Annual Report 2019
Uscom Limited ASX: UCM
www.uscom.com.au
CONTENTS
CHAIRMAN’S LETTER ................................................................................................................ 2-9
ANNOUNCEMENTS FY 2019 .............................................................................................. 10
DIRECTORS REPORT ..................................................................................................... 11-17
FINANCIAL REPORT
AUDITORS INDEPENDENCE DECLARATION ....................................................................... 18
STATEMENT OF PROFIT AND LOSS & OTHER COMPREHENSIVE INCOME ................... 19
STATEMENT OF FINANCIAL POSITION ................................................................................ 20
STATEMENT OF CHANGES IN EQUITY ................................................................................. 21
STATEMENT OF CASH FLOWS .............................................................................................. 22
NOTES TO FINANCIAL STATEMENTS ............................................................................. 23 - 42
DIRECTORS DECLARATION ............................................................................................... 43
INDEPENDENT AUDIT REPORT ................................................................................... 44 - 47
SHAREHOLDER INFORMATION .................................................................................. 48- 49
CHAIRMAN’S LETTER
DEAR INVESTORS, CUSTOMERS, PARTNERS, AND EMPLOYEES:
“Uscom continues to build an international growth
asset, and finished FY 2019 with record revenue,
increased sales for all product suites, operational
expansion, and global investment. It was a year in
which our continued record sales growth drove
fundamentals as we prepared for our global
strategic expansion to accelerate growth into 2020
and beyond”- Rob Phillips CEO
Management’s strategy for 2019 was focused on the
establishment of Uscom China and the building out of a
wholly owned subsidiary to guide our emerging China
operations. We restructured and relocated Uscom Kft
(Budapest) to meet anticipated manufacturing demand,
rebranded our SpiroSonic products and established a new
Uscom European sales marketing hub for all Uscom
products. We also opened an Asian representative office in
Singapore to cover SE Asia and bridge the China and Sydney
operations. Our US operations were also expanded with new
dealer led sales initiatives implemented. These changes are
the expanded foundation of the new global Uscom, as we
grow to meet the demand anticipated from our multiple
impending device approvals across four continents over the
coming year. In the mean time we have maintained record
sales growth from our current products and markets.
ANNUAL REPORT 2019 | Uscom Limited | Page 2
*CAGR – Compound Annual Growth Rate
CHAIRMAN’S LETTER Continued
MILESTONES
RESULTS
Total income - $3.64m (up 27%)
Sales revenue - $2.84m (up 31%)
6 year total income growth - 24% CAGR per year, and
up 260% over 6 years
6 year sales revenue - 29% CAGR per year, and up
358% over 6 years
Cash consumption - $1.21m (reduced 28%)
Total costs - $4.34m (up 3%)
Cash on hand - $1.21m
Record sales and growth for all Uscom products
Uscom China expanded to support USCOM 1A, BP+
and SpiroSonic devices
Wholly owned Beijing based subsidiary
Regulatory applications for eight new China
products approaching final stages
Approval of sales license for all NMPA Type II
medical devices (Uscom and non-Uscom)
Importation process established for all Uscom and
non-Uscom devices
Expanded team - admin, finance, marketing, sales,
technical and clinical
Uscom Kft (Budapest) renamed, relocated and
products rebranded
New Uscom European hub - sales, marketing, technical
and clinical support services
US BP+ and SpiroSonic trials with major technology
and innovation companies
New US sales innovation - dealer-led distribution
Singapore office opened
Total income of $3.64m was up 27% on 2018, with a six year 24% compound annual growth rate (CAGR), and a total increase of
260% for that period. Sales receipts were $2.84m, up 31%, and maintaining a six year CAGR of 29%, with sales up 358% over the
preceding 6 years.
The operating loss after income tax decreased 29% to $1.38m, total operating cash consumption for the year was reduced 28%
to $1.21m, and cash on hand at the end of the period was $1.21m.
The 27% increase in total income was substantially due to increased sales across all product suites including the USCOM 1A, the
BP+ and the SpiroSonic devices. USCOM 1A sales increased by 17% yoy globally, while total revenue from Uscom Kft (Budapest)
increased 47% yoy ($0.87M from $0.58M). This growth was partly driven by structural changes, product rebranding and repricing,
and increased international partnerships, as well as EuroGrant R&D projects, and despite relocation and a consequent 3 month
interruption to manufacturing approvals. Outstanding regulatory re-approvals for the Middle East and South East Asian markets
should be received over the coming 6 months, restoring sales access and stimulating sales.
For BP+ we increased unit sales by 143% largely due to participation in two major international hypertension trials. The first trial
in Pennsylvania with Professor Julio Chirinos, VP of North American Artery Society, in conjunction with a US based global health
tech leader. The second BP+ study is a nationwide trial assessing the occurrence and effectiveness of management of
hypertension in rural New Zealand.
Costs: Total costs for FY 2019 were $4.34m, increased by 3% on 2018. Continued spend on expanding manufacturing activities
and regulatory applications remains significant, but should diminish over the next year. In 2019 Uscom increased its headcount
from 32 to 38 (up 19%), with a focus on sales across four continents and five offices (Sydney, Singapore, Beijing, Budapest, Los
Angeles), while reducing total employee costs by 16%.
ANNUAL REPORT 2019 | Uscom Limited | Page 3
CHAIRMAN’S LETTER Continued
China: In 2019, we established a wholly owned subsidiary, Uscom China, in Chaoyang, Beijing. This was a significant task that
involved:
registering Uscom China as a business entity
1.
2. opening a Beijing office
3. opening trading and capital bank accounts
4. advancing our NMPA applications covering
5.
6.
eight products
submitting a new spirometry device for
regulatory approval
receiving type II medical device sales
certification
7. establishing a medical device importation
system
8. employing 6 clinical, financial, admin and
technical staff
9. applying for 20 China trademarks and
copyrights (3 received and 6 approved so far),
10. restructuring our sales and dealer models
11. developing China specific marketing materials
to support distributors and dealers
12. hosting our first national ICU congress
13. initiating discussions with potential Chinese
partners for local manufacturing and
strategic partnerships.
Pictured at the Uscom booth at Zhuhai are Mark Ho from PMS, and Rob
Phillips, Yvonne Song, Nancy Wang and Scarlett Zhang, all from Uscom China.
China remains our strategic growth platform, and we are focused on advancing our NMPA applications of eight new products into
the most accessible, and largest and fastest growing medical device market in the world, a not trivial feat. We are also developing
new distribution and dealer relationships to more efficiently deliver sales. This year we have disrupted our established distribution
model and introduced a more direct pathway via our Uscom China operations allowing us to reclaim margin and increase volume,
and importantly expand our access to more of the 10,000 major Hospitals in China. The year ahead should see this strategy improve
revenue and profit in Uscom China.
Europe: Uscom Budapest was formally renamed Uscom Kft and relocated to larger premises in Budapest, a move which was
accompanied by rebranding and repricing of products, and restructuring of the operation. This year we also released the new
SpiroSonic AIR device and initiated sales, marketing, and clinical and technical support activities for all Uscom products in Europe,
creating a new Uscom European hub. Uscom Kft will continue its R&D function and continues to expand its manufacturing capacity
to meet the anticipated demand once NMPA approvals are received. Expansion of our European operations will increase access
to the European market, providing diversification and mitigating against regional economic and currency fluctuations.
USA: Uscom maintained its presence in the US despite a health care system with an unresolved future. We have revised the Uscom
sales strategy, and are now re-engaging directly with dealers across the US with a new commission only model. We continue to
make key USCOM 1A sales and preserve key relationships as we prepare for the FDA approvals of BP+ and SpiroSonic devices.
Singapore and Los Angeles: Uscom Limited has also registered representative offices in Singapore and Los Angeles.
Products: Uscom continued supporting our NMPA regulatory submissions in China for the BP+, BP+ Reporter, the SpiroSonic
FLO, SMART, MOBILE, and the SpiroReporter, and the resubmission for the USCOM 1A. We also added the new SpiroSonic AIR
digital ultrasonic spirometer to our NMPA application, taking the total of new products in regulatory approval to eight. The
SpiroSonic AIR is the most advanced digital ultrasonic spirometer available and has been specifically developed for the home
care asthma and COPD market in China. The NMPA process continues to progress and we are approaching certification, despite
the slow pace of review. The time and cost to register eight products is significant, however registered products are revenue
generators, and the approval of these new devices in China is anticipated to rapidly generate revenue, particularly as our current
operations are approaching break even.
ANNUAL REPORT 2019 | Uscom Limited | Page 4
CHAIRMAN’S LETTER Continued
Share trading: The Uscom FPO VWAP share price in FY
2019 was 14.8c, ranging from 11.5c to 19c. Over the year
15M shares were traded being approximately 13% of
issued capital. Uscom management continues to fully
inform the market of relevant activities and events within
the company supporting ASX releases and regular
investor, staff, and dealer updates. Additionally we have
an active social media strategy across Twitter, Facebook
and LinkedIn to ensure awareness of our activities and
achievements, and to provide potential investors with
information of our results so they have every opportunity
to benefit from an informed investment in Uscom.
s
t
n
e
C
40
30
20
10
0
Share Price
2012 2013 2014 2015 2016 2017 2018 2019
Despite a 6 year 29% pa CAGR in sales a total sales
increase of 358% for the 6 year period, two corporate
acquisitions, development of 7 new products, and a
sustained internal and external public information campaign, the Uscom share price remains unreflective.
Maximum
VWAP
Minimum
Science: Uscom is a company driven by scientific excellence, and our technologies continue to be international leaders.
The total number of Uscom publications now exceeds 650, with more than 110 of those from China alone. While our science has
traditionally centred on paediatrics, ICU, anaesthesia, and ED, this year saw USCOM 1A become the pre-eminent technology for
identification and management of pre-eclampsia and is revolutionising the field. It has been proposed that a first trimester
USCOM 1A examination, followed by 20 and 30 week scans may become the standard of care for all pregnancies to exclude and
identify maternal hypertension and monitor therapy. Maternal hypertension remains the highest cause of mortality and morbidity
in pregnancy. USCOM 1A is leading this revolution in clinical care, and this strengthening scientific platform creates the potential
for ongoing revenue growth.
Sales, Marketing and Distribution: USCOM 1A sales represented approximately 72% of all 2019 Uscom sales receipts (down
from 75% in 2018), while SpiroSonic generated 20%, and BP+ 8%, predominantly from global research sales. Regionally China
and the rest of Asia were responsible for 63% of Uscom sales, while Europe generated 25% and the US 9%.
ANNUAL REPORT 2019 | Uscom Limited | Page 5
CHAIRMAN’S LETTER Continued
Brands: Uscom is building a great business based on brands and culture, and that is our focus; great brands and great culture.
Branding creates value and we have created brands with aesthetic appeal and clinical utility, a valuable combination recognised
worldwide in medicine. USCOM, SpiroSonic and BP+ are valuable and allow the preservation of margin.
The three Uscom brands - USCOM 1A, SpiroSonic and BP+
Education and Distributor Support: As part of our sales focus in 2019, we updated our sales, training and education materials
for all our products and have completed translating them into Chinese. We have also employed technical and clinical support
staff in China to induct new distributors and their sales teams rapidly and effectively and train new users. We are also establishing
a new harmonised global website and digital sales interface so global customers can access our products and support.
Patents and IP: Uscom also received both US and European patents for a non-invasive flow pressure device. This protected
technology combines USCOM 1A and Uscom BP+ technology to create highly insightful “volume – pressure” loops to describe
cardiovascular function. This powerful patent will provide commercial protection for the development of a new generation of
Uscom devices over the coming years.
In China trademarks and copyrights are an efficient strategy, and we have applied for 14 trademarks, with 3 approved, 8 notified
of acceptance, and the remainder still in review.
New Products: While this year has been predominantly concerned with supporting regulatory submissions of existing products,
we have continued to innovate and create clinical solutions, developing and releasing a new home care spirometer. The
SpiroSonic AIR is a wireless charging, wireless connecting technology which feeds digital lung function signals via a phone APP,
the SpiroSonic myAIR, to the cloud or station based SprioReporter for archiving and analysis.
The SpiroSonic AIR is a totally wireless, digital ultrasonic spirometer; a practice leading innovation for management of asthma
and COPD. The SpiroSonic AIR is conceived to fit at the front end of home care medicine and interface with wireless home
connections to remote specialist clinicians, allowing immediate diagnostic and therapeutic guidance to patients, thus reducing
unnecessary hospital or clinic attendances. Uscom is currently working with some of the world’s leading technology companies in
US and European eHealth trials to improve management of asthma, COPD and hypertension using telemetric solutions.
