Rua Releases Annual Report for Year Ended 30 June 2021
PO Box 1387, Gisborne 4040, Aotearoa New Zealand | 0800 RUABIO | www.ruabio.com
FOR PUBLIC RELEASE
NZX Limited
Wellington
Friday 17 September 2021
Rua Bioscience Limited Releases Annual Report for Year Ended 30 June 2021
Rua Bioscience (NZX:RUA) today released its Annual Report for the 12 months ended 30 June 2021
(FY21).
In our report, we review the strides we have made in the past 12 months, outline our current
performance, and share our aspirations for the future. We'll give you insight into our industry and
the ever-changing environment within which we operate as an ambitious medicinal cannabis
start-up. We'll also explore our deep connection to Te Tairāwhiti, the responsibilities we carry as a
company established to impact our people and our whenua positively.
The Annual Report is available now on the Rua website www.ruabio.com/investors. Those who
have requested it, will receive a hard copy in the post in due course.
ENDS
For more information, please visit www.ruabio.com or contact:
Media
Kerry Donovan
Communications Manager
+64 (21) 128 7689
kerry.donovan@ruabio.com
Investors
Hamish White
Chief Financial Officer
+64 (21) 050 5795
Hamish.white@ruabio.com
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
MARKET ANNOUNCEMENT
---
Te Ripoata ā Tau – Rua Bioscience
Annual Report 2021
Our vision at Rua Bioscience is
simple – to create cannabinoid-
derived medicines that change
people’s lives; from right here
in Te Tairāwhiti.
Ko te pae tata kia waihangatia he rongoā hei whakapiki
hauora mo nga tāngata katoa, ko te pae tawhiti, kia
whakareia ake i te oranga o Te Tairāwhiti whānui.
4
Welcome
The Directors are pleased to present Rua Bioscience Limited’s Annual Report and Financial
Statements for the year ended 30 June 2021. The Directors are not aware of any circumstances
since the end of the year that have significantly affected or may significantly affect the
operations of Rua Bioscience. This Annual Report is dated 17 September 2021 and is signed
on behalf of the Board by
Trevor Burt
Chairman
Brett Gamble
Chair Audit and Finance
We’ll also explore our deep connection to
Te Tairāwhiti and the responsibilities we
carry as a company established to have a
positive impact on our people and
our whenua.
Rua is committed to reporting openly and
honestly on our performance, providing
information that is clear and easily
understood. If you have any feedback on
our report please email info@ruabio.com.
Pohiritia ra nga Iwi -
Haere mai ki Rua Bioscience
Welcome to Rua Bioscience
Nga Kiianga a nga Ringatohu
Directors’ Statement
In this report we introduce you to Rua
Bioscience (Rua), review the strides we
have made in the past 12 months, outline
our current performance, and share our
aspirations for the future.
We’ll give you insight into our industry
and the ever-changing environment within
which we operate as an ambitious medicinal
cannabis start-up.
2021 Annual Report
5
Rārangi Kōrero
Table of Contents
Directors’ Statement
Note from our Co-Founders
Chairman’s Report
CEO’s Report
Our People
Board of Directors
Senior Management
Our Roadmap
Our Values
Our Strategy
Highlights for the Year
Scientific Insights
Industry Insights
Creating Value
Recruiting for the Future
Towards Sustainability
Community Engagement
Financial Statements
Code of Corporate Governance
Shareholder Information
Company Directory
4
6
8
10
12
16
18
20
22
26
28
32
38
40
46
48
94
114
120
We’re focused on becoming a leading producer of medicinal cannabis
formulations for patients at home here in Aotearoa and, ultimately, around
the world. We have a social mission that sets us apart – the creation of
sustainable economic opportunities for the people of our region.
6
A Note from our Co-Founders
Kia ora koutou, It is with much pleasure
that we add our kōrero to Rua Bioscience’s
inaugural Annual Report.
With dedication and determination, Rua
has gone from a dream to reality. While the
environment within which we operate is
ever-evolving, the company’s mission remains
constant – to maximise the potential of the
emerging medicinal cannabis industry to
enhance health, heal our lands and restore
prosperity to the indigenous communities of
which we are a part.
He Kōrero mai i nga Kaiwhakaū
Note from our Co-Founders
In creating a strong and prosperous future
for whānau in our region and partners
further afield, our commitment to innovation
goes beyond scientific curiosity – we aim
to embed it in everything we do, from our
kaupapa and values to the relationships we
have with cultivation partners, suppliers and
the communities hosting our cultivation and
manufacturing sites.
By choosing ethical business practices, we
hope to influence the wider cannabis industry
and create positive change in the communities
in which we are involved.
We’re excited by the progress the company
has made so far. Though the company is still
in the early stages of its commercial activities,
we believe that with a clear vision, strategic
partnerships and by working with the best
people for the job, anything is possible.
“We started with a dream
to help our community
by helping people
everywhere”
- Co-Founders Manu Caddie and Panapa Ehau.
Panapa Ehau
Ngāti Uepohatu, Ngati Porou
Director, Co-Founder
Kaiwhakaū /Ringatohu
Manu Caddie
Ngāti Pūkenga, Ngāti Hauā
Kaiwhakaū / Kaihautu - Innovation
and Regulation
Pictured. Panapa Ehau (left)
and Manu Caddie (right).
2021 Annual Report
7
Te Ripoata a te
Heamana
Chairman’s Report
Tenā tatou katoa, rau Rangatira ma, kei te
mihi. Ahakoa nga piki me nga heke o te
tau, e whai tonu ana mātou o Rua i te ara
i whakatakotoria i te timatatanga, te ara
e whai ana i te oranga mo Te Tairāwhiti
whānui.
This has been a transformational year
for Rua Bioscience. We have achieved
goals such as listing on the NZX, signing
a sales agreement with a distributor in
Germany, securing our commercial licence
and supplier partners, developