Annual
Report
2020
CONTENTS
The Business
Directors’ Report
Financial Report
Independent Auditor’s Report
Corporate Governance Report
Corporate Directory
2
4
9
33
37
IBC
Our Vision
Our vision is to become a trusted business-to-business (B2B) supplier of nutritional dairy
products including consumer ready Infant Milk Formula (IMF), IMF base powders, and
other nutritional ingredients.
Annual Report 2020 1
The Business
We are Happy Valley Nutrition Limited, a
proudly independent, New Zealand dairy
company located in the Waikato region.
The Facility
The Company is planning to
develop a nutritional grade milk
processing plant for IMF and other
nutritional products (Facility).
The Company’s site is strategically
located in the Waikato region, the
largest milk producing region in
New Zealand.
The Company has successfully
obtained Resource Consents, which
include: land use, air discharge,
stormwater discharge, waste water
discharge and water take for the
proposed Facility.
2 Happy Valley Nutrition Limited
Progress since IPO
Since listing on the ASX, many
pre-project milestones set out in
the Prospectus have been achieved,
including building our internal
capability, finalising the basis of
design, and conditional acquisition
of the outstanding property.
Despite the challenges presented
by Covid-19, the Company made
significant progress with several
international dairy and infant formula
companies, signing four non-binding
Heads of Agreement for the supply of
high value nutritional ingredients.
This progression with our partners
clearly highlights robust demand for
the Company’s product offerings and
manufacturing flexibility inherent in
the Facility’s proposed design.
These evolving market signals have
strengthened our business case
to firstly focus on producing dairy
nutritional ingredients and then
moving toward consumer ready
IMF products.
Growth Strategy
The Company’s growth strategy can be summarised
under four pillars:
1) Partners / Customers and Products
Happy Valley Nutrition Limited is pursuing
a B2B strategy that is focused on a range
of nutritional ingredient products, strategic
partners and customers.
2) Milk Pool
Happy Valley Nutrition Limited recognises that the
success of its business is dependent on reliable milk
supply, which stems from great relationships with
farmers, sustainable environmental practices and
being situated in a large milk catchment.
3) Construction
The spray dryer for the Facility is anticipated to
have a capacity of 35,000 metric tonnes per annum,
which will include state-of-the-art technology
that has capability to produce a wide range of
nutritional powders efficiently. The Facility will
utilise low carbon and water use technologies for
the manufacturing process via the use of solar
arrays to produce electricity, and reverse osmosis
for water recycling, respectively.
4) Quality
Quality and regulatory requirements are
fundamental to Happy Valley Nutrition Limited’s
ability to export products and is planning to
implement leading edge traceability and hygiene
standards that drive product quality, product
flexibility and efficiency.
Annual Report 2020 3
Directors’ Report
For year ended 30 June 2020
The board of directors of Happy Valley Nutrition Limited (“HVM” or “the Company”) present their report, together with the financial
statements, on the Company for the year ended 30 June 2020.
Directors
The following persons held office as directors of Happy Valley Nutrition Limited during the year ended 30 June 2020. The names and details
of the directors are:
Ivan Hammerschlag
David McCann
Randolph van der Burgh
Anthony Kahn
Gregory Wood
Review of Operations
Chairman
Director
Director
Director (appointed 22 January 2020)
Director and CEO (appointed 10 March 2020)
The Company set a series of objectives at the start of the financial year, which included raising additional capital, listing on the Australian
Securities Exchange (ASX), engaging with potential strategic partners, finalising the basis of design for the major plant, expanding the
network of potential milk suppliers, building an experienced leadership and operations team, securing agreements for remaining irrigation
properties and seeking Overseas Investment Office (OIO) approval.
The year to 30 June 2020 saw the Company complete its Initial Public Offering for NZD 13,016,764 (AUD 12,505,910) and being admitted to
the official list of the ASX on 22 January 2020 (ASX Code: HVM).
It is also pleasing to report the Company has made significant progress on other critical project development initiatives which enables the
business to move closer to the next major milestone of securing funding for the construction of the Facility. While the COVID-19 pandemic
has somewhat slowed progress, HVM is making solid, tangible progress.
Some key highlights for the year include:
l Ongoing discussions with large international dairy companies and multinational suppliers of Infant Milk Formula (IMF) has resulted in four
non-binding Heads of Agreement being signed shortly after year end for the supply of skim milk powder ingredients and Anhydrous Milk
Fat (AMF) to start in the initial years of operation.
l Continued positive engagement with milk suppliers in the Waikato milk catchment region.
l Babbage Consultants Limited was appointed to assist in the design and documentation to enable HVM to be prepared to tender the
contract for the main plant in a timely manner and to assist in discussions to secure strategic partners.
l Preparation, development, and submission of management plans to the District Council to give effect to the land use consent.
l Progression on the detailed design of the road realignment for the Redlands Road and State Highway 31 intersection.
l The appointments of CFO, Gareth Jones, Capital Projects Manager, Luke Reeves, and GM of Sales and Marketing, Champak Mehta.
All three have considerable experience to successfully advance the Company’s project development initiatives.
l Secured agreements to acquire the outstanding irrigation land and land adjacent to the proposed Facility at 5 Redlands Road,
Ōtorohanga, New Zealand. Settlement is conditional upon receiving OIO approval, funding and other relevant consents.
During the last six months of the 2020 financial year, HVM enhanced its development strategy which will result in more diversified revenue
streams when the IMF plant commences operations. This sees an initial focus on selling high-quality skim milk powders and AMF to a
broader customer base in the early years of operation, then adding IMF products over time. This path reduces the initial capital expenditure
by allowing the canning plant to be added later. The site has been master-planned for two dryers and a blending and canning plant, which
will be incrementally added over time without major disruptions to the site operations.
Having made significant progress on all our objectives and with an enhanced strategy focusing on a broader customer base in the initial years,
the Board believes execution risks are reducing. The work to date and that of the coming 12 months, places HVM in the very best position to
meet its strategic vision of becoming a trusted business-to-business supplier of consumer-ready high-quality nutritional dairy products.
Ivan Hammerschlag
Chairman
23 September 2020
Greg Wood
CEO
23 September 2020
4 Happy Valley Nutrition Limited
Our Board
Ivan Hammerschlag
Non-Executive Chairman
Mr Hammerschlag was appointed to the Board as non-executive Chairman on 4 July 2018.
He has 40 years of business and finance experience including as a retail specialist. Founder and Chairman
of ASX listed RCG Corporation Limited (now called Accent Group Limited).
Mr Hammerschlag is also a founding shareholder and director in Centennial Property Group, a property
syndicator based in Sydney that invests across Australia. He is based in Sydney.
Directorships of Listed Entities held in the last 3 years:
Accent Group Limited (retired 23 November 2017).
Committees:
Chair, Remuneration and Nomination Committee
Greg Wood
Director and CEO
Greg has 20 years’ experience in the dairy industry across New Zealand and Australia. Greg joined the Company
from Beca Limited, where he was responsible for its New Zealand and Australia dairy business. Previously Greg
was a Senior Project Manager for Fonterra’s Major Capital Projects group.
Across his career, Greg has had various leadership roles in managing the implementation of multiple:
l Nutritional powder plants (IMF Stage 1, 2 and 3)
l Commodity milk powder plants;
l Consumer ready packaging plants (dry-blending, canning and sachet);
l Dairy product distribution centres (including rail distribution);
l Servicing infrastructure plants (utilities).
Committees:
Member, Audit and Risk Management Committee
David McCann
Non-Executive Director
David is a founding shareholder in Happy Valley Nutrition Limited and brings more than 25 years’ experience
in managing and operating businesses. David built infant milk formula brand A+Puro from the ground up in
Hong Kong and China with operations in New Zealand. He has served on both public and private company
Boards and has been involved in food and FMCG distribution businesses in the United States, Australia and Asia.
David is Principal of AOP Capital Limited a Hong Kong SFC regulated Asset and Wealth Manager.
Randolph van der Burgh
Non-Executive Director
Randolph is a founding shareholder in Happy Valley Nutrition Limited has more than 30 years’ experience
in managing and advising businesses. Randolph built infant milk formula brand A+Puro from the ground up
in Hong Kong and China with operations in New Zealand. Randolph is also a founding shareholder in VCFO
Group and Rockburgh Fund Services and was a former partner at Ernst & Young, New Zealand and Australia,
specialising in financial services and international tax. Randolph is a member of Chartered Accountants
Australia and New Zealand.
Committees
Chair, Audit and Risk Management Committee
Anthony Kahn
Non-Executive Director
Anthony has worked in the finance industry for over 30 years. Previously worked for Macquarie Bank Group for
18 years, including as Executive Director for 10 years. Anthony was Managing Director of ASX listed Macquarie
Infrastructure Group for 6 years.
Committees:
Member, Audit and Risk Management Committee
Member, Remuneration and Nomination Committee
Annual Report 2020 5
Directors’ Report continued
For year ended 30 June 2020
Board and Committee Attendance
The ultimate responsibility for the oversight of the operations of the Company rests with the board. However, the board may discharge any
of its responsibilities through committees of the board. The board has established the following standing committees, which assist it with the
execution of its responsibilities. The composition and effectiveness of the committees are reviewed on an annual basis:
l Audit and Risk Management Committee; and
l Remuneration and Nomination Committee.
Each of these committees operate in accordance with specific charters approved by the board which can be found on the Company’s
website. The number of scheduled board and committee meetings held during the period ending 30 June 2020 and the number of meetings
attended by each of the directors is set out in Table 1.
