USCOM LIMITED
ASX: UCM
www.uscom.com.au
ANNUAL
REPORT
2020
Level 8, 66 Clarence Street
Sydney, NSW, 2000, Australia
Phone: +612 9247 4144
E-mail: info@uscom.com.au
Business fundamentals with
blue sky vision
CONTENTS
CHAIRMAN’S LETTER .................................................................................................................................. 1-13
ANNOUNCEMENTS FY 2020 ........................................................................................................... 14-15
DIRECTORS REPORT ....................................................................................................................... 16-23
FINANCIAL REPORT ........................................................................................................................ 24-49
AUDITORS INDEPENDENCE DECLARATION ........................................................................................... 25
STATEMENT OF PROFIT AND LOSS & OTHER COMPREHENSIVE INCOME ....................................... 26
STATEMENT OF FINANCIAL POSITION .................................................................................................... 27
STATEMENT OF CHANGES IN EQUITY ..................................................................................................... 28
STATEMENT OF CASH FLOWS .................................................................................................................. 29
NOTES TO FINANCIAL STATEMENTS ..................................................................................................30- 49
DIRECTORS DECLARATION ................................................................................................................. 50
INDEPENDENT AUDIT REPORT ......................................................................................................51- 54
SHAREHOLDERS INFORMATION ...................................................................................................55- 56
ANNUAL REPORT | 2019-2020 USCOM LIMITED
1
CHAIRMAN’S
LETTER
“Continuing strong growth with
profitability, and blue sky ahead.”
DEAR INVESTORS, CUSTOMERS, PARTNERS, AND EMPLOYEES,
Uscom reported continued strong growth and record sales and receipts for 2020 despite some of the most difficult
and unpredictable global trading conditions in modern history. Importantly H2 was our first ever cash flow positive
and profitable half.
Our resilience was proven off the back of a global restructure, expanded global footprint across four continents,
increased distribution in all jurisdictions, growth and development of our skilled staff and operations, increased
product ranges, and receiving new regulatory approvals, all while improving cash receipts and cash flow, and
increasing shareholder value by 67%.
Annual cash receipts were up 36% to $4.6M, with Net cash flow up $2M off the back of the global restructure of our
sales and distribution model. The successful restructure by Uscom China drove a profitable and cash flow positive
H2 with receipts increased 83% and sales up 57%. For 2020 Uscom’s capitalised value increased 67% despite the
pandemic, and outperformed the all ordinaries which fell in the same period 11%.
The successful Uscom China sales and distribution strategy, activated in January, is now being migrated into our
developing European operations as it begins recovery, and into the US in anticipation of eventual recovery.
While our global strategy is focused on distribution in China and Asia, we are also driving European and US
operations which will position us well for the growth expected from worldwide markets in the coming years and will
provide global distribution channels for our expanding list of products as they progress to regulatory approval.
Off the back of established growth, we have invested in the foundations for future growth, and look forward to
continuing our global expansion in the years ahead as worldwide economies recover and rebound.
Professor Rob Phillips
Chairman
August 2020
ANNUAL REPORT | 2019-2020
USCOM LIMITED
2 CHAIRMAN’S LETTER
RESULTS
Uscom Annual Results
$AUD Millions
4.6
3.48
3.39
2.84
FY 19
FY 20
0.71
Profit
Net Cash Flow
Sales
Cash Receipts
-1.4
-1.36
-1.29
Uscom H2 Results
$AUD Millions
2.8
3.02
FY19
FY20
1.78
1.64
0.5
0.14
Profit
Net Cash Flow
Sales
Cash Receipts
-0.64
-0.97
Record results
•
• Cash receipts $4.6M up 36%
•
Sales $3.48M up 22%
• Net cash flow up $2M
• Net operating cash outflow $0.28M down 77%
•
• Cash on hand
• Debt free
Poor H1 due to global restructure, with record H2
Annual results reported cash receipts of $4.60M, up 36%
from 2019, customer sales $3.48M, up 22%, and with cash
and cash equivalents of $1.92M, up 59%.
Revenue from ordinary activities was $4.28M, up 18%, and
total expenses for the period $5.16M, up 19%. Net cash
consumed in operations was $0.28M, down 77% from
$1.22M in 2019.
Record H2 Results
•
• Cash receipts $3.02M up 83%
•
Sales $2.80M up 57%
• Net cash flow up $1.47M
•
•
•
Profit up $0.78M
Profitable, cash flow positive with record cash receipts
Receipts, revenue and cash flow equal to full year 2019
The results of the restructured operations of H2 FY
included cash receipts of $3.02M, up 83% YOY from
$1.64M, and sales of 2.80M, up 57% from $1.78M.
H2 was cash flow positive $0.5M up $1.47M from a loss of
$0.97M in 2019. Sales revenue and sales receipts for H2
were twice those of H1 and exceeded the entire 2019 year.
H2 was the first reporting period for Uscom China and was
profitable and cash flow positive contributing significantly
to the results of the consolidated entity.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
3 CHAIRMAN’S LETTER
D
U
A
M
$
35
30
25
20
15
10
5
0
Uscom Cap Value
$AUD Millions
32.2
↑ 67%
19.2
2019
2020
% Change FY2020
$AUD Millions
67%
ASX XAO
-11%
UCM CAP VALUE
E
G
N
A
H
C
%
80
70
60
50
40
30
20
10
0
-10
-20
The capitalised value of UCM increased by 67%
in the financial year between 30th June 2019 and
30th June 2020.
UCM capitalised value increased 67% while the ASX All
Ordinaries Index dropped 11% between 30th June 2019 and
30th June 2020.
Summary
For Uscom 2020 can be summarised as a tale of two halves
H1
• Global restructure of sales, marketing and distribution
• Delayed regulatory cycles
•
Regulatory approvals finally received
H2
Response to the COVID emergency
•
•
•
Focus on China, shifting into Europe while preparing for the US to recover
VENTITEST developed
Profitable and cash flow positive with record annual results
36% increased receipts
Annual
•
• Net cash flow up $2M up from -$1.29M
•
67% increase in UCM capitalised value, compared with -11% for ASX All Ords in FY2020.
Uscom continued its consistent growth trend in 2020 with total annual receipts of $4.6M, up 36% YOY, despite including 6 months
of complex restructure, delayed approvals and 6 months of the most difficult operational conditions in modern history.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
4 CHAIRMAN’S LETTER
MILESTONES
• Ms Teresa Guo appointed Director of Uscom China
• Uscom China established and operational
•
5-year NMPA approval for USCOM 1A.
• Mr Xianhui Meng appointed to Uscom Board of Directors as non-executive
• USCOM 1A - recommended as treatment of choice for COVID-19 by the National Health and Medical Commission of the
People’s Republic of China
• USCOM 1A installed in over 51 Chinese Hospitals specialising in management of infectious diseases, including COVID-19
• USCOM 1A – included as a preferred method for management of paediatric sepsis in the International Guidelines
• Uscom partners with A&D for Japanese BP+ module
• Ms. Teresa Guo promoted to Director of Global Operations and General Manager of Uscom China
• Uscom Singapore Regional HQ established
•
Record annual results 2020
COSTS
Total expenses were $5.16M including impaired expenses of $0.23M, while salary and wages were $1.61M up 24% from $1.30M,
as we established China and expanded our European sales organisation. Increased sales also means increased component costs.
Regulatory expenses of $0.14M continue to significantly weigh on the accounts as we approach final approval stages for a number
of our products. Regulatory will remain a significant part of our operating focus and costs as we continue to bring new products
to market.
The total cost of listing remains a significant and increasing load on the profitability and mindshare of Uscom, with an estimated
annual cost of $0.56M to maintain our ASX listing responsibilities despite the increasing complexity of compliance.
While our mid and long-term strategy remains intact and current cash flow is healthy, the global environment is unpredictable,
making forecasts and business planning challenging. With an unpredictable US trade war in effect globally, overlayed on the most
significant pandemic in modern history, global markets remain challenging. As a risk mitigation strategy, management have
introduced focused control of non-essential spending. At the same time, we are closely watching international events so that we
are prepared for the opportunities as international markets rebound and confidence in global growth resumes.
OPERATIONS
In 2020 Uscom reviewed, restructured and expanded its global distribution, a change which covered all the major jurisdictions
of China, Europe and the US.
Operations
Sydney
Beijing
Budapest
Offices
Singapore
Auckland
London
LA
Multiple products hedged for currencies and markets across multiple jurisdictions
ANNUAL REPORT | 2019-2020 USCOM LIMITED
5 CHAIRMAN’S LETTER
Uscom China
Uscom China was established as a wholly owned Uscom subsidiary in Chaoyang District, Beijing with Ms. Teresa Guo appointed
as Director of Uscom China. This establishment of a local subsidiary was accompanied by a complete restructure of distribution
in China. Uscom now acts as its own direct importer of medical devices and is approved to sell any NMPA approved medical
device into Chinese national markets. Under the management of Ms. Teresa Guo Uscom China returned a profit for its first two
quarters (Q3 and Q4) and its first operating half (H2) as our distribution network continues to expand. Mr Xianhui Meng was
also appointed to the UCM Board of Directors mid-year bringing extensive experience as both an international investor and
executive in the biotechnology field.
