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NUHEARA LIMITED
ABN 29 125 167 133
CORPORATE DIRECTORY
Directors
Justin Miller
Executive Chairman
Managing Director/Chief Executive Officer
Principal Place of Business
190 Aberdeen Street
Northbridge WA 6003
Phone:
Fax:
+61 (8) 6555 9999
+61 (8) 6555 9998
David Cannington
Executive Director/Chief Marketing Officer
Share Registry
Kathryn Foster
Independent Non-Executive Director
Company Secretaries
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth WA 6000
Phone:
1300 850 505 (within Australia)
+61 3 9415 4000 (outside Australia)
Susan Hunter – Company Secretary
Jean-Marie Rudd – Joint Company Secretary
Auditors
Walker Wayland WA Audit Pty Ltd
Level 3, 1 Preston Street
Como WA 6152
Phone:
Fax:
+61 (8) 9364 9988
+61 (8) 9367 3444
ASX Code
NUH
Website and Email
Website: www.nuheara.com
Email: administration@nuheara.com
Registered Office
190 Aberdeen Street
Northbridge WA 6003
Phone:
Fax:
+61 (8) 6555 9999
+61 (8) 6555 9998
NUHEARA LIMITED
ABN 29 125 167 133
TABLE OF CONTENTS
Page
Message from the Managing Director/Chief Executive Officer .................................... 1
Directors’ Report ........................................................................................................... 3
Remuneration Report .................................................................................................... 9
Auditor’s Independence Declaration ..........................................................................16
Statement of Profit or Loss and Other Comprehensive Income .................................17
Statement of Financial Position ...................................................................................18
Statement of Changes in Equity ..................................................................................19
Statement of Cash Flows .............................................................................................20
Notes to the Financial Statements ..............................................................................21
Directors’ Declaration ..................................................................................................42
Independent Audit Report ..........................................................................................43
ASX Additional Information .........................................................................................47
NUHEARA LIMITED
ABN 29 125 167 133
MESSAGE FROM THE MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER
Dear Fellow Shareholders
Nuheara Limited (“Nuheara”) was founded with a clear mission to change lives by enhancing the power to hear. Our conception and
creation of the world’s first smart hearing buds, IQbuds™ and IQbuds BOOST™, has unlocked the global transformation in how people
are able to hear, listen and communicate. Indeed, Nuheara in its brief history has already changed the lives of thousands of hearing
challenged consumers worldwide: by making hearing healthcare more accessible and affordable with our game changing smart
hearing solutions.
What our customers say…
Over the past year, wireless earbuds, led by the likes of Apple Airpods, have become an increasingly crowded product category. The
aim of this product category is simply to remove cables – a feat that we regard as engineering rather than innovation. At the other
end of the hearing spectrum we have a hearing aid category that has seen an absence of true innovation and furthermore, due of a
lack of competition, is a market that remains expensive and inaccessible to the millions of people requiring hearing assistance at the
mild to moderate level.
We are different at Nuheara. And we’re proud to shake up the status quo by striving to achieve the hard things that come with being
true innovators in hearing. In doing so, we are the first to market in creating a complete hearing ecosystem, and with it, a new
category designed to serve a multitude of hearing healthcare needs of a global market with potentially hundreds of millions of users
– Smart Hearing.
As true innovators, Nuheara is home to the most passionate, dedicated and brilliant group of people I have ever had the opportunity
to work with. Testament to their dedication is the fact that this remarkable team of proud Nuhearians has created a new category
of hearing products that were researched, designed, built, marketed and sold to a growing global market. And all in under three
years.
At the beginning of FY18, Nuheara had set itself targets for the diversification of our product range, but more importantly, the further
expansion and consolidation of our global retail presence. I am pleased to report that we duly responded with the launch of our
second product, IQbuds BOOST™ with Ear ID™ in April 2018, as well as expanding our global retail reach, both online and in store,
across the USA, Europe, the Middle East and most recently Asia.
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NUHEARA LIMITED
ABN 29 125 167 133
MESSAGE FROM THE MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER
Nuheara’s commitment to hearing healthcare research, extends beyond the pure science of our technology. We believe in unlocking
the power of technology to change lives and enhance human experiences. It is for this reason that we have commissioned two
research studies by the University of Melbourne and the Ear Science Institute of Australia to determine whether IQBuds™ can provide
treatment support to children with Autism and Auditory Processing Disorder (APD). Accordingly, our smart hearing products present
potential game changing solutions for a global hearing market that is far greater than traditional hearing loss.
Our job as innovators is never complete. We remain absolutely committed to the future of hearing healthcare and our position of
leadership within the category of Smart Hearing. This is a commitment that is matched by the loyal and ongoing support of you, our
trusted shareholders.
Together, we have focused on realising the long-term opportunities that come with new category creation, without being overly
focused or too distracted by short-term opportunism. This is both brave and bold, but it is also how great companies are built. For
this we say thank you.
As such, I am pleased to present to you Nuheara’s Annual Report for the financial year ended 30 June 2018. I look forward to sharing
many more updates with you on our progress throughout the course of FY19.
Yours sincerely
Justin Miller
Managing Director/CEO
“Nuheara exists to change lives by
enhancing the power to hear; to transform
the way people hear by creating smart
hearing solutions that are both accessible
and affordable.”
Justin Miller, Co-founder and
Managing Director/CEO
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
The Directors have the pleasure in presenting their report, together with the financial statements of the Group, being the
Company and its controlled entities, for the year ended 30 June 2018.
1.
Directors
The Directors in office at any time during or since the end of the financial year are:
Justin Miller (Executive Chairman and Managing Director/Chief Executive Officer)
Appointed: 25 February 2016
Mr Miller is a serial entrepreneur who has developed a thorough knowledge of the global technology and innovation
marketplace during his 25-year executive career. Throughout the course of his career, Mr Miller has successfully founded and
managed the aggressive and profitable growth of technology, manufacturing and service related companies. This includes
strategic acquisitions, capital raisings, research & development, product development & onshore/offshore manufacture,
significant staff growth and multi-million-dollar sales deals involving both direct & channel sales models.
Mr Miller founded ASX-listed IT services Company Empired Limited and most recently was the founder and CEO of industrial
hearing and communication Company, Sensear Pty Ltd, where he was responsible for growing the global business from the
San Francisco bay area.
Mr Miller did not have any directorships in other listed companies during the past three years.
David Cannington B.Bus (Marketing) (Executive Director and Chief Marketing Officer)
Appointed: 25 February 2016
Mr Cannington has over 25 years' global sales and marketing experience. He has held senior positions in sales and marketing
for companies spanning consumer packaged goods (Cadbury Schweppes), advertising (McCann Erickson) data analytics
(Neochange) and hearing technology (Sensear Pty Ltd). He has advised many start-ups on go-to-market and growth strategies
and was the founding CEO of ANZA Technology Network, a leading cross-pacific technology entrepreneurs’ network. Mr
Cannington has been recognised as one of the most influential Australian technology executives in Silicon Valley and brings
a global perspective to technology commercialisation.
Mr Cannington did not have any directorships in other listed companies during the past three years.
Kathryn Foster BSc, ASc, MAICD (Independent Non-Executive Director)
Appointed: 12 February 2018
Ms Foster has over 20 years’ experience creating and running large internet-based businesses, starting in the late 1990’s on
Windows Update. Prior to becoming a professional director, Ms Foster was Senior Director of Microsoft Store online where
she managed the sales and merchandising team for Microsoft Store online across 232 geographies. As the Senior Director,
she was responsible for an annual revenue budget in the low billions of dollars. Prior to that, for the inception of the Xbox
Games Marketplace, Ms Foster set business vision, strategy and drove the technical execution around digital and physical
supply chain technology and operations to enable Xbox’s billion-dollar business globally.
Ms Foster has been an Independent Non-Executive Director of Class Limited since July 1, 2015. She joined the QSuper Audit
and Risk committee in March 2017, and the advisory board of Mine Hive Pty Ltd in May 2018. Ms Foster is also the managing
director of Foster Consulting, a boutique consulting firm focusing on strategic initiatives and direction.
During the past three years, Ms Foster served as a director of the following listed Company:
•
Class Limited – appointed 1 July 2015*
Dr Michael Ottaviano B.Eng, MSc, DBA, MAICD, M.I.EngAus (Independent Non-Executive Director)
Appointed: 25 February 2016 / Resigned: 4 July 2016
During the past three years, Dr Ottaviano served as a director of Carnegie Wave Energy Limited – appointed 16 March 2007*
*Denotes current directorship
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
2.
Company Secretaries
Susan Hunter B.Com, ACA, F Fin, GAICD, AGIA – Company Secretary
Appointed: 6 June 2016
Ms Hunter has over 20 years' experience in the corporate finance industry and is founder and Managing Director of consulting
firm Hunter Corporate Pty Ltd which specialises in the provision of corporate governance and company secretarial advice to
ASX listed companies. Ms Hunter holds a Bachelor of Commerce degree from the University of Western Australia majoring in
accounting and finance, is a Member of Chartered Accountants Australia and New Zealand, a Fellow of the Financial Services
Institute of Australasia, a Member of the Governance Institute of Australia and is a Member of the Australian Institute of
Company Directors.
Jean-Marie Rudd B.Bus, ACA, GAICD – Chief Financial Officer/Company Secretary
Appointed: 30 November 2016
Mrs Rudd has over 20 years' experience in the corporate sector and professional services, including over 10 years as Chief
Financial Officer and Company Secretary in ASX listed companies. Mrs Rudd holds a Bachelor of Business degree from Curtin
University majoring in accounting, is a Member of Chartered Accountants Australia and New Zealand and a Member of the
Australian Institute of Company Directors.
3.
Principal activities
The principal activity of the Group is the development and commercialisation of its proprietary hearing and wearables
technology platform.
4.
Dividends
No dividend has been declared or paid by the Group since the start of the financial year and the Directors do not recommend
a dividend in relation to the financial year ended 30 June 2018.
5. Operating and financial review
Our business model and objectives
Nuheara is a global leader in intelligent hearing technology, developing proprietary hardware and software to deliver smart
hearing solutions that are both accessible and affordable to transform the way people hear. Nuheara’s vision is to change
lives by enhancing the power to hear.
Co-located in offices in Perth, Australia and San Francisco, United States, Nuheara was the first consumer wearables
technology company to be listed on the Australian Stock Exchange (ASX).
Operating results
The Group achieved a net loss after tax of $7,416,412. This compared with a net loss after tax of $4,839,623 for the year
ended 30 June 2017, a decline of 53%. The net loss after tax result represented a loss of 0.92 cents per share, compared to a
loss of 0.78 cents per share last year.
Net cash inflows of $4,941,146 were attributable to $15,635,968 received through capital raisings and $1,208,451 from an
R&D Tax Incentive Rebate, offset by $7,737,508 in net operating outflows, $122,337 for the purchase of plant and equipment
and $4,043,428 for the purchase of intangible assets (capitalised development costs and trademarks).
Further discussion on the Group’s operations is provided below.
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
5. Operating and financial review (continued)
Mining tenements
Whilst the Group recognises the value in its resources project in Peru, the directors are also cognisant of the fact that these
mining interests lie outside the company’s core business activities. Accordingly, the directors remain committed to divest
these assets within the next 12 months.
Review of operations
In 2016, the Group released its revolutionary wireless earbuds, IQbuds™, which allow consumers to augment their hearing
according to their personal hearing preferences and connect hands free with their voice-enabled smart devices. In 2017, the
Group released IQbuds BOOST™ featuring Ear ID™, a clinical grade hearing assessment that automatically calibrates the
earbuds to your unique hearing profile. IQbuds™ and IQbuds BOOST™ are now sold in major consumer electronics retailers
and hearing health centres around the world.
Revenue from ordinary activities for the year was $5,251,960. This compared with revenue of $2,893,627 for the year
ended 30 June 2016, growth of 80%.
