Rua Bioscience Annual Results FY21
PO Box 1387, Gisborne 4040, Aotearoa New Zealand | 0800 RUABIO | www.ruabio.com
FOR PUBLIC RELEASE
NZX Limited
Wellington
Monday, 30 August 2021
Rua Bioscience Annual Results – Company on track to deliver revenue
Rua Bioscience (RUA:NZX) (Rua) announces its annual financial results for the 12 months ended 30
June 2021 (FY21).
In FY21, Rua's focus has been on building solid foundations for growth – developing the
partnerships, places, processes, and people it needs to create a sustainable medicinal cannabis
business model.
Rua’s commitment to creating shareholder value has seen it working on two fronts - preparing to
enter local and global medicinal cannabis markets by calendar year end 2021 / early 2022 and
developing long-term opportunities across the medicinal cannabis value chain.
Highlights FY21:
• July 2020 Exclusive New Zealand supplier sales agreement signed with German
pharmaceutical wholesaler Nimbus Health to distribute pharmaceutical-
grade medicinal cannabis products.
• August 2020 - Commercial licence received to grow and supply cannabis-derived
medicines.
- Completed construction of its facilities, including a cultivation centre in
Ruatorea and a purpose-built extraction and manufacturing facility in
Gisborne.
• October 2020 NZX listing, $20m raised in oversubscribed Initial Public Offering (IPO).
• November 2020 MedSafe Compliance Management team begin Gisborne manufacturing
facility GMP audit.
• March 2021 Successful export of the first medicinal cannabis flower sample to
Germany.
• June 2021 Hyperspectral Imaging project with the University of Waikato announced,
targeting entry into the $2.5b Global cannabis testing industry.
Summary of Results
Figures in brackets are for the 12 months to 30 June 2020
Rua recorded a loss before tax for FY21 of $6.17m (FY20 $3.60m). The investment in R&D was $1.90m
(FY20 $1.29m), and the total other income received was $0.45m (FY20 $0.73m).
Cash and investments at 30 June 2021 were $16.4m (FY20 $3.94m). Total investment in property,
plant and equipment as at 30 June 2021 was $6.17m (FY20 $5.66m).
MARKET ANNOUNCEMENT
PO Box 1387, Gisborne 4040, Aotearoa New Zealand | 0800 RUABIO | www.ruabio.com
The result was in line with the board’s expectations for the year-end and sees Rua further continue
to roll-out its strategy to deliver revenue through export sales of pharmaceutical-grade dried
cannabis flower to Germany and manufacture the Company's first products for New Zealand
patients.
Rua Chief Financial Officer (CFO) Hamish White said, "as a company we continue to focus on the
development of our product portfolio and the associated systems and processes in both our
cultivation and manufacturing operations. The IPO in October 2020 was a significant milestone for the
company and has provided the funding to continue our momentum as we begin to transition into
commercialisation in FY22.”
The Company achieved several key milestones in its strategy during the period, including a successful,
The Company achieved several key milestones in its strategy during the period, including a successful,
oversubscribed IPO. The Company was listed on the NZX Main Board on 22 October 2020, raising its
targeted $20 million. Rua deployed funds raised from the IPO across strategic priority areas that
underpin achieving initial sales and revenue.
Update on Key Milestones
1. Progress Towards First Export Sales
Rua’s first material sales will be through wholesale exports of pharmaceutical-grade products into
the German market via its agreement with Nimbus Health. Germany remains Rua’s core focus - its
size, expected growth, and favourable market dynamics present unparalleled opportunities for the
Company. Latest data
1
(June 2021) from Germany shows continued strong growth for cannabis
flowers (up 29% in the second quarter of calendar 2021 from the first quarter) as well as cannabis
extracts which grew 16% during the same period.
Good Manufacturing Practice (GMP) certification is an essential step in this process. Rua began the
audit of its Gisborne manufacturing facility in November 2020 and, while the process has been
considerably slower than originally anticipated due to many factors outside of our control, we
continue to work closely with Medsafe towards finalising GMP Certification; a process we hope to
complete soon.
In March, Rua successfully exported its first sample of dried flower material to Germany for scientific
analysis.
2. Product for New Zealand Patients
Rua has been working to meet the heightened demand for medicinal cannabis products in Aotearoa.
The Company anticipates having product available for New Zealand patients as a prescription-only
medicine in 2022, once it has obtained GMP certification, completed the New Medicinal Cannabis
Product Application process and Ministry of Health's Quality Standard assessment which is required
for all new products.
3. Progress on Cultivation Optimization and Capacity
Rua's cultivation is progressing well and as planned. Discussions continue with potential grower
partners to expand cultivation capacity and increase biomass supplies. The Company has a number
of MoUs and small supply agreements in place as it looks to test and develop different cannabinoid
products.
1
Market Data Report – The German Cannabis Market – Q2 2021
PO Box 1387, Gisborne 4040, Aotearoa New Zealand | 0800 RUABIO | www.ruabio.com
4. Research and Development (R&D)
R&D is the critical for all pharmaceutical companies and is an area on that Rua has focused on in
FY21.
In June, Rua announced a ground-breaking, two-year research programme to investigate the
application of hyperspectral technology to the cultivation and assessment of medicinal cannabis,
paving the way for Rua to enter New Zealand's booming agritech sector.
Primarily driven by global demand for medicinal cannabis, commentators expect the cannabis
testing industry to be worth around $2.5bn (US $1,806 million) by 2025
2
. However, current analytical
methods present significant challenges for commercial cannabis growers.
Testing requires the destruction of product, is expensive, and the turn-around of results means
delays in decision-making. Rua’s researchers anticipate real-time monitoring using hyperspectral
imaging will transform how the global medicinal cannabis industry qualifies, assesses, and manages
its crops.
Rua Bioscience Chief Executive officer (CEO) Rob Mitchell says, "if the technology works the way we
expect it will, hyperspectral imaging will revolutionise our internal cultivation practices and position
us well to lead in the development and marketing of world-class agritech for the global cannabis
industry".
5. Team Capability and Capacity
In FY21, Rua’s recruitment strategy focused on two equally critical components; building a capable
and committed team that will propel the Company towards commercialisation; creating highly
skilled jobs for the people of Te Tairāwhiti.
In May, Rua welcomed Product Development Manager Dr Dawn Smith. Dr Smith joined Rua from
Crown Research Institute Scion and is responsible for developing innovative medicines for evolving
markets. Dawn comes with a proven track record in producing pharmaceuticals, medical devices,
packaging and new products.
In June, Dr Andi Grant joined the team as Rua's CCO. Dr Grant was a key appointment and she brings
a wealth of global pharmaceutical experience having worked for companies including Janssen Cilag,
Living Cell Technologies and Roche Products NZ; her task, to drive Rua’s domestic and global
expansion.
Of the Company’s 30 staff as at balance date, 15 have whānau connections or whakapapa to Te
Tairāwhiti. These staff work at all levels of the organisation.
Outlook
Rua Bioscience is a pharmaceutical company aiming to lead the production of cannabinoid-derived
medicines. The Company has a focused and realistic export strategy, with a clear path to revenue
and a view extending along the medicinal cannabis value chain. Proceeds from the IPO continue to
fund Rua Bioscience's next growth stage, building long-term resilience and accelerating growth.
ENDS
2
Markets and Markets. (2021, January). Cannabis Testing Market by Products & Software’s (Instruments, Consumables, LIMS), Services
(Heavy Metal Testing, Microbial Analysis, Potency, Residual Screening), End-User (Cultivators, Laboratories, Research Institutes) -Global
Forecast to 2025. Retrieved May 2021, from MarketsandMarkets.com: https://www.marketsandmarkets.com/Market-Reports/cannabis-
testing-market-46932450.html
PO Box 1387, Gisborne 4040, Aotearoa New Zealand | 0800 RUABIO | www.ruabio.com
For more information, please visit www.ruabio.com or contact:
Media Investors
Kerry Donovan Hamish White
Communications Manager Chief Finance Officer
+64 (21) 128 7689 +64 (21) 050 5795
kerry.donovan@ruabio.com Hamish.whte@ruabio.com
Notes to Financial Information
As disclosed in Note 7, the Company has a deferred tax asset of $2.55m that has arisen largely from
the recognition of $2.3m of tax losses. The tax losses have been incurred during the pre-revenue,
research and development stage of the Company's business in the medicinal cannabis industry.
NZ IAS 12 Income Taxes permits a deferred tax asset to be recognised for the carry forward of unused
tax losses and unused tax credits to the extent that it is probable that future taxable profit will be
available against which the unused tax losses and unused tax credits can be utilised. Key to this is
meeting milestones as the Company progresses towards commercialisation, including obtaining
and retaining licenses to operate.
Recoverability of deferred tax asset is considered a key audit matter due to the significance of the
balance to the financial statements and the inherent estimation uncertainty due to the nature of the
balance. Refer to the Independent Auditors Report for more information.
NB: Figures in brackets are for the 12 months to 30 June 2020
About Rua Bioscience
Rua Bioscience is a New Zealand pharmaceutical company aiming to produce cannabinoid derived
medicines for both export and local markets. Rua has been an early mover in the sector and was the
first private company in New Zealand to receive a licence to cultivate Cannabis for research
purposes. Founded in 2017 in Ruatorea as a subsidiary of charitable company Hikurangi Enterprises
Limited, Rua is underpinned by its mission to heal the people and heal the land. It is committed to
New Zealand's Te Tairāwhiti (East Coast) region and its local community. The Company has
completed facilities for cultivation and manufacturing and is currently going through the GMP
certification process. www.ruabio.com
---
InvestorConferenceCallFY21
August30th, 2021
Rua Bioscience Limited (Rua) is a New Zealand pharmaceutical company aiming to be a leading
producer of cannabinoid derived medicines. This presentation and the information contained in or
accompanying this presentation are not, and are under no circumstances to be construed as, an
invitation to subscribe for, or an offer of, shares, securities or financial products to any person, in
any country or the basis for a contract, financial advice, other advice or recommendation to
conclude any transaction for the purchase or sale of any security, loan or other instrument. This
presentation has not been independently verified.Neither Rua nor any of its directors, officers,
shareholders, advisors, agents or employees make any representation or warranty as to the
accuracy or completeness of the information contained in this presentation and those parties shall
have no liability for any statement, opinion, information or matters arising out of, contained in, or
for any omissions from, or failure to correct or update any information in, this presentation or any
other communications transmitted to you in relation to this presentation.
2
Rob Mitchell
Kaiwhakahāere Matua
Chief Executive Officer
Hamish White
ĀpihaKaiwhakahāerePūtea
Chief Financial Officer
Overview
•Achievements at a Glance
•Key Appointments
•Financial Highlights
•Balance Sheet and Cashflow
•Regulatory Issues
•Next Milestones for Rua
•Outlook
4
In FY21, Rua's focus has been on building solid foundations for growth –developing the
partnerships, places, processes, and people it needs to create a sustainable medicinal
cannabis business model.
Rua’s commitment to creating shareholder value has seen it working on two fronts -preparing
to enter local and global medicinal cannabis markets by calendar year end 2021 / early 2022
and developing long-term opportunities across the medicinal cannabis value chain.