ANNUAL REPORT 2019 | Uscom Limited | Page 6
CHAIRMAN’S LETTER Continued
Regulatory: Advancing seven products through the China NMPA regulatory cycle is complex, expensive and unpredictable and
has not been assisted by evolving international trade events. Regardless the regulatory process is progressing, and a new device
(SpiroSonic AIR) added to the regulatory application over the 2019 year. It is anticipated that all devices will be certified by the
end of FY 2020.
The approval pathway for products through the Chinese NMPA process is generally proposed to take 2 years if the process is
optimally progressed by all parties.
TGA Aust CE Europe
Market
Population (B)
0.025
0.75
FDA
US
0.33
NMPA
China
1.40
USCOM 1A
Granted
Granted
Granted
Granted
BP+ (x2)
Granted
Granted
Submission
Pre-approval
SpiroSonic (x5)
Granted
Granted
Submission
Final Testing
Progress of Uscom devices through the global approval processes
As medical device regulation continues to become more complex and entwined with international trade, and approvals more
difficult to achieve, their value increases. These approvals provide a path to revenue, and our constellation of regulatory
applications currently in process will add revenue and market value to Uscom.
STRATEGY FY 2020
Management’s objective is to pursue our strategy to drive rapid operational growth off the delivery of
multiple products into multiple global markets, as we optimise manufacturing, distribution and sale of our
world leading cardiovascular and pulmonary monitoring technologies and establish enduring profitability
and dividends for shareholders.
Our focus will remain on China, as we grow the marketing and sales collateral, clinical and technical support, and product required
to support our rapidly growing China distribution partners. We are focused on developing some of the remarkable commercial
opportunities offered by our unique connection to the China market.
We have also invested in the European and US markets. We are committed to the ongoing development of these substantial
international markets and anticipate that they too will grow strongly in the coming years.
Manufacturing will be important for us as we prepare to meet the demand that our constellation of approvals and an increasingly
effective global distribution is anticipated to generate. We are preparing to transform from a micro-manufacturer, to a cost
efficient global provider of high quality, practice leading, cardiovascular and pulmonary technologies.
ANNUAL REPORT 2019 | Uscom Limited | Page 7
CHAIRMAN’S LETTER Continued
Operating costs are expected to remain high for the coming period as we finalise global regulatory and marketing for our new
product series, while non-recurring costs should gradually diminish, being replaced by increasing revenue and a transition to
profitability.
The opportunities for Uscom continue to grow. Our strategy in 2019 was to invest in manufacturing and distribution to sustain
growth in 2020. China, Europe and the US have had significant investments in operations, and sales and marketing strategies, as
we transition to systems that have greater capacity and reach.
Uscom sales and revenue have shown long term growth, achievements. However our rapidly transforming fundamentals provide
us with the opportunity to leverage strategic opportunities to position us for the “globalisation” of Uscom. Management are
committed to developing the necessary strategies to optimise capital and shareholder value, and this involves an open minded
review of all aspects of partnership, manufacturing, distribution and capital and corporate structure.
Risks:
Global markets – For Uscom, operating in global markets creates exposure to risk such as international trade wars and volatility,
US Health reform, Brexit, a China slow down, North Korea and the South China Sea. All of these unpredictable events, cited in
2018, remain unresolved, and may evolve at any time to impact our business. However global diversification, while exposing us
to more challenges, it also mitigates us against regional economic, trade and currency risks.
China – China is a major market and investment for Uscom and any significant change in sales, operations and manufacturing
regulations may impact us as we adjust our distribution channels. Uscom has confidence in the scale and accessibility of the China
market as China proceeds with their goal of growing Health GDP spend from 5.8% to 12%.
Distributors – Uscom has substantially revised our sales strategy world-wide as we move to take a more direct role in all our
markets, particularly China where we have high quality people and direct dealer access. We continually monitor our markets
closely to optimise our operations and mitigate unpredicted negative changes.
Regulatory – Regulatory certification is becoming increasingly complex, expensive and time consuming and with increasing
uncertainty in all jurisdictions. Uscom is managing the regulatory submissions for eight products across four continents into
multiple markets, and international trade protectionism is increasingly a consideration for management.
Key personnel – Uscom is dependent on a small and vital team working to ensure and manage ongoing rapid growth.
Implementation of a competitive executive remuneration plan to ensure adequate executive compensation may mitigate the risk
of damaging resignations. The establishment of Uscom China and the expansion of the Budapest operations will also mitigate
these risks.
Other risks – Competitive risks, patent breaches, and scale up stress are potential threats to our growth expectations, and may
challenge cash flow management and equity adequacy, and require the focused attention of management.
ANNUAL REPORT 2019 | Uscom Limited | Page 8
CHAIRMAN’S LETTER Continued
CONCLUSION
Uscom continues to build an international growth asset based on great culture and great brands, and
finished FY 2019 with record revenue, increased sales for all product suites, operational expansion, and
global investment. It was a year in which our continued record sales growth drove fundamentals as we
prepared for our global strategic expansion to accelerate growth into 2020 and beyond.
Nancy Wang, Rob Phillips, Teresa Guo (Director of China Operations), Lebron Wei, Leo Liu and Helen Zhang in
the Beijing Uscom China office demonstrating new Chinese marketing materials.
We continued to grow a global medical device company with a strong clinical and operational footprint across four continents
with a rapidly expanding portfolio of non-invasive cardiovascular and pulmonary medical devices. We have created the
foundations to become a clinical and industry leader.
Thanks to shareholders for their loyalty and patience as we continue to build a better business. Management are committed to
ensuring that the recognition of these achievements occur sooner rather than later.
Kind Regards
Professor Rob Phillips
Uscom Chairman
ANNUAL REPORT 2019 | Uscom Limited | Page 9
ASX ANNOUNCEMENTS FY2019
Below is the list of FY 2019 ASX announcements, a measure of our corporate activities, with those reported to be market
sensitive identified as ($), being 12 of 26 (46%):
1
2
3
4
5
6
7
8
9
03/06/2019 Change in substantial holding
13/05/2019
Becoming a substantial holder
30/04/2019 Appendix 4C – quarterly ($)
25/03/2019 Uscom Granted Type II Medical Device Sales Cert in China ($)
21/03/2019 Change in substantial holding - Meng
28/02/2019 Half Year Accounts ($)
25/02/2019 Clarification related to Unissued Indeterminate Rights
07/02/2019 Uscom Signs SpiroSonic Deal with US eHealth Leader – Koneksa ($)
29/01/2019 Appendix 4C – quarterly ($)
10 14/01/2019 Appendix 3B
11 14/01/2019 Cleansing statement
12 28/11/2018 Uscom Ltd 2018 AGM Presentation ($)
13 28/11/2018
Results of Meeting
14 19/11/2018 Uscom China IP Granted ($)
15 12/11/2018 Uscom China Registered ($)
16 29/10/2018 Appendix 4C – quarterly ($)
17 25/10/2018 Notice of Annual General Meeting/Proxy Form
18 04/10/2018 Appendix 3B
19 31/08/2018 Appendix 4G
20 31/08/2018 Corporate Governance Statement
21 23/08/2018 Director Appointment/Resignation
22 23/08/2018
Initial Director's Interest Notice – Crowley
23 22/08/2018
Preliminary Final Report ($)
24 22/08/2018 Annual Report to shareholders
25 02/08/2018 Uscom releases new hypertension product ($)
26 31/07/2018 Appendix 4C – quarterly ($)
ANNUAL REPORT 2019 | Uscom Limited | Page 10
DIRECTOR’S REPORT
The Directors present their report on Uscom Ltd and its Controlled Entities for the financial year ended 30 June 2019.
Directors
The following persons were Directors of Uscom Ltd during the whole of the financial year and up to the date of this report,
unless otherwise stated.
Associate Professor R A Phillips
Mr C Bernecker
Mr B Crowley
Ms S Jack
Executive Director - Chairman
Non-Executive Director
Non-Executive Director (Appointed on 23 August 2018)
Non-Executive Director (Resigned on 23 August 2018)
Directors’ qualifications and experience
Associate Professor Rob Phillips (Chairman and Executive Director)
Rob Phillips is the founder of Uscom Ltd, the Chief Executive Officer, Executive Director and Chief Scientist of the Company.
Rob has 16 years’ experience as Executive Chairman of the Company, having taken Uscom to IPO in 2003, and has over 20 years
in executive corporate management and capital raising. Rob has overseen the company’s acquisition of two international
medical device companies in 2013 and 2016. Rob has a Doctor of Philosophy and a Master of Philosophy in Cardiovascular
Medicine from The University of Queensland and is an Adjunct Associate Professor with the Critical Care Research Group, at the
School of Medicine, The University of Queensland. He is an Australian Post Graduate Award recipient and was a finalist in the
Time-Google-CNN-Science-NYSE World Health and Medicine Technology Awards in 2004. Rob has pioneered novel clinical
approaches to cardiovascular assessment having authored over 30 patents and patent applications and is an internationally
recognised author, teacher and examiner in the field of cardiac ultrasound, cardiovascular function and circulation.
Mr Christian Bernecker (Non-executive Director)
Mr Christian Bernecker is a Non-Executive Director of Uscom Ltd since November 2011. Christian is Non-Executive Director of
Stream Group Limited and has more than 10 years of broad investment experience across capital raising, acquisitions and
divestments. Christian qualified as a Chartered Accountant in Australia and holds a Bachelor of Commerce from Ballarat
University.
Mr Brett Crowley (Non-executive Director and Company Secretary)
Brett Crowley was appointed as a Non-Executive Director of Uscom Ltd on 23 August 2018. He is a practicing solicitor and a
former Partner of Ernst & Young in Hong Kong and Australia, and of KPMG in Hong Kong, and has worked in China establishing
and managing JV companies there. Mr Crowley is an experienced chairman, finance director and company secretary of ASX-
listed companies, and is a former Senior Legal Member of the NSW Civil and Administrative Tribunal.
Ms Sheena Jack
Ms Sheena Jack is a Non-Executive Director of Uscom Ltd since November 2011 and resigned on 23 August 2018. Sheena is the
CEO of HCF and has over 25 years’ experience as a finance professional and corporate executive. She has had experience
across a range of corporate organisations including ASX listed companies, government and not for profit in both mature and
start-up businesses. Sheena has significant experience in mergers and acquisitions, business integration, strategy development
and implementation, capital markets and organisational transformation. Sheena is a Chartered Accountant and a graduate
member of the Australian Institute of Company Directors.
Company Secretary’s qualifications and experience
Mr Brett Crowley
Brett Crowley is also the Company Secretary since 24 May 2016.
Meetings of Directors
Directors
R A Phillips
C Bernecker
B Crowley
S Jack
Board of Directors
Meetings held while a Director
7
7
5
2
No. of meetings attended
7
7
5
2
ANNUAL REPORT 2019 | Uscom Limited | Page 11
DIRECTOR’S REPORT Continued
Principal activities
Uscom Ltd is engaged in the development, design, manufacture and marketing of premium non-invasive cardiovascular and
pulmonary medical devices. Uscom Ltd owns a portfolio of intellectual property relating to the technology and techniques
associated with these devices and manages a worldwide network of distribution partners for the sale of its equipment to
hospitals and other medical care locations. Uscom Ltd owns 100% of Uscom Inc a company engaged in the sale and promotion
of Uscom products primarily in the United States, and owns 100% of Uscom Kft, a company that manufactures respiratory
devices based in Hungary. Uscom Ltd owns 100% of Beijing Uscom Consulting Co. Ltd, a company that manages and sells
Uscom products in China.
Operating result
The loss of the Consolidated Entity after providing for income tax amounted to $1,389,398 (2018: $1,960,923).
Dividends
No dividends were declared or recommended for the financial year ended 30 June 2019 (2018: nil).
Significant changes in state of affairs
There were no significant changes in state of affairs during the financial year.
Corporate Governance Statement
Refer to the investor page of Uscom Limited’s website www.uscom.com.au/for-investors.
Operating and financial review
The operating and financial review is stated per the Chairman’s letter on pages 2-10.
Events after the reporting date
No matters or circumstances have arisen since the end of the financial year to the date of this report, that has significantly
affected or may significantly affect the activities of the Consolidated Entity, the results of those activities or the state of affairs of
the Consolidated Entity in the ensuing or any subsequent financial year.
Future developments
Other than the business activities described in the annual report and, in particular, those matters discussed in the Operating
and Financial Review, the Board is not aware of any likely developments in the foreseeable future which may materially impact
on the financial outlook of the Consolidated Entity.