The Group successfully completed two capital raisings during the year, raising $9 million in July 2017, and $6 million in June
2018. Funds raised will be used to assist Nuheara in achieving its planned objectives of increasing sales and marketing
activities of IQbuds™ and IQbuds BOOST™, increasing inventory levels of IQbuds BOOST™, and the production and launch of
LiveIQ™, expected for release in Q4, 2018. At year-end, the Group held $8.35 million in cash reserves.
Performance indicators
Management and the Board monitor the Group’s overall performance, from the execution of its strategic plan through to the
performance of the Group against operating plans and financial budgets.
The Board, together with management have identified key performance indicators (KPI’s) that are used to monitor
performance. Directors receive the KPI’s for review prior to each monthly Board meeting allowing all Directors to actively
monitor the Group’s performance.
Shareholder returns
The Group’s return to shareholders is as follows:
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Review of financial condition
Liquidity and Capital Resources
2018
(0.92)
(0.83)
2017
(0.78)
(0.69)
The Statement of Cash Flows illustrates that cash used in operating activities amounted to $6,529,060 (2017: outflow of
$4,070,267). This increase in outgoings in comparison to 2017 is largely due to the payment of suppliers for the manufacture
of IQbuds™ and IQbuds BOOST™, and research and development costs relating to the commercialisation of the Group’s
hearing and wearables platform. Net outflows of $4,165,765 used in investing activities comprised: $4,043,428 in
development costs that were capitalised as intangible assets, $133,335 as payment for plant and equipment and 10,998 as
proceeds from the disposal of plant and equipment. The net increase in the cash outflows from operating and investing
activities was funded by $15,635,968 cash received from the raising of funds from the issues of shares, net of share raising
costs.
The net tangible asset backing of the Group was 0.01 cents per share (2017: 0.006 per share).
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
5. Operating and financial review (continued)
Asset and capital structure
Debts:
Trade and other payables
Less: Cash and cash equivalents
Net cash
Total equity
Total capital employed
2018
$
2017
$
1,583,180
(8,345,695)
(6,762,515)
15,018,701
8,256,186
1,796,242
(3,404,552)
(1,608,310)
6,517,639
4,909,329
The level of gearing in the Group is within acceptable limits set by the Directors.
Share issues during the year
The Group issued 193,983,977 shares during the year:
•
•
•
•
•
•
•
•
•
•
•
•
•
17 July 2017 issued 750,000 shares on exercise of options @ $0.04 each
20 July 2017 issued 97,826,082 shares under share placement @ $0.092 each
20 July 2017 issued 2,250,000 shares on exercise of options @ $0.04 each
12 March 2018 issued 2,000,000 shares on exercise of options @ $0.05 each
14 March 2018 issued 3,000,000 shares on exercise of options @ $0.05 each
14 March 2018 issued 1,500,000 shares on exercise of options @ $0.05 each
15 March 2018 issued 3,000,000 shares on exercise of options @ $0.05 each
21 March 2018 issued 2,000,000 shares on exercise of options @ $0.05 each
21 March 2018 issued 3,750,000 shares on exercise of options @ $0.05 each
21 March 2018 issued 2,000,000 shares on exercise of options @ $0.05 each
21 March 2018 issued 4,735,714 shares on exercise of options @ $0.05 each
21 March 2018 issued 8,014,286 shares on exercise of options @ $0.05 each
15 June 2018 issued 63,157,895 shares under share placement @ $0.095 each
Risk management
The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also
opportunities, are identified on a timely basis and that the Group’s objectives and activities are aligned with the risks and
opportunities identified by the Board. The Group believes that it is crucial for all Board members to be part of this process,
and as such the Board has not established a separate risk management committee. Instead sub-committees are convened as
appropriate in response to issues and risks identified by the Board as a whole and the sub-committee further examines the
issue and reports back to the Board.
The Board has a number of mechanisms in place to ensure that management’s objectives and activities are aligned with the
risks identified by the Board. These include the following:
•
•
Implementation of Board approved budget and Board monitoring of progress against budget, including the
establishment and monitoring of financial KPI’s; and
The establishment of committees to report on specific business risks.
6.
Significant changes in the state of affairs
Significant changes in the state of affairs during the year ended 30 June 2018 are as follows:
The Group continued to deliver on its commitment to establish quality global distribution and retail partnerships with
aggressive growth in brick and mortar and online retail. Expansion in Europe featured deployments to retailers including
Harrods, Selfridges, Elkjop and Media Markt. Dubai based GR Media Solutions was appointed as a distributor and will supply
premium retail outlets in the Middle East, including Virgin Megastores, Dubai Duty Free, HMV and iStyle. Force Technology
was appointed as a key distribution partner to service Australia and New Zealand, with more than 4,000 reseller partners
including Telstra, Harvey Norman, Optus, Retravision, JB Hi-fi and Officeworks. Value Trade was appointed as a key
distribution partner in Japan, a renowned and experienced consumer electronics distributor that currently suppliers more
than 5,000 consumer electronics retailers. Product continues to be sold in leading USA retailers such as Best Buy, Brookstone
and Amazon.
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
6.
Significant changes in the state of affairs (continued)
Nuheara also expanded its direct to consumer retail platform, with the Group’s online shopfront now operating in seven
major currencies. With these platform enhancements, the Group now has the capability to directly reach, transact and ship
IQbuds™ and IQbuds BOOST™ to the majority of countries globally, independent of third parties.
The Group commenced diversification into the Hearing Care Professional Clinic (HCPC) channel in Australia and Europe
through Bloom Hearing Centres. In the US, the Over the Counter (OTC) Hearing Aid Act 2017 came into law in August. Nuheara
is now poised to deliver solutions across a range of retail channels that do not require the consumer to visit a HCPC. This new
category of hearing products will offer advanced capabilities at significantly lower prices compared to hearing aids.
Nuheara expanded its product offering by releasing IQbuds BOOST™, a world-first multifunctional hearing bud solution
featuring our clinically validated proprietary Ear ID™ hearing assessment, utilising industry-recognised NAL-NL2 for hearing
aids. This product launch was a direct result of Nuheara’s foresight and ongoing commitment to research and development
in hearing intelligence and our strategic partnership with HEARing CRC and National Acoustics Laboratory. The initial
production run of 2,500 units sold out in the first six weeks of sale.
Nuheara also continues to develop its third product, LiveIQ™, which is the world’s first hybrid Active Noise Cancellation
hearing bud. LiveIQ™ has been developed in partnership with the global leader in the design and manufacture of advanced
sensor solutions, ams AG.
The Group has set a new standard in upgradable truly wireless earbuds by giving customers enhanced functionality with a
simple firmware upgrade, coupled with an App upgrade to their smart device. During the year Nuheara introduced an industry
first upgrade, including Custom Tap Touch, that delivers powerful levels of personalisation and customisation features for
new and existing users of IQbuds™. The upgrade also delivered improved wind noise reduction, reducing microphone
thumping and improving speech clarity in windy conditions.
In March 2018, Nuheara announced the Group’s successful registration as an approved supplier to the Australian
Governments Hearing Services Program (HSP). The HSP provides eligible Australians access to free and subsidised hearing
devises and services. In the 2017-18 Federal budget the HSP was allocated $539m. The Group will place both IQbuds™ and
IQbuds BOOST™ on the Device Schedule as Assisted Listening Devices (ALD). The registration of Nuheara as a supplier to the
HSP is a significant development for the Group, demonstrating its innovated hearing solutions have been recognised as a
cost-effective options by the Australian Government.
Nuheara is determined to have an evidence-based approach in the marketing of its products to a healthcare channel that is
already demonstrating positive anecdotal response. As a result, Nuheara has commissioned a study with Ear Science Institute
Australia (ESIA) to determine whether the use of IQbuds™ by children with Auditory Processing Disorder (APD) improves their
listening performance. Nuheara has also engaged The Centre for Auditory Neuroscience at the University of Melbourne in a
study to determine whether the use of IQbuds™ by children with Autism Spectrum Disorder improves their sensory
experience.
Nuheara continues to be recognised for its innovative technology, having won seven global awards, including three innovation
awards from CES 2017 (Las Vegas) and two innovation awards from IFA 2017 (Berlin) – the two largest consumer electronics
shows in the world. Nuheara was also chosen to attend The Luxury Technology Show in New York sponsored by the Wall
Street Journal, a one-of-a-kind luxury showcase displaying best-in-class technology innovations.
The Group received a R&D Tax Incentive cash rebate from the Australian Taxation Office of $1.2m. The R&D Tax Incentive is
a highly effective Government policy which has supported Nuheara to undertake research and development.
The Group successfully completed two capital raisings during the year, raising $9 million in July 2017 and $6 million in June
2018, with funds raised being used to assist Nuheara in achieving its planned objectives of increasing sales and marketing
activities of IQbuds™ and IQbuds BOOST™, increasing inventory levels of IQbuds BOOST™, and the production and launch of
LiveIQ™, expected for release in Q4, 2018.
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
7.
Likely developments
Consistent with the Group’s business plan, Nuheara will continue to work towards the productisation and commercialisation
of its smart hearing products, including current offerings, IQbuds™ and IQbuds BOOST™, plus the development of new
product, LiveIQ™.
8.
Significant events after balance date
There were no significant events after balance date.
9.
Environmental regulation
The Group’s operations are not subject to any significant environmental, Commonwealth or State, regulations or laws.
10. Share options
As at the date of this report, the Group has 78,000,000 options over ordinary shares. These options have been issued on the
following terms.
Number of Unlisted Options
Exercise Price
20,000,000
3,000,000
5,500,000
1,000,000
10,500,000
1,500,000
3,500,000
10,000,000
10,000,000
500,000
3,000,000
500,000
1,000,000
8,000,000
$0.03 each
$0.04 each
$0.06 each
$0.09 each
$0.09 each
$0.115 each
$0.09 each
$0.078 each
$0.12 each
$0.09 each
$0.115 each
$0.09 each
$0.09 each
$0.09 each
Expiry Date
24 February 2019
18 April 2019
18 April 2019
20 April 2019
30 November 2019
16 February 2020
22 May 2020
2 November 2019
6 June 2019
14 July 2020
24 July 2020
10 November 2020
12 January 2020
1 March 2021
TOTAL
78,000,000
Option holders do not have any rights to participate in any issues of shares or other interests in the Group or any other entity.
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
11. Remuneration report (audited)
This report, which forms part of the Directors’ Report, details the amount and nature of remuneration of each Key
Management Personnel of the Group. The following people were identified as Key Management Personnel (KMP) during the
year:
i) Directors
Justin Miller
Executive Chairman and Managing Director / Chief Executive Officer
David Cannington
Executive Director / Chief Marketing Officer
Kathryn Foster
Non-Executive Director (appointed 12 February 2018)
Michael Ottaviano
Non-Executive Director (resigned 4 July 2018)
ii) Executives
Jean-Marie Rudd
Chief Financial Officer/Co-Company Secretary
There were no other changes to KMP after the reporting date and before the date the annual report was authorised for issue.
Remuneration policy
The remuneration policy of the Group has been designed to align KMP objectives with shareholder and business objectives
by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas
affecting the consolidated group’s financial results. The Board believes the remuneration policy to be appropriate and
effective in its ability to attract and retain high-quality KMP to run and manage the consolidated group, as well as create goal
congruence between Directors, executives and shareholders.
The remuneration policy is to provide a fixed remuneration component, performance related bonus and a specific equity
related component. The Board believes that this remuneration policy is appropriate given the stage of development of the
Group and the activities which it undertakes and is appropriate in aligning executives’ objectives with shareholder and
business objectives.
The remuneration policy, in regards to settling terms and conditions for the Executive Directors and executives, has been
developed by the Board, taking into account market conditions and comparable salary levels for companies of similar size
and operating in similar sectors. The Board reviews the remuneration packages of all KMP on an annual basis.
The maximum remuneration of Non-Executive Directors is to be determined by Shareholders in general meeting in
accordance with the Constitution, the Corporations Act and the ASX Listing Rules, as applicable. At present the maximum
aggregate remuneration of Non-Executive Directors is $250,000 per annum. The apportionment of Non-Executive Director
Remuneration within that maximum will be made by the Board having regard to the inputs and value to the Group of the
respective contributions by each Non-Executive Director. Remuneration is not linked to specific performance criteria.