FY21: An Overview
5
z
July, 2020
Signed salesagreementwithNimbusHealth
August, 2020
Grantedcommerciallicence
October, 2020
CommissionedcultivationcentreinRuatorea
October, 2020
RualistedonNZX,raises$20millioninIPO
November, 2020
Ruabegan itsGMP certificationprocess
Achievements at
a Glance
Ma whiti ma i ki nga
whakatutukitanga
6
March, 2021
Successful export of the first medicinal cannabis
flower sample to Germany.
June, 2021
Hyperspectral Imaging project with the University
of Waikato announced, targeting entry into the
$2.5b Global cannabis testing industry.
Achievements at
a Glance
Ma whiti ma i ki nga
whakatutukitanga
7
Update on Key Milestones
Progress Towards First Export Sales
Rua’s first material sales will be through wholesale
exports of pharmaceutical-grade products into the
German market via its agreement with Nimbus
Health.
Rua began the audit of its Gisborne manufacturing
facility in November 2020, a process we hope to
complete soon.
In March, Rua successfully exported its first sample
of dried flower material to Germany for scientific
analysis.
Productfor NewZealandPatients
Rua has been working to meet the heightened
demand for medicinal cannabis products in Aotearoa.
Rua anticipates having product available for New
Zealand patients as a prescription-only medicine in
calendar year2022
Successful export of the first.
8
Update on Key Milestones
Progress on Cultivation Optimization and
Capacity
Discussions continue with potential grower partners
to expand cultivation capacity and increase biomass
supplies.
Successful export of the first.
Research and Development (R&D)
Rua announced a ground-breaking, two-year research
programme to investigate the application of
hyperspectral technology to the cultivation and
assessment of medicinal cannabis, paving the way for
Rua to enter New Zealand's booming agritech sector
Successful export of the first.
9
In FY21, our recruitment strategy focused on two equally critical components; building a
capable and committed team that will propel the Company towards commercialisation;
creating highly-skilled, well-paid jobs for the people of Te Tairāwhiti.
Key Appointments
10
Key
Appointments
Dr Andrea Grant
Āpiha Kaihoko Matua
Chief Commercial Officer
PhD Molecular Neurobiology
Andi has carved out an outstanding international career focused on
commercialising medical innovations in the pharmaceutical and
biotech sectors across the UK, Europe, USA, NZ and Asia. Andi will
drive the Company’s domestic and global expansion.
11
Key
Appointments
Dr Dawn Smith
Kaiwhakahāerewhanakehua
Product Development Manager
PhD Polymer Science
Dawn joined Rua after a decade at Crown Research Institute Scion, first
as Research Leader Polymers and Composites, and as Portfolio Leader
Bioproducts and Packaging. Dr Smith is responsible for developing
innovative medicines for evolving markets. Dawn comes with a proven
track record in producing pharmaceuticals, medical devices, packaging
and new products.
12
Key
Appointments
Len Walker
Ngāti Porou, Aitanga-a-Hauiti, Te Whānau-a-Apanui
Kaiwhakahāere hangahanga
Production Manager
MBA
Len returns home having carved out an impressive management career
in the Dairy industry that takes in Tui Co-operative Dairy Company, the
NZ Dairy Research Institute, Edendale, Open Country Miraka, and
Westland Milk Product.
13
Rua’sannualfinancialresultsforthe
year the ended 30 June 2021.
Other income$451k
Investment in R&D$1.90m
F i n a n c ia l
Hi g h l i g ht s
P r o f i t & L o s s
Nga Pūtea
Lossbeforetax$6.17m
Income Tax Credit$1.75m
Loss after tax$4.42m
14
Cash & Investments was $16.4m
Investment in property, plant and
equipment was $6.17m
Net Assets $28.8m
Rua’sannualfinancialresultsforthe
year the ended 30 June 2021.
F i n a n c ia l
Hi g h l i g ht s
B a l a n c e S h e e t
Nga Pūtea
15
Net cash inflow from financing activities
$18.3m
Net cash outflow from operating activities
$4.48m
Net cash outflow from investing activities
$14.43m
Rua’sannualfinancialresultsforthe
year the ended 30 June 2021.
F i n a n c ia l
Hi g h l i g ht s
C a s h f l o w
Nga Pūtea
16
The NZ Market
•April 2020 -Misuse of Drugs (Medicinal Cannabis)
Regulations
•The purpose of the Scheme is to improve access to
quality medicinal cannabis products for patients
•Licensable activities:
•Cultivation
•Nursery
•Research
•Manufacture
•Supply
•Domestic Market –$70m
•Export Market opportunity will be key to our financial
performance
17
Access in NZ
•Requires a prescription from a GP or specialist.
•Doctors or pharmacies dispense the product.
•Legally you cannot purchase medicinal cannabis products online or
from a third party.
•Any doctor can prescribe CBD or THC products.
•Sativex is the only approved registered medical cannabis product.
•Otherunregisteredproducts are available such asthe Tilray range of
products.
18
The New Zealand Medicinal Cannabis
Market
19
•Subsidies for cannabis-derived medicines.
•Provisional consent for medicines with Phase 1 and 2 clinical
trial data, enabling some marketing to healthcare
professionals.
•Low-dose CBD (which has a low-risk profile) available over
the pharmacy counter.
•ACC and MSD funding of legitimate medicinal cannabis
prescriptions for their clients.
•Government recognition of the production standards and
requirements of each export jurisdiction on a case-by-case
basis.
19
Good Manufacturing Practice
20
•Globally recognised minimum
standards for the manufacture of
medicines.
•Prerequisite for commercial
production.
•Key step on the path to revenue.
•Rua began audit in November
with a result due soon.
Future Milestones
21
•New Medicinal Cannabis Product
Application
•Stability / Shelf Life Testing
•First Export Revenues
•Development of the Grower
Partner programme
•First Cultivation Partner
Production
Outlook
Focused and realistic export strategy.
Clear path to revenue extending along the medicinal
cannabis value chain.
Successful export of the first.
12:00pm
19 October, 2021
Waikanae Surf Club, Gisborne and
online.
Join us for the AGM
22
---
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Results for announcement to the market
Name of issuer Rua Bioscience Ltd
Reporting Period 12 months to 30 June 2021
Previous Reporting Period 12 months to 30 June 2020
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$451 (38%)
Total Revenue $451 (38%)
Net profit/(loss) from
continuing operations
$4,418 57%
Total net profit/(loss) $4,418 57%
Interim/Final Dividend
Amount per Quoted Equity
Security
None
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.18 $0.61
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Net tangible asset per share is calculated by dividing net assets
less intangible assets by the total shares on issue at the end of
the period.
Authority for this announcement
Name of person
authorised
to make this announcement
Rob Mitchell
Contact person for this
announcement
Hamish White
Contact phone number +64 (21) 050 5795
Contact email address Hamish.white@ruabio.com
Date of release through MAP
30/08/2021
Audited financial statements accompany this announcement.
---
Rua Bioscience Limited
Contents
Company Directory 3
Independent Auditor's Report 4 – 7
Statement of Profit or Loss and Other Comprehensive Income 8
Statement of Changes in Equity 9
Statement of Financial Position 10
Statement of Cash Flows 11
Notes forming part of the Financial Statements 12 - 50
3
Company Directory
For the year ended 30 June 2021
Country of incorporation of company: New Zealand
Company Number: 6484092
Legal form: NZ Limited Company
Principal activities: Pharmaceutical Manufacturer
Registered office: 1 Commerce Place
Awapuni
Gisborne
Directors: Trevor BURT
Panapa EHAU
Brett GAMBLE
Martin SMITH
Anna Kate STOVE
Auditor: PricewaterhouseCoopers
Bankers: Kiwibank
Solicitors: Lowndes Jordan
PricewaterhouseCoopers, Level 3, 6 Albion St, PO Box 645, Napier, 4110, New Zealand
T: +64 6 835 6144, F: +64 6 835 0360, pwc.co.nz
Independent auditor’s report
To the shareholders of Rua Bioscience Limited
Our opinion
In our opinion, the accompanying financial statements of Rua Bioscience Limited (the Company),
present fairly, in all material respects, the financial position of the Company as at 30 June 2021, its
financial performance and its cash flows for the year then ended in accordance with New Zealand
Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial
Reporting Standards (IFRS).
What we have audited
The financial statements comprise:
● the statement of financial position as at 30 June 2021;
● the statement of profit or loss and other comprehensive income for the year then ended;
● the statement of changes in equity for the year then ended;
● the statement of cash flows for the year then ended; and
● the notes to the financial statements, which include significant accounting policies and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial statements section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Company in accordance with Professional and Ethical Standard 1
International Code of Ethics for Assurance Practitioners (including International Independence
Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards
Board and the International Code of Ethics for Professional Accountants (including International
Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor we have no relationship with, or interests in, the Company.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
PwC 5
Description of the key audit matter How our audit addressed the key audit matter
Recoverability of Deferred Tax Asset
As disclosed in Note 7, the Company has
a deferred tax asset of $2.55m that has
arisen largely from the recognition of
$2.3m of tax losses. The tax losses have
been incurred during the pre-revenue,
research and development stage of the
Company's business in the medicinal
cannabis industry.
NZ IAS 12 Income Taxes permits a
deferred tax asset to be recognised for the
carry forward of unused tax losses and
unused tax credits to the extent that it is
probable that future taxable profit will be
available against which the unused tax
losses and unused tax credits can be
utilised. Key to this is meeting milestones
as the Company progresses towards
commercialisation, including obtaining and
retaining licenses to operate.
Recoverability of deferred tax asset is
considered a key audit matter due to the
significance of the balance to the financial
statements and the inherent estimation
uncertainty due to the nature of the
balance.
We focussed our audit response on the evaluation of
the Company's assessment regarding the
recoverability of the deferred tax asset. This included:
- obtaining and understanding the Company's
assessment and plans, including management's profit
and loss forecast;
- discussing with management the Company's
assumptions regarding the forecasted profitability
including the underlying revenue and expenditure
assumptions;
- confirming key milestones that have been met and
assessing management's ability to achieve forecast
milestones;
- challenging management's assessment and
assumptions of the forecasted profitability; and
- assessing the mathematical accuracy of
management's profit and loss forecast.
- reviewing the appropriateness of the disclosure in
Note 7.
From our procedures performed, we have no matters
to report.
Our audit approach
Overview
Materiality Overall materiality: $66,000, which represents 1% of total expenses.
We chose total expenses as the benchmark because, in our view, it is most
representative of the current operations and performance of the Company in
the view of the users of the financial statements. The Company is incurring
losses in a start-up phase; therefore, we consider that profit/loss before tax is
not an appropriate benchmark. Total expenses is also a generally accepted
benchmark.
Key audit
matters
As reported above, we have one key audit matter, being:
● Recoverability of Deferred Tax Asset
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we considered where management made
subjective judgements; for example, in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain.
PwC 6
As in all of our audits, we also addressed the risk of management override of internal controls,
including among other matters, consideration of whether there was evidence of bias that represented
a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the financial statements as a whole, taking into account the structure of the Company, the
accounting processes and controls, and the industry in which the Company operates.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall materiality for the financial statements as a whole as set out above. These,
together with qualitative considerations, helped us to determine the scope of our audit, the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and in aggregate, on the financial statements as a whole.
