Technology where he served as Chief Technical Officer, and then Chief
Scientist when it was acquired by Internet Security Systems, and subsequently IBM. Previously, he designed
a high resolution, high speed colour Graphics Accelerator chip for IBM PC graphics at PolyGraphics Systems.
He was the founder of PolyGraphics Systems, vCIS Technology, and BrainChip Inc.
Mr van der Made was previously held the position of Executive Director of BrainChip Holdings Ltd from 10
September 2015 to 1 January 2018.
Mr van der Made has held no other public company directorships in the past three years.
BrainChip Holdings Ltd
2020 Annual Report
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Directors’ Report
INFORMATION ON DIRECTORS (Continued)
Names, qualifications, experience and special responsibilities (continued)
Steve Liebeskind, BComm, CAANZ – Non-Executive Director (Appointed 1 May 2018, resigned 31
December 2020)
Mr. Liebeskind is an experienced front line operational manager with a broad set of skills developed from his
time working with Ernst & Young in Australia and Canada. He has held positions of Advisor, CEO and COO
for high growth companies in the telecommunications, technology and financial services sector. Mr
Liebeskind is a founding principal of Sydney Capital Partners, a boutique corporate advisory firm.
Mr Liebeskind was Chair of the Company’s Audit & Governance Committee effective from 1 April 2019 and
joined the Renumeration and Nomination Committee as Chair on 1 January 2020. He has resigned from both
committees effective 31 December 2020.
Other directorships in the past 3 years: Nil.
Christa Steele – Non-Executive Director (Appointed 14 September 2020)
Ms Steele was a partner and board member of FIG Partners, a full-service boutique investment bank, until
its sale in April 2019. Prior to this date, she spent two decades (1995-2015) in senior level positions within
the financial services industry where she led the execution of strategic initiatives, streamlined operations,
implemented technology, led digital transformation, underwrote, structured and managed retail and
commercial credit functions, grew new markets and oversaw M&A activity. Ms Steele’s most notable role
was as President and CEO of Mechanics Bank (MCHB 2013-2015) where she led a significant financial
turnaround where the value of the company doubled and was sold at a premium in 2015. Previously, Ms
Steele served as EVP and other roles of F&M Bank.
Ms Steele currently serves as Director of Recology, Tanimura & Antle, and BALCO Holdings, as well as the
listed corporations noted below.. Mr Steele received her Bachelors Degree from California State University
and Master’s Degree from the University of Southern California.
Ms Steele is a member of the Company’s Remuneration & Nomination Committee and Audit & Governance
Committee, effective from 2 October 2020, and Audit & Governance Committee Chair from 1 January 2021.
Other directorships in the past 3 years:
- Non-Executive Director of OLG Bancorp (NYSE: OFG) (May 2018 – October 2020).
Geoffrey Carrick – Non-Executive Director (Appointed 23 November 2020)
Mr Carrick held the positions of Head of Corporate Finance at Shaw and Partners Limited from March 2016
through July 2019, and Head of Equity Capital Markets at Commonwealth Bank from 2012 – 2015. From
1999 through 2011 Mr Carrick was Division Director of Equity Capital Markets at Macquarie Capital.
Mr Carrick currently serves as Director of VCF Capital Partners Pty Limited and Non-Executive Director of
Global Study Partners Holdings Pty Limited. Mr Carrick is a graduate of the University of Sydney B.Ec, LLB.
Mr Carrick is a member and Chair of the Company’s Remuneration & Nomination Committee, and a member
of the Audit & Governance Committee, effective 1 January 2021.
Other directorships in the past 3 years: Nil.
Adam Osseiran, A/Prof – Non-Executive Director (Appointed 10 Sep 2015, resigned 29 Jan 2020)
Dr Osseiran has been involved with BrainChip since 2012, providing advice and assistance on several
aspects of technology, applications and commercial opportunities. Dr Osseiran is the co-founder of Termite
Monitoring and Protection Solutions Pty Ltd, founded in 2013, to exploit the unique Wireless Smart Probe
acoustic termite detection technology. He is also Senior Technical Advisor to Mulpin (MRL) Ltd which has
developed a new patented concept of embedding electronic components within a multi-layered printed circuit
board.
Dr Osseiran is the co-founder and director of Innovate Australia, established to promote and assist Australian
innovators and encourage innovation and was the President of the Inventors Association of Australia from
2013-2014. Dr Osseiran holds a Ph.D. in microelectronics from the National Polytechnic Institute of Grenoble,
France and a M.Sc. and B.Sc. from the University of Joseph Fourier in Grenoble. Dr Osseiran is currently
Associate Professor of Electrical Engineering at Edith Cowan University in Perth, Western Australia.
BrainChip Holdings Ltd
2020 Annual Report
11
Directors’ Report
INFORMATION ON DIRECTORS (Continued)
Names, qualifications, experience and special responsibilities (continued)
Dr Osseiran served as a member on the Company’s Remuneration & Nomination Committee effective from
1 May 2018 until 29 January 2020.He was appointed Chair of the Scientific Advisory Board of the BrainChip
Group when he left the board.
Other directorships in the past 3 years: Nil.
COMPANY SECRETARY
Kim Clark (Appointed 1 Dec 2018)
Ms Clark is an experienced business professional with 21 years’ experience in the Banking and Finance
industries and 8 years as a Company Secretary (in-house) of an ASX300 company. Her experience includes
debt and capital raising, risk management, mergers and acquisitions, compliance and governance. Ms Clark
currently acts as Company Secretary to various ASX listed and unlisted companies in Australia and is the
Head of Corporate Services for Boardroom Pty Limited’s Queensland office.
INTERESTS IN THE SHARES, OPTIONS AND PERFORMANCE RIGHTS OF THE COMPANY
As at the date of this report, the interests of the directors in the shares, options and performance rights of the
Company were:
Director
E Hernandez
L DiNardo
Fully Paid
Ordinary Shares
Options over
Ordinary Shares
-
8,000,000
11,779,361
57,500,000
Peter van der Made
176,305,508
-
-
-
-
-
188,084,869
65,500,000
C Steele
G Carrick
Total
DIRECTORS’ MEETINGS
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The number of meetings of directors (including meetings of committees of directors) held during the year and
the number of meetings attended by each director was as follows:
r
o
F
Directors Meetings
Audit & Governance
Committee Meetings
(1)
Remuneration &
Nomination Committee
Meetings (1)
Eligible
to attend
Attended
Eligible to
attend
Attended
Eligible to
attend
Attended
E Hernandez
L DiNardo
P van der Made
S Liebeskind
C Steele
G Carrick
A Osseiran
13
13
12
13
5
-
1
13
13
12
13
4
-
1
6
6
n/a
6
1
n/a
n/a
6
6
n/a
6
1
n/a
n/a
3
3
n/a
3
1
n/a
n/a
3
3
n/a
3
1
n/a
n/a
(1) Directors who are not members of the Audit & Governance Committee or Remuneration & Nomination
Committee may be invited to attend meetings of the Committees.
BrainChip Holdings Ltd
2020 Annual Report
12
Directors’ Report
DIRECTORS’ MEETINGS (Continued)
Committee Memberships
The Board maintained an Audit & Governance Committee and established a Remuneration & Nomination
Committee during the year. The membership of each Committee is set out below:
Audit & Governance Committee
Remuneration & Nomination Committee
S Liebeskind (Chair) (resigned 31 December 2020) S Liebeskind (Chair from 1 January 2020, resigned
E Hernandez
C Steele (appointed 2 October 2020; appointed
Chair 1 January 2021)
G Carrick (appointed 1 January 2021)
31 December 2020)
E Hernandez
C Steele (appointed 2 October 2020)
G Carrick (appointed member and Chair - 1
January 2021);
A Osseiran (resigned 29 January 2020)
REMUNERATION REPORT (Audited)
This remuneration report for the year ended 31 December 2020 outlines the remuneration arrangements of
the Group in accordance with the requirements of the Corporations Act 2001 (“the Act”) and its regulations.
This information has been audited as required by section 308(3C) of the Act.
The remuneration report is presented under the following sections:
Introduction
1.
2. Remuneration governance
3. Non-executive Director remuneration arrangements
4. Executive remuneration arrangements
5. Options and performance rights granted as part of remuneration
6. Company performance and the link to remuneration
7. Executive contractual arrangements
8. Equity instruments disclosures
9. Other transactions and balances with Key Management Personnel (“KMP”)
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BrainChip Holdings Ltd
2020 Annual Report
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Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
1.
Introduction
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The Remuneration Report details the remuneration arrangements for KMP who are defined as those persons
having authority and responsibility for planning, directing and controlling the major activities of the Group,
including any director of the parent entity.
For the purposes of this Remuneration Report, the term ‘executive’ includes the executive directors and
senior executives of the Parent and the Group.
Details of KMP of the Group are set out below:
Key Management Personnel
Name
Position
Directors
Date of
appointment
Date of
resignation
E Hernandez (1)
Non-Executive Director
7 July 2017
L DiNardo
P van der Made (2)
S Liebeskind
C Steele
G Carrick
A Osseiran
Executive Director & Chief
Executive Officer
Executive Director & Chief
Technical Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Other Key Management Personnel
30 September 2016
10 September 2015
1 May 2018
14 September 2020
23 November 2020
10 September 2015
-
-
-
31 December 2020
-
-
29 January 2020
A Mankar
K Scarince
R Telson
R Levinson
Chief Development Officer
Chief Financial Officer
Vice President of Worldwide Sales
Chief Operating Officer
1 October 2014
11 March 2019
10 August 2020
18 March 2019
-
-
-
22 July 2020
(1) Mr Hernandez was appointed Chair effective 1 January 2020.
(2) Mr van der Made was appointed as Executive Director effective 29 January 2020. He was
previously reported as a KMP.
BrainChip Holdings Ltd
2020 Annual Report
14
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
2. Remuneration governance
Remuneration & Nomination Committee
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The Remuneration & Nomination Committee operated throughout the year with the purpose of assisting the
Board in establishing the Group’s remuneration philosophy, guiding principles and practices and for
monitoring their effectiveness. The principal objective of the Company’s remuneration programs is to attract,
retain and motivate highly talented individuals who can deliver competitive results and financial returns to our
shareholders, while accomplishing both our short and long-term plans and goals. The Remuneration &
Nomination Committee is specifically tasked with reviewing and making recommendations to the Board in
respect of the Group’s remuneration policies, short and long-term incentives and equity remuneration,
including the structure and amount of remuneration of executives and non-executive directors. The
Remuneration & Nomination Committee is also responsible for overseeing the succession planning of the
Chief Executive Officer and other top executives.
Remuneration approval process
The Board approves, subject to a recommendation from the Remuneration & Nomination Committee the
remuneration arrangements of the non-executive Directors, executive directors and executives and all
awards made under the Company’s 2018 Long Term Incentive Plan (“LTIP”). Aggregate fees paid to non-
executive directors are paid within the total remuneration fee pool approved by shareholders.
Remuneration Strategy
The remuneration strategy of the Group is evolving towards the following core principles:
• Alignment with Shareholder Interests. The Group’s current use of equity as part of its remuneration
structure enhances alignment between executives’ interests with those of our shareholders.
Achievement of the Group’s objectives are aimed at creating shareholder value, thus directly benefiting
executives and non-executive directors as well.
• Pay for Performance. The Group has not implemented a cash bonus or variable remuneration program
in the current year, acknowledging that achieving or exceeding expected results and performance will
be a necessary condition for our executives to realise targeted levels of remuneration, particularly with
respect to variable pay and long-term incentives. However, cash bonus and variable remuneration are
awarded to KMPs subject to Board approval.
• Market or Peer Company Comparison. The Company’s remuneration program must be competitive with
those of our peer companies in order to attract and retain our executives. As a general rule, we target
the market median (50th percentile) though we may deviate, up or down, from the median from time to
time, due to a variety of factors. The Remuneration & Nomination Committee is not planning to
recommend significant changes to its remuneration programs until the Company achieves significant
progress in Akida-related developments.
• Retention. The Company’s remuneration program is designed to attract and retain highly talented
individuals critical to our success by providing programs with retentive features. The Group’s current
use of equity, which is an acceptable methodology internationally, as part of its remuneration structure
includes performance and/or time-based vesting in order to retain our executives. Achieving our
objectives should lead to creation of shareholder value which would benefit executives and non-
executive directors as their equity grants vest over time. Vested shares do not have value until exercise
prices are exceeded thereby raising shareholder value over time.
• Separate Remuneration Structures. In accordance with best practice corporate governance, the
structure of executive and non-executive directors’ remuneration is separate and distinct.
Risk Analysis. The Remuneration & Nomination Committee considers the potential for unacceptable
risk-taking in its remuneration design. We believe that the design of our executive remuneration does
not unduly incentivize our executives to take actions that may conflict with the long-term best interests
of the Company and its shareholders. Specifically, the Company provides executives with an
appropriate mix of pay elements between cash and equity, with compensation not overly weighted
towards any one remuneration component.
Adoption of 2019 Remuneration Report
At the Annual General Meeting of Shareholders on 27 May 2020, shareholders resolved to adopt the
Remuneration Report as contained within the 2019 Annual Report.
BrainChip Holdings Ltd
2020 Annual Report
15
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4. Executive remuneration arrangements
Remuneration Policy
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Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
3. Non-executive director remuneration arrangements
Remuneration Policy
The Board seeks to set aggregate remuneration for non-executive directors at a level which provides the
Company with the ability to attract and retain directors of the highest calibre, highest ethical standard and
broad experience, whilst incurring a cost which is competitive.
The Company’s constitution and the ASX listing rules specify that the non-executive director fee pool shall
be determined from time to time by a general meeting. The last determination was at the Company’s 2018
Annual General Meeting, held on 10 May 2018, where shareholders approved an aggregate fee pool of
A$600,000 per year.
Structure
The remuneration of non-executive directors consists of cash and participation in the Group’s LTIP at the
Board’s discretion and subject to approval by shareholders.
With effect from 11 February 2019, each non-executive member of the Board received a base fee of
A$90,000 per year, the Non-Executive Chair received an additional fee of A$60,000 per year; the Audit &
Governance Committee Chair and the Remuneration & Nomination Committee Chair each received a fee of
A$15,000 per year and each member of those Committees received A$10,000 per year.
The total remuneration received by each director during the reporting period is disclosed in Section 7.
The Company recognises that if it is to be successful in a relatively nascent industry with its pioneering
technology, it must recruit and retain highly talented individuals. Considering the stage of our technology
and business development, these individuals also bear the incremental risk of joining an early-stage public
Company. Although it is not the only factor, remuneration plays a key part in determining the Company’s
ability to compete for human resources and retain executives, particularly in the technical fields. In doing so,
the Remuneration & Nomination Committee, the Board and management aim to design competitive
remuneration programs commensurate with executives’ positions, responsibilities and experience, and
incentivize them to drive towards the achievement of the Company’s short and long-term objectives.
Structure
Remuneration consists of the following key elements:
• Fixed remuneration (base salary and superannuation); and
• Variable remuneration (variable commissions, shares, share options, restricted stock units and
The fixed pay element of the Company’s remuneration program for executives are designed to attract and
retain top talent in a competitive environment, taking into consideration the role, responsibilities, capabilities
and experience of individual executives. In 2020 executives received a fixed base pay and their contracts do
not include any guaranteed base pay increases. Fixed remuneration is reviewed annually by the Board. This
process consists of a review of the Company’s results, individual performance, relevant comparative
remuneration internally and externally.
performance rights).
Fixed Remuneration
Variable Remuneration
Variable commissions
A contract for a sales and marketing executive includes variable commissions of up to 30% of the annual
base salary, contingent upon meeting agreed performance objectives.
Cash Bonuses
Some executive contracts include a provision for cash bonuses on such terms and conditions as may be
determined from time to time by the Board (in 2020 a moderate cash bonus was awarded to a KMP for a
specific performance with regards to deliverable on the Akida technology). The Remuneration & Nomination
Committee has no current plans to recommend a bonus program until the Company achieves substantial
Akida-related commercialisation progress.
BrainChip Holdings Ltd
2020 Annual Report
16
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
4. Executive remuneration arrangements (continued)
Variable Remuneration (continued)
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2018 and 2015 Long Term Incentive Plan (LTIP), 2015 Performance Rights Plan (PRP) and 2015 Directors’
and Officers’ Option Plan (DOOP).
The granting of equity instruments is a critical element of the Company’s remuneration program for
executives as it aligns their interests directly with that the Company. The realisation of value from these
equity grants over time, are highly dependent on the success of the Company. As a result, equity grants
incentivise our executives to drive towards achievement of our short and long-term objectives.