Registered Uscom China as a business entity
Uscom China progress in 2020:
•
• Opened a Beijing office
• Opened trading and capital bank accounts
•
•
•
•
•
•
•
•
•
•
Advanced our NMPA applications covering eight products
Submitted a new spirometry device for regulatory approval
Received type II medical device sales certification
Established a medical device importation system
Employed 7 clinical, financial, admin and technical staff
Applyed for 20 China trademarks and copyrights
Restructured our sales and dealer models
Developed China specific marketing and education materials to support distributors and dealers
Hostied our first national ICU congress
Initiated discussions with potential Chinese partners for local manufacturing and strategic partnerships
Uscom Singapore
Uscom SNG Pte. Ltd was established as a Regional Head Quarters in Singapore as a platform for increased Asian and SE Asian
engagement. The headquarters will act as a regional sales and technical and clinical support hub for anchoring regional
expansion into the SE Asian market. Asia and SE Asia remain the growth focus of the world as traditional economies struggle
to recover from the global health pandemic. Singapore is geographically convenient positioned between Uscom’s listed home
in Australia, and its major market of China and its European office in Budapest.
Uscom Europe
Uscom Europe HQ in Budapest has been expanded from R&D and manufacture to cover sales, marketing and clinical and
technical support. Dr Antonio Ferrario, an experienced European sales expert, has been appointed to oversee and co-ordinate
marketing activities in Europe. Antonio is well connected in the medical device field throughout Europe and has already signed
a large French distributor, Aria Medical in Paris, to distribute Uscom products in France. While the European strategy was
implemented for Q3 and Q4, the pandemic has effectively delayed results. However, we are advancing discussions with a
number of new distributors so that as business in Europe rebounds we will be well prepared with an expanded team of well-
trained distributors.
Uscom USA
The US remains problematic with the national health care system under stress and the superimposed effects of the pandemic
stalling all routine business for the last half year. During Q1 and Q2 of FY20 Uscom appointed and trained a new dealer network
of >30 sales persons to cover ~75% of the country. These dealers are preparing to re-activate as the pandemic begins to resolve,
and we are optimistic that US sales will then respond.
ANNUAL REPORT | 2019-2020
USCOM LIMITED
6 CHAIRMAN’S LETTER
SALES BY PRODUCT AND REGION
USCOM 1A sales represented approximately 87% of all 2020 Uscom sales receipts, up from 75% in 2019, while SpiroSonic
generated 12%, down from 20%, and BP+ 1%, predominantly from global research sales. BP+ sales will be reactivated following
release of the new A&D module in early September. Regionally China and the rest of Asia were responsible for 71% of all Uscom
sales, while Europe generated 20% and the US and other regions were responsible for 9%.
Sales by Product
FY2020
12% 1%
87%
Sales by Region
FY2020
9%
20%
71%
USCOM 1A
SpiroSonic
BP+
China/Asia
Europe
US/Other
SCIENCE
Uscom is a company driven by scientific excellence, and our technologies continue to be international leaders in cardiovascular
and pulmonary monitoring and management.
COVID and Sepsis
This year Uscom technology was endorsed by the National Health and Medical Commission of the People’s Republic of China
as the preferred method for treatment of severe COVID infections. The USCOM 1A was also included in the International
Society of Critical Care Medicine Guidelines for management of Sepsis in Children, which includes management of COVID. This
is global recognition of the clinical value of our USCOM 1A in infectious diseases.
USCOM 1A recommended as the treatment of choice for serious cases of COVID-19 by the National Health and Medical
Commission of the People’s Republic of China
ANNUAL REPORT | 2019-2020 USCOM LIMITED
7 CHAIRMAN’S LETTER
Preeclampsia
The USCOM 1A was demonstrated to identify the changes of preeclampsia at 5-11 weeks allowing for early diagnosis and
treatment. This research from UQ and Department of Maternal Intensive Care Medicine Unit, Shandong Maternal and Child
Health Hospital, Jinan, Shandong, China was published in Springer Nature Current Hypertension Reports and recommended the
benefits of USCOM 1A screening at 10-12 weeks. Preeclampsia is the greatest cause of maternal and foetal morbidity and
mortality in pregnancy occurring in ~10% of ~130M annual pregnancies worldwide.
Phillips RA, Ma Z, Kong B, Gao L. Maternal hypertension, advanced Doppler haemodynamic and therapeutic precision: principles and illustrative
cases. Current Hypertension Reports 2020;22:7, https://doi.org/10.1007/s11906-020-01060-2
Hypertension
“Current hypertensive management is poor, and we have developed the BP+ to advance the science in this common and
dangerous condition. Quality technology is critical for clinical accuracy, and this new partnership with A&D, world leaders in
medical measurements and instrumentation, allows Uscom to provide clinicians with the best tools for BP monitoring and
hypertensive care.” Hypertension occurs in approximately 40% of all people over the age of 25 and is responsible for
approximately 7.5m deaths annually from the associated complications of stroke, heart attack and kidney failure. A&D are a Tokyo
based multinational engaged in the development, manufacture and sale of precision measurement instruments in the Industrial
and Medical and Health care sector, particularly specialising in BP technology.
NEW PRODUCTS
Uscom continues to create innovative clinical solutions, based on the precision technologies we have developed over a number
of years.
VENTITEST
This year Uscom developed the VENTITEST ventilator testing device. The global demand for ventilators associated with the
COVID pandemic has exploded and is projected to increase 10-fold over the next 7 years as hospitals and clinics worldwide are
refurbished and upgraded. Importantly the VENTITEST is now released and will have an expedited 2-3-month regulatory approval
path to market.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
8 CHAIRMAN’S LETTER
The VENTITEST sensor, the VENTITEST-S installed, and the test lung used to create a standardised resistance simulating normal
lung function.
Calibration of the outputs of respiratory assist devices such as ventilators, anaesthesia devices, and home ventilations systems
such as CPAP, and respiratory drug administration systems, is necessary to ensure effectiveness. The principle of these devices is
the application of a simple pump to drive air, gas and medications into the lungs when natural breathing is impaired or needs
support. With use the devices “drift” and the devices require daily, weekly, monthly or annual calibration depending on the
technology and the accuracy required of the device.
While ventilators are relatively simple to construct, ventilator calibration and testing devices require refined and highly precise
technology, which is the technology used in the PureFlow tube which is the foundation of the SpiroSonic digital ultrasonic
spirometers. The VENTITEST provides high fidelity digital ultrasonic measurements of flow, pressure and volume waves output
by respiratory support devices. The VENTITEST-S is the accompanying software application that provides archiving, display and
analysis of the flow, pressure, and volume waveforms and provides extended calculations, data logging and test report generation
and printing. The VENTITEST system can be sold into hospital respiratory departments or sold as a service on a pay per use basis
creating a new revenue model and has just been released. Uscom Is now preparing the device for distribution and sale in China,
Europe and the US, and has received enthusiastic enquiries from a number of current and new distributors.
The SpiroSonic PureFlow multi-path technology used in the VENTITEST ventilator testing system.
The SpiroSonic AIR
The SpiroSonic AIR is a new digital home care spirometer equipped with the most advanced functionality which was released in
October last year and is progressing through all major regulatory cycles. It’s a wireless charging, wireless connecting technology
which feeds digital lung function signals through a phone APP, the SpiroSonic myAIR, to the cloud or station based SpiroReporter
for archiving and analysis, and has special application for home use and post COVID recovery monitoring.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
9 CHAIRMAN’S LETTER
REGULATORY
Regulatory approvals are required to sell medical devices into all jurisdictions and this year we received new approvals for USCOM
1A for China and SpiroSonic devices for Europe, with more approvals progressing. Our main regulatory processes are NMPA for
China, CE for Europe and FDA for the US, and each requires a detailed and time-consuming submission with outcomes
significantly impacting revenue. While the ultimate approval of our non-invasive devices is almost certain, the time and cost is
increasing in all jurisdictions.
China - NMPA
In December 2019 the USCOM 1A received a new 5-year NMPA approval. This assures the company of ongoing revenue for its
most popular and established product in its largest market. We continue advancing NMPA applications for our BP+ and
SpiroSonic devices as they progress to the final stages of approval.
Europe - CE
The Uscom SpiroSonic devices received new CE approvals over the year so now USCOM 1A, BP+ SpiroSonic devices have CE
approvals. However technical upgrades to the BP+ and the SpiroSonic AIR continue in review with approvals expected soon.
US – FDA
The USCOM 1A has an active FDA approval, while BP+ and SpiroSonic devices have valid approvals, these approvals are currently
being upgraded to match new product specifications.
The global regulatory process has grown exponentially with regulatory bodies remaining independent with minimal reciprocity,
and so our current applications require multiple duplications, with repeated revisions required for even minor changes of function
and components. This increasing complexity acts as a barrier to entry for new devices and increases the value of approved devices.