Environmental regulations
The Consolidated Entity’s operations are not subject to significant environmental regulation under the law of the
Commonwealth and State.
Indemnifying officers
The Consolidated Entity has paid premiums to insure all Directors and Executives against liabilities for costs and expenses
incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Director of the
Company, other than conduct involving a wilful breach of duty in relation to the Company.
Indemnity of auditors
To the extent permitted by law, the Company has not agreed to indemnify its auditors, BDO East Coast Partnership, as part of
the terms of its audit engagement agreement against claims by third parties arising from the audit [for an unspecified amount].
No payment has been made to indemnify BDO East Coast Partnership during or since the financial year.
Proceedings on behalf of the Consolidated Entity
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
the Consolidated Entity, or to intervene in any proceedings to which the Consolidated Entity is a party, for the purpose of taking
responsibility on behalf of the Consolidated Entity for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Consolidated Entity with leave of the Court under section
237 of the Corporations Act 2001.
ANNUAL REPORT 2019 | Uscom Limited | Page 12
DIRECTOR’S REPORT Continued
Non-audit services
The Consolidated Entity may decide to employ the auditor on assignments additional to their audit duties where the auditor’s
expertise and experience with the Consolidated Entity are important.
The Directors are of the opinion that the provision of non-audit services as disclosed in Note 25 in the financial report does not
compromise the external auditor’s independence as outlined in the Corporations Act 2001 for the following reasons:
• All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor, and
• None of the services undermine the general principles relating to auditor independence as set out in the Code of
•
Conduct APES110 Code of Ethics of Professional Accountants issued by the Accounting.
Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in
management decision making capacity for the Company, acting as advocate for the Company or jointly sharing -
economic risks and rewards.
Refer to Note 25 of the financial statements on page 41 for details of auditors’ remuneration.
The auditor’s independence declaration as required under section 307C of the Corporation Act is set out on page 18 and forms
part of the Directors’ Report.
BDO East Coast Partnership continues in office in accordance with section 327 of the Corporations Act 2001.
Remuneration report (Audited)
This remuneration report has been prepared by the Directors of Uscom Ltd to comply with the Corporations Act 2001 and the
key management personnel (KMP) disclosures required under Australian Accounting Standards AASB 124 – Related Party
Disclosures.
Key management personnel
The following were key management personnel of the Entity at the start of the financial year to the date of this report unless
otherwise stated:
Non-Executive Directors
Christian Bernecker, Non-Executive Director
Brett Crowley, Non-Executive Director (Appointed on 23 August 2018)
Sheena Jack, Non-Executive Director (Resigned on 23 August 2018)
Executive Directors
Rob Phillips, Executive Director, Chairman, Chief Executive Officer
Senior Executives
Nick Schicht, General Manager
In the Directors’ opinion, there are no other Executives of the Entity.
Remuneration policies
The Board is responsible for reviewing the remuneration policies and practices of the Consolidated Entity, including the
compensation arrangements of Executive Directors, Non-Executive Directors and Senior Executives.
The Consolidated Entity has adopted remuneration policies based on performance and contribution for determining the nature
and amount of emoluments of Board Members and Senior Executives. The objective of these policies is to:
• Make Uscom Ltd and its Controlled Entities an employer of choice
• Attract and retain the highest calibre personnel
• Encourage a culture of reward for effort and contribution
• Set incentives that reward short and medium term performance for the Consolidated Entity
• Encourage professional and personal development
In the case of Senior Executives, a recommendation for compensation review will be made by the Chairman to the Board, which
will conduct a performance review.
ANNUAL REPORT 2019 | Uscom Limited | Page 13
DIRECTOR’S REPORT Continued
Non-Executive Directors
The Board determines the Non-Executive Director remuneration by independent market data for comparative Companies.
As at the date of this report the maximum aggregate remuneration payable out of the funds of the Entity to Non-Executive
Directors of the Consolidated Entity for their services as Directors including their service on a committee of Directors is $165,000
per annum.
Non-Executive Directors do not receive any performance related remuneration, therefore they do not receive bonuses or non-
cash benefits.
Non-Executive Directors’ retirement payments are limited to compulsory employer superannuation.
Executive Directors and Senior Executives remuneration
The Consolidated Entity’s remuneration policy directs that the remuneration package appropriately reflects the Executives’
duties and responsibilities and that remuneration levels attract and retain high calibre Executives with the skills necessary to
successfully manage the Consolidated Entity’s operations and achieve its strategic and financial objectives.
The total remuneration packages of Executive Directors and Senior Executives are on a salary basis. In addition to base salary,
the Company has a policy of rewarding extraordinary contribution to the growth of the Company with the grant of an annual
discretionary cash bonus and options under the Consolidated Entity’s Employee Share Option Plan.
Executives are also entitled to be paid for their reasonable travel, accommodation and other expenses incurred in consequence
on the execution of duties.
Other than the Uscom Ltd Employee Share Option Plan, the Consolidated Entity does not provide any other non-cash benefits
in lieu of base salary to Executives.
Remuneration packages for Executive Directors and Senior Executives generally consist of three components:
• Fixed remuneration which is made up of cash salary, salary sacrifice components and superannuation
• Short term incentives
• Long term incentives which include issuing options pursuant to the Uscom Ltd Employee Share Option Plan.
Fixed remuneration
Senior Executives who possess a high level of skill and experience are offered a competitive base salary. The performance of
each Executive will be reviewed annually. Following the review, the Consolidated Entity may in its sole discretion increase the
salary based on that Executive’s performance, productivity and such other matters as the Board considers relevant.
Superannuation contribution by the Consolidated Entity is limited to the statutory level of wages and salaries.
Short-term incentives
The remuneration of Uscom Ltd Senior Executives does not include any short-term incentive bonuses as part of their
employment conditions. The Board may however approve discretionary bonuses to Executives in relation to certain milestones
being achieved.
Long-term incentives
The Consolidated Entity has adopted an Equity Incentive Plan for the benefit of the Executive Director, an employee,
contractor, consultant or any other person whom the Board determines to be eligible to participate in the Plans.
The Board, at its discretion, may approve the issue of options and rights under the Equity Incentive Plan to the Senior
Executives. The vesting of options and rights issued may be conditional upon the achievement of performance hurdles
determined by the Board from time to time. The Board may propose the issue of options and rights to Directors, however this
will be subject to shareholder approval at the Annual General Meeting.
Independent data from applicable sources may be requested by the Board to assess whether the performance hurdles have
been met.
Service agreements
The Consolidated Entity has entered into an employment agreement with the Executives that
• Outlines the components of remuneration payable; and
• Specifies termination conditions.
Details of the employment agreement are as follows:
ANNUAL REPORT 2019 | Uscom Limited | Page 14
DIRECTOR’S REPORT Continued
Each Executive may not, during the term of the employment agreement, perform work for any other person, corporation or
business without the prior written consent of the Consolidated Entity.
The employment terms do not prescribe the duration of employment for executives.
Due to the small number of Executives the remuneration committee comprises the Board of Directors which is made up of two
Non-Executive Directors. Reference is made to external market information in order to retain the most suitable Executives for
meeting the entity’s goals. Executive Directors are excluded from discussions on their remuneration. The remuneration of key
Executives are not linked with the Consolidated Entity’s performance as the focus is on retention of key Executives to ensure
growth and traction in what is a new market. The Board of Directors will consider linking executive remuneration to the
Consolidated Entity’s performance once the Consolidated Entity has sufficient market traction.
Termination
Despite anything to the contrary in the agreement, the Consolidated Entity or the Executive may terminate the employment at
any time by giving the other party 3 months’ notice in writing.
If either the Consolidated Entity or the Executive gives notice of termination, the Consolidated Entity may, at its discretion,
choose to terminate the Executive’s employment immediately or at any time during the notice period and pay the Executive an
amount equal to the salary due to them for the residual period of notice at the time of termination.
Where the Executive gives less than 3 months’ written notice, the Consolidated Entity may withhold from the Executive’s final
payment an amount equal to the shortfall in the notice period.
The employment of each Executive may be terminated immediately without notice or payment in lieu in the event of any serious
or persistent breach of the agreement, any serious misconduct or wilful neglect of duties, in the event of bankruptcy or any
arrangement or compensation being made with creditors, on conviction of a criminal offence, permanent incapacity of the
Executive or a consistent failure to carry out duties in a manner satisfactory to the Consolidated Entity.
Key management personnel remuneration
Remuneration includes salaries, benefits and superannuation contributions in respect of the financial year 2019.
Short term benefits
Post-employment
benefits
Base salary
Superannuation
Non-Executive Director
S Jack
C Bernecker
B Crowley
Executive Director
R Phillips
Senior Executive
N Schicht
Total
Directors’ Base
Fee
$
5,081
38,325
15,950
$
-
-
-
-
239,887
-
59,356
189,000
428,887
Equity
Share-based
payment
$
-
-
-
-
11,289
11,289
Total
remuneration
Performance
related
$
5,564
38,325
15,950
250,765
218,244
528,848
%
-
-
-
-
5%
2%
$
483
-
-
10,878
17,955
29,316
Remuneration includes salaries, benefits and superannuation contributions in respect of the financial year 2018.
Short term benefits
Post-employment
benefits
Directors’ Base
Fee
$
35,000
38,325
-
Base salary
Superannuation
$
-
-
-
$
3,325
-
-
Equity
Share-based
payment
$
-
-
19,163
$
38,325
38,325
19,163
Total
remuneration
Performance
related
-
229,000
21,755
85,862
336,617
-
73,325
200,000
429,000
19,000
44,080
29,811
134,836
248,811
681,241
%
-
-
-
26%
12%
20%
Non-Executive Director
S Jack
C Bernecker
C X He
Executive Director
R Phillips
Senior Executive
N Schicht
Total
ANNUAL REPORT 2019 | Uscom Limited | Page 15
DIRECTOR’S REPORT Continued
Equity Incentive Plan
The Consolidated Entity has adopted an Equity Incentive Plan for the benefit of an employee, contractor, consultant or
executive director of the Group or any other person whom the Board determines to be eligible to participate in the Plans.
The purpose of the Plan is to:
•
•
•
•
provide Eligible Persons with an incentive plan which recognises ongoing contribution to the achievement by the
Company of its strategic goals thereby encouraging the mutual interdependence of Participants and the Company;
align the interests of Participants with shareholders of the Company through the sharing of a personal interest in the
future growth and development of the Company as represented in the price of the Company’s ordinary fully paid
shares;
encourage Eligible Persons to improve the performance of the Company and its total return to Shareholders; and
provide a means of attracting and retaining skilled and experienced employees.
Under the Plan, the Consolidated Entity will be able to grant short-term incentive and long-term incentive awards to Eligible
Employees (including Executive Directors). The Plan will provide the Board with the flexibility to grant equity incentives to
Eligible Persons in the form of Plan Shares, rights or Options, will only vest on the satisfaction of appropriate hurdles.
Number of rights over ordinary shares held by Directors and Senior Executives
Balance
Granted
Exercised
1 July 2018
No.
During
FY2019
No.
During
FY2019
No.
Lapsed /
Cancelled
During
FY2018
No.
Balance
Total
vested
Total
unexercisable
30 June 2019
30 June 2019
30 June 2019
No.
No.
No.
Non-Executive Director
S Jack
C Bernecker
C X He
Executive Director
R Phillips
Senior Executive
N Schicht
Total
-
-
-
-
-
1,190,476
450,000
450,000
-
1,190,476
Further details of the options are disclosed in Note 18 of the financial statements.
Details of rights outstanding as at end of year
-
-
-
-
-
-
-
-
-
-
-
-
1,190,476
450,000
1,640,476
-
-
-
-
-
-
-
1,190,476
450,000
1,640,476
Holders No.
Grant date
1 (Director)
1 (Executive)
Total
28 November 2018
26 November 2014
Exercisable
at 30 June
2019
%
0%
0%
Expiry date
1 July 2021
1 July 2020
30 June 2019
Outstanding
Right
Exercise
Price
No.
1,190,476
450,000
1,640,476
$
0.00
0.00
Issued
date fair
value
$
0.21
0.19
1,190,476 Indeterminate rights were issued to Rob Phillips on the terms and conditions approved by shareholders at the AGM
on 28 November 2018 under the Equity Incentive Plan, vesting dependent on performance hurdles on 1 July 2021.
Consideration payable upon vesting is $nil. The Board may exercise its discretion to pay cash in lieu of issue of ordinary shares.
450,000 Performance Rights were issued to Nick Schicht on 26 November 2014, vesting is dependent on performance hurdles
on 1 July 2018, 1 July 2019 and 1 July 2020. Consideration payable upon vesting is $nil.
