NUHEARA LIMITED
ABN 29 125 167 133
APPENDIX 4E
PRELIMINARY FINAL REPORT
1. Results for Announcement to the Market
Current reporting period:
Previous corresponding period:
Year ended 30 June 2020
Year ended 30 June 2019
Revenue from ordinary activities
Loss from ordinary activities after tax attributable to members
(from continuing operations)
Net loss for the period attributable to members
2. Dividend Information
Amount
$
4,436,581
(11,690,733)
(11,690,733)
% Change
up(+)/down(-)
-1%
+17%
+17%
The directors do not recommend the payment of a dividend in relation to the financial year ended 30 June 2020 (2019: Nil).
3. Net tangible assets per security
Net tangible asset backing per ordinary share
2020
$
0.001
2019
$
0.005
As at 30 June 2020 the number of shares on issue was 1,359,811,585 (30 June 2019: 982,210,292).
4. Details of joint venture entities
The Company does not have any interests in joint ventures.
5. Details of entities over which the company has control
Name of Entity
Nuheara IP Pty Ltd
Terrace Gold Pty Ltd
Wild Acre Metals (Peru) SAC (in liquidation)
Nuheara, Inc
6. Audit
%
Interest
100%
80%
100%
100%
Country of
Registration
Australia
Australia
Peru
USA
Date of gain
of control
25 February 2016
25 February 2016
25 February 2016
21 June 2016
This report is based on financial statements which have been audited by Walker Wayland WA Audit Pty Ltd.
7. Commentary on the results
The Group achieved a net loss after tax of $11,690,733. This compared with a net loss after tax of $10,027,238 for the year ended 30
June 2019, a decline of 17%. The net loss after tax result represented a loss of 1.14 cents per share, compared to a loss of 1.09 cents
per share last year.
Net cash inflows of $1,210,631 were attributable to $7,770,405 received through capital raisings (net of share issue expenses),
$2,407,480 from borrowings, offset by $5,433,327 in net operating outflows, $22,709 for the purchase of plant and equipment and
$3,511,218 for the purchase of intangible assets (capitalised development costs and trademarks).
Revenue from ordinary activities for the year was $4,436,581. This compared with revenue of $4,481,405 for the year ended 30 June
2019, a decrease of 1%.
At year-end, the Company held $4,430,710 in cash reserves (30 June 2019: $3,220,079).
Detailed commentary on the results for the year is contained in the annual financial report that accompanies this announcement.
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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NUHEARA LIMITED
ABN 29 125 167 133
CORPORATE DIRECTORY
Principal Place of Business
190 Aberdeen Street
Northbridge WA 6003
Phone: +61 (8) 6555 9999
+61 (8) 6555 9998
Fax:
Share Registry
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)
Auditors
Walker Wayland WA Audit Pty Ltd
Level 3, 1 Preston Street
Como WA 6152
Phone: +61 (8) 9364 9988
+61 (8) 9367 3444
Fax:
Directors
The Hon Cheryl Edwardes AM
Independent Non-Executive Chairman
Justin Miller
Managing Director/CEO
David Cannington
Executive Director/Chief Marketing Officer
Kathryn Foster
Independent Non-Executive Director
David Buckingham
Independent Non-Executive Director
Company Secretaries
Susan Hunter – Company Secretary
Jean-Marie Rudd – Joint Company Secretary
ASX Code
NUH
Website and Email
Website: www.nuheara.com
Email: administration@nuheara.com
Registered Office
190 Aberdeen Street
Northbridge WA 6003
Phone: +61 (8) 6555 9999
+61 (8) 6555 9998
Fax:
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NUHEARA LIMITED
ABN 29 125 167 133
TABLE OF CONTENTS
Chairman’s Letter .................................................................................................................................................................................... 1
Director’s Report ..................................................................................................................................................................................... 3
Remuneration Report ............................................................................................................................................................................ 10
Auditor’s Independence Declaration ..................................................................................................................................................... 18
Consolidated Statement of Profit or Loss and Other Comprehensive Income ...................................................................................... 19
Consolidated Statement of Financial Position ....................................................................................................................................... 20
Consolidated Statement of Changes in Equity ...................................................................................................................................... 21
Consolidated Statement of Cashflows ................................................................................................................................................... 22
Notes to the Financial Statements ........................................................................................................................................................ 23
Directors’ Declaration ............................................................................................................................................................................ 45
Independent Auditor’s Report ............................................................................................................................................................... 46
ASX Additional Information ................................................................................................................................................................... 51
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NUHEARA LIMITED
ABN 29 125 167 133
CHAIRMAN’S LETTER
Dear Shareholders
On behalf of the Board of Nuheara Limited I am pleased to present the 2020 Annual Report
to shareholders.
As for many organisations, 2020 was a year of challenges, but also opportunities for the
Company. We have for some time been pursuing a strategy of “hearing healthcare” at
retail, in a consultative sales approach alongside our Direct to Consumer (DTC) channels.
We continue to see significant opportunity in the hearing healthcare segment, particularly
as changes are made to Over-the-Counter (OTC) regulations in the United States.
With the advent of the COVID-19 crisis, traditional hearing clinics and retailers were
shuttered around the world. Fortunately, this was a year of transition for Nuheara as the
Company moved beyond its start-up phase and created global inroads with strong growth
with its DTC strategy. Improved sales results have been achieved almost exclusively via the
DTC online sales platform, further validating the sales model’s ability to reach and transact
with global customers. The DTC model is proving to be a viable alternative and strong
adjunct to the hearing healthcare segment. The launch of our new third generation
product, IQbuds2 MAX, early in calendar 2020 also helped the DTC strategy deliver excellent
outcomes.
Nuheara also continues to pursue other traditional sales channels in accordance with its business strategy, including partnerships
and distributor relationships in the healthcare sector to extend brand awareness and drive further sales. An exciting development on
this front was Nuheara’s new partnership with HP, Inc to co-develop new audio experiences for HP and its customers. This was
announced after the financial year end in August, and this the first phase of what we look forward to being a long-term relationship
with HP. Importantly, a product collaboration with one of the world’s largest computer vendors speaks highly of Nuheara’s
technology and people, and Nuheara will be paid for works completed.
The second half was dominated by COVID-19 related disruptions to global markets. Most critically for Nuheara, this impacted
manufacturing ability through extended plant closures and longer timeframes in finished product distribution. Importantly, these
logistics disruptions have not impacted demand for Nuheara products, with the company maintaining very strong pre-order sales
traction for the flagship product.
Nuheara responded to the COVID-19 crisis with the implementation of several temporary business stabilisation measures to ensure
that the Company is well positioned operationally and financially to manage the economic uncertainty and business interruption. In
addition to recommended workplace protocols related to staff safety, the Company also implemented significant cost reduction
measures including standing down staff in non-essential functions and reducing senior executive and Board remuneration by 50% for
the period 1 April 2020 to 30 June 2020.
Nuheara was able to resume manufacturing in the latter part of the financial year with the fulfilment of backorders entering the
logistics phase in June. Nuheara is working through the staged delivery of completed product, from the Malaysian manufacturing
facility, to its five warehouses located in the UK, USA, Canada, Australia and China. However, the full impact of the success of sales
cannot be recognised as sales revenue until products are shipped. As at 30 June 2020, 248 units had been shipped and recognised as
income with the remaining income from 5,000+ sales carried over as unearned income in the Statement of Financial Position.
Nuheara welcomed new additions to the Board with Mr David Buckingham and I being appointed independent non-executive Director
and independent non-executive Chairman, respectively. Mr Buckingham’s proven record in growing disruptive technological
companies and my own strong legal and governance background will add value to Nuheara going forward. This is the first annual
report to be presented by an independent non-executive Chairman for Nuheara, a sign of the growing corporate maturity of the
Company.
Another highlight during the year was the successful completion of a Share Purchase Plan in June, which continued our careful
management of the capital requirements of the Company in its current growth phase. The Board will continue to be mindful of
setting the capital structure in place as the Company needs to grow.
Nuheara’s mission is to transform the way people hear by creating smart hearing solutions that are both accessible and affordable.
We are committed to this mission and will continue to invest in research and development initiatives, our people and other areas to
drive sustainable long-term value for our shareholders. The fundamentals of our business are now in place and with the global market
opportunities available, we are confident that our efforts from both a technology and sales point of view will translate into revenue
growth for Nuheara.
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NUHEARA LIMITED
ABN 29 125 167 133
CHAIRMAN’S LETTER
I would like to extend my thanks to the Company’s CEO Mr Justin Miller, my fellow Directors, the management team and all other
employees for their extended hours and commitment to make Nuheara a successful global company. On behalf of the Board, I would
also like to thank shareholders for their continued support during the period. I look forward to delivering further news on the
Company’s continued success.
Yours faithfully
The Hon Cheryl Edwardes AM
Chairman
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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 2020.