INVESTMENT
“De-risked medical technology companies with established growth fundamentals and a blue-sky vision will always be central
to the portfolios of value investors.”
Uscom is a firm believer in the value of fundamentals and this year saw further strong growth and improving fundamentals setting
a platform for value investors. In 2020 the Uscom FPO VWAP was 17.4c, ranging from 9.9c to 48c, with 130M shares traded over
the year being approximately 87% of issued capital. The average share price for the 8-year period was 18.6c.
Uscom Share Price
s
t
n
e
C
60
50
40
30
20
10
0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Uscom Total Receipts
$4.60
$3.64
$3.50 $2.86
$2.94
$2.04
$1.38
$0.86 $1.01
D
U
A
M
$
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
Max
Mean
Min
2012 2013 2014 2015 2016 2017 2018 2019 2020
Comparison of share price and total receipts since 2012 during which time Uscom acquired two new companies and established
a global network of distribution while bringing 8 new products to market, and reported cash flow positivity and profitability in H2
of 2020.
As part of its capital initiatives Uscom performed a small parcels consolidation in September with a compulsory buy back of all
holdings of less than $500 AUD in value; this reduced UCM shareholding by 25%. The 345,939 shares were consolidated and on
sold with sales benefits returned pro-rata to the vendors. This consolidation simplified the Uscom register.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
10 CHAIRMAN’S LETTER
Uscom has developed an active in-house social media strategy across Twitter, Facebook and LinkedIn to ensure awareness of our
activities and achievements, and to provide investors with information and results so they have every opportunity to benefit from
an informed investment in Uscom.
IP AND BRANDS
Uscom’s strong IP and great brands represent significant off balance-sheet value. A strong IP and Brand portfolio is the foundation
of a great global company.
Uscom holds approximately 20 patents and continue to grow IP with 2 new powerful new patent applications in the last 12 months,
including a new method of measuring and monitoring hypertension to accompany our BP+, and a patent to protect our
VENTITEST ventilator testing technology.
Uscom continues to register trademarks and copyrights in China as an efficient IP strategy, and continues to grow this portfolio.
Uscom expanded its brands by adding the new VENTITEST ventilator testing technology this year.
The four Uscom brands - USCOM 1A, BP+, SpiroSonic and VENTITEST are clean and create a professional and positive visual impression
EDUCATION AND DISTRIBUTOR SUPPORT
Education is essential for adoption and effective use of our advanced Uscom devices, and we have continued to expand our
educational resource materials, and are complimenting these resources with in-house videos. The delivery of comprehensive and
professional education modules enhances our brands and our products. This year also saw the release of the Uscom China website
(www.uscom.com.cn) and the SpiroSonic website (www.spirosonic.com) to complement our Uscom website (www.uscom.com.au).
Digital support and education materials are delivered through these portals and provide cost-effective and quality-controlled
education for established, new and prospective users.
Uscom China marketing logos
Uscom koalas were created for different clinical applications of adult, maternal, paediatric and neonatal care in China.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
11 CHAIRMAN’S LETTER
STRATEGY FY 2021
Governments worldwide are responding to the pandemic with investments to improve health care systems in preparation for
future infectious disease outbreaks. This spending stimulus targets new and refurbished hospitals with special funding for critical
care equipment such as cardiac monitors and ventilators.
Importantly the USCOM 1A, a non-invasive cardiac output monitor, is recognised as the preferred treatment for patients with
severe COVID-19 by the People’s Republic of China, and the international Society of Critical Care Medicine. These endorsements
will drive sales as new infectious disease centres are established worldwide in preparation for the next generation of seasonal
pandemics.
Management’s strategy for 2021 is based on expanding the new distributor growth model developed by Uscom China in mid-
2020 and which generated immediate profitability in H2. For implementation we have divided the globe into South East Asia,
focused on our new Singapore office, China, from our office in Beijing, Europe from our office in Budapest, and the US from our
office in LA. Central to this growth plan has been the appointment of Ms Teresa Guo as our Director of Global Operations, while
retaining her role as General Manager of Uscom China.
We are currently focused on Europe where we are expanding the role of the Budapest office to include sales and distribution in
addition to the current R&D and manufacturing role. Our Beijing operations are also being expanded in preparation for the NMPA
approval of our BP+ and SpiroSonic devices and the approval of VENTITEST.
In the US we already have 30 direct dealers covering more than 75% of the US geography. These dealers are commission based,
with a direct revenue related to cost. While the US pandemic has arrested the implementation of this initiative, the dealers are
trained and ready to sell as soon as the US infectious condition stabilises and access to the hospitals and the Health care system
resumes.
This expanded global distribution network has been founded on the sale of the USCOM 1A, while our new initiatives will provide
dealer channels into the high-volume consumer market which will deliver our BP+ and SpiroSonic devices to market and volume
sales.
Our new VENTITEST and VENTITEST-S devices will reach the market in the next few months, and will receive fast track approval
as a non-medical device. We are already planning to feed these devices into our current distribution channels as we target the
global leaders in ventilator manufacture as potential partners of scale.
For 2021 we will also continue to drive our product regulatory applications step by step. Once these approvals are received Uscom
will shift from an essentially single product company to a 10 product, multi-suite medical technology company, supported by its
own powerful global distribution network. Management are firmly focused on the accompanying revenue growth opportunities.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
12 CHAIRMAN’S LETTER
RISKS
The Pandemic
COVID-19 has changed the way we do business. The time to recovery from this pandemic is unpredictable, with some predicting
we will need to adopt to living with seasonal infections of one type or another. The establishment of global business centres in
Australia, Singapore, China, Budapest, London and LA assists us to keep channels open to global markets.
Global markets
For Uscom, operating in global markets creates exposure to risk such as international trade wars and currency volatility, US Health
reform, Brexit, a China slow down, North Korea and the South China Sea. All of these unpredictable events, cited in 2019, remain
unresolved, and may evolve at any time to impact our business. However global diversification, while exposing us to more
challenges, also mitigates us against regional geopolitical, economic, trade and currency risks.
China
China is our major market and investment for Uscom, and any significant change in business conditions in China may impact us
as we respond. Uscom has confidence in the scale and accessibility of the China market as China continues to rebound from the
COVID pandemic.
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 and a strong market. 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 an identified risk 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.
CORPORATE SOCIAL RESPONSIBILITY
Uscom supports the Australian Wildlife Conservancy
Koala populations have been devastated this year with the widespread wildfires responsible for the death of an estimated 30,000
koalas of the total 100,000 national population, and their extinction is predicted by 2050 unless action is taken to conserve them.
The Australian Wildlife Conservancy (AWC) are active in protecting Koalas.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
13 CHAIRMAN’S LETTER
The AWC is the largest private (non-profit) owner of land for conservation in Australia. They protect (alone or in partnership) more
than 6.5 million hectares including in iconic regions like the Kimberley, the Top End, Lake Eyre and the south-west forests. AWC
depend on tax deductible donations to support their critical national conservation initiatives as they deliver cost-effective land
management to protect 72% of all Australian mammal species and 88% of all Australian mainland bird species. 87 per cent of our
mammal species, 93 per cent of reptiles, 94 per cent of frogs and 45 per cent of our bird species are found only in Australia. The
vital national activities of the AWC are endorsed by Uscom - www.australianwildlife.org
CONCLUSION
FY2020 was a milestone year for Uscom, as it reported its first cash flow positive and profitable half in H2 despite the challenges
of the pandemic with our H2 cash receipts were up 83%. For shareholders the capitalised value of UCM increased 67% for the
year, while the ASX All Ordinaries was decreased by 11%.
Strategic growth remained strong as we expanded our global footprint across four continents, increased our distribution in all
jurisdictions, grew and developed our skilled staff and operations, increased our product ranges, all while improving cash receipts
and cash flow and increasing shareholder value by 67%. These investments are the foundations of our future growth and positions
us well as global economies rebound over the years ahead.
Medical technology provides persistent social value and is a leading value investment class, and Uscom has sector leading
technologies across multiple product suites with a global network of distribution and a strategy for global sales and an established
history of strong and reliable growth. We continue to grow our clinical and industry leadership.
Thanks to shareholders for their support as we grow our valuable global medical technology company. In uncertain times reliable
growth is valuable, and growth is the defining feature of Uscom as we continue to build a reliable wealth vehicle with an
outstanding future. We are delighted to share this growth with investors.