ANNUAL REPORT 2019 | Uscom Limited | Page 16
DIRECTOR’S REPORT Continued
Number ordinary shares held by Directors and Senior Executives
Balance
1 July 2018
Received as
Remuneration
Options/Rights
Exercised
No.
No.
No.
Non-Executive Director
S Jack
C Bernecker
C X He
Executive Director
R Phillips
Senior Executive
N Schicht
Total
800,000
-
-
23,496,158
318,200
24,614,358
-
-
-
-
-
-
-
-
-
-
-
-
Purchased on
market
-
-
-
Balance
30 June 2019
No.
800,000(1)
-
-
5,000
23,501,158(2)
-
5,000
318,200(3)
24,619,358
*Net change other refers to share purchased or sold during the financial year, or cessation of categorisation as a Director or Senior Executive.
(1) All these ordinary shares are held by a family associate.
(2) 11,362,161 of these ordinary shares are held by Australian Cardiac Sonography Pty Ltd as trustee for the Phillips Superannuation fund.
(3) 10,000 of these ordinary shares are held by a family associate.
Additional Information
The earnings of the consolidated entity for the five years to 30 June 2019 are summarised below:
2019
2018
2017
2016
2015
$
$
$
$
Sales Revenue
2,844,138
2,168,051
2,723,359
2,482,925
1,515,381
Loss after income tax
(1,389,398)
(1,960,923)
(1,800,849)
(1,915,029)
(1,215,654)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
2019
2018
2017
2016
2015
Share Price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings declared (cents per share)
0.14
(1.0)
0.17
-
(1.6)
0.19
-
(1.6)
0.25
-
(2.0)
0.19
-
(1.5)
No shares, options or rights were issued or excised by directors or senior executives during the reporting period.
This concludes the remuneration report, which has been audited.
This Directors’ report is signed in accordance with a resolution of the Board of Directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
Associate Professor Rob Phillips
Executive Director - Chairman
Sydney, 19 August 2019
ANNUAL REPORT 2019 | Uscom Limited | Page 17
AUDITOR’S INDEPENDENCE DECLARATION
Tel: +61 2 9251 4100
Fax: +61 2 9240 9821
www.bdo.com.au
Level 11, 1 Margaret St
Sydney NSW 2000
Australia
DECLARATION OF INDEPENDENCE BY GARETH FEW TO THE DIRECTORS OF USCOM LIMITED
As lead auditor of Uscom Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge
and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Uscom Limited and the entities it controlled during the year.
Gareth Few
Partner
BDO East Coast Partnership
Sydney, 19 August 2019
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110
275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by
guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation,
other than for the acts or omissions of financial services licensees.
ANNUAL REPORT 2019 | Uscom Limited | Page 18
STATEMENT OF PROFIT OR LOSS & OTHER
COMPREHENSIVE INCOME FOR YEAR ENDED 30 JUNE
Continuing operations
Revenue and other income
Raw materials and consumables used
Expenses from continuing activities
Loss before income tax from continuing operations
Income tax
Loss after income tax from continuing operations
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation difference for foreign operations, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Attributable to:
Owners of the Company
Total comprehensive loss for the year
Earnings per share from continuing operations attributable to the owners
of the Company
Earnings per share (EPS)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Consolidated
2019
$
2018
$
Note
3
4
5
6
7
7
3,641,958
(687,249)
2,861,708
(605,348)
(4,335,647)
(4,212,655)
(1,380,938)
(1,956,295)
(8,460)
(4,628)
(1,389,398)
(1,960,923)
(24,925)
(24,925)
154
154
(1,414,323)
(1,960,769)
(1,414,323)
(1,960,769)
(1,414,323)
(1,960,769)
(1.0)
(1.0)
(1.6)
(1.6)
This Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the attached Notes.
ANNUAL REPORT 2019 | Uscom Limited | Page 19
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Tax asset
Other assets
Total current assets
Non-current assets
Bank guarantee
Plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current provisions
Total current liabilities
Non-current liabilities
Non-current provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Options and rights reserve
Accumulated losses
Foreign currency translation reserve
Total equity
Consolidated
2019
$
2018
$
Note
8
9
10
11
12
13
14
15
16
16
17
18
6
19
1,208,496
583,306
511,334
462,997
108,639
2,874,772
83,456
223,387
957,329
1,264,172
2,493,575
249,289
494,809
498,060
163,138
3,898,871
83,457
238,456
1,154,732
1,476,645
4,138,944
5,375,516
437,159
175,827
612,986
38,002
38,002
275,023
215,687
490,710
40,048
40,048
650,988
530,758
3,487,956
4,844,758
33,300,933
2,824,660
(32,684,790)
47,153
33,254,701
2,813,371
(31,295,392)
72,078
3,487,956
4,844,758
This Statement of Financial Position is to be read in conjunction with the attached Notes.
ANNUAL REPORT 2019 | Uscom Limited | Page 20
STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2019
Issued
Capital
Options and
rights
Reserve
Accumulated
Losses
Foreign Currency
Translation
Reserve
Total
Consolidated
$
$
$
$
$
Balance at 30 June 2017
30,332,259
2,708,298
(29,334,469)
71,924
3,778,012
Loss for the year
Other comprehensive income
Total Comprehensive Income
for the year
Transactions with Owners in
their capacity as owners:
-
-
-
Shares issued (Note 17)
3,088,625
Transaction costs on shares
issued (Note 17)
Share-based payments (Note
18)
(166,183)
-
105,073
-
-
-
-
-
(1,960,923)
-
(1,960,923)
-
(1,960,923)
154
154
154
(1,960,769)
-
-
-
-
-
-
3,088,625
(166,183)
105,073
Balance at 30 June 2018
33,254,701
2,813,371
(31,295,392)
72,078
4,844,758
Loss for the year
Other comprehensive income
Total Comprehensive Income
for the year
Transactions with Owners in
their capacity as owners:
Shares issued (Note 17)
Transaction costs on shares
issued (Note 17)
Share-based payments (Note
18)
-
-
-
50,000
(3,768)
-
-
-
-
-
-
11,289
(1,389,398)
-
(1,389,398)
-
(24,925)
(24,925)
(1,389,398)
(24,925)
(1,414,323)
-
-
-
-
-
-
50,000
(3,768)
11,289
Balance at 30 June 2019
33,300,933
2,824,660
(32,684,790)
47,153
3,487,956
This Statement of Changes in Equity is to be read in conjunction with the attached Notes.
ANNUAL REPORT 2019 | Uscom Limited | Page 21
STATEMENT OF CASH FLOWS FOR YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Interest received
Interest expense
Payments to suppliers and employees (inclusive of GST)
Grant and other income received
Consolidated
2019
$
2018
$
Note
2,530,918
42,895
-
2,118,093
8,743
(3,406)
(4,605,496)
(4,449,907)
812,203
629,852
Net cash used in operating activities
20(b)
(1,219,480)
(1,696,625)
Cash flows from investing activities
Purchase of patents and trademarks
Purchase of plant and equipment
Term deposit
Acquisition of Thor Laboratories
(43,298)
(68,533)
-
-
(65,025)
(171,838)
(41,888)
(60,000)
Net cash used in investing activities
(111,831)
(338,751)
Cash flows from financing activities
Issue of shares (net of share issue cost)
17
46,232
2,864,616
Net cash provided by financing activities
46,232
2,864,616
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the year
Exchange rate adjustment for opening balance
(1,285,079)
2,493,575
-
829,240
1,663,565
770
Cash and cash equivalents at the end of the year
20 (a)
1,208,496
2,493,575
This Statement of Cash Flows is to be read in conjunction with the attached Notes.
ANNUAL REPORT 2019 | Uscom Limited | Page 22
NOTES TO FINANCIAL STATEMENTS
Note 1: Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. The financial report
covers the Consolidated Entity of Uscom Ltd and its Controlled Entities. Uscom Ltd is a listed public company, incorporated
and domiciled in Australia.
The following is a summary of the material accounting policies adopted by the consolidated Group in the preparation of the
financial report. The accounting policies have been consistently applied to all years presented, unless otherwise stated.
Basis of preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standard Board [“AASB’] and the Corporations Act 2001, as
appropriate for-profit oriented entities.
(i) Statement of Compliance
These financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board [“IASB”].
(ii) Historical cost convention
The financial report has been prepared on an accrual basis under the historical cost convention.
The financial report is presented in Australian dollars, which is the Parent Company’s functional and presentational currency.
The financial statements have been approved and authorised for issue by the Board of Directors on the 19th August 2019.
Going concern
The consolidated entity incurred an operating cash outflow of $1,219,480 during the year ended 30 June 2019 (2018:
$1,696,625). The total comprehensive loss for the year ended 30 June 2019 was $1,414,323 (2018: $1,960,769) and the cash on
hand as at 30 June 2019 was $1,208,496.
These conditions indicate the existence of a material uncertainty which may cast significant doubt over the consolidated entity’s
ability to continue as a going concern.
The consolidated entity’s forecasts and projections for the next twelve months take into account the current status, operational
changes and projected future trading performance, and indicate that, in the directors’ opinion, the consolidated entity will be
able to operate as a going concern.
The timing and sales volumes may vary from those forecast by management as the timing of the regulatory approvals from the
US and China is unpredictable. As such the timing of operating cash flows may differ to those forecast by management. Should
the timing of operating cash flow be significantly different to those forecast the consolidated entity may need to seek
alternative financing to enable it to settle its labilities as they fall due.
The Directors have historically been successful in obtaining financing through equity raises and are actively managing the
expenditure of the company to ensure that cash is maintained whilst executing the strategy and are confident that should the
need arise further funding can be raised through either debt or equity.
Should the company be unable to continue as a going concern it may be required to realise its assets and discharge its
liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The
financial statements do not include any adjustments relating to the recoverability and classification of assets carrying amount or
the amount of liabilities that might result should the company be unable to continue as a going concern and meet its debts as
and when they fall due.
Significant judgment and key assumptions
The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best
available current information. Estimates assume a reasonable expectation of future events and are based on current trends and
economic data, obtained both externally and within the company. Information on material estimates and judgements used in
applying the accounting policies can be found in Note 14 - Carrying value of intangible.
ANNUAL REPORT 2019 | Uscom Limited | Page 23
NOTES TO FINANCIAL STATEMENTS Continued
Note 1: Summary of significant accounting policies (continued)
Principles of consolidation
A Controlled Entity is any entity Uscom Ltd has the power to control the financial and operating policies of so as to obtain
benefits from its activities.
A list of Controlled Entities is contained in Note 22 to the financial statements. All Controlled Entities have a June financial year-
end.
All inter-company balances and transactions between Entities in the Consolidated Group, including any unrealised profits or
losses, have been eliminated on consolidation. Accounting policies of Subsidiaries have been changed where necessary to
ensure consistencies with those polices applied by the Parent Entity.
On consolidation, the assets and liabilities of the Consolidated Entity’s overseas operations are translated at exchange rates
prevailing at the reporting dates. Income and expense items are translated at the average exchange rates for the period unless
exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised in the foreign currency translation
reserve, and are recognised in statement of profit or loss and other comprehensive income on disposal of the foreign
operation.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the
asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive
of GST.
Note 2: New accounting standards and interpretations
The Group has adopted AASB 15 Revenue from Contracts with Customers and AASB 9 Financial Instruments from 1 July 2018.
A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2018. Whilst
earlier application is permitted, the Group has not early adopted the following new or amended standards in preparing these
consolidated financial statements. A discussion of those future requirements and their impact on the Group is as follows:
AASB 9: Financial Instruments
Mandatory date of application: 1st July 2018
The Standard replaces AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 includes revised guidance on
the classification and measurement of financial instruments, including a new expected credit loss model for calculation of
impairment on financial assets and new general hedge accounting requirements. It also carried forward guidance on
recognition and derecognition of financial instruments from AASB139.
Assessment of Impact
The Group has assessed the new standard and based on its financial assets and liabilities, the key impact of the standard on the
Group will be in relation to trade debtors and the assessment of the provision for doubtful debts under the expected credit loss
model.
The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit
losses at each reporting date to reflect changes. The Group has adopted a simplified approach for trade receivables on the
initial transition date (1 July 2018) and as there hasn’t been a significant increase in credit risk since initial recognition of these
assets an amount equal to 12-month ECL is to be recognised. As the ECL assessment has resulted in an immaterial credit loss
no impairment allowance has been recognised by the Group.