The Group does not currently grant equity to executives on an annual basis however it does re-fresh annually
as applicable. The market internationally incentivises executives with annual and refresh scenarios. The
Remuneration & Nomination Committee will monitor the remuneration program of the Group, particularly
from a retention standpoint, but has no current plans to recommend significant changes to our remuneration
program until the Company achieves substantial Akida-related commercialisation progress.
The 2018 LTIP was adopted by shareholders on 10 May 2018. The Company had equity instruments that
were issued under the 2015 LTIP however all new awards post 10 May 2018 have been issued under the
2018 LTIP. All equity instruments issued under the 2015 PRP and the 2015 DOOP have been exercised or
expired, and these plans have been terminated.
The objective of the 2018 LTIP is to attract and retain key employees and consultants. It is considered that
the LTIP, through the issue of shares, share options, restricted stock units and performance rights (“LTIP
equity instruments”), will provide eligible participants with the opportunity to participate in the future growth
of the Company. Share options offered under the LTIP must be offered at no more than a nominal value and
under terms to be determined by the Board from time to time. It is not the intention of the Company to apply
for quotation of any of the share options which are issued under the LTIP.
LTIP equity instruments issued to eligible participants are issued in accordance with the 2018 LTIP and,
historically, in accordance with the 2015 LTIP. The number of LTIP equity instruments issued is determined
by the policy set by the Board upon recommendation by the Remuneration & Nomination Committee and is
based on each eligible participant’s role and position within the Group.
The LTIP equity instruments will vest over periods as determined by the Board and eligible participants are
able to exercise or convert the LTIP equity instruments any time after vesting and before the expiry date.
Where an eligible participant ceases employment prior to the vesting of their LTIP equity instrument, the LTIP
equity instrument will generally automatically lapse and be forfeited. Where an eligible participant ceases
employment after the vesting but before the exercise of their LTIP equity instrument, unless the eligible
participant has been terminated for cause (when their LTIP equity instrument will immediately lapse), the
LTIP equity instrument may generally be exercised by the eligible participant within a period after cessation
of employment prescribed either under the applicable Plan or offer documentation or a longer period as
determined by the Board. Any LTIP equity instruments not exercised within such period will automatically
lapse and be forfeited.
(a) Options and performance rights linked to performance criteria
The Board has full discretion in approving specified performance criteria linked with options granted to KMP
with the intention to align the interests of management with that of shareholders and reward the execution of
corporate strategies that are expected to increase shareholder wealth.
No options over ordinary shares or performance rights with performance criteria attached were issued during
2020, 2019 or 2018 and there are no unsatisfied performance criteria at year end.
Details of options over ordinary shares in the Company provided as remuneration with linked performance
conditions in the prior years are as follows:
Year
Options
awarded
during the
year
Grant
Date
Fair
value
per
option
Total
Fair
Value
Exercise
price per
option
Expiry
date
Options
vested
during the
year
Options
forfeited
during the
year
Options
lapsed
during the
year
Directors
Number
US$
US$
US$
Number
Number
Number
L DiNardo 2016 21,000,000 28/09/2016 $0.064 1,334,151
$0.172 30/09/2021 5,250,000
2017
6,000,000
16/02/2017 $0.175 1,050,104
$0.173 30/09/2021 1,500,000
-
-
-
-
BrainChip Holdings Ltd
2020 Annual Report
17
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
5. Options and performance rights granted as part of remuneration (continued)
(b) Options and performance rights with no linked performance criteria
Options were also issued to KMP with no performance criteria however included a service condition of between 1 to 10 years vesting period in tranches of
varying time periods from the date of issue of the options to encourage the retention of staff. Details of these Options over ordinary shares in the Company
are set out in the table below:
Year
Options
awarded
during the
year
Options
vested
during
2020
Options
exercise
d during
2020
Options
forfeited
during
2020
Options
lapsed
during
2020
Grant Date
End of
Vesting
Period
Fair
value per
option ^
Total Fair
Value
Exercise
price per
option
Expiry
date
Number
Number
Number
Number
Number
US$
US$
US$
L DiNardo
L DiNardo
A Osseiran (1)
E Hernandez
K Scarince
K Scarince
K Scarince
R Telson
R Levinson (2)
2016
2019
2017
2017
2019
2019
2020
2020
2019
- 5,750,000
-
-
-
-
- 2,000,000
- 2,500,000
- 4,375,000
-
-
- 7,375,000
4,000,000
14,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 14,625,000
-
-
-
-
-
-
-
-
-
28/09/2016
30/05/2019
31/05/2017
7/07/2017
11/03/2019
11/03/2019
10/08/2020
17/08/2020
18/03/2019
30/09/2020
30/05/2019
01/02/2020
07/07/2020
11/03/2023
11/03/2023
10/08/2024
17/08/2024
18/03/2029
$0.064
$0.104
$0.118
$0.106
$0.038
$0.038
$0.079
$0.112
$0.039
1,461,607
780,000
118,423
209,581
381,370
381,370
317,440
1,563,831
388,304
$0.172 30/09/2021
$0.100 30/05/2029
$0.182 01/02/2024
$0.125 07/07/2024
$0.047 11/03/2029
$0.047 11/03/2029
$0.125 06/08/2030
$0.144 17/08/2030
$0.042 18/03/2029
^ For details on valuation of the options issued in the current year, including models and assumptions used, please refer to Note 25.
(1) Mr Osseiran resigned and ceased to be a KMP effective 29 January 2020. The vesting of his options in the current year occurred after his resignation date as he has
continued to provide services as Chair of the Scientific Advisory Board.
(2) Mr Levinson resigned from BrainChip effective 22 July 2020. The Company agreed to allow certain options to vest up to 31 December 2020 with all remaining unvested
options to be forfeited.
No Performance Rights over ordinary shares in the Company provided as remuneration to KMPs, of which there are no performance conditions were on issue
during the financial year.
BrainChip Holdings Ltd
2020 Annual Report
18
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Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
6. Company performance and the link to remuneration
The actual remuneration earned by executives and non-executive directors during 2020 is set out in section
7 of this report. Shareholders can see the remuneration earned and the value ascribed to share-based
payments which were vesting during the year. These share-based payment values were calculated at the
date of grant using the Black Scholes model and the costs are expensed over the vesting period.
Remuneration in the form of share-based payments awarded to executives included service conditions and
therefore in recognition of the service provided. However as noted in section 5 of this report, Mr DiNardo was
awarded options in 2016 that were subject to specific performance criteria.
The adoption of BrainChip’s 2018 LTIP gave the Board the ability to add performance criteria as appropriate
to the specific terms as and when options or performance rights are offered to participants. The granting of
options and performance rights is carried out to attain services and encourage retention and, is a
performance incentive which allows executives to share the rewards of the success of the Company.
The table below shows information on the Group’s earnings and movements in shareholder value for the
past five years up to and including the current financial year.
Net loss after tax US$ million
Closing share price AUD
Closing share price USD
Loss per share (US cents)
2020
2019
2018
2017
26.82
$0.430
$0.331
1.76
11.31
$0.047
$0.033
0.95
16.52
$0.105
$0.074
1.64
13.77
$0.185
$0.144
1.59
Restated
2016 (1)
5.10
$0.28
$0.202
0.69
0.38
Net tangible assets US cents per share
(1) 2016 results have been restated after the finalisation of the fair value of the acquisition of BrainChip SAS.
0.90
0.68
0.49
1.77
No dividends were issued in the past five years including the current financial year.
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2020 Annual Report
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Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
7. Executive contractual arrangements
Details for executive contractual arrangements for KMP are detailed below:
Name
Title
Term of agreement Open agreement with no fixed term
Details
Louis DiNardo
Chief Executive Officer and Executive Director
Termination
Base fee of $400,000 plus benefits under health and welfare benefit plans,
practices, policies and programs provided by BrainChip Inc.
Terminated at any time with or without cause or notice by either himself or
BrainChip Inc. Mr DiNardo is entitled to 12 months’ severance pay upon
termination by BrainChip Inc. at any time without cause. The amount is
payable over 12 months from the date of termination.
Name
Title
Term of agreement Open agreement with no fixed term
Details
Peter van der Made
Chief Technical Officer and Executive Director
Effective 1 July 2020, salary package of A$437,000 ($300,000 equivalent)
inclusive of superannuation and employee benefits, practices, policies and
programs provided by BrainChip Research Institute Pty Ltd (“BRIPL”).
Prior to 1 July 2020, base fee of $300,000 plus benefits under health and
welfare benefit plans, practices, policies and programs provided by BrainChip
Inc.
Mr van der Made will be entitled to a cash bonus on such terms and conditions
as determined from time to time by the Board (Annual Bonus). No bonuses
have been paid to date.
Terminated without cause or notice by either himself or BRIPL by giving 4
weeks notice. Termination without notice is applicable if there is serious
misconduct or other specific clauses of the contract have been breached.
Mr van der Made is entitled to 12 months’ severance pay upon termination by
BRIPL. at any time without cause. The amount is payable over 12 months from
the date of termination.
Name
Title
Term of agreement Open agreement with no fixed term
Details
Anil Mankar
Chief Development Officer
Base fee of $325,000 effective 1 September 2020 (previously $300,000 plus
benefits under health and welfare benefit plans, practices, policies and
programs provided by BrainChip Inc.
Mr Mankar will be entitled to a cash bonus on such terms and conditions as
determined from time to time by the Board (Annual Bonus). The Annual Bonus
may be an amount up to fifty percent (50%) of the base salary in effect at the
end of any fiscal year. Mr Mankar received a cash bonus of $25,000 during the
year.
Terminated at any time with or without cause or notice by either himself or
BrainChip Inc. Mr Mankar is entitled to 24 months’ severance pay upon
termination by BrainChip Inc. at any time without cause. The amount is payable
over 24 months from the date of termination.
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Termination
Termination
BrainChip Holdings Ltd
2020 Annual Report
20
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
7. Executive contractual arrangements (continued)
Name
Title
Term of agreement Open agreement with no fixed term
Details
Ken Scarince
Chief Financial Officer
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Termination
Termination
Termination
Base fee of $300,000 effective 1 May 2020 (previously $250,000) plus benefits
under health and welfare benefit plans, practices, policies and programs
provided by BrainChip Inc.
Mr Scarince will be entitled to a cash bonus on such terms and conditions as
determined from time to time by the Board (Annual Bonus). The Annual Bonus
may be an amount up to fifty percent (50%) of the base salary in effect at the
end of any fiscal year. No bonuses have been paid to date.
Terminated at any time with or without cause or notice by either himself or
BrainChip Inc. Mr Scarince is entitled to 12 months’ severance pay upon
termination by BrainChip Inc. at any time without cause. The amount is payable
over 12 months from the date of termination.
Robert Telson
Name
Title
Vice President of Worldwide Sales
Term of agreement Open agreement with no fixed term
Details
Base fee of $225,000, plus a variable component of $100,000 per year, of
which the first six months component is guaranteed; plus benefits under health
and welfare benefit plans, practices, policies and programs provided by
BrainChip Inc.
Mr Telson will be entitled to a cash bonus on such terms and conditions as
determined from time to time by the Board (Annual Bonus). The Annual Bonus
may be an amount up to fifty percent (50%) of the base salary in effect at the
end of any fiscal year. No bonuses have been paid to date.
Terminated at any time with or without cause or notice by either himself or
BrainChip Inc.
Name
Title
Term of agreement Open agreement with no fixed term
Details
Roger Levinson (ceased 22 July 2020)
Chief Operating Officer
Base fee of $300,000 plus benefits under health and welfare benefit plans,
practices, policies and programs provided by BrainChip Inc.
Mr Levinson will be entitled to a cash bonus on such terms and conditions as
determined from time to time by the Board (Annual Bonus). The Annual Bonus
may be an amount up to fifty percent (50%) of the base salary in effect at the
end of any fiscal year. No bonuses have been paid to date.
Terminated at any time with or without cause or notice by either himself or
BrainChip Inc. Mr Levinson is entitled to 12 months’ severance pay upon
termination by BrainChip Inc. at any time without cause. The amount is payable
over 12 months from the date of termination.
There are no other formalised KMP employment agreements.
BrainChip Holdings Ltd
2020 Annual Report
21
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
7.
Executive contractual arrangements (continued)
Remuneration of KMP
2020
Non-Executive Directors
E Hernandez (1)
S Liebeskind (2)
C Steele (3)
G Carrick (4)
A Osseiran (5)
Executive Directors
L DiNardo
P van der Made (6)
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Other Key Management
Personnel
A Mankar (7)
K Scarince
R Telson (8)
R Levinson (9)
Totals
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Short Term
Post-
Employment
Salary and
Fees
US$
Annual
leave
US$
Super-
annuation
US$
Share-
based
Payment (10)
Equity
Instruments
US$
Termin-
ation
Total
Perform
-ance
related
US$
US$
%
86,811
96,235
22,856
7,290
5,639
-
-
-
-
-
-
-
-
-
-
92,735
-
-
-
6,828
406,482
303,753
5,089
22,886
-
13,908
296,958
-
-
-
-
-
-
-
-
179,546
96,235
22,856
7,290
12,467
-
-
-
-
-
708,529
340,547
32%
-
348,041
289,815
122,252
177,751
11,827
23,254
6,923
12,959
8,550
5,313
2,031
-
-
279,002
326,122
(84,696)
-
-
-
80,830
368,418
597,384
457,328
186,844
7%
-
-
-
1,866,925
82,938
29,802
916,949
80,830
2,977,444
(1) Mr Hernandez agreed to forgo Chair fees totalling $31,252 (A$45,000) during the period from 1 January to 30
September 2020 whilst he was appointed Interim Chair.
(2) Mr Liebeskind agreed to defer the payment of director fees during the period from 1 January to 30 September 2020.
An amount of $9,051 (A$11,750) was payable to Mr Liebeskind at 31 December 2020. He resigned as a Non-
Executive effective 31 December 2020.
(3) Ms Steele was appointed Non-Executive Director on 14 September 2020.
(4) Mr Carrick was appointed Non-Executive Director on 23 November 2020.
(5) Mr Osseiran resigned as Non-Executive Director on 29 January 2020.
(6) Mr van der Made was appointed Executive Director on 29 January 2020.
(7) Mr Mankar was awarded a bonus of $25,000 during the year in recognition of his contribution to the development of
the Akida chip. No other bonuses were awarded to KMPs during the year.
(8) Mr Telson became a KMP upon his employment effective from 10 August 2020.
(9) Mr Levinson resigned effective 22 July 2020.
(10) Share-based payment “remuneration” represents the current period expense in respect of options and performance
rights issued, offset by the value of options and performance rights that have been forfeited during the year.
BrainChip Holdings Ltd
2020 Annual Report
22
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
7. Executive contractual arrangements (continued)
Remuneration of KMP
2019
Non-Executive Directors
S Wilks (1)
S Liebeskind
E Hernandez
A Osseiran
J Stein (2)
Executive Directors
L DiNardo
Other Key Management
Personnel
A Mankar
P van der Made
R Levinson (3)
K Scarince (4)
R Beachler (5)
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Short Term
Post-
Employment
Salary and
Fees (6)
US$
Annual
leave
US$
Super-
annuation
US$
Share-
based
Payment (7)
Equity
Instruments
US$
Termin-
ation
Total
Perform
-ance
related
US$
US$
%
92,087
78,884
90,530
71,130
27,528
-
-
-
-
-
377,051
17,988
-
-
-
-
-
-
-
-
180,901
77,625
(272,640)
-
-
-
-
-
92,087
78,884
271,431
148,755
(245,112)
-
-
-
-
798,709
-
1,193,748
25%
292,259
291,671
246,685
207,833
106,809
20,747
20,747
17,152
14,571
5,214
8,344
-
-
3,750
3,028
-
-
372,359
342,411
(786,349)
-
-
-
-
-
-
321,350
312,418
636,196
568,565
(671,298)
2,707,024
-
-
-
-
-
Totals
1,882,467
96,419
15,122
713,016
(1) Mr Wilks was appointed Non-Executive Director and Chair on 11 February 2019. Options awarded to Mr Wilks during
2019 were forfeited upon his resignation with no financial impact.
(2) Ms Stein resigned effective 1 April 2019. Unvested options were forfeited upon her resignation.
(3) Mr Levinson was appointed 18 March 2019
(4) Mr Scarince was appointed 11 March 2019.
(5) Mr Beachler ceased to be KMP upon his resignation, effective 3 May 2019.
(6) No bonuses were awarded to any KMP during 2019.
(7) Share-based payment “remuneration” represents the current period expense in respect of options and performance
rights issued, offset by the value of options and performance rights that have been forfeited during the year.