Board
Audit and Risk Management
Committee
Remuneration and
Nomination Committee
A
20
20
20
13
9
B
20
19
20
13
9
A
—
—
3
3
3
B
—
—
3
3
3
A
2
—
—
2
—
B
2
—
—
2
—
Number of Securities Currently Held
5,347,024
Ordinary Shares
21,428,571
Options
6,696,429
Milestone Options
8,778,031
Ordinary Shares
727,485
Options
16,104,306
Milestone Options
9,633,555
Ordinary Shares
727,485
Options
16,104,306
Milestone Options
1,625,000
Ordinary Shares
5,000,000
Options
Nil
Table 1
Ivan Hammerschlag
David McCann
Randolph van der Burgh
Anthony Kahn1
Greg Wood2
A: Meetings eligible to attend. B: Meetings attended.
1. Appointed 23 January 2020.
2. Appointed 10 March 2020.
Director Shareholdings (HVM)
Director
Mr Ivan Hammerschlag
Mr David McCann
Mr Randolph van der Burgh
Mr Anthony Kahn
Mr Greg Wood
6 Happy Valley Nutrition Limited
6 Happy Valley Nutrition Limited
Our Management Team
Greg Wood
CEO
See details on page 5.
Gareth Jones
CFO
Gareth has spent the last 9 years working in the dairy and consumer foods industry in New Zealand.
Gareth joined the Company from Goodman Fielder, where he was the Commercial Finance Manager, and
previously with Fonterra New Zealand Brands as Financial Controller. Gareth also has experience working
in the UK for multinationals, including Royal Bank of Scotland, Kraft Heinz and GlaxoSmithKline. Gareth is
a member of Chartered Accountants Australia and New Zealand.
Grant Horan
Project Manager
Grant is a founding shareholder in Happy Valley Nutrition Limited. Accomplished Executive with domestic
and international experience in operations, P&L oversight, multi-channel product distribution.
Zach Mounsey
GM Milk Supply
Significant experience in agri-business strategy management, finance, economics and leadership. Zach has
responsibility for selecting and managing the Company’s farmer suppliers, overseeing farm management
policies and practices. Zach Also partly owns a dairy farm in Ōtorohanga.
Luke Reeves
Capital Projects Manager
Luke joined Happy Valley Nutrition Limited in March 2020 from Westland Milk Products. Experienced and
successful civil infrastructure and dairy manufacturing project manager with proven delivery of multi-million
dollar projects for clients. Luke will be responsible for the overall delivery, culture and implementation of the
site development.
Champak Mehta
GM Sales and Marketing
Champak joined Happy Valley Nutrition in July 2020. He has extensive experience in strategy formulation and
business development with Fonterra, in NZ, Asia and the US. This is complemented by general management
experience in B2B sales and marketing for the pharmaceutical raw material, dairy commodity and infant
formula sectors.
Leanne Ralph
Company Secretary
Leanne Ralph was appointed to the position of Company Secretary in September 2019. Leanne has over
15 years of experience in company secretarial roles and holds this position for a number of ASX-listed entities.
Leanne is a Fellow of the Governance Institute of Australia and a Graduate Member of the Australian Institute
of Company Directors.
Annual Report 2020 7
Directors’ Report continued
For year ended 30 June 2020
Core Values
At Happy Valley Nutrition Limited we manage our business with the following core values.
l Capability and Innovation – We believe in manufacturing flexibility, using the latest technology, science, and innovation, and operating
within recognised quality frameworks.
l Community – We place people at the centre of our business. This includes our employees, suppliers, business partners, neighbours
and customers.
l Care – World leading animal care and sustainable farming practices are integral to us building our reputation and protecting resources
for future generations.
l Consumer Trust – We recognise the value and trust consumers place on the source of the products they, and their dependants, consume.
We will build trust through taking a staged approach to our product offerings, demonstrating our values along the journey to realise
our vision.
Health, Safety, Wellbeing and Environmental Sustainability
Health, Safety and Wellbeing of Our People
ARRIVE WELL
ACT SAFE
HOME HAPPY EVERYDAY
Happy Valley Nutrition Limited place our people at the centre of our business. To deliver on this commitment we:
l Set objectives, SMART goals and strategies to provide easily understood direction for our health, safety and wellness performance.
l Promote a fair and positive culture that recognises the work undertaken across our business.
l Review and maintain an active health, safety and wellness management system.
l Comply with all relevant health and safety legislation, compliance obligations and voluntary standards.
Our commitment to the Environment
ZERO-WASTE
CLEAN SITE
OUR FUTURE
To deliver on our environmental commitment we will meet, or exceed, current regulatory and compliance standards by:
l Acting responsibly to implement international best practice environmental standards throughout our supply chain, which includes a focus
on minimising our environmental footprint.
l Aiming for zero-waste through strategy, design, and applying our core values.
l Supporting best practice dairy farming through assisting our suppliers with sustainable farming practices.
8 Happy Valley Nutrition Limited
8 Happy Valley Nutrition Limited
Financial Report
Year Ended 30 June 2020
Happy Valley Nutrition Limited
NZCN 5952532 (ARBN 636 597 101)
ASX Code: HVM
Contents
Directors’ Declaration
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Financial Position
Statement of Cash Flows
Notes to the Financial Statements
Reporting entity
Basis of preparation
Significant Judgements and Estimates
1. Going Concern
2. Company performance
2.1 Revenue
2.2 Expenses
2.3 Reconciliation of net profit/(loss) to operating cashflows
2.4 Earnings per share
2.5 Segment Reporting
3. Assets
3.1 Property, plant and equipment
4. Debt and equity
4.1 Borrowings
4.2 Lease liabilities
4.3 Convertible debt
4.4 Share capital
4.5 Share based payments
5. Capital and financial
risk management
5.1 Foreign exchange
5.2 Interest rate
5.3 Credit risk management
5.4 Liquidity risk
5.5 Capital risk management
5.6 Financial instruments
5.7 Fair value measurement
6. Other information
6.1 Related party transactions
6.2 Commitments
6.3 Contingent liabilities
6.4 Events after reporting date
6.5 Income Tax
6.6 Goods and Services Tax
10
11
12
13
14
15
15
15
15
17
18
18
19
19
19
20
21
21
21
24
25
27
27
27
27
27
27
28
28
31
31
31
32
32
General information
The Annual Financial Statements of Happy Valley Nutrition Limited are for the year ended 30 June 2020.
The Annual Financial Statements are presented in New Zealand dollars, which is Happy Valley Nutrition Limited’s functional currency.
Happy Valley Nutrition Limited is an ASX listed public company limited by shares, incorporated and domiciled in New Zealand.
Its registered office and principal place of business are 96 St Georges Bay Road, Parnell, Auckland 1052 New Zealand
Happy Valley Nutrition Limited is in the process of developing a vertically integrated, formulaic milk processing, blending and packaging
Facility (Facility) that produces infant milk formula (IMF) and other nutritional products for sale in the global export markets.
Annual Report 2020 9
Directors’ Declaration
For the year ended 30 June 2020
In the opinion of the Directors of Happy Valley Nutrition Limited, the financial statements and notes, on pages 11 to 32:
l Comply with New Zealand generally accepted accounting practice and give a true and fair view of the financial position of the
Happy Valley Nutrition Limited as at 30 June 2020 and the results of its operations and cash flows for the year ended on that date; and
l Have been prepared using appropriate accounting policies, which have been consistently applied and supported by reasonable
judgements and estimates.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of the
financial position of the Group and facilitate compliance of the financial statements with the Financial Reporting Act 2013.