AASB 15: Revenue from Contracts with Customers
Mandatory date of application: 1st July 2018
AASB 15 establishes a single comprehensive five-step model for entities to use in accounting for revenue arising from contracts
with customers. AASB 15 will supersede the current revenue recognition guidance including AASB 118 Revenue, AASB 111
Construction Contracts and the related interpretations when it becomes effective.
ANNUAL REPORT 2019 | Uscom Limited | Page 24
NOTES TO FINANCIAL STATEMENTS Continued
Note 2: New accounting standards and interpretations (continued)
Assessment of Impact
The Group has adopted AASB 15 using the cumulative effect method (by recognising the cumulative effect of initially applying
AASB 15 as an adjustment to the opening balance of equity at 1 July 2018). The transition exercise on adopting AASB 15 did
not result in an adjustment to the opening balance of equity at 1 July 2018 due to the major component of the Group’s revenue
encompassing revenue arising from the sale of goods. Revenue for these activities are recognised when the customers obtain
control of these assets at the time of delivery of the goods. As this reflects the underlying performance obligation under AASB
15, the application of AASB 15 has not had a material impact on the Group’s financial statements. Comparative information has
not been restated and continues to be reported under AASB 118.
AASB 16: Leases
Mandatory date of application: 1st July 2019
AASB 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both
lessors and lessees. AASB16 will supersede the current lease guidance including AASB 117 Leases and the related
interpretations when it becomes effective.
AASB 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer.
Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting,
and are replaced by a mode where a right-of-use asset and a corresponding liability have to be recognised for all leases by
lessees (i.e. all on balance sheet) except for short-term leases and leases of low value assets.
Assessment of Impact
As at 30 June 2019, the Group has non-cancellable operating lease commitments of $830,485 (Note 24). The Group is in the
process of completing an assessment of the impact of adoption of AASB 16 on these commitments.
The full financial impact of adopting AASB 16 has not yet been determined, however the following impacts are expected on
implementation date:
Finance costs will increase due to the impact of the interest component of the lease liability.
• A material right-of-use asset and a lease liability will be recognised on the Balance Sheet.
•
• Depreciation expense will increase due to depreciation of the right-of-use asset over the lease term.
•
•
Lease rental operating expenses will reduce to nil.
In the Cash Flow Statement, operating cash outflows will decrease and financing cash outflows will increase as
repayment of the principal balance in the lease liability will be classified as a financing activity.
Note 3: Revenue and other income
Operating revenue
Sale of goods
Other revenue
Interest received
Other income
Grants – R&D tax incentive
Grants – EU research grant
Grants – Business growth grant
Foreign exchange gain
Sundry income
Total other income
Consolidated
2019
$
2018
$
2,844,138
2,168,051
20,539
31,100
421,000
295,499
9,000
46,443
5,339
777,281
489,126
148,969
3,850
15,500
5,112
662,557
Total revenues and other income from continuing operations
3,641,958
2,861,708
ANNUAL REPORT 2019 | Uscom Limited | Page 25
NOTES TO FINANCIAL STATEMENTS Continued
Note 3: Revenue and other income (continued)
Recognition and Measurement
Revenue is measured at the fair value of the consideration received or receivable. Amounts are disclosed as revenue net of
returns, discounts, allowances and goods and services tax (GST).
• Sale of goods
Revenue from the sale of goods is recognised at which time control of the asset passes to the customer. (i.e. goods
delivered to the customers)
• Revenue from rendering of services
Rendering of services consists of training, repair and product maintenance supplied to customers. Revenue is recognised
when contractual obligations are expired and services are provided.
•
Interest revenue
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial
assets.
• Government grants
Government grants revenue is recognised at fair value when there is reasonable assurance that the grant will be received
and the grant conditions will be met.
Note 4: Expenses from continuing activities
Depreciation and amortisation expenses
Employee benefits expense
Research and development expenses
Advertising and marketing expenses
Occupancy expenses
Auditors remuneration (audit and review)
Regulatory expenses
Administrative expenses
Finance costs
Total expenses from continuing activities, excluding finance costs
Consolidated
2019
$
2018
$
334,672
1,440,409
759,565
852,015
209,562
79,991
182,231
475,746
1,456
4,335,647
304,303
1,711,313
845,436
519,658
197,445
65,522
105,066
459,002
4,910
4,212,655
Employee Benefits Expenses
Employer contributions to defined contribution superannuation plans are recognised as an expense in the profit or loss as they
are paid or payable. Refer to Note 16 for details on provisions for employee benefits. Share based expenses of $46,232 in 2019
(2018: $142,898) are included in employee benefits expenses above.
Research and development expenses
Research & development costs are charged to the statement of profit or loss and other comprehensive income as incurred, or
deferred where it is probable that sufficient future benefits will be derived so as to recover those deferred costs.
Lease
Operating lease payments, where the lessors effectively retain substantially all the risks and benefits of ownership of the lease
items, are included in the determination of profit or loss in equal instalments over the period of the lease. Lease incentives
received are recognised as an integral part of the total lease payments made and are spread on a basis representative of the
pattern of benefits expected to be derived from the leased asset. Lease expenses of $226,445 in 2019 (2018: $197,445) are
included in occupancy expenses above. The lease commitment disclosed in Note 24.
ANNUAL REPORT 2019 | Uscom Limited | Page 26
NOTES TO FINANCIAL STATEMENTS Continued
Note 5: Income tax
Major components of income tax
Current income tax
Income tax
Reconciliation between income tax credit and prima facie tax on accounting loss
Accounting loss before income tax
Tax benefit at 27.5% in Australia, 15% in USA, 12% in Hungary, 25% in China (2018: 27.5%
in Australia, 15% in USA, 12% in Hungary)
Tax effect on non-taxable income and non-deductible expenses
Temporary differences
Deferred tax asset not brought to account
Income tax
Consolidated
2019
$
2018
$
(8,460)
(8,460)
(4,628)
(4,628)
1,380,938
1,956,295
238,407
(159,877)
(7,470)
(79,520)
(8,460)
462,679
(208,320)
(12,589)
(246,398)
(4,628)
As at 30 June 2019, the Consolidated Entity had estimated unrecouped operating income tax losses of $20,224,587 (2018:
$20,012,191). The benefit of these losses of $5,393,850 (2018: $5,329,094) has not been brought to account as it is not probable
that the Consolidated Entity will have sufficient future gains available against which the deferred tax asset could be utilised.
Note 6: Accumulated losses
Accumulated losses at the beginning of the financial year
Net loss attributable to members of the Entity
Accumulated losses at the end of the financial year
Note 7: Earnings per share
Loss after tax used in calculation of basic and diluted EPS
Weighted average number of ordinary shares during the year used in calculation of basic
EPS
Weighted average number of options outstanding
Weighted average number of rights outstanding
Weighted average number of ordinary shares outstanding during the year used in
calculation of diluted EPS
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
(31,295,392)
(1,389,398)
(29,334,469)
(1,960,923)
(32,684,790)
(31,295,392)
(1,389,398)
(1,960,923)
Number
Number
137,483,354
125,569,613
-
-
-
-
137,483,354
125,569,613
(1.0)
(1.0)
(1.6)
(1.6)
The options and rights in existence have an anti-dilutive effect on EPS, therefore there is no difference between basic earnings
per share and diluted earnings per share as shown above.
Note 8: Cash and cash equivalents
Cash on hand
Bank: Cheque accounts
Bank: Cash management
Bank: Term deposits
Total cash and cash equivalents
118
1,138,270
55,016
15,092
1,208,496
1,569
479,906
28,551
1,983,549
2,493,575
Cash and cash equivalents comprise cash on hand and at call deposits with banks or financial institutions.
ANNUAL REPORT 2019 | Uscom Limited | Page 27
NOTES TO FINANCIAL STATEMENTS Continued
Note 9: Trade and other receivables
Current
Trade receivables
Total current receivables
Consolidated
2019
$
2018
$
583,306
583,306
249,289
249,289
Trade receivables are non-interest bearing and on an average of 45 day terms. Details of trade receivables past due but not
impaired are disclosed in Note 21.
Trade receivables and other receivables represent the principal amounts due at reporting date plus accrued interest and less,
where applicable, any unearned income and provision for doubtful accounts. An estimated doubtful debt is made when
collection of the full amount is no longer probable.
Collectability of trade receivables is reviewed on an ongoing basis in accordance with the expected credit loss (“ECL”) model.
The ECL assessment completed by the Group as at 30 June 2019 has resulted in an immaterial credit loss and no impairment
allowance has been recognised by the Group (2018: $Nil).
Note 10: Inventories
Current inventories at cost
Raw materials
Work in Progress
Finished products
Total inventories
441,490
696
69,148
511,334
262,016
128,406
104,387
494,809
Inventories are measured at the lower of cost or net realisable value. Costs are assigned on the basis of weighted average costs.
Cost comprises all costs of purchase and conversion and an appropriate proportion of fixed and variable overheads, net of
settlement discounts. Overheads are applied on the basis of normal operative capacity. The costs are recognised when
materials are delivered to the Consolidated Entity.
Note 11: Tax asset
Income tax credit
R & D tax incentive
Total tax asset
41,997
421,000
462,997
8,934
489,126
498,060
Income tax
Income taxes are accounted for using the Balance Sheet liability method whereby:
• The tax consequences of recovering (settling) all assets (liabilities) are reflected in the financial statements;
• Current and deferred tax is recognised as income or expenses except to the extent that the tax relates to equity items or to
a business combination;
• A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available to realise the
asset;
• Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realised or the liability settled.
The charge for current income tax expense/credit is based on the profit or loss for the year adjusted for any non- assessable or
disallowed items. It is credited using tax rates that have been enacted or are substantively enacted by the reporting date.
Deferred tax is accounted for using the Balance Sheet liability method in respect of temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is
settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to
equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which
deductible temporary differences can be utilised.
ANNUAL REPORT 2019 | Uscom Limited | Page 28
NOTES TO FINANCIAL STATEMENTS Continued
Note 11: Tax asset (continued)
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse
change will occur in income taxation legislation and the anticipation that the Consolidated Entity will derive sufficient future
assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
R & D tax incentive
Where the Consolidated Entity is entitled to a research and development tax offset, this is treated as other income in the period
to which the entitlement relates.
Note 12: Other assets
Current
Accrued income
GST/VAT receivable
Prepayments
Total other current assets
Note 13: Plant and equipment
Plant and equipment at cost
Accumulated depreciation – including foreign exchange impact
Office furniture and equipment at cost
Accumulated depreciation – including foreign exchange impact
Computer software at cost
Accumulated depreciation – including foreign exchange impact
Low value asset pool at cost
Accumulated depreciation – including foreign exchange impact
Consolidated
2019
$
2018
$
-
39,420
69,219
108,639
22,356
63,090
77,692
163,138
734,700
(641,463)
93,237
701,628
(609,149)
92,479
179,306
(60,516)
118,790
44,012
(33,447)
10,565
59,687
(58,892)
795
174,005
(32,002)
142,003
33,535
(30,059)
3,476
50,314
(49,816)
498
Total plant and equipment
223,387
238,456
Movements in carrying amounts
Plant and
equipment
Office furniture
and equipment
Computer
software
Low value
asset pool
TOTAL
Useful life
Consolidated Entity
Carrying amount at 1 July 2018
Additions
Disposals
Depreciation expense
2-7 years
$
2-7 years
$
92,479
33,764
543
(33,549)
142,003
13,471
55
(36,739)
Carrying amount at 30 June 2019
93,237
118,790
3 years
$
3,476
10,015
269
(3,195)
10,565
3 years
$
498
22,461
(1)
(22,163)
238,456
79,711
866
(95,646)
795
223,387
ANNUAL REPORT 2019 | Uscom Limited | Page 29
NOTES TO FINANCIAL STATEMENTS Continued
Note 13: Plant and equipment (continued)
Property, plant and equipment are included at cost. Assets in plant and equipment are depreciated on diminishing value basis
over their estimated useful lives covering a period of two to seven years.
On disposal of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount
of the asset is recognised as a gain or loss in the statement of profit or loss and other comprehensive income.