Kind Regards
Professor Rob Phillips
Chairman
ANNUAL REPORT | 2019-2020 USCOM LIMITED
14
ASX
ANNOUNCEMENTS
FY 2020
Announcements are a measure of corporate activity, and below is the list of FY 2020 announcements (Excluding
Financial Reporting) with those deemed to be financially sensitive by the ASX marked as ($), being 25 of 59
1
2
3
4
5
6
7
8
9
01/06/2020
Appendix 2A
01/06/2020
Cleansing notice
29/05/2020
Change of Director’s Interest Notice - Meng
01/05/2020
Q4 Briefing 2020 ($)
30/04/2020
Uscom Partners with AD for BP Plus New Advanced Modules ($)
29/04/2020
Virtual Health Conference
20/04/2020
Appendix 4C – quarterly ($)
08/04/2020
Uscom Partners with UTAS in IDEAL eHealth Initiative ($)
26/03/2020
Q3 Investor Presentation COVID-19 ($)
10
23/03/2020
Uscom Virtual Investor Presentation - 26 March 2020
11
02/03/2020
Half Yearly Report and Accounts ($)
12
02/03/2020
Cleansing notice
13
02/03/2020
Appendix 2A
14
27/02/2020
Uscom Investor Update – Coronavirus ($)
15
24/02/2020
USCOM 1A in New International Sepsis Guidelines for Children ($)
16
14/02/2020
New Hubei recommendations for children with Coronavirus
17
12/02/2020
Response to ASX Aware Query ($)
18
11/02/2020
Reinstatement to Official Quotation ($)
19
11/02/2020
Clarification-Material increase in USCOM 1A orders in China ($)
21
10/02/2020
Material increase in USCOM 1A orders in China ($)
22
06/02/2020
Response to ASX Price Query ($)
23
23/01/2020
Appendix 4C – quarterly ($)
24
10/01/2020
Change of Director's Interest Notice
25
10/01/2020
Cleansing notice
26
10/01/2020
Appendix 2A
27
06/01/2020
China 5 Year NMPA Certification for Uscom ($)
28
19/12/2019
Initial Director's Interest Notice - Meng
ANNUAL REPORT | 2019-2020 USCOM LIMITED
15 ASX ANNOUNCEMENTS FY2020
29
16/12/2019
Mr Meng Joins Uscom Board
30
06/12/2019
Appendix 3B
31
05/12/2019
FORM 604
32
03/12/2019
US Sales and Marketing Expansion ($)
33
02/12/2019
Cleansing statement
34
02/12/2019
Appendix 2A
35
18/11/2019
Corporate governance statement
36
14/11/2019
Uscom Successful Small Parcels Consolidation Completed
37
30/10/2019
Uscom European Sales and Marketing Expansion ($)
38
28/10/2019
Becoming a substantial holder
39
25/10/2019
Capital Reconstruction
40
23/10/2019
Appendix 4C – quarterly ($)
41
16/10/2019
Uscom 2019 AGM Results ($)
42
16/10/2019
Uscom 2019 AGM Presentation ($)
43
10/10/2019
Uscom Investor Update ($)
44
04/10/2019
Consolidation Small Parcels - Amended Terms
45
30/09/2019
Cleansing statement
46
30/09/2019
Appendix 3B
47
30/09/2019
Private placement to management and major shareholders
48
11/09/2019
Notice of Annual General Meeting/Proxy Form
49
10/09/2019
Consolidation of Unmarketable Parcels
50
02/09/2019
Appendix 4G
51
26/08/2019
Regulatory Approvals for Three Uscom Devices ($)
52
19/08/2019
Ceasing to be a substantial holder
53
19/08/2019
Annual Report to shareholders ($)
54
19/08/2019
Preliminary Final Report ($)
55
23/07/2019
Appendix 4C – quarterly ($)
56
17/07/2019
New Patents for Revolutionary Uscom Monitor
57
11/07/2019
Cleansing statement
58
11/07/2019
Appendix 3B
59
09/07/2019
Record Manufacturing for FY2019
ANNUAL REPORT | 2019-2020 USCOM LIMITED
16
DIRECTORS
REPORT
The Directors present their report on Uscom Ltd and its Controlled Entities for the financial year ended 30 June 2020.
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.
Rob Phillips is the founder of Uscom Ltd, the Chief
Executive Officer, Executive Director and Chief
Scientist of the Company. Rob has 17 years’
experience as Executive Chairman of USCOM, since
taking the compqny public in 2003, With over 20
years in executive corporate management, Rob has
overseen the acquisition of two
international
medical device companies. Rob has a PhD and MPhil
in Cardiovascular Medicine from The University of
is an Adjunct Associate
Queensland where he
the University of
Professor of Medicine,at
Queensland.
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
finance director and
company secretary of ASX-listed companies, and is a
former Senior Legal Member of the NSW Civil and
Administrative Tribunal.
chairman,
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.
in
and
management
Xianhui Meng is an experienced international value
economics,
qualifications
investor, with
engineering
business
administration. Mr Meng has 10 years experience as
a China government departmental head, and 20
years experience as the Executive Manager and
Executive Director of a HK Listed Chinese Pharma
specialising in sales and distribution. Mr Meng brings
both his international corporate management and
strategic skills to the Uscom Board.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
17 DIRECTORS REPORT
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
X Meng
Board of Directors
Meetings held while a Director
6
6
6
4
No. of meetings attended
6
6
5
4
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 $1,314,189 (2019: $1,389,398).
Dividends
No dividends were declared or recommended for the financial year ended 30 June 2020 (2019: 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 1-13.
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 Audit Pty Ltd, 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 Audit Pty Ltd during or since the financial year.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
18 DIRECTORS REPORT
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.
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 24 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 24 of the financial statements on page 48 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 Audit Pty Ltd 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, Brett Crowley, Xianhui Meng,
Non-Executive Director Non-Executive Director Non-Executive Director
Executive Directors
Rob Phillips,
Chairman, Chief Executive Officer
ANNUAL REPORT | 2019-2020 USCOM LIMITED
19 DIRECTORS REPORT
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.
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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
20 DIRECTORS REPORT
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:
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 three
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.
Service contracts have been entered into by the Consolidated Entity with non-executive directors, describing the components
and amounts of remuneration applicable on their initial appointment. These contracts are at fixed fees for their service.
Service contracts have been entered into by the Consolidated Entity with key management personnel, describing the components
and amounts applicable on their initial appointment, including terms and performance criteria for performance-related cash
bonuses. These contracts do not fix the amount of remuneration increases from year to year. Remuneration levels are reviewed
generally each year by the Board of Directors to align with changes in job responsibilities and market salary expectations. All
contracts are for on ongoing period.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
21 DIRECTORS REPORT
Key management personnel remuneration
Remuneration includes salaries, benefits and superannuation contributions in respect of the financial year 2020.
Short term benefits
Post-employment
benefits
Long term
benefits
Equity
Total
remuneration
Performance
related
Directors’ Base
Fee
$
Base salary
$
Superannuation
$
Long service
leave
$
Share-based
payment
$
$
%
38,325
34,959
-
-
-
73,284
-
-
-
265,764
189,000
454,764
-
3,321
-
-
17,955
21,276
-
-
-
-
-
-
38,325
38,280
-
9,402
77,309
352,474
6,201
15,603
5,103
82,412
218,259
647,339
-
-
-
22%
2%
13%
Non-Executive Director
C Bernecker
B Crowley
X Meng
Executive Director
R Phillips
Senior Executive
N Schicht
Total
Remuneration includes salaries, benefits and superannuation contributions in respect of the financial year 2019.
Short term benefits
Post-employment
benefits
Long term
benefits
Equity
Total
remuneration
Performance
related
Directors’ Base
Fee
$
Base salary
$
Superannuation
$
Long service
leave
$
Share-based
payment
$
$
%
5,081
38,325
15,950
-
-
59,356
-
-
-
483
-
-
-
-
-
239,887
10,878
13,901
-
-
-
-
189,000
428,887
17,955
29,316
3,051
16,952
11,289
11,289
5,564
38,325
15,950
264,666
221,295
545,800
-
-
-
-
5%
2%
Non-Executive Director
S Jack
C Bernecker
B Crowley
Executive Director
R Phillips
Senior Executive
N Schicht
Total
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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
22 DIRECTORS REPORT
Number of rights over ordinary shares held by Directors and Senior Executives
Balance
Granted
Exercised
1 July
2019
No.
During FY2020
No.
During
FY2020
No.
Lapsed /
Cancelled
During
FY2020
No.
Balance
30 June 2020
No.
Total
Vested
30 June
2020
No.
Total
Unexercisable
-
-
-
-
-
-
1,190,476
2,173,913
(3,364,389)
450,000
1,640,476
-
2,173,913
-
(3,364,389)
-
-
-
-
-
-
-
-
450,000
450,000
-
-
-
-
-
450,000
Non-Executive Director
C Bernecker
B Crowley
X Meng
Executive Director
R Phillips
Senior Executive
N Schicht
Total
Further details of the options are disclosed in Note 18 of the financial statements.
Details of rights outstanding as at end of year
Holders No.
Grant date
Exercisable
at 30 June 2019
Expiry date
30 June 2019
Outstanding Right
Exercise
Price
Issued date
fair value
1 (Executive)
Total
26 November 2014
%
0%
1 July 2020
No.
450,000
450,000
$
0.00
$
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. 2,173,913 Indeterminate rights were issued to Rob Phillips on the terms and
conditions approved by shareholders at the AGM on 16 October 2019 under the Equity Incentive Plan. Consideration payable
upon vesting is $nil. The Board may exercise its discretion to pay cash in lieu of issue of ordinary shares. Total of 3,364,389 were
exercised on 10 January 2020.