For and on behalf of the Board of Directors:
Ivan Hammerschlag
Chairman
10 Happy Valley Nutrition Limited
Statement of Comprehensive Income
For the year ended 30 June 2020
Interest Income – financial assets at amortised cost
Other income
Gross Profit
Operating expenses:
Directors’ fees
Employee costs
LGO reverse takeover costs
Loss on derecognition of financial liability
Fair value loss on embedded derivatives
Finance costs
IPO costs
Share-based Transactions
Depreciation
Foreign exchange loss
Other operating expenses
Total Operating Expenses
Operating income/(Loss)
Net profit (loss) before taxation
Income tax expense
Net profit (loss) after taxation
Other comprehensive income
Total comprehensive income after tax
Earnings per share
Basic (NZD per share)
Diluted (NZD per share)
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
Notes
79,444
—
79,444
4,580
8,088
12,668
(468,555)
(301,285)
(770,833)
(223,795)
(617,575)
(250,906)
(751,091)
(769,769)
(753,351)
(9,577,393)
(6,074)
(70,309)
—
—
—
—
—
—
—
(2,507)
4.3
4.3
4.3
4.5
2.2
(682,184)
(318,613)
(14,718,040)
(846,200)
(14,638,596)
(833,532)
(14,638,596)
(833,532)
6.5
—
(75,395)
(14,638,596)
(908,927)
—
—
(14,638,596)
(908,927)
(0.10)
(0.10)
(0.01)
(0.01)
Annual Report 2020 11
Statement of Changes in Equity
For the year ended 30 June 2020
Notes
Share Capital
NZD
2,384,000
Share Option
Reserve
NZD
Accumulated
Losses
NZD
Total
NZD
Balance at 1 July 2019
Loss for the period
Total comprehensive loss for the period
Transactions with Owners in their capacity as owners
Share capital issued – IPO proceeds
Share capital – IPO issue costs
Share options issued
Share-based payment
Convertible debt converted upon IPO
—
—
13,016,764
(808,111)
4.5.1
4.5.2
4.3
—
7,719,213
1,858,180
8,506,165
—
—
—
—
—
—
—
(1,102,800)
1,281,200
(14,638,596)
(14,638,596)
(14,638,596)
(14,638,596)
—
—
—
—
—
13,016,764
(808,111)
7,719,213
1,858,180
8,506,165
Total contributions by and distributions to owners
22,572,998
7,719,213
(14,638,596)
15,653,615
Equity as at 30 June 2020
4.4
24,956,998
7,719,213
(15,741,396)
16,934,815
Balance at 1 July 2018
Loss for the period
Total comprehensive loss for the period
Total contributions by and distributions to owners
Share Capital
NZD
2,384,000
—
—
—
Equity as at 30 June 2019
2,384,000
Share Option
Reserve
NZD
Accumulated
Losses
NZD
Total
NZD
—
—
—
—
—
(193,873)
2,190,127
(908,927)
(908,927)
(908,927)
(908,927)
(908,927)
(908,927)
(1,102,800)
1,281,200
12 Happy Valley Nutrition Limited
Statement of Financial Position
As at 30 June 2020
Current Assets
Cash and Cash Equivalents
Other Current Assets
Total Current Assets
Non-Current Assets
Property, Plant and Equipment
Other Non-Current Assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and Other Payables
Convertible Debt
Total Current Liabilities
Non-Current Liabilities
Loan
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Share Capital
Share Options Reserve
Accumulated Losses
Total Equity
As at
30 Jun 20
NZD
As at
30 Jun 19
NZD
Notes
9,280,325
1,362,162
277,067
27,359
9,557,392
1,389,521
3.1
7,865,120
5,630,834
—
14,193
7,865,120
5,645,027
17,422,512
7,034,548
487,697
—
429,006
3,214,165
487,697
3,643,171
—
—
2,110,177
2,110,177
487,697
5,753,348
16,934,815
1,281,200
4.3.1
4.3.3
4.4
4.5.1
24,956,998
2,384,000
7,719,213
—
(15,741,396)
(1,102,800)
16,934,815
1,281,200
Annual Report 2020 13
Statement of Cash Flows
For the year ended 30 June 2020
Cash Flows from Operating Activities
Payments to Suppliers and Employees
Interest received
Cash receipts from other operating activities
Tax paid
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
Notes
(2,936,215)
(1,083,294)
83,581
—
(18,482)
4,533
68,472
(1,359)
Net Cash Flows from Operating Activities
2.3
(2,871,116)
(1,011,648)
Cash Flows from Investing Activities
Payment for property, plant and equipment
3.1
(2,240,360)
(1,743,234)
Other receipts from investing activities
Net Cash Flows from Investing Activities
Cash Flows from Financing Activities
Proceeds from Share Issue
Share Issue Costs
—
—
(2,240,360)
(1,743,234)
13,016,764
(808,111)
—
—
Net proceeds from Convertible Notes and Loans
4.3.2
801,900
2,110,177
Net Cash Flows from Financing Activities
Net (decrease)/increase in cash
Foreign exchange adjustment
Net (decrease)/increase in cash
Cash at beginning of the period
Cash at end of the period
13,010,553
2,110,177
7,899,077
(644,705)
19,086
—
7,918,163
(644,705)
1,362,162
2,006,867
9,280,325
1,362,162
14 Happy Valley Nutrition Limited
Notes to the Financial Statements
For the year ended 30 June 2020
Reporting Entity
The Financial Statements presented are those of Happy Valley Nutrition Limited (‘HVM’ or ‘the Company’).
The Company is an ASX listed public company limited by shares, incorporated and domiciled in New Zealand. The Company’s purpose is
to develop a vertically integrated, formulaic milk processing, blending and packaging Facility that produces infant milk formula and other
nutritional products for sale in the global export markets.
The Company is a for profit entity, registered in New Zealand under the Companies Act 1993.
The Financial Statements were authorised by the Board of Directors on 23 September 2020.
The comparative period is for year ended 30 June 2019. The comparative period was audited by another auditor who expressed an
unmodified opinion.
Basis of Preparation
Statement of Compliance
The financial statements for the year ended 30 June 2020 have been prepared in accordance with Generally Accepted Accounting Practice.
They comply with New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable. Financial
Reporting Standards, as applicable for profit oriented entities. The financial statements also comply with International Financial Reporting
Standards (‘IFRS’).
Certain comparative figures have been reclassified during the year for consistency with the current year presentation. These classifications
had no effect on the reported results of operations.
Basis of Measurement
These financial statements have been prepared on the historical cost basis except for certain items as identified in specific accounting policies.
Foreign Exchange Transactions and Translation
These financial statements are presented in New Zealand dollars (NZD), which is the Company’s functional currency.
In the course of normal activities, the Company undertakes transactions in currencies other than the entity’s functional currency (foreign
currencies). Foreign currency transactions are recognised at the rates of exchange prevailing on the dates of the transactions. At each
reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that
date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date
when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise.
Significant Judgements and Estimates
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. Some of the estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are detailed below.
The Company has also had to make judgements regarding accounting policies and treatments that have a significant impact on the amounts
recognised in the condensed interim financial statements.
Judgement on Classification as Equity
Convertible Notes and Converting Loan
Following receipt of the ASX confirmation that the listing conditions were met on 27 December 2019 the automatic conversion obligations of
the convertible debt instruments (Note 4.3) was activated. The Company recognised the convertible debt within equity as the Company was
obliged to issue a fixed number of shares at this date, the issue of these shares occurred on 10 January 2020.
Key Sources of Estimation (Valuation)
Embedded Derivatives
The fair value of the embedded derivative liabilities associated with the Company’s convertible debt were determined utilising assumptions
and inputs to a Black-Scholes valuation model including estimated time to expiry of convertible debt instruments, the Company’s share
price of AUD 0.20 based on the expected IPO price at the time of recognition, risk free interest rate of 0.74% and assuming a 100% volatility.
This volatility was based on similar companies within the industry at the same stage in their life cycle given HVM currently had no trading
history at the date of recognition.
Annual Report 2020 15
Notes to the Financial StatementsFor the year ended 30 June 2020 Notes to the Financial Statements continued
For year ended 30 June 2020
Significant Judgements and Estimates continued
Share-Based Payments
Equity-settled share awards are recognised as an expense based on their fair value at grant date. The fair value of equity-settled shares and
options is estimated through the use of the Black Scholes valuation model which require inputs such as the risk-free interest rate, expected
dividends, expected volatility and the expected option life, and is expensed over the vesting period.
Some of the inputs used, such as expected volatility and the expected option lives, are not market observable. Using different input
estimates or models could produce different option and share values, which would result in the recognition of a higher or lower expense.
Refer to Note 4.5 for further details.
Capitalisation of development costs
Management exercises judgement in determining whether costs, such as professional and consulting fees, meet criteria to be capitalised
as development costs. Refer to note 3.1.
Changes to Accounting Policies
Apart from the adoption of NZ IFRS 16 Leases and NZ IFRIC 23 Uncertainty over Income Tax Treatments noted below, the principal
accounting policies adopted are consistent with those of the previous financial year, unless otherwise stated.
Leases
NZ IFRS 16 introduces a single lessee accounting model for all lessees which recognises all leases in the statement of financial position
through an asset representing a right to use the leased item during the leased term and a liability for the obligation to make lease payments.
The Company has a short-term sub-lease for its premises. The Company has applied the short-term lease exemption and not recognised
a right to use asset and lease liability under NZ IFRS 16.
Income Tax
NZ IFRIC 23 Uncertainty over Income Tax Treatments was adopted by the Company in the current reporting period.
Standards Issue Not Yet Effective
We are not aware of any NZ IFRS Standards or Interpretations that have recently been issued or amended that have not yet been adopted
by the Company that would materially impact the Company for the period ending 30 June 2020.
16 Happy Valley Nutrition Limited
16 Happy Valley Nutrition Limited
1. Going Concern
The financial statements have been prepared based on a going concern basis which assumes that the Company will have sufficient cash
to continue its operations for a minimum of 12 months from the date of signing the financial statements. The Directors believe the going
concern assumption is valid, reaching such a conclusion after having regard to the circumstances which they consider reasonably likely
to affect the Company during the period of at least one year from the date the financial statements are approved.
As at 30 June 2020, the Company has no external debt or debt-like obligations. The Company has committed to capital expenditure
of NZD 0.9 million (Note 6.2.1). Based on management budgets and plans, the Company has budgeted an operating loss and budgeted
certain capital expenditure for the financial year ended 30 June 2021. As at 30 June 2020, the Company had NZD 9.3 million of cash and
cash equivalents in the bank which, together with the capital raise referred to below, is sufficient to fund the budgeted operating loss and
budgeted capital expenditure.
Land Acquisition and Earthworks
Prior to settling land acquisitions of NZD 9.675 million (Note 6.2.3) and commencing earthworks, an additional capital raise is required
and is planned for later this year.
Future Business Development and Construction of the Facility
The Company also needs to raise further funding (debt or equity) to establish the business and enable construction of the Facility.
The Company still needs to:
l Secure additional funding to fund construction and working capital;
l Obtain Overseas Investment Office (OIO) approval for remaining land acquisitions;
l Obtain additional resource consents and permits regulatory approvals, licenses and /or renewals to build and operate the Facility;
l Secure long-term agreement(s) with strategic partner(s) and milk supply agreements on favourable commercial terms; and
l Complete the basis of design for the Facility, followed by construction and commissioning of the Facility within estimated timeframes
and budgets.
In the event that the Company is not able to raise sufficient additional funding for the land acquisition and earthworks as well as the future
business development and construction of the Facility, a material uncertainty would exist that may cast significant doubt on the ability of
the Company to continue as a going concern in its current configuration, and therefore it may be unable to realise its assets and discharge
its liabilities in the normal course of business. This situation could possibly impact, in particular, on the carrying value of Property, Plant and
Equipment currently recorded in the statement of financial position.