BrainChip Holdings Ltd
2020 Annual Report
23
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
8. Equity Instruments Disclosure
Shareholdings of KMP (including nominees)
Shares held in BrainChip Holdings by KMP are summarised as follows:
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Directors
E Hernandez
L DiNardo
P van der Made
S Liebeskind (1)
C Steele
G Carrick
A Osseiran
Other KMPs
A Mankar (3)
K Scarince
R Telson
R Levinson
Total
Shares
issued as
remuneration
Acquired /
Disposed
Net change
other (2)
Balance held at
31 December
2020
Balance held
at
1 January
2020
-
11,779,362
176,305,508
11,649,242
-
-
9,338,500
-
-
-
-
-
-
-
121,885,000
-
-
-
330,957,612
(6,295,167)
-
-
-
(6,295,167)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(11,649,242)
-
-
(9,338,500)
-
-
-
-
(20,987,742)
-
11,779,362
176,305,508
-
-
-
-
115,589,833
-
-
-
303,674,703
(1) Shares held indirectly comprise 2,310,742 fully paid shares in the name of Crossfield Intech Nominees Pty Ltd
and 9,338,500 fully paid shares via Crossfield Intech Nominees Pty Ltd as trustee for the Liebeskind Family
Superfund. Mr Liebeskind ceased being a KMP effective 31 December 2020.
(2) Shares held indirectly by Adam Osseiran and Rebecca Osseiran-Moisson ATF the Osseiran Family Trust. Mr
(3)
Osseiran ceased being a KMP effective 29 January 2020.
92,839,833 fully paid ordinary shares are held by Merrill Lynch (Australia) Nominees Pty Ltd on behalf of Mr
Mankar.
Options holdings of Key Management Personnel (including nominees)
The table below summarises the options granted to KMPs and exercised during the current year. Refer to
section 5 for the terms of the options granted to KMP in the current and prior years. There were no
alterations to the terms and conditions of options awarded as remuneration since their award date. No
options were lapsed during the current year.
Balance at
beginning of
period 1 January
2020
Granted as
remuner-
ation
Exercised
Net change
other (2)
Balance at end
of period 31
December 2020
Vested
and not
exercise-
able
Vested and
exercisable
Directors
E Hernandez
L DiNardo
P van der Made
S Liebeskind (1)
C Steele
G Carrick
A Osseiran (2)
Other KMPs
A Mankar
K Scarince
R Telson
R Levinson (2)
Total
8,000,000
57,500,000
-
6,000,000
-
-
4,000,000
-
-
-
-
-
-
-
-
20,000,000
-
4,000,000
- 14,000,000
-
117,500,000 18,000,000
22,000,000
-
-
-
-
-
-
-
-
-
-
(6,000,000)
-
-
(4,000,000)
8,000,000
57,500,000
-
-
-
-
-
-
-
-
-
-
-
- (22,000,000)
- (32,000,000)
-
24,000,000
14,000,000
-
103,500,000
-
6,000,000
- 49,250,000
-
-
-
-
-
-
-
-
-
-
-
-
-
6,875,000
-
-
-
-
- 62,125,000
(1) Mr Liebeskind held 3,000,000 options directly and 3,000,000 indirectly via Crossfield Intech Nominees Pty Ltd as
trustee for the Liebeskind Family Superfund. Mr Liebeskind ceased being a KMP effective 31 December 2020.
(2) Both Mr Osseiran and Mr Levinson ceased being a KMP on 29 January 2020 and 22 July 2020 respectively.
BrainChip Holdings Ltd
2020 Annual Report
24
Directors’ Report
REMUNERATION REPORT (Audited) (Continued)
9. Other transactions and balances with KMP
There were no other transactions with other Key management personnel have been incurred, other than
reported above.
End of Audited Remuneration Report.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, the Company paid a premium in respect to a contract of insurance to insure
directors and officers of the Company and related bodies corporate against those liabilities for which
insurance is permitted under section 199B of the Corporations Act 2001. Disclosure of the nature of the
liabilities and the amount of the premium is prohibited under the conditions of the contract of insurance.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of
the terms of its audit engagement agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial
year.
The Directors received the Independence Declaration, as set out on page 26, from Ernst & Young.
AUDITOR INDEPENDENCE
NON-AUDIT SERVICES
No non-audit services were provided by the entity’s auditor, Ernst & Young during the current and the prior
year.
Signed in accordance with a resolution of the Directors.
Emmanuel Hernandez
Chair
California, U.S.A., 24 February 2021
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BrainChip Holdings Ltd
2020 Annual Report
25
Ernst & Young
11 Mounts Bay Road
Perth WA 6000, Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s independence declaration to the directors of BrainChip
Holdings Ltd
As lead auditor for the audit of the financial report of BrainChip Holdings Ltd for the financial year
ended 31 December 2020, I declare to the best of my knowledge and belief, there have been:
a.
No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b.
No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of BrainChip Holdings Ltd and the entities it controlled during the
financial year.
Ernst & Young
J K Newton
Partner
25 February 2021
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A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
JKN:AJ:BRAINCHIP:008
Consolidated Statement of Profit or Loss and Other Comprehensive
Income for the year ended 31 December 2020
Continuing operations
Revenue from contracts with customers
Cost of goods sold
Gross profit
Research & development expenses
Selling & marketing expenses
General & administrative expenses
Share-based payment expense
Operating Loss
Finance income
Finance expense
Fair value (loss)/gain through profit and loss
Loss from continuing operations before income tax
Income tax expense
Note
5
6(a)
6(b)
6(c)
25(a)
7(a)
7(b)
7(c)
9(c)
31 December
2020
$US
31 December
2019
$US
120,829
(48,616)
72,213
(5,152,239)
(1,426,501)
(3,227,647)
(1,435,645)
75,574
-
75,574
(4,511,410)
(1,061,595)
(3,795,200)
(1,636,113)
(11,169,819)
(10,928,744)
27,453
(5,541,909)
(10,137,774)
66,571
(612,945)
165,056
(26,822,049)
(11,310,062)
-
-
Loss from continuing operations after income tax
(26,822,049)
(11,310,062)
Net loss for the year
(26,822,049)
(11,310,062)
Other comprehensive income/(loss)
Other comprehensive income not to be reclassified to profit or
loss in subsequent periods (net of tax):
Remeasurement (losses)/gains on defined benefit plans
Items that may be reclassified subsequently to profit or loss
(net of tax):
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
(24,364)
(16,990)
42,137
17,773
(7,723)
(24,713)
Total comprehensive loss for the year, net of tax
(26,804,276)
(11,334,775)
Loss per share attributable to ordinary equity holders of
the Company
Basic loss per share
Diluted loss per share
10
10
(1.76)
(1.76)
(0.95)
(0.95)
US cents per
share
US cents per
share
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The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
BrainChip Holdings Ltd
2020 Annual Report
27
Consolidated Statement of Financial Position
As at 31 December 2020
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CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Financial asset
Inventory
Other assets
Total current assets
NON-CURRENT ASSETS
Right-of-use assets
Plant and equipment
Intangible assets and goodwill
Other assets
Total non-current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Deferred revenue
Financial liabilities
Lease liabilities
Employee benefits liabilities
Other
Total current liabilities
NON-CURRENT LIABILITIES
Financial liabilities
Lease liabilities
Defined benefit plan
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Share-based payments reserve
Foreign currency translation reserve
Other equity reserve
Accumulated losses
TOTAL EQUITY
Note
31 December
2020
$US
31 December
2019
$US
11
12
19
13
14
15
16
19
18
17
19
18
20
19,136,425
907,680
1,470,275
54,399
127,791
21,696,570
98,056
149,316
1,710,642
40,311
1,998,325
7,622,178
1,187,512
-
16,021
135,534
8,961,245
191,460
178,883
1,776,113
34,801
2,181,257
23,694,895
11,142,502
927,271
13,441
3,500,434
51,136
420,156
635,049
5,547,487
166,116
48,088
203,868
418,072
471,284
-
736,932
102,362
280,801
-
1,591,379
222,667
90,691
141,415
454,773
5,965,559
2,046,152
17,729,336
9,096,350
22(a)
23
23
23
24
98,741,885
19,854,509
114,940
247,872
(101,229,870)
64,740,268
18,418,864
72,803
247,872
(74,383,457)
17,729,336
9,096,350
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
BrainChip Holdings Ltd
2020 Annual Report
28
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
CASH FLOWS USED IN OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Grants and R&D credits received from third parties
Note
31 December
2020
US$
31 December
2019
US$
55,207
(10,544,627)
27,453
(4,214)
437,205
186,142
(9,583,435)
80,054
(9,804)
325,608
Net cash flows used in operating activities
11
(10,028,976)
(9,001,435)
CASH FLOWS USED IN INVESTING ACTIVITIES
Payments for property, plant and equipment
Payments for purchase of patents and licenses
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts from the issue of shares
Payment of share issue costs
Receipts from the exercise of unlisted options
Subscription proceeds received under the LDA Capital put
Receipts from the exercise of unlisted options – LDA Capital
Proceeds from the reduction of collateral share holdings
Receipt from the issue of Convertible Securities
Payment of Convertible Securities costs
Proceeds from loans from third parties
Repayment of loans to third parties
Payment to reduce lease liabilities
Net cash flows generated from financing activities
19(d)
19(d).
12(a)
19(c)
19(c)
19(b)
19(a)
18
(44,241)
-
(44,241)
(39,673)
(119,826)
(159,499)
1,989,896
(214,823)
3,381,641
7,536,236
7,570,156
910,971
-
(2,833)
412,300
-
(106,984)
21,476,560
7,394,000
(484,150)
-
-
-
-
2,565,000
(30,454)
-
(2,193)
(223,779)
9,218,424
Net increase in cash and cash equivalents
11,403,343
57,490
Net foreign exchange differences
Cash at the beginning of the financial period
Cash and cash equivalents at the end of the period
11
110,904
7,622,178
19,136,425
21,362
7,543,326
7,622,178
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
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BrainChip Holdings Ltd
2020 Annual Report
29
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
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Contributed
equity
US$
Share-based
payment
reserve
US$
Other
reserves
US$
Foreign
currency
reserve
US$
Accumulated
losses
US$
Total equity
US$
At 1 January 2019
55,143,789
16,463,527 247,872
80,526
(63,056,405)
8,879,309
Loss for the year
Other comprehensive loss
Total comprehensive
loss for the period
-
-
-
Issue of share capital
9,056,810
Converted treasury shares
1,023,821
Share issue costs
(484,152)
-
-
-
-
-
-
Share-based payment –
Note 25(a)
-
1,955,337
-
-
-
-
-
-
-
-
(11,310,062)
(11,310,062)
(7,723)
(16,990)
(24,713)
(7,723)
(11,327,052)
(11,334,775)
-
-
-
-
-
-
-
-
9,056,810
1,023,821
(484,152)
1,955,337
At 31 December 2019
64,740,268
18,418,864 247,872
72,803
(74,383,457)
9,096,350
Contributed
equity
US$
Share-based
payment
reserve
US$
Other
reserves
US$
Foreign
currency
reserve
US$
Accumulated
losses
US$
Total equity
US$
At 1 January 2020
64,740,268
18,418,864 247,872
72,803
(74,383,457)
9,096,350
Loss for the year
Other comprehensive loss
Total comprehensive
loss for the period
-
-
-
Issue of share capital
32,781,966
Converted treasury shares
1,463,743
Share issue costs
(244,092)
-
-
-
-
-
-
Share-based payment –
Note 25(a)
At 31 December 2020
-
1,435,645
-
-
-
-
-
-
-
-
(26,822,049)
(26,822,049)
42,137
(24,364)
17,773
42,137
(26,846,413)
(26,804,276)
-
-
-
-
-
-
-
-
32,781,966
1,463,743
(244,092)
1,435,645
98,741,885
19,854,509 247,872
114,940
(101,229,870)
17,729,336
The above consolidated statement of changes of equity should be read in conjunction with the accompanying notes.
BrainChip Holdings Ltd
2020 Annual Report
30
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
1.
CORPORATE INFORMATION
The annual financial report of BrainChip Holdings Ltd (“Company”) and its controlled entities (“Consolidated Entity”
or “Group”) for the year ended 31 December 2020 was authorised for issue in accordance with a resolution of the
Directors on 24 February 2021, California, U.S.A.
BrainChip Holdings is a for-profit Company limited by shares, incorporated and domiciled in Australia, and whose
shares are publicly traded on the Australian Securities Exchange.
The address of the registered office is Level 12, 225 George Street, Sydney NSW 2000, Australia.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report has been prepared on a
historical cost basis except for certain financial assets and liabilities that have been measured at fair value.
Notwithstanding the operating loss and the net operating cash outflows recognised in the current year, the Directors
are confident that the Company will continue operating as a going concern based on the current available cash
resources.
The financial report is presented in US dollars, being the functional currency of the Company.
New standards, interpretation and amendments adopted by the Group
The Group applied for the first time all new and amended Accounting Standards and Interpretations, which are
effective for annual periods beginning 1 January 2020. Although these new and amended standards and
Interpretations applied for the first time in 2020, they did not have a material impact on the annual consolidated
financial statements of the Group.
Amendments to AASB 3: Definition of a Business
The amendment to AASB 3 clarifies that to be considered a business, an integrated set of activities and assets must
include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create
output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to
create outputs. These amendments had no impact on the consolidated financial statements of the Group but may
impact future periods should the Group enter into any business combinations.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards
Board. The financial report also complies with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board.
The following Standards and Interpretations have been issued by the AASB, are relevant to the Group, but are not
yet effective and have not been adopted by the Group for the period ending 31 December 2020. Unless otherwise
stated, the Group has yet to fully assess the impact of these Standards and Interpretations when applied in future
periods.
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Reference
AASB 2020-8
Amendment to
AASs –
Interest Rate
Benchmark
Reform –
Phase 2
Summary
The second phase of the project in addressing the financial reporting effects
of IBOR reform has been completed recently. This phase focuses on issues
that might affect financial reporting upon replacement of existing interest
rate benchmarks, and amends the requirements in AASB 9, AASB 139,
AASB 7, AASB 4 Insurance Contracts and AASB 16 Leases. The objective
of the amendments is to minimise financial reporting consequences of a
change in benchmark interest rates that Australian Accounting Standards
may otherwise require, such as the derecognition or remeasurement of
financial instruments, and the discontinuation of hedge accounting.
Application
date of
standard
1 January
2021
Application
date for
Group
1 January
2021
Provided that the interest rate will be substantially similar before and after
the replacement, the amendments:
•
Require changes to future cash flows that are directly required by the
IBOR reform to be treated as if they were changes to a floating interest
rate. Applying this expedient would not affect the carrying amount of
the financial instrument. It also relieves entities of the need to assess
whether modification or derecognition accounting applies under AASB
9 and AASB 139.
Require changes to lease payments that are directly required by the
IBOR reform to be accounted for as a remeasurement of lease liability
using the original discount rate with a corresponding adjustment to the
•
BrainChip Holdings Ltd
2020 Annual Report
31
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
Reference
Summary
Application
date of
standard
Application
date for
Group
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AASB 2020-3
Amendment to
AASB 9 –
Fees in the ’10
per cent’ Test
for
Derecognition
of Financial
Liabilities
AASB 2020-3
Amendments
to AASB 3 –
Reference to
the Conceptual
Framework
AASB 2020-1
Amendments
to AASs –
Classification
of Liabilities as
Current or
Non-current
right-of-use asset. This expedient exempts entities from remeasuring
the lease liability using a new discount rate under AASB 16.
Entities are required to provide disclosures that help readers understand the
effect of the IBOR reform on the financial statements and risk management
strategies, including the progress in completing the transition to alternative
benchmark rates and how such transition is being managed. These
amendments apply retrospectively. However, restatement of prior periods is
not required but permitted only if such restatement is possible without the
use of hindsight.
Under AASB 9, an existing financial liability that has been modified or
exchanged is considered extinguished when the contractual terms of the
new liability are substantially different, measured by the “10 per cent” test.
That is, when the present value of the cash flows under the new terms,
including any fees paid or received, is at least 10 per cent different from the
present value of the remaining cash flows of the original financial liability.
The amendment to AASB 9 clarifies that fees included in the 10 per cent test
are limited to fees paid or received between the borrower and the lender,
including amounts paid or received by them on the other’s behalf. When
assessing the significance of any difference between the new and old
contractual terms, only the changes in contractual cash flows between the
lender and borrower are relevant. Consequently, fees incurred on the
modification or exchange of a financial liability paid to third parties are
excluded from the 10 per cent test.
These amendments are applied prospectively. Earlier application is
permitted.
The IASB’s assessment of applying the revised definitions of assets and
liabilities in the Conceptual Framework to business combinations showed
that the problem of day 2 gains or losses would be significant only for
liabilities that an acquirer accounts for after the acquisition date by applying
IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21
Levies. The Board updated IFRS 3 in May 2020 for the revised definitions of
an asset and a liability and excluded the application of the Conceptual
Framework to liabilities and contingent liabilities within the scope of IAS 37
or IFRIC 21.
The AASB released the equivalent amendments to AASB 3 in June 2020.