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.
Number ordinary shares held by Directors and Senior Executives
Balance
01 July 2019
No.
Received as
Remuneration
No.
Options/Rights
Exercised
No.
Purchased on market
No.
Balance
30 June 2020
No.
Non-Executive Director
C Bernecker
B Crowley
X Meng
Executive Director
R Phillips
Senior Executive
N Schicht
Total
-
-
27,323,649(1)
23,501,158
313,200(3)
51,138,007
-
-
-
-
-
-
-
-
-
3,364,389
-
3,364,389
-
-
4,044,559(2)
31,368,208
-
26,865,547
-
4,044,559
313,200
58,546,955
*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 Smart Top Overseas Limited managed by Citicorp Nominees Pty Limited
(2) 3,500,000 @ $0.10 share capital were purchased on 3 December 2019 and 544,559 ordinary shares were purchased on market
on 22 May 2020.
(3) 5,000 of these ordinary shares are held by a family associate
This concludes the remuneration report, which has been audited.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
23 DIRECTORS REPORT
Additional Information
The earnings of the consolidated entity for the five years to 30 June 2019 are summarised below:
2020
$
2019
$
2018
$
2017
$
2016
$
Sales Revenue
Loss after income tax
3,479,758
(1,331,335)
2,844,138
(1,389,398)
2,168,051
(1,960,923)
2,723,359
(1,800,849)
2,482,925
(1,915,029)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share Price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings declared (cents per share)
2020
0.22
(0.9)
2019
0.14
(1.0)
2018
0.17
-
(1.6)
2017
0.19
-
(1.6)
2016
0.25
-
(2.0)
2,173,913 rights were issued and exercised by director during the reporting period.
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.
Professor Rob Phillips
Chairman
Sydney, 14 August 2020
ANNUAL REPORT | 2019-2020 USCOM LIMITED
24
FINANCIAL
REPORT
AUDITORS INDEPENDENCE DECLARATION 25
STATEMENT OF PROFIT AND LOSS &
OTHER COMPREHENSIVE INCOME 26
STATEMENT OF FINANCIAL POSITION 27
STATEMENT OF CHANGES IN EQUITY 28
STATEMENT OF CASH FLOWS 29
NOTES TO FINANCIAL STATEMENTS 30-49
ANNUAL REPORT | 2019-2020 USCOM LIMITED
25 FINANCIAL REPORT
AUDITOR’S INDEPENDENCE DECLARATION
ANNUAL REPORT | 2019-2020 USCOM LIMITED
26 FINANCIAL REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME
For the Year Ended 30 June 2020
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)
Note
Note
2020
$
2019
$
3
4
5
6
7
7
4,284,726
(435,007)
3,641,958
(687,249)
(5,163,908)
(4,335,647)
(1,314,189)
(1,380,938)
(17,146)
(8,460)
(1,331,335)
(1,389,398)
(13,185)
(13,185)
(24,925)
(24,925)
(1,344,520)
(1,414,323)
(1,344,520)
(1,414,323)
(1,344,520)
(1,414,323)
(0.9)
(0.9)
(1.0)
(1.0)
This Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the attached Notes.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
27 FINANCIAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Tax asset
Total current assets
Non-current assets
Bank guarantee
Plant and equipment
Intangible assets
Right-of-use assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Lease liabilities
Total current liabilities
Non-current liabilities
Provisions
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Options and rights reserve
Other reserves – unissued equity
Accumulated losses
Foreign currency translation reserve
Total equity
Note
Note
2020
$
2019
$
8
9
10
11
12
13
14
2
15
16
2
16
2
17
18
18
6
19
1,920,657
453,700
828,853
475,109
3,678,319
83,456
163,524
498,122
1,493,980
2,239,082
1,208,496
691,945
511,334
462,997
2,874,772
83,456
223,387
957,329
-
1,264,172
5,917,401
4,138,944
597,124
213,985
187,310
998,419
66,703
1,429,935
1,496,638
437,159
175,827
-
612,986
38,002
-
38,002
2,495,057
650,988
3,422,345
3,487,956
34,197,430
2,907,072
300,000
(34,016,125)
33,968
33,300,933
2,824,660
-
(32,684,790)
47,153
3,422,345
3,487,956
This Statement of Financial Position is to be read in conjunction with the attached Notes.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
28 FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Year Ended 30 June 2020
Issued
Capital
$
Options and rights
Reserve
$
Other
reserves
$
Accumulated
Losses
$
Foreign Currency
Translation
Reserve
$
Total
$
Balance at 30 June 2018
33,254,701
2,813,371
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)
-
-
-
(3,768)
50,000
-
-
-
-
-
11,289
Balance at 30 June 2019
33,300,933
2,824,660
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 17) (Note 18)
Unissued equity (Note 18)
-
-
-
-
750,000
(16,455)
162,952
-
-
-
-
-
82,412
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
(31,295,392)
72,078
4,844,758
(1,389,398)
-
(1,389,398)
-
(24,925)
(24,925)
(1,389,398)
(24,925)
(1,414,323)
-
-
-
-
-
-
50,000
(3,768)
11,289
(32,684,790)
47,153
3,487,956
(1,331,335)
-
(1,331,335)
-
(13,185)
(13,185)
(1,331,335)
(13,185)
(1,344,520)
-
-
-
-
-
-
750,000
(16,455)
245,364
300,000
Balance at 30 June 2020
34,197,430
2,907,072
300,000
(34,016,125)
33,968
3,422,345
This Statement of Changes in Equity is to be read in conjunction with the attached Notes.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
29 FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended 30 June 2020
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
Note
Note
2020
$
2019
$
4,025,173
2,530,918
14,390
-
42,895
-
(4,884,878)
(4,605,496)
562,090
812,203
Net cash used in operating activities
20(b)
(283,225)
(1,219,480)
Cash flows from investing activities
Purchase of patents and trademarks
Purchase of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares and options
Share issue costs
Unissued equity contributions received
14
13
17
17
18
(22,405)
(15,754)
(43,298)
(68,533)
(38,159)
(111,831)
750,000
(16,455)
300,000
50,000
(3,768)
-
Net cash provided by financing activities
1,033,545
46,232
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the year
Exchange rate adjustment for opening balance
712,161
(1,285,079)
1,208,496
2,493,575
-
-
Cash and cash equivalents at the end of the year
20 (a)
1,920,657
1,208,496
This Statement of Cash Flows is to be read in conjunction with the attached Notes.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
30 FINANCIAL REPORT
NOTES TO FINANCIAL STATEMENTS
For the Year Ended 30 June 2020
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 14th August 2020.
Going concern
The consolidated entity incurred an operating cash outflow of $283,225 during the year ended 30 June 2020 (2019: $1,219,480).
The total comprehensive loss for the year ended 30 June 2020 was $1,344,520 (2019: $1,414,323) and the cash on hand as at 30
June 2020 was $1,920,657.
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.
Impact of COVID-19
The effect of COVID-19 on future results of Uscom is difficult to predict. However during the last 6 months, the only period in
which COVID-19 has been impacting Uscom markets worldwide, Uscom receipts increased 83% with sales up 57%, and for the
half Uscom was cash flow positive and profitable for the first time since listing. While this performance may be related to the
positive role of USCOM 1A in management of COVID-19 and may normalise once a vaccine is discovered, it may also represent
a new operational growth trend in response to our Uscom China restructure. In any event Uscom management is watching sales
trends and the progress of COVID-19 intently to plan appropriate responses to any unanticipated changes in operational
circumstances.
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.
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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
31 FINANCIAL REPORT
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
AASB 16: Leases
Mandatory date of application: 1st July 2019
The consolidated entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees
eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets,
right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating
lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an
interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses
associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by
interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is
disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities.