Other information
The Directors are responsible for the other information. The other information comprises the
information included in the Annual Report but does not include the financial statements and our
auditor's report thereon. The Annual report is expected to be made available to us after the date of this
auditor's report.
Our opinion on the financial statements does not cover the other information and we will not express
any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the Directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
PwC 7
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a
whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance but is not a
guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-2/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Maxwell John
Dixon.
For and on behalf of:
Chartered Accountants
29 August 2021
Napier
8
Rua Bioscience Limited
Statement of profit or loss
and other comprehensive income
For the year ended 30 June 2021
Note
2021
2020
$ $
Restated
Research and development expenses 6 (1,897,126) (1,289,662)
Other expenses 6,20 (4,744,082) (3,053,818)
Operating loss before net financing income (6,641,208) (4,343,480)
Other income 5 450,971 727,948
Interest income 47,560 35,716
Interest expense (9,699) (3,230)
Interest expense - leases (21,859) (14,523)
Net finance income 16,002 17,963
Loss before tax (6,174,235) (3,597,569)
Income tax credit 7,20 1,756,275 784,517
Loss after tax (4,417,960) (2,813,052)
Other comprehensive income - -
Total comprehensive loss for the year
attributable to shareholders
(4,417,960) (2,813,052)
Earnings per share attributable to the
ordinary equity holders of the Company
Loss from operations
Basic ($)
9 (0.03)* (0.03)**
Diluted ($)
9 (0.03)* (0.03)**
_______ _______
* On 15 September 2020, the Company completed a 5.882:1 share split.
** Share and per share amounts have been retrospectively restated for the prior period to reflect the
5.882:1 share split completed on 15 September 2020 and the prior period error disclosed in Note 20.
The above statements should be read in conjunction with the accompanying notes.
9
Rua Bioscience Limited
Statement of Changes in Equity
For the year ended 30 June 2021
Note Share Share option Accumulated Total
capital reserve losses equity
$ $ $ $
Opening balance at 1 July 2019 12,480,242 - (1,968,208) 10,512,034
Total comprehensive loss for the year
- Loss for the year -
-
(2,900,035) (2,900,035)
- Other comprehensive income - - - -
Total comprehensive loss for the year - - (2,900,035) (2,900,035)
Transactions with owners of the Company
- Issue of share capital 7,000,948 - - 7,000,948
- Costs of issuing share capital (558,277) - - (558,277)
- Employee share options expense - 336,108 - 336,108
Total transactions with owners of the Company 6,442,671 336,108 - 6,778,779
Balance at 30 June 2020 18,922,913 336,108 (4,868,243) 14,390,778
Opening balance at 1 July 2020 18,922,913 336,108 (4,868,243) 14,390,778
- Correction of prior period error 20 - (75,800) 86,983 11,183
Restated opening balance at 1 July 2020
18,922,913
260,308
(4,781,260)
14,401,961
Total comprehensive loss for the year
- Loss for the year - - (4,417,960) (4,417,960)
- Other comprehensive income - - - -
Total comprehensive loss for the year - - (4,417,960) (4,417,960)
Transactions with owners of the Company
- Issue of share capital 20,000,000 - - 20,000,000
- Costs of issuing share capital (1,504,414) - - (1,504,414)
- Employee share options expense - 354,459 - 354,459
Total transactions with owners of the Company 18,495,586 354,459 - 18,850,045
Balance at 30 June 2021 37,418,499 614,767 (9,199,220) 28,834,046
The above statements should be read in conjunction with the accompanying notes.
10
Rua Bioscience Limited
Statement of Financial Position
As at 30 June 2021
Note 2021 2020
$ $
Restated
Current assets
Cash and cash equivalents 4
3,359,479 3,937,501
Other receivables 13
605,927 800,837
Prepayments
110,527 81,998
Investments 4
13,041,549 -
Total current assets
17,117,482 4,820,336
Non-current assets
Property, plant and equipment 10
6,174,610
5,658,360
Goodwill 11
4,000,000
4,000,000
Right-of-use lease assets 12
929,897
252,955
Other receivables 13
75,000
197,256
Deferred tax asset 7,20
2,554,480
798,205
Total non-current assets
13,733,987 10,906,776
Total assets
30,851,469 15,727,112
Current liabilities
Trade and other payables 14
510,167 578,182
Employee benefit liabilities 15 233,862 169,406
Lease liabilities 4,12 133,958 68,935
Borrowings 4 10,762 78,169
Deferred grant income -91,636
Share-based payment liability 20 286,647 12,277
Total current liabilities
1,175,396 998,605
Non-current liabilities
Borrowings 4 -10,762
Lease liabilities 4,12 810,120 190,928
Share-based payment liability 20 31,907 124,856
Total non-current liabilities
842,027 326,546
Total liabilities
2,017,423 1,325,151
Net assets 28,834,046 14,401,961
Equity
Share capital 16
37,418,499 18,922,913
Accumulated losses
(9,199,220) (4,781,260)
Share option reserve 20
614,767 260,308
Total equity 28,834,046 14,401,961
The financial statements on pages 8 to 50 were approved and authorised for issue by the Board
of Directors on 29 August 2021 and were signed on its behalf by:
______________________ (Director)
______________________ (Director)
The above statements should be read in conjunction with the accompanying notes.
11
Rua Bioscience Limited
Statement of Cash Flows
For the year ended 30 June 2021
Note 2021 2020
$ $
Cash flows from operating activities
Grant income received 691,261 182,790
Payments to suppliers and employees (5,138,432) (3,810,610)
Net cash inflows/(outflows) from operating activities 8 (4,447,171) (3,627,820)
Cash flows from Investing activities
Interest income 69,277 47,619
Proceeds from sale of plant and equipment 15,739 2,400
Proceeds from maturing investments 2,001,420 2,000,000
Investment deposits made (15,117,969) -
Purchase of property, plant and equipment (1,402,258) (5,020,661)
Net cash inflows/(outflows) from investing activities (14,433,791) (2,970,642)
Cash flows from financing activities
Issue of ordinary shares 20,000,000 7,000,948
Proceeds from borrowings - 44,200
Repayment of borrowings (78,169) (48,451)
Principal elements of lease payments (82,914) (59,909)
Interest paid (27,789) (19,444)
Share issue costs paid (1,508,188) (554,503)
Net cash inflows/(outflows) from financing activities 8 18,302,940 6,362,841
Net increase/(decrease) in cash and cash equivalents (578,022) (235,621)
Cash and cash equivalents at beginning of year 3,937,501 4,173,122
Cash and cash equivalents at end of year 4 3,359,479 3,937,501
The above statements should be read in conjunction with the accompanying notes.
12
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
1. Reporting Entity
Rua Bioscience Limited (formerly Hikurangi Cannabis Company Ltd) (“the Company”) is a
company incorporated and domiciled in New Zealand and registered under the Companies Act
1993. The address of the Company’s registered office and principal place of business is 1
Commerce Place, Awapuni, Gisborne.
The Company is principally engaged in the business of research and development, and
pharmaceuticals manufacturing.
2. Basis of preparation
(a) Statement of compliance
The financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (NZ GAAP), being in accordance with New Zealand Equivalents to International
Financial Reporting Standards (NZ IFRS) and other New Zealand accounting standards and
authoritative notices that are applicable to entities that apply NZ IFRS and International Financial
Reporting Standards (IFRS). They comply with interpretations issued by the IFRS Interpretations
Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements have
also been prepared in accordance with the requirements of the Companies Act 1993, the Financial
Markets Conduct Act 2013 and the Main Board/Debt Market Listing Rules of NZX Limited.
The Company is a for-profit entity for the purposes of complying with NZ GAAP.
These financial statements include non-NZ GAAP financial measures that are not prepared in
accordance with NZ IFRS. The Company presents Net Tangible Assets, in Note 22. The Company
believes that this non-NZ GAAP measure provides useful information to readers, as this is a
required disclosure under the NZX Listing Rules, but it should not be viewed in isolation, nor
considered as a substitute for measures reported in accordance with NZ IFRS. Non-NZ GAAP
measures as reported by the Company may not be comparable to similarly titled amounts
reported by other companies.
The financial statements are presented in New Zealand dollars ($), which is also the Company’s
functional currency. All financial information presented has been rounded to the nearest dollar.
(b) Significant accounting policies
Significant accounting policies have been disclosed alongside the related notes in the financial
statements.
(c) Basis of measurement
The financial statements have been prepared on a historical cost basis, except for the following
items (refer to note 2(h) for further details).
13
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
2. Basis of preparation (continued)
(d) New standards, interpretations and amendments
(i) Adopted during the period
New standards that have become mandatorily effective in the annual financial statements for
the year ended 30 June 2021, but have not had a significant effect on the Group are:
• COVID-19-Related Rent Concessions (Amendments to NZ IFRS 16);
• Definition of a Business (Amendments to NZ IFRS 3);
• NZ IAS 1 Presentation of Financial Statements and NZ IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors (Amendment – Disclosure Initiative -
Definition of Material);
• Going Concern Disclosures (Amendments to FRS-44); and
• Revisions to the Conceptual Framework for Financial Reporting.
(ii) Issued, but not yet effective
There are a number of standards, amendments to standards, and interpretations which have
been issued that are effective in future accounting periods that the Company has decided not
to adopt early.
The following amendments are effective for the periods beginning on or after 1 January 2022:
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to NZ IAS 37);
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to
NZ IAS 16);
• Annual Improvements to NZ IFRS Standards 2018-2020 (Amendments to NZ IFRS 1,
NZ IFRS 9, NZ IFRS 16 and NZ IAS 41); and
• References to Conceptual Framework (Amendments to NZ IFRS 3).
The following is a list of other new and amended standards which, at the time of writing,
had been issued by the NZ ASB but which are effective in future periods:
• NZ IFRS 17 Insurance Contracts (effective 1 January 2023); and
• Amendments to IAS 1 – Classification of Liabilities as Current or Non-current
(effective 1 January 2023).
The Company does not expect these new and amended standards to have a material impact
on the Company.
14
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
2. Basis of preparation (continued)
(e) Accounting estimates and judgements made
The preparation of the financial statements, in conformity with NZ IFRS, requires management to
make judgements, estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis, with revisions to
accounting estimates recognised in the period in which the estimates are revised and in any future
periods affected.
Details of significant judgements and estimates made by management include:
Judgements
− Recognition (or not) of deferred tax assets related to carried forward tax losses (note 7).
− Recognition of research and development tax credits and research and development expenses
(notes 5 & 6).
− Preparation of the financial statements on a going concern basis (note 2(f)).
− Impacts from COVID-19 (note 2(g))
(f) Going Concern
The financial statements have been prepared on the going concern basis, which assumes that the
Company will continue to be able to meet its liabilities as they fall due for the foreseeable future.
The Company incurred a net loss of $4,417,960 during the year ended 30 June 2021 (2020: net loss
of $2,813,052).
In October 2020, the Company successfully completed a listing on the New Zealand Stock Exchange
(NZX) raising $20 million in capital. This capital provides a sufficient runway for the company to
continue operating as a going concern while it continues the development of its research projects,
product suite and sales opportunities.