These financial statements do not include any adjustments relating to the classification and recoverability of recorded asset amounts
or to the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.
Annual Report 2020 17
Notes to the Financial Statements continued
For year ended 30 June 2020
2. Company performance
2.1 Revenue
The Company did not receive revenue from customer contracts during the year ended 30 June 2020.
The Company earns interest from funds placed on deposit with banks. Interest income on financial assets at amortised cost is earned using
the effective interest method.
2.2 Expenses
The following items of expenditure are included within other operating expenses
Convertible Note and Loan Issue Expenses
Audit fees
Insurance
Legal expenses
Rent
Deloitte Limited services included in operating expenses
Statutory audit fee
Half year accounts review
Total paid for Deloitte Limited services
HLB Mann Judd services included in operating expenses
Statutory audit fee
Total paid for HLB Mann Judd services
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
(5,135)
(177,768)
(119,855)
(96,948)
(136,349)
(16,610)
(14,750)
—
(39,588)
(10,095)
(50,000)
(60,000)
(110,000)
—
—
—
(9,855)
(9,855)
(16,610)
(16,610)
18 Happy Valley Nutrition Limited
18 Happy Valley Nutrition Limited
2.3 Reconciliation of net profit/ (loss) to operating cash flows
Loss for the period
Add/(less) non-cash items
Non-cash and non-operating items:
Depreciation expense
Convertible note novation
Expenses recognised in respect of share based payments
Loss on derecognition of financial liability and embedded derivatives
Finance Costs
Foreign exchange movements
Deferred Tax
Movements in working capital
(Increase)/Decrease in other current assets
Increase/(Decrease) in trade and other payables
Net cash outflow from operating activities
2.4 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
Earnings for the purposes of basic earnings per share
being net profit attributable to owners of the Company
Weighted average number of shares
Weighted average number of basic shares
Weighted average number of diluted shares
Earnings per share
Basic (cents per share)
Diluted (cents per share)
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
(14,638,596)
(908,927)
6,074
2,507
534,600
9,577,393
1,001,998
769,769
54,470
—
11,944,304
—
—
—
—
—
75,395
77,902
(235,515)
58,978
58,691
(239,601)
(176,824)
(180,624)
(2,871,116)
(1,011,648)
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
(14,638,596)
(908,927)
145,224,710
85,552,381*
145,224,710
85,552,381*
(0.10)
(0.10)
(0.01)
(0.01)
* The impact of the share split that occurred prior to the Company listing on the ASX has been adjusted as if the event occurred at the beginning of the prior period.
2.5 Segment Reporting
HVM is planning to operate in one industry, being the manufacture and sale of formulaic milk powder and other nutritional products. HVM
operates in one geographic location, New Zealand.
The Company’s Chief Executive Officer (CEO) is the chief operating decision maker.
Annual Report 2020 19
Notes to the Financial Statements continued
For year ended 30 June 2020
3. Assets
3.1 Property, plant and equipment
Freehold land is stated at cost and is not depreciated.
Computer and Office equipment is stated at cost less accumulated depreciation and accumulated impairment loss.
Development costs are those costs directly attributable to the acquisition and development of property and are stated at cost, less any
recognised impairment loss. These include costs incurred which are directly attributable to bringing an asset to the location and into the
condition necessary for it to be capable of operating in the manner intended by management. Development costs include consents and
permits which comprises expenditure incurred to obtain the required consents and permits to both construct and operate the Facility.
Costs such as professional fees directly attributable to bringing an asset to the location and into the condition necessary for it to be capable
of operating in the manner intended by management have also been capitalised.
Depreciation of these assets, determined on the same basis as other property assets, commences when the assets are ready for their
intended use.
Depreciation is recognised so as to write off the cost of assets (other than freehold land and development costs) less their residual values
over their useful lives, using the straight-line method.
The estimated useful lives used for each class of depreciable asset are shown below:
Fixed asset class
Computer and office equipment
Useful Life
2-5 years
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any
changes in estimate accounted for on a prospective basis. 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. The gain or loss arising on the disposal or retirement of
an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Table 3.1 Movements in Property, plant and equipment
Balance at 30 June 2018
Additions
Disposals
Depreciation
Balance at 30 June 2019
Additions
Disposals
Depreciation
Land
NZD
698,160
198,977
—
—
897,137
456,900
—
—
Computer
and Office
Equipment
NZD
Development
Costs
NZD
Total
NZD
—
7,773
—
(2,507)
5,266
17,499
—
(6,074)
3,191,947
3,890,107
1,536,484
1,743,234
—
—
—
(2,507)
4,728,431
5,630,834
1,765,961
2,240,360
—
—
—
(6,074)
Balance at 30 June 2020
1,354,037
16,691
6,494,392
7,865,120
20 Happy Valley Nutrition Limited
20 Happy Valley Nutrition Limited
4. Debt and equity
4.1 Borrowings
As at the reporting date the Company does not have any debt or interest bearing liabilities.
Borrowings
Secured convertible loan
Secured convertible note
Total Borrowings
4.2 Lease liabilities
Notes
4.3.3
4.3.1
As at
30 Jun 20
NZD
As at
30 Jun 19
NZD
—
—
—
2,110,177
3,214,165
5,324,342
NZ IFRS 16 introduces a single lessee accounting model for all lessees which recognises all leases in the statement of financial position
through an asset representing a right to use the leased item during the leased term and a liability for the obligation to make lease payments.
The Company has a short-term sub-lease for its premises. The Company has applied the short-term lease exemption and not recognised a
right to use asset and lease liability under IFRS 16.
4.3 Convertible debt
4.3.1 Secured convertible notes
The secured convertible loan notes were originally issued on 21 May 2018 with the following terms:
l Denominated in NZD 3,214,165
l Maturity date 21 November 2019
l Interest free period until 21 November 2019
l Automatic conversion – upon exchange of HVM shares for Longreach Oil Limited shares under the Share Purchase Agreement
(Note 4.5.2)
l Conversion was anticipated to be through a back-door listing via Longreach Oil Limited, where the number of shares = (x/0.7619),
where x = total number of shares on issue immediately prior to conversion.
On 10 October 2019, an amendment to the convertible notes agreement extended the interest free period to 31 March 2020, extended the
conversion and redemption period to 31 March 2020, automatically converted the notes into HVM shares upon listing on the ASX and made
the notes redeemable if the Company had not listed on the ASX or before the sunset date of 31 March 2020.
The amendment changing the IPO assumption from a back-door listing to a front door listing on the ASX was considered a substantial
modification. The original convertible note liability was derecognised on this date, with a corresponding gain (NZD 51,218) recognised in
profit or loss and a new convertible note (debt host liability) and embedded derivative recognised.
Subsequently upon receiving ASX confirmation that the listing conditions were met on 27 December 2019 the automatic conversion
obligation of the convertible note was activated. The Company reclassified the convertible note (NZD 2,280,512) and associated embedded
derivative (NZD 2,479,761) to Equity and the issue of these shares occurred on 10 January 2020.
Annual Report 2020 21
Notes to the Financial Statements continued
For year ended 30 June 2020
4. Debt and equity continued
Secured
Convertible Note
NZD
New Secured
Convertible Note
NZD
New Embedded
Derivative
NZD
Note
4.3.1
4.3.1
4.3.1
30 June 2018
Cash inflows/(outflows)
Non-cash Transactions
30 June 2019
Cash inflows/(outflows)
Non-cash Transactions
3,214,165
—
—
3,214,165
—
Derecognition original convertible note
(3,259,702)
—
—
—
—
—
—
—
—
—
—
—
—
Total
NZD
4.3.1
3,214,165
—
—
3,214,165
—
(3,259,702)
Recognition of new convertible note and
embedded derivative
—
1,791,399
1,417,085
3,208,484
Finance Costs
45,537
489,113
—
534,650
Fair value (gain)/loss on embedded derivative
Transfer to equity upon conversion
30 June 2020
—
—
—
1,062,676
1,062,676
(2,280,512)
(2,479,761)
(4,760,273)
—
—
—
Refer Note 6.1.7 Directors’ interest in convertible notes and loans.
4.3.2 Unsecured convertible notes
As part of the Deed of Termination and Release with Longreach Oil Limited (refer Note 4.5.2) on 10 October 2019, the Company entered into
an unsecured convertible loan note deed with the following terms:
l Denominated in AUD 1,250,000 (NZD 1,336,500)
l Issue date tranche 1: AUD 500,000 issued on 10-Oct-2019 (original agreement of 5 May 2019 novated and assigned to HVM, with no
consideration received)
l Issue date tranche 2: AUD 750,000 issued on 10-Oct-2019
l Maturity date: 5 November 2020
l Automatic conversion – upon receiving ASX confirmation
l Convertible into HVM shares on listing on the ASX at a conversion price equal to 80% of the issue price of the HVM shares.
A new convertible note (debt host liability) and embedded derivative was recognised on 10 October 2019. Subsequently upon receipt of the
ASX confirmation that the listing conditions were met on 27 December 2019 the automatic conversion obligation of the convertible debt
instrument was activated, the financial liability (NZD 1,010,283) and associated embedded derivative (NZD 354,937) were reclassified to
Equity and the issue of these shares occurred on 10 January 2020.