The depreciation rates used for each class of depreciable assets are:
Class Of Fixed Asset
- Plant & Equipment
- Office Furniture & Equipment
- Computer Software
- Low Value Pool
Depreciation Rate
10% - 40%
15%
40%
37.5%
Note 14: Intangible assets
Non-current
Patents at cost
Accumulated amortisation and impairment
Carrying amount at 30 June
Regulatory approvals -acquisitions through business combinations
Accumulated amortisation
Carrying amount at 30 June
Total intangible assets
Movements in carrying amounts
Patents carrying amount at 1 July
Additions
Impairment
Amortisation
Patents carrying amount at 30 June
Regulatory approvals -acquisitions through business combinations
Additions
Impairment
Amortisation
Regulatory approvals carrying amount at 30 June
Consolidated
2019
$
2018
$
1,952,334
(1,142,175)
810,159
630,730
(483,560)
147,170
957,329
881,416
41,623
-
(112,880)
810,159
273,316
-
-
(126,146)
147,170
1,910,711
(1,029,295)
881,416
630,730
(357,414)
273,316
1,154,732
936,786
65,025
-
(120,395)
881,416
399,462
-
-
(126,146)
273,316
Recognition and Measurement
Intangibles are carried at cost less accumulated amortisation and impairment losses where applicable. Intangible assets
acquired separately are capitalised at cost or if arising from a business combination at fair value as at the date of acquisition.
Intangible Assets comprise Intellectual Property in the form of Patents and Regulatory approvals (FDA and CE). Patents and
Regulatory approvals have finite useful lives. The current amortisation charge in respect of Patents and Regulatory approvals is
included under Expenses from Continuing Activities in the Statement of Profit or Loss and Other Comprehensive Income.
Patents and Trademarks are valued in the financial statements at cost of acquisition less accumulated amortisation and are
amortised on diminishing value basis at 12.5% per annum.
Impairment of assets
At each reporting date, the Consolidated Entity reviews the carrying values of its tangible and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the
asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any
excess of the asset’s carrying value over its recoverable amount is expensed to the statement of profit or loss and other
comprehensive income. In assessing value in use, the estimated future cash flows discounted to their present value using a pre-
tax discount rate.
ANNUAL REPORT 2019 | Uscom Limited | Page 30
NOTES TO FINANCIAL STATEMENTS Continued
Note 15: Trade and other payables
Current
Trade payables
Sundry payables and accrued expenses
Employee related payables
Total payables
Consolidated
2019
$
2018
$
282,259
123,863
31,037
437,159
132,542
95,330
47,151
275,023
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received
by the Group during the reporting period which remains unpaid. The balance is recognised as a current liability with the amount
being normally paid within 30 days of recognition of the liability.
The carrying amounts of the Group’s trade and other payables are denominated in Australian Dollars. For an analysis of the
financial risks associated with trade and other payable refer to Note 21.
Note 16: Provisions
Current
Provision for annual leave
Provision for long service leave
Non-current
Provision for long service leave
Provision for warranties
Provision for make good
(a) Aggregate employee benefits
(b) Movement in employee benefits
Balance at beginning of the year
Additional provision
Amounts used
Balance at end of the year
(c) Movement in warranties
Balance at beginning of the year
Additional provision
Amounts used
Balance at end of the year
(d) Movement in make good
Balance at beginning of the year
Additional provision
Amounts used
Balance at end of the year
138,356
37,471
175,827
9,584
12,700
15,718
38,002
185,411
227,551
146,866
(189,006)
185,411
14,150
(129)
(1,321)
12,700
14,034
1,684
-
15,718
172,779
42,908
215,687
11,864
14,150
14,034
40,048
227,551
246,082
153,969
(172,500)
227,551
15,800
90
(1,740)
14,150
12,530
1,504
-
14,034
Short term employee benefits
Short term employee benefits are employee benefits (other than termination benefits and equity compensation benefits) which
fall due wholly within 12 months after the end of the period in which employee services are rendered. They comprise wages,
salaries, social security obligations, short-term compensation absences, profit sharing and bonuses payables within 12 months
and non-mandatory benefits such as medical care, housing, car and service goods.
The provision for employee entitlements to wages, salaries and annual leave represents the amount that the Consolidated
Entity has a present obligation to pay resulting from employee services provided up to reporting date. The provision has been
calculated after taking into consideration estimated future increases in wages and salaries and past experience regarding staff
departures and includes related on-costs.
The undiscounted amount of short-term benefits expected to be paid is recognised as an expense.
ANNUAL REPORT 2019 | Uscom Limited | Page 31
NOTES TO FINANCIAL STATEMENTS Continued
Note 16: Provisions (continued)
Long term employee benefits
Long term employee benefits include long-service leave, long-term disability benefits, deferred compensation and profit
sharing and bonuses payable 12 months or more after the end of the period in which employee services are rendered.
Warranties
Provision is made in respect of the Consolidated Entity’s estimated liability on all products and services under warranty at
reporting date. The provision is measured at 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 the Consolidated Entity’s history of warranty
claims.
Lease Make Good
A provision for lease make good is recognised in relation to the properties held under operating lease. The Group recognises
the provision for property leases which contain specific clauses to restore the property to a specific condition. The provision at
balance date represents management’s best estimate of the present value of the future make good costs required.
Note 17: Issued capital
Issued capital
Fully paid ordinary shares
Total contributed equity
Movement in issued capital
Shares on issue at the beginning of the year
250,000 ordinary shares issued at nil cost on 5 July 2017
100,000 ordinary shares issued at 16.5 cents on 6 September 2017
165,000 ordinary shares issued at 16.5 cents on 6 September 2017
52,000 ordinary shares issued at 20 cents on 7 December 2017
153,300 ordinary shares issued at 25 cents on 7 December 2017
1,500,000 ordinary shares issued at nil cost on 7 December 2017
22,044,998 ordinary shares issued at 13.5 cents on 21 December 2017
636,364 ordinary shares issued at nil cost on 8 January 2018
121,212 ordinary shares issued at 16.5 cents on 8 June 2018
142,857 ordinary shares issued at 14 cents on 4 October 2018
30,303 ordinary shares issued at 16.5 cents on 4 October 2018
166,667 ordinary shares issued at 12 cents on 14 January 2019
41,667 ordinary shares issued at 12 cents on 14 January 2019
Share issue costs
Issued Equity at the end of the year
Fully paid ordinary shares
Ordinary shares at the beginning of the year
Ordinary shares issued on 5 July 2017 as per Thor acquisition agreement
Ordinary shares issued on 6 September 2017 to an employee
Ordinary shares issued on 6 September 2017 to employees
Ordinary shares issued on 7 December 2017 in lieu of FY2016 directors fees
Ordinary shares issued on 7 December 2017 in lieu of FY2017 directors fees
Ordinary shares issued by exercise of rights on 7 December 2017
Ordinary shares issued by private placement on 21 December 2017
Ordinary shares issued by exercise of rights on 8 January 2018
Ordinary shares issued at 16.5 cents on 8 June 2018 in lieu of salary
Ordinary shares issued at 14 cents on 4 October 2018 in lieu of salary
Ordinary shares issued at 16.5 cents on 4 October 2018 in lieu of salary
Ordinary shares issued at 12 cents on 14 January 2019 in lieu of salary
Ordinary shares issued at 12 cents on 14 January 2019 in lieu of salary
Consolidated
2019
$
2018
$
33,300,933
33,300,933
33,254,701
33,254,701
32,254,701
-
-
-
-
-
-
-
-
-
20,000
5,000
20,000
5,000
(3,768)
33,300,933
Number
137,259,372
-
-
-
-
-
-
-
-
-
142,857
30,303
166,667
41,667
30,332,259
-
16,500
27,225
10,500
38,325
-
2,976,075
-
20,000
-
-
-
-
(166,183)
33,254,701
Number
112,235,998
250,000
100,000
165,000
52,500
153,300
1,500,000
22,044,998
636,364
121,212
-
-
-
-
Total ordinary shares at the end of the year
137,640,866
137,259,372
ANNUAL REPORT 2019 | Uscom Limited | Page 32
NOTES TO FINANCIAL STATEMENTS Continued
Note 17: Issued capital (continued)
The Company’s authorised share capital amounted to 137,640,866 ordinary shares of no par value at 30 June 2019.
Fully paid ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the
number of shares held. At shareholders meetings, each ordinary share is entitled to one vote when a poll is called, or via a show
of hands.
Note 18: Options and rights reserve
The Consolidated Entity has adopted a new Equity Incentive Plan for the benefit of an employee, contractor, consultant,
executive director of the Group or any other person whom the Board determines to be eligible to participate in the Plans. The
Board may impose conditions, including performance related conditions, on the right to exercise any options and rights
granted under the Equity Incentive Plan.
The purpose of the Plan is to:
•
•
•
•
provide Eligible Persons with an incentive plan which recognises ongoing contribution to the achievement by the
Company of its strategic goals thereby encouraging the mutual interdependence of Participants and the Company;
align the interests of Participants with shareholders of the Company through the sharing of a personal interest in the
future growth and development of the Company as represented in the price of the Company’s ordinary fully paid
shares;
encourage Eligible Persons to improve the performance of the Company and its total return to Shareholders; and
provide a means of attracting and retaining skilled and experienced employees.
Under the Plan, the Consolidated Entity will be able to grant short-term incentive and long-term incentive awards to Eligible
Employees (including Executive Directors). The Plan will provide the Board with the flexibility to grant equity incentives to
Eligible Persons in the form of Plan Shares, Rights or Options, will only vest on the satisfaction of appropriate hurdles.
Effect of share-based payment transactions
Share Option Plan
Options and rights reserve balance at the beginning of the year
Expenses arising from share-based payment transactions
Options and rights reserve balance for Share Option Plan at the end of the year
Consolidated
2019
$
2018
$
2,813,371
11,289
2,824,660
2,708,298
105,073
2,813,371
Number of
Options 2019
75,000
(75,000)
-
-
Weighted
average
exercise price
0.17
0.17
Number of
Options 2018
4,840,544
(4,765,544)
-
Weighted
average
exercise price
0.23
0.25
-
-
75,000
0.17
Consolidated
2019
Number
450,000
1,190,476
-
1,640,476
2018
Number
2,586,364
2,586,364
(2,136,364)
450,000
Movement in options during the financial year
Movement during the financial year
Opening number of options
Lapsed during the financial year
Exercised during the financial year
Closing number of options
Movement in rights during the financial year
Rights at the beginning of the period
Granted during the period
Exercised during the period
Rights at the end of the period
ANNUAL REPORT 2019 | Uscom Limited | Page 33
NOTES TO FINANCIAL STATEMENTS Continued
Note 18: Options and rights reserve (continued)
1,190,476 Indeterminate rights were issued to Rob Phillips on the terms and conditions approved by shareholders at the AGM
on 28 November 2018 under the Equity Incentive Plan, vesting dependent on performance hurdles on 1 July 2021.
Consideration payable upon vesting is $nil. The Board may exercise its discretion to pay cash in lieu of issue of ordinary shares.
450,000 Performance rights were issued to Nick Schicht on 26 November 2014 under the Equity Incentive Plan, vesting
dependent on performance hurdles on 1 July 2018, 1 July 2019 and 1 July 2020. Consideration payable upon vesting is $nil.
Uscom Ltd has adopted an Employee Share Option Plan for the benefit of Executive Directors and full-time or part-time staff
members employed by the Consolidated Entity.
Goods or services received or acquired in a share-based payment transaction are recognised as an increase in equity if the
goods or services were received in an equity-settled share based payment transaction or as a liability if the goods and services
were acquired in a cash settled share based payment transaction.
For equity-settled share based transactions, goods or services received are measured directly at the fair value of the goods or
services received provided this can be estimated reliably. If a reliable estimate cannot be made the value of the goods or
services is determined indirectly by reference to the fair value of the equity instrument granted.
Transactions with employees and others providing similar services are measured by reference to the fair value at grant date of
the equity instrument granted.
Note 19: Foreign currency translation reserve
Opening balance
Translation of financial statements of foreign Controlled Entities
Closing balance
Consolidated
2019
$
72,078
(24,925)
47,153
2018
$
71,924
154
72,078
All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of
the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting
date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not retranslated.
The gains and losses from conversion of assets and liabilities, whether realised or unrealised, are included in profit or loss from
continuous operations as they arise.
ANNUAL REPORT 2019 | Uscom Limited | Page 34
NOTES TO FINANCIAL STATEMENTS Continued
Note 20: Cash flow information
(a) Reconciliation of cash
Cash at bank and on hand
Total cash at end of year
(b) Reconciliation of cash flow from operations to loss from continuing operations
after income tax
Loss from continuing operations after income tax
Non cash flows in loss from continuing operations
Depreciation
Amortisation
Options reserve
Translation reserve
(Increase)/decrease in assets
Trade debtors
Inventories
Inventories transferred to PE
Prepayments
Tax credit
Accrue income
GST/VAT assets
Increase/(decrease) in liabilities
Trade payables
Sundry payables and accrued expenses
Employee related payables
Employee provisions
Other provisions
Net cash used in operating activities
Consolidated
2019
$
2018
$
1,208,496
1,208,496
2,493,575
2,493,575
(1,389,398)
(1,960,923)
95,646
239,026
61,289
(24,925)
(334,017)
(16,525)
(18,596)
8,473
35,063
22,356
23,670
149,717
28,532
(58,637)
(42,140)
986
(1,219,480)
57,762
246,541
162,898
154
(53,226)
(2,600)
(10,936)
(16,627)
5,152
(20,733)
8,928
20,557
(72,577)
(54,848)
(18,531)
12,384
(1,696,625)
Note 21: Financial instruments
Significant accounting policies
(a)
Details of the significant accounting policies and methods adopted, including the criteria of recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial
liability and equity instrument are disclosed in Note 2 to the financial statements.