In the coming years the Company plans to move into commercialisation where the income
generated from products will begin to fund the operations of the company to the point where the
Company is financially sustainable and begins to generate profits.
With the market for cannabis derived medicines continuing to show strong growth globally it is
forecast the Company will be able to capture a proportion of the market in key jurisdictions and
that the sales of the Company products will increase.
The Company currently has a Licence to Sell Medicines by Wholesale & a Medical Cannabis Licence
issued by the Ministry of Health. The Company has submitted applications for a Licence to Deal in
Controlled Drugs, Licence to Manufacture Medicine (GMP) and a New Medical Cannabis Product
Application. Once these licenses are approved, the company will be able to manufacture and sell
products to earn revenues. It is forecast that the licenses required will all be obtained in the 2021
calendar year. Further licenses will be required as the Company continues its business and product
development.
15
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
2. Basis of preparation (continued)
(f) Going Concern (continued)
Currently there are no indications that the Company will not be able to continue as a going
concern. The Company has net current assets and the Directors are of the opinion that the
Company is able to settle liabilities as they fall due. There are risks related to the assumptions
being made, particularly around obtaining GMP certification for products, obtaining regulatory
approvals of products in local and in international markets. The timing of supplying product to
markets, product volumes and the sales price of these products. The Company is monitoring and
managing these risks, however there is no indications at this point in time that they will affect the
Company's ability to continue as a going concern.
(g) Impact of COVID-19
The impact of COVID-19 has been considered for all balances and areas of judgements made in
relation to the preparation of the financial statements. The COVID-19 wage subsidy extension
was received in FY 2020 but as related to wages in FY 2021, was recognised in profit or loss in
FY 2021, see note 5. No other material impacts have been identified as a result of COVID-19.
(h) Estimates and assumptions
− Fair value measurement
The fair value of certain assets and liabilities included in the Company’s financial statements
is disclosed.
Determining the fair value of these assets and liabilities utilises market observable inputs and
data as far as possible. Inputs used in determining fair value measurements are categorised
into different levels based on how observable the inputs used in the valuation technique
utilised are (the ‘fair value hierarchy’):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs
used that has a significant effect on the fair value measurement of the item.
For more detailed information in relation to the fair value measurement of the items above,
please refer to the applicable notes.
Borrowings, disclosure of fair value (note 4)
Financial assets and liabilities at amortised cost, disclosure of fair value (note 4)
Share-based payments measured at fair value (note 20).
3. Segment Reporting
The Company operates in one segment, its primary business being pharmaceutical manufacturing
in New Zealand.
The chief operating decision maker has been identified as the Chief Executive Officer (CEO), as
they make all the key strategic resource allocation decisions related to the Company’s segment.
16
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
4. Financial instruments and Financial Risk Management and Capital Management
This note describes:
(A) The Company’s accounting policies with respect to financial instruments recognised in the
Company’s financial statements, and detail of those balances.
(B) The nature of the financial risk that the Company is exposed to, and the Company’s
objectives, policies and processes for managing those risks, the methods used to measure
them, and sensitivity analysis to movements in rates (where applicable).
(C) The nature of the Company’s Capital Management policies.
(A) Financial instruments recognised
The Company recognises financial assets and financial liabilities when it becomes party to the
contractual provisions of the financial instrument.
Financial Assets
The Company classifies its financial assets depending on the purpose for which the asset was
acquired (i.e. the business model) and the contractual terms of the cash flows.
Amortised Cost
These represent financial assets where the objective is to hold these assets in order to collect
contractual cash flows that represent solely payments of principal and interest. These comprise
cash and cash equivalents, other receivables and term deposit investments.
Cash and cash equivalents comprise of cash on hand and demand deposits, as well as highly liquid
deposits that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value, with terms of 90 days or less (otherwise these are presented
as “investments”).
These financial assets are:
− Initially measured at fair value, plus directly attributable transaction costs.
− Subsequently measured at amortised cost using the effective interest rate method, less
provision for impairment. Cash and cash equivalents and investments are held with
“investment grade” financial institutions and are deemed to have no significant increase in
credit risk in terms of impairment.
− Derecognised when the contractual rights to the cash flows from the financial asset expire or
a transferred.
17
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
4. Financial instruments - Risk Management (continued)
Financial liabilities
The Company classifies its financial liabilities depending on whether (or not) it meets the
definition of a financial liability at fair value.
Other financial liabilities at amortised cost
These include trade and other payables, borrowings, and lease liabilities recognised in the
statement of financial position.
These financial liabilities are:
− Initially measured at fair value, plus directly attributable transaction costs.
− Subsequently measured at amortised cost using the effective interest rate method.
− Derecognised when the contractual obligation to settle the obligation is discharged,
cancelled, or expires.
Categories and fair values of the Company’s financial instruments
2021
Financial
Assets at
Amortised Cost
Financial
Liabilities
at
Amortised
Cost
Total Carrying
Amount
Fair
Value
$ $ $ $
Investments 13,041,549 13,041,549
(a)
Cash and cash
equivalents
3,359,479 3,359,479 (a)
Other Receivables 75,000 75,000 (a)
Trade and other
payables
(510,167) (510,167) (a)
Borrowings (10,762) (10,762) (b)
Lease liabilities (944,078) (944,078) (c)
Total 16,476,028 (1,465,007)
(a) Due to their short-term nature, the carrying value of these financial instruments approximates their fair value. They
are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including
counterparty and own credit risk.
(b) Due to the market rate of lending for the remaining term and outstanding balance not being materially different
from the current effective interest rate, the carrying value of these financial instruments approximates their fair
value. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs
including own credit risk.
(c) Not required to be disclosed per NZ IFRS 7.
18
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
4. Financial instruments - Risk Management (continued)
2020
Financial
Assets at
Amortised Cost
Financial
Liabilities
at
Amortised
Cost
Total Carrying
Amount
Fair
Value
$ $ $ $
Cash and cash
equivalents
3,937,501 3,937,501 (a)
Trade and other
payables
(578,182) (578,182) (a)
Borrowings (88,931) (88,931) (b)
Lease liabilities (259,863) (259,863) (c)
Total 3,937,501 (926,976)
(a) Due to their short-term nature, the carrying value of these financial instruments approximates their fair value. They
are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including
counterparty and own credit risk.
(b) Due to the market rate of lending for the remaining term and outstanding balance not being materially different
from the current effective interest rate, the carrying value of these financial instruments approximates their fair
value. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs
including own credit risk.
(c) Not required to be disclosed per NZ IFRS 7.
(B) Financial risk management
The Board has overall responsibility for the determination of the Company’s risk management
objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the effective implementation of the
objectives and policies to the Company's finance function. The Board receives monthly reports
from the Chief Financial Officer through which it reviews the effectiveness of the processes put
in place and the appropriateness of the objectives and policies it sets. The Company's internal
finance team also review the risk management policies and processes and report their findings to
the Audit, Finance & Risk Committee.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible
without unduly affecting the Company’s competitiveness and flexibility. Further details regarding
these policies as they relate to the specific financial risks that the Company is exposed to are set
out below:
Through its operations, the Company is exposed to the following financial risks:
(a) Credit risk
(b) Market risk
i. Interest rate risk
ii. Foreign exchange risk, and
iii. Price risk
(c) Liquidity risk.
19
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
4. Financial instruments - Risk Management (continued)
(a) Credit risk
Credit risk is the risk of financial loss to the Company if a counterparty to a financial asset fails to
meet their contractual obligations. The Company’s exposure to credit risk is represented by the
carrying amount of cash and cash equivalents and investments.
The Company only holds cash and cash equivalents and investments with financial institutions that
are independently determined credit ratings of "A" or higher.
The Company has an Audit, Finance & Risk Committee that monitors credit risk as part of its wider
duties.
Cash and cash equivalents and investments held with financial institutions are presented in the
table below:
30 June 2021
Credit rating
(a)
Cash and
cash
equivalents
Investments Total
$ $ $
Kiwibank A1, AA 3,359,479 13,041,549 16,401,028
Total 3,359,479 13,041,549 16,401,028
30 June 2020
Credit rating
(a)
Cash and
cash
equivalents
Investments Total
$ $ $
Kiwibank A1, AA 3,937,501 - 3,937,501
Total 3,937,501 - 3,937,501
(a) Standard & Poor’s, Moody’s, Fitch
Interest rates on interest bearing cash and cash equivalents and investments range between 0.35%
- 1.00% (2020: 1.00% - 3.45%).
20
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
4. Financial instruments - Risk Management (continued)
(b) Market risk
Market risk arises from the Company’s:
− Use of interest-bearing borrowings (interest rate risk)
− Credit sales and purchases in foreign currencies (foreign currency risk), and
− Prices of key commodity inputs (price risk)
i. Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
The Company is exposed to fair value interest rate risk from its fixed-rate borrowings and lease
liabilities, with rates between 3.90% - 7.50% (2020: 3.00% - 7.50%).
The Company manages its interest rate risk by placing surplus funds on medium term interest-
returning investments with financial institutions (per above).
A 1% change in interest rates would have increased or decreased equity and profit or loss by $1,152
(2020: $1,293) after tax (assuming all other variables remain constant).
ii. Foreign exchange risk
The Company currently does not have any sales transactions denominated in foreign currencies,
however this is likely to change in subsequent reporting periods.
During the current reporting period the company has purchased plant and equipment with
purchase prices denominated in foreign currencies (USD and AUD).
To mitigate foreign exchange risk on significant plant and equipment purchases, the Company
enters into forward exchange contracts to match the timing and amount of payments due.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into,
and they are subsequently remeasured to their fair value at the end of each reporting period with
changes in fair value recognised in profit or loss.
The Company does not apply hedge accounting to these transactions, and they are classified as
held for trading for accounting purposes and are accounted for at fair value through profit or loss.
They are presented as current assets or liabilities to the extent they are expected to be settled
within 12 months after the end of the reporting period. They are considered level 2 fair value
measurements being based on the present value of future cash flows based on the forward
exchange rates at the reporting date.
There are no open forward exchange contracts at the end of the reporting period (2020: no open
forward exchange contracts).
The net foreign exchange loss recognised for the year was $1,266 (2020: $1,265).
21
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
4. Financial instruments - Risk Management (continued)
(c) Liquidity risk
Liquidity risk arises from the Company’s management of working capital. It is the risk that the
Company will encounter difficulty in meeting its financial obligations as they fall due.
The Company's policy is to ensure that it will always have sufficient cash to allow it to meet its
liabilities when they become due. To achieve this the Company maintains a monthly forecast
on it’s future cash position to ensure it can meet financial obligations when they fall due.
The Board receives monthly financial statements which include statements of financial position,
performance, and cash flow, as well as budget/forecast variance reports, to ensure it holds or
will hold cash equivalents to meet its obligations.