22 Happy Valley Nutrition Limited
22 Happy Valley Nutrition Limited
New Unsecured
Convertible Note
NZD
New Embedded
Derivative
NZD
Note
4.3.2
4.3.2
30 June 2018
Cash inflows/(outflows)
Non-cash Transactions
30 June 2019
—
—
—
—
Cash inflows/(outflows) – recognition of original convertible note
801,900
Non-cash Transactions
—
—
—
—
—
Total
NZD
4.3.2
—
—
—
—
801,900
Recognition of original convertible note (non-cash)
144,368
390,232
534,600
Finance Costs
Fair value (gain)/loss on embedded derivative
64,015
—
—
(35,295)
64,015
(35,295)
Transfer to equity upon conversion
(1,010,283)
(354,937)
(1,365,220)
30 June 2020
—
—
—
Refer Note 6.1.7 Directors’ interest in convertible notes and loans.
4.3.3 Secured converting loan
On 2 May 2019 the Company entered into a Secured Loan Agreement with the following key terms:
l Denominated in AUD 2,000,000 (NZD 2,110,177)
l Redemption amount AUD 2,400,000
l Maturity date 2 November 2020
l Interest rate of 20%
On 10 October 2019, an amendment to the secured loan agreement amended the terms of the agreement such that HVM at its discretion
could repay the redemption amount by issuing HVM shares on listing on the ASX based on a conversion price equal to 80% of the issue
price of the HVM shares on listing. This amendment was considered a substantial modification due to the inclusion of an embedded
derivative which altered the future economic risk exposure of the instrument. The original loan liability was derecognised on this date,
with a corresponding loss recognised in profit or loss (NZD 302,124) and a new convertible loan (debt host liability) and embedded
derivative recognised.
Upon receipt of the ASX confirmation that the listing conditions were met on 27 December 2019 the conversion obligation was activated.
The Company reclassified the convertible loan (NZD 2,110,915) and associated derivative (NZD 269,757) to Equity and the issue of these
shares occurred on 10 January 2020.
Annual Report 2020 23
Notes to the Financial Statements continued
For year ended 30 June 2020
4. Debt and equity continued
Secured
Convertible Loan
NZD
New Secured
Convertible Loan
NZD
New Embedded
Derivative
NZD
Note
4.3.3
4.3.3
4.3.3
30 June 2018
Cash inflows/(outflows)
Non-cash Transactions
30 June 2019
Cash inflows/(outflows)
Non-cash Transactions
2,110,177
—
—
2,110,177
—
Derecognition original loan
(2,260,883)
—
—
—
—
—
—
Total
NZD
4.3.3
2,110,177
—
—
2,110,177
—
—
—
—
—
—
—
(2,260,883)
Recognition of new convertible loan and
embedded derivative
Finance Costs
Foreign exchange movement
Fair value (gain)/loss on embedded derivative
Transfer to equity upon conversion
30 June 2020
Refer Note 6.1.7 Directors’ interest in convertible notes and loans.
4.4 Share capital
—
2,016,960
546,047
2,563,007
77,149
73,557
—
—
—
93,955
—
—
—
—
171,104
73,557
(276,290)
(276,290)
(2,110,915)
(269,757)
(2,380,672)
—
—
—
Ordinary shares are classified as equity. The Company has one class of ordinary shares which carry no right to fixed income.
Movements in contributed equity
Note
Number of
Shares
Share Capital
NZD
Number of
Shares
Share Capital
NZD
2020
2019
Ordinary shares
Balance at beginning of the year
10,000
2,384,000
10,000
2,420,000
Movements in the period
Impact of share splits*
Convertible Note Holders
LGO Convertible Note
HVM Converting Loan
HVM/Shaw Convertible Note
IPO raising
LGO
Share issue costs
Balance at end of year
4.3.1
4.3.2
4.3.3
4.3.2
85,542,381
—
26,735,119
4,760,273
3,125,000
546,088
12,500,000
2,380,672
4,687,500
819,132
62,529,546
13,016,764
4.5.2
17,400,000
1,858,180
—
(808,111)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(36,000)
212,529,546
24,956,998
10,000
2,384,000
* The share splits occurred on 11 October 2019, 19 October 2019 and 7 November 2019.
24 Happy Valley Nutrition Limited
24 Happy Valley Nutrition Limited
4.5 Share-based payments
Equity settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. The fair value excludes the effect of non-market based vesting conditions.
The fair value of options granted as share-based payments is determined at grant date of the equity-settled share-based payments. Such fair
value of is ascertained using a Black-Scholes pricing model which incorporates all market vesting conditions. This pricing model reflects the
price volatility of the underlying shares and therefore the probability of the options being exercised on price considerations.
At the end of each reporting period, the Company assesses the probability of the specified vesting conditions being fulfilled and the
consequent accounting implications. Revisions to the prior period estimate are recognised in profit or loss and equity.
Equity settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity
instruments granted, measured at the date the entity obtained the good or the counterparty receives the services.
4.5.1 Share Options
During the year, as part of HVM’s IPO (and as included in its prospectus dated 22 November 2019), the Directors were granted the following
options on 11 October 2019.
l IPO Options – each director received options with vesting conditions requiring the Company to list on the ASX and expiry dates range
from 3-5 years. Details of the options are included in the table below.
l Milestone Options – 3 of the directors received options, provided in 3 separate tranches with vesting conditions based on strategic,
financial and production targets for the Company and an implied service condition associated with the continued involvement of the
directors. Expiry dates range from 3-5 years from the date of vesting. Details of the options are included in the table below.
The options do not carry rights to dividends or voting rights.
IPO Options
The IPO options vested upon listing on the ASX, deemed to be 27 December 2019, and were issued on 10 January 2020. NZD 4,916,182 was
expensed as a share-based payment in profit or loss in the current period.
Option Holder
IPO Options
Ivan Hammerschlag
David McCann
Anthony Kahn
21,428,571
727,485
5,000,000
Randolph van der Burgh
727,485
Total
27,883,541
Exercise Price
AUD
Expiry date
range
Black-Scholes
Price
AUD
$0.06
$0.20
$0.20
$0.20
5 Years
5 Years
3 Years
5 Years
$0.17
$0.15
$0.13
$0.15
Total Value
AUD
Total Value
NZD
$3,733,063
$3,996,856
$109,765
$117,521
$639,121
$684,284
$109,765
$117,521
$4,591,714
$4,916,182
The value of these options was determined using the Black-Scholes model. The price determined using this model was applied to the
number of options received by each director. In addition to the above inputs a risk free rate of either 0.68% or 0.74% was used which is
based on the 3 or 5 year Australian government bond yields respectively. A volatility of 100% was also used. This was based on similar
companies within the industry at the same stage in their life cycle as HVM currently has no trading history.
None of the IPO Options have been exercised.
Milestone Options
Milestone options were granted to the Directors on the 11 October 2019 in tranches as follows:
a. Tranche 1 Strategic: This tranche consists of 10,736,204 options which can be exercised three years after the specified vesting condition is met
The specified vesting condition is the Company’s entry into a legally binding agreement (or agreements) between the Company and a party
or parties, including a disclosed agent, which provides for the security, placement or sale of product produced at the Facility. Management
expects the vesting condition to be met in 0.9 years from the grant date. Therefore, these options have an expiry period of 3.9 years.
b. Tranche 2(a): This tranche granted to Ivan Hammerschlag consists of 6,696,429 options which can be exercised during a period of five
years after the specified vesting condition is met. The specified vesting condition for this tranche is any post-IPO debt or equity raising
conducted by the Company. The specified vesting condition is expected to be fulfilled in 1.1 years from the grant date. Therefore, these
options have an expiry period of 6.1 years.
Annual Report 2020 25
Notes to the Financial Statements continued
For year ended 30 June 2020
4. Debt and equity continued
c. Tranche 2(b): This tranche consists of 10,736,204 options which can be exercised in three years after the specified vesting condition is
met. The specified vesting condition is the Company’s entry into a legally binding agreement (or agreements) which provide for, broadly,
the raising of debt and/or equity by the Company or a subsidiary of the Company of an amount that is sufficient to finance the design,
build and commissioning of the production Facility. The specified vesting condition is expected to be met in 1.1 years from the grant date.
Therefore, these options have an expiry period of 4.1 years.
d. Tranche 3: Production: This tranche consists 10,736,204 options which can be exercised during a period of three years after the specified
vesting condition is met. The vesting condition for this tranche is the achievement of the first commercial order by an independent
customer of product produced at the Facility following or as part of the Facility’s commissioning. The specified vesting condition is
expected to be met in 2.7 years from the grant date. Therefore, these options have an expiry period of 5.7 years.
Number of options per tranche
Option Holder
Ivan Hammerschlag
David McCann
Tranche 1
Strategic
Tranche 2
Financing
Tranche 3
Production
Exercise
Price
Expiry Date
Range
—
6,696,429
—
5,368,102
5,368,102
5,368,102
$0.06
$0.25
$0.25
5 Years
3 Years
3 Years
Randolph van der Burgh
5,368,102
5,368,102
5,368,102
Total
10,736,204
17,432,633
10,736,204
The value of these options was determined using the Black-Scholes Option Pricing Model (‘BSOPM’) based on the following parameters:
l a risk-free rate of either 0.68% or 0.74% based on the 3- or 5-year Australian government bond yields respectively on the date of granting;
l a volatility of 100%. This was based on similar companies within the industry at the same stage in their life cycle as HVM do not have a
trading history.
The price determined using the BSOPM was applied to the number of options received by each director. In addition, the Company has
assessed the probability of the specified vesting conditions being fulfilled in the period applicable to each tranche.
Description
Total estimated life (years)
Fair value of option on grant date
Risk-free rate of interest
Tranche
1
Tranche
2a
Tranche
2b
Tranche
3
Total
AUD
Total
NZD
3.9
$0.13
0.68%
6.1
$0.17
0.74%
4.1
$0.13
0.74%
5.7
$0.15
0.74%
Fair value of option on grant date
$1,382,975
$1,189,219
$1,412,837
$1,601,451
$5,586,482
$5,981,244
Amount to be accounted for
period ending 30 June 2020
$813,696
$779,962
$691,948
$332,424
$2,618,030
$2,803,031
As at 30 June 2020, no condition had vested, and the share based payment expense recognised in the Statement of Comprehensive Income
was determined by apportioning the total.