For lessor accounting, the standard does not substantially change how a lessor accounts for leases
Assessment of Impact
The impact on the financial performance and position of the consolidated entity from the adoption of AASB 16 is detailed below.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost
of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the
site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of
the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of
the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases
with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as
incurred.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value
of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate
cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments
less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid
under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to
occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there
is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
32 FINANCIAL REPORT
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The
impact of the adoption is summarised as follows:
Statement of Profit or Loss and Other Comprehensive Income
Accounting under new
accounting policy (AASB 16)
$
Accounting under previous
policy (AASB 117)
$
Effect of change to
accounting policy
$
Occupancy expenses
Depreciation on Right-of-use assets
Finance expenses
Statement of Financial Position
Right-of-use assets
Lease liabilities – current
Lease liabilities – non current
Retained losses
Total equity
31,161
249,507
88,002
368,670
1,493,980
(187,310)
(1,429,935)
(123,265)
(33,053,459)
(33,053,459)
245,405
-
-
245,405
-
-
-
-
(33,903,274)
(33,903,274)
Reconciliation of operating lease commitments as at 30 June 2019 to lease liability recognised as at 1 July 2019
Current
Non-current
Total lease liabilities
Operating lease commitments disclosed as at 30 June 2019
Short term and low value lease commitments as at 30 June 2019
Further terms reasonably certain to exercise
Discounted using the Group’s incremental borrowing rate on 1 July 2019
Lease liability recognised as at 1 July 2019
Reconciliation of movement in lease liabilities
Lease liability recognised as at 1 July 2019
Additions
Interest expense
Repayment of lease liabilities
Total lease liabilities as at 30 June 2020
(214,244)
249,507
88,002
123,265
1,493,980
(187,310)
(1,429,935)
(123,265)
(123,265)
(123,265)
30 June 2020
$
187,310
1,429,935
1,617,245
830,485
(39,497)
1,304,168
(474,621)
1,620,535
30 June 2020
$
1,620,535
145,486
88,002
(236,778)
1,617,245
ANNUAL REPORT | 2019-2020 USCOM LIMITED
33 FINANCIAL REPORT
Note 3: Revenue and other income
Operating revenue
Sale of products
Services revenue
Other revenue
Interest received
Other income
Grants - R&D incentive
Grants – EU research grant
Grant – Business growth grant
COVID-19 Cash Flow Boost
COVID-19 JobKeeper payments
Foreign exchange gain
Sundry income
Total other income
Total revenues and other income from continuing operations
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows
2020
$
2019
$
3,407,932
71,826
2,827,449
16,689
13,540
20,539
468,454
36,433
-
50,000
46,500
190,041
-
791,428
4,284,726
421,000
295,499
9,000
-
-
46,443
5,339
777,281
3,641,958
2020
Revenue lines
Sales of products
Services revenue
Total
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Total
2019
Revenue lines
Sales of products
Services revenue
Total
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Total
Australia
$
Asia
$
Americas
$
Europe
$
Other regions
$
Consolidated
$
5,386
13,567
18,953
5,386
13,567
18,953
2,415,770
16,396
2,432,166
2,415,770
16,396
2,432,166
524
149
673
524
149
673
86,102
16,689
102,791
86,102
16,689
102,791
1,694,128
-
1,694,128
1,694,128
-
1,694,128
265,827
-
265,827
265,827
-
265,827
681,956
41,714
723,670
681,956
41,714
723,670
719,060
-
719,060
719,060
-
719,060
304,296
-
304,296
304,296
-
304,296
62,332
-
62,332
62,332
-
62,332
3,407,932
71,826
3,479,758
3,407,932
71,826
3,479,758
2,827,449
16,689
2,844,138
2,827,449
16,689
2,844,138
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 when control of the products has transferred, being the point in time when the
products are delivered to the customer’s specified location, the amount of revenue can be measured reliably, and it is
probable that payment will be received by the Group.
• 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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
34 FINANCIAL REPORT
•
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
Impairment of patents
Depreciation – right-of-use assets
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
2020
$
320,225
231,185
249,507
2,017,014
809,998
681,578
56,977
95,861
140,718
470,949
89,896
5,163,908
2019
$
334,672
-
-
1,440,409
759,565
852,015
209,562
79,991
182,231
475,746
1,456
4,335,647
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 $245,364 in 2020
(2019: $11,289) 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.
Impairment of patents
Impairment of patents of $231,185 in 2020 (2019: Nil). Refer to Note 14 for details.
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, 11% in Hungary, 25% in China (2019: 27.5%
in Australia, 15% in USA, 12% in Hungary and 25% in China )
Tax effect on non-taxable income and non-deductible expenses
Temporary differences
Deferred tax asset not brought to account
Income tax
2020
$
(17,146)
(17,146)
2019
$
(8,460)
(8,460)
(1,314,189)
(1,380,938)
51,888
(179,607)
(47,532)
158,105
(17,146)
238,407
(159,877)
(7,470)
(79,520)
(8,460)
As at 30 June 2020, the Consolidated Entity had estimated recouped operating income tax losses of $20,063,998 (2019:
$20,224,587). The benefit of these losses of $5,337,771 (2019: $5,393,850 ) 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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
35 FINANCIAL REPORT
Note 6: Accumulated Losses
Accumulated losses at the beginning of the financial year
Loss for the year
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)
2020
$
(32,684,790)
(1,331,335)
(34,016,125)
2019
$
(31,295,392)
(1,389,398)
(32,684,790)
2020
$
(1,331,335)
Number
2019
$
(1,389,398)
Number
145,211,920
137,483,354
-
450,000
-
-
145,661,920
137,483,354
(0.9)
(0.9)
(1.0)
(1.0)
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
2020
$
66
1,853,415
51,972
15,204
1,920,657
2019
$
118
1,138,270
55,016
15,092
1,208,496
Cash at bank and on hand bears floating interest rates. The interest rate relating to cash and cash equivalents for the year was
between 0.15% and 0.85% (2019: between 0.60% and 1.20%)
Note 9: Trade and other receivables
Current
Trade receivables (a)
Other receivables (b)
Total current receivables
2020
$
271,761
181,939
453,700
2019
$
583,306
108,639
691,945
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.
a. Past due but not impaired and impairment of receivables
Trade receivables are non-interest bearing and on an average of 45 day terms. Customers with balances past due without
provisions for impairment of receivables amount to $Nil as at 30 June 2020 ($63,321 as at 30 June 2019). The company has
recognised a loss of $NIL (2019: $NIL) in profit and loss in respect of impairment of receivables for the year ended 30 June 2020.
The group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. The ECL assessment completed by the Group as at 30 June 2020 has resulted in an immaterial
credit loss and no impairment allowance has been recognised by the Group (2019: $Nil).
ANNUAL REPORT | 2019-2020 USCOM LIMITED
36 FINANCIAL REPORT
b. Other receivables
These amounts related to prepayments, accrued interest and net GST refunds receivable. None of these receivables are impaired
or past due but not impaired.
c. Fair value and credit risk
Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.
Information about the company’s exposure to fair value and credit risk in relation to trade and other receivables in provided in
note 21.
Note 10: Inventories
Current inventories at cost
Raw materials
Work in Progress
Finished products
Total inventories
2020
$
511,617
-
317,236
828,853
2019
$
441,490
696
69,148
511,334
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. Net realisable value is the estimated selling price in the ordinary course of business less
the estimated costs of completion and the estimated costs necessary to make the sale.
Note 11: Tax asset
Income tax credit
R & D tax incentive
Total tax asset
2020
$
15,486
459,623
475,109
2019
$
41,997
421,000
462,997
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.
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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
37 FINANCIAL REPORT
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
Non-Current
Bank guarantee
Total other non-current assets
2020
$
83,456
83,456
2019
$
83,456
83,456
The parent entity has provided a guarantee in respect of obligations under premises lease of $83,456 (2019: $83,456).
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
2020
$
743,157
(669,337)
73,820
175,712
(92,825)
82,887
43,338
(37,303)
6,035
58,760
(57,978)
782
2019
$
734,700
(641,463)
93,237
179,306
(60,516)
118,790
44,012
(33,447)
10,565
59,687
(58,892)
795
Total plant and equipment
163,524
223,387
Movements in carrying amounts
Plant and
equipment
Office furniture
and equipment
Computer
software
Low value
asset pool
Total
Useful life
2-7 years
$
2-7 years
$
3 years
$
Consolidated Entity
Carrying amount at 1 July 2019
Additions
Disposals
Depreciation expense
Effects of foreign currency exchange differences
Carrying amount at 30 June 2020
93,237
12,979
-
(31,569)
(827)
73,820
118,790
-
(2,290)
(32,742)
(871)
82,887
10,565
1,650
(1,295)
(4,348)
(537)
6,035
3 years
$
795
1,125
-
(1,139)
1
782
$
223,387
15,754
(3,585)
(69,798)
(2,234)
163,524
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%
ANNUAL REPORT | 2019-2020 USCOM LIMITED
38 FINANCIAL REPORT
Note 14: Intangible assets
Non-current
Patents at cost
Accumulated amortisation
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
2020
$
1,974,739
(1,245,433)
(231,185)
498,122
630,730
(630,730)
-
498,122
810,159
22,405
(231,185)
(103,257)
498,122
147,170
-
-
(147,170)
-
2019
$
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
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
Intangible is monitored by management at the level of the four operating segments identified in note 25.
A segment-level summary of the intangible allocation is presented below:
2020
Patent from cardiovascular products
Regulatory approvals
Less: Impairment provided
Total
2019
Patent from cardiovascular products
Regulatory approvals
Total
Australia
$
Asia
$
Americas
$
Europe
$
Consolidated
$
40,537
-
-
40,537
45,805
-
45,805
76,719
-
-
76,719
87,524
-
87,524
231,185
-
(231,185)
-
380,866
-
-
380,866
262,258
-
262,258
414,572
-
414,572
729,307
-
(231,185)
498,122
810,159
-
810,159
ANNUAL REPORT | 2019-2020 USCOM LIMITED
39 FINANCIAL REPORT
The group tests whether intangible has suffered any impairment on an annual basis or any indications present that an asset may
be impaired. For the 2020 and 2019 reporting periods, the recoverable amount of the cash-generating units (CGUs) was
determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections
based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are
extrapolated using the estimated growth rates stated below.