The following table sets out the contractual maturities (representing undiscounted contractual
cash-flows) of financial liabilities:
Between Between Between
Up to 3 3 and 12 1 and 2 2 and 5 Over
As at 30 June 2021 Months months year years 5 years Total
$ $ $ $ $ $
Trade and other
payables
510,167 - - - - 510,167
Borrowings 10,832 - - - - 10,832
Lease liabilities 43,367 130,102 147,470 330,910 479,744 1,131,593
Total 564,366 130,102 147,470 330,910 479,744 1,652,592
As at 30 June 2020
Trade and other
payables
578,182 - - - - 578,182
Borrowings 10,832 32,497 10,832 50,830 - 104,992
Lease liabilities 20,826 62,478 83,304 81,151 56,250 304,009
Total 609,840 94,975 94,136 131,981 56,250 987,183
(C) Capital Management
The Company’s objectives when managing capital are to safeguard the entity's ability to continue
as a going concern, so that it can continue to fund activities for the purposes of deriving sustainable
returns to its shareholders and other stakeholders.
The Company’s capital structure consists of Equity of the Company (comprising issued capital and
retained earnings). The Company is not subject to any externally imposed capital requirements.
The Board continually reviews the capital structure of the Company. As part of this review, the
Board considers the availability and cost of capital and the risks associated therein. The Company
has available funding from its capital raising activities during the year.
22
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
5. Other income
(i) Revenue (from contracts with customers)
As the Company is still in its start-up research phase it presently has no revenue from contracts
with customers.
(ii) Government grants
Government grants are recognised at their fair value where there is reasonable assurance that
the grant will be received and the Company will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in profit or loss over the period
necessary to match them with the costs that they are intended to compensate. They are
recognised as other income rather than reducing the costs that they are intended to
compensate.
The Company currently receives government grants in the form of general and COVID-19 related
employee wage subsidies received from the Ministry of Social Development (MSD); and, research
and development (R&D) tax losses cash out and R&D tax incentive credits, received from the
Inland Revenue Department (IRD).
R&D tax losses cash out and R&D tax incentive credits are accounted for as government grant
income as opposed to income tax credits as the benefit is independent of the taxable profit or
tax liability where Company is eligible for a cash refund; specific conditions exist for the
Company, the R&D activities and the expenditure to be eligible for the tax credits; and the tax
credits are not structured as an additional deduction in computing taxable profit.
R&D tax losses cash out is earned by cashing in R&D losses for the year and is repaid by the
Company to the IRD from future taxable income or by paying R&D repayment tax if a loss
recovery event occurs. R&D tax incentive credits that are not cashed out have no expiry,
subject to shareholder continuity, and are carried forward and utilised against future taxable
profits.
As at the 22 October 2020, the Company was no longer eligible for R&D tax loss cash outs.
The Company has reasonable assurance at the reporting date that the R&D tax incentive will
be received and all attached conditions will be complied with. The Company expects to receive
the losses cash out and tax credit when the return is filed subsequent to the end of the reporting
period.
There are no unfulfilled conditions relating to the MSD grant income.
Revenue and other income streams recognised by the Company include:
2021 2020
$ $
Research and development grant income 357,366 567,488
COVID-19 wage subsidy 91,636 135,654
Other grant income - 24,080
Total government grant income 449,002 727,222
Gain on sale of property, plant and equipment - 726
Other Income 1,969 -
Total other income 450,971 727,948
23
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
6. Expenses
2021 2020
$ $
Restated
Cultivation costs 622,676 306,556
Extraction and manufacturing 584,502 88,035
Accommodation and travel 58,740 132,601
Consultancy 1,063,505 1,042,813
Depreciation of property, plant and equipment 596,698 149,634
Depreciation of right-of-use lease assets 97,904 65,179
Direct research and development expenses 296,803 288,576
General 225,562 164,775
Insurance
126,180 46,774
Motor vehicle expenses
57,193 50,237
Quality 182,427 280,845
Office expenses 72,689 45,174
Personnel costs 20 2,479,916 1,681,016
Marketing costs related to IPO 175,147 -
Foreign exchange loss 1,266 1,265
Total expenses 6,641,208 4,343,480
Included in the above:
Employee benefit expense
- Short term benefits (wages and salaries) 2,406,567 1,821,262
- Defined contribution plan 64,935 49,494
- Share-based payment expense 20 602,466 397,442
Total employee benefit expense 3,073,968 2,268,198
Research and development expenses
- Direct costs 296,803 288,576
- Indirect costs 1,600,323 1,001,086
Total research and development expenses 1,897,126 1,289,662
(i) Research and development
Research and development expenditure that do not meet the development criteria in NZ IAS
38 Intangible Assets for recognition as intangible assets are expensed as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a
subsequent period.
Currently the Company is still in the research phase (refer to note 19 Biological assets) and
related costs are recognised in profit or loss accordingly until such time as the Company moves
into the development phase and the relevant recognition criteria are met.
24
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
6. Expenses (continued)
(ii) Fees paid to auditors
Fees paid to auditors include payments to PricewaterhouseCoopers for the following:
2021 2020
$ $
Audit and review of the financial statements
- Audit of the financial statements 60,132 47,775
- Review of half year financial statements 27,635 8,925
Total audit and review fees 87,767 56,700
Other services
- Business valuation services - 19,950
Total other services - 19,950
Total fees paid to auditors 87,767 76,650
Business valuation services were provided to the Company during the year ended 30 June
2020 but before the appointment of PricewaterhouseCoopers as the Company's auditors.
7. Income tax
Tax expense/(credit) comprises current and deferred tax.
Current tax is the expected tax payable or receivable on the taxable income or loss for the
year, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or substantively enacted
at the reporting date.
In determining the amount of current and deferred tax the Company takes into account the
impact of uncertain tax positions and whether additional taxes and interest may be due. The
Company believes that its accruals for tax liabilities are adequate for all open tax years based
on its assessment of many factors, including interpretations of tax law and prior experience.
This assessment relies on estimates and assumptions and may involve a series of judgements
about future events. New information may become available that causes the Company to
change its judgement regarding the adequacy of existing tax liabilities; such changes to tax
liabilities will impact tax expense in the period that such a determination is made.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available
against which they can be utilised. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the related tax benefit will
be realised.
25
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
7. Income Tax (continued)
The Company has assessed the realisation of the deferred tax asset at the reporting date and
considers that it is probable that future taxable profits will be available to realise the deferred
tax asset. Key factors supporting the assessment include:
− Progress towards obtaining the required licences (refer to note 2(f)) including GMP
certification, a key milestone, to commence commercial production and sales to target
markets;
− Securing an export agreement with German distributor, Nimbus Health, and discussions
with local distributors for selling to the key German and New Zealand target markets;
− Securing an initial supply agreement with a local grower and discussions with local growers
to provide sufficient flower to sell to target markets;
− Completing the Company’s cultivation and extraction facilities; and
− Forecasted taxable profits in the foreseeable future that are sufficient to utilise the
deferred tax asset
The Directors have considered the likelihood of these key factors occurring and have
determined that it is probable that the Company will commercialise its production and
generate sufficient future taxable profits to realise the deferred tax asset.
(i) Income tax recognised in profit or loss
The income tax expense/(credit) recognised for the year includes current and deferred tax as
presented below:
2021 2020
$ $
Restated
Current tax on profits for the year - -
Total current tax - -
Origination and reversal of temporary differences (62,089) (168,143)
Current year tax losses (1,673,717) -
Recognition of previously unrecognised deferred tax assets - (616,374)
Prior period adjustments (20,469) -
Total deferred tax expense/(credit) (1,756,275) (784,517)
Total income tax expense/(credit) (1,756,275) (784,517)
26
(ii) Reconciliation of income tax expense/(credit)
The reconciliation of income tax expense/(credit) is presented below:
2021 2020
$ $
Restated
Loss before income tax expense/(credit)
(6,174,235) (3,597,569)
Tax expense/(income) @28% (1,728,786) (1,007,319)
Add/(less) reconciling items
- Expenses not deductible for tax purposes 116,953 56,134
- Tax losses extinguished (R&D cash out credit) - 370,232
- Tax losses reinstated (R&D cash out credit adjustment) (20,469) -
- Non-assessable income (123,973) (203,564)
Total income tax expense/(credit) (1,756,275) (784,517)
(iii) Imputation credits
The Company has $194,087 of imputation credits as at 30 June 2021 (2020: $23,400).
(iv) Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a
tax rate of 28%.
The movement on the deferred tax account is as shown below:
2021 2020
$ $
Restated
Opening as at 1 July 798,205 13,688
Recognised in profit and loss
- Recognition of temporary difference 62,089 168,143
- Recognition of tax losses 1,673,717 616,374
- Adjustments from prior years 20,469 -
1,756,275 784,517
Closing as at 30 June 2,554,480 798,205
27
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
7. Tax expense (continued)
(v) Deferred tax (continued)
Details of the deferred tax asset and liability amounts recognised in profit or loss are as follows:
Employee
entitlements Buildings
Lease liabilities
and Right-of-
use lease assets
Share-based
payments –
cash settled
Share-based
payments –
equity settled
Carried
forward tax
losses
Total
$ $ $ $ $ $ $
As at 1 July 2019 12,756 - 932 - - - 13,688
Amounts recognised
- In profit or loss 18,166 37,692 1,002 51,001 94,110 616,374 818,345
- In OCI - - - - - - -
At 30 June 2020 30,922 37,692 1,934 51,001 94,110 616,374 832,033
As at 1 July 2020 30,922 37,692 1,934 51,001 94,110 616,374 832,033
Correction - - - (12,604) (21,224) - (33,828)
As at 1 July 2020 - Restated 30,922 37,692 1,934 38,397 72,886 616,374 798,205
Amounts recognised
- In profit or loss 937 (53,075) 2,036 50,798 61,393 1,694,186 1,756,275
- In OCI - - - - - - -
At 30 June 2021 31,859 (15,383) 3,970 89,195 134,279 2,310,560 2,554,480
Tax losses available but not recognised as a deferred tax asset at reporting date are nil (2020: nil).