4.5.2 Longreach Oil Limited Termination Deed – share-based payment transaction
A Deed of Termination and Release between HVM and Longreach Oil Limited (LGO) in relation to the Share Purchase Agreement
(between HVM, LGO and Gleneagle Securities Nominees Pty Ltd and shareholders) dated 20 March 2018 and related documents received
the necessary approvals and consents from shareholders, convertible note holders and loan note holders on 14 October 2019.
Consideration for this Termination Deed was the issue of 17,400,000 HVM shares upon receiving confirmation of acceptance of its listing on
the ASX. The Deed had a sunset date of 31 December 2019.
The successful IPO is a non-vesting condition. The fair value of the shares was determined at grant date and NZD 1,858,180 expensed on that
date, with the corresponding credit to equity. The shares were issued on 10 January 2020.
26 Happy Valley Nutrition Limited
26 Happy Valley Nutrition Limited
5. Capital and financial risk management
5.1 Foreign exchange risk
The Company is listed on the ASX and raises capital predominantly in Australian dollars. Most of this is converted to New Zealand dollars
to cover budgeted New Zealand dollar expenses. The Company is exposed to expenses denominated in Australian dollars. The Company
maintains sufficient Australian dollar deposits to cover its budgeted Australian dollar expenses.
The Company is not a party to any derivative arrangements.
The Company has a Board approved treasury policy.
5.2 Interest rate risk
Interest rate risk is the risk that the value of the Company’s assets and liabilities will fluctuate due to changes in market interest rates.
The Company is exposed to interest rate risk primarily through its bank deposits.
The Company has a Board approved treasury policy which covers exposure limits.
5.3 Credit risk management
The Company does not currently have any trade receivables and therefore is not subject to credit risk in this regard. The Company has not
made loans to any party. The Company’s cash is invested with reputable New Zealand banks which the Company has assessed to have low
credit risk. The Company continuously monitors the credit quality of its New Zealand banks and does not anticipate any non-performance of
those banks.
The carrying amount of financial assets represent the Company’s maximum credit exposure, or the cash and cash equivalent. While cash and
cash equivalents are subject to the impairment requirement of NZ IFRS 9, the identified impairment loss was immaterial.
5.4 Liquidity risk
The following table sets out the contractual cash flows for all financial liabilities and for derivatives that are settled on a gross cash flow basis.
As at 30 June 2020
Current Liabilities
Non-current Liabilities
As at 30 June 2019
Current Liabilities
Non-current Liabilities
Statement of
Financial Position
<12 months
12 months <
487,697
487,697
Nil
Nil
3,643,171
2,110,177
3,643,171
Nil
2,110,177
Nil
Nil
Nil
5.5 Capital Risk Management
The Company’s capital includes share capital, retained earnings and reserves.
The Company’s policy is to maintain a sound capital base so as to maintain investor and creditor confidence and to sustain future
development of the business. The Company’s policies in respect of capital management and allocation are reviewed by the Board.
The Company listed on the ASX on 23 January 2020 and raised NZD 13,016,764 on listing. The Company intends to raise further capital in
order to meet its business plan objectives.
5.6 Financial instruments
Accounting policies
NZ IFRS 9 applies to the classification, measurement and impairment of financial assets, liabilities and the application of hedge accounting.
Classification and Measurement
Financial instruments are recognised in the Statement of Financial Position when the Company becomes a party to the contractual
provisions of the instrument. A financial instrument is initially recognised at fair value and is adjusted for (in the case of instruments not
carried at FVTPL) transaction costs that are incremental and directly attributable to the acquisition or issuance of the financial instrument.
Transaction costs relating to financial instruments carried at FVTPL are expensed in the Statement of Comprehensive Income.
Financial assets are de-recognised from the Statement of Financial Position when the rights to cash flows have expired or the Company has
transferred the financial asset such that it has transferred substantially all the risks and rewards of ownership of the financial asset.
Annual Report 2020 27
Notes to the Financial Statements continued
For year ended 30 June 2020
5. Capital and financial risk management continued
Financial liabilities are de-recognised from the Statement of Financial Position when the Company’s obligation has been discharged,
cancelled or has expired. Gains and losses on the derecognition of non-trading related financial assets and liabilities are recognised as other
income as part of other operating income and charges.
The Company’s principal financial instruments comprise cash and cash equivalents, trade payables and loans. The classification of financial
instruments depends on the purpose for which the instruments were acquired. Management determines the classification of its financial
instruments at initial recognition.
Cash and cash equivalents
Cash and cash equivalents represent short-term deposits held at banks and are recognised initially at fair value.
Trade and other payables
Trade creditors and other payables are recognised at amortised cost and represent liabilities for goods and services provided to the Company
prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of
the purchase of these goods and services. It has been determined that these payables do not include a significant financing component.
Loans
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest
method. Amortised cost is calculated by considering any issue costs, and any discount or premium on settlement.
5.7 Fair value measurement
The Company measures the following assets and liabilities at fair value on a recurring basis:
Financial liabilities
l Convertible debt and embedded derivatives
Fair value hierarchy
NZ IFRS 13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a level in the fair value hierarchy
as follows:
l Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
l Level 2: Inputs other than quoted pries included within Level 1 that are observable for the asset or liability, either directly or indirectly.
l Level 3: Unobservable inputs for the asset or liability.
Convertible debt embedded derivatives are classified as level 3. The fair value of convertible debt embedded derivatives was determined
using a Black-Scholes model based on time to expiry and other factors as disclosed in Note 4.3.
The carrying amounts of cash and cash equivalents, trade and other payables (2019: convertible debt and loan) approximates their fair value.
6. Other information
6.1 Related party transactions
6.1.1 Key management personnel compensation
The remuneration of key management personnel of the Company, is set out below in aggregate for each of the categories specified:
2020
NZD
362,353
573,555
[1]
2019
NZD
81,542
481,285
—
Short-term employee benefits
Director and service fees
Share-based payments
[1] In their capacity as initial investors Directors were awarded share options as disclosed in Note 4.5.1.
Key management personnel include the following:
Chairman
Non-executive Directors
CEO and Director
28 Happy Valley Nutrition Limited
28 Happy Valley Nutrition Limited
6.1.2 Director Services Agreements
Each Director has entered into a Director Services Agreement through an associated entity. The key terms of those agreements are set out in
Table 6.1.2 below.
Table 6.1.2 Summary of Key Terms of Director’s Services Agreements
Parties
Role
Remuneration up to listing
Remuneration post listing
Ivan Hammerschlag
Honeystone Pty Limited
David McCann
Olwyn Ventures Limited
Non-Executive Director
NZD 15,000/month
non-exec director fee
Non-Executive Chairman AUD 6,700 (NZD 6,968)
per month non-exec director fee
AUD 120,000pa. (NZD 124,800) base director/
chairman fees
Randolph van der Burgh
VCFO Group Limited
Non-Executive Director
NZD 15,000/month
non-exec director fee
Anthony Kahn
Partnership Investors
Pty Limited
Independent
Non-Executive Director
AUD 6,700 (NZD 6,968)
per month
non-exec director fee
6.1.3 Summary of payments to directors and related parties
Description
David McCann
D McCann – Expenses
Olwyn Ventures Limited – Director and service fees
Randolph van der Burgh
Randolph van der Burgh – Expenses
VCFO Group Limited – Director and service fees
VCFO Group Limited – Professional Services
Ivan Hammerschlag
Honeystone Pty Limited – Expenses
Honeystone Pty Limited – Director Fees
Anthony Kahn
Partnership Investors Pty Ltd – Expenses
Partnership Investors Pty Ltd – Director Fees
Partnership Investors Pty Ltd – Consultancy
Partnership Investors Pty Ltd – IPO Success Fee
AUD 80,000pa. (NZD 83,200) base director fees
AUD 120,000pa. (NZD 124,800) additional base
fees to reflect the non director services they
provide. This reduces to AUD 80,000 pa. from
1 July 2020, then terminates from 1 Jan 2021
AUD 80,000pa. (NZD 83,200) base director fees
AUD 120,000pa. (NZD 124,800) additional base
fees to reflect the non director services they
provide. This reduces to AUD 80,000 pa. from
1 July 2020, then terminates from 1 Jan 2021
AUD 80,000pa. (NZD 83,200) base director fees
Success Listing fee AUD 20,000 (NZD 20,800)
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
21,200
192,608
22,488
180,195
1,298
3,694
192,837
180,000
203,602
121,058
11,587
—
102,928
92,704
1,323
42,019
43,163
20,844
—
—
28,776
—
Annual Report 2020 29
Notes to the Financial Statements continued
For year ended 30 June 2020
6. Other information continued
6.1.4 Summary of payments to other related parties
VCFO Group Limited
Professional Services Agreement with VCFO Group Limited for the provision of various financial, taxation and project related services.
Randolph van der Burgh is a shareholder and director of VCFO Group Limited and a shareholder and director of the Company.
The key terms of those agreements are set out in Table 6.1.4 below.