(b) Capital risk management
The Consolidated Entity manages its capital to ensure that companies in the Consolidated Entity are able to continue as a
going concern. The capital structure of the Entity consists of cash and cash equivalents (Note 8 on page 27) and equity
attributable to equity holders of the Parent Entity, comprising issued capital (Note 17 on page 32), and accumulated losses
(Note 6 on page 27).
(c) Outstanding contracts
At 30 June 2019, there were no outstanding contracts.
(d) Financial risk management objectives
The Consolidated Entity’s principal financial instruments are cash and term deposit accounts. Its financial instruments risk is with
interest rate risk on its cash and term deposits and liquidity risk for its term deposits.
The Consolidated Entity does not enter into or trade financial instruments, including derivative financial instruments, for
speculative purposes. The Board is updated monthly by management as to the amounts of funds available to the Consolidated
Entity from either cash in the bank or term deposits, and continually monitors interest rate movements.
(e) Foreign currency risk management
The Consolidated Entity undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise. The Consolidated Entity does not have any forward foreign exchange contracts as at 30 June 2018 and is
exposed to foreign currency risk on sales and purchases denominated in a currency other than Australian dollars.
ANNUAL REPORT 2019 | Uscom Limited | Page 35
NOTES TO FINANCIAL STATEMENTS Continued
Note 21: Financial instruments (continued)
The currencies giving rise to this risk is primarily the US Dollar and Euro. The Consolidated Entity incurs costs in US Dollars for its
operations which provide a natural hedge for a portion of income denominated in US Dollars.
The carrying amount of the Consolidated Entity’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date is as follows:
Cash
Current trade debtors
Current trade creditors
Cash
Current trade debtors
Current trade creditors
Cash
Current trade debtors
Current trade creditors
Cash
Current trade debtors
Current trade creditors
Consolidated
2019
US$
656,521
568,836
61,956
HUF
9,808,032
6,349,758
1,118,045
€
5,740
-
6,527
NZ$
-
19,226
-
2018
US$
558,376
122,500
20,734
HUF
2,355,437
105,895
31,286,548
€
31,210
52,680
-
NZ$
-
-
-
Foreign currency sensitivity
(f)
The Consolidated Entity is mainly exposed to exchange rate risks arising from movements in the US Dollar, Euro, New Zealand
Dollar and Hungarian forint (HUF) against the Australian Dollar, and the US Dollar from the translation of the operations of its
Controlled Entity.
The analysis below demonstrates the profit impact of a 10% movement of US Dollar and a 5% movement of Euro rates against
the Australian Dollar with all other variables held constant. 10% and 5% are the sensitivity rates used when reporting foreign
currency risk internally to key management personnel and represents management’s assessment of the possible change in
foreign exchange rates.
Profit/Loss - increase 10% (US$) and 5% (€)
- decrease 10% (US$) and 5% (€)
Consolidated
2019
$
(206,011)
206,011
2018
$
(178,829)
178,829
Interest rate risk management
(g)
The Consolidated Entity does not have any external loans or borrowings as at 30 June 2019 and is not exposed to interest rate
risks related to debt.
The Consolidated Entity is exposed to interest rate risk as companies in the Consolidated Entity hold cash and term deposits at
both fixed and floating interest rates. The risk is managed by the Consolidated Entity maintaining an appropriate mix between
both rates.
Management continually monitors its cash requirements through forecasts and cash flow projections and moves funds between
fixed and variable interest instruments to hold the maximum amount possible in instruments which pay the greater rate of
interest. This limits the amount of risk associated with setting a policy on the mix of funds to be held in fixed or variable interest
rate instruments.
ANNUAL REPORT 2019 | Uscom Limited | Page 36
NOTES TO FINANCIAL STATEMENTS Continued
Note 21: Financial instruments (continued)
(h)
A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the possible change in interest rates.
Interest rate sensitivity
Profit/Loss - increase 100 basis points
- decrease 100 basis points
Consolidated
2019
$
2,054
(2,054)
2018
$
3,110
(3,110)
Credit risk management
(i)
Credit risk represents the loss that would be recognised if counterparties defaulted on its contractual obligations. The
Consolidated Entity’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value
of transactions concluded is spread among approved counterparties. Credit exposure is controlled by counterparty limits that
are reviewed and approved by the management annually. Ongoing credit evaluation is also performed on the financial
condition of accounts receivable.
The Consolidated Entity does not have significant credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics; because the current major counterparties are alliance distributors and public hospitals with
approved funds available prior to purchases under most circumstances.
The credit risk on financial assets of the Consolidated Entity, as recognised on the Statement of Financial Position, is the
carrying amount, net of any allowance for doubtful debts. Credit risk in respect of cash and deposits is minimised as
counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency.
Debtors outstanding but not impaired
0 - 45 days
46 – 90 days
Over 90 days
Total
Consolidated
2019
$
519,985
22,455
40,866
583,306
2018
$
231,629
17,660
-
249,289
No bad debt was written off during the year (2018: $Nil). There was no doubtful debt provision as at 30 June 2019 (2018: Nil).
The outstanding debts $22,455 was received in July 2019, $40,866 will be received in August 2019 and the remaining $519,985
are not past due to the reporting date. The group applies the AASB 9 simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables. Details included in Note 9.
Liquidity risk management
(j)
The objective for managing liquidity risk is to ensure the business has sufficient working capital or access to working capital as
and when required. The Consolidated Entity limits its exposure to liquidity risk by holding the majority of its assets in cash or
term deposits which can be quickly converted to cash if required.
The carrying amounts of financial assets and financial liabilities recorded at cost approximate their fair values.
The following table details the Consolidated Entity’s remaining contractual maturity for its non-derivative financial assets and
liabilities. The table has been drawn up based on the undiscounted cash flows expected to be received/paid by the
Consolidated Entity.
ANNUAL REPORT 2019 | Uscom Limited | Page 37
NOTES TO FINANCIAL STATEMENTS Continued
Note 21: Financial instruments (continued)
Weighted
Average
effective interest
Rate %
Fixed interest rate maturing
Floating
interest
$
Within 1
year
$
1 to 5
years
$
Non-interest
bearing
$
Consolidated
2019
Financial assets
Cash
Term deposit
Bank guarantee
Trade receivables
Other receivables
Total financial assets
Financial liabilities
Trade creditors
Payables
Total financial liabilities
Net financial assets
Consolidated
2018
Financial assets
Cash
Term deposit
Bank guarantee
Trade receivables
Other receivables
Total financial assets
Financial liabilities
Trade creditors
Payables
Total financial liabilities
Net financial assets
0.0
1.5
2.85
-
-
-
-
-
-
-
-
-
-
-
15,092
-
-
-
15,092
-
-
-
-
-
83,457
-
-
83,457
-
-
-
1,193,404
-
-
583,306
39,420
1,816,130
282,259
31,037
313,296
15,092
83,457
1,502,834
1,601,383
Weighted
Average
effective interest
Rate %
Floating
interest
$
Fixed interest rate maturing
Within 1
year
$
1 to 5
years
$
Non-interest
bearing
$
0.0
2.5
2.85
-
-
-
-
-
-
-
-
-
-
-
1,983,549
-
-
-
-
-
83,457
-
-
1,983,549
83,457
-
-
-
-
-
-
510,026
-
-
249,289
85,446
844,761
132,542
47,151
179,693
Total
$
1,193,404
15,092
83,457
583,306
39,420
1,914,679
282,259
31,037
313,296
Total
$
510,026
1,983,549
83,457
249,289
85,446
2,911,767
132,542
47,151
179,693
Reconciliation of net financial assets to net assets
Net financial assets as above
Non-financial assets and liabilities
R & D tax incentive receivable
Inventories
Prepayments
Plant and equipment
Intangible assets
Accruals
Provisions
Net assets per Statement of Financial Position
1,983,549
83,457
665,068
2,732,074
2019
$
1,601,383
462,997
511,334
69,218
223,387
957,329
(123,863)
(213,829)
3,487,956
2018
$
2,732,074
498,060
494,809
77,692
238,456
1,154,732
(95,330)
(255,735)
4,844,758
The carrying amounts of the Consolidated Entity’s financial assets and financial liabilities are assumed to approximate their fair
values due to their short-term nature.
ANNUAL REPORT 2019 | Uscom Limited | Page 38
NOTES TO FINANCIAL STATEMENTS Continued
Note 22: Related party disclosures
Transactions between related parties are on normal commercial terms and conditions, no more favourable than those available
to other parties unless otherwise stated.
Parent and Controlled Entity
Parent Entity
Significant investments in subsidiaries:
Country of subsidiary incorporation:
Proportion of ownership interest:
Uscom Inc
U.S.A
100%
Significant investments in subsidiaries:
Country of subsidiary incorporation:
Proportion of ownership interest:
Uscom Medical Ltd
U.K.
100%
Significant investments in subsidiaries:
Country of subsidiary incorporation:
Proportion of ownership interest:
Uscom Kft
Hungary
100%
Significant investments in subsidiaries:
Country of subsidiary incorporation:
Proportion of ownership interest:
Beijing Uscom Consulting Co. LTD
China
100%
Consolidated
The Parent and Ultimate Parent Entity is Uscom Limited.
Key management personnel
The following were key management personnel of the Consolidated Entity at any time during the reporting period and unless
otherwise indicated were key management personnel for the entire period:
Non-Executive Directors
Christian Bernecker, Non-Executive Director
Brett Crowley, Non-Executive Director (Appointed on 23 August 2018)
Sheena Jack, Non-Executive Director (Resigned on 23 August 2018)
Executive Directors
Rob Phillips, Executive Director, Chairman, Chief Executive Officer
Senior Executives
Nick Schicht, General Manager
For further remuneration information of key management personnel refer to the remuneration report in the Directors’ report on
pages 10-17.
The aggregate compensation made to Directors and other members of key management personnel of the Company and the
Consolidated Entity is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payment
Total key management personnel remuneration
Consolidated
2019
$
488,243
29,316
-
517,559
2018
$
502,325
44,080
134,836
681,241
ANNUAL REPORT 2019 | Uscom Limited | Page 39
NOTES TO FINANCIAL STATEMENTS Continued
Note 23: Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Options reserve
Accumulated losses
Total equity
Parent
2019
$
(857,794)
(857,794)
2,823,102
4,124,748
598,790
636,792
33,300,933
2,824,660
(32,637,637)
3,487,956
2018
$
(1,615,921)
(1,615,921)
3,778,368
5,323,937
439,131
479,179
33,254,701
2,813,371
(31,223,314)
4,844,758
Contingent liabilities
The parent entity has provided a guarantee in respect of obligations under premises lease of $83,457 (2018: $83,457). No
liability was recognised by the parent entity or the consolidated entity in relation to this guarantee.
Other than the guarantee mentioned above, the parent entity did not have any contingent liabilities as at 30 June 2019 or 30
June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 2.
Note 24: Commitments
Operating lease commitments
Operating commitments represent payments due for office rentals and have an
average term from 18 to 30 months and month to month thereafter.
Less than 1 year
Between 1 and 5 years
Total operating commitments
235,330
595,154
830,485
154,100
574,121
728,221
Lease of assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal
ownership, are transferred to the Consolidated Entity were classified as finance leases. Finance leases are capitalised, recording
an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values.
Leased assets are amortised on diminishing value basis over their estimated useful lives where it is likely that the Consolidated
Entity will obtain ownership of the asset or over the term of the lease. Lease payments are allocated between the reduction of
the lease liability and the lease interest expense for the period.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as an
expense on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern in
which benefits are diminished.
Lease incentives under operating leases are recognised as liabilities. The incentives are recognised as a reduction of expenses
on a straight line basis unless another systematic basis is more representative of the time pattern in which benefits are
diminished.