The Board policy is to remunerate Non-Executive Directors at market rates for comparable companies for time, commitment
and responsibilities. The Board determines payment to the Non-Executive Directors and reviews their remuneration on an
individual basis, based on market practices, duties and accountability. Independent external advice is sought when required.
Remuneration is not linked to the performance of the Group.
There are no service or performance criteria on the options granted to Directors as, given the speculative nature of the
Group’s activities and the small management team responsible for its running, it is considered the performance of the
Directors and the performance and value of the Group are closely related. The Board has a policy of granting options to KMP
with exercise prices above the respective share price at the time that the options were agreed to be granted. As such, options
granted to KMP will generally only be of benefit if the KMP’s perform to the level whereby the value of the Group increases
sufficiently to warrant exercising the options granted. Given the stage of development of the Group and the high-risk nature
of its activities, the Board considers that the prospects of the Group and resulting impact on shareholder wealth are largely
linked to the success of this approach, rather than by referring to current or prior year earnings.
Australian-based executives receive a superannuation guarantee contribution required by the Government, currently 9.5%
and do not receive any other retirement benefit. Executives may also choose to sacrifice part of their salary to increase
contributions towards superannuation. Upon retirement, KMP are paid employee benefit entitlements accrued to the date
of retirement.
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
11. Remuneration report (audited) (continued)
All remuneration paid to KMP is valued at the cost to the Group and expensed.
KMP are also entitled and encouraged to participate in the employee option arrangements to align Directors’ interests with
shareholders’ interests.
Options granted under the arrangement do not carry dividend or voting rights. Each option is entitled to be converted into
one ordinary share once the interim or final financial report has been disclosed to the public and is measured using the Black-
Scholes methodology.
KMP or closely related parties of KMP are prohibited from entering into hedge arrangements that would have the effect of
limiting the risk exposure relating to their remuneration. In addition, the Board’s remuneration policy prohibits Directors and
KMP from using the Group’s shares as collateral in any financial transaction, including margin loan arrangements.
Performance-based remuneration policy
Key performance indicators (KPI’s) are set annually, with a certain level of consultation with KMP. The measures are
specifically tailored to the area each individual is involved in and has a level of control over. The KPI’s target areas the Board
believes hold greater potential for group expansion and profit, covering financial and non-financial, as well as short and long-
term goals. The level set for each KPI is based on budgeted figures for the Group and respective industry standards.
Performance in relation to the KPI’s is assessed annually, with bonuses being awarded depending on the number and deemed
difficulty of the KPI’s achieved. Following the assessment, the KPI’s are reviewed by the Board in light of the desired and
actual outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth, before the KPI’s are
set for the following year.
Relationship between remuneration policy and Group performance
The remuneration policy has been tailored to increase goal congruence between shareholders, Directors and executives. Two
methods have been applied to achieve this aim, the first being a performance-based bonus based on KPI’s, and the second
being the issue of options to encourage the alignment of personal and shareholder interests.
Performance conditions linked to remuneration
The Group seeks to emphasise reward incentives for results and continued commitment to the Group through the provision
of various cash bonus reward schemes, specifically the incorporation of incentive payments based on the achievement of
financial targets, ratios, and continued employment with the Group.
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
11. Remuneration report (audited) (continued)
Details of remuneration provided to Directors and executives during the year are as follows:
Short-Term Employee Benefits
Salary & Consulting Fees
$
Cash Bonus
$
Post-Employment Benefits
Superannuation
$
Share-Based Payments
Shares
$
Options
$
Total
$
David Cannington (1)
Kathryn Foster
(appointed 12 February 2018)
Justin Miller (1)
Michael Ottaviano
(resigned 4 July 2018)
Jean-Marie Rudd
TOTAL
TOTAL
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
305,670
243,860
19,167
-
290,494
210,000
65,000
30,000
184,167
146,897
864,498
630,757
-
663
-
-
-
1,000
-
-
-
1,000
-
2,663
-
-
1,821
-
27,597
20,045
6,175
2,850
17,496
14,050
53,089
36,945
-
-
-
-
-
-
-
-
-
-
-
-
-
49,000
-
-
-
49,000
-
-
48,941
44,258
48,941
142,258
305,670
293,522
20,988
-
318,091
280,045
71,175
32,850
250,604
206,206
966,527
812,623
Notes:
(1) Justin Miller and David Cannington received 10,000,000 options each as part of the Nuheara Pty Ltd acquisition. 100% of these options vested in the 2017 financial year.
11
NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
11. Remuneration report (audited) (continued)
Services agreements
Justin Miller – Chief Executive Officer
Mr Miller has been engaged as an Executive Director of the Group pursuant to an employment and services agreement
between the Group and Mr Miller (Miller Agreement).
The total annual remuneration payable to Mr Miller under the Miller Agreement is a salary of USD$240,000 (2018: USD
$240,000) per annum (inclusive of superannuation). Mr Miller will also be entitled to participate in short-term cash incentives
of up to 30% of the base package and long-term incentives to be defined by the Board.
The Miller Agreement commenced on 2 March 2016 and employment under the Miller Agreement will continue until
terminated in accordance with the Miller Agreement (Term). During the Term, the Miller Agreement may be terminated by
the Group at any time:
• by six months' written notice to Mr Miller, at which time the Group will immediately pay Mr Miller 6 months’ base salary
in lieu;
• by three written months' notice to Mr Miller in cases of prolonged illness or incapacity (mental or physical); or
• by summary notice in circumstances where Mr Miller neglects to perform his duties, or comply with reasonable or proper
direction, or engages in serious misconduct.
Otherwise, the Miller Agreement may be terminated by Mr Miller at any time for any reason by giving not less than three
months' notice in writing to the Group. Mr Miller may also terminate the Miller Agreement immediately by giving notice if
at any time the Group is in breach of a material term of the Miller Agreement.
In the event of a change of control, Mr Miller will receive a bonus payment comprising of a lump sum gross payment of 12
months’ base salary.
Mr Miller is also subject to restrictions in relation to the use of confidential information during and after his employment with
the Group ceases, being directly or indirectly involved in a competing business during the continuance of his employment
with the Group, and for a period of 12 months after his employment with the Group ceases, on terms which are otherwise
considered standard for agreements of this nature.
The Miller Agreement contains additional provisions considered standard for agreements of this nature.
David Cannington – Chief Marketing Officer
Mr David Cannington has been engaged as an Executive Director of the Group pursuant to an employment and services
agreement between the Group and Mr Cannington (Cannington Agreement).
The total annual remuneration payable to Mr Cannington under the Cannington Agreement is a salary of USD$228,000 (2017:
USD$228,000) per annum and a health care allowance of USD$750 (2017: USD $750) per month. Mr Cannington will also be
entitled to participate in short-term cash incentives of up to 30% of the base package and long-term incentives to be defined
by the Board.
The Cannington Agreement commenced on 2 March 2016 and employment under the Cannington Agreement will continue
until terminated in accordance with the Cannington Agreement (Term). During the Term, the Cannington Agreement may
be terminated by the Group at any time:
•
•
•
by six months' written notice to Mr Cannington, at which time the Group will immediately pay Mr Cannington 6 months’
base salary in lieu;
by three months' written notice to Mr Cannington in cases of prolonged illness or incapacity (mental or physical); or
by summary notice in circumstances where Mr Cannington neglects to perform his duties, or comply with reasonable or
proper direction or engages in serious misconduct.
Otherwise, the Cannington Agreement may be terminated by Mr Cannington at any time for any reason by giving not less
than three months' notice in writing to the Group. Mr Cannington may also terminate the Cannington Agreement immediately
by giving notice if at any time the Group is in breach of a material term of the Cannington Agreement.
In the event of a change of control, Mr Cannington will receive a bonus payment comprising of a lump sum gross payment of
12 months’ base salary.
12
NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
11. Remuneration report (audited) (continued)
Services agreements (continued)
Mr Cannington is also subject to restrictions in relation to the use of confidential information during and after his employment
with the Group ceases, being directly or indirectly involved in a competing business during the continuance of his employment
with the Group, and for a period of 12 months after his employment with the Group ceases, on terms which are otherwise
considered standard for agreements of this nature.
The Cannington Agreement contains additional provisions considered standard for agreements of this nature.
Jean-Marie Rudd – Chief Financial Officer/Co-Company Secretary
Mrs Jean-Marie Rudd has been engaged as a Chief Financial Officer/Co-Company Secretary of the Group pursuant to an
employment and services agreement between the Group and Mrs Rudd (Rudd Agreement).
The total annual remuneration payable to Mrs Rudd under the Rudd Agreement is a salary of $201,025 per annum (exclusive
of superannuation) (2017: $187,000). Mrs Rudd will also be entitled to participate in short-term cash incentives of up to 20%
of the base package and long-term incentives to be defined by the Board.
The Rudd Agreement commenced on 16 August 2016 and employment under the Rudd Agreement will continue until
terminated in accordance with the Rudd Agreement (Term). During the Term, the Rudd Agreement may be terminated by
the Group at any time:
•
•
•
by three months' written notice to Mrs Rudd, at which time the Group will immediately pay Mrs Rudd 6 months’ base
salary in lieu;
by one months' written notice to Mrs Rudd in cases of prolonged illness or incapacity (mental or physical); or
by summary notice in circumstances where Mrs Rudd neglects to perform her duties, or comply with reasonable or
proper direction or engages in serious misconduct.
Otherwise, the Rudd Agreement may be terminated by Mrs Rudd at any time for any reason by giving not less than three
months' notice in writing to the Group. Mrs Rudd may also terminate the Rudd Agreement immediately by giving notice if at
any time the Group is in breach of a material term of the Rudd Agreement.
Mrs Rudd is also subject to restrictions in relation to the use of confidential information during and after her employment
with the Group ceases, being directly or indirectly involved in a competing business during the continuance of her
employment with the Group, and for a period of six months after her employment with the Group ceases, on terms which
are otherwise considered standard for agreements of this nature.
The Rudd Agreement contains additional provisions considered standard for agreements of this nature.
KMP shareholdings
The number of ordinary shares the Group held by KMP during the financial year is as follows:
Ordinary Shares
Justin Miller(1)
David Cannington
Michael Ottaviano(2)
Jean-Marie Rudd
Opening balance
1 July 2017
or balance on
appointment
63,142,857
63,142,857
24,802,321
19,279
Issued
during
the year
-
-
-
-
Purchased
during
the year
-
Closing Balance
30 June 2018
or resignation date
63,142,857
-
-
-
63,142,857
24,802,321
19,279
Total
Notes:
(1) 63,142,857 shares are held by Wasagi Corporation Pty Ltd as trustee for the Wasagi Family Trust of which Justin Miller is a beneficiary.
(2) Mr Ottaviano ceased to be a KMP on his resignation on 4 July 2018
(3) Ms Foster (non-executive Director appointed on 12 February 2018) does not hold any shares in the Group
151,107,314
151,107,314
-
-
13
NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
11. Remuneration report (audited) (continued)
KMP shareholdings (continued)
The relevant beneficial interest of KMP in the options over ordinary share capital of the Group is as follows:
Options
Justin Miller(1)
David Cannington
Jean-Marie Rudd
Opening balance
1 July 2017
or balance on
appointment
10,000,000
10,000,000
4,500,000
Issued
during
the year
-
-
-
Expired
during
the year
-
-
-
Closing Balance
30 June 2018
or resignation date
10,000,000
10,000,000
4,500,000
Total
Notes:
(1) 10,000,000 unlisted options are held by Wasagi Corporation Pty Ltd as trustee for the Wasagi Family Trust of which Justin Miller is a
24,500,00000
24,500,00000
-
-
beneficiary.
(2) Mr Ottaviano (non-executive Director, resigned on 4 July 2018) and Ms Foster (non-executive Director, appointed on 12 February 2018)
do not have any beneficial interests in the options over ordinary share capital of the Group.
Options granted
There were no options issued to KMP for the year ended 30 June 2018 (2017: 4,500,000).
Shares issued
During the 2018 year, no shares were issued as remuneration (2017: nil).
Other transactions with KMP and/or their related parties
During the year there were no other transactions with KMP and/or related parties.
END OF REMUNERATION REPORT
14
NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
12.
Directors' meetings
The following table sets out the number of meetings of the Group’s Directors held during the year ended 30 June 2018 and
the number of meetings attended by each Director:
Director
David Cannington
Kathryn Foster (appointed 12 February 2018)
Justin Miller
Michael Ottaviano (resigned 4 July 2018)
Number
Attended
5
2
5
5
Number Eligible
to Attend
5
2
5
5
13.
Indemnifying officers or auditor
The Group has paid premiums to insure all Directors against liabilities for costs and expenses incurred by them in defending
legal proceedings arising from their conduct while acting in the capacity of Director of the Group, other than conduct involving
a wilful breach of duty in relation to the Group. The premiums in total amounted to $33,339.
14.
Proceedings on behalf of the Group
No person has applied for leave of court to bring proceedings on behalf of the Group, or intervene in any proceedings to
which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or any part of those
proceedings.
The Group was not a party to any such proceedings during the year.
15.
Auditor
Walker Wayland WA Audit Pty Ltd (formerly Hall Chadwick WA Audit Pty Ltd) has been appointed auditor of the Group in
accordance with section 327 of the Corporations Act 2001. The Directors are of the opinion that the auditor has procedures
in place to ensure there will be no deterioration of audit quality as a result of the extension, and the extension will not give
rise to a conflict of interest situation.
16.
Non audit services
The Board of Directors is satisfied that there was no provision of non-audit services during the year.
17.
Auditor’s independence declaration
The auditor’s independence declaration for the year ended 30 June 2018 has been received and can be found on page 16 of
the financial report.
Made and signed in accordance with a resolution of the Directors.
Justin Miller
Managing Director/Chief Executive Officer
Perth, 26 September 2018
15
Auditor’s Independence Declaration Under Section 307C of The Corporations Act
2001 to The Directors of Nuheara Limited And Controlled Entities
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2018
there have been no contraventions of:
(i)
the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
WALKER WAYLAND WA AUDIT PTY LTD
Richard Gregson CA
Director
Level 3, 1 Preston Street, COMO WA 6152
Dated this 26th day of September 2018
NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Revenue
Cost of sales
Gross profit/(loss)
Other income
Salaries and employee benefits
Marketing and promotional
Research and development
General and administrative
Share based payments
Total expenses
NOTES
2018
$
2017
$
3
3,962,565
2,466,336
(3,660,856)
(3,118,036)
301,709
(651,700)
1,289,395
(4,509,514)
(1,958,069)
(247,755)
450,316
(1,270,997)
(1,010,753)
(205,343)
(2,009,044)
(1,689,638)
(283,134)
(461,508)
(7,718,121)
(4,187,923)
Loss before tax from continuing operations
(7,416,412)
(4,839,623)
Income tax benefit
2
-
-
Net loss after tax from continuing operations
(7,416,412)
(4,839,623)
Total comprehensive loss attributable to:
Equity holders
Total comprehensive loss
Earnings per share
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
(7,416,412)
(7,416,412)
(4,839,623)
(4,839,623)
16
16
(0.92)
(0.92)
(0.78)
(0.78)
The accompanying notes form part of these financial statements.
17
NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
NOTES
2018
$
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Disposal group – mining tenements held for sale
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Security deposits
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Share option reserve
Foreign currency translation reserve
Accumulated losses
TOTAL EQUITY
4
5
6
7
8
2017
$
3,404,552
871,209
1,125,144
206,233
5,607,138
871,245
27,581
2,194,198
3,093,024
8,345,698
849,035
2,353,392
206,233
11,754,358
762,526
32,098
4,533,697
5,328,321
17,082,679
8,700,162
1,583,180
474,029
2,057,209
1,796,242
386,281
2,182,523
2,063,977
2,182,523
15,018,701
6,517,639
9
33,038,866
17,402,898
960,561
(6,478)
677,427
(4,850)
(18,974,248)
(11,557,836)
15,018,701
6,517,639
The accompanying notes form part of these financial statements.
18
NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Ordinary
Shares
$
Accumulated
Losses
$
Share
Option
Reserve
$
Foreign
Currency
Translation
Reserve
$
8,229,327
(6,718,213)
415,919
Total
$
1,927,033
(4,839,623)
(6,716,807)
9,831,903
(658,332)
99,814
161,694
-
-
-
-
-
-
-
-
-
(4,839,623)
(6,716,807)
9,831,903
(658,332)
-
-
-
-
-
-
-
-
-
-
-
99,814
161,694
-
(4,850)
161,694
17,402,898
(11,557,836)
677,427
(4,850)
6,517,639
17,402,898
(11,557,836)
677,427
(4,850)
6,517,639
-
-
(7,416,412)
(7,416,412)
16,620,000
(984,032)
-
-
-
-
-
-
-
-
-
-
-
(362,329)
645,463
-
33,038,866
(18,974,248)
960,561
-
-
-
-
-
-
(7,416,412)
(7,416,412)
16,620,000
(984,032)
(362,329)
645,463
(1,628)
(6,478)
(1,628)
15,018,701
Balance at 1 July 2016
Comprehensive income
Loss for the year
Total comprehensive loss for the year
Transactions with owners
capacity as owners
in their
Shares issued during the year
Share issue costs
Options issued during the year
Movement in valuation of options
issued in prior periods
Foreign currency translation
movements
Balance at 30 June 2017
Balance at 1 July 2017
Comprehensive income
Loss for the year
Total comprehensive loss for the year
Transactions with owners
capacity as owners
in their
Shares issued during the year
Share issue costs
Options issued during the year
Movement in valuation of options
issued in prior periods
Foreign currency translation
movements
Balance at 30 June 2018
The accompanying notes form part of these financial statements.
19
NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Interest received
Grants and rebates received
Payments to suppliers and employees
Interest and other costs of finance paid
NET CASH FLOWS USED IN OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
Payment for acquisition of businesses (net of cash acquired)
Payment for the acquisition of intangibles
NET CASH FLOWS USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share and option issues
Share raising costs
NET CASH FLOWS FROM FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS HELD
Cash and cash equivalent at beginning of the financial year
NOTES
2018
$
2017
$
4,057,505
1,898,869
77,880
1,208,451
33,382
411,175
(11,873,017)
(6,412,608)
124
(1,085)
23
(6,529,057)
(4,070,267)
(133,335)
(851,882)
10,998
-
(4,043,428)
(2,640,998)
(4,165,765)
(3,492,880)
16,620,000
(984,032)
9,631,903
(658,332)
15,635,968
8,973,571
4,941,146
3,404,552
1,410,424
1,994,128
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
8,345,698
3,404,552
The accompanying notes form part of these financial statements.
20
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
It is important to read the following definitions in order to assist with understanding this report.
For the purposes of this report:
Nuheara IP Pty Ltd or Company refers to the Company purchased by Nuheara Limited on 25 February 2016. As required by
Australian Accounting Standard AASB 3: Business Combinations, Nuheara Limited is deemed to have been acquired by Nuheara IP
Pty Ltd as at 25 February 2016 under the reverse acquisition rules. While the financial statements are headed with the legal
acquirer, Nuheara Limited, the financial statements presented are a continuation of those of the accounting acquirer, Nuheara IP
Pty Ltd.
Nuheara Limited or Listed Entity means only the legal entity of Nuheara Limited, which is listed on the Australian Securities
Exchange (ASX: NUH). Nuheara Limited is the legal parent of Nuheara IP Pty Ltd although Nuheara IP Pty Ltd has been treated as
the acquirer for accounting purposes in the financial statements.
Wild Acre Metals Limited (ASX: WAC) means Nuheara Limited and all its controlled entities prior to the purchase of Nuheara IP
Pty Ltd. On 25 February 2016, the Company’s name was changed from Wild Acre Metals Limited to Nuheara Limited and the ASX
code was subsequently changed from WAC to NUH.
The financial report for Nuheara Limited for the year ended 30 June 2018 was authorised for issue in accordance with a resolution
by the Board of Directors.
Nuheara Limited is incorporated in Australia, and is a listed public Company whose shares are publicly traded on the Australian
Securities Exchange (ASX). Its registered office and principal place of business is located at 190 Aberdeen Street, Northbridge,
Western Australia.
1.
a)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
interpretations of the Australian Accounting Standards Board (AASB), International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board, and the Corporations Act 2001. The Group is a for-profit entity
for financial reporting purposes under the Australian Accounting Standards.
Material accounting policies adopted in the preparation of these financial statements are presented below and have been
consistently applied unless otherwise stated.
Reporting Basis and Conventions
Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on
historical costs, modified where applicable, by the measurement of fair value of selected non-current assets, financial
assets and financial liabilities.
Critical accounting estimates
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 14.
Going concern
For the year ended 30 June 2018, the Group has incurred a net loss after tax of $7,416,412 (2017: loss of $4,839,623) and
net cash outflows from operating activities of $6,529,057 (2017: outflow of $4,070,267). As at 30 June 2018, the group
has a net current asset position of $15,018,701 (30 June 2017: $6,517,639).
The Group’s trading and cash flow forecasts for the 12-month period from the date of reporting indicate that there is
some risk that it may not meet all of its payment obligations unless the Group is able to complete a successful
equity/finance raising. These matters present a significant material uncertainty in relation to the Group’s ability to
continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course
of business and at the amounts stated in the financial report.
The Directors remain committed to the long-term business plan that is contributing to improved results as the business
progresses from start-up phase into a more established business operation. The Directors believe there are reasonable
grounds to believe that the Group will be able to continue as a going concern after consideration of the following factors:
21
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation (continued)
Going concern (continued)
• Ongoing growth in sales of IQbuds™ and IQbuds BOOST™ through expanding distribution channels;
• New products planned for release over the course of the next 12-months;
•
•
•
The recent appointment of a Chief Sales Officer, expected to generate increasing revenue;
Active management of the current level of discretionary expenditure in line with the funds available to the Group
Raising additional working capital through the issue of securities and/or other funding;
After taking into account all available information, the Directors have concluded that there are currently reasonable
grounds to believe that the group will be able to pay its debts as and when they become due and payable, and to continue
as a going concern and be in a position to realise its assets and settle its liabilities and commitments in the normal course
of business, and at the amounts stated in the financial report. Accordingly, the Directors also believe that it is appropriate
to adopt the going concern basis in the preparation of the financial statements.
In the event that the Group does not achieve the conditions stated by the Directors, the ability of the Group to continue as
a going concern may be impacted and therefore the Group may not be able to realise its assets and extinguish its liabilities
in the ordinary course of operations, and at the amounts stated in the financial report. No adjustments have been made to
the recoverability and classification of recorded asset values and the amount and classification of liabilities that might be
necessary should the Group not continue as going concern.
New Accounting Standards for Application in Future Periods
Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, together
with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are
discussed below:
• AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods beginning on or after 1 January
2018, as deferred by AASB 2015-8: Amendments to Australian Accounting Standards – Effective Date of AASB 15).
When effective, this Standard will replace the current accounting requirements applicable to revenue with a single,
principles-based model. Except for a limited number of exceptions, including leases, the new revenue model in AASB 15
will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of
business to facilitate sales to customers and potential customers.
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for the goods or services. To achieve this objective, AASB 15 provides the following five-step process:
•
•
•
•
•
identify the contract(s) with a customer;
identify the performance obligations in the contract(s);
determine the transaction price;
allocate the transaction price to the performance obligations in the contract(s); and
recognise revenue when (or as) the performance obligations are satisfied.
The transitional provisions of this Standard permit an entity to either: restate the contracts that existed in each prior
period presented per AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors (subject to certain
practical expedients in AASB 15); or recognise the cumulative effect of retrospective application to incomplete contracts
on the date of initial application. There are also enhanced disclosure requirements regarding revenue. Although the
Directors anticipate that the adoption of AASB 15 may have an impact on the Group 's financial statements, it is
impracticable at this stage to provide a reasonable estimate of such impact.
•
AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019)
When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases
and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for
leases to be classified as operating or finance leases. The main changes introduced by the new Standard include:
•
recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months
of tenure and leases relating to low-value assets);
22
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
a) Basis of preparation (continued)
New Accounting Standards for Application in Future Periods (continued)
•
•
•
•
depreciation of right-to-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and
unwinding of the liability in principal and interest components;
variable lease payments that depend on an index or a rate are included in the initial measurement of the lease
liability using the index or rate at the commencement date;
by applying a practical expedient, a lessee is permitted to elect not to separate non-lease components and instead
account for all components as a lease; and
additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line
with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on
the date of initial application.
Although the Directors anticipate that the adoption of AASB 16 will impact the Group 's financial statements, it is
impracticable at this stage to provide a reasonable estimate of such impact.
• AASB 2014-10: Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture (applicable to annual reporting periods beginning on or after 1 January 2018, as
deferred by AASB 2015-10: Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB
10 and AASB 128).
This Standard amends AASB 10: Financial Statements with regards to a parent losing control over a subsidiary that is
not a “business” as defined in AASB 3 to an associate or joint venture, and requires that:
•
•
•
a gain or loss (including any amounts in other comprehensive income (OCI) be recognised only to the extent of the
unrelated investor's interest in that associate or joint venture;
the remaining gain or loss be eliminated against the carrying amount of the investment in that associate or joint
venture; and
any gain or loss from remeasuring the remaining investment in the former subsidiary at fair value also be
recognised only to the extent of the unrelated investor's interest in the associate or joint venture. The remaining
gain or loss should be eliminated against the carrying amount of the remaining investment.
The application of AASB 2014-10 will result in a change in accounting policies for transactions of loss of control over
subsidiaries (involving an associate or joint venture) that are businesses per AASB 3, for which gains or losses were
previously recognised only to the extent of the unrelated investor's interest.
The transitional provisions require that the Standard should be applied prospectively to sales or contributions of
subsidiaries to associates or joint ventures occurring on or after 1 January 2018. Although the Directors anticipate that
the adoption of AASB 2014-10 may have an impact on the Group 's financial statements, it is impracticable at this stage
to provide a reasonable estimate of such impact.
b)
Business combinations
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities
or businesses under common control. The business combination will be accounted for from the date that control is
attained, whereby the fair value of the identifiable assets acquired, and liabilities assumed (including contingent liabilities)
is recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a
contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent
consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change
to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations are recognised as expenses in profit or loss when
incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
23
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
c)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Employee benefits
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance
date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected
to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present
value of the estimated future cash outflows to be made for those benefits. Those cash flows are discounted using market
yields on national government bonds with terms to maturity that match the expected timing of cash flows.
d)
Impairment of assets
At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired.
The assessment will include the consideration of external and internal sources of information including dividends received
from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication
exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher
of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount.
Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless
the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation
model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation
decrease in accordance with that other Standard.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill,
intangible assets with indefinite lives and intangible assets not yet available for use.
e)
Intangible assets
Research and development
(i) Research phase
No intangible asset arising from research (or from the research phase of an internal project) is recognised. Expenditure on
research (or on the research phase of an internal project) is recognised as an expense when incurred.
(ii) Development phase
An intangible asset arising from development (or from the development of an internal project) is recognised if, and only if,
all of the following have been demonstrated:
•
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell
the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Development costs include costs directly attributable to the development activities. Development costs not capitalised are
recognised as an expense when incurred.
Following initial recognition, the Group will adopt the cost model. As a result, any development costs carried forward will
be carried forward at its cost less any accumulated amortization and any accumulated impairment losses.
Capitalised development costs have a finite useful life and are amortised on a straight-line basis over 2.5 years.
Patents and trademarks
Patents and Trademarks are recognised at cost of acquisition. They have a finite life and are carried at cost less any
accumulated amortisation and any impairment losses.
Patents and trademarks are amortised on a straight-line basis over 10 years.
24
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions, which are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
g)
Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the
instrument. For financial assets, this is equivalent to the date that the Group commits itself to either the purchase or sale
of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified
“at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value or amortised cost using the effective interest method, or
cost. Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial
recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of
the difference between that initial amount and the maturity amount calculated using the effective interest method.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is
equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and
other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of
the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future
net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or
expense item in profit or loss.
The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the
requirements of Accounting Standards specifically applicable to financial instruments.
(i)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through
the amortisation process and when the financial asset is derecognised.
(ii) Financial liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or
losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.
Impairment
From 1 January 2018, the Group assesses on a forward-looking basis the expected credit losses associated with its debt
instruments carried at fair value. The impairment methodology applied depends on whether there has been a significant
increase in credit risk. For trade receivables, the Group applies the simplified approach permitted by AASB 9 Financial
Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
Derecognition
Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to
another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated
with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired.
The difference between the carrying amount of the financial liability extinguished or transferred to another party and the
fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or
loss.
Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices at the balance date. The quoted market price used for
financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the
current ask price.
25
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g)
Financial instruments (continued)
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their
fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available to the Group for similar financial instruments.
h)
Foreign currency transactions and balances
Functional and presentation currency
The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment
in which that entity operates. The financial statements are presented in Australian dollars, which is the parent entity’s
functional currency.
Transactions and balances
Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive
income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the
exchange difference is recognised in profit or loss.
Foreign controlled entities
The financial results and position of foreign operations, whose functional currency is different from the Group’s
presentation currency, are translated as follows:
income and expenses are translated at average exchange rates for the period;
retained earnings are translated at the exchange rates prevailing at the date of the transaction; and
• assets and liabilities are translated at exchange rates prevailing at the end of the reporting period;
•
•
• exchange differences arising on translation of foreign operations with functional currencies other than Australian
dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the
statement of financial position. These differences are recognised in profit or loss in the period when a foreign operation
is disposed.
i)
Issued capital
Ordinary shares and options are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds. Incremental costs directly attributable to the issue of new shares or options, for the acquisition of a
business, are not included in the cost of the acquisition as part of the purchase consideration.
j)
Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as
expenses in the periods in which they are incurred.
k) Plant and equipment
Plant and equipment and leasehold improvements are stated at cost less accumulated depreciation and impairment. Cost
includes expenditure that is directly attributable to the acquisition of the item.
Depreciation is provided on plant and equipment and is calculated on a straight line basis so as to write off the net cost of each
asset over its expected useful life to its estimated residual value. Leasehold improvements are depreciated over the period of
the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual
values and depreciation method are reviewed, and adjusted if appropriate, at the end of each annual reporting period.
The following depreciation rates that are used in the calculation of depreciation:
• Office equipment - 10% - 25%
• Plant and Equipment - 15%
• Leasehold improvements - 40%
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are
included in the statement of profit or loss and other comprehensive income. When revalued assets are sold, amounts
included in the revaluation surplus relating to that asset are transferred to retained earnings.
26
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l)
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct
materials, direct labour and an appropriate proportion of variable and fixed overheads. Overheads are applied on the basis
of normal operating capacity. Costs are assigned on the basis of weighted average costs.
m) Principles of consolidation
On 25 February 2016, Nuheara Limited acquired all of the issued shares of Nuheara IP Pty Ltd, resulting in Nuheara IP Pty
Ltd becoming a wholly owned subsidiary of Nuheara Limited. The acquisition resulted in the original shareholders of
Nuheara IP Pty Ltd holding a controlling interest in Nuheara Limited (formerly known as Wild Acre Metals Limited). Pursuant
to AASB 3: Business Combinations, this transaction represents a reverse acquisition with the result that Nuheara IP Pty Ltd
was identified as the acquirer, for accounting purposes, of Nuheara Limited (the “acquiree” and “legal parent”). Wild Acre
Metals Limited was not considered a business as it only held disposal groups in Australia and Peru. Accordingly, in the year
to 30 June 2016 it was treated as an asset purchase and the excess consideration paid was disclosed as listing costs on the
Statement of Profit or Loss and Other Comprehensive Income.
A list of controlled entities is contained in Note 21.
n) Revenue recognition
Revenue is measured at the value of the consideration received or receivable after taking into account any trade discounts and
volume rebates allowed. For this purpose, deferred consideration is not discounted to present values when recognising
revenue.
Revenue from the sale of goods is recognised when the Group has delivered the products to the customer, the customer has
accepted the products and collectability of the related receivables is reasonably assured.
Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the
transaction at the end of the reporting period and where outcome of the contract can be estimated reliably. Stage of
completion is determined with reference to the services performed to date as a percentage of total anticipated services to be
performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure
is recoverable.
Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent
in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established.
Revenue from the sale of tenement interests is recognised at the time of the transfer of the significant risks and rewards of
ownership.
All revenue is stated net of the amount of goods and services tax.
o) Provisions
(i) Warranty provisions
Provision is made in respect of the Group’s best estimate of the liability on all products under warranty at the end of the
reporting period. The provision is measured as the present value of future cash flows estimated to be required to settle the
warranty obligation. The future cash flows have been estimated by reference to historical averages for warranty claims.
(ii) Long service leave and annual leave
The Group expects annual leave benefits to be settled wholly within 12 months of the reporting date. The Group recognises
a liability for long service leave and annual leave measured as the present value of expected future payments to be made
in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and
salary levels, experience of employee departures, and periods of service.
Employees in Australia are entitled to long service leave in accordance with statutory requirements. International
employees are granted the same annual and long service leave entitlements as those in Australia.
27
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
p) Share-based payments
Equity-settled share-based payments are measured at fair value at the date of grant. Fair value of options is measured by
use of a Black-Scholes model. The expected life used in the model has been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. The fair value of
shares is the market value of the shares at the grant date.
The fair value determined at the grant date of options issued as part of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.
q) Taxes
(i) Income Tax
The income tax expense income for the year comprises current income tax expense (income) and deferred tax expense
(income).
Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are
measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as
well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to
items that are recognised outside profit or loss.
Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability,
where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled and their measurement also reflects the manner in which management expects to recover
or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures,
deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be
controlled and it is not probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets
and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities
relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities,
where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will
occur in future periods, in which significant amounts of deferred tax assets or liabilities are expected to be recovered or
settled.
(ii) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
• Where 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 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 the amount of GST recoverable from, or payable to, the taxation
authority.
28
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
r) New and amended accounting policies adopted by the Group
Standards and Interpretations applicable to 30 June 2018
In the year ended 30 June 2018, the Directors have reviewed all of the new and revised Standards and Interpretations
issued by the AASB that are relevant to the Group and effective for the current annual reporting period.
As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards
and Interpretations on the Group and, therefore, no material change is necessary to the Group accounting policies.
29
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
2.
INCOME TAX
a)
Income tax expense
Current income tax
Deferred income tax
Income tax expense
b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Loss before tax from disposal group
Loss before income tax
Tax credit at the Australian tax rate of 27.5% (2017: 27.5%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable
income:
Non-deductible expenses
Non assessable-non exempt income related expenditure/(income)
Temporary differences
Tax loss not brought to account as a deferred tax asset
R&D Tax Offset
Income tax expense
c) Unrecognised deferred tax assets/(liabilities)
Unrecognised temporary differences
Unrecognised deferred tax asset/(liability) relates to the following:
Interest receivable
Prepayments
Software
Trade and other payables
Employee benefits
Provisions
Business related costs
Foreign exchange
Tax Losses
2018
$
2017
$
-
-
-
-
-
-
(7,416,412)
-
(7,416,412)
(2,039,513)
(4,839,623)
-
(4,839,623)
(1,330,896)
83,722
11,542
278,741
1,997,832
(332,324)
-
128,480
411,176
171,723
732,590
(113,073)
-
2018
$
2017
$
(1,360)
(5,692)
591,450
6,609
51,325
78,931
414,475
(16,512)
4,419,672
(1,584)
(46,907)
57,279
7,425
24,217
67,824
291,543
9,726
2,311,958
Potential unrecognised deferred tax asset @ 27.5% (2017: 27.5%)
5,538,898
2,721,481
The tax losses do not expire under current legislation. Deferred tax assets have not been recognised in respect of these
items because it is not probable that future taxable profits will be available against which the Group can utilise the
benefits.
3. OTHER INCOME
Interest income
Grants and rebates received
Sundry income
Total other income
4.
TRADE AND OTHER RECEIVABLES
2018
$
77,066
1,208,451
3,878
1,289,395
2018
$
2017
$
39,139
411,175
2
450,316
2017
$
Trade and other receivables
849,033
871,209
Credit risk – trade and other receivables
The Group has no significant credit risk with respect to any single
counterparty. The class of assets described as trade and other receivables is
considered to be the main source of credit risk related to the Group. The trade
and other receivables as at 30 June are considered to be of low credit risk.
30
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
5.
PLANT AND EQUIPMENT
Plant and equipment – at cost
Less: accumulated depreciation
Total plant and equipment
Opening balance - plant and equipment
Additions
Disposals
Depreciation
Foreign currency translation movement
Closing balance – plant and equipment
6.
INTANGIBLE ASSETS
Development costs – at cost
Less: accumulated amortisation and impairment losses
Net carrying amount
Patents & Trademarks – at cost
Less: accumulated amortisation and impairment losses
Net carrying amount
2018
$
1,148,651
(386,125)
762,526
2018
$
871,245
293,675
(16,269)
(386,125)
-
762,526
2018
$
6,333,580
(2,130,535)
4,203,045
350,846
(20,194)
330,652
2017
$
1,036,615
(165,370)
871,245
2017
$
160,399
853,434
-
(142,309)
(279)
871,245
2017
$
2,544,152
(444,354)
2,099,798
96,846
(2,446)
94,400
Total intangible assets
4,533,697
2,194,198
Balance as at 1 July 2016
Balance as at 30 June 2017
Additions – internally developed
Amortisation charge
Balance as at 30 June 2018
7.
TRADE AND OTHER PAYABLES - CURRENT
Trade creditors
Unearned Income
Other creditors and accrued expenses
8.
PROVISIONS – CURRENT
Employee provisions
Provision for warranty claims
Development
Costs
$
-
2,099,798
3,789,427
(1,686,180)
4,203,045
Patents
&
Trademarks
$
-
94,400
254,000
(17,748)
330,652
2018
$
692,795
28,453
861,932
1,583,180
2018
$
236,275
237,754
474,029
Total
$
-
2,194,198
4,043,427
(1,703,928)
4,533,697
2017
$
1,081,511
-
714,731
1,796,242
2017
$
139,647
246,634
386,281
31
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
ISSUED CAPITAL
Ordinary shares
(i)
Issued and paid up capital
891,473,723 (2017: 697,489,746) Ordinary shares, fully paid
(ii) Movements during the period number of shares
Opening Balance shares
27 October 2016 issue 83,073,383 shares under share placement
at $0.06 each
3 April 2017 issue 36,250,000 shares under share placement at
$0.08 each
4 April 2017 issue 18,750,000 shares under share placement at
$0.08 each
5 May 2017 issue 3,093,750 shares under share purchase plan at
0.08 each
23 June 2017 issue 2,500,000 shares to consultant in consideration
of investor relations and corporate advisory services provided to
the Group
Less: Share issue costs
Balance shares at 30 June 2017
Opening balance at 1 July 2017
17 July 2017 issued 750,000 shares under share purchase plan at
$0.04 each
20 July 2017 issued 97,826,082 shares under share placement at
$0.092 each
20 July 2017 issued 2,250,000 shares under share purchase plan
at $0.04 each
12 March 2018 issued 2,000,000 shares under share purchase
plan at $0.05 each
14 March 2018 issued 3,000,000 shares under share purchase
plan at $0.05 each
14 March 2018 issued 1,500,000 shares under share purchase
plan at $0.05 each
15 March 2018 issued 3,000,000 shares under share purchase
plan at $0.05 each
21 March 2018 issued 2,000,000 shares under share purchase
plan at $0.05 each
21 March 2018 issued 3,750,000 shares under share purchase
plan at $0.05 each
21 March 2018 issued 2,000,000 shares under share purchase
plan at $0.05 each
21 March 2018 issued 4,735,714 shares under share purchase
plan at $0.05 each
21 March 2018 issued 8,014,286 shares under share purchase
plan at $0.05 each
15 June 2018 issued 63,157,895 shares under share placement at
$0.095 each
Less: Share issue costs
Balance shares at 30 June 2018
32
2018
$
33,038,866
Number of
Shares
2017
553,822,613
2017
$
17,402,898
2017
$
8,229,327
83,073,383
4,984,403
36,250,000
2,900,000
18,750,000
1,500,000
3,093,750
247,500
2,500,000
-
697,489,746
Number of
Shares
2018
697,489,746
200,000
(658,332)
17,402,898
2018
$
17,402,898
750,000
30,000
97,826,082
9,000,000
2,250,000
90,000
2,000,000
100,000
3,000,000
150,000
1,500,000
75,000
3,000,000
150,000
2,000,000
100,000
3,750,000
187,500
2,000,000
100,000
4,735,714
236,786
8,014,286
400,714
63,157,895
-
891,473,723
6,000,000
(984,032)
33,038,866
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
ISSUED CAPITAL (continued)
Ordinary shares (continued)
(iii) Holders of ordinary shares
Holders of ordinary shares have the right to receive dividends as declared, and in the event of winding up the Group, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of shares held and the amount
paid up. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
Unlisted Options
(i)
Issued unlisted options
78,000,000 (2017: 107,319,445) unlisted options
Description
Number
Grant
Date
Unlisted Options
20,000,000
25/02/2016
Unlisted Options
3,000,000
18/04/2016
Unlisted Options
5,500,000
18/04/2016
Unlisted Options
1,000,000
24/05/2016
Unlisted Options
10,500,000
30/11/2016
Unlisted Options
1,500,000
21/02/2017
Unlisted Options
3,500,000
22/05/2017
Exercise
Price
$0.03
$0.04
$0.06
$0.09
$0.09
$0.12
$0.09
2018
$
960,561
2017
$
677,427
Weighted
Average
time until
expiry
2018
Expiry
Date
24/02/2019
8 months
18/04/2019
10 months
18/04/2019
10 months
18/04/2019
10 months
30/11/2019
17 months
16/02/2020
20 months
22/05/2020
23 months
Unlisted Options
10,000,000
20/06/2017
$0.078
2/11/2019
16 months
Unlisted Options
10,000,000
20/06/2017
Unlisted Options
500,000
14/07/2017
Unlisted Options
3,000,000
24/07/2017
Unlisted Options
500,000
10/11/2017
Unlisted Options
1,000,000
12/01/2018
Unlisted Options
8,000,000
1/03/2018
Total Unlisted Options
78,000,000
$0.12
$0.09
$0.12
$0.09
$0.09
$0.09
6/06/2019
11 months
14/07/2020
24 months
24/07/2020
25 months
10/11/2020
28 months
12/01/2021
30 months
1/03/2021
32 months
15 months
For information relating to share options issued to KMP and contractors including details of options issued, exercised and
lapsed during the financial year, refer to Note 22 Share Based Payments.
33
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9.
ISSUED CAPITAL (continued)
Unlisted Options (continued)
(ii) Movements during the period for number of options
Balance unlisted options at 30 June 2016
Issue of employee options @ $0.09 each on 19 December 2016
Issue of employee options @ $0.115 each on 16 February 2017
Issue of employee options @ $0.09 each on 22 May 2017
Issue of options @ $0.078 each on 23 June 2017
Issue of options @ $0.12 each on 23 June 2017
Less: options forfeited
Movement in valuation of options issued in prior reporting periods
Balance unlisted options at 30 June 2017
Balance unlisted options at 30 June 2017
Issue of Employee options @ $0.09 each on 14 July 2017
Issue of Employee options @ $0.09 each on 24 July 2017
Issue of Employee options @ $0.09 each on 10 November 2017
Issue of Employee options @ $0.09 each on 12 January 2018
Issue of Employee options @ $0.09 each on 1 March 2018
Less: Options exercised/forfeited
Movement in valuation of options issued in prior reporting periods
Balance unlisted options at 30 June 2018
Number of
Options
2017
85,469,445
11,000,000
1,500,000
4,000,000
10,000,000
10,000,000
(14,650,000)
-
107,319,445
Number of
Options
2018
107,319,445
1,000,000
3,000,000
1,000,000
1,000,000
8,000,000
(43,319,445)
-
78,000,000
2017
$
415,919
79,900
6,059
5,435
4,300
4,120
-
161,694
677,427
2018
$
677,427
3,012
15,667
2,132
6,352
37,061
(426,553)
645,463
960,561
(iii) Capital Management
As the Group is a start-up operation in the field of hearing health, it is not prudent at this time to expose the Group to the
financial risk of borrowing. The Group is therefore financed 100% by equity at a level to ensure that the Group can fund its
operations and continue as a going concern.
The Group’s capital comprises only of ordinary share capital and options.
There are no externally imposed capital requirements.
Management effectively manages the Group’s capital by assessing the Group’s financial requirements and raising additional
capital as required to fund the Group’s operations.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.
10. OPERATING SEGEMENTS
Nuheara Limited, Nuheara IP Pty Ltd and Nuheara, Inc are operating within the hearing health sector, and have been
aggregated to one reportable segment given the similarity of the products manufactured for sale, method in which
products are delivered, types of customers and regulatory environment.
11. RELATED PARTY DISCLOSURES
Key Management Personnel (KMP)
Any person(s) having authority and responsibility for planning, directing or controlling the activities of the Group, directly or
indirectly (whether executive or otherwise) of that Group, are considered KMP. For details of disclosures relating to KMP
refer to Note 0, Interests of KMP.
Transactions with director related entities
During the year, there were no transactions with director related entities.
12. EVENTS OCCURRING AFTER BALANCE DATE
There were no events occurring after balance date.
34
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
13. COMMITMENTS FOR EXPENDITURE
These amounts are payable, if required, over various times over the next five years.
Operating Lease Commitment
The Group has entered into a rental agreement commencing 1 September 2017 for a period of 24 months.
Office Lease
Due within 1 year
Due 1 to 5 years
2018
$
$151,800
$151,800
2017
$
72,633
-
The Group has entered into fixed term agreements to provide contractors to the Group. The amounts due under
these fixed term contracts are as follows:
Contractors
Due within 1 year
Due 1 to 5 years
Exploration Expenditure Commitments
2018
$
-
-
2017
$
213,551
28,442
The Group has minimum statutory commitments as a condition of tenure of certain Peru mining tenements. Whilst these
obligations may vary, a reasonable estimate of the annual minimum commitments is $34,000. The Directors intend to dispose
of these tenements as soon as it is commercially practical to do so.
14. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. 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 discussed below.
i) Estimated impairment of assets
The Group assesses impairment of its assets at the end of each reporting period by evaluating conditions and events
specific to the Group that may be indicative of impairment triggers. Where impairment has been triggered, assets are
written down to their recoverable amounts. An impairment trigger includes operating losses and net cash outflows.
The ability of capitalised development costs to generate sufficient future economic benefits to recover the carrying
amount is usually subject to greater uncertainty before the asset is available for use than after it is available for use.
Judgement has been made in the estimation of future profitability and net cash flows in the assessment of fair value for
capitalised development costs, and in the resulting determination that no impairment existed at balance date.
Management acknowledges that a modest reduction in realised revenue growth against these forecasts may result in an
impairment at a later date.
ii) Estimated warranty costs
Provision is made in respect of the Group’s best estimate of the liability on all products under warranty at the end of the
reporting period. The provision is measured as the present value of future cash flows estimated to be required to settle
the warranty obligation. The future cash flows have been estimated by reference to an industry average of warranty
claims.
iii) Valuation of options
Share-based payment transaction:
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model, using the
assumptions detailed in Note 22.
The Group measures the cost of cash-settled share-based payments at fair value at the grant date using the Black-Scholes
formula, taking into account the terms and conditions upon which the instruments were granted, as discussed in Note 22.
35
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
14. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
i)
Capitalisation of development costs
Under AASB 138: Intangible Assets, an entity is required to recognise an intangible asset if, and only if, certain criteria are
met. Judgement has been made in the determination that research expenditure incurred during the year did not meet the
definition of an intangible asset. The group has assessed the effective life of development assets to be 2.5 years.
ii) Contingent Purchase Consideration
On 10 December 2015 Nuheara Limited (formerly Wild Acre Metals Limited) announced that its controlled entity, Wild Acre
Metals (Peru) SAC, had entered into an acquisition agreement to acquire the Salvador exploration project from Teck Peru
S.A., a subsidiary of Teck Resources Limited (Teck Agreement). Under the Teck Agreement, contingent purchase consideration
of USD$2m (production bonus) is payable to Teck Peru S.A. upon making a production decision. The production bonus is
jointly and severally payable by the Group in the event of a disposal of the tenements to a third party. As the Group intends
to dispose of its Peruvian subsidiary, including the mining tenements and liability for the production bonus, management has
ascertained the probability of a production bonus being payable as being assessed at nil at balance date. Additionally, if there
is a sale of the Salvador interests by the Group within 36 months of the date of execution of the Teck Agreement, an additional
20% of the purchase price is payable to Teck Peru S.A. The additional contingent purchase consideration is assessed at nil at
balance date.
iii) Net Smelter Royalties
The Group holds an 80% interest in Terrace Gold Pty Ltd (“Terrace”). Terrace holds a 0.5% Net Smelter Royalty over the El
Molino Gold Project and part of the El Galeno Copper Project located in Northern Peru, currently owned under joint venture
by China Minmetals and Jiangxi Copper, and a 1.5% Net Smelter Royalty over the Mt Ida gold project located in Western
Australia.
Management has ascertained that the probability of Net Smelter Royalty revenue was nil at balance date.
15. FINANCIAL INSTRUMENTS
Overview
The Group has exposure to the following risks from their use of financial instruments:
interest rate risk
credit risk
liquidity risk
foreign exchange risk
This note presents information about the Group’s exposure to each of the above risks.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Risk management policies are established by the Board of Directors to identify and analyse the risks faced by the Group, to
set appropriate risk limits and controls, and to monitor risks and adherence to limits.
The Group’s principal financial instruments are cash, short-term deposits, receivables and payables.
36
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
15. FINANCIAL INSTRUMENTS (continued)
(a)
Interest Rate Risk
The Group’s exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of
changes in market interest rates and the effective weighted average interest rates on those financial assets and financial
liabilities, is as follows:
30 June 2018
Financial Assets
Cash at bank
Trade and other receivables
Financial Liabilities
Trade and other payables
30 June 2017
Financial Assets
Cash at bank
Trade and other receivables
Financial Liabilities
Trade and other payables
Weighted Average
Effective Interest
Rate
%
1.24
-
-
Interest
Bearing
$
7,163,297
-
7,163,297
Non-Interest
Bearing
$
1,182,401
849,035
2,031,436
Total
$
8,345,698
849,035
9,194,733
-
-
1,583,180
1,583,180
Weighted Average
Effective Interest
Rate
%
1.54
-
-
Interest
Bearing
$
2,799,525
-
2,799,525
Non-Interest
Bearing
$
605,027
871,208
1,476,235
Total
$
3,404,552
874,208
4,275,760
-
-
1,796,242
1,796,242
It is the Group’s policy to settle trade payables within the credit terms allowed and therefore not incur interest on overdue
balances.
Sensitivity analysis
If interest rates on cash balances had weakened/strengthened by 1% at 30 June, there would be no material impact on the
statement of profit or loss and other comprehensive income. There would be no material effect on the equity reserves,
other than those directly related to the statement of profit or loss and other comprehensive income movements.
(b)
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.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised
financial assets is the carrying amount, net of any allowances for doubtful debts, as disclosed in the statement of financial
position and notes to the financial statements.
(c)
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The 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 following are the contractual maturities of financial liabilities:
2018
2017
Carrying
Amount
Under
6 Months
Carrying
Amount
Under
6 Months
Non-derivative financial liabilities:
Trade and other payables
1,583,180
1,583,180
1,796,242
1,796,242
Net Fair Values
The net fair value of cash and non-interest-bearing monetary assets and financial liabilities of the Group approximates their
carrying amount.
37
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
15. FINANCIAL INSTRUMENTS (continued)
(d)
Foreign exchange risk
Exposure to foreign exchange risk may result in the fair value, or future cash flows, of a financial instrument fluctuating due
to movement in foreign exchange rates of currencies in which the Group holds financial instruments, which are other than
the AUD functional currency of the Group.
With instruments being held by overseas operations, fluctuations in the US dollar and Peruvian Soles may impact on the
Group’s financial results unless those exposures are appropriately hedged.
It is the Group’s policy that hedging is not necessary, as the Group does not hold funds of any significance in any other
denomination than Australian dollars.
The foreign currency risk on net financial assets / (liabilities) in the books of the Group at balance date in 2018 is not
material (2017: not material).
16. EARNINGS PER SHARE
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Basic loss per share
The earnings and weighted average number of ordinary shares used in the
calculation of basic loss per share are as follows:
Loss
Weighted average number of ordinary shares – basic loss per share
Weighted average number of ordinary shares – diluted loss per share
17. AUDITOR’S REMUNERATON
Amounts received, or due and receivable by the current auditors for audit or
review of the financial report
Amounts received, or due and receivable by the Peruvian auditors for audit or
review of the financial report
2018
Cents
(0.92)
(0.92)
2017
Cents
(0.78)
(0.78)
2018
$
(7,416,412)
2018
No.
802,765,484
898,701,661
2017
$
(4,839,623)
2017
No.
622,333,724
701,003,854
2018
$
37,175
16,212
46,387
2017
$
38,575
7,753
46,328
18.
INTERESTS OF KEY MANAGEMENT PERSONNEL (KMP)
Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each
member of the Group’s KMP.
The totals of remuneration paid to KMP of the Group during the year are as follows:
Short term benefits
Post-employment benefits
Share based payments - options
2018
$
864,498
53,089
48,941
966,527
2017
$
633,420
36,945
142,258
812,623
38
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
19. CONTINGENT LIABILITIES
There are no known contingent liabilities.
20. COMPANY DETAILS
Registered Office
The registered office is at 190 Aberdeen Street, Northbridge, Western Australia 6003.
Principal Place of Business
The principal place of business in Australia is at 190 Aberdeen Street, Northbridge, Western Australia 6003.
The principal place of business in Peru is Berlin 748, Of. 202, Miraflores, Lima, Peru.
21.
INFORMATION ABOUT CONTROLLED ENTITIES
The controlled entities listed below have share capital consisting solely of ordinary shares which are held directly by the
Group. The proportion of ownership interests held equals the voting rights held by the Group. Each controlled entity’s
principal place of business is also its country of incorporation.
Name of
Controlled
Entity
Principal
Place of
Business
Nuheara IP Pty Ltd
Perth, Australia
Wild Acre Metals (Peru) SAC
Lima, Peru
Nuheara, Inc
San Francisco, USA
Terrace Gold Pty Ltd
Perth, Australia
Ownership interest
held by
the Company
Proportion of
non-controlling
interest
2018
100%
100%
100%
80%
2017
100%
100%
100%
80%
2018
0%
0%
0%
20%
2017
0%
0%
0%
20%
The Group holds an 80% interest in Terrace Gold Pty Ltd (“Terrace”). Terrace holds a 0.5% Net Smelter Royalty over the El
Molino Gold Project and part of the El Galeno Copper Project located in Northern Peru, currently owned under joint venture
by China Minmetals and Jiangxi Copper, and a 1.5% Net Smelter Royalty over the Mt Ida gold project located in Western
Australia.
22. SHARE BASED PAYMENTS
(a) Shares and options granted to KMP
There were no shares or options granted to KMP during the financial year (2017: 4,500,000).
The Group’s shareholders approved an Incentive Option Plan on 28 November 2016, with the main objective to attract,
motivate and retain key employees and provide selected employees with the opportunity to participate in the future
growth of the Group.
Employees are granted options which vest over three years from commencement with the Group, subject to meeting
specified performance criteria. The options are issued for no consideration and carry no entitlements to voting rights or
dividends of the Group. The number available to be granted is determined by the Board and is based on performance
measures including growth in shareholder return, return on equity, cash earnings and group EPS growth.
During the financial year 1,125,000 options vested with KMP (2017: 7,791,668).
39
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
22. SHARE BASED PAYMENTS (continued)
(b) Shares and options issued to non-KMP or employees are as follows:
Grant
Date
24 July 2017
24 July 2017
No. of
Options
1,500,000
1,500,000
No. of
Shares
-
-
Name
Hunter Capital
Impact Group International
A summary of the movements of all Group options issued is as follows:
Options outstanding and exercisable as at 30 June 2016
Granted
Forfeited
Options outstanding and exercisable as at 30 June 2017
Granted
Forfeited
Exercised
Options outstanding and exercisable as at 30 June 2018
No.
85,469,455
36,500,000
(14,650,000)
107,319,445
14,000,000
(10,319,445)
(33,000,000)
78,000,000
Weighted Average
Exercise Price
$0.07
$0.03
-
$0.07
$0.10
-
-
$0.07
The weighted average remaining contractual life of options outstanding at year end was 1.28 years (2017: 1.85).
The weighted average exercise price of outstanding options at the end of the reporting period was $0.07 (2017: $0.07).
The fair value of options granted during the year was $447,125 (2017: $1,304,100). These values were calculated using the
Black-Scholes option pricing model, applying the following inputs:
Employees/
Contractors
14/07/2017
Corporate
Advisors
24/07/2017
Employees/
Contractors
10/11/2017
Employees/
Contractors
12/01/2018
Employees/
Contractors
1/03/2018
$0.099
$0.115
$0.063
$0.076
$0.078
100%
$0.09
14/07/2020
100%
$0.09
24/07/2020
100%
$0.09
10/11/2020
100%
$0.09
12/01/2021
100%
$0.09
1/03/2021
1.50%
1.50%
1.50%
1.50%
1.50%
500,000
3,000,000
500,000
1,000,000
8,000,000
$0.0269
$9,415
$0.0240
$50,400
$0.0288
$10,080
$0.0589
$41,230
$0.0600
$336,000
Grant Date
Share price
on issue date
Expected
volatility
Exercise price
Expiry date
Risk free
interest rate
Number
issued
Value per
option
Total
Historical share price volatility has been the basis for determining expected share price volatility as it assumed that this is
indicative of future volatility.
Included in the statement of profit or loss is $283,134, which relates to equity-settled share-based payment transactions
(2017: $200,000).
40
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
23. NOTES TO THE STATEMENT OF CASHFLOWS
Reconciliation of net loss to net cash flows used in operating activities
Loss from ordinary activities after income tax
Add back non-cash items:
(Profit)/loss on property plant & equipment
Depreciation and amortisation expenses
Share based payments expense
Changes in assets and liabilities
Increase/(decrease) in trade debtors
(Decrease)/increase in other receivables
Increase in inventories
(Decrease)/increase in non-current assets
(Decrease)/increase in trade creditors
Increase in other payables
Increase in provision for employee entitlements
Increase in provision for warranty claims
Increase/(decrease) in unearned income
Net cash used in operating activities
2018
$
2017
$
(7,416,412)
(4,839,623)
1,967
1,932,031
283,134
255,133
(234,443)
(1,228,248)
(4,517)
(389,455)
148,779
103,396
(8,880)
28,453
(6,529,062)
-
587,837
461,508
(562,834)
750,201
(1,109,997)
126
734,921
484,825
115,345
246,634
(939,210)
(4,070,267)
24. PARENT ENTITY FINANCIAL INFORMATION
Nuheara IP Pty Ltd was acquired by Nuheara Limited (previously Wild Acre Metals Limited) on 25 February 2016. As
required by Australian Accounting Standard AASB3: Business Combinations, Nuheara Limited is deemed to have been
acquired by Nuheara IP Pty Ltd as at 25 February 2016 under the reverse acquisition rules. Accordingly, Nuheara IP Pty Ltd
is the Parent Entity for accounting purposes.
The following information has been extracted from the books and records of the legal parent, Nuheara Limited, and has
been prepared in accordance with Australian Accounting Standards.
2018
$
2017
$
(7,527,479)
-
(7,527,479)
10,571,376
12,723,094
23,294,470
1,889,175
5,393
1,894,568
21,339,902
(3,496,050)
-
(3,496,050)
5,031,778
10,041,803
15,073,681
2,027,267
-
2,027,267
13,046,314
39,813,230
1,251,726
(19,665,054)
21,399,902
24,177,261
1,004,771
(12,135,718)
13,046,314
Results for the parent entity:
Net (loss)
Other comprehensive income
Total comprehensive loss for the year
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Total equity of the parent entity
Contributed equity
Reserves
Accumulated losses
Total Equity
41
NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS' DECLARATION
The Directors of Nuheara Limited declare that:
1.
the financial statements and notes, as set out on pages 17 to 41, are in accordance with the Corporations Act 2001 and:
a.
b.
2.
3.
comply with Australian Accounting Standards which, as stated in the accounting policy Note 1 to the financial statements,
constitutes compliance with International Accounting Reporting Standards (IFRS); and
give a true and fair view of the financial position as at 30 June 2018 and of the performance for the year ended on that
date of the Group;
the Directors have given the declarations required by S295A of the Corporations Act 2001 from the Chief Executive Officer
and Chief Financial Officer;
in the Directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when
they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
On behalf of the Board of Directors:
Justin Miller
Managing Director/Chief Executive Officer
Perth, 26 September 2018
42
Independent Auditor’s Report
To the Members of Nuheara Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Nuheara Limited (“the Company”) and its controlled entities (“the
Group”), which comprises the consolidated statement of financial position as at 30 June 2018, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity, and
the consolidated statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial
performance for the year then ended; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements
of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the time
of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Material Uncertainty Regarding Going Concern
Without modifying our opinion, we draw attention to the following matter. As a result of the matters
disclosed in Note 1a) ”Going Concern” of the financial report, there is significant material uncertainty
whether the Group can continue as a going concern and therefore whether it will realise its assets and
extinguish its liabilities in the normal course of business and at amounts stated in the financial report. The
ability of the Group to continue as a going concern is dependent upon its ability to generate sufficient cash
surpluses from continued sales of IQ buds, growth in retail distribution channels through the ongoing
negotiation of new distribution agreements, release of new product lines, management of the current level
of discretionary expenditure in line with the funds available to the Group, and an equity raising.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going
section, we have determined the matters described below to be the key audit matters to be communicated
in our report.
Key Audit Matter
How our audit addressed the key audit matter
Capitalised Development Costs
(Note 6,13 &14) (AASB 136 and AASB138)
Capitalised development costs had a net carrying
2018
of
value
(2017:$2,099,798).
$4,203,045
June
30
at
This area is a key audit matter due to subjectivity and
management judgement applied in the assessment of
the capitalisation criteria
whether costs meet
described in AASB 138.
The impairment of development costs is a key audit
to subjectivity and management
matter due
judgement applied in the assessment of whether the
asset should be impaired under the criteria described
in AASB 136.
Audit procedures include the following:
•
•
•
•
•
•
•
assessing the Group's accounting policy in
respect of product development costs in
accordance with AASB 138;
testing a sample of amounts capitalised to
supporting documentation and assessing
compliance with AASB 138;
assessing the Group's accounting policy in
respect of amortisation, and period of
amortisation;
assessing the adequacy of the related
disclosures within the financial statements.
assessing the Group's accounting policy in
respect of impairment in accordance with
AASB 136;
assessing the future cash out flows of the
capitalised development costs; and
assessing the adequacy of the related
disclosures within the financial statements.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
• 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, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 10 of the directors’ report for the year
ended 30 June 2018.
In our opinion, the Remuneration Report of Nuheara Limited for the year ended 30 June 2018 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
WALKER WAYLAND WA AUDIT PTY LTD
Richard Gregson CA
Director
Level 3, 1 Preston Street, COMO WA 6152
Dated this 26th day of September 2018.
NUHEARA LIMITED
ABN 29 125 167 133
ADDITIONAL ASX INFORMATION
The following additional information is required by the Australian Securities Exchange. The information is current as at 18 September
2018.
(a) Distribution schedule and number of holders of equity securities as at 18 September 2018
Fully Paid Ordinary Shares
Unlisted Options:
3 cents, exp 24/2/2019
Unlisted Options:
4 cents, exp 18/4/2019
Unlisted Options:
6 cents, exp 18/4/2019
Unlisted Options:
9 cents, exp 20/4/2019
Unlisted Options:
9 cents, exp 30/11/2019
Unlisted Options:
11.5 cents, exp 16/2/2020
Unlisted Options:
9 cents, exp 22/5/2020
Unlisted Options:
7.8 cents, exp 2/11/2019
Unlisted Options:
12 cents, exp 6/6/2019
Unlisted Options:
9 cents, exp 14/7/2020
Unlisted Options:
11.5 cents, exp 24/7/2020
Unlisted Options:
9 cents, exp 10/11/2020
Unlisted Options:
9 cents, exp 17/9/2021
Unlisted Options:
9 cents, exp 1/3/2021
Unlisted Options:
9 cents, exp 12/1/2021
1 – 1,000
115
1,001 –
5,000
158
5,001 –
10,000
667
10,001 –
100,000
2,226
100,001 –
and over
1,056
Total
4,222
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
2
5
1
6
2
5
1
3
1
2
2
2
2
5
1
6
2
5
1
3
1
2
2
10
10
7
1
7
1
The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 18 September 2018 is 350.
47
NUHEARA LIMITED
ABN 29 125 167 133
ADDITIONAL ASX INFORMATION
(b) 20 Largest holders of quoted equity securities
The names of the twenty largest holders of fully paid ordinary shares (ASX code: NUH) as at 18 September 2018 are:
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Farjoy Pty Ltd
David Cannington
Wasagi Corporation Pty Ltd
Jamore Pty Ltd
Fiago Pty Ltd
HSBC Custody Nominees (Australia) Limited
Xuan Khoa Pham
Alan Davis
Citicorp Nominees Pty Limited
National Nominees Limited
Kellie Anne Davis
Power Edge Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Effingham Pty Ltd
Sven Nordholm
Zora Bunoza
Reo-Phon Pty Ltd
Jason John Carroll + Jodie Marie Carroll
CK Corporate Pty Ltd
Pjarms Investments Pty Ltd
Shares
70,407,585
63,142,857
63,142,857
37,560,212
18,301,067
12,711,525
8,250,000
8,095,238
6,835,396
6,522,723
6,095,238
6,000,000
5,886,243
5,500,000
5,030,141
4,778,179
4,400,000
4,100,000
3,750,000
% of Total
Shares
7.90
7.08
7.08
4.21
2.05
1.43
0.93
0.91
0.77
0.73
0.68
0.67
0.66
0.62
0.56
0.54
0.49
0.46
0.42
3,400,000
343,909,261
0.38
38.57
Stock Exchange Listing – Listing has been granted for 891,473,723 ordinary fully paid shares of the Group on issue on the Australian
Securities Exchange.
The unquoted securities on issue as at 18 September 2018 are detailed below in part (d).
(c) Substantial shareholders
Substantial shareholders in Nuheara Limited and the number of equity securities over which the substantial shareholder has a
relevant interest as disclosed in substantial holding notices provided to the Group are listed below:
Name
Farjoy Pty Ltd
David Cannington
Wasagi Corporation Pty Ltd
Shares
70,407,585
63,142,857
63,142,857
% of Total
Shares
7.90
7.91
7.91
48
NUHEARA LIMITED
ABN 29 125 167 133
ADDITIONAL ASX INFORMATION
(d) Unquoted Securities
The number of unquoted securities on issue as at 18 September 2018:
Security
Unlisted Options – exercisable at 3 cents on or before 24/2/2019
Unlisted Options – exercisable at 4 cents on or before 18/4/2019
Unlisted Options – exercisable at 6 cents on or before 18/4/2019
Unlisted Options – exercisable at 9 cents on or before 20/4/2019
Unlisted Options – exercisable at 9 cents on or before 30/11/2019
Unlisted Options – exercisable at 11.5 cents on or before 16/2/2020
Unlisted Options – exercisable at 9 cents on or before 22/5/2020
Unlisted Options – exercisable at 7.8 cents on or before 2/11/2019
Unlisted Options – exercisable at 12 cents on or before 6/6/2019
Unlisted Options – exercisable at 9 cents on or before 14/7/2020
Unlisted Options – exercisable at 11.5 cents on or before 24/7/2020
Unlisted Options – exercisable at 9 cents on or before 10/11/2020
Unlisted Options – exercisable at 9 cents on or before 12/1/2021
Unlisted Options – exercisable at 9 cents on or before 1/3/2021
Unlisted Options – exercisable at 9 cents on or before 17/9/2021
(e) Holder Details of Unquoted Securities
Number on issue
20,000,000
3,000,000
5,500,000
1,000,000
10,500,000
1,500,000
3,500,000
10,000,000
10,000,000
500,000
3,000,000
500,000
1,000,000
8,000,000
10,500,000
The holders that hold more than 20% of a given class of unquoted securities that were not issued under an employee incentive
scheme as at 18 September 2018 are detailed below:
Number of
Securities
10,000,000
10,000,000
10,000,000
5,000,000
3,000,000
2,000,000
Security
Name
Unlisted Options – exercisable at 3
cents on or before 24/2/2019
Unlisted Options – exercisable at 3
cents on or before 24/2/2019
David Cannington
Wasagi Corporation Pty Ltd
Unlisted Options – exercisable at 7.8
cents on or before 2/11/2019
Foster Stockbroking Pty Ltd
Unlisted Options – exercisable at 12
cents on or before 6/6/2019
LTL Capital Pty Ltd
Unlisted Options – exercisable at 12
cents on or before 6/6/2019
Unlisted Options – exercisable at 12
cents on or before 6/6/2019
CS Third Nominees Pty Ltd
A & J Tannous Nominees Pty Ltd
(f) Restricted Securities
The Group had no restricted securities as at 18 September 2018:
(g) Voting Rights
All fully paid ordinary shares carry one vote per ordinary share without restriction.
Unquoted options have no voting rights.
(h) Company Secretary
The Company Secretaries are Ms Susan Hunter and Mrs Jean-Marie Rudd.
49
NUHEARA LIMITED
ABN 29 125 167 133
ADDITIONAL ASX INFORMATION
(i) Registered Office
The Group’s Registered Office is 190 Aberdeen Street, Northbridge, WA 6003, Australia.
Telephone: +61 8 6555 9999
(j) Share Registry
The Group’s Share Registry is as follows:
Computershare Investor Services Pty Limited
11/172 St Georges Terrace, Perth WA 6000
Telephone: +61 (0)3 9415 4000 or 1300 850 505 (within Australia)
(k) On-Market Buy-back
The Group is not currently performing an on-market buy-back.
(l) Corporate Governance
The Board of Nuheara Limited is committed to achieving and demonstrating the highest standards of Corporate Governance. The
Board is responsible to its Shareholders for the performance of the Group and seeks to communicate extensively with Shareholders.
The Board believes that sound Corporate Governance practices will assist in the creation of Shareholder wealth and provide
accountability. In accordance with ASX Listing Rule 4.10.3, the Group has elected to disclose its Corporate Governance policies and
its compliance with them on its website, rather than in the Annual Report. Accordingly, information about the Group 's Corporate
Governance practices is set out on the Group 's website at www.nuheara.com/corporate -governance.
(m) Application of Funds
During the financial year, Nuheara Limited confirms that it has used its cash and assets (in a form readily convertible to cash) in a
manner which is consistent with the Group’s business objectives.
(n) Schedule of Interests in Mining Tenements
The schedule of interests in mining tenements both as at 30 June 2018 and as at 18 September 2018 is as follows:
PERU:
Sambalay 1
Sambalay 2
Sambalay 3
Salvador
Salvador
MINING TENEMENT REGISTER
Tenement
Interest %
010180210
010180310
010185310
010227410
010328310
100%
100%
100%
100%
100%
50