Table 6.1.4 Summary of Key Terms of Agreements with VCFO Group Limited
Services
Fees (until March 2020)
Fees (from April 2020)
Accounting and taxation services
Fixed monthly fee of NZD 1,250
Fixed monthly fee of NZD 2,250
Project modelling and valuation services
Fixed monthly fee of NZD 3,250
Nil
Other services
Hourly fees for additional services
on a time engaged basis
Hourly fees for additional services on a time
engaged basis
Premises (furnished)
NZD 1,200 per month per work desk
NZD 480 per month per car park
NZD 9,208 per month rent (one-year
renewable sub-lease of ground floor)
NZD 792 per month for two car parks
Office services
Additional services such as secretarial
and photocopying charged per use
Nil
6.1.5 Related Party Outstanding Payables as at 30 June 2020
Contact
Olwyn Ventures Limited
VCFO Group Limited
Total Payables
2020
NZD
—
2,803
2,803
6.1.6 Directors’ interests in shares and options held
(including via
related companies)
Director
Ivan Hammerschlag
David McCann
Randolph van der Burgh
Anthony Kahn
Total
2020
2019
Ordinary Shares
Number
5,347,024
8,778,031
9,633,555
1,625,000
%
2.5%
4.1%
4.5%
0.8%
Options
Number
28,125,000
16,831,791
16,831,791
5,000,000
Ordinary Shares
Number
—
1,000
1,100
—
%
—
10.0%
11.0%
—
25,383,610
11.9%
66,788,582
2,100
21.0%
2019
NZD
15,015
13,901
28,916
Options
Number
—
—
—
—
—
30 Happy Valley Nutrition Limited
30 Happy Valley Nutrition Limited
6.1.7 Directors’ interest in convertible notes and loans
Director
Ivan Hammerschlag
David McCann
Randolph van der Burgh
Convertible Debt
Note
Note 4.3.1
Note 4.3.1
Note 4.3.1
Anthony Kahn
Note 4.3.2 and 4.3.3
Number of shares
issued on Conversion
Number
Value of Convertible
Debt on conversion
NZD
5,347,024
222,793
222,793
625,000
952,055
39,669
39,669
116,683
6.1.8 Directors’ interest in companies who have shares in HVM
Director
Company
Ivan Hammerschlag
Tidereef Pty Ltd (Shareholder and Director)
Randolph van der Burgh
Rockburgh Nominees Limited (Shareholder and Director)
Anthony Kahn
David McCann
K. F. Superannuation Pty Ltd (Shareholder and Director)
Olwyn International Limited (Shareholder and Director)
6.2 Commitments
6.2.1 Capital commitments
As at 30 June 2020, the Company had entered into contractual commitments for the acquisition of property, plant and equipment
amounting of NZD 891,424.
6.2.2 Short-term lease commitments
On 13 March 2020, the Company entered a sub-lease agreement with VCFO Group Limited which provides the Company with exclusive
occupation rights in their ground floor premises, including all furniture and fittings. The commencement date was 16 March 2020 and the
initial term ends on 31 March 2021.
6.2.3 Conditional Sale and Purchase agreements for properties
The Company entered into conditional Sale and Purchase Agreements to acquire the properties detailed below. These agreements are
subject to a number of conditions including obtaining Overseas Investment Office approval and funding.
Date
4 July 2019
13 March 2020
20 March 2020
Property
Waipa Meadows, Ōtorohanga
Woolly Farm, 117 Mangamahoe Road, Ōtorohanga
Lot 2, 5 Redlands Road, Ōtorohanga
25 February 2020
6 Redlands Road, Ōtorohanga
Value NZD
3,200,000
5,500,000
600,000
375,000
6.2.4 Non-cancellable water take agreement
On 23 April 2019, HVM and Wairakei Pastoral Limited entered in a non-cancellable water take agreement with the following terms:
l 1,000m3 per day water take licence, using Wairakei Pastoral Limited consent from the Waipa river;
l Commencement date is the later of 1 November 2019 and the date on which construction of the plant commences;
l Annual maximum volume of water is 365,000m3; and
l Maximum daily volume of water is 1,000m3.
6.3 Contingent liabilities
There were no known contingent liabilities as 30 June 2020 (June 2019: nil).
6.4 Events after reporting date
During 2020 financial markets were affected by the on-going COVID-19 pandemic and so were unusually volatile. Actual economic events
and conditions in the future may be materially different from those recorded at reporting date. In the event the impacts from the COVID-19
pandemic are more severe or prolonged than anticipated, this may have adverse impacts to the Company’s capital raising plans and timing
of the achievement of milestones. The financial statements have been prepared based upon conditions existing at 30 June 2020.
Annual Report 2020 31
Notes to the Financial Statements continued
For year ended 30 June 2020
6. Other information continued
6.5 Income Tax
The tax expense charged against earnings for the period is the estimated total liability including both the current period’s provision and
deferred tax. The current period’s tax payable to Inland Revenue is recorded in income tax payable and any amounts due from Inland
Revenue is recorded as income tax receivable.
Deferred income tax is provided, using the balance sheet method, on all temporary differences at the reporting date between the tax book
value of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred
income tax asset is realised, or the deferred income tax liability is settled.
Income tax expense
Loss before tax
Prima facie tax expense/(benefit)
Non-deductible expenses at 28%
Non-deductible capital expenses at 28%
Tax losses not recognised
Tax losses forfeited on IPO
Deferred tax asset not recognised
Income tax expense
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
(14,638,596)
(4,098,807)
102
3,365,694
506,209
199,619
27,184
—
(833,265)
(233,314)
—
—
233,314
—
75,395
75,395
The carrying amount of deferred tax is recognised on the basis there is probable realisation through future profits. Happy Valley Nutrition
Limited is expected to move into taxable profits earlier than previously anticipated but not within the next 12 months. The future income tax
benefit of tax losses and other deferred tax assets have therefore not been recognised as at 30 June 2020.
Deferred tax asset not recognised in relation to short-term timing differences
Deferred tax asset not recognised in relation to the future benefit of income taxes
(NZD 1,807,888 of tax losses carried forward, 2019 NZD 1,102,533)
Total deferred tax asset not recognised
Imputation credit
Imputation credit account
Opening balance
Credits
Resident withholding tax
Debits
Refund
Closing balance
Year ended
30 Jun 20
NZD
27,184
506,209
Year ended
30 Jun 19
NZD
—
308,709
533,393
308,709
Year ended
30 Jun 20
NZD
Year ended
30 Jun 19
NZD
1,610
19,994
(1,511)
20,092
235
1,511
(136)
1,610
NZ IFRIC 23 was adopted by the Company in the current reporting period. The Company considers that there are no material uncertainties
regarding the tax positions it has adopted.
6.6 Goods and Services Tax
All amounts are shown exclusive of Goods and Services Tax (GST), except Australian GST incurred which is not recoverable by the Company.
Receivables and Payables are stated inclusive of GST.
32 Happy Valley Nutrition Limited
32 Happy Valley Nutrition Limited
Independent Auditor’s Report
Independent Auditor’s Report
To the Shareholders of Happy Valley Nutrition Limited
Opinion
Basis for opinion
Emphasis of Matter – Material
uncertainty related to going
concern
Audit materiality
We have audited the financial statements of Happy Valley Nutrition Limited (the
‘Company’), which comprise the statement of financial position as at 30 June 2020, and
the statement of comprehensive income, statement of changes in equity and statement of
cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying financial statements, on pages 11 to 32, present fairly,
in all material respects, the financial position of the Company as at 30 June 2020, and its
financial performance and cash flows for the year then ended in accordance with New
Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and
International Financial Reporting Standards (‘IFRS’).
We conducted our audit in accordance with International Standards on Auditing (‘ISAs’)
and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is enough and appropriate to
provide a basis for our opinion.
We are independent of the Company in accordance with Professional and Ethical Standard
1 International Code of Ethics for Assurance Practitioners (including International
Independence Standards) (New Zealand) issued by the New Zealand Auditing and
Assurance Standards Board and the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants (including International
Independence Standards), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Other than in our capacity as auditor, we have no relationship with or interests in the
Company.
We draw attention to the disclosure in Note 1 Going Concern of the financial
statements, which indicates the Company is reliant on securing additional funding to
finance land settlements and earthworks along with future business development and
construction of the Facility. Prior to settling land acquisitions of NZD 9.675m (Note 6.2.3)
and commencing earthworks, an additional capital raise is required and is planned for
later this year. The Company also needs to raise further funding (debt or equity) to
establish the business and enable construction of the Facility.
As stated in Note 1, these matters indicate that a material uncertainty exists that may
cast significant doubt on the Company’s ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
We consider materiality primarily in terms of the magnitude of misstatement in the
financial statements of the Company that in our judgement would make it probable that
the economic decisions of a reasonably knowledgeable person would be changed or
influenced (the ‘quantitative’ materiality). In addition, we also assess whether other
matters that come to our attention during the audit would in our judgement change or
influence the decisions of such a person (the ‘qualitative’ materiality). We use materiality
both in planning the scope of our audit work and in evaluating the results of our work.
We determined materiality for the Company’s financial statements as a whole to be
$300,000.
1
Annual Report 2020 33
Independent Auditor’s Report continued
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period. These matters
were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matters
Key audit matter
Share options
Note 4.5.1 of the financial statements describes the
accounting for the share options.
As part of the Initial Public Offering (IPO) process, two types
of share options were granted to the Directors.
•
IPO options which vested upon the successful
completion of the listing on the ASX (completed in
January 2020)
• Milestone options – provided in 3 tranches which vest
according to the achievement of certain strategic,
financing and operational targets for the Company.
The options are equity settled share based payments in
accordance with NZ IFRS 2 Share Based Payments. The
Company used the Black Scholes model in valuing the
shared-based payment options.
The valuation of and accounting for the share options is a
key audit matter due to the complex and judgemental
estimates used to value and record the share options.