These amendments are applied prospectively.
A liability is classified as current if the entity has no right at the end of the
reporting period to defer settlement for at least 12 months after the reporting
period. The AASB recently issued amendments to AASB 101 to clarify the
requirements for classifying liabilities as current or non-current. Specifically:
•
The amendments specify that the conditions which exist at the end of
the reporting period are those which will be used to determine if a right
to defer settlement of a liability exists.
Management intention or expectation does not affect classification of
liabilities.
In cases where an instrument with a conversion option is classified as a
liability, the transfer of equity instruments would constitute settlement of
the liability for the purpose of classifying it as current or non-current.
•
•
1 January
2022
1 January
2022
1 January
2022
1 January
2022
1 January
2023
1 January
2023
These amendments are applied retrospectively.
BrainChip Holdings Ltd
2020 Annual Report
32
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of the parent entity and its subsidiaries (the
‘Group') as at 31 December each year. Control is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if and only if the Group has:
•
•
•
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
•
•
•
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements;
The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and
expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive
income from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent
of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit
balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies. All intra-Group assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
(d) Foreign currency translation
(i) Functional and presentation currency
The functional currency of each entity within the Group is the currency of the primary economic environment in
which that entity operates. The consolidated financial statements are presented in United States Dollars which is
the parent entity’s functional and presentation currency. The United States Dollar is also the functional currency of
all subsidiaries in the Group except for BrainChip SAS which has a functional currency of Euros, BrainChip Research
Institute Pty Ltd with a functional currency of AUD and BrainChip Systems India Private Limited which has a
functional currency of Indian Rupee.
(ii) Transactions and balances
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 at the reporting date.
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. All exchange differences arising from the above policies are
recognised in the profit and loss.
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(iii) Translations of subsidiary Companies’ functional currency to presentation currency
The results of non-US$ reporting subsidiaries, if any, are translated into United States Dollars (presentation currency).
Income and expenses are translated at the average exchange rates for the month. Assets and liabilities are translated
at the closing exchange rate for each balance sheet date. Share capital, reserves and accumulated losses are
converted at applicable historical rates.
Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity.
On consolidation, exchange differences arising from the translation of monetary items considered to be part of the net
investment in subsidiaries are taken to the foreign currency translation reserve. If a subsidiary were sold, the
proportionate share of the foreign currency translation reserve would be transferred out of equity and recognised in the
statement of comprehensive income.
(e) Operating segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenues
and incur expenses (including revenues and expenses relating to transactions with other components of the same
entity), whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions
about resources to be allocated to the segment and assess its performance and for which discrete financial information
is available. This includes start-up operations which are yet to earn revenues. Management will also consider other
factors in determining operating segments such as the existence of a line manager and the level of segment information
presented to the board of directors.
BrainChip Holdings Ltd
2020 Annual Report
33
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Cash and cash equivalents
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Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term
deposits 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, net of outstanding bank overdrafts.
(g) Trade and other receivables
A receivable represents the Group’s right to an amount of consideration that is unconditional (i,e. only the passage
of time is required before payment of the consideration is due).
Trade receivables are initially measured at transaction value and other receivables are initially recognised at fair value
plus transaction costs. Trade and other receivables are subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables generally have 30-60 day payment terms.
Refer Note 2(h)(i) below for the accounting policy related to financial assets at fair value through profit or loss
reported in other receivables.
Collectability of trade and other receivables is reviewed on an ongoing basis in accordance with the expected credit
loss (“ECL”) model.
(h) Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
i) Financial assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through
other comprehensive income (OCI) and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them. With the exception of trade receivables that do
not contain a significant financing component or for which the Group has applied the practical expedient, the Group
initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the
Group has applied the practical expedient are measured at the transaction price determined under AASB 15. Refer
to the accounting policies in section (p) Revenue from contracts with customers.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to
give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding.
This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash
flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within
a business model with the objective to hold financial assets in order to collect contractual cash flows while financial
assets classified and measured at fair value through OCI are held within a business model with the objective of both
holding to collect contractual cash flows and selling.
Gains and losses on initial recognition.
When the transaction price of a financial asset differs from the fair value on initial recognition and the fair value is
evidenced by a quoted price in an active market for an identical asset or based on a valuation technique that uses
only data from observable markets, the difference between the transaction price and fair value is recognised
immediately in profit or loss. If fair value is based on models for which some of the inputs are not observable, the
difference between the transaction price and the fair value is deferred and recognised in profit or loss when the inputs
become observable or when realised through settlement.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
•
•
•
•
Financial assets at amortised cost (debt instruments)
Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments)
Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or
impaired. The Group’s financial assets at amortised cost includes trade receivables and other receivables.
BrainChip Holdings Ltd
2020 Annual Report
34
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) Financial instruments – initial recognition and subsequent measurement (continued)
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Financial assets at fair value through OCI (debt instruments)
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses
or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets
measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the
cumulative fair value change recognised in OCI is recycled to profit or loss.
The Group’s debt instruments at fair value through OCI includes investments in quoted debt instruments included
under other current financial assets.
Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments
designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments:
Presentation and are not held for trading. The classification is determined on an instrument -by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other
income in the statement of profit or loss when the right of payment has been established, except when the Group
benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are
recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with
net changes in fair value recognised in the statement of profit or loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:
• The rights to receive cash flows from the asset have expired, or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and
either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has
neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of
the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has
neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the
asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case,
the Group also recognises an associated liability. The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the Group could be required to
repay.
Impairment
Further disclosures relating to impairment of financial assets are also provided in the following notes:
• Disclosures for significant assumptions Note 3,
• Trade receivables Note 12.
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value
through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original
effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within
the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not
track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.
The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment.
BrainChip Holdings Ltd
2020 Annual Report
35
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Financial instruments – initial recognition and subsequent measurement (continued)
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ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans
and borrowings, payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net
of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, Convertible
Securities recognised as financial liabilities, and derivative financial instruments.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in two categories:
• Financial liabilities at fair value through profit or loss
•
Financial liabilities at amortised cost (loans and borrowings)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include embedded derivatives designated upon initial recognition
as at fair value through profit or loss.
A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host
and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the
host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative;
and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at
fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change
in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a
reclassification of a financial asset out of the fair value through profit or loss category.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial
date of recognition, and only if the criteria in AASB 9 are satisfied.
Financial liabilities at amortised cost (loans and borrowings)
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as
through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of a new liability. The difference in the respective carrying amounts is
recognised in the statement of profit or loss.
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of
financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
(i) Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation.
Capital work-in-progress is stated at cost and comprises all costs directly attributable to bringing the assets under
construction ready to their intended use. Capital work-in-progress is transferred to property, plant and equipment at
cost on completion.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset which ranges between
3 and 25 years.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
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 item) is included in the statement of comprehensive income in the period
the item is derecognised.
BrainChip Holdings Ltd
2020 Annual Report
36
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j)
Intangible assets
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Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible
assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally
generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is
reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are
assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method
for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in
the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset
are considered to modify the amortisation period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement
of profit or loss in the expense category that is consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine
whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made
on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when
the asset is derecognised.
(k) Research and development costs
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Research costs are expensed as incurred. Development expenditures on an individual project are recognised
as an intangible asset when the Group can demonstrate:
the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;
its intention to complete and its ability and intention to use or sell the asset;
•
•
• how the asset will generate future economic benefits;
•
•
the availability of resources to complete the asset; and
the ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any
accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development
is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation
is recorded in profit and loss. During the period of development, the asset is tested for impairment annually.
Patents and licences
The Group made upfront payments to purchase patents and licences. The patents have been granted for a period
of 20 years by the relevant government agency with the option of renewal at the end of this period.
A summary of the policies applied to the Group’s intangible assets is, as follows:
USEFUL LIFE
AMORTISATION
METHOD
PATENTS
Finite (5 - 20 years)
Amortised on a straight-
line basis over the period
of the patent
DEVELOPMENT COSTS
Finite (5 - 20 years)
Amortised on a straight-line basis over
the period of expected future sales from
the related project
(l) Trade and other payables
Trade payables and other payables are carried at amortised cost and are not discounted due to their short-term
nature. They 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. The amounts are unsecured and usually paid within 30 days of recognition.
BrainChip Holdings Ltd
2020 Annual Report
37
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(m) Provisions
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(n)
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 measured at the present value of management’s best estimate of the expenditure required to settle
the present obligation at the reporting date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the liability. The increase in the provision
resulting from the passage of time is recognised in finance costs.
Issued capital
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.
(o) Share-based payment transactions
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The Group provides benefits to employees, consultants and service providers (including Directors) (“eligible
participants”) in the form of share-based payment transactions, whereby employees render services in exchange
for shares or rights over shares (equity-settled transactions).
The 2018 LTIP was adopted by shareholders on 10 May 2018. The Company had share options and performance
rights that were issued under the plans current at the time of offer (Performance Rights Plan, 2015 Long Term
Incentive Plan and Directors and Officers Option Plan) however all new awards post 10 May 2018 have been issued
under the 2018 LTIP.
The cost of these equity-settled transactions to employees is measured by reference to the fair value at the date at
which they are granted. The fair value is determined by using a Black Scholes model, further details of which are
given in Note 25.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to
the price of the shares of the Company (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on
which the relevant employees become fully entitled to the award (the vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income
is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that
will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the
likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period.
The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above
less the amounts already charged in previous periods. There is a corresponding credit to equity.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest
than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective
of whether or not the market condition is fulfilled, provided that all other conditions are satisfied.
If a non-vesting condition is within the control of the Group, Company or the eligible participant, the failure to satisfy
the condition is treated as a cancellation. If a non-vesting condition within the control of neither the Group, Company
nor eligible participant is not satisfied during the vesting period, any expense for the award not previously recognised
is recognised over the remaining vesting period, unless the award is forfeited.
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. An additional 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.
Share-based payments to non-employees are measured at the fair value of goods or services received or the fair
value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably
measured and are recorded at the date the goods or services are received.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of
earnings per share.
BrainChip Holdings Ltd
2020 Annual Report
38
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(p) Employee benefits
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(i) Wages, salaries and annual leave
A liability is recognised for benefits accruing to employees in respect of wages and salaries in the period the related
service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the
benefits expected to be paid in exchange for the related service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the
estimated future cash outflows expected to be made by the Group in respect of services provided by employees up
to the reporting date.
(ii) Superannuation
Contributions made by the Group to employee superannuation funds, which are defined contribution plans, are
charged as an expense when incurred.
(iii) Defined benefit plan
The Group’s net obligation in respect of defined benefits plans is calculated by estimating the discounted amount of
future benefit that employees have earned in the current and prior periods. The calculation of defined benefit plan
obligations is performed annually by a qualified actuary using the projected unit credit method, taking into account
staff turnover and mortality probability.
Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, are recognised
immediately in OCI. The Group determines the net interest expense on the defined benefit liability for the period by
applying the discount rate used to measure the net defined benefit obligation. Net interest expense and other
expenses related to defined benefit plans are recognised in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to
past service or the gain or loss on curtailment is recognised immediately in profit or loss.
(q) Revenue from contracts with customers
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(r) Government grants
The Group accounts for a contract when it has approval and commitment from both parties, the rights of the parties
are identified, payment terms are identified, the contract has commercial substance and collectability of the
consideration is probable.
Revenues from license and product sales are recognised when an identified performance obligation is satisfied, and
the customer obtains and accepts control of the Company’s product. This means that the customer can direct the
use, and obtain substantially all of the remaining benefits, from the use of the license and product. Sales of product
and licenses generally occur at a point in time, typically upon delivery to the customer. In instances where the Group
has significant obligations to maintain or update licences, the revenue is recognised over time.
Revenue from development service is generally recognised as the Company creates or enhances an asset that the
customer controls.
The Group determined that the input method is the best method in measuring progress of the development services
revenue because there is a direct relationship between the Group’s effort (i.e., labour hours incurred) and the
transfer of service to the customer. The Group recognises revenue on the basis of the time lapsed as a percentage
compared to total expected service.
Taxes collected from customers relating to product and service sales and remitted to governmental authorities are
excluded from revenues. The Company expenses incremental costs of obtaining a contract as and when incurred
because the expected amortisation period of the asset that the Company would have recognised is one year or less.
Government grants are recognised where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with. When the grant relates to an expense item, it is recognised as a credit on
a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.
When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the
related asset.
When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts
and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the
benefits of the underlying asset by equal annual instalments.
BrainChip Holdings Ltd
2020 Annual Report
39
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(s)
Income tax
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The income tax expense or credit 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 differences and to unused tax losses.
Deferred income tax is provided for using the full liability, balance sheet method.
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, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
• when the taxable temporary differences associated with investments in subsidiaries, associates and interests
in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it
is probable that the temporary differences 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 assets 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; and
• when the deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which
the temporary differences 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 reporting 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 reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the Statement of
comprehensive income.
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.
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.
Commitments and contingencies are disclosed net of amounts of GST recoverable from, or payable to, the taxation
authority.
BrainChip Holdings Ltd
2020 Annual Report
40
(t) Other taxes
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(u) Earnings per share
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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 aver age
number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share are calculated as net profit attributable to members of the parent adjusted for:
•
•
•
cost 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-discriminatory 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.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its
judgements and estimates on historical experience and on other various factors it believes to be reasonable under the
circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily
apparent from other sources.
Management has identified the following critical accounting policies for which significant judgements, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and
may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial
statements.
• Revenue from contracts with customers
Judgement was applied in determining whether applicable contracts were considered a contract with a customer,
where goods and/or services are delivered in exchange for consideration, or a co-development agreement where
the risks and benefits that result from the activity are shared. In all instances, management concluded that a
contract with a customer had been negotiated and AASB 15 was applicable.
The revenue recognition standard states that if a contract has more than one performance obligation, judgement
is required in determining the allocation of the transaction price to each performance obligation (or distinct good
and service) in an amount that depicts the amount of consideration to which the entity expects to be entitled in
exchange for transferring the promised goods or services to the customer.
Determining the performance obligation in a contract comprising license revenue and development service revenue
The Group determined that both license and development service revenue is capable of being distinct and
identifiable in a specific contract, comprising the delivery of the perpetual license and the engineering services
provided to specifically enhance the license to the specifications of the customer.
Determining the timing of satisfaction of the development service revenue
The Group concluded that development service revenue is to be recognised over time because the customer
simultaneously receives and consumes the benefits provided by the Group; BrainChip is enhancing an asset that
the customer controls, and the work completed does not create an alternative use to the Group.
The Group determined that the input method is the best method in measuring progress of the development services
revenue because there is a direct relationship between the Group’s effort (i.e., labour hours incurred) and the
transfer of service to the customer. The Group recognises revenue on the basis of the labour hours expended
relative to the total expected labour hours to complete the service.
• 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 by using a Black Scholes
model, using the assumptions as discussed in Note 25. The accounting estimates and assumptions relating to
equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities in the
next annual reporting period but may impact expenses and equity.
BrainChip Holdings Ltd
2020 Annual Report
41
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (Continued)
•
Impairment of non-financial assets other than goodwill
The Group assesses all non-financial assets other than goodwill for impairment at each reporting date by evaluating
the carrying value of the asset against the recoverable amount, which is the higher of fair value less costs to sell
and its value in use. This requires assessment of conditions specific to the Group and to the particular asset which
may lead to an impairment being recognised.
• Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is
carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and
are not subsequently reversed.
•
Impairment of goodwill
The Group is organised into one operating segment, being the technological development of designs that can be
licensed to original equipment manufacturer and semiconductor manufacturers of chips based on artificial neural
networks. All the activities of the Group are interrelated, and each activity is dependent on the others. As such,
BrainChip has only one cash generating unit and, therefore goodwill has been allocated to, and the impairment
testing is performed at, the consolidated level. The recoverable amount of goodwill has been assessed utilising fair
value less cost of disposal, using a market comparison approach based on the market capitalisation of the Group
at balance sheet date. This approach was supported by external sources of information, being recent transactions
within the semiconductor industry that have provided evidence that fair value exceeds market capitalisation (i.e.
purchase consideration exceeds market capitalisation), as well as internal information including the high liquidity of
the Group’s shares.
• Development costs
The Group capitalises development costs for a project in accordance with the accounting policy. Initial
capitalisation of costs is based on management’s judgement that technological and economic feasibility is
confirmed. In determining the amounts to be capitalised, management makes assumptions regarding the expected
future cash generation of the project, discount rates to be applied and the expected period of benefits. At 31
December 2020, the carrying amount of capitalised development costs was $Nil (2019: $Nil).