1.
DIRECTORS
The Directors in office at any time during or since the end of the financial year are:
The Hon. Cheryl Edwardes AM LLM, BA, GAICD - Independent Non-Executive Chairman
Appointed: 1 January 2020
Mrs Edwardes has a strong legal and governance background with an extensive career spanning across government and
business. She is on the Board of the West Australian Football Commission, a Board member of the Foreign Investment Review
Board (FIRB) and Chairman and non-executive Director on a number of ASX-listed boards.
During her political career, Mrs Edwardes held positions as the first female Attorney General for Western Australia, Minister
for Environment and Labour Relations, and was the Member for Kingsley for nearly 17 years. Mrs Edwardes was awarded an
Order of Australia in the Queen’s Birthday Honours 2016 for “significant service to the people and Parliament of Western
Australia, to the law and to the environment, and through executive roles with business, education and community
organisations”. Cheryl was also named in the 100 Women of Influence 2016, inducted into Western Australian Women’s Hall
of Fame 2016 and was a finalist in the Women in Resources Award 2015.
During the past three years, Mrs Edwardes served as a director of the following listed Companies:
Atlas Iron Limited – appointed 6 May 2015, resigned October 2018
CropLogic Limited – appointed 1 March 2018, resigned 15 February 2019
Vimy Resources Limited* – appointed 26 May 2014
Flinders Mines Limited* - appointed 17 June 2019
Auscann Group Holdings Ltd – appointed 19 January 2017, resigned 19 January 2020
* Denotes current directorship
Justin Miller - 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.
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DIRECTORS’ REPORT
1.
DIRECTORS (continued)
Kathryn Foster BSc, ASc, MAICD - Independent Non-Executive Director
Appointed: 12 February 2019
Ms. Foster has a strong background in technology, sales and early stage start-up companies. Ms. Foster has more than two
decades of experience designing, building and running large internet-based businesses. Prior to becoming a professional non-
exec director, Ms. Foster was executive Senior Director of Xbox Games Marketplace as well as Microsoft Store online where
she managed the profit and loss and global expansion in over 200 geographies with annual revenue budgets in the low billions
of dollars. She has extensive technical and commercial experience in software and hardware solutions and advises companies
on strategy and technology.
Ms. Foster is a non-executive director for Class Ltd and for other non-listed companies in Australia.
Ms. Foster holds a Bachelor of Science (BSc) in International Marketing from Oregon State University and Associate of Science
(ASc) - Computer Science and Information Systems from SCC Seattle, USA.
During the past three years, Ms Foster served as a director of the following listed Company:
Class Limited – appointed 1 July 2015*
* Denotes current directorship
David Buckingham Engineering Science B.Tech (Hons), ACA, ICAEW, GAICD - Independent Non-Executive Director
Appointed: 1 November 2019
Mr Buckingham has a diverse career which spans extensively across technology, growth, mergers and acquisitions and
disrupting entrenched industries by focusing on technology, service and the customer experience. His career began in the
United Kingdom with PricewaterhouseCoopers and he later moved into the telecommunications industry to which he
devoted much of his career. He has worked for Telewest Global as the Group Treasurer and Director of Financial Planning,
Virginmedia, as Finance Director Business Division and iiNet where he held the roles of Chief Financial Officer and Chief
Executive Officer between 2008 and 2015. In early 2016 he joined the ASX listed education provider Navitas Limited as Chief
Financial Officer. He subsequently became the Chief Executive Officer in 2017 until Navitas was acquired by a private equity
group in July 2019. Most recently, Mr Buckingham was appointed non-executive director for Open Learning Limited.
During the past three years, Mr Buckingham served as a director of the following listed Companies:
Navitas Limited – appointed 1 July 2018, Resigned 5 July 2019
Open Leaning Limited* – appointed 9 December 2019*
* Denotes current directorship
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/Joint Company Secretary
Appointed: 30 November 2016
Mrs Rudd has over 25 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.
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DIRECTORS’ REPORT
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 2020.
5.
OPERATING AND FINANCIAL REVIEW
Our business model and objectives
Nuheara is transforming the way people hear by developing personalised hearing device solutions that are multifunctional,
accessible and affordable. The Company is selling globally, via traditional retail and Direct-To-Consumer, to an underserviced
segment of the hearing market that fits between traditional headphones and hearing aids. Nuheara's advanced market
offering also includes government supply contracts, for fully subsidised products, to support mainstream mild-to-moderate
hearing challenges through to more complex hearing sensitivity disorders including Autism/APD.
Nuheara is headquartered in Perth, Australia.
Operating results
The Group achieved a net loss after tax of $11,690,733. This compared with a net loss after tax of $10,027,238 for the year
ended 30 June 2019, a decline of 17%. The net loss after tax result represented a loss of 1.14 cents per share, compared to a
loss of 1.09 cents per share last year.
Net cash inflows of $1,210,631 were attributable to $7,770,405 received through capital raisings (net of share issues
expenses), $2,407,480 from borrowings, offset by $5,433,327 in net operating outflows, $22,709 for the purchase of plant
and equipment and $3,511,218 for the purchase of intangible assets (capitalised development costs and trademarks).
Further discussion on the Group’s operations is provided below.
Review of Operations
Revenue for the year was $4,436,581. This compared with revenue of $4,481,405 for the year ended 30 June 2019, a decline
of 1%. At year-end, the Group held $4,430,710 in cash reserves.
In January 2020, the Group launched its next generation of hearable technology: IQbuds2 MAX, which features hybrid Active
Noise Cancellation and unique features for personalising and enhancing the wearer’s soundscape. Nuheara redesigned the
IQbuds2 MAX from the ground up with its latest acoustic technology, which enhances normal hearing and allows users to
fine-tune their sound environment. Nuheara’s EarID technology and Speech in Noise Control (SINC) provides wearers with
unrivalled customisation and control over their personal hearing experience, so they can enjoy music, phone calls,
conversations or silence wherever they go.
Following the successful launch of IQbuds2 MAX, sales increased significantly in the second half of the year. However, the full
impact of the success of the IQbuds2 MAX sales cannot be recognised as sales revenue until products are shipped. As at 30
June 2020, 248 units had been shipped and recognised as income with the remaining income from 5,000+ sales carried over
as unearned income in the Statement of Financial Position.
Capital Raisings
The Group successfully completed a capital raising in July 2019, raising $4,000,000 (before costs). Funds raised were used to
assist Nuheara in achieving its planned objectives, namely, to increase sales and marketing activities, and manufacture and
develop new products, including IQbuds2 MAX.
The Group successfully completed a capital raising in June 2020, via a share purchase plan $4,506,722 (before costs of
$410,728). Funds raised will be used to build the Group’s global DTC sales through an improving Return on Advertising Spend
(ROAS) and to bolster Nuheara’s inventory of the newly released IQbuds² MAX. With this award-winning new product and
the Group’s unique ability to globally reach hearing customers in their home, the funds will place Nuheara in a stronger
financial position to maximise and take advantage of DTC sales opportunities.
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DIRECTORS’ REPORT
5.
OPERATING AND FINANCIAL REVIEW (continued)
Funding Agreement
On 24 January 2020, Nuheara executed an agreement for a 24-month $2.5 million convertible note (Funding Agreement) with
the Lind Global Macro Fund, LP, an entity managed by The Lind Partners (together “Lind”), a New York-based institutional
fund manager. The funding will be provided as a secured convertible note with a 24-month term, the proceeds of which were
used to fund the mass production and marketing of the recently released IQbuds2 MAX and working capital requirements.
The Funding Agreement includes provisions that allow for conversion of securities outstanding to Lind into fully paid ordinary
shares in the capital of the Company, optional cash payments by the Company or early repayment, without penalty and
subject to Lind’s buy back conversion rights for up to 33% of the outstanding face value. Lind invested $2.5 million into
Nuheara who issued a secured redeemable convertible security with a face value of $3.0 million. Nuheara has the right to
redeem at any time without penalty. Other than following an event of default, the convertible note does not bear interest.
Lind has agreed to certain conversion limits and trading restrictions. If Lind converts at a price below $0.02, instead of issuing
shares, Nuheara will have three business days to elect to pay that conversion in cash plus a 5% premium.
On 5 June 2020, Lind provided notice to the Company requesting conversion of $200,000. 12,500,000 shares were
subsequently issued at a conversion price of $0.016.
Sale of Mining Royalties
In August 2019, the Company announced that it had entered into a Mining Concessions Transfer Agreement for the sale of
its mining concessions in southern Peru. Under the transfer agreement entered with Corisur Peru SAC (“Corisur”), a subsidiary
of Auryn Resources Inc. (TSX:ARG), Corisur paid US$250,000 (A$363,347) for the transfer of the concessions upon recording
of the Transfer Agreement with the Peruvian Public Registry.
The mining concessions were held by Nuheara’s wholly owned subsidiary, Wild Acre Metals (Peru) SAC which is now
undergoing a process of liquidation following the sale.
On 24 January 2020, the Company announced the sale of a royalty interest to SilverStream SEZC and Vox Royalty Australia
Pty Ltd (“Vox”) for US$200,000. The royalty sold was a 1.5% Net Smelter Return Royalty over the Mt Ida South/Quinns gold
projects located in Western Australia and currently owned by Alt Resources Ltd (ASX:ARS).
Payment for the Royalty was satisfied by the issuance of US$100,000 of Vox Royalty Corp shares on the TSX-V at a listing price
of CAD$3.00 per share; and US$100,000 (A$154,321) in cash in May 2020.
Nuheara’s remaining mining asset consists of an 80% interest in a Net Smelter Royalty located in Northern Peru, held by its
subsidiary Terrace Gold Pty Ltd. Nuheara intends to divest the asset as soon as it is commercially practical to do so.
COVID-19 and Nuheara’s Response
During March, as a result of the rapidly evolving situation worldwide with regards to COVID-19, the Board implemented a
number of temporary business stabilisation measures to ensure that the Company was well positioned operationally and
financially to manage the economic uncertainty and business interruption.
Of primary importance was the safety of employees and their families, and so the Company was proactive in implementing
recommended and required workplace protocols to minimise the risk of spreading the virus. The escalating restrictions
imposed by governments worldwide, particularly in Malaysia where Nuheara hardware is manufactured, required the Board
to implement further measures to ensure the Nuheara business remained in the strongest possible financial position during
the temporary interruption caused by COVID-19.
Nuheara temporarily stood down employees in non-essential functions and all senior executive remuneration was reduced
by 50%, This included the Nuheara CEO and was matched by the Nuheara Board. While manufacturing activities remained
constrained, Nuheara also refocused and reduced advertising spend to more effectively manage available distribution
capability.
These measures were reviewed on 30 June 2020 and all employees and Directors returned to work at full remuneration from
1 July 2020.
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DIRECTORS’ REPORT
5.
OPERATING AND FINANCIAL REVIEW (continued)
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
2020
(1.14)
(1.09)
2019
(1.09)
(1.02)
The Statement of Cash Flows illustrates that cash used in operating activities amounted to $5,433,327 (2019: outflow of
$6,504,146). Net outflows of $3,533,927 used in investing activities comprised: $3,511,218 in development costs that were
capitalised as intangible assets, $22,709 as payment for plant and equipment. The net cash outflows from operating and
investing activities were funded by $7,770,405 cash received from the raising of funds from the issues of shares, net of share
raising costs and $2,407,480 from borrowings.
The net tangible asset backing of the Group was 0.001 cents per share (2019: 0.01 cents per share).
Asset and Capital Structure
Debts:
Trade and other payables
Less: Cash and cash equivalents
Net cash
Total equity
Total capital employed
2020
$
2019
$
5,074,240
(4,430,710)
643,530
6,219,562
6,863,092
1,237,885
(3,220,079)
(1,982,194)
10,697,884
8,715,690
The level of gearing in the Group is within acceptable limits set by the Directors.
Share issues during the year
The Group issued 377,601,293 shares (2019: 90,736,569 shares) during the year:
• 15 July 2019 issue 80,000,000 shares by way of share placement at $0.05 each
• 3 February 2020 issue 20,000,000 collateral shares pursuant to Convertible Note funding agreement at $0.00 each
• 1 June 2020 issue 176,865,999 shares under share purchase plan at $0.017 each
• 4 June 2020 issue 88,235,294 shares by way of share placement to SPP underwriters at $0.017 each
• 5 June 2020 issue 12,500,000 shares by way of conversion under Convertible Note funding agreement at $0.016 each
Risk Management
The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and 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.
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5.
OPERATING AND FINANCIAL REVIEW (continued)
Risk Management (continued)
The Board has several 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.
•
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
6.
Significant changes in the state of affairs during the year ended 30 June 2020 are as follows:
The Group maintains its vision of building an ecosystem of affordable and accessible software and hardware products for a
hearing market that is currently underserviced. To that end, the Group’s decision to concentrate on high-end high value
hearing products saw the launch of its new third generation product, IQbuds2 MAX in January 2020.
Sales of IQbuds2 MAX have been achieved almost exclusively via the Company’s Direct-To-Consumer (DTC) online sales
platform, further validating the sales model’s ability to reach and transact with global customers. The DTC model is proving
to be a viable alternative as traditional hearing clinics and retailers shutter around the world with the advent of the COVID-
19 crisis. Nuheara also continues to pursue other traditional sales channels in accordance with its business strategy, including
partnerships and distributor relationships in the healthcare sector to extend brand awareness and drive further sales.
The ongoing advances in R&D, design, and manufacture of forward-thinking new products consolidates Nuheara’s global
leadership position of smart hearing solutions. The Group’s investment in R&D has been supported by the receipt of a R&D
Tax Incentive cash rebate from the Australian Taxation Office of $1,673,964. The Group also received $150,000 in an Export
Market Development Grant, which is an Australian government financial assistance program supporting export marketing
activities.
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, IQbuds2 MAX, IQbuds BOOST, and IQstream TV plus the
development of new generation products.
8.
SIGNIFICANT EVENTS AFTER BALANCE DATE
Convertible Note conversions and purchase of Collateral Shares
On 10 July 2020, Lind provided notice to the Company requesting conversion of a further $200,000 of the convertible note
balance at $0.011. Nuheara exercised its right to settle the conversion in cash at 105% of the conversion amount – ie
$210,000. On the same day, Lind exercised its option to purchase 10,000,000 of the shares held as collateral under the
Funding Agreement. These shares were purchased for $0.011, for cash consideration of $110,000.
On 13 July 2020, Lind exercised its option to purchase the remaining 10,000,000 collateral shares at $0.011, for cash
consideration of $110,000.
On 6 August 2020, Lind provided notice to the Company requesting conversion of $200,000. 8,695,653 shares were
subsequently issued at a conversion price of $0.023.
On 24 August 2020, Lind provided notice to the Company requesting conversion of $700,000. 20,000,000 shares were
subsequently issued at a conversion price of $0.035.
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8.
SIGNIFICANT EVENTS AFTER BALANCE DATE (continued)
Unlisted Options
Following approval by the General Meeting of Shareholders, 3,000,000 options were issued to each of the non-executive
Directors, Mrs Edwardes and Mr Buckingham on 21 August 2020. The options are subject to vesting conditions – 1,000,000
options vested immediately and have an exercise price of $0.025, 1,000,000 options vest on the first anniversary of
appointment as a Director and have an exercise price of $0.05, and the remaining 1,000,000 options vest on the second
anniversary of appointment as a Director and have an exercise price of $0.10. On 21 August 2020, Mr Buckingham exercised
his vested options and acquired 1,000,000 shares in the Company at $0.025 each.
On 21 August 2020, the Company issued 29,200,000 options with an exercise price of $0.025 to employees under the Nuheara
Incentive Option Plan and 10,500,000 options were cancelled. On 21 August 2020, three employees exercised their vested
options and 1,666,667 shares in the Company were issued.
Announcement of Collaboration Agreement with HP, Inc
On 27 August 2020, the Company announced a collaboration agreement with multinational technology company HP, Inc
(NYSE:HPQ). The collaboration will see Nuheara co-develop new audio-experiences for HP and its customers. Phase 1 of an
expected multi-phased arrangement is a services-based Scope of Work valued at US$1.2 million (AUD$1.7 million). These
works will commence immediately.
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 64,048,039 options over ordinary shares. These options have been issued on the
following terms.
Number of Unlisted Options
1,000,000
2,500,000
24,264,706
3,750,000
26,533,333
5,000,000
TOTAL
64,048,039
Exercise Price
$0.09 each
$0.09 each
$0.05 each
$0.026 each
$0.025 each
1,000,000 @ $0.025 each
2,000,000 @ $0.05 each
2,000,000 @ $0.10 each
Expiry Date
17 September 2021
17 April 2022
3 February 2024
4 June 2023
21 August 2023
21 August 2023
Option holders do not have any rights to participate in any issues of shares or other interests in the Group or any other entity.
This report, which forms part of the Directors’ Report, details the amount and nature of remuneration of each Key
Management Personnel (KMP) of the Group. The following people were identified KMP during the year:
Directors
Cheryl Edwardes
Justin Miller
David Cannington
Kathryn Foster
David Buckingham
Executives
Jean-Marie Rudd
Independent Non-Executive Chairman (appointed 1 January 2020)
Managing Director/Chief Executive Officer
Executive Director/Chief Marketing Officer
Non-Executive Director
Non-Executive Director (appointed 1 November 2019)
Chief Financial Officer/Joint Company Secretary
There were no other changes to KMP after the reporting date and before the date the annual report was authorised for issue.
9
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ABN 29 125 167 133
DIRECTORS’ REPORT
11. REMUNERATION REPORT (AUDITED)
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 regard 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.
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.
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DIRECTORS’ REPORT
11. REMUNERATION REPORT (AUDITED) (continued)
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 everyone 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 considering 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.
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.
11
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11. REMUNERATION REPORT (AUDITED) (continued)
Details of remuneration provided to Directors and executives during the year are as follows:
NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
Short-Term Employee Benefits
Salary & Allowances
$
Cash Bonus
$
Post-Employment Benefits
Superannuation
$
Share-Based Payments
Shares
$
Options
$
Cheryl Edwardes
(appointed 1 January 2020)
Justin Miller
David Cannington
Kathryn Foster
(appointed 12 February 2019)
David Buckingham
(appointed 1 November 2019)
Jean-Marie Rudd
TOTAL
TOTAL
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
28,125
-
357,900
400,000
277,454
319,904
56,875
65,000
27,083
-
236,675
201,025
984,112
985,929
2,672
-
33,849
38,000
26,073
12,231
5,403
9,025
2,573
-
22,028
19,097
92,598
78,353
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,000
-
-
-
-
-
30,000
12
Total
$
30,797
-
391,749
438,000
303,527
332,135
62,278
104,025
29,656
-
258,703
220,122
1,076,710
1,094,282
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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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 $445,884 (2019: $445,884) per
annum (inclusive of superannuation). Mr Miller will also be entitled to participate in short-term cash incentives of up to 40%
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 $343,460 (2019:
$343,460) per annum and a telecommunications allowance of $200 per month (2019: $200 per month).
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.
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ABN 29 125 167 133
DIRECTORS’ REPORT
12. REMUNERATION REPORT (AUDITED) (continued)
Services Agreements (continued)
David Cannington – Chief Marketing Officer (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/Joint Company Secretary
Mrs Jean-Marie Rudd has been engaged as a Chief Financial Officer/Joint 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 $265,000 per annum (exclusive
of superannuation) (2019: $265,000) and a telecommunications allowance of $200 per month.
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 3 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.
In the event of a change of control, Mrs Rudd will receive a bonus payment comprising of a lump sum gross payment of 6
months’ base salary.
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
Cheryl Edwardes
Justin Miller(1)
David Cannington
Kathryn Foster(2)
David Buckingham(3)
Jean-Marie Rudd(4)
Total
Opening balance
1 July 2019
or balance on
appointment
-
68,142,857
68,142,857
640,000
-
19,279
136,944,993
Issued
during
the year
Purchased
during
the year
-
-
-
-
-
-
-
554,447
882,352
882,352
-
588,235
292,117
3,199,503
Closing Balance
30 June 2020
or resignation date
554,447
69,025,209
69,025,209
640,000
588,235
311,396
140,144,496
Notes:
(1) 68,142,857 shares are held by Wasagi Corporation Pty Ltd as trustee for the Wasagi Family Trust and 882,352 shares are
held by Mr Justin Miller and Mrs Kym Miller as trustee for the BBFC Super Fund, both of which Justin Miller is a beneficiary.
(2) 640,000 shares are held by Aylesham Pty Ltd as trustee for the Norval Court Super Fund of which Kathryn Foster is a
beneficiary.
(3) 588,235 shares are held by The Buckingham Family Trust of which David Buckingham is a beneficiary.
(4) 311,396 shares are held by the Rudd Family Trust of which Jean-Marie Rudd is a beneficiary.
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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
Jean-Marie Rudd(1)
Total
Opening balance
1 July 2019
or balance on
appointment
4,500,000
4,500,000
Issued
during
the year
-
-
Exercised
during
the year
-
-
Expired
during
the year
4,500,000
4,500,000
Closing Balance
30 June 2020
or resignation date
-
-
Notes:
(1) 4,500,000 options are held by the Rudd Family Trust of which Jean-Marie Rudd is a beneficiary.
(2) Mrs Edwardes, Mr Miller, Mr Buckingham and Ms Foster did not have any beneficial interests in the options over ordinary
share capital of the Group as at 30 June 2020.
Options granted
There were no options issued to KMP for the year ended 30 June 2020 (2019: nil).
Shares issued
During the 2020 year, no shares were issued as remuneration (2019: 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
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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 2020 and
the number of meetings attended by each Director:
BOARD
AUDIT & RISK
MANAGEMENT
COMMITTEE3
NOMINATION &
REMUNERATION
COMMITTEE4
Number
Eligible
to
Attend
13
17
17
17
14
Number
Attended
1
-
-
1
1
Number
Eligible
to
Attend
1
-
-
1
1
Number
Attended
13
17
17
16
14
Number
Attended
1
-
-
1
1
Number
Eligible
to Attend
1
-
-
1
1
Director
Cheryl Edwardes1
Justin Miller
David Cannington
Kathryn Foster
David Buckingham2
Notes:
(1) Hon. Cheryl Edwardes AM was appointed as Chair on 2 January 2020.
(2) David Buckingham was appointed as a Non-executive Director on 1 November 2019.
(3) The Audit and Risk Committee was established on 14 February 2020. The Chair of the Committee is David Buckingham and
the members of the Committee are the Non-executive Chair Cheryl Edwardes and Non-executive Director Kathryn Foster.
(4) The Remuneration and Nomination Committee was established on 12 March 2020. The Chair of the Committee is Kathryn
Foster and the members of the Committee are the Non-executive Chair Cheryl Edwardes and Non-executive Director David
Buckingham.
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 $43,641.
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 2020 has been received and can be found on page 18 of
the financial report.
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NUHEARA LIMITED
ABN 29 125 167 133
DIRECTORS’ REPORT
Made and signed in accordance with a resolution of the Directors.
Justin Miller
Managing Director/Chief Executive Officer
Perth, 28 August 2020
17
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For personal use only NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenue
Cost of sales
Gross profit
Other income
Salaries and employee benefits
Marketing and promotional
Product development and technology related expenses
General and administrative
Share based payments
Total expenses
Loss before tax from continuing operations
Income tax benefit
Net loss after tax from continuing operations
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)
NOTES
3
3
4
2
2020
$
1,739,535
(1,691,789)
47,746
2,697,046
(5,231,511)
(3,658,232)
(3,681,092)
(2,618,684)
753,994
2019
$
2,218,714
(1,849,115)
369,599
2,262,691
(5,943,896)
(2,532,568)
(1,573,372)
(2,157,092)
(450,513)
(11,738,479)
(10,394,750)
(11,690,733)
(10,025,151)
-
(11,690,733)
(2,087)
(10,027,238)
(11,690,733)
(11,690,733)
(10,027,238)
(10,027,238)
19
19
(1.14)
(1.09)
(1.09)
(1.02)
The accompanying notes form part of these financial statements.
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NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
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
Right of use asset
Security deposits
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Share option reserve
Foreign currency translation reserve
Accumulated losses
TOTAL EQUITY
NOTES
2020
$
2019
$
5
6
7
8
9
10
11
12
12
4,430,710
1,566,874
2,866,566
153,544
9,017,694
387,916
27,275
5,063
4,879,857
5,300,111
3,220,079
674,458
2,432,267
206,233
6,533,037
605,957
-
3,515
5,241,203
5,850,675
14,317,805
12,383,712
5,074,240
27,271
438,266
5,539,777
2,508,843
49,623
2,558,466
1,237,885
-
424,399
1,662,284
-
23,544
23,544
8,098,243
1,685,828
6,219,562
10,697,884
46,295,932
656,273
25,518
(40,758,161)
6,219,562
38,325,527
1,410,267
(6,478)
(29,031,432)
10,697,884
The accompanying notes form part of these financial statements.
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NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Ordinary
Shares
$
Accumulated
Losses
$
33,038,866
(18,974,248)
Share
Option
Reserve
$
960,561
Foreign
Currency
Translation
Reserve
$
(6,478)
Balance at 1 July 2018
Comprehensive income
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners
Shares issued during the year
Share issue costs
Options issued during the year
Movement in valuation of options
issued in prior periods
Option issue costs
Foreign currency translation
movements
Balance at 30 June 2019
-
-
(10,027,238)
(10,027,238)
-
-
5,740,250
(453,589)
-
-
-
-
-
-
-
-
-
38,325,527
(29,946)
(29,031,432)
-
-
(319,584)
777,762
(8,472)
-
1,410,267
Total
$
15,018,701
(10,027,238)
(10,027,238)
5,740,250
(453,589)
(319,584)
777,762
(8,472)
-
-
-
-
-
-
-
-
(6,478)
(29,946)
10,697,884
Balance at 1 July 2019
38,325,527
(29,031,432)
1,410,267
(6,478)
10,697,884
Comprehensive income
Loss for the year
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners
Shares issued during the year
Share issue costs
Options issued/forfeited during the
year
Movement in valuation of options
issued in prior periods
Foreign currency translation
movements
Balance at 30 June 2020
-
-
(11,690,733)
(11,690,733)
-
-
-
-
(968,841)
214,847
-
-
-
-
8,706,724
(736,319)
-
-
-
(35,996)
-
46,295,932
(40,758,161)
656,273
-
-
-
-
-
-
31,996
25,518
(11,690,733)
(11,690,733)
8,706,724
(736,319)
(968,841)
214,847
(4,000)
6,219,562
The accompanying notes form part of these financial statements.
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NUHEARA LIMITED
ABN 29 125 167 133
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Interest received
Grants and rebates received
Proceeds from the sale of assets held for sale
Payments to suppliers and employees
Interest and other costs of finance paid
Income tax 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 ACTIVITES
Proceeds from borrowings (net of transaction costs)
Proceeds from share and option issues
Share raising costs
NET CASH FLOWS FROM FINANCING ACTIVITIES
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD
Cash and cash equivalent at beginning of the financial year
CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR
NOTES
2020
$
2019
$
26
3,379,102
69,371
2,076,745
517,668
(11,472,808)
(3,405)
-
(5,433,327)
(22,709)
-
(3,511,218)
(3,533,927)
2,407,480
8,506,724
(736,319)
10,177,885
1,210,631
3,220,079
4,430,710
2,351,962
101,357
2,153,397
-
(11,108,775)
-
(2,087)
(6,504,146)
(102,299)
1,389
(3,806,417)
(3,907,327)
-
5,740,250
(454,396)
5,285,854
(5,125,619)
8,345,698
3,220,079
The accompanying notes form part of these financial statements.
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NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
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 2020 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 17.
Going concern
For the year ended 30 June 2020, the Group has incurred a net loss after tax of $11,690,733 (2019: loss of $10,027,238)
and net cash outflows from operating activities of $5,433,327 (2019: outflow of $6,504,146). As at 30 June 2020, the group
has a net current asset position of $3,477,917 (30 June 2019: $4,870,753).
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 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.
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NOTES TO THE FINANCIAL STATEMENTS
1.
(a)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of preparation (continued)
Going concern (continued)
The Directors remain committed to the long-term business plan that will result in the business progressing 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:
• Ongoing sales Nuheara’s existing product range through expanding distribution channels;
• New products planned for release over the course of the next 12-months;
• 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 and Amended Accounting Policies Adopted by the Group
Initial application of AASB 16: Leases
The impact of the adoption of this Standard and the respective accounting policies is disclosed in Note 7. This note describes
the nature and effect of the adoption of AASB 16: Leases on the Group’s financial statements and discloses the new
accounting policies that have been applied from 1 July 2019, where they are different to those applied in prior periods.
Leases
The Group as lessee:
At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use
asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts
that are classified as short-term leases (ie a lease with a remaining lease term of 12 months or less) and leases of low-value
assets are recognised as an operating expense on a straight-line basis over the term of the lease.
Initially the lease liability is measured at the present value of the lease payments still to be paid at the commencement
date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined,
the Group uses the incremental borrowing rate.
Lease payments included in the measurement of the lease liability are as follows:
fixed lease payments less any lease incentives;
•
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date;
the amount expected to be payable by the lessee under residual value guarantees;
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
lease payments under extension options, if the lessee is reasonably certain to exercise the options; and
•
•
•
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the
lease.
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NOTES TO THE FINANCIAL STATEMENTS
1.
(a)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of preparation (continued)
New and Amended Accounting Policies Adopted by the Group (continued)
The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at
or before the commencement date and any initial direct costs. The subsequent measurement of the right-of-use assets is
at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest.
The Group has recognised a lease liability and right-of-use asset for all leases (with the exception of short-term and low-
value leases) recognised as operating leases under AASB 117: Leases where the Group is the lessee.
Lease liabilities are measured at the present value of the remaining lease payments. The Group's incremental borrowing
rate as at 1 July 2019 was used to discount the lease payments.
The right-of-use assets for the leases have been measured and recognised in the statement of financial position as at 1 July
2019 by taking into consideration the lease liability and the prepaid and accrued lease payments previously recognised as
at 1 July 2019 (that are related to the lease).
The following practical expedients have been used by the Group in applying AASB 16 for the first time:
•
•
•
for a portfolio of leases that have reasonably similar characteristics, a single discount rate has been applied.
leases that have remaining lease term of less than 12 months as at 1 July 2019 have been accounted for in the same
way as short-term leases.
the use of hindsight to determine lease terms on contracts that have options to extend or terminate.
o applying AASB 16 to leases previously identified as leases under AASB 117: Leases and Interpretation 4: Determining
whether an arrangement contains a lease without reassessing whether they are, or contain, a lease at the date of
initial application.
o not applying AASB 16 to leases previously not identified as containing a lease under AASB 117 and Interpretation 4.
The Group’s weighted average incremental borrowing rate on 1 July 2019 applied to the lease liabilities was 3.83%.
The difference between the undiscounted amount of operating lease commitments at 30 June 2019 of $199,290 and the
discounted operating lease commitments as at 1 July 2019 of $190,927 were $8,362 which is due to discounting the
operating lease commitments at the Group's incremental borrowing rate.
Accounting Standards for Application in Future Periods
The AASB has issued a number of new and amended Accounting Standards that have mandatory application dates for future
reporting periods, some of which are relevant to the Group. The directors have decided not to early-adopt any of the new
and amended pronouncements.
(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.
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NOTES TO THE FINANCIAL STATEMENTS
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
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.
Development phase
An intangible asset arising from development (or from the development of an internal project) is recognised if, and only if,
all 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.
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NOTES TO THE FINANCIAL STATEMENTS
1.
(f)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and cash equivalents
Cash and cash equivalents include 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 the Statement of 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.
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.
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 2019, 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.
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NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
1.
(g)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial instruments (continued)
Fair value estimation (continued)
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.
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)
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%
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NOTES TO THE FINANCIAL STATEMENTS
1.
(j)
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Plant and equipment (continued)
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.
(k)
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 based on weighted average costs.
(l)
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 24.
(m)
Revenue recognition
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.
These products are sold under standard warranty terms. These terms may require the Group to provide a refund for faulty
products. The Group's obligation to provide a refund for these faulty products is recognised as a provision in accordance
with AASB 137: Provisions, Contingent Liabilities and Contingent Assets.
A receivable is recognised when the goods are delivered. The Group's right to consideration is deemed unconditional at this
time, as only the passage of time is required before payment of that consideration is due. There is no significant financing
component because sales are made within a credit term of 30 to 90 days.
Customers have a right to return products within 30 days as stipulated in the current contract terms. At the point of sale, a
refund liability is recognised based on an estimate of the products expected to be returned, with a corresponding
adjustment to revenue for these products. Consistent with the recognition of the refund liability, the Group further has a
right to recover the product when customers exercise their right of return, so consequently the Group recognises a right to
returned goods asset and a corresponding adjustment is made to cost of sales. Historical experience of product returns is
used to estimate the number of returns using the expected value method. It is considered highly probable that significant
reversal in the cumulative revenue will not occur given the consistency in the rate of return presented in the historical
information.
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.
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NOTES TO THE FINANCIAL STATEMENTS
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(n)
Provisions
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.
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.
(o)
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.
(p)
Taxes
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.
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NOTES TO THE FINANCIAL STATEMENTS
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p)
Taxes (continued)
(i)
Income Tax (continued)
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.
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.
(q)
Convertible note
The component of the convertible note that exhibits characteristics of a liability is recognised as a liability in the
Statement of Financial Position, net of transaction costs.
On issuance of the convertible note, the fair value of the liability component is determined using the market rate for an
equivalent non-convertible bond and this amount is carried as a long-term liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance
cost.
The remainder of the proceeds is allocated to the conversion option that may either be recognised as equity and included
in shareholders’ equity, net of transaction costs, or recognised as an embedded derivative and accounted for separately
from the host (convertible note) as a liability. If classified as equity, the carrying value of the conversion option is not
remeasured in subsequent years. If classified as an embedded derivative, the carrying value is valued each reporting period
at fair value through the Statement of Profit or Loss and other Comprehensive Income.
Interest on the liability component of the instruments is recognised as an expense in the Statement of Profit or Loss and
Other Comprehensive Income.
Transaction costs are apportioned between the liability and equity components of the convertible shares based on the
allocation of proceeds to the liability and equity components when the instruments are first recognised.
(r)
New and amended accounting policies adopted by the Group
Standards and Interpretations applicable to 30 June 2020
In the year ended 30 June 2020, the Directors have reviewed all of the new and revised Standards and Interpretations
issued by the AASB that are relevant to the 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.
31
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
2.
INCOME TAX
Income tax expense
Current income tax
Deferred income tax
Income tax expense
(i)
Numerical reconciliation of income tax expense to prima facie tax
payable
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% (2019: 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
Non-assessable income
Income tax expense
(ii)
Unrecognised deferred tax assets/(liabilities)
Unrecognised temporary differences
Unrecognised deferred tax (liability) relates to the following:
Interest receivable
Prepayments
Software
Trade and other payables
Borrowing costs
Convertible note
Employee benefits
Provisions
Business related costs
Foreign exchange
Tax Losses
Potential unrecognised deferred tax asset @ 27.5% (2019: 27.5%)
2020
$
2019
$
-
-
-
2,087
-
2,087
2020
$
(11,690,733)
-
(11,690,733)
(3,214,952)
2019
$
(10,025,151)
-
(10,025,151)
(2,756,917)
1,170
(68,858)
1,123,711
2,925,030
(460,340)
(305,761)
-
126,956
11,183
688,828
2,465,742
(533,704)
-
2,087
2020
$
2019
$
(307)
(5,236)
2,508,606
23,650
19,901
57,432
98,444
52,524
480,053
(24,951)
9,482,186
12,692,302
(2,454)
-
1,443,651
8,003
-
-
72,293
49,598
457,739
(57,677)
6,666,881
8,638,034
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.
REVENUE AND OTHER INCOME
Revenue from contracts with customers
Interest income
Grants and rebates received
Sale of mining interests
Sundry income
Total revenue and other income
2020
$
1,739,535
61,565
2,168,245
464,979
2,257
4,436,581
2019
$
2,218,714
105,333
2,153,397
-
3,961
4,481,405
32
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
4.
PRODUCT DEVELOPMENT AND TECHNOLOGY RELATED
EXPENSES
Product development, including research and development costs(i)
Inventory and components written off(ii)
2020
$
2,015,220
1,665,872
3,681,092
2019
$
1,163,685
409,687
1,573,372
(i) Excludes expenditure directly attributable to development activities that are capitalised as an intangible asset under
Australian Accounting Standards.
(ii) Inventories are stated at the lower of cost or market. The Company periodically reviews the value of items in
inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-
downs and write-offs are charged as an expense to the Statement of Profit or Loss. For the year to 30 June 2020,
the company experienced total write-downs and write-offs of $1,665,872 (30 June 2019: $409,687), including a
one-time charge of $716,570 attributable to the development of superior technology (30 June 2019: nil).
5.
TRADE AND OTHER RECEIVABLES
2020
$
2019
$
Trade and other receivables
1,566,874
674,458
The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits
the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade
receivables have been individually assessed based on credit risk characteristics. The expected credit losses also
incorporate forward-looking information.
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.
6.
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
2020
$
1,220,359
(832,443)
387,916
2020
$
605,957
32,145
(2,964)
(247,222)
-
387,916
2019
$
1,215,035
(609,078)
605,957
2019
$
762,526
102,283
(35,899)
(222,953)
-
605,957
33
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
7.
RIGHT OF USE ASSET
The Group's lease portfolio includes buildings. These leases have an average of 2 years as their lease term.
Options to extend or terminate
There are no extension options for the building lease.
(i) AASB 16 related amounts recognised in the Statement of Financial Position
2020
$
2019
$
Right of use assets
Leased building
Less: accumulated depreciation
Net carrying amount
Movements in carrying amounts:
Recognised on initial application of AASB 16
(previously classified as operating leases under AASB 117)
Depreciation
Closing balance – plant and equipment
(ii) AASB 16 related amounts recognised in the Statement of Profit or Loss
Depreciation charge related to right-of-use assets
Interest expense on lease liabilities (under finance cost)
(iii) AASB 16 related amounts recognised in the Statement of Cash Flows
Total yearly operating cash outflows for leases
8.
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
Total intangible assets
Development
Costs
$
4,203,045
4,650,885
3,270,658
(3,794,344)
4,127,199
Balance as at 1 July 2018
Balance as at 30 June 2019
Additions – internally developed
Amortisation charge
Balance as at 30 June 2020
9.
TRADE AND OTHER PAYABLES - CURRENT
Trade creditors
Unearned Income(i)
Other creditors and accrued expenses
190,927
(163,652)
27,275
190,927
(163,652)
27,275
2020
$
163,652
7,164
2020
$
170,820
2020
$
13,098,989
(8,971,790)
4,127,199
903,072
(150,414)
752,658
4,879,857
Patents
&
Trademarks
$
330,652
590,318
240,559
(78,219)
752,658
2020
$
365,585
1,762,754
2,945,901
5,074,240
-
-
-
-
-
-
-
-
-
2019
$
2019
$
2019
$
9,828,331
(5,177,446)
4,650,885
662,512
(72,194)
590,318
5,241,203
Total
$
4,533,697
5,241,203
3,511,217
(3,872,563)
4,879,857
2019
$
566,619
40,943
630,323
1,237,885
(i) Unearned income represents pre-sales of IQbuds2 MAX that cannot be recognised as revenue until shipped. As at
30 June 2020, 248 units had been shipped and recognised as sales revenue with the remaining pre-sales carried
forward to be recognised as revenue in the next financial year.
34
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
10. PROVISIONS – CURRENT
Employee provisions
Provision for refunds and warranty claims
11.
FINANCIAL LIABILITIES – NON-CURRENT
Convertible note
2020
$
313,839
124,427
438,266
2020
$
2,508,243
2019
$
259,321
165,078
424,399
2019
$
-
The Group entered into a 24-month $2.5 million convertible note (Funding Agreement) with the Lind Global Macro Fund,
LP, an entity managed by The Lind Partners (together “Lind”), a New York-based institutional fund manager. The
convertible note is secured and has a 24-month term.
The Funding Agreement includes provisions that allow for conversion of securities outstanding to Lind into fully paid
ordinary shares in the capital of the Company, optional cash payments by the Company or early repayment, without
penalty and subject to Lind’s buy back conversion rights for up to 33% of the outstanding face value. Lind invested $2.5
million into Nuheara who issued a secured redeemable convertible security with a face value of $3.0 million. Nuheara
has the right to redeem at any time without penalty. Other than following an event of default, the convertible note
does not bear interest.
Lind has agreed to certain conversion limits and trading restrictions. If Lind converts at a price below $0.02, instead of
issuing shares, Nuheara will have three business days to elect to pay that conversion in cash plus a 5% premium.
12.
ISSUED CAPITAL
Ordinary shares
Issued and paid up capital
1,359,811,585 (2019: 982,210,292) Ordinary shares, fully paid
2020
$
46,295,932
2019
$
38,325,527
Movements during the period number of shares
Opening Balance at 1 July 2018
10 December 2019 issued 2,250,000 shares on exercise of options $0.04 each
10 December 2019 issued 66,936,667 shares under placement at $0.075 each
25 February 2020 issued 20,000,000 shares on exercise of options at $0.05
each
17 April 2020 issued 322,718 shares on exercise of options at $0.04 each
17 April 2020 issued 1,227,184 shares on exercise of options at $0.06 each
Less: Share issue costs
Balance shares at 30 June 2019
Movements during the period number of shares
Opening balance at 1 July 2019
15 July 2019 issue 80,000,000 shares by way of share placement at $0.05 each
3 February 2020 issue 20,000,000 collateral shares pursuant to Convertible
Note funding agreement at $0.00 each
1 June 2020 issue 176,865,999 shares under share purchase plan at $0.017
each
4 June 2020 issue 88,235,294 shares by way of share placement to SPP
underwriters at $0.017 each
5 June 2020 issue 12,500,000 shares by way of conversion under Convertible
Note funding agreement at $0.016 each
Less: Share issue costs
Balance shares at 30 June 2020
Number of
Shares
2019
891,473,723
2,250,000
66,936,667
20,000,000
322,718
1,227,184
-
982,210,292
Number of
Shares
2020
982,210,292
80,000,000
20,000,000
176,865,999
88,235,294
2019
$
33,038,867
90,000
5,020,250
600,000
-
30,000
(453,590)
38,325,527
2020
$
38,325,527
4,000,0
00
-
3,006,7
22
1,500,0
00
12,500,000
-
1,359,811,585
200,000
(736,318)
46,295,932
35
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
12.
ISSUED CAPITAL (continued)
Ordinary shares (continued)
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.
2019
$
1,410,267
Weighted
Average
time until
expiry
2020
0 months
1 month
4 months
8 months
Unlisted Options
Issued unlisted options
46,514,706 (2019: 56,000,000) unlisted options
2020
$
656,273
Description
Number
Grant
Date
Exercise
Price
Expiry
Date
Unlisted Options
500,000
14/07/2017
Unlisted Options
3,000,000
24/07/2017
Unlisted Options
500,000
10/11/2017
Unlisted Options
3,000,000
01/03/2018
Unlisted Options
3,000,000
17/09/2018
Unlisted Options
6,000,000
18/03/2019
Unlisted Options
2,500,000
17/04/2019
Unlisted Options
24,264,706
03/02/2020
$0.09
$0.015
$0.09
$0.09
$0.09
$0.09
$0.09
$0.05
14/07/2020
24/07/2020
10/11/2020
01/03/2021
17/09/2021
15 months
18/03/2022
21 months
17/04/2022
22 months
03/02/2024
43 months
Unlisted Options
3,750,000
04/06/2020
$0.026
04/06/2023
35 months
Total Unlisted
Options
46,514,706
31 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 25 Share Based Payments.
Movements during the period for number of options
Balance unlisted options at 30 June 2018
Issue of Employee options @ $0.09 each on 17 September 2019
Issue of Employee options @ $0.09 each on 10 December 2019
Issue of Employee options @ $0.09 each on 18 March 2020
Issue of Employee options @ $0.09 each on 17 April 2020
Less: Options exercised/forfeited
Less: Option issue expenses
Movement in valuation of options issued in prior reporting periods
Balance unlisted options at 30 June 2019
Balance unlisted options at 30 June 2019
Issue of Employee options @ $0.05 each on 3 February 2020
Issue of Employee options @ $0.026 each on 4 June 2020
Less: Options exercised/forfeited
Movement in valuation of options issued in prior reporting periods
Balance unlisted options at 30 June 2020
36
Number of
Options
2019
78,000,000
10,500,000
1,500,000
6,000,000
2,500,000
(42,500,000)
-
-
56,000,000
Number of
Options
2020
56,000,000
24,264,706
3,750,000
(37,500,000)
-
46,514,706
2019
$
960,561
84,095
5,026
15,430
5,407
(319,584)
(8,472)
667,804
1,410,267
2020
$
1,410,267
36,108
560
(1,005,509)
214,847
656,273
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
12.
ISSUED CAPITAL (continued)
Capital Management
When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain
optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure
to ensure the lowest costs of capital available to the Company.
The Group’s capital comprises equity and options as shown in the statement of financial position. The Group is not exposed
to externally imposed capital requirements.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior
year.
13. 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.
14. 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 21, Interests of KMP.
Transactions with director related entities
During the year, there were no transactions with director related entities.
15.
EVENTS OCCURRING AFTER BALANCE DATE
Convertible Note conversions and purchase of Collateral Shares
On 10 July 2020, Lind provided notice to the Company requesting conversion of a further $200,000 of the convertible note
balance at $0.011. Nuheara exercised its right to settle the conversion in cash at 105% of the conversion amount – ie
$210,000. On the same day, Lind exercised its option to purchase 10,000,000 of the shares held as collateral under the
Funding Agreement. These shares were purchased for $0.011, for cash consideration of $110,000.
On 13 July 2020, Lind exercised its option to purchase the remaining 10,000,000 collateral shares at $0.011, for cash
consideration of $110,000.
On 6 August 2020, Lind provided notice to the Company requesting conversion of $200,000. 8,695,653 shares were
subsequently issued at a conversion price of $0.023.
On 24 August 2020, Lind provided notice to the Company requesting conversion of $700,000. 20,000,000 shares were
subsequently issued at a conversion price of $0.035.
Unlisted Options
Following approval by the General Meeting of Shareholders, 3,000,000 options were issued to each of the non-executive
Directors, Mrs Edwardes and Mr Buckingham on 21 August 2020. The options are subject to vesting conditions – 1,000,000
options vested immediately and have an exercise price of $0.025, 1,000,000 options vest on the first anniversary of
appointment as a Director and have an exercise price of $0.05, and the remaining 1,000,000 options vest on the second
anniversary of appointment as a Director and have an exercise price of $0.10. On 21 August 2020, Mr Buckingham exercised
his vested options and acquired 1,000,000 shares in the Company at $0.025 each.
On 21 August 2020, the Company issued 29,200,000 options with an exercise price of $0.025 to employees under the
Nuheara Incentive Option Plan and 10,500,000 options were cancelled. On 21 August 2020, three employees exercised
their vested options and 1,666,667 shares in the Company were issued.
37
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
15.
EVENTS OCCURRING AFTER BALANCE DATE (continued)
Announcement of Collaboration Agreement with HP, Inc
On 27 August 2020, the Company announced a collaboration agreement with multinational technology company HP, Inc
(NYSE:HPQ). The collaboration will see Nuheara co-develop new audio-experiences for HP and its customers. Phase 1 of an
expected multi-phased arrangement is a services-based Scope of Work valued at US$1.2 million (AUD$1.7 million). These
works will commence immediately.
16. COMMITMENTS FOR EXPENDITURE
These amounts are payable, if required, over various times over the next five years.
Operating Lease Commitment
The Group has a rental agreement which commenced 1 September 2018 for a period of 24 months.
Office Lease
Due within 1 year
Due 1 to 5 years
2020
$
28,470
-
2019
$
170,820
28,470
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
2020
$
-
-
2019
$
170,820
28,470
17. 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.
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.
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.
38
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
17. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
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 25.
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 25.
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.
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.
Management has ascertained that the probability of Net Smelter Royalty revenue was nil at balance date.
Convertible Notes
The Group's convertible notes have been treated as a financial liability, in accordance with the principles set out in AASB
132. The key criterion for liability classification is whether there is an unconditional right to avoid delivery of cash for
another financial asset to settle the contractual obligation. The terms and conditions applicable to the convertible notes
require the Group to settle the obligation in either cash, or in the Company's own shares.
The notes are convertible into ordinary shares of the parent entity, at the option of the holder, or repayable in 24 months
from draw-down date. The conversion rate is based on a variable formula subject to adjustments for share price movement.
Management determined that these terms give rise to a derivative financial liability. The initial consideration received for
the note was deemed to be fair value of the liability at the issue date. The liability will subsequently be recognised on a fair
value basis at each reporting period.
18.
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.
39
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
18.
FINANCIAL INSTRUMENTS (continued)
(i)
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 2020
Financial assets
Cash at bank
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Convertible note
Total financial liabilities
30 June 2019
Financial assets
Cash at bank
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
Weighted Average
Effective Interest
Rate
%
4.5%
-
-
-
Weighted Average
Effective Interest
Rate
%
2.13%
-
-
Interest
Bearing
$
Non-Interest
Bearing
$
Total
$
3,967,877
-
3,967,877
-
-
-
462,833
1,566,874
2,029,707
5,074,240
2,308,843
7,383,083
4,430,710
1,566,874
5,997,584
5,074,240
2,308,843
7,383,083
Interest
Bearing
$
Non-Interest
Bearing
$
Total
$
2,951,540
-
2,951,540
268,539
674,458
942,997
3,220,079
674,458
3,894,537
-
-
-
1,237,885
1,237,885
1,237,885
1,237,885
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 2020, 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.
(ii)
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.
(iii)
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.
Liquidity risk is reviewed regularly by the Board.
The Group manages liquidity risk by monitoring forecast cash flows and liquidity ratios such as working capital. The Group
did not have any financing facilities available at reporting date.
40
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
18.
FINANCIAL INSTRUMENTS (continued)
(iii)
Liquidity Risk (continued)
The following are the contractual maturities of financial liabilities:
30 June 2020
Liquid financial liabilities
Trade and other payables
Convertible note
Total financial liabilities
30 June 2019
Liquid financial liabilities
Trade and other payables
Total financial liabilities
Net Fair Values
< 6 months
$
6-12 months
$
1-5 years
$
Total
$
5,074,240
-
5,074,240
< 6 months
$
6-12 months
$
1,237,885
1,237,885
-
-
-
-
-
-
2,308,843
2,308,843
5,074,240
2,308,843
7,383,083
1-5 years
$
Total
$
-
-
1,237,885
1,237,885
With the exception of convertible notes which are measured at fair value, due to the short-term nature of the above assets
and liabilities, their carrying values are assumed to approximate their fair values.
(iv)
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 2020 is not material
(2019: not material).
19.
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
2020
Cents
(1.14)
(1.09)
2020
$
2019
Cents
(1.09)
(1.02)
2019
$
(11,690,733)
(10,027,238)
2020
No.
2019
No.
1,017,934,136
1,069,557,029
914,324,594
980,383,498
41
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
20. 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
2020
$
2019
$
38,838
-
38,838
39,800
7,626
47,426
21.
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
22. CONTINGENT LIABILITIES
There are no known contingent liabilities.
23. COMPANY DETAILS
Registered Office
2020
$
984,112
92,598
-
1,076,710
2019
$
1,015,929
78,358
-
1,094,287
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.
24.
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
Nuheara IP Pty Ltd
Wild Acre Metals (Peru) SAC
(in liquidation)
Nuheara, Inc
Terrace Gold Pty Ltd
Principal
Place of
Business
Perth, Australia
Lima, Peru
New York, USA
Perth, Australia
Ownership interest
held by
the Company
Proportion of
non-controlling
interest
2020
100%
100%
100%
80%
2019
100%
100%
100%
80%
2020
0%
0%
0%
20%
2019
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.
42
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NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
25.
SHARE BASED PAYMENTS
Shares and options granted to KMP
There were no shares or options granted to KMP during the financial year (2019: nil).
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 no options vested with KMP (2019: 1,125,000) and there were no shares or options issued to non-
KMP employees (2019: nil).
A summary of the movements of all Group options issued is as follows:
Options outstanding and exercisable as at 30 June 2018
Granted
Forfeited
Exercised
Options outstanding and exercisable as at 30 June 2019
Granted
Forfeited
Exercised
Options outstanding and exercisable as at 30 June 2020
No.
78,000,000
20,500,000
(14,000,000)
(28,500,000)
56,000,000
28,014,706
(37,500,000)
-
46,514,706
Weighted Average
Exercise Price
$0.07
$0.09
-
-
$0.09
$0.05
-
-
$0.07
The weighted average remaining contractual life of options outstanding at year end was 2.56 years (2019: 1.35). The
weighted average exercise price of outstanding options at the end of the reporting period was $0.07 (2019: $0.09).
The fair value of options granted during the year was $380,316 (2019: $660,170). These values were calculated using the
Black-Scholes option pricing model, applying the following inputs:
Grant Date
Share price on issue date
Expected volatility
Exercise price
Expiry date
Risk free interest rate
Number issued
Value per option
Total
Funder
Options
03/02/2020
$0.034
100%
$0.05
03/02/2024
0.25%
24,264,706
$0.0210
$356,991
Underwriter
Options
04/06/2020
$0.017
100%
$0.026
04/06/2023
0.25%
3,750,000
$0.0090
$23,625
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 ($753,994) (2019: $450,513), which relates to net movements in equity-settled
share-based payment transactions.
43
For personal use only
NUHEARA LIMITED
ABN 29 125 167 133
NOTES TO THE FINANCIAL STATEMENTS
26. 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:
Loss/(profit) on property plant & equipment
Depreciation and amortisation expenses
Income tax
Share based payments expense
Sale of mining interests
Right of use asset cost
Convertible note fair value adjustment
Borrowing costs on convertible note
WAM (Peru) transactions
Changes in assets and liabilities
Increase in trade debtors
Increase in assets held for sale
(Decrease)/increase in other receivables
Decrease in inventories
(Decrease)/increase in non-current assets
Decrease in trade creditors
Increase/(decrease) in other payables
Increase in lease liabilities
Increase in provision for employee entitlements
Decrease in provision for warranty claims
Increase in unearned income
Net cash used in operating activities
27. PARENT ENTITY FINANCIAL INFORMATION
2020
$
2019
$
(11,690,733)
(10,025,151)
21
4,284,205
-
(753,994)
(464,979)
(190,927)
208,843
92,520
(7,260)
1,778,657
517,668
(949,259)
(434,299)
(1,549)
(201,034)
2,311,576
27,271
80,597
(40,651)
-
(5,433,327)
18,253
3,337,654
(2,087)
450,513
-
-
-
-
-
95,015
-
79,556
(78,875)
28,585
(126,179)
(261,066)
-
39,822
(72,676)
12,490
(6,504,146)
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.
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
44
2020
$
2019
$
(11,785,510)
-
(11,785,510)
(10,194,174)
-
(10,194,174)
8,836,670
10,021,068
18,857,738
5,378,441
1,137,574
6,516,015
12,341,723
6,091,745
12,403,391
18,495,136
1,560,703
21,829
1,582,532
16,912,604
53,070,295
947,438
(41,676,010)
12,341,723
45,099,890
1,701,432
(29,888,718)
16,912,604
For personal use only
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 page 19 to 44, are in accordance with the Corporations Act 2001
and:
(a)
(b)
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 2020 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.
(2)
(3)
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, 28 August 2020
45
For personal use only
For personal use only For personal use only For personal use only For personal use only For personal use only 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 19 August
2020.
(1)
Distribution schedule and number of holders of equity securities as at 19 August 2020
Fully Paid Ordinary Shares
Unlisted Options:
9 cents, exp 10/11/2020
Unlisted Options:
9 cents, exp 1/3/2021
Unlisted Options:
9 cents, exp 17/9/2021
Unlisted Options:
9 cents, exp 18/3/2022
Unlisted Options:
9 cents, exp 17/4/2022
Unlisted Options:
5 cents, exp 3/2/2024
Unlisted Options:
2.6 cents, exp 4/6/2023
1 – 1,000
131
1,001 –
5,000
120
5,001 –
10,000
520
10,001 –
100,000
1,830
100,001 –
and over
1212
Total
3,813
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3
5
4
5
15
1
1
1
5
4
5
1
1
1
The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 19 August 2020 is 535.
(2)
20 Largest holders of quoted equity securities
The names of the twenty largest holders of fully paid ordinary shares (ASX code: NUH) as at 19 August 2020 are:
Rank
1
Name
FARJOY PTY LTD
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
MR DAVID ROBERT CANNINGTON
WASAGI CORPORATION PTY LTD
JAMORE PTY LTD
MR XUAN KHOA PHAM
MR MILAN TRIFUNOVIC
FIAGO PTY LTD
CITICORP NOMINEES PTY LIMITED
MR STEPHEN CHARLES STUART WATTS
NO BULL HEALTH PTY LTD
MRS WEI YA JUN FENG HU
MRS QUYNH CHI PHAN
DR LIONEL JOSHUA HOVEY
BNP PARIBAS NOMINEES PTY LTD
MR ZHEN XIN GAO
MR TAHIR OZKUL
MRS JANE ELIZEBETH VANDERHORST
MR ALAN DAVIS
DR STEPHEN DENNIS GIPPS
MS KELLIE ANNE DAVIS
Shares
118,740,919
% of Total
Shares
8.68
69,025,209
68,142,857
61,696,043
39,000,000
27,000,000
24,898,146
19,071,968
16,000,000
13,226,000
12,592,000
12,000,000
11,395,000
9,971,526
9,877,000
9,000,000
8,600,000
8,095,238
7,000,000
6,653,250
5.04
4.98
4.51
2.85
1.97
1.82
1.39
1.17
0.97
0.92
0.88
0.83
0.73
0.72
0.66
0.63
0.59
0.51
0.49
551,985,156
40.33
Stock Exchange Listing – Listing has been granted for 1,368,507,237 ordinary fully paid shares of the Group on issue on the Australian
Securities Exchange. The unquoted securities on issue as at 19 August 2020 are detailed below in part (4).
51
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NUHEARA LIMITED
ABN 29 125 167 133
ADDITIONAL ASX INFORMATION
(3)
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
Justin Miller:
Wasagi Corporation Pty Ltd
Mr Justin Miller & Mrs Kym Miller
(4)
Unquoted Securities
The number of unquoted securities on issue as at 19 August 2020:
Security
Unlisted Options – exercisable at 9 cents on or before 10/11/2020
Unlisted Options – exercisable at 9 cents on or before 01/03/2021
Unlisted Options – exercisable at 9 cents on or before 17/09/2021
Unlisted Options – exercisable at 9 cents on or before 18/3/2022
Unlisted Options – exercisable at 9 cents on or before 17/4/2022
Unlisted Options – exercisable at 5 cents on or before 03/02/2024
Unlisted Options – exercisable at 2.6 cents on or before 04/06/2023
Shares
118,740,919
69,025,209
68,142,857
882,352
% of Total
Shares
8.68
5.04
5.04
Number on issue
500,000
3,000,000
3,000,000
5,000,000
2,500,000
24,264,706
3,750,000
(5)
Holder Details of Unquoted Securities
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 19 August 2020 are detailed below:
Security
Unlisted Options –
exercisable at 9 cents on or before 03/02/2024
Name
Citicorp Nominees Pty Limited
Number of
Securities
24,264,706
(6)
Restricted Securities
The Group had no restricted securities as at 19 August 2020.
(7)
Voting Rights
All fully paid ordinary shares carry one vote per ordinary share without restriction.
Unquoted options have no voting rights.
(8)
Company Secretary
The Company Secretaries are Ms Susan Hunter and Mrs Jean-Marie Rudd.
52
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NUHEARA LIMITED
ABN 29 125 167 133
ADDITIONAL ASX INFORMATION
(9)
Registered Office
The Group’s Registered Office is 190 Aberdeen Street, Northbridge, WA 6003, Australia.
Telephone: +61 8 6555 9999
(10)
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)
(11) On-Market Buy-back
The Group is not currently performing an on-market buy-back.
(12)
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.
(13)
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.
53
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