The Company offsets assets and liabilities if, and only if, it has a legal enforceable right to set off current tax assets and current tax liabilities and the deferred tax
assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
28
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
8. Notes supporting statement of cash flows
(i) Reconciliation of net operating cash flows to profit/loss
2021 2020
$ $
Restated
Net loss for the year (4,417,960) (2,813,052)
Adjustments for non-cash and non-operating activity items:
- Add back: Depreciation – Property, Plant & Equipment 596,698 149,634
- Add back: Depreciation – RoU lease asset 97,904 65,179
- Deduct: Deferred tax income (1,756,275) (784,517)
- Deduct: Gain on sale of Property, Plant & Equipment - (726)
- Add back: Loss on sale of Property, Plant & Equipment 4,396 -
- Add back: Share-based payment expense 535,879 397,442
- Deduct: Cash settled portion of salary sacrifice (66,587) -
- Add back: Interest expense 31,558 17,753
- Deduct: Interest income (47,560) (35,716)
(603,987) (190,951)
Movements in working capital:
- (Increase)/decrease in other receivables
(1)
370,451 (708,826)
- (Increase)/decrease in prepayments (28,529) (81,998)
- Increase/(decrease) in trade and other payables
(2)
260,033 49,820
- Increase/(decrease) in employee benefit liabilities 64,457 25,551
- Increase/(decrease) in deferred grant income (91,636) 91,636
574,776 (623,817)
Net cash outflows from operating activities (4,447,171) (3,627,820)
(1)
Excludes accruals for interest income (investing activity)
(2)
Excludes accruals for interest expense (financing activity), and payables related to property, plant & equipment
(investing activity)
29
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
8. Notes supporting statement of cash flows (continued)
(ii) Changes in the Company’s liabilities arising from financing activities (cash and non-cash)
30 June 2021 NON-CASH NON-CASH CASH CASH CASH
Opening New leases Unpaid
accrued
lease
payments
Payment of
prior year
accrued
interest
Drawdown Payment Closing
$ $ $ $ $ $ $
Borrowings 88,931 - - - - (78,169) 10,762
Lease
liabilities
259,863 774,846 (7,717) - - (82,914) 944,078
348,794 774,846 (7,717) - - (161,083) 954,840
30 June 2020 NON-CASH NON-CASH CASH CASH CASH
Opening New leases Unpaid
accrued
lease
payments
Payment of
prior year
accrued
interest
Drawdown Payment Closing
$ $ $ $ $ $ $
Borrowings 93,182 - - - 44,200 (48,451) 88,931
Lease
liabilities
123,618 197,845 - (1,691) - (59,909) 259,863
216,800 197,845 - (1,691) 44,200 (108,360) 348,794
30
Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
9. Earnings per share
Basic earnings per share (EPS) is calculated by dividing the profit attributable to
shareholders of the Company by the weighted average number of ordinary shares on issue
during the year, excluding shares held as treasury stock.
Diluted earnings per share assumes conversion of all dilutive potential ordinary shares in
determining the denominator.
In both years, the Company has not adjusted the weighted average number of shares used in
diluted EPS to reflect the impact of outstanding share-options granted, because as the
Company is loss-making, the impact of the outstanding share options granted is “anti-
dilutive” (i.e. decreases the loss per share).
2021 2020
Numerator $ $
Restated
(Loss) for the year and earnings (basic and diluted EPS) 20 (4,417,960) (2,813,052)
2021 2020
Denominator No. shares No. shares
Weighted average number of shares (basic and diluted EPS) 127,393,230 97,481,881*
* Number of shares has been retrospectively restated for the prior period to reflect the
5.882 share split completed on 15 September 2020.
10. Property, plant and equipment
Property, plant and equipment are stated at historical cost less any accumulated depreciation
and impairment losses. Costs includes expenditure directly attributable to the acquisition of
assets, and includes the cost of replacements that are eligible for capitalisation when these are
incurred.
Where self-constructed items take a substantial period of time to construct for their intended
use (“qualifying asset”) borrowing costs are capitalised to the initial cost of item, with
associated cash flows presented within interest expense paid in the statement of cash flows.
Where material parts of an item of property, plant and equipment have different useful lives,
they are accounted for as separate items (major components) of property, plant and
equipment.
Th e cost of property, plant and equipment constructed by the Company, including capital work
in progress, includes the cost of all materials used in construction, associated direct labour and
an appropriate proportion of variable and fixed overheads, and where applicable borrowing
costs. Costs cease to be capitalised as soon as the asset is ready for productive use.
31
Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
10. Property, plant and equipment (continued)
Depreciation is calculated on a diminishing value basis over the estimated useful life of the
asset based on estimates by management. Assets' estimated useful life is reassessed annually.
The following estimated depreciation rates have been used:
− Buildings and fitout 0% to 50% (2020: 8% to 20%)
− Cultivation Containers 10% (2020: 10%)
− Office Equipment 8% to 67% (2020: 13% to 67%)
− Plant and Equipment 8% to 100% (2020: 8% to 40%)
− Vehicles 20% to 40% (2020: 40%)
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the
difference between the net proceeds from disposal and the carrying amount of the item) is
recognised in profit or loss.
Subsequent expenditure is capitalised only when it is probable that the future economic
benefits associated with the expenditure will flow to the Company. Ongoing repairs and
maintenance is expensed as incurred.
Impairment
The carrying amounts of the Company's non-financial assets, other than deferred tax assets,
are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset exceeds its
recoverable amount. Impairment losses directly reduce the carrying amount of assets and are
recognised in profit or loss.
The estimated recoverable amount of non-financial assets is the greater of their fair value less
costs to sell and value in use. Value in use is determined by estimating future cash flows from
the use and ultimate disposal of the asset and discounting these to their present value using a
pre-tax discount rate that reflects current market rates and the risks specific to the asset. For
an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
Impairment losses are reversed when there is a change in the estimate used to determine the
recoverable amount and there is an indication that the impairment loss has decreased or no
longer exists. An impairment loss is reversed only to the extent that the asset's carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised. All other impairment losses are
reversed through profit or loss.
32
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
10. Property, plant and equipment (continued)
Buildings
and fitout
Cultivation
Containers
Office
Equipment
Plant and
equipment
Vehicles Capital
works
Total
Year ended 30 June 2021 $ $ $ $ $ $ $
Opening net book value 2,103,929 160,781 79,227 920,254 77,116 2,317,053 5,658,360
Additions - - 73,028 - 19,503 1,040,553 1,133,084
Depreciation charge (303,192) (14,356) (33,216) (213,317) (32,617) - (596,698)
Disposals - (17,223) (208) - (2,705) - (20,136)
Transfers 2,598,849 - 6,162 566,705 - (3,171,716) -
Closing net book value 4,399,586 129,202 124,993 1,273,642 61,297 185,890 6,174,610
Cost 4,718,203 159,197 185,219 1,540,443 157,874 185,890 6,946,826
Accumulated depreciation (318,617) (29,995) (60,226) (266,801) (96,577) - (772,216)
Net book amount 4,399,586 129,202 124,993 1,273,642 61,297 185,890 6,174,610
The assets under capital work-in-progress relate to the Company’s plant and equipment. The cost of the plant and equipment will be depreciated once the assets
are commissioned and available for use. There are no (additional) costs to completion to which the Company is contractually committed to.
The Company’s borrowings are secured over the vehicles.
33
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
10. Property, plant and equipment (continued)
Buildings
and fitout
Cultivation
Containers
Office
Equipment
Plant and
equipment
Vehicles Capital
works
Total
Year ended 30 June 2020 $ $ $ $ $ $ $
Opening net book value - 147,480 28,015 60,528 104,082 185,221 525,326
Additions 232,890 - 20,475 8,118 20,000 5,002,860 5,284,343
Depreciation charge (15,425) (15,994) (20,411) (50,839) (46,966) - (149,635)
Disposals (net book value) - - (1,674) - - - (1,674)
Transfers 1,886,464 29,295 52,822 902,447 - (2,871,028) -
Closing net book value 2,103,929 160,781 79,227 920,254 77,116 2,317,053 5,658,360
Cost 2,119,354 178,825 106,724 973,739 143,872 2,317,053 5,839,567
Accumulated depreciation (15,425) (18,044) (27,497) (53,485) (66,756) - (181,207)
Net book amount 2,103,929 160,781 79,227 920,254 77,116 2,317,053 5,658,360
34
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
11. Goodwill and Business Combinations
The financial statements incorporate the results of business combinations using the
acquisition method, as at the acquisition date.
Goodwill resulting from business combinations represents the excess between:
● The fair value of (i) the consideration paid, (ii) any previous held interest, and (iii) any
remaining non-controlling interest, and
● The fair value of the net identifiable assets, and their associated acquisition date
deferred tax balances.
● Acquisition-related costs are expensed as incurred.
On initial recognition, goodwill is allocated to the cash generating units ('CGU') that are
expected to benefit from a business combination that gives rise to the goodwill (a CGU being
the smallest group of assets for which there are separately identifiable cash flows).
Subsequently, a CGU to which goodwill has been allocated is tested for impairment on an
annual basis, and at any other time where there is an indicator of impairment, by comparing
the CGU’s carrying amount to its recoverable amount.
Any impairment recognised against goodwill is not subsequently reversed in future periods
where the recoverable amount of a CGU increases above its carrying amount.
(i) Business combinations in the prior year
On the 28
th
August 2018, the Company acquired the trade and net assets of Hikurangi
Bioactives Limited Partnership (HBLP), an entity involved in the cultivation and the research
& development of cannabis products. The resulting $4,000,000 of goodwill (not deductible for
tax purposes) is attributable to the value of the know-how embedded in the under
development IP and acquired workforce, as well as the potential future profitability of the
acquired business.
(ii) Impairment testing of goodwill
Goodwill is monitored at a company level, of a single cash-generating-unit (CGU).
The recoverable amount of the CGU has been determined based on fair value less costs of
disposal, being the price that would be received between market participants at the
measurement date, less any directly incremental transaction costs and costs to bring the CGU
to a saleable condition.
The recoverable value is based on an estimate of market value at the reporting date based
on the quoted share price of $0.41 per share. The share issue price at reporting date is based
on the quoted price on the NZX listed exchange and represents a “level 1” fair value
measurement per the fair value hierarchy.
In 2020, determination of the recoverable value of the Company (being the CGU) was based
on the share issue price of capital proceeds received by the Company from related and third
party investors during the period and the Company’s development to the reporting date. The
estimated share issue price at the reporting date was $2.12 per share. Because the Company
was not publicly listed, the estimated share price was an unobservable input and represented
a “level 3” fair value measurement per the fair value hierarchy.
No impairment of goodwill has been recognised as at 30 June 2021 (2020: nil).
35
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
12. Leases
All leases are accounted for by recognising a right-of -use asset and a lease liability except for:
− Leases of low value assets; and
− Leases with a duration of 12 months or less.
Initial measurement
Lease liabilities are measured at the present value of the contractual payments due to the
lessor over the lease term, with the discount rate determined by reference to the rate inherent
in the lease unless (as is typically the case) this is not readily determinable, in which case the
Company’s incremental borrowing rate on commencement of the lease is used. Variable lease
payments are only included in the measurement of the lease liability if they depend on an index
or rate, however in such cases the initial present value determination assumes that the variable
element will remain unchanged throughout the lease term.
Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
− amounts expected to be payable under any residual value guarantee;
− the exercise price of any purchase option granted in favour of the Company if it is
reasonably certain to assess that option;
− any penalties payable for terminating the lease, if the term of the lease has been
estimated on the basis of termination option being exercised.
Right-of -use assets are initially measured at the amount of the lease liability, reduced for any
lease incentives received, and increased for:
− lease payments made at or before commencement of the lease;
− initial direct costs incurred; and
− the amount of any provision recognised where the company is contractually required to
dismantle, remove or restore the leased asset (typically make-good provisions on buildings)
Subsequent measurement
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a
constant rate on the balance outstanding and are reduced for lease payments made.
Right-of -use assets are depreciated on a straight-line basis over the remaining term of the lease
or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the
lease term. Right-of -use assets are also subject to impairment assessment at reporting date.
Remeasurement
When the Company revises its determination of the use (or non-use) of renewal and/or
termination options, the carrying amount of the lease liability is adjusted to reflect the
payments to make over the revised term, which are discounted at the revised discount rate.
The carrying value of lease liabilities is similarly revised when the variable element of future
lease payments dependent on a rate or index is revised, however this is discounted at the
original discount rate.
In both cases an equivalent adjustment is made to the carrying value of the right-of -use asset,
with the revised carrying amount being depreciated over the remaining (revised) lease term.