• Defined benefit plans
The cost of the defined benefit pension plan and the present value of the pension obligation are determined using
actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual
developments in the future. These includes the determination of the discount rate, future salary growth, mortality
rates and employee turnover rate. Due to the complexities involved in the valuation and its long-term nature, a
defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at
each reporting date. Further details about defined benefit plans are provided in Note 20.
• Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot
be measured based on quoted prices in active markets, their fair value is measured using valuation techniques
including the monte carlo model. The inputs to these models are taken from observable markets where possible,
but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include
considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these
factors could affect the reported fair value of financial instruments. See Note 19 for further disclosure.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial
statements.
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BrainChip Holdings Ltd
2020 Annual Report
42
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
4.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Overview
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This note presents information about the Group’s exposure to credit, liquidity and market risks, its objectives, policies
and processes for measuring and managing risk, and the management of capital.
Other than derivatives associated with the Put Option Premium and Convertible Securities described in Note 19, the
Group does not use any form of derivatives as it is not at a level of exposure that requires the use of derivatives to
hedge its exposure. Exposure limits are reviewed by management on a continuous basis. The Group does not enter
into or trade financial instruments, including derivative financial instruments, for speculative purposes.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework. Management monitors and manages the financial risks relating to the operations of the Group through
regular reviews of the risks.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group’s cash and cash equivalents and receivables from
customers.
Presently, the Group undertakes technology development activities in the USA, Australia, India and France and is
exposed to credit risk from its operating activities (primarily trade and other receivables).
Cash and cash equivalents and investment securities
The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have
an acceptable credit rating.
Trade and other receivables
The Group operates primarily in technology development and has trade receivables. There is risk that these
receivables may not be recovered however the Group does not consider this to be likely. The Group reviews the
collectability of trade and other receivables on an ongoing basis and measures the expected credit loss at each
reporting date (see Note 12).
Credit risk associated with Other receivables related to the sale of collateral shares and the Financial asset is
considered low due to its short-term nature and is ability to offset the receivable against any outstanding liability
recognised in relation to the Convertible Securities and the Put Option Premium.
Exposure to credit risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum
exposure to credit risk at the reporting date was:
Cash and cash equivalents
Trade and other receivables
Financial asset
Liquidity risk
Carrying amount
2020
US$
19,136,425
907,680
1,470,275
2019
US$
7,622,178
1,187,512
-
Note
11
12
19
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
The Group manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by
continuously monitoring forecast and actual cash flows. The Group entered into Convertible Securities during 2019
which terminated in 2020. Further, the Group entered into a Put Option Agreement in August 2020 resulting in cash
inflows to the Group.
BrainChip Holdings Ltd
2020 Annual Report
43
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
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4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)
Liquidity risk (continued)
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding
the impact of netting agreements:
Carrying amount
US$
Contractual
cash flows
US$
6 mths or
less
US$
6-12 mths
1-5 years
US$
US$
31 December 2020
Trade and other
payables
Financial liabilities (1)
Lease liabilities
31 December 2019
Trade and other
payables
Financial liabilities
Lease liabilities
927,271
486,794
99,224
1,513,289
927,271
501,086
100,909
1,529,266
927,271
-
26,324
953,595
-
332,193
26,324
358,517
471,284
959,599
193,053
1,623,936
471,284
1,214,060
197,845
1,883,189
471,284
990,000
81,652
1,542,936
-
-
24,040
24,040
-
168,893
48,261
217,154
-
224,060
92,153
316,213
(1) The LDA Capital derivative liability (see Note 19(d)) has been excluded from the above table. The unlisted options
are equity settled and cash inflows are received when the options are exercised.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return. The Group is
not exposed to material market risk at period end.
Foreign currency risk
The Group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in
currencies other than the transacting entity’s functional currency. The legal parent, BrainChip Holdings, holds cash
balances in AUD. As a result of this, the Group’s statement of financial position can be affected by movements in the
USD/AUD exchange rate when translating to the USD functional currency.
In respect of other monetary assets and liabilities denominated in foreign currencies (AUD), the Group’s policy is to
ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when
necessary to address short-term imbalances.
The Group is exposed to foreign currency risk on the derivative liability recognised in the balance sheet.
Equity price risk
The Group is exposed to equity price risk associated with unlisted options. Refer to Note 22(e) for sensitivity
analysis.
Interest rate risk
The Group is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that a
financial instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing
financial instruments. The Group does not use derivatives to mitigate these exposures.
The Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents in interest
bearing accounts.
The Group’s exposure to interest rate risk at the balance sheet date was negligible.
BrainChip Holdings Ltd
2020 Annual Report
44
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5.
(a)
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
4.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued)
Fair values
Fair values versus carrying amounts
Set out below is a comparison of the carrying amount and fair values of the Group’s financial instruments, other than
those with carrying amounts that are reasonable approximations of fair values.
(i)
(ii)
(iii)
Cash and short-term deposits, trade and other receivables, trade and other payables and current financial
liabilities are short term in nature. As a result, the fair value of these instruments is considered to approximate
its fair value.
The fair value of the convertible securities are carried at amortised cost is considered to approximate the fair
value given the 12-month term.
The LDA derivative asset and derivative liability are carried at fair value (see Notes 19(d) and 22(e)).
Capital Management
Capital managed by the Board includes contributed equity totalling $98,741,885 and other equity reserves of
$247,872 at 31 December 2020 (2019: $64,740,268 and $247,872 respectively). When managing capital,
management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns
to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that
ensures the lowest cost of capital available to the entity. Managed capital is disclosed on the face of the Statement
of financial position and comprises contributed equity and reserves.
Management may adjust the capital structure to fund the continued development of the Company’s pioneering AI
technology and keep the Company operational. As the market is constantly changing, management may issue new
shares or sell assets to raise cash, change the amount of dividends to be paid to shareholders (if at all) or return
capital to shareholders.
During the financial year ending 31 December 2020, management did not pay a dividend and does not expect to pay
a dividend in the foreseeable future (31 December 2019: Nil).
The Group encourages employees to be shareholders through the Long Term Incentive Plan.
There were no changes in the Group’s approach to capital management during the year. Risk management policies
and procedures are established with regular monitoring and reporting.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Types of good and services
Product revenue
License revenue
Development service revenue
Total revenue from contracts with customers
(b) Timing of revenue recognition
Services transferred over time
Sale of product and license transferred at a point in time
Total revenue
2020
US$
2019
US$
30,005
-
90,824
120,829
90,824
30,005
120,829
10,153
2,232
63,189
75,574
63,189
12,385
75,574
BrainChip Holdings Ltd
2020 Annual Report
45
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
6.
EXPENSES
(a) Research & development expenses
Employee expenses
Government grants received (1)
Debt forgiveness of financial liability – refer Note 19(a)
Third party development services
Other contractor fees
Amortisation of intangible assets
Other expenses
Total research & development expenses
(b) Selling & marketing expenses
Employee expenses
Contractor fees
Promotional advertising
Other expenses
Total selling & marketing expenses
(c) General and administration expenses
Employee expenses
Legal and professional fees
Corporate and listing fees
Travel and accommodation expenses
Depreciation of plant & equipment
Depreciation of right of use assets
Office rent
Software lease and hardware expense
Other
Total general & administrative expenses
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7.
(a)
2020
US$
2019
US$
3,651,420
(720,617)
(151,388)
1,525,000
403,651
65,471
378,702
5,152,239
762,265
315,824
224,442
123,970
1,426,501
1,696,515
482,250
457,252
40,733
79,878
102,564
67,817
150,791
149,847
3,227,647
3,530,335
(547,034)
-
700,000
366,590
78,509
383,010
4,511,410
541,981
234,356
-
285,258
1,061,595
1,631,083
894,000
111,777
285,323
86,311
226,992
93,165
191,763
274,786
3,795,200
(1)
The Group recognised research credits from the French and Australian regulatory authorities in
accordance with local tax regulations. There are no unfulfilled conditions attached to amounts recognised.
FINANCE INCOME AND FINANCE EXPENSE
Finance income
Interest received
Total finance income
27,453
27,453
66,571
66,571
(b)
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Finance expense
Amortisation of day one loss on LDA Capital put option premium - refer Note
19(d)
Convertible Securities interest expense – refer Note 19(c)
Other interest expense
Foreign exchange loss
Total finance expense
5,085,464
268,522
14,764
173,159
5,541,909
-
519,454
11,413
82,078
612,945
(c)
Fair value gain/(loss) through profit and loss
Gain from financial assets and liabilities measured at fair value through the
profit or loss – Borrowings - refer to Note 19(b)
Net loss from financial liabilities measured at fair value through the profit and
loss – Convertible securities (refer Notes 12(a) and 19(b))
Net loss from liabilities measured at fair value through the profit and loss –
LDA unlisted options (refer Note 19(d))
(14,292)
-
137,525
171,485
10,014,541
10,137,774
-
171,485
BrainChip Holdings Ltd
2020 Annual Report
46
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
8.
DIVIDENDS PAID AND PROPOSED
No dividends have been paid or declared by the Company during the current or prior financial years or up to the date
of this report.
INCOME TAX
2020
US$
2019
US$
(a) Major components of income tax expense
Consolidated income statement
Current income tax:
Current income tax expense/(benefit)
Tax losses previously not recognised
Deferred tax asset not recognised
Income tax (benefit)/expense reported in the statement of
comprehensive income
(b) Amounts charged or credited directly to equity
Current income tax related to items charged or credited directly to equity
Deferred income tax related to items charged or credited directly to equity
Income tax (benefit)/expense reported in equity
A reconciliation between tax expense and the product of accounting
loss before income tax multiplied by the Group's applicable income
tax rate is as follows:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Accounting loss before tax
26,822,049
11,310,062
At statutory income tax rate of 26% (2019: 27.5%)
(6,973,733)
(3,110,267)
Non-deductible expenses
Effect of lower/(higher) taxation rates of foreign subsidiaries
Other
Unrecognised tax losses and deferred income tax assets
Income tax expense/(benefit) reported in statement of profit or loss and
other comprehensive income
Effective income tax rate
9.
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Accrued expenses
Tax losses
Share-based compensation
Intangible assets
Deferred State Tax deduction
Other
Not recognised
Net deferred tax liability
Deferred tax income/(expense)
6,603,121
(654,498)
(648,208)
1,673,318
-
576,357
(148,252)
2,682,162
-
0%
-
0%
Consolidated
Statement of
financial
position
2020
102,404
12,251,465
3,375,034
23,744
-
38,935
(15,791,582)
-
-
2019
96,525
9,730,206
4,234,651
32,222
-
24,660
(14,118,264)
-
-
(e) Unrecognised losses
At 31 December 2020, there are unrecognised deferred taxes on losses of $12,251,465 (tax effected) (2019:
$9,730,206 (tax effected)), and other temporary differences of $3,540,117 (2019: $4,388,058) for the Group.
BrainChip Holdings Ltd
2020 Annual Report
47
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
10. LOSS PER SHARE
Net loss attributable to ordinary shareholders for basic and diluted earnings
per share
2020
US$
2019
US$
(26,822,049)
(11,310,062)
US cents per
share
US cents per
share
Basic and diluted loss per share
(1.76)
(0.95)
Number
Number
Weighted average number of ordinary shares for basic loss per share (3)
Effect of the dilution of share options and performance rights (1) (2)
Weighted average number of ordinary shares adjusted for the effect of
dilution
1,527,522,665
-
1,187,151,633
-
1,527,522,665
1,187,151,633
(1) At 31 December 2020, the Company had on issue 167,290,556 (2019: 195,068,976) share options that are
excluded from the calculation of diluted loss per share for the current period as they are considered anti-
dilutive.
(2) At 31 December 2020, the Company had on issue 4,462,500 restricted stock units (2019: 5,800,000) and
25,000 performance rights (2019: Nil) that are excluded from the calculation of diluted loss per share for the
current period as they are considered anti-dilutive.
(3) Weighted average number of ordinary shares has been adjusted as a result of rights issue to institutional and
sophisticated investors for all periods:
- to 31 December 2017 by a factor of approximately 1.02, effective November 2017;
- to 31 December 2019 by a factor of approximately 1.01, effective July 2019;
- to 31 December 2020 by a factor of approximately 1.02, effective August 2020.
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2020 Annual Report
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
11. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Term deposits
Total
Reconciliation of the net loss after tax to net cash flows from
operations
Loss after tax
Non-cash adjustment to reconcile loss before tax to net cash flows:
Depreciation
Amortisation
Debt forgiven on financial liabilities
Share-based payments
Amortisation of day one loss on LDA Capital put option premium
Loss/(gain) from financial liabilities measured at fair value through the profit
or loss
Interest expense
Foreign exchange (gain)/loss - unrealised
Working capital adjustments:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventory
Increase/(decrease) in prepayments
(Decrease)/Increase in other assets
Decrease in financial liabilities
Increase in deferred revenue
Increase in interest payable
Increase/(decrease) in defined benefits plan
Increase in employee provisions
Increase/(decrease) in trade and other payables
Net cash flows used in operating activities
12. TRADE AND OTHER RECEIVABLES
Current
Trade receivables (1)
Research tax credit
Receivable from sale of collateral shares (a)
Other receivables
2020
US$
2019
US$
19,096,796
39,629
19,136,425
7,593,022
29,156
7,622,178
(26,822,049)
(11,310,062)
182,439
65,474
(151,388)
1,435,645
5,085,464
10,137,774
268,522
(139,249)
(435,040)
(38,378)
7,744
(5,510)
-
13,441
10,551
23,463
139,355
192,766
(10,028,976)
313,303
78,509
-
1,636,113
-
(165,056)
521,063
87,311
47,571
4,843
(57,278)
4,913
(4,207)
-
34,464
51,840
(244,762)
(9,001,435)
2020
US$
2019
US$
97,716
721,655
-
88,309
907,680
4,228
402,974
766,818
13,492
1,187,512
(1) Trade receivables are non-interest bearing and generally on terms of 30-90 days. As at year end, there is no
allowance for expected credit loss recorded.
BrainChip Holdings Ltd
2020 Annual Report
49
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
12. TRADE AND OTHER RECEIVABLES (continued)
(a) Receivable from the sale of collateral shares
Collateral Shares issuable to CST under the terms of the CSA were treated as treasury shares until traded.
During the reporting period, 418,490 treasury shares were released to CST, valued at $22,395 (refer Note
22(b). In January 2020, CST and BrainChip agreed to reduce the number of collateral shares held by CST
through the sale of 10 million collateral shares at an agreed price, resulting in a net gain to BrainChip of
$87,832. CST also converted Convertible Securities valued at $136,798 via a reduction in collateral shares.
CST traded all remaining collateral shares by the end of the period. The shares were valued in accordance with
the CSA, being the lower of $0.079 per share and 92% of the average 5 day VWAP during the 20 trading days
prior to maturity.
Movement in Receivable from the sale of collateral shares
Opening balance
Gain on settlement of financial asset at fair value through profit and loss
Fair value recognised through profit or loss
Reduction in collateral shareholding through conversion of convertible note – refer Note 19(c)
Additional collateral shares traded
Cash received on reduction in collateral shareholding
Closing balance
US$
766,818
87,832
170,724
(136,798)
22,395
(910,971)
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13. RIGHT-OF-USE ASSETS
Cost
Accumulated depreciation
Net carrying amount
Movement in Right-of-Use Assets:
At 1 January
Initial adoption of AASB 16
Additions
Written down value of ROU asset disposed
Depreciation
Foreign exchange movements
At 31 December
14. PLANT & EQUIPMENT
Plant and equipment – Gross carrying value at cost
Accumulated depreciation
Net carrying amount
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Movement in plant and equipment
At 1 January
Additions
Depreciation charge for the year
Net foreign exchange movements
At 31 December
2020
US$
2019
US$
153,479
(55,423)
98,056
191,460
-
-
(55,191)
(47,373)
9,160
98,056
360,732
(169,272)
191,460
-
114,407
305,736
-
(226,992)
(1,691)
191,460
561,659
(412,343)
149,316
498,290
(319,407)
178,883
178,883
47,587
(79,875)
2,721
149,316
226,456
39,673
(86,311)
(935)
178,883
BrainChip Holdings Ltd
2020 Annual Report
50
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
15.
INTANGIBLE ASSETS AND GOODWILL
(a) Patents and licenses with finite useful life – at cost
Patents and licenses (a)
Goodwill
Accumulated amortisation
Movement in patents and licenses
At 1 January
Additions
Amortisation
Net foreign exchange movements
At 31 December
2020
US$
2019
US$
805,184
905,458
1,710,642
1,116,851
(311,667)
805,184
870,655
-
(65,471)
-
805,184
870,655
905,458
1,776,113
1,081,320
(210,665)
870,655
829,664
119,826
(78,509)
(326)
870,655
As at 31 December 2020, the Group performed an impairment assessment based on the fair value less cost of
disposal (Level 2 in the fair value hierarchy) to confirm the recoverability of the Group’s net assets. Based on the
Group’s assessment as at 31 December 2020, the market capitalisation of the Group was above the book value
of its equity, demonstrating that the estimated recoverable amount was sufficient to recover the consolidated net
assets at 31 December 2020. Assumptions used within the Group’s fair value less cost of disposal determination
included the Group’s share price of A$0.43 at 31 December 2020 and the foreign exchange rate of $0.7703
AUD/USD at 31 December 2020.
As at 31 December 2020, the Group considered indicators of impairment of these assets and determined that
there was none.
16. TRADE AND OTHER PAYABLES
Current
Trade creditors and accruals
LDA Capital commitment fee payable - refer Note 19(d)
Interest payable on borrowings
VAT and other taxes payable to foreign authorities
17. EMPLOYEE BENEFITS LIABILITIES
Provision for annual leave
The nature of the provision is described in Note 2(p).
18. LEASE LIABILITIES
Current
Non-current
Movement in lease liabilities
Opening balance
Initial adoption of AASB 16
Additions
Reduction in lease liabilities
Foreign exchange movements
2020
US$
2019
US$
693,320
223,400
10,551
-
927,271
469,408
-
-
1,876
471,284
420,156
420,156
280,801
280,801
51,136
48,088
99,224
193,053
-
-
(106,984)
13,155
99,224
102,362
90,691
193,053
-
114,407
305,736
(223,779)
(3,311)
193,053
BrainChip Holdings Ltd
2020 Annual Report
51
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
19. FINANCIAL ASSETS AND LIABILITIES
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Financial assets - Current
Derivative asset - put option premium (d)
Total Financial assets
Financial liabilities - Current
Borrowings (b)
Convertible liabilities - CST(c)
Derivative liabilities - CST(c)
Derivative liabilities – LDA unlisted options (d)
Financial liabilities - Non-Current
Advances from third parties (a)
Borrowings (b)
2020
US$
1,470,275
1,470,275
320,678
-
-
3,179,756
3,500,434
88,786
77,330
166,116
2019
US$
-
-
-
586,673
150,259
-
736,932
222,667
-
222,667
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Total Financial liabilities
3,666,550
959,599
(a) Advance from third parties
Non-current advances include loans from various French government agencies which are granted without any
interest and are to be repaid under certain conditions. The benefit of the government loan at a below-market rate
of interest is treated as a government grant.
During the year, BrainChip SAS received notification of the forgiveness of the loan totalling $151,388.
Movement in advances from third parties
As at 1 January
Forgiveness of financial liability
Repayment of loans to third parties
Foreign exchange
As at 31 December
2020
US$
2019
US$
222,667
(151,388)
-
17,507
88,786
226,873
-
(2,193)
(2,013)
222,667
(b) Borrowings
In response to the COVID-19 pandemic, on 20 April 2020, BrainChip Inc signed documents with First Republic
Bank and received funding of $412,300 from the US Small Business Administration, “SBA”, Payroll Protection
Program which is part of a program created by the Coronavirus Aid, Relief, and Economic Security Act, “CARES
Act”, which provides financial relief from the COVID-19 emergency.
This loan bears interest at a fixed rate equal to 1.0% per annum and is payable every month beginning November
2020. This loan, guaranteed by the SBA, will mature in 2 years. SBA may forgive this loan if certain conditions
are met. These conditions include all employees are to be kept on the payroll for eight weeks from receipt of the
loan and the money to be used for payroll, rent, mortgage interest, or utilities. As of 31 December 2020, BrainChip
Inc has met the prerequisites however is yet to receive confirmation that the loan is forgiven.
Movement in borrowings
As at 1 January
Financial liability with First Republic Bank
Grant revenue recognised in profit and loss
As at 31 December
Borrowings – current
Borrowings – non-current
2020
US$
2019
US$
-
412,300
(14,292)
398,008
320,678
77,330
398,008
-
-
-
-
-
-
-
BrainChip Holdings Ltd
2020 Annual Report
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
19. FINANCIAL ASSETS AND LIABILITIES (continued)
(c) Convertible Securities Agreement
On 26 June 2019, the Company entered into an unsecured Convertible Securities Agreement (“CSA”) with CST
Capital Pty Ltd (“CST”) as trustee of the CST Investments Fund, under which the Company has issued
Convertible Securities with a face value of US$2,850,000 (“Convertible Securities”) to CST and an interest rate
of 10%pa. The effect of the key terms described below gave rise to Convertible Securities held at amortised cost
and embedded derivatives (conversion and extension option) held at fair value through profit and loss.
Conversion of debt and treasury shares
During the year, the remaining 418,490 treasury shares held by CST were disposed on market. The Company
issued 30,734,684 ordinary shares to CST as a result of the conversion of Convertible Securities. The shares
were valued in accordance with the CSA at the lower of $0.079 or 92% of the average 5 day VWAP during the
20 actual trading days prior to conversion. The value of the debt converted totalled $1,264,737. CST
also converted Convertible Securities valued at $136,798 via the sale of collateral shares (refer Note 12(a))
Movement in CST convertible and derivative liabilities
As at 1 January
Cash received on issue of Convertible Note
Recognition of Receivable from sale of collateral shares
Share based payment expense allocated to derivative liability
Conversion of notes through collateral shares
Value of shares issued on conversion of convertible notes
Value of options issued
Costs of issue of Convertible and derivative liabilities
Interest expense
Fair value recognised through profit or loss
As at 31 December
2020
US$
2019
US$
736,932
-
-
-
(136,798)
(1,264,737)
-
-
268,522
396,081
-
-
2,565,000
766,818
310,972
(1,023,821)
(1,549,251)
(650,302)
(30,454)
519,454
(171,485)
736,932
(d) LDA Capital Agreement
On 13 August 2020, the Company announced it has entered into a Put Option Agreement (POA) with LDA Capital
to provide the Company with up to A$29 million in committed equity capital over the next 12 months which may
be extended by the parties for a further 12 months. The Company will control the timing and maximum amount
of the draw down under this facility subject only to the minimum draw down commitment of A$10 million with in
the first 12 months.
The POA was amended effective 22 October 2020, noting that BrainChip had fulfilled its obligation under the
original agreement, and that LDA Capital had chosen to increase the available funding to A$45 million along with
an increase in BrainChip’s minimum draw down commitment to A$20million, inclusive of any funds received
under the first capital call notice issued prior to the amendment.
The effect of the key terms as described below gave rise to a derivative liability and derivative asset held at fair
value through profit and loss.
Key terms and conditions
(i)
In accordance with the POA, as part consideration, the Company issued 75,000,000 unlisted options to LDA
Capital comprising 37,500,000 unlisted options exercisable at A$0.15 and 37,500,000 unlisted options
exercisable at A$0.20, expiring on 13 August 2023. These options were valued at $5,806,040 using a Black
Scholes model and classified as derivative liabilities. Refer Note 22(e) for the valuation inputs.
(ii) On 19 August 2020, the Company issued a call notice to LDA Capital (a Put Option) and subsequently, on
24 August 2020, issued LDA Capital with 35,000,000 shares for no consideration (“Collateral Shares”) which
LDA Capital was entitled to sell on-market (subject to certain terms). Any unused Collateral Shares were to
be adjusted or used for subsequent calls, brought back by the Company or transferred to a trustee or
nominee of the Company. LDA Capital holds 8,750,000 Collateral shares at 31 December 2020 which are
included in Treasury shares (Note 22(c)).
The issue price of the shares under the purchased put option is calculated as 90% of the higher of the
average VWAP of shares in the 30- trading day period after the issue of a call notice, and the minimum price
notified to LDA Capital by the Company upon exercise of the put option. The VWAP calculation and the
number of subscription shares are subject to adjustment as a result of certain events occurring including
trading volumes falling below an agreed threshold level or a material adverse event occurring in relation to
the Company.
(iii)
BrainChip Holdings Ltd
2020 Annual Report
53
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
19. FINANCIAL ASSETS AND LIABILITIES (continued)
Key terms and conditions (continued)
(iv) The Company is liable for a commitment fee of A$580,000, comprising A$290,000 due and payable at the
closing of the Company’s first capital call and the remaining A$290,000 due and payable at closing of the
second capital call. The commitment fee may be paid in shares at the Company’s discretion. The
outstanding commitment fee translated to $223,400 at year end and is recognised in Trade and other
payables.
(v) The Company is also liable for a failure fee payable if the Company does not meet the agreed minimum
draw down commitment within 12 months of the date of the POA. The failure fee has been accounted for
as a deferred option premium on the committed portion of the put option.
Recognition and reduction in put option premium and derivative liability
On entering the POA, the Company recognised the purchased put option as a derivative asset with a fair value
of $1,153,781. The consideration payable comprised 75,000,000 unlisted options, recognised as a derivative
liability totalling $5,800,734, and a commitment fee payable of $415,361. The difference between the total
consideration payable and the derivative asset recognised was deferred on the balance sheet in accordance
with the requirements of accounting standards. The valuation of the derivative asset was determined using a
market based approach with reference to a 15% market placement discount. A derivative liability was recognised
based on the fair value of the 75,000,000 options issued determined using a Black Scholes option pricing model.
On 24 August 2020, the Company issued a Capital Call Notice under the POA to LDA Capital for 35,000,000
shares which triggered the POA pricing mechanism. The settlement of this Capital Call Notice in October 2020
resulted in LDA Capital subscribing for 26,250,000 ordinary shares. The net subscription proceeds received
amounted to $7,536,236 (A$10,538,125). The settlement of this Capital Call Notice also released the deferred
day one loss to profit and loss.
The derivative liability relating to the unlisted options issued to LDA Capital as part consideration were revalued
during the period for exercised options and at the year end for the unexercised options. The remeasurement of
the derivative liability resulted in a fair value loss of $10,014,541. Unlisted options exercised by LDA Capital
contributed to cash inflows of $7,570,156 to the Company.
Movement in LDA financial asset
As at 1 January
Derivative asset – put option premium recognised at inception
Fair value movement in financial asset - put option premium
Release of derivative assets on settlement
Revaluation of the put option premium
Foreign exchange movements
As at 31 December
Movement in LDA derivative liabilities
2019
US$
2020
US$
-
1,153,781
(9,295)
(413,583)
635,049
104,323
1,470,275
2020
US$
2019
US$
As at 1 January
Derivative liability recognised at inception
Re-measurement to fair value through profit or loss
Fair value of options exercised at each exercise date Foreign
exchange movements
As at 31 December
-
5,800,734
10,014,541
(12,641,387)
5,868
3,179,756
-
-
-
-
-
-
-
-
-
-
-
-
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o
e
s
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BrainChip Holdings Ltd
2020 Annual Report
54
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
20. DEFINED BENEFIT PLAN
2020
US$
2019
US$
Net employee defined benefit liabilities
203,868
141,415
BrainChip SAS has a defined benefit pension plan which is governed by the employment laws of France. Pension
plans that are defined benefit schemes (in which the Company guarantees an amount or defined level of benefits)
are recognised on the balance sheet based on an actuarial valuation of the obligations at period-end.
This valuation uses the projected unit credit method, taking into account staff turnover and mortality probability.
The defined benefit plan is administered by the French regulatory authority and is legally separated from the
Group. The authority is required by law to act in the best interests of the plan participants and is responsible for
setting certain policies (e.g. investment, contribution and indexation policies) of the fund.
The defined benefit plan exposes the Group to actuarial risks, such as longevity risk, currency risk, interest rate
risk, and market (investment) risk.
(a) Movement in net defined benefit liability
At 1 January
Included in profit or loss
Current services costs
Finance costs
Included in OCI
Actuarial losses/(gains)
Foreign exchange movement
At 31 December
(b) Defined benefit obligation
2020
US$
2019
US$
141,415
106,951
23,463
932
24,364
13,694
203,868
18,309
1,608
16,990
(2,443)
141,415
The following were the principal actuarial assumptions at the reporting date:
Discount rate
Future salary growth
Retirement at employee’s initiative
Turnover rate (weighted average)
0.4%
1.5%
45.0%
1.0%
0.8%
1.5%
45.0%
1.0%
Assumptions regarding future mortality have been based on published statistics and morality tables provided by
the French government.
(c) Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other
assumptions constant, would have affected the defined benefit obligation by the amounts shown below:
Discount rate (+/-1% movement)
Future salary growth (+/-1.0 % movement)
Increase
US$
Decrease
US$
(30,169)
38,365
39,124
(30,331)
Although the analysis does not take account of the full distribution of cashflows expected under the plan, it does
provide an approximation of the sensitivity of the assumptions shown.
BrainChip Holdings Ltd
2020 Annual Report
55
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
21. FINANCIAL ASSETS & LIABILITIES
(a) Set out below is an overview of financial assets (other than cash and short term deposits) and financial
liabilities held by the Group as at 31 December 2020:
Financial assets at amortised cost
Trade and other receivables
Financial assets at fair value through profit or loss
Receivable on sale of collateral shares
Derivative asset – put option premium
Total financial assets
Current
Non-current
Total financial assets
Financial liabilities at amortised cost
Trade and other payables
Financial liabilities
- Advances from third parties
- Convertible liabilities
- Borrowings
- Deferred gain
Financial liabilities at fair value through profit & loss
Financial liabilities
- Derivative liabilities (LDA unlisted options)
Total financial liabilities
Current
Non-current
Total financial liabilities
2020
US$
2019
US$
907,680
420,694
-
1,470,275
766,818
-
2,377,955
1,187,512
2,377,955
-
2,377,955
1,187,512
-
1,187,512
927,271
471,284
88,786
-
398,008
635,049
222,667
586,673
-
-
3,179,756
150,259
5,228,870
1,430,883
5,062,754
166,116
5,228,870
1,208,216
222,667
1,430,883
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BrainChip Holdings Ltd
2020 Annual Report
56
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
21. FINANCIAL ASSETS & LIABILITIES (Continued)
(b) The following table provides the fair value measurement hierarchy of the Group’s financial assets and liabilities:
l
y
n
o
e
s
u
l
As at 31 December 2020
Financial assets measurement at fair
value
Derivative asset - put option premium (1)
Financial liabilities measured at fair
value
Derivative liabilities – LDA Capital
As at 31 December 2019
Financial assets measurement at fair
value
Receivable on sale of collateral shares
Financial liabilities measured at fair
value
Derivative liabilities - CST
Fair value measurement using
Quoted prices
in active
markets
(Level 1)
US$
Significant
observable
inputs
(Level 2)
US$
Significant
unobservable
inputs
(Level 3)
US$
1,470,275
1,470,275
-
-
-
-
3,179,756
3,179,756
Total
US$
1,470,275
1,470,275
3,179,756
3,179,756
766,818
766,818
766,818
766,818
-
-
150,259
150,259
-
-
150,259
150,259
-
-
-
-
-
-
There were no transfers between Level 1, Level 2 and Level 3 during 2020 and 2019.
(1) The fair value of the derivative asset on recognition of the put option premium was determined using a
market based approach with reference to a 15% market placement discount by an independent expert.
(c) Changes in liabilities arising from financing activities are disclosed within individual notes.
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BrainChip Holdings Ltd
2020 Annual Report
57
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
22. CONTRIBUTED EQUITY
2020
US$
2019
US$
(a) Ordinary Shares
Issued and fully paid
98,741,885
64,740,268
(b) Movements in ordinary shares on issue
At 1 January 2019
Issue of shares as per Convertible Securities
Issue of shares as collateral in relation to the Convertible Securities
Issue of shares upon non-renounceable entitlement (1)
Shares issued on conversion of Convertible Securities
Treasury shares disposed by CST Capital Pty Ltd
Share issue costs incurred
At 31 December 2019
At 1 January 2020
Shares issued on conversion of Convertible Securities - refer Note 19(c)
Treasury shares disposed by CST Capital Pty Ltd - refer Note 12(a)
Issue of shares
Issue of shares to the Trustee of the BrainChip LTIP
Issue of collateral shares under LDA Capital put option premium - refer
Note 19(d)
Shares allocated on exercise of LDA Capital put option premium - refer
Note 19(d) (2)
Collateral shares offset against subscription shares
Shares allotted on exercise of LDA Capital options - refer Note 19(d)
Shares issued on conversion of CST options
Shares issued on conversion of RSUs
Shares issued on conversion of options
Treasury shares issued on conversion of options
Share issue costs incurred
Number
1,049,883,519
1,561,279
30,000,000
178,753,609
77,177,256
-
-
US$
55,143,789
-
-
7,507,560
1,549,251
1,023,820
(484,152)
1,337,375,663
64,740,268
1,337,375,663
30,734,684
-
103,958,000
20,000,000
64,740,268
1,264,737
22,395
1,989,897
-
35,000,000
-
26,250,000
(26,250,000)
61,854,444
21,868,796
3,000,000
2,800,000
-
-
7,327,638
-
20,211,543
1,845,133
-
143,016
1,441,348
(244,090)
At 31 December 2020
1,616,591,587
98,741,885
(1) The Company issued 112,206,282 shares on 8 July 2019 raising A$6,732,377 (US$4,696,641) and
66,547,327 shares on 16 July 2019 raising a further A$3,992,840 (US$2,810,919).
(2) LDA Capital cash reconciliation:
Cash received on settlement
Commitment fee released
Release of derivative assets on settlement
Other
Value of shares allocated on exercise of LDA Capital put option premium
2020
US$
7,536,236
207,341
(413,583)
(2,356)
7,327,638
2019
US$
-
-
-
-
-
BrainChip Holdings Ltd
2020 Annual Report
58
(c)
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
22. CONTRIBUTED EQUITY (Continued)
Treasury shares
Fully paid shares issued to LDA Capital Pty Ltd
Fully paid shares issued to CST Capital Pty Ltd
Fully paid shares issued to Trustee of Long Term Incentive Plan (“LTIP”)
Movements in Treasury shares
At 1 January
Shares issued to Trust from BrainChip Holdings Ltd (1)
Shares issued to CST Capital Pty Ltd – refer Note 19(c)
Shares disposed by CST Capital Pty Ltd
Shares issued by Trustee of the LTIP on conversion of Performance Rights
Shares Issued on exercise of share options
Shares Issued on conversion of RSU
Shares issued to LDA Capital as collateral shares – refer Note 19(d)(ii)
Shares disposed of by LDA Capital and offset against subscription shares
– refer Note 19(d)(ii)
At 31 December
2020
Number
2019
Number
8,750,000
-
9,495,000
18,245,000
868,490
20,000,000
-
(418,490)
-
(10,155,000)
(800,000)
35,000,000
-
418,490
450,000
868,490
1,500,000
-
30,000,000
(29,581,510)
(1,000,000)
-
(50,000)
-
(26,250,000)
-
18,245,000
868,490
(1) The BrainChip Long Term Incentive Plan Trust was established on 2 August 2018. Equity Trustees Limited
was appointed the Plan Trustee effective 2 March 2020, replacing Solium Nominees (Australia) Pty Limited.
The Company issues shares to the Trust at no value to be held available for the conversion of vested options,
performance rights and restricted stock units held by LTIP members.
(d) Terms and conditions of contributed equity
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at shareholder meetings. In the event of winding up the Company the holders are entitled to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid
up on shares held.
(e) Options on issue
Unissued ordinary shares of the Company under option at 31 December 2020 are as follows:
31 December
2020
Number
Exercise
Price (US$)
Expiry Date
31 December
2019
Number
Type
Options issued to shareholders
Unlisted
Options issued to LDA Capital
Unlisted (1)
Options issued as share-based payments
Unlisted – refer Note 25(b)
31/05/2020
0.171
-
20,000,000
13/08/2023
0.143
13,145,556
-
Various
Various
154,145,000
175,068,976
Total
167,290,556
195,068,976
The above options are exercisable at any time on or before the expiry date.
(1) Options issues to LDA Capital in accordance with POA -2020
In accordance with the Agreement, the Company issued 75,000,000 unlisted options to LDA Capital, expiring
on 13 August 2023 and comprising:
(a) 37,500,000 unlisted options exercisable at $0.108 (A$0.15) which were fully exercised by year end;
and
(b) 37,500,000 unlisted options exercisable at $0.143 (A$0.20), of which 13,145,556 remained exercisable
at 31 December 2020.
BrainChip Holdings Ltd
2020 Annual Report
59
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
22. CONTRIBUTED EQUITY (Continued)
(1) Options issued to LDA Capital in accordance with POA – 2020 (continued)
Refer to Note 19 for further details of the arrangement. The fair value of the equity-settled share options
granted in accordance with the POA is estimated as at the date of the agreement using a Black Scholes Option
Pricing model applying the following inputs:
Valuation inputs at inception:
Number of
options
Fair value at
measurement
date
US$
Share price at
Contract Date
Exercise
price
A$
US$
A$
US$
Expected
Volatility
(%)
Risk-free
interest rate
(%)
Expected
life of
options in
years
37,500,000
37,500,000
0.081
0.074
0.175
0.125
0.150
0.108
0.175
0.125
0.20
0.143
100
100
0.26
0.26
3
3
Valuation inputs for re-measurement at 31 December:
Number of
options
Fair value at
measurement
date
US$
Share price at 31
December 2020
Exercise
price
A$
US$
A$
US$
Expected
Volatility
(%)
Risk-free
interest rate
(%)
Expected
life of
options in
years
13,145,556
0.242
0.43
0.331
0.20
0.154
100
0.04
2.63
Sensitivity analysis
Reasonably possible changes in the share price, holding other assumptions constant, would have affected
the fair value of the options at 31 December 2020 by the amounts shown below:
Increase
US$
Decrease
US$
Share price (+/-$0.05 movement)
455,698
(455,698)
Performance Rights on issue
Type
Unlisted – refer Note 25(e)
Total
Movement in Performance Rights
1 January
Issue during the period
Converted during the period
31 December
31 December
2020
Number
31 December
2019
Number
25,000
25,000
-
25,000
-
25,000
-
-
-
-
-
-
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o
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s
u
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a
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(f)
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F
BrainChip Holdings Ltd
2020 Annual Report
60
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
22. CONTRIBUTED EQUITY (Continued)
(g) Restricted Stock Units (RSUs) on issue
Unissued ordinary shares of the Company under restricted stock units at 31 December 2020 are as follows:
Type
Unlisted – refer Note 25(g)
Total
Movement in RSUs
1 January
Issue during the period
Converted during the period
31 December
31 December
2020
Number
31 December
2019
Number
4,462,500
4,462,500
5,800,000
5,800,000
5,800,000
2,462,500
(3,800,000)
4,462,500
3,850,000
2,000,000
(50,000)
5,800,000
23. RESERVES
Foreign
currency
translation
reserve
US$
80,526
-
(7,723)
72,803
72,803
-
42,137
114,940
Share- based
payment
reserve
Other equity
reserve
Total
US$
16,463,527
1,955,337
-
18,418,864
18,418,864
1,435,645
-
19,854,509
US$
247,872
-
-
247,872
247,872
-
-
247,872
US$
16,791,925
1,955,337
(7,723)
18,739,539
18,739,539
1,435,645
42,137
20,217,321
CONSOLIDATED
At 1 January 2019
Share-based payments
Translation of foreign operations
At 31 December 2019
At 1 January 2020
Share-based payments
Translation of foreign operations
At 31 December 2020
Nature and purpose of reserves
Share-based payment reserve
The share-based payment reserve is used to record the value of share-based payments provided to
Directors, employees and third parties as part of their remuneration.
Other equity reserve
This reserve arises from the issue of shares in BrainChip Holdings Ltd to extinguish the liability owing to
Convertible Securities holders in BrainChip Inc., on 10 September 2015.
Foreign currency translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
24. ACCUMULATED LOSSES
At 1 January
Re-measurement losses on defined benefit plans
Net loss in current period attributable to members of the Company
At 31 December
2020
US$
2019
US$
(74,383,457)
(24,364)
(26,822,049)
(63,056,405)
(16,990)
(11,310,062)
(101,229,870)
(74,383,457)
BrainChip Holdings Ltd
2020 Annual Report
61
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
25. SHARE-BASED PAYMENTS
(a) Recognised share-based payment expenses
Options issued to LTIP members and CST
Performance Rights issued to LTIP members and consultants
Restricted stock units issued to LTIP members
Recognised in share-based payment reserve
Equity Instruments capitalised to Convertible Securities
Equity instruments reported as prepayments
Total share-based payment expense
l
y
n
o
2020
US$
1,251,815
2,020
181,810
1,435,645
-
-
1,415,645
2019
US$
1,384,201
358,447
212,689
1,955,337
(342,965)
23,741
1,636,113
e
s
u
l
The 2018 Long Term Incentive Plan (LTIP) was adopted by shareholders in May 2018. The Company has
Options that were issued under the 2015 LTIP current at the time of offer however all new equity awards post
May 2018 have been issued under the 2018 LTIP. The 2015 Performance Rights Plan and the 2015 Directors &
Officers Option Plan have been terminated as all equity instruments issued under these plans have been
exercised or expired.
2018 and 2015 Long Term Incentive Plan
The objective of the LTIP is to attract and retain key employees and consultants. It is considered that the LTIP,
through the issue of equity instruments, will provide selected employees and consultants with opportunity to
participate in the future growth of the Company. Equity instruments offered under the LTIP must be offered at no
more than a nominal value and under terms to be determined by the Board from time to time. It is not the intention
of the Company to apply for quotation of any of the equity instruments which are issued under the LTIP.
a
n
o
s
r
e
p
(b) Share Options granted as share-based payments
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in,
share options issued as share based payments during the year:
Outstanding at 1 January
Granted during the period
Exercised during the period
Forfeited during the period
Lapsed during the period
Expired during the period
Outstanding at the end of the period
Exercisable (vested and unrestricted)
at the end of the period
2020
Number
175,068,796
29,525,000
(34,823,796)
(15,625,000)
-
-
2020
WAEP
(US$)
0.115
0.167
(0.096)
(0.048)
-
-
2019
Number
136,700,000
85,018,796
-
(28,275,000)
(11,375,000)
(7,000,000)
154,145,000
0.138
175,068,796
2019
WAEP
(US$)
0.165
0.056
-
(0.138)
(0.201)
(0.137)
0.115
90,665,833
0.143
91,656,296
0.117
r
o
F
The weighted average remaining contractual life for the share options outstanding at 31 December 2020 is
5.374 years (2019: 3.23 years).
The weighted average fair value of options granted during the year was $0.104 (2019: $0.081)
The range of exercise prices for options outstanding at the end of the year was $0.031 to $0.262(2019: $0.037
to $0.242).
The above options are exercisable after vesting and at any time on or before the expiry date.
BrainChip Holdings Ltd
2020 Annual Report
62
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
25. SHARE-BASED PAYMENTS (Continued)
(c) Options granted under the Long Term Incentive Plan
Unissued ordinary shares of the Company under option at 31 December 2020 are as follows:
Grant Date
Expiry Date
Exercise
Price (US$)
Number at
year end
Exercised
during year
Forfeited
during year
Vested at
year end
l
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a
n
o
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Grant Type
LTIP (1)
LTIP (1)
LTIP (2)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (3)
LTIP (3)
AGM 2017 (4)
AGM 2017 (4)
AGM 2017 (5)
AGM 2017 (5)
AGM 2017 (5)
AGM 2017 (5)
LTIP (6)
LTIP (6)
LTIP (6)
LTIP (6)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (7)
LTIP (8)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (9)
LTIP (10)
AGM 2019 (11)
LTIP (1)
LTIP (1)
LTIP (12)
CST – Note
17(c)
LTIP (13)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (1)
LTIP (1)
4/12/2015
22/01/2016
28/09/2016
8/07/2016
7/10/2016
27/01/2017
30/01/2017
30/01/2017
31/05/2017
31/05/2017
31/05/2017
31/05/2017
31/05/2017
31/05/2017
7/07/2017
7/07/2017
7/07/2017
7/07/2017
28/11/2017
28/11/2017
28/11/2017
1/12/2017
5/03/2018
5/03/2018
5/03/2018
30/04/2018
30/04/2018
16/06/2018
19/11/2018
11/03/2019
18/03/2019
30/05/2019
13/06/2019
23/09/2019
23/09/2019
13/06/2019
10/8/2020
26/8/2020
7/10/2020
3/12/2020
07/12/2020
21/12/2020
21/12/2020
01/02/2021
30/09/2021
10/10/2021
10/10/2021
16/02/2022
16/02/2022
31/12/2022
31/01/2023
31/01/2024
01/02/2023
01/02/2024
01/02/2025
01/02/2026
7/07/2023
7/07/2024
7/07/2025
7/07/2026
14/12/2022
14/12/2022
14/12/2022
14/12/2022
13/03/2028
13/03/2028
13/03/2028
08/06/2028
08/06/2028
16/06/2028
5/10/2028
13/03/2029
18/03/2029
30/05/2029
30/05/2029
23/09/2029
23/09/2029
26/06/2022
06/08/2030
17/08/2030
07/10/2030
03/12/2030
07/12/2030
21/12/2030
0.172
0.165
0.172
0.113
0.205
0.242
0.185
0.185
0.138
0.138
0.182
0.182
0.182
0.182
0.125
0.125
0.125
0.125
0.136
0.141
0.148
0.140
0.147
0.147
0.171
0.136
0.117
0.105
0.103
0.047
0.042
0.069
0.037
0.031
0.035
0.081
0.125
0.144
0.250
0.256
0.262
0.244
-
1,125,000
50,000,000
3,400,000
2,000,000
100,000
3,000,000
3,000,000
2,000,000
2,000,000
1,250,000
1,750,000
1,750,000
1,750,000
2,000,000
2,000,000
2,000,000
2,000,000
345,000
300,000
400,000
100,000
4,450,000
4,800,000
375,000
-
600,000
-
-
-
-
-
-
500,000
-
-
-
-
-
-
-
155,000
-
-
-
-
-
2,000,000
200,000
500,000
1,000,000
450,000
200,000
20,000,000
3,200,000
7,500,000
3,850,000
500,000
500,000
-
-
-
150,000
200,000
-
-
-
-
-
-
21,868,796
8,300,000
14,000,000
600,000
3,225,000
2,900,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
600,000
-
-
-
-
-
-
300,000
-
-
-
-
-
-
-
-
-
1,125,000
41,750,000
3,400,000
2,000,000
75,000
3,000,000
3,000,000
2,000,000
2,000,000
1,250,000
1,750,000
1,750,000
-
2,000,000
2,000,000
2,000,000
-
200,000
225,000
300,000
100,000
1,575,000
-
400,000
250,000
500,000
150,000
-
6,875,000
3,200,000
7,500,000
-
125,000
145,833
-
-
-
-
-
-
-
90,665,833
500,000
154,145,000
-
34,823,796
-
15,625,000
4,175,000
14,625,000
BrainChip Holdings Ltd
2020 Annual Report
63
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
25. SHARE-BASED PAYMENTS (Continued)
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(1) Options issued to employees and consultants which vest equally over a 4-year period on each anniversary of
the grant date.
(2) 50,000,000 unlisted options were with an expiry date of 30 September 2021. 23,000,000 options vest equally
over a 4-year period. 27,000,000 options vest equally over a 4-year period after attainment of specific
performance criteria.
(3) 6,000,000 unlisted options issued to consultants on 16 February 2017. 50% of these options vested
immediately and 50% vested on 31 December 2017. Options expire on 16 February 2022 and 31 December
2022 respectively.
(4) 4,000,000 unlisted vested options held after the resignation of the Director.
(5) 7,000,000 unlisted options were issued to Directors, of which 25% of the options vest on each anniversary date
of the offer date (1 February 2017) and expire five years from each vesting date.
(6) 8,000,000 unlisted options were issued to Directors of which 25% of the options vest on each anniversary date
of the offer date (7 July 2017) expire five years from each vesting date.
(7) 4,450,000 unlisted options issued to employees on 13 March 2018 and expiring on 13 March 2028 with the
following vesting terms: 1,200,000 vest 5 July 2021; 800,000 vest 7 October 2021; 1,500,000 vest 9 December
2019; 800,000 vest 15 January 2021; 150,000 vesting equally over a 4-year period from 5 March 2018.
(8) 2,000,000 unlisted options issued to consultants on 13 March 2018, expiring on 13 March 2028, with the
following vesting terms: 25% on 30 April 2018, 25% on 30 September 2018 and 50% on 13 February 2019.
(9) 7,500,000 options vest on the first anniversary of the grant date, with 1/36th monthly thereafter; 2,500,000
options will vest each anniversary of the grant date.
(10) 7,500,000 options vest on the first anniversary of the grant date, with 1/36th monthly thereafter; 3,000,000
options will vest each anniversary of the grant date.
(11) 7,500,000 options vest immediately.
(12) 25% vests on the first anniversary of the grant date, with 1/36th monthly thereafter.
(13) Options vest on the 4th anniversary of the grant date.
(d) Options pricing model
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(1) Options issued under LTIP - 2020
The fair value of the equity-settled share options granted under the LTIP is estimated as at the date of the
offer of the grant using a Black Scholes Option Pricing model. The following table lists the inputs to the
models used for the valuation of options during the year ended 31 December 2020:
Number of
options
Expected
Share price
life of
at Grant
options in
Date
years
US$
10.0
0.089
10.0
0.215
10.0
0.338
10.0
0.271
10.0
0.264
10.0
0.264
(1) Options were originally granted on 10 August 2020 with a fair value of $0.112 per option. These options were
modified on 11 September 2020 resulting in an incremental FV of $0.01 per option which has been added to
options fair value.