How our audit addressed the key audit matter
Our procedures focused on the appropriateness of the
valuation methodology and the key assumptions applied
in the Black Scholes model, and included:
Reading the terms of the share option agreements
and evaluating the appropriateness of the
accounting treatment in accordance with NZ IFRS 2
Share Based Payments;
Assessing the assumptions used in the Company’s
valuation of the share options including the
expected volatility. We involved our internal
valuation specialists in assessing the reasonableness
of the assumptions;
Evaluating the non-market performance conditions
attached to the milestone options for consistency
with the Company’s performance and
management’s reassessment of the number of
options expected to vest and the expected timing of
vesting;
Recalculating the share based payments expense;
Involving our technical accounting specialists to
assist in considering the appropriateness of the
adopted accounting treatment; and
Assessing the adequacy of the disclosure in the
financial statements.
Convertible debt and related derivatives
Note 4.3 of the financial statements describes the financial
instruments entered into by the Company before its IPO
process that were convertible to equity upon listing of the
Company with the Australian Securities Exchange (ASX).
Our procedures focused on the appropriateness of the
accounting treatment as well as the judgements made in
determining the valuation methodology. Our procedures
included, amongst others:
The conversion features of the convertible debt instruments
were accounted for as derivative financial liabilities
(embedded derivatives) at fair value through profit or loss.
Assessing the requirements of NZ IFRS 9 Financial
Instruments to consider whether the convertible debt
was appropriately recognised as a hybrid contract.
As part of the Company’s listing on the ASX during the year,
all convertible debt and related derivatives were converted
to equity.
The accounting for convertible debt and related derivatives
is a key audit matter due to the complex nature, including
judgemental estimates used in determining the valuation, of
the convertible debt instruments at inception, upon
Utilising an internal valuation specialist to assist with
assessing the reasonableness of the valuation method
and model used to value the embedded derivatives,
the key inputs into the model and the resulting
valuation amounts recognised by management;
Assessing the accuracy of the calculation of the
conversion expense;
2
34 Happy Valley Nutrition Limited
Key audit matter
How our audit addressed the key audit matter
modification (if applicable) and conversion to equity.
Capitalisation of development costs
Note 3.1 of the financial statements includes capitalised
development cost additions of $1,765,961 within property,
plant and equipment.
The capitalisation of development costs is material to the
financial statements and is a key audit matter because of
the judgements exercised by management in determining
whether the costs meet the criteria to be capitalised
including that they are directly attributable to bringing an
asset to the location and into the condition necessary for it
to be capable of operating in the manner intended by
management.
Share based payment transaction with Longreach Oil
Limited
Note 4.5.2 of the financial statements describes the
accounting for the share based payment transaction with
Longreach Oil Limited (LGO).
The Company issued LGO with 17,400,000 shares as
consideration for the Termination Deed agreed as part of
the IPO process for the Company listing on the ASX during
the year.
The accounting for the share based payment transaction
with LGO is a key audit matter due to the quantum of the
balance, complex nature of the transaction and judgemental
estimates used in determining the valuation of the share
based payment.
Involving our technical accounting specialists to assist
in considering the appropriateness of the adopted
accounting treatment; and
Considering the adequacy of the disclosure in the
financial statements.
Our procedures focused on the appropriateness of
capitalising the development cost including:
Assessing the appropriateness of management’s
capitalisation methodology; and
Agreeing a sample of capitalised development costs to
supporting documentation and assessing the
reasonableness of the costs capitalised in accordance
with NZ IAS 16 Property, Plant and Equipment.
Our procedures focused on the appropriateness of the
accounting treatment as well as the judgements made in
determining the valuation methodology. Our procedures
included, amongst others:
Reviewing management’s assessment and considering
this relative to the requirements of NZ IFRS 2 Share
Based Payments;
Considering management’s assessment of conditions
in the agreement for the issue of consideration shares
(predominantly the IPO listing requirement) to be non-
vesting conditions;
Assessing the appropriateness of the methodology
and the key assumptions, and the calculation of the
fair value of the share-based payment transaction;
Involving our technical accounting specialists to assist
in considering the appropriateness of the adopted
accounting treatment; and
Considering the adequacy of the disclosure in the
financial statements.
3
Annual Report 2020 35
Independent Auditor’s Report continued
The comparative period financial statements for the year ended 30 June 2019 were
audited by another auditor who expressed an unmodified opinion.
The directors are responsible on behalf of the Company for the other information. The
other information comprises the information in the Annual Report that accompanies the
financial statements and the audit report.
Our opinion on the financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and consider whether it is materially
inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If so, we are required to report that fact.
We have nothing to report in this regard.
The directors are responsible on behalf of the Company for the preparation and fair
presentation of the financial statements in accordance with NZ IFRS and IFRS, and for such
internal control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible on behalf of the
Company for assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs and
ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is
located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-
responsibilities/audit-report-2
This description forms part of our auditor’s report.
This report is made solely to the Company’s shareholders, as a body. Our audit has been
undertaken so that we might state to the Company’s shareholders those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than
the Company’s shareholders as a body, for our audit work, for this report, or for the
opinions we have formed.
4
Other matter
Other information
Directors’ responsibilities for
the financial statements
Auditor’s responsibilities for the
audit of the financial
statements
Restriction on use
Heidi Rautjoki, Partner
for Deloitte Limited
Dunedin, New Zealand
23 September 2020
36 Happy Valley Nutrition Limited
Corporate Governance Report
The Board of Directors of Happy Valley Nutrition Limited is committed to ensuring that its Corporate Governance framework is
appropriate for the Company’s operations and meets the requirements set out in the ASX Corporate Governance Council’s Principles and
Recommendations 4th Edition (Governance Principles) where it is appropriate to do so. The Corporate Governance Statement, policies and
practices are available on the Company’s website: https://investors.hvn.co.nz/investor-centre/?page=corporate-governance.
Statutory Information
Business Operations
Happy Valley Nutrition Limited is in the process of developing a vertically integrated, formulaic milk processing, blending and packaging
Facility that produces infant milk formula (IMF) and other nutritional products for sale in the global export markets.
Non-executive Director Remuneration
Non-executive Directors are remunerated by way of fees which are set with reference to the prevailing market rates. They do not participate
in the schemes designed for the remuneration of executives, nor do they receive bonus payments, or any retirement benefits other than
statutory superannuation.
Remuneration paid to non-executive directors during the year ended 30 June 2020 was as follows:
Director
Position
Ivan Hammerschlag
Non-Executive Chairman
David McCann
Non-Executive Director
Randolph van der Burgh
Non-Executive Director
Anthony Kahn
Non-Executive Director
Employee Remuneration
Director fees
NZD
Non-director
services fees
NZD
Total
Remuneration
NZD
$102,928
$140,044
$140,136
$42,019
—
$52,564
$52,701
$43,163
$102,928
$192,608
$192,837
$85,182
The Company’s remuneration policy is designed to attract, motivate and retain employees, including senior management, and ensure that
the interests of the employees are aligned with those of the shareholders. In discharging its duties, the Remuneration and Nomination
Committee reviews and makes recommendations to the Board on the remuneration of the CFO and other senior managers, including:
l Short and long-term remuneration, including both fixed remuneration and performance-based remuneration;
l Any termination payments; and
l Appropriate grants of securities under the Employee Incentive Plan.
In making its recommendations the Remuneration and Nomination Committee ensures that:
l Remuneration is set with reference to prevailing market rates for similar positions, adjusted to account for experience, productivity
and ability;
l Remuneration packages are designed to motivate senior management to pursue the long-term growth and success of the Company,
and not reward conduct that is contrary to the Company’s values or risk appetite; and
l A clear relationship exists between performance and remuneration.
During the year ended 30 June 2020, 4 current and former employees received remuneration and other benefits in their capacity of
employees of Happy Valley Nutrition Limited, the value of was NZD 100,000 or more. The following table shows the remuneration and
other benefits in brackets of NZD 25,000.
Remuneration range
NZD
From
To
$100,000 — $124,999
$125,000 — $149,999
$150,000 — $174,999
$175,000 — $199,999
$200,000 — $224,999
$225,000 — $249,999
Number of
employees
FY2020
1
1
1
Number of
employees
FY2020
Remuneration range
NZD
From
To
$250,000 — $274,999
$275,000 — $299,999
$300,000 — $324,999
$325,000 — $349,999
$350,000 — $374,999
1
$375,000 — $399,999
Annual Report 2020 37
Corporate Governance Report continued
For year ended 30 June 2020
Shareholding Information
Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows. This information is
current as at 17 August 2020.
In accordance with ASX Listing Rule 4.10.19, the Company confirms that it has used cash and assets in a form readily convertible to cash that
it had at the time of admission in a way consistent with its business objectives.
Distribution of Shareholders
The distribution of issued capital is as follows:
Size of Holding
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Distribution of Option holders
The distribution of unquoted Options on issue are:
Size of Holding
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
Shareholders
Ordinary
Shares
% of Issued
Capital
146
433
263
311
1,481
193,591,907
15,582,418
2,373,610
785,110
196,501
91.09
7.33
1.12
0.37
0.09
2,634
212,529,546
100.00
Number of
Optionholders
Unlisted
Options
% of Total
Options
4
0
0
0
0
4
66,788,582
100.00
0
0
0
0
0.00
0.00
0.00
0.00
66,788,582
100.00
Less than marketable parcels of ordinary shares
There were 1,678 holders of 538,463 securities with unmarketable parcels based on the closing share price as at 17 August 2020.
38 Happy Valley Nutrition Limited
38 Happy Valley Nutrition Limited
20 Largest Shareholders of Quoted Securities
The names of the 20 largest shareholders of quoted equity securities are as follows:
1
2
3
4
5
6
7
8
9
Rockburgh Nominees Limited
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