The following table sets out the key assumptions for those CGUs that have significant intangibles allocated to them:
Australia
Asia
Americas
Europe
2020
Patent from BP+ and 1A products
Sales volume (% annual growth rate)
Sales price (% annual growth rate)
Budgeted gross margin (average %)
Other operating costs (average$)
Long-term growth rate (%)
Pre-tax discount rate (%)
2019
Patent from BP+ and 1A products
Sales volume (% annual growth rate)
Sales price (% annual growth rate)
Budgeted gross margin (average %)
Other operating costs (average$)
Long-term growth rate (%)
Pre-tax discount rate (%)
5%
NIL
80%
838,633
NIL
14.55%
5%
NIL
80%
1,050,000
NIL
14.05%
10%
NIL
48%
961,100
NIL
15.53%
10%
NIL
48%
902,100
NIL
15.03%
NIL
NIL
82%
246,000
NIL
15.24%
2%
NIL
82%
224,000
NIL
14.74%
10%
NIL
82%
599,040
NIL
16.08%
10%
NIL
82%
705,000
NIL
15.58%
Management has determined the values assigned to each of the above key assumptions as follows:
Assumptions
Approach used to determining values
Sales volume
Sales price
Budgeted gross margin
Other operating costs
Average annual growth rate over the five-year forecast period; based on past
performance and management’s expectations of market development as well as the
regulatory approvals obtained.
Average annual growth rate over the five-year forecast period; based on current
industry trends and including long-term inflation forecasts for each territory.
Based on past performance and management’s expectations for the future.
Fixed costs for the CGUs, which do not vary significantly with sales volumes or prices.
Management forecasts these costs based on the current structure of the business,
adjusting for inflationary increases but not reflecting any future restructurings or cost-
saving measures. The amounts disclosed above are the average operating costs for
the five-year forecast period.
Pre-tax discount rate
Reflect specific risks relating to the relevant segments and the countries in which they
operate.
Significant estimate – impairment charge of Americas Territory
The impairment charge of $231,185 arose in the Americas Territory of patent BP+ and 1A products in response to poor economic
conditions in the US, the world’s largest medical device market, particularly in response to the US downturn in H2 of the 2020
period and anticipated poor conditions for at least the first half of 2021.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
40 FINANCIAL REPORT
Note 15: Trade and other payables
Current
Trade payables
Sundry payables and accrued expenses
Employee related payables
Total payables
2020
$
269,893
147,752
179,479
597,124
2019
$
282,259
123,863
31,037
437,159
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
2020
$
173,280
40,705
213,985
27,549
21,550
17,604
66,703
241,535
185,411
134,879
(78,755)
241,535
12,700
11,894
(3,044)
21,550
15,718
1,886
-
17,604
2019
$
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
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, and 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 | 2019-2020 USCOM LIMITED
41 FINANCIAL REPORT
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
Ordinary shares
Fully paid ordinary shares
Total contributed equity
Movement in issued capital
Shares on issue at the beginning of the year
Ordinary share issued for cash
Ordinary share issued for in lieu of salary
Share issue costs
Issued Equity at the end of the year
2020
Number
2019
Number
2020
$
2019
$
149,828,334
149,828,334
137,640,866
137,640,866
34,197,430
34,197,430
33,300,933
33,300,933
137,640,866
7,500,000
4,687,468
-
149,828,334
137,259,372
-
381,494
-
137,640,866
33,300,933
750,000
162,952
(16,455)
34,197,430
33,254,701
-
50,000
(3,768)
33,300,933
The Company’s authorised share capital amounted to 149,828,334 ordinary shares of no par value at 30 June 2020.
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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
42 FINANCIAL REPORT
Options and rights reserves (i)
Other equity reserves (b)
Foreign currency translation reserves
Total reserves
(i) Movement in options and rights reserves
Options reserve
Opening balance
Granted during the period
Exercised during the period
Lapsed during the period
Options at the end of the period
Performance rights reserve
Opening balance
Granted during the period (a)
Exercised during the period
Lapsed during the period
Expenses from share-based payment
Rights at the end of the period
Total
2020
Number
2019
Number
-
-
-
-
-
1,640,476
2,173,913
(3,364,389)
-
-
450,000
75,000
-
-
(75,000)
-
450,000
1,190,476
-
-
-
1,640,476
2020
$
2,907,072
300,000
33,968
3,241,040
2020
$
-
-
-
-
-
2019
$
2,824,660
-
47,153
2,871,813
2019
$
-
-
-
-
-
2,824,660
-
-
-
82,412
2,907,072
2,813,371
-
-
-
11,289
2,824,660
2,907,072
2,824,660
(a) 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. 2,173,913 Indeterminate rights were issued to Rob Phillips on the
terms and conditions approved by shareholders at the AGM on 16 October 2019 under the Equity Incentive Plan, vesting
dependent on performance hurdles on 1 July 2023. Consideration payable upon vesting is $nil. The Board may exercise its
discretion to pay cash in lieu of issue of ordinary shares. Total of 3,364,389 were exercised on 10 January 2020 upon meeting
the performance hurdles.
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.
Performance rights were issued during the year, pursuant to the Equity Incentive Plan. Fair values at grant date are determined
using a Black-Scholes Pricing Model that takes into account the exercise price, the term of the rights, the share price at the
grant date, the expected volatility of the underlying share, and risk free interest rate for the term of the option. The model
inputs for options granted during the year ended 30 June 2020 are noted below:
Grant date
Expiry
date
Vesting
period
(moths)
Exercise
price
Share price
at issue date
Fair value at
issue date
Est.
volatility
Expected
dividend yield
16-Oct-19
01-Jul-23
44.5
Nil
$0.12
$0.12
74%
-
Average
risk-free
rate
2.27%
(b) On 30 September 2019, the Company announced the private placement of shares to management and major shareholders.
Included in the placement was the issue of 3 million shares to the Company Executive Chairman Rob Philips at $0.10 per share.
The issue is conditional on shareholder approval which will be sought at the general meeting. An amount of $300,000 was
received by the company from Rob Philips as an advance on the placement which will be allocated to the allotted capital once
approved. In the event the shareholders reject the placement, the amount will be repaid to Rob Philips without attracting
interest.
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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
43 FINANCIAL REPORT
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
2020
$
47,153
(13,185)
33,968
2019
$
72,078
(24,925)
47,153
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.
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
Impairment
Depreciation on right-of-use assets
Interest expense on right-of-use assets
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
Repayment of lease liabilities
Net cash used in operating activities
2020
$
1,920,657
1,920,657
2019
$
1,208,496
1,208,496
(1,331,335)
(1,389,398)
69,798
250,427
231,185
249,507
88,002
245,364
(13,185)
311,545
(317,518)
3,826
(38,754)
(12,112)
(2,017)
(32,530)
(4,296)
23,889
164,897
56,124
10,736
(236,778)
(283,225)
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)
ANNUAL REPORT | 2019-2020 USCOM LIMITED
44 FINANCIAL REPORT
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 1 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) and equity attributable to equity holders
of the Parent Entity, comprising issued capital (Note 17), and accumulated losses (Note 6).
(c) Outstanding contracts
At 30 June 2020, 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.
Foreign currency risk management
(e)
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 2020 and is
exposed to foreign currency risk on sales and purchases denominated in a currency other than Australian dollars.
The currencies giving rise to this risk is primarily the US Dollar, Euro and Chinese yuan. 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
Cash
Current trade debtors
Current trade creditors
2020
USD
407,288
234,335
28,582
HUF
2,459
4,090,988
6,893,267
EUR
50,975
22,045
5,902
NZD
-
-
18,767
CNY
4,076,199
925,000
-
2019
USD
656,521
568,836
61,956
HUF
9,808,032
6,349,758
1,118,045
EUR
5,740
-
6,527
NZD
-
19,226
-
CNY
-
-
-
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, Hungarian forint (HUF) and Chinese yuan (CNY) 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, CNY and HUF
rates against the Australian Dollar with all other variables held constant. 10% and 5% are the sensitivity rates used when reporting
ANNUAL REPORT | 2019-2020 USCOM LIMITED
45 FINANCIAL REPORT
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% USD, 5% EUR, 5% CNY and 5% HUF
- decrease 10% USD, 5% EUR, 5% CNY and 5% HUF
2020
$
(580,978)
580,978
2019
$
(206,011)
206,011
Interest rate risk management
(g)
The Consolidated Entity does not have any external loans or borrowings as at 30 June 2020 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.
Interest rate sensitivity
(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.
Profit/Loss - increase 100 basis points
- decrease 100 basis points
2020
$
1,354
(1,354)
2019
$
2,054
(2,054)
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
2020
$
271,761
-
-
271,761
2019
$
519,985
22,455
40,866
583,306
No bad debt was written off during the year (2019: $Nil). There was no doubtful debt provision as at 30 June 2020 (2019: Nil). The
outstanding debts $271,761 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
Note9.
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.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
46 FINANCIAL REPORT
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.
Weighted
Average
effective interest
Rate %
Fixed interest rate maturing
Floating
interest
$
Within 1
year
$
1 to 5
years
$
Non-interest
bearing
$
Total
$
0.0
0.0
2.85
0.0
1.5
2.85
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,203
-
-
-
15,203
-
-
-
15,203
-
15,092
-
-
-
15,092
-
-
-
15,092
-
-
83,457
-
-
83,457
-
-
-
83,457
-
-
83,457
-
-
83,457
-
-
-
83,457
Consolidated
2020
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
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
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
Right-to-use assets
Accruals
Provisions
Net assets per Statement of Financial Position
1,905,454
-
-
271,761
73,967
2,251,182
269,893
179,479
449,372
1,801,810
1,193,404
-
-
583,306
39,420
1,816,130
282,259
31,037
313,296
1,502,834
2020
$
1,900,469
475,109
828,853
107,973
163,524
498,121
(123,264)
(147,752)
(280,688)
3,422,345
1,905,454
15,203
83,457
271,761
73,967
2,349,842
269,893
179,479
449,372
1,900,470
1,193,404
15,092
83,457
583,306
39,420
1,914,679
282,259
31,037
313,296
1,601,383
2019
$
1,601,383
462,997
511,334
69,218
223,387
957,329
-
(123,863)
(213,829)
3,487,956
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 | 2019-2020 USCOM LIMITED
47 FINANCIAL REPORT
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%
Significant investments in subsidiaries:
Country of subsidiary incorporation:
Proportion of ownership interest:
Uscom SNG Pte. Ltd.
Singapore
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
Xianhui Meng, Non-Executive Director (Appointed on 16 December 2019)
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 18.
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
Long-term benefits
Share-based payment
Total key management personnel remuneration
2020
$
528,048
21,276
15,603
82,412
647,339
2019
$
488,243
29,316
16,952
11,289
545,800
ANNUAL REPORT | 2019-2020 USCOM LIMITED
48 FINANCIAL REPORT
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
2020
$
2019
$
(360,451)
(360,451)
3,709,591
4,515,814
1,026,764
1,093,469
34,197,430
2,907,072
(33,682,157)
3,422,345
(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
Contingent liabilities
The parent entity has provided a guarantee in respect of obligations under premises lease of $83,456 (2019: $83,456). 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 2020 or 30 June
2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1.
Note 24: Auditors’ remuneration
Audit services
BDO Audit Pty Limited for audit and review of financial reports *
BDO Hungary for audit and review of financial reports
Total remuneration for audit services
2020
$
85,650
10,211
95,861
2019
$
70,000
9,911
79,911
* The BDO entity preforming the audit of the group transitioned from BDO East Coast Partnership to BDO Audit Pty Ltd on 1
August 2020. The disclosure include amounts received or due and receivable by BDO East Coast Partnership.
Note 25: 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 70% of the total sales. For the current period USCOM
1A comprised 87%, SpiroSonic spirometers 12% and BP+ 1% 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
ANNUAL REPORT | 2019-2020 USCOM LIMITED
49 FINANCIAL REPORT
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.
2020
Sales to external customers
Other income/revenue
Total segment revenue/income
Segment expenses
Segment result
Income tax
Consolidated
activities after income tax
loss
from ordinary
Australia
$
Asia
$
Americas
$
Europe
$
Consolidated
$
323,249
569,636
892,885
3,987,506
(3,094,621)
-
2,432,166
8,854
2,441,020
380,102
2,060,917
-
673
190,041
190,714
413,760
(223,046)
-
723,670
36,438
760,108
817,547
(227,888)
(17,146)
3,479,758
804,969
4,284,726
5,598,915
(1,314,189)
(17,146)
(2,602,412)
1,707,269
(191,158)
(245,034)
(1,331,335)
Segment assets
Segment liabilities
3,902,217
2,405,208
1,380,020
16,535
43,439
41,711
591,425
31,603
5,917,401
2,495,057
of
plant
Acquisition
equipment and intangibles
Depreciation, amortisation and
impairment
and
9,629
-
18,024
10,505
38,159
317,828
26,895
310,568
145,629
800,917
2019
Sales to external customers
Other income/revenue
Total segment revenue/income
Segment expenses
Segment result
Income tax
Consolidated loss from ordinary
activities after income tax
165,123
502,158
667,281
2,288,746
(1,621,465)
-
1,694,128
-
1,694,128
1,046,253
647,875
-
265,827
-
265,827
893,806
(627,979)
-
719,060
295,662
1,014,722
794,092
220,630
(8,460)
2,844,138
797,820
3,641,958
5,022,896
(1,380,938)
(8,460)
(1,621,465)
647,875
(627,979)
221,171
(1,389,398)
Segment assets
Segment liabilities
3,989,298
636,792
3,133
5,035
of
Acquisition
equipment and intangibles
Depreciation and amortisation
plant
and
32,931
65,362
1,699
20,015
-
3,548
23,822
17,900
146,513
5,613
4,138,944
650,988
62,881
231,395
121,333
334,672
Note 26: Contingencies
Other than the guarantee mentioned at Note 23, the consolidated entity did not have any contingent liabilities as at 30 June 2020
or 30 June 2019.
Note 27: 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 | 2019-2020 USCOM LIMITED
50
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 2020 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:
Professor Rob Phillips
Chairman
Sydney, 14 August 2020
ANNUAL REPORT | 2019-2020 USCOM LIMITED
51
INDEPENDENT
AUDIT REPORT
ANNUAL REPORT | 2019-2020 USCOM LIMITED
52
•
•
o
o
o
o
•
•
•
•
•
•
ANNUAL REPORT | 2019-2020 USCOM LIMITED
53
ANNUAL REPORT | 2019-2020 USCOM LIMITED
54
ANNUAL REPORT | 2019-2020 USCOM LIMITED
55
SHAREHOLDERS
INFORMATION
Additional information required by Australian Stock Exchange Listing Rules is as follows. This information is current as at 31 July
2020.
(a) Distribution Schedules of Shareholder
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 99,999,999,999
Total
Holders
Number
56
276
185
496
138
1,151
Ordinary Shares
Number
11,148
917,177
1,487,583
17,308,827
130,103,599
149,828,334
%
0.010
0.610
0.990
11.550
86.840
100.000
There were 138 holders of less than a marketable parcel of 2,499 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 2020 are:
CITICORP NOMINEES PTY LIMITED
DR ROBERT ALLAN PHILLIPS
JETAN PTY LTD & JETAN PTY LTD
(d) Twenty largest registered holders – ordinary shares
Balance as at 31 July 2020
CITICORP NOMINEES PTY LIMITED
MR ROBERT ALLAN PHILLIPS
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR JOHN LIONEL GLEESON
JETAN PTY LTD
JETAN PTY LTD
EASTBOURNE ROAD PTY LTD
DONGJUN SUN
MS TIANRAN GUO
INVIA CUSTODIAN PTY LIMITED
MR PETER ROBERT WOODLAND
MR DAVID LEROY BOYLES
MR RUTHERFORD JAMES BROWNE & MRS SHEBA ELIZABETH MARJORIE BROWNE
RAEWYN JANETTE LOVETT & STRUAN GRANT MCOMISH
MR CHRISTOPHER JAMES WERE & LOCKHART TRUSTEE SERVICES NO 17 LIMITED
QUERION PTY LTD
MAK PLANNING AND DESIGN PTY LTD
NETWEALTH INVESTMENTS LIMITED
INVIA CUSTODIAN PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
Total
Total Securities
31,646,796
26,865,547
8,030,428
Ordinary Shares
Number
31,646,796
26,865,547
6,267,009
5,555,279
5,000,000
3,030,428
2,461,086
2,414,125
2,122,161
2,088,118
1,645,488
1,500,000
1,479,300
1,477,640
1,424,095
1,266,667
1,075,001
1,035,942
991,667
901,667
100,248,016
149,828,334
%
21.122
17.931
4.183
3.708
3.337
2.023
1.643
1.611
1.416
1.394
1.098
1.001
0.987
0.986
0.950
0.845
0.717
0.691
0.662
0.602
66.909
ANNUAL REPORT | 2019-2020 USCOM LIMITED
56 SHAREHOLDERS INFORMATION
Registered office and principal place of office
Suite 2, Level 8, 66 Clarence Street
Sydney NSW 2000 Australia
Tel:
02 9247 4144
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 149,828,334 ordinary shares of the Company as at 31 July 2020 on all Member Exchanges of the
Australian Stock Exchange Limited.
Unquoted securities
Rights over unissued shares as at 31 July 2020
450,000 rights over ordinary shares are on issue to an executive under the new Equity Incentive Plan.
ANNUAL REPORT | 2019-2020 USCOM LIMITED
THANK YOU!
Level 8, 66 Clarence Street
Sydney, NSW, 2000, Australia
Phone: +612 9247 4144
E-mail: info@uscom.com.au
www.uscom.com.au