The company did not receive (nor is it expected to receive) any COVID-19 related lease payment
reductions during the year.
36
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
12. Leases (continued)
(i) Lease related balances as at period end, and amounts for the period
2021 2020
Expenses and income in the period $ $
Depreciation
- Leases of property (land and buildings) 68,722 60,791
- Vehicles 29,182 4,388
Interest expense 21,859 14,520
Balance sheet and cash flow statements
Carrying amount of Right-of-use asset
- Leases of property (land and buildings) 853,155 204,692
- Vehicles 76,742 48,263
Additions to Right-of-use assets 774,846 197,845
Total cash outflow related to leases 101,010 76,121
(ii) Information regarding the Company’s leases and leasing activity
The Company leases a number of properties including land, buildings, including commercial
office premises, in the jurisdiction from which it operates.
As standard industry practice, several of the Company’s property leases are subject to periodic
CPI increases and/or market rent reviews. A 1% increase in these payments would result in an
additional $907 cash outflow (2020: nil) compared to the current period’s cash outflow.
The Company’s property leases typically include renewal and termination options. The
Company must assess whether it reasonably expects (or not) to exercise these when
determining the lease term.
The Company has two property leases (2020: one property lease) where the Company has
assessed it is does not reasonably expect to exercise all available renewal options, resulting in
a potential lease term in the range of 10 - 20 years (2020: 10 - 20 years) and potential future
lease payments of between $109,020 - $689,160 (2020: $150,000 - $300,000) that are not
currently included in measurement of the lease liability recognised for these leases.
37
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
13. Other receivables
2021 2020
Note $ $
Non-trade receivables 75,000 -
Financial assets classified as amortised cost 4 75,000 -
GST receivable 85,861 124,386
Accrued interest income - -
Withholding tax receivable 1,683 23,400
Government grants receivable
- Research and development tax credit 508,581 581,712
- COVID Wage subsidy - 70,296
- Other 9,802 1,043
Other receivables 605,927 800,837
Government grants receivable
- Research and development tax credit - 197,256
Other receivables (non-current portion) - 197,256
Total other receivables 680,927 998,093
14. Trade and other payables
2021 2020
Note $ $
Trade payables 453,388 512,014
Accruals 56,779 66,168
Financial liabilities classified as amortised cost 4 510,167 578,182
Total Trade and other payables 510,167 578,182
38
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
15. Employee benefit liabilities
Short-term employee benefit liabilities represent those that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the related
service.
For defined contribution plans (Kiwisaver), the Company has no further payment obligations
once the contributions have been paid. The contributions are recognised as an employee
benefit expense when they are due.
2021 2020
$ $
Short term employee benefits payable
- Wages and salaries 99,837 49,020
- Accrual for annual and sick leave 130,475 118,497
230,312 167,516
Defined contribution plan payable 3,550 1,889
Total employee benefit liabilities 233,862 169,406
16. Share Capital
The Company’s ordinary shares are classified as equity instruments. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a deduction from equity, net of
any tax effects, including costs related to shares still to be issued.
2021 2020
Number Number
Opening shares 17,003,096 12,990,000
Shares issued - 4,013,096
Total pre-share split* 17,003,096 17,003,096
Effect of share split* 83,009,129 N/A
Shares issued** 40,250,366 -
Total share capital 140,262,591 17,003,096
* On 15 September 2020, the Company completed a 5.882:1 share split.
** On 22 October 2020, the Company issued 40,000,000 shares by way of listing on the NZX.
They also issued a further 250,366 shares through the vesting of the ESOP issue 3.
At 30 June 2021, share capital comprised 140,262,591 authorised and issued ordinary shares
(2020: 17,003,096). All issued shares are fully paid and have no par value. The holders of
ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company, and rank equally with regard to
the Company’s residual assets.
39
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
17. Related party transactions
(i) Company information
The Company has no ultimate parent entity. There are no individual shareholders holding more
than 20% of the ordinary shares of the Company at reporting date.
(ii) Transactions and balances with related parties
During the year the Company entered into the below transactions with entities related to
shareholders and key management personnel.
Nature of
transactions
Transaction
amount
Amounts receivable
(payable)
$ $
30 June 2021
Alvarium Investments (NZ)
Limited
Purchases 1,492 -
EECOMS Ltd Purchases 22,778 -
Hikurangi Enterprises
Limited Purchases 27,000 27,000
Mitchel Family Trust Purchases 6,735 1,250
30 June 2020
Digital Accounting Limited Purchases 972 -
EECOMS Ltd Purchases 13,118 1,940
Mitchel Family Trust Purchases 220 220
(iii) Key management personnel compensation
Compensation of key management personnel (being those persons having authority and
responsibility for planning, directing and controlling the activities of the company, including
the directors) was as follows:
2021 2020
$ $
Restated
Directors fees 248,700 235,894
Short-term employee benefits 961,677 669,448
Defined contribution plan payments 23,747 20,267
Share-based payment expense 500,128 258,418*
Total key management personnel compensation 1,734,252 1,184,027*
* Refer to Note 20 for details of the restatement.
The impact of the error to these specific line items as they relate to Key management
personnel compensation is $65,228.
Accordingly, the previous reported amounts for these line items were:
- Share-based payment expense $ 323,646
- Total key management personnel compensation $1,249,255
40
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
18. Contingent liabilities
There were no contingent liabilities at balance date that would affect the financial statements.
19. Biological assets
The Company is currently still in a research and development phase and as such the plants and
produce resulting from current operations are not being developed for sale, or for
transformation into agricultural produce or additional biological assets. Under the Company’s
licensing requirements, plants must be destroyed and therefore hold no value at balance date.
The plants are destroyed by way of being composted and as they are not able to be traded,
they have no value from a product manufacturing perspective.
Accordingly, related costs are recognised in profit or loss rather than in the recognition of a
biological asset in accordance with NZ IAS 41 Agriculture, until such time as the Company moves
past the research and development phase. The agricultural assets will be recognised at fair
value once the regulations allow commercial production and they are used for commercial
production.
20. Share-based payments
(a) Accounting policy
Equity-settled share-based payments
The grant‑date fair value of equity‑settled share‑based payment arrangements granted to
employees and directors is recognised as an expense, with a corresponding increase in equity
(share-based payment reserve), over the vesting period of the awards.
The amount recognised as an expense is adjusted to reflect the number of awards for which
the related service and non‑market performance conditions are expected to be met, such that
the amount ultimately recognised is based on the number of awards that meet the related
service and non‑market performance conditions at the vesting date.
Cash-settled share-based payments
Cash-settled share-based payments are measured at fair value and presented as a liability, with
a corresponding amount recognised as an expense.
(b) Correction of prior period error
During the prior reporting period, the Company modified certain non-market vesting conditions
related to Issue #1 and Issue #2 of its employee share option plans (ESOP), such that a portion
(55,750) were denoted as having “vested automatically”. Accordingly, the unamortised and
incremental value associated with these share options were recognised in full, and disclosed as
having vested but remaining unexercised as at 30 June 2020.
However, subsequent review and legal advice has identified and confirmed that while certain
non-market vesting conditions were removed for these share options, they were still subject
to the general vesting conditions which included a requirement of continued employment
(service condition) over the original vesting period. Consequently, this expense should have
continued to be recognised over the remaining service period. This error affected both the
equity-settled and cash-settled components of these share options.
41
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
The impact of the error and relevant restated information is presented below:
(i) Impact to statement of financial position as at 30 June 2020
2020 Adjustment 2020
As reported Restated
$ $ $
Non-current assets
Deferred tax asset 832,033 (33,828) 798,205
Current liabilities
Share-based payment liability (70,492) 58,215 (12,277)
Non-current liabilities
Share-based payment liability (111,653) (13,203) (124,856)
Equity
Accumulated losses (4,868,243) 86,983 (4,781,260)
Share option reserve 336,108 (75,800) 260,308
(ii) Impact to statement of profit or loss and other comprehensive income for the year to
30 June 2020
2020 Adjustment 2020
As reported Restated
$ $ $
Other expenses* (3,174,629) 120,811 (3,053,818)
Income tax credit/(expense)** 818,345 (33,828) 784,517
Total comprehensive loss for the period (2,900,035) 86,983 (2,813,052)
* Employee benefit expense – Personnel costs (Note 6)
Employee benefit expense – Share-based payment expense (Note 6)
** Deferred tax (Note 7)
42
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(b) Correction of prior period error (continued)
(iii) Impact to share option balances
Issue #1 Issue #2 Issue #3 Total
No. No. No. No.
Opening (1 July 2019) - - - -
- Options issued (As reported) 408,000 75,000 42,564 525,564
- Options vested (As reported) (51,000) (4,750) - (55,750)
Adjustment 51,000 4,750 - 55,750
Options vested (Restated) - - - -
Options forfeited (As reported) (51,000) (4,750) - (55,750)
Closing (30 June 2020) (Restated) 357,000 70,250 42,564 469,814
Closing (30 June 2020) (As reported) 306,000 65,500 42,564 414,064
(c) Relevant information relating to the Company’s share-based payments
● During the prior period the Company issued an employee share option plan (ESOP) in
the form of equity-settled share options to its directors, senior management, and
selected employees. This occurred in three separate “Issues”.
● During the current period, the Company completed a 5.882:1 share split, resulting in a
pro-rata increase in the number of share options.
● There were no additional share options issued during the current period.
● Additionally, certain tranches in Issue #2 were modified subsequent to grant date, such
that the affected share options were forfeited.
● The number of share options expect to vest for Issue #1 and Issue #2 has been adjusted
to reflect share options attributed to employees who have terminated their
employment, and thus forfeited their rights to share options, during the period.
● At reporting date, the number of unvested share options was 2,298,392.
43
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(d) Key features and balances of ESOPs
All tranches of ESOPs:
● Are subject to a general service vesting condition (i.e. if the party terminates their
directorship or employment with the company to share options are forfeited).
● Have a $nil exercise price.
● Include tranches where the vesting conditions are yet to be confirmed between the
parties.
In these cases, the ESOPs are deemed to have been granted with respect to their
requirement to be recognised, however, a grant-date fair value is not able to be
determined.
Accordingly, until such time as the vesting conditions are confirmed, the Company
estimates the fair value of the options at each reporting date.
In addition, the Company has elected to pay the PAYE tax associated with the share options, in
addition to the share-options (i.e. no net settlement feature).
Accordingly, this feature of each ESOP is accounted for as a cash-settled share-based payment.
Further details are provided in the subsequent disclosures associated with each Issue.
(i) Share options balances
Issue #1 Issue #2 Issue #3 Total
No. No. No. No.
Opening (1 July 2020) (Restated)* 357,000 70,250 42,564 469,814
- Net share-split impact 1,742,874 342,961 207,802 2,293,637
- Options issued - - - -
- Options vested - - (250,366) (250,366)
- Options forfeited (102,935) (111,758) - (214,693)
Closing (30 June 2021) 1,996,939 301,453 - 2,298,392
(ii) Vested share options balances outstanding
Issue #1 Issue #2 Issue #3 Total
No. No. No. No.