ANNUAL REPORT 2019 | Uscom Limited | Page 40
NOTES TO FINANCIAL STATEMENTS Continued
Note 25: Auditors’ remuneration
a. Audit services
BDO East Coast Partnership for Audit and review of financial reports
BDO Hungary Audit and review of financial reports
Total remuneration for audit services
b. Non-audit services
BDO East Coast Partnership – other services
Total remuneration for Non-audit services
Consolidated
2019
$
70,000
9,911
79,911
-
-
2018
$
55,500
10,022
65,522
-
-
Total auditors’ remuneration
79,911
65,522
Note 26: Operating segments
Segment information
The Consolidated Entity operates in the global health and medical products industry.
The Consolidated Entity sells two cardiovascular products, the USCOM 1A cardiac output monitor and the Uscom BP+
central blood pressure monitor and a series of pulmonary products the Uscom SpiroSonic spirometers.
Globally the Company has five geographic sales and distribution segments Australia, Asia, the Americas, Europe and Mid
East and Africa, and other regions. For each segment, the CEO and General Manager review internal management reports
on at least a monthly basis.
The largest customer group operates in Asia and accounts for approximately 60% of the total sales. For the current period
USCOM 1A comprised 72%, SpiroSonic spirometers 20% and BP+ 8% of the total Uscom sales revenue.
Basis of accounting for purposes of reporting by operating segments
Accounting policies
Segment information is prepared in conformity with the accounting policies of the entity as disclosed in Note 2 and
accounting standard AASB 8 Operating Segments which requires a ‘Management approach’ under which segment
information is presented on the same basis as that used for internal reporting purposes. This has resulted in no change to
the reportable segments as operating segments continue to be reported in a manner consistent with the internal reporting
provided to the chief operating decision maker, which is the Board of Directors.
Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment. Segment assets
include all assets used by a segment and consist primarily of inventories, property, plant and equipment and intangible
assets. While most of these assets can be directly attributable to individual segments, the carrying amounts of certain assets
used jointly by segments are not allocated. Segment liabilities consist primarily of trade and other creditors, employee
benefits and provisions for warranties. Segment assets and liabilities do not include deferred income taxes.
ANNUAL REPORT 2019 | Uscom Limited | Page 41
NOTES TO FINANCIAL STATEMENTS Continued
Note 26: Operating segments (continued)
2019
Sales to external customers
Other income
Total segment
revenue/income
Segment expenses
Segment result
Income tax
Consolidated loss from
ordinary activities after income
tax
Australia
Asia
Americas
Europe
$
$
$
Other
regions
$
$
102,791
450,529
1,694,128
-
553,320
2,277,296
(1,723,976)
-
1,694,128
1,046,253
647,875
-
265,827
-
265,827
893,806
(627,979)
-
719,060
295,662
62,332
51,629
1,014,722
794,092
220,630
(8,460)
113,961
11,450
102,512
-
Consolidated
$
2,844,138
797,820
3,641,958
5,022,896
(1,380,938)
(8,460)
(1,723,976)
647,875
(627,979)
221,171
102,513
(1,389,398)
Segment assets
Segment liabilities
3,989,298
636,792
3,133
5,035
-
3,548
146,513
5,613
Acquisition of plant and
equipment and intangibles
Depreciation and
amortisation
32,931
1,699
23,822
62,881
65,362
20,015
17,900
231,395
-
-
-
-
4,138,944
650,988
121,333
334,672
Australia
Asia
Americas
Europe
Other
regions
Consolidated
$
$
$
$
$
$
2018
Sales to external customers
Other income
Total segment
revenue/income
Segment expenses
Segment result
Income tax
Consolidated loss from
ordinary activities after income
tax
63,464
524,206
587,670
1,395,497
-
1,395,497
3,192,312
(2,604,642)
-
(2,604,642)
426,305
969,192
-
969,192
34,416
-
34,416
290,433
(256,017)
-
(256,017)
573,768
169,451
743,219
861,001
(117,782)
(4,628)
(122,410)
100,906
-
100,906
47,952
52,954
-
52,954
Segment assets
Segment liabilities
3,857,282
479,179
99,030
-
572,148
15,450
847,056
36,129
Acquisition of plant and
equipment and intangibles
Depreciation and
amortisation
184,839
-
31,059
42,058
50,614
13,527
35,796
204,366
-
-
-
-
2,168,051
693,657
2,861,708
4,818,003
(1,956,295)
(4,628)
(1,960,923)
5,375,516
530,758
257,956
304,303
Note 27: Contingencies
Other than the guarantee mentioned at Note 23, the consolidated entity did not have any contingent liabilities as at 30 June
2019 or 30 June 2018.
Note 28: Events after the reporting date
No matters or circumstances have arisen since the end of the financial year to the date of this report, that has significantly
affected or may significantly affect the activities of the Consolidated Entity, the results of those activities or the state of affairs of
the Consolidated Entity in the ensuing or any subsequent financial year.
ANNUAL REPORT 2019 | Uscom Limited | Page 42
DIRECTORS DECLARATION
Uscom Limited and its Controlled Entity
1. The directors of the company declare that: The financial statements, comprising the statement of comprehensive income,
statement of financial position, statement of cash flows, statement of changes in equity, accompanying Notes, are in
accordance with the Corporations Act 2001 and:
a. comply with Accounting Standards and the Corporations Regulations 2001; and
b. give a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance
for the year ended on that date.
2. The company has included in the Notes to the financial statements an explicit and unreserved statement of compliance
with International Financial Reporting Standards.
3.
In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable.
4. The directors have been given the declarations required by section 295A.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the
directors by:
Associate Professor Rob Phillips
Executive Director - Chairman
Sydney, 19 August 2019
ANNUAL REPORT 2019 | Uscom Limited | Page 43
INDEPENDENT AUDIT REPORT
Tel: +61 2 9251 4100
Fax: +61 2 9240 9821
www.bdo.com.au
Level 11, 1 Margaret St
Sydney NSW 2000
Australia
To the members of Uscom Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Uscom Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial report, including a
summary of significant accounting policies and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001,
including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial
performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of
our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited
by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent
member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
ANNUAL REPORT 2019 | Uscom Limited | Page 44
INDEPENDENT AUDIT REPORT Continued
Material uncertainty related to going concern
We draw attention to Note 2 in the financial report which describes the events and/or conditions which give rise
to the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue
as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the
normal course of business. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. In addition to the matter described in the Material uncertainty related to going concern section,
we have determined the matters described below to be the key audit matters to be communicated in our report.
Impairment and carrying value of intangible assets
- Patents and regulatory approvals
Key audit matter
How the matter was addressed in our audit
As disclosed in note 14 of the financial report,
the carrying value of the intangibles was
considered significant to our audit as the carrying
value of $957,329 at 30 June 2019 is material to
the financial statements and requires
considerable judgement and estimation by
management based on uncertain outcomes of
regulatory approvals. The intangible assets relate
to patents held in connection with the BP+ and
Uscom 1A products and regulatory approvals of
the SpiroSonic devices.
Our audit procedures included amongst others:
•
•
•
•
Re-performance of valuation assessment to
determine whether the carrying value was
impaired. This was done through the
assessment of estimated future discounted
cash flows.
Verified movements in the carrying value of
intangibles.
Scrutinised the inputs to the forecasts
provided by management and agreed to
supporting documentation, such as
historical data and distribution
agreements, where appropriate.
Reviewed the status of regulatory
submissions when assessing any potential
impairment indicators.
ANNUAL REPORT 2019 | Uscom Limited | Page 45
INDEPENDENT AUDIT REPORT Continued
Existence and Valuation of Inventory
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 10, the Group held
inventories of $511,334 as at 30 June 2019, which
consisted of a combination of raw materials, work
in progress and finished goods.
This matter was considered significant to our
audit given the relative size of the balance in the
consolidated statement of financial position, the
estimates and judgements involved in assessing
net realisable value and the significant effort
required in auditing this balance.
Our audit procedures included amongst others:
•
•
•
•
Attended the year end stock-take in order
to validate the existence and condition of
inventories held.
Performed detailed testing of a sample of
goods despatched and goods received to
ensure the transactions around the year
end were recorded in the correct period.
Selected a sample of inventory items to
ensure inventory was recorded at the lower
of cost and net realisable value, by
reference to recent sales.
Evaluated the inventory obsolescence
provision through consideration of the
composition of inventory on hand, historic
sales trends and repair costs.
Other information
The directors are responsible for the other information. The other information comprises the information in the
Group’s annual report for the year ended 30 June 2019, but does not include the financial report and the
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error.
ANNUAL REPORT 2019 | Uscom Limited | Page 46
INDEPENDENT AUDIT REPORT Continued
In preparing the financial report, the directors are responsible for assessing the ability of the group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2019.
In our opinion, the Remuneration Report of Uscom Limited, for the year ended 30 June 2018, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
BDO East Coast Partnership
Gareth Few
Partner
Sydney, 19 August 2019
ANNUAL REPORT 2019 | Uscom Limited | Page 47
SHAREHOLDER INFORMATION
Additional information required by Australian Stock Exchange Listing Rules is as follows. This information is current as at 31 July
2019.
(a) Distribution Schedules of Shareholder
Holdings Ranges
Holders
Ordinary shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 99,999,999,999
Total
Number
114
175
88
280
134
791
Number
65,747
533,175
694,848
11,421,952
125,503,349
138,219,071
%
0.05%
0.39%
0.50%
8.26%
90.80%
100%
There were 230 holders of less than a marketable parcel of 3,571 ordinary shares.
(b) Class of shares and voting rights
All shares are ordinary shares. Each ordinary share is entitled to one vote when a poll is called, otherwise each member present
at a meeting or by proxy has one vote on a show of hands.
Substantial shareholders
(c)
The names of the substantial shareholders listed in the holding company’s register as at 31 July 2019 are:
CITICORP NOMINEES PTY LIMITED
DR ROBERT ALLAN PHILLIPS
MR JOHN LIONEL GLEESON
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JETAN PTY LTD
(d) Twenty largest registered holders – ordinary shares
Balance as at 31 July 2019
CITICORP NOMINEES PTY LIMITED
MR ROBERT ALLAN PHILLIPS
MR JOHN LIONEL GLEESON
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JETAN PTY LTD
DONGJUN SUN
BELL POTTER NOMINEES LTD
INVIA CUSTODIAN PTY LIMITED
DR RUSSELL KAY HANCOCK
EASTBOURNE ROAD PTY LTD
DRP CARTONS (NSW) PTY LTD
NETWEALTH INVESTMENTS LIMITED
CORF CORPORATION PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
RAEWYN JANETTE LOVETT & STRUAN GRANT MCOMISH
MR CHRISTOPHER JAMES WERE & LOCKHART TRUSTEE SERVICES NO 17 LIMITED
MR DARYL LINDSAY ALLEN
QUERION PTY LTD
MR DAVID LEROY BOYLES
MR RUTHERFORD JAMES BROWNE & MRS SHEBA ELIZABETH MARJORIE BROWNE
Total
Total Securities
ANNUAL REPORT 2019 | Uscom Limited | Page 48
26,423,302
23,501,158
7,013,679
6,266,609
3,120,000
Ordinary shares
Number
26,423,302
23,501,158
7,013,679
6,266,609
3,120,000
2,414,125
2,116,636
2,088,118
2,000,000
1,985,904
1,759,616
1,604,508
1,600,000
1,486,720
1,477,640
1,424,095
1,295,405
1,266,667
1,250,000
1,229,300
91,323,482
138,219,071
%
19.117%
17.003%
5.074%
4.534%
2.257%
1.747%
1.531%
1.511%
1.447%
1.437%
1.273%
1.161%
1.158%
1.076%
1.069%
1.035%
0.937%
0.916%
0.904%
0.8889%
66.072%
SHAREHOLDER INFORMATION Continued
Registered office and principal place of office
Level 8, Suite 2, 66 Clarence Street
Sydney NSW 2000 Australia
Tel:
Fax:
02 9247 4144
02 9247 8157
Company Secretary
Brett Crowley
Registers of securities
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000 Australia
GPO Box 3993
Sydney NSW 2001 Australia
1300 737 760
Tel:
Fax:
1300 653 459
www.boardroomlimited.com.au
Stock exchange listing
Quotation has been granted for 138,219,071 ordinary shares of the Company as at 31 July 2019 on all Member Exchanges of the
Australian Stock Exchange Limited.
Unquoted securities
Rights over unissued shares as at 31 July 2019
A total of 1,1940,476 rights over ordinary shares are on issue to a director and 450,000 rights over ordinary shares are on issue to
an executive under the new Equity Incentive Plan.
ANNUAL REPORT 2019 | Uscom Limited | Page 49