Risk-free
interest rate
(%)
0.89
0.90
0.90
0.96
0.91
0.91
Fair value at
measurement
date
$US
0.079
0.122
0.301
0.242
0.235
0.235
Exercise
price
US$
0.089
0.145 (1)
0.338
0.271
0.264
0.264
Expected
volatility
(%)
100.0
100.0
100.0
100.0
100.0
100.0
8,300,000
14,000,000
600,000
3,225,000
2,900,000
500,000
Employees
(2) Options issued under LTIP - 2019
The fair value of the equity-settled share options granted under the LTIP is estimated as at the date of grant
using a Black Scholes Option Pricing model. The following table lists the inputs to the models used for the
valuation of options during the year ended 31 December 2019:
Director
Employees
Number of
options
8,000,000
22,000,000
20,000,000
7,500,000
4,650,000
500,000
500,000
Fair value at
measurement
date
US$
0.031
0.038
0.039
0.030
0.042
0.023
0.028
Share
price at
Grant
Date
US$
0.037
0.045
0.045
0.037
0.048
0.026
0.032
Exercise
price
US$
0.052
0.047
0.042
0.069
0.037
0.031
0.035
Expected
volatility
(%)
88.4
88.4
88.4
88.4
94.5
94.4
95.3
Risk-free
interest rate
(%)
1.50
1.44
1.44
1.50
1.17
0.96
1.00
Expected
life of
options in
years
10.3
10.0
10.0
10.1
10.0
10.0
10.0
BrainChip Holdings Ltd
2020 Annual Report
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
25.
SHARE-BASED PAYMENTS (Continued)
(3) Options issued in accordance with Convertible Securities Agreement - 2019
The fair value of the equity-settled share options granted in accordance with the Convertible Securities
Agreement is estimated as at the date of grant using a Black Scholes Option Pricing model applying the
following inputs:
Number of
options
Fair value at
measurement
date
US$
Share price at
Grant Date
US$
Exercise price
US$
21,868,796
0.03
0.053
0.082
Expected
Volatility
(%)
92.0
Risk-free
interest rate
(%)
Expected
life of
options in
years
0.98
3
The expected dividend yield for all options granted during the period was nil. The expected life of the share
options 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 over a period similar to the life of the
options is indicative of future trends, which may not necessarily be the actual outcome.
(e) Performance Rights issued under LTIP
The following table summarises the movement in Performance Rights issued to under LTIP:
LTIP Performance Rights
Opening
balance
1 January
2020
Issued during
the year
Converted
during the
year
-
-
25,000
25,000
Closing
balance
31 December
2020
25,000
25,000
-
-
Performance rights valuation model
The fair value of the performance rights granted under the LTIP is estimated as at the date of grant using the
share price and the exchange rate at the date of the offer of the grant. The following table lists the fair value
of performance rights issued during the year:
Number of
performance
rights
Grant date
Fair value at
grant date
US$
2020: Consultants
25,000
18/11/2020
0.264
(g) Restricted Stock Units issued as share-based payments
The Company granted the following Restricted Stock Units to employees, the fair value of which is estimated
using the share price on the date of the offer of the grant. The RSUs are subject to various vesting periods
effective from date of grant.
2020
2019
Consultant
Employees
Employees
Number of RSUs
granted
Grant date
Fair value at the
date of offer of
grant.
US$
12,500
2,100,000
350,000
2,462,500
2,000,000
2,000,000
03/12/2020
10/08/2020
21/12/2020
0.264
0.089
0.264
26/06/2019
0.048
BrainChip Holdings Ltd
2020 Annual Report
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Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
26. CONTINGENT ASSETS AND LIABILITIES
The Group had no contingent assets or liabilities at 31 December 2020 (31 December 2019: $Nil).
27. EVENTS AFTER THE BALANCE SHEET DATE
Subsequent to the end of the year, LDA converted the remaining 13,145,556 options exercisable at A$0.20 by
the end of January 2021, resulting in a cash injection of $2,031,235 (A$2,629,111). A further 4,850,000 options
were exercised under the LTIP.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or
may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the
Group in subsequent financial years.
28. AUDITOR’S REMUNERATION
Amounts received or due to be receivable by Ernst & Young (Australia) for:
An audit or review of the financial reports of the entity
Amounts received or due and receivable by non-Ernst & Young audit firms
for:
An audit or review of the financial report of the entity
2020
US$
2019
US$
107,593
107,593
96,460
96,460
9,851
9,851
9,785
9,785
29. OPERATING SEGMENTS
For management purposes, the Group is organised into one operating segment, being the technological
development of designs that can be licensed to OEM (Original Equipment Manufacturer) Customers, End Users
and System Integrators based on Artificial Neural Networks.
All the activities of the Group are interrelated, and each activity is dependent on the others. Accordingly, all
significant operating disclosures are based upon analysis of the Group as one segment. The financial results
from this segment are equivalent to the financial statements of the Group as a whole.
The Group currently derives revenue from BrainChip Inc., located in the USA, and BrainChip SAS, its France
based subsidiary.
Geographically, the Group has the following revenue information based on the location of its customers and non-
current assets from where its investing activities are managed.
Revenue from external customers
North America
Europe, Middle East & Asia (EMEA)
Revenue from continuing operations
2020
US$
2019
US$
100,000
20,829
120,829
12,231
63,343
75,574
Customers representing more than 10% of revenues in the current year amounted to $80,000 (2019: $13,397)
comprising USA based Customer A: $50,000 of development service revenue; and USA based Customer B:
$20,000 of development service revenue and $10,000 product revenue.
In the prior year $10,000 of product sales and from an Asian customer and $60,958 of development service
revenue from European customers, comprising Customer A: $22,228 and Customer B $38,730.
Non-current assets
North America
EMEA
2020
US$
945,494
1,052,832
1,998,326
2019
US$
1,104,788
1,076,469
2,181,257
BrainChip Holdings Ltd
2020 Annual Report
66
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(f)
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
30. RELATED PARTY DISCLOSURES
(a) Ultimate parent
The ultimate legal parent entity of the Group is BrainChip Holdings Ltd.
(b) Subsidiaries
The consolidated financial statements include the financial statements of BrainChip Holdings and the
subsidiaries listed in the following table:
Name
Subsidiary companies of BrainChip Holdings Ltd
BrainChip Inc. (1)
BrainChip Research Institute Pty Ltd
Subsidiary companies of BrainChip Inc.
BrainChip SAS
BrainChip Systems India Private Limited (2)
Country of
incorporation
USA
Australia
France
India
Beneficial interest
2020
100%
100%
100%
100%
2019
100%
-
100%
-
(1) BrainChip Holdings Ltd holds 100% of the shares of BrainChip Inc. effective from 10 September 2015.
(2) BrainChip Holdings Ltd holds 1%, and BrainChip Inc. holds 99%, of the shares of BrainChip Systems India
Private Limited, effective from 22 July 2020.
(c) Other entities
The consolidated financial statements include the following entities controlled by BrainChip Holdings Ltd:
Beneficial interest
Name
BrainChip Long Term Incentive Plan Trust (1)
Country of
registration
Australia
2020
-
2019
-
(1) BrainChip Holdings Ltd executed the BrainChip Long Term Incentive Plan Trust on 2 August 2018 and
appointed Equity Trustees Limited as the Plan Trustee, replacing Solium Nominees (Australia) Pty Ltd,
effective from 2 March 2020.
(d) Key Management Personnel compensation
Total remuneration paid to KMP of the Group during the year are as follows:
Short-term employee benefits
Termination expense
Share-based payment
2020
US$
1,979,665
80,830
916,949
2,977,444
2019
US$
1,994,008
-
713,016
2,707,024
Related party transactions with KMPs of the Group are as follows:
There were no related party transactions with KMPs of the Group.
Transactions with other related parties
There were no transactions with other related parties.
Loans to/from related parties
There were no outstanding loans arising to or from related parties (31 December 2019: $Nil).
BrainChip Holdings Ltd
2020 Annual Report
67
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
31.
PARENT ENTITY INFORMATION
Information relating to BrainChip Holdings Ltd
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Other contributed equity
Accumulated losses
Share-based payment reserve
Option premium reserve
Foreign currency translation reserve
Other reserves
Total shareholders’ equity
Net loss of the parent entity (1)
Total comprehensive loss of the parent entity
2020
US$
2019
US$
3,308,421
18,164,857
21,473,278
(4,379,393)
-
(4,379,393)
17,093,885
6,373,463
3,538,746
9,912,209
(815,859)
-
(815,859)
9,096,350
123,804,655
2,025,617
(148,350,917)
39,384,827
480,731
-
(251,028)
17,093,885
89,961,546
2,025,617
(121,309,888)
38,189,372
480,731
-
(251,028)
9,096,350
27,041,026
27,041,026
12,563,187
12,563,187
(1) At the reporting date investments and loans receivable from controlled entities net of provision for impairment
totalled $19,046,878 (2019: $3,537,745). Impairment expense of $9,370,125 (2019: $8,684,413) was
recognised for the year ended 31 December 2020.
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Nil
Contingent liabilities of the parent entity
Nil
Contractual commitments by the parent entity for the acquisition of property, plant or equipment
Nil
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2020 Annual Report
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Directors’ Declaration
In accordance with a resolution of the Directors of BrainChip Holdings Ltd, I state that:
In the opinion of the Directors:
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the financial statements and notes of the Company and of the Group are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Company's and the Group's financial position as at 31
December 2020 and of their performance for the year ended on that date; and
complying with the Australian Accounting Standards (including the Australian Accounting
Interpretations) and Corporations Regulations 2001; and
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2(b) and;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable; and
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 31 December
2020.
(b)
(c)
(d)
On behalf of the Board.
l
Emmanuel T. Hernandez
Chair
California, U.S.A., 24 February 2021
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2020 Annual Report
69
Ernst & Young
11 Mounts Bay Road
Perth WA 6000, Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
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Independent auditor’s report to the members of BrainChip Holdings Ltd
Report on the audit of the financial report
Opinion
We have audited the financial report of BrainChip Holdings Ltd (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at
31 December 2020, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, 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 consolidated financial position of the Group as at
31 December 2020 and of its consolidated financial performance for the year ended on that
date; 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 (including Independence Standards) (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.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
JKN:AJ:BRAINCHIP:009
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We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
Financial instruments
Why significant
How our audit addressed the key audit matter
As disclosed in Notes 19 and 22 to the financial
statements, the Group entered into a Put Option
Agreement (POA) with LDA Capital Limited and LDA
Capital LLC (together LDA Capital) to provide funding
of up to A$45 million with a minimum commitment of
A$20 million.
The accounting treatment, classification and
valuation of the financial instruments was complex
due to significant judgement involved in identifying
and valuing the derivative asset and derivative
liability at inception and through to the balance date.
Fair value movements in the derivatives are driven by
movements in the financial markets.
Refer to note 2(h) of the financial report for a
description of the applied accounting policy.
As such this matter was determined to be a key audit
matter.
Our audit procedures included the following:
►
►
►
►
►
►
►
►
Examining the agreements to understand the
key terms and conditions.
Evaluating the Group’s accounting treatment of
the financial instruments in accordance with
the applicable Australian Accounting
Standards.
Assessing the Group’s valuations of the
derivative liabilities - options, including the
methodology used for the valuations.
Vouching the cash received from the exercise
of options.
Assessing the valuation of the derivative asset
– put option premium, including assessing the
methodology used for the valuations by
management’s specialist.
Testing the calculation of fair value movements
on the derivatives and the corresponding
impact on the Statement of Profit and Loss and
Other Comprehensive Income.
Engaging our internal valuation specialists to
assess the reasonableness of the assumptions
used in the derivative liability valuation.
Assessing the adequacy of the presentation
and disclosures included in Notes 2(h), 19 and
22 to the financial statements, including
whether the classifications and disclosures
were presented in accordance with the
applicable Australian Accounting Standards.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Share-based payments
Why significant
How our audit addressed the key audit matter
As disclosed in Note 25 to the financial statements,
the Group has awarded significant share-based
payments to employees, directors, and consultants
during the year, contributing to a total share-based
payment expense of approximately US$1.4 million.
The valuation of share-based payments is complex
and involves the use of subjective assumptions that
have a material effect on the financial statements.
►
►
As such this matter was determined to be a key audit
matter.
►
Our audit procedures included the following:
Assessing the Group’s determination of share-
based payment expense to ensure the balances
were calculated in accordance with the
applicable Australian Accounting Standards.
Engaging our internal valuation specialists to
assess the Group’s calculation of the fair value
of share-based payments issued during the
year, including assessing the key assumptions
used.
Assessing the adequacy of the disclosures
included in Note 25 to the financial statements,
including whether the classifications and
disclosures were presented in accordance with
the applicable Australian Accounting
Standards.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2020 Annual Report, 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, with the exception of the Remuneration Report
and our related assurance opinion.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the 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 the 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
judgment 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
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, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 25 of the directors’ report for the
year ended 31 December 2020.
In our opinion, the Remuneration Report of BrainChip Holdings Ltd for the year ended 31 December
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.
Ernst & Young
J K Newton
Partner
Perth
25 February 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Additional Shareholder Information as at 31 January 2021
(a) Top 20 Shareholders
Number of Shares
%
MR PETER ADRAIN VAN DER MADE
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR LOUIS DINARDO
LDA CAPITAL LIMITED
MR ADAM OSSEIRAN & MRS REBECCA OSSEIRAN-MOISSON
CROSSFIELD INTECH NOMINEES PTY LTD
NERONA PTE LTD
MR PAUL GLENDON HUNTER
BRISPOT NOMINEES PTY LTD
COMSEC NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
MR JEFFREY BRIAN WILTON
MR DAVID JAMES EVANS
EQUITY TRUSTEES LIMITED
BNP PARIBAS NOMS PTY LTD
ARVADA PTY LTD
176,305,508
119,205,377
114,093,915
54,023,572
52,770,144
20,734,547
11,779,362
11,145,556
9,338,500
9,338,500
8,050,000
8,000,000
7,253,083
7,199,542
6,806,907
5,620,000
5,500,000
5,370,000
5,358,947
5,250,000
10.818%
7.314%
7.001%
3.315%
3.238%
1.272%
0.723%
0.684%
0.573%
0.573%
0.494%
0.491%
0.445%
0.442%
0.418%
0.345%
0.337%
0.330%
0.329%
0.322%
Total Shares - Top 20 Holdings
643,143,460
39.463%
Total Shares
(1) 115,589,833 fully paid ordinary shares are held by Merrill Lynch (Australia) Nominees Pty Limited on behalf of Mr
1,629,737,144
Mankar.
(b)
(i) Distribution of quoted fully paid ordinary shares
Size of parcel
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Number of
share holders
3,236
15,260
6,490
10,335
Number of
shares
2,551,906
41,362,388
51,677,797
326,958,982
1,551
1,207,186,071
36,872
1,629,737,144
%
0.16
2.54
3.17
20.06
74.07
100.0
There are 2,028 holders with less than a marketable parcel of ordinary shares based on the Company’s closing
market price of $0.545 on 31 January 2021.
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BrainChip Holdings Ltd
2020 Annual Report
75
Additional Shareholder Information as at 31 January 2021
(ii) Distribution of unquoted securities
Number of
Option
holders
Number of
options
Number of
perfor-
mance
rights
holders
Number of
perform-
ance
rights
Number of
restricted
stock unit
holders
-
-
-
1
36
37
-
-
-
100,000
149,920,000
150,020,000
-
-
-
2
-
2
-
-
-
25,000
-
25,000
-
-
-
4
10
14
Number of
restricted
stock units
-
-
-
387,500
4,075,000
4,462,500
Size of parcel
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
(c) Substantial Shareholders
MR PETER AJ VAN DER MADE
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED (1)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
%
Number of
shares
10.82
176,305,508
7.31
7.00
119,205,377
114,093,915
(1) 115,589,833 fully paid ordinary shares are held by Merrill Lynch (Australia) Nominees Pty Limited on
behalf of Mr Mankar.
(d) Voting Rights
The voting rights for each class of security on issue are:
Ordinary fully paid shares
Each ordinary shareholder is entitled to one vote for each share held.
Options
The holders of options have no voting rights. Upon exercise of the option, the holders will be holders of fully
paid ordinary shares and therefore will have voting rights as afforded to shareholders of these securities.
Performance Rights
The holders of performance rights have no voting rights. Upon vesting of the performance rights, the holders
will be holders of fully paid ordinary shares and therefore will have voting rights as afforded to shareholders of
these securities.
Restricted Stock Units
The holders of restricted stock units have no voting rights. Upon vesting of the restricted stock units, the
holders will be holders of fully paid ordinary shares and therefore will have voting rights as afforded to
shareholders of these securities.
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2020 Annual Report
76