Opening (1 July 2020) (Restated)* - - - -
- New options vested - - 250,366 250,366
- Options exercised - - (250,366) (250,366)
Closing (30 June 2021) - - - -
* Refer to Correction of Prior Period Error above.
44
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(e) Specific ESOP details – Issue #1
(i) Originally issued
Tranche [Vesting period] Vesting conditions 2021
Number
2020
Number
Tranche 1 [25 months]
1
Non-market performance conditions relating to developing the company’s intellectual property (IP), licencing the IP, and
supplying GMP-grade biomass.
N/A
1
102,000
Tranche 2 [25 months]
1
Non-market performance conditions relating to achieving Medsafe NZ GMP Certification, dispatching commercial product to an
EU approved EU conformance testing lab, and having granted and retaining all required certifications.
N/A
1
102,000
Tranche 3 [25 months]
2
To be confirmed for each party prior to 5 September 2020
N/A
2
204,000
1
In the prior period, subsequent to grant date, the vesting conditions attached to Tranche 1 and Tranche 2 were modified, such that:
25% (51,000 share options) were forfeited.
50% (102,000 share options) were split evenly between four new vesting conditions (12.5% each) (Tranche 4A – 4D, below).
25% (51,000 share options) were subject to only continued service conditions (Tranche 4E, below).
The modifications are beneficial to the employees and the new vesting conditions are taken into account in the determination of the share-based payment cost.
2
During the period, the previously yet to be determined vesting conditions applicable to Tranche 3 were confirmed, resulting in four separate tranches (25% each)
with unique vesting conditions. These modified tranches are referred to as Tranche 3A – 3D, below.
45
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(e) Specific ESOP details – Issue #1 (continued)
(ii) Currently issued
Tranche [Vesting period] Vesting conditions 2021
Number *
2020
Number
Tranche 3A [25 months]
2
Non-market performance conditions relating to the Company receiving NZ Medsafe “Good Manufacturing Practice” (GMP) within
a prescribed time frame.
285,277
N/A
2
Tranche 3B [25 months]
2
Non-market performance conditions relating to the Company completing its first commercial harvest in relation to sales
agreement with a specified customer within a prescribed timeframe.
285,277
N/A
2
Tranche 3C [25 months]
2
Non-market performance conditions relating to the Company achieving EU GMP certification within a prescribed timeframe. 285,277
N/A
2
Tranche 3D [25 months]
2
Non-market performance conditions relating to the Company achieving sales into the German market within a prescribed
timeframe.
285,277
N/A
2
Tranche 4A [25 months]
1
Non-market performance conditions relating to the establishment of a board-approved grower partner and collaboration
agreement with a specified target party.
142,639 25,500
Tranche 4B [25 months]
1
Non-market performance conditions relating to establishment of a commercialisation plan between the company and a specified
target entity.
142,639 25,500
Tranche 4C [25 months]
1
Non-market performance conditions relating to the company achieving various medicinal cannabis licences and authorities. 142,639 25,500
Tranche 4D [25 months]
1
Non-market performance conditions relating to board-approved cash-flow and funding plans being confirmed. 142,639 25,500
Tranche 4E [25 months]
1
Service condition. 285,277 51,000
* Includes impact for share split and forfeited share options.
1
In the prior period, subsequent to grant date, the vesting conditions attached to Tranche 1 and Tranche 2 were modified, such that:
25% (51,000 share options) were forfeited.
50% (102,000 share options) were split evenly between four new vesting conditions (12.5% each) (Tranche 4A – 4D, below).
25% (51,000 share options) were subject to only continued service conditions (Tranche 4E, below).
The modifications are beneficial to the employees and the new vesting conditions are taken into account in the determination of the share-based payment cost.
2
During the period, the previously yet to be determined vesting conditions applicable to Tranche 3 were confirmed, resulting in four separate tranches (25% each)
with unique vesting conditions. These modified tranches are referred to as Tranche 3A – 3D, below.
46
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(e) Specific ESOP details – Issue #1 (continued)
(iii) Measurement information
The following information is relevant in the determination of the fair value of share options granted:
Equity Settled Cash-settled
ESOP Issue #1: Tranche 3A – 3D, and 4A – 4E
2021 2020 2021 2020
Option pricing model used Black-Scholes Black-Scholes Black-Scholes Black-Scholes
Weighted average share price
⮚ Tranche 4A – 4E
⮚ Tranche 3A – 3D
$0.30
$0.50
$2.12
$2.12
0.41
0.41
$2.12
$2.12
Exercise price $nil $nil
Weighted average contractual life (in days)
⮚ Tranche 4A – 4E
⮚ Tranche 3A – 3D
93
184
848
549
184
184
549
549
Volatility
⮚ Tranche 4A – 4E
⮚ Tranche 3A – 3D
96%
80%
96%
81%
78%
78%
81%
81%
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over the last
3 years and 6 months of stock movements at the date of issue, matching the time to expiry on the options.
47
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(f) Specific ESOP details – Issue #2
(i) Originally issued
Tranche [Vesting period] Vesting conditions 2021
Number *
2020
Number
Tranche 1 [30 months]
3
Non-market performance conditions relating to developing the company’s intellectual property (IP), licencing the IP, and
supplying GMP-grade biomass.
N/A
3
9,500
Tranche 2 [30 months]
3
Non-market performance conditions relating to achieving Medsafe NZ GMP Certification, dispatching commercial product to an
EU approved EU conformance testing lab, and having granted and retaining all required certifications.
N/A
3
9,500
Tranche 3 [30 months]
4
To be confirmed for each party prior to 1 October 2020.
N/A
4
28,000
Tranche 4 [30 months] To be confirmed for each party prior to 1 October 2021. 117,640 28,000
* Includes impact for share split and forfeited share options.
3
In the prior period, subsequent to grant date, the vesting conditions attached to Tranche 1 and Tranche 2 were modified, such that:
25% (4,750 share options) were forfeited.
50% (9,500 share options) were split evenly between four new vesting conditions (12.5% each) (Tranche 5A – 5D, below).
25% (4,750 share options) were subject to only continued service conditions (Tranche 5E, below).
The modifications are beneficial to the employees and the new vesting conditions are taken into account in the determination of the share-based payment cost.
4
During the period, the previously yet to be determined vesting conditions applicable to Tranche 3 were confirmed, resulting in four separate tranches (25% each)
with unique vesting conditions. These modified tranches are referred to as Tranche 3A – 3D, below.
48
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(f) Specific ESOP details – Issue #2 (continued)
(ii) Currently issued
Tranche [Vesting period] Vesting conditions 2021
Number *
2020
Number
Tranche 3A [30 months]
4
Non-market performance conditions relating to the Company receiving NZ Medsafe “Good Manufacturing Practice” (GMP) within
a prescribed time frame.
29,410
N/A
4
Tranche 3B [30 months]
4
Non-market performance conditions relating to the Company completing its first commercial harvest in relation to sales
agreement with a specified customer within a prescribed timeframe.
29,410
N/A
4
Tranche 3C [30 months]
4
Non-market performance conditions relating to the Company achieving EU GMP certification within a prescribed timeframe. 29,410
N/A
4
Tranche 3D [30 months]
4
Non-market performance conditions relating to the Company achieving sales into the German market within a prescribed
timeframe.
29,410
N/A
4
Tranche 4 [30 months] To be confirmed for each party prior to 1 October 2021. 117,640 28,000
Tranche 5A [30 months]
3
Non-market performance conditions relating to the establishment of a board-approved grower partner and collaboration
agreement with a specified target party.
11,029 2,375
Tranche 5B [30 months]
3
Non-market performance conditions relating to establishment of a commercialisation plan between the company and a specified
target entity.
11,029 2,375
Tranche 5C [30 months]
3
Non-market performance conditions relating to the company achieving various medicinal cannabis licences and authorities. 11,029 2,375
Tranche 5D [30 months]
3
Non-market performance conditions relating to board-approved cash-flow and funding plans being confirmed. 11,029 2,375
Tranche 5E [30 months]
3
Service condition. 22,058 4,750
* Includes impact for share split and forfeited share options.
3
In the prior period, subsequent to grant date, the vesting conditions attached to Tranche 1 and Tranche 2 were modified, such that:
25% (4,750 share options) were forfeited.
50% (9,500 share options) were split evenly between four new vesting conditions (12.5% each) (Tranche 5A – 5D, below).
25% (4,750 share options) were subject to only continued service conditions (Tranche 5E, below).
The modifications are beneficial to the employees and the new vesting conditions are taken into account in the determination of the share-based payment cost.
4
During the period, the previously yet to be determined vesting conditions applicable to Tranche 3 were confirmed, resulting in four separate tranches (25% each)
with unique vesting conditions. These modified tranches are referred to as Tranche 3A – 3D, below.
49
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
20. Share-based payments (continued)
(f) Specific ESOP details – Issue #2 (continued)
(iii) Measurement information
The following information is relevant in the determination of the fair value of share options granted:
Equity-settled Cash-settled
ESOP Issue #2: Tranche 3A – 3D, 4, and 5A – 5E
2021 2020 2021 2020
Option pricing model used Black-Scholes Black-Scholes Black-Scholes Black-Scholes
Weighted average share price
⮚ Tranche 3A – 3D
⮚ Tranche 4
⮚ Tranche 5A – 5E
$0.50
$0.41
$0.36
-
$2.12
$2.12
$0.41
$0.41
$0.41
-
$2.12
$2.12
Exercise price $nil $nil $nil $nil
Weighted average contractual life (in days)
⮚ Tranche 3A – 3D
⮚ Tranche 4 (from reporting date – no confirmed conditions)
⮚ Tranche 5A – 5E
645
645
549
1,010
1,010
914
549
645
549
-
1,010
914
Volatility
⮚ Tranche 3A – 3D
⮚ Tranche 4
⮚ Tranche 5A – 5E
76%
78%
80%
80%
80%
81%
78%
78%
78%
-
81%
81%
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over the last
3 years and 6 months of stock movements at the date of issue, matching the time to expiry on the options.
50
Rua Bioscience Limited
Notes forming part of the financial statements
For the year ended 30 June 2021
21. Events after the reporting date
On 17 August 2021, the New Zealand Government reinstated Covid-19 Alert level 4 for the whole
of New Zealand. The Alert Level 4 settings are applicable to the Auckland region until 31 August
2021 and for the rest of New Zealand until 27 August 2021. The level 4 lockdown in August 2021
does not affect the operations of the Company as Rua Bioscience Limited is in the business of
medicine manufacturing and deemed as essential business. No adjustment for the lockdown has
been included in the financial statements as this is treated as a non-adjusting subsequent
event.
22. Net Tangible Assets
Net tangible assets per share is a non-NZ GAAP measure that is required to be disclosed by
the NZX Listing Rules. The calculation of the Group's net tangible assets per share and its
reconciliation to the consolidated balance sheet is presented below:
2021 2020
$ $
Total assets 30,851,469
15,727,112
(less): Intangible assets (4,000,000)
(4,000,000)
(less): total liabilities (2,017,423)
(1,325,150)
Net tangible assets 24,834,046
10,401,962
Number of shares issued at
balance date
140,262,591
17,003,096
Net tangible assets per share
0.18
0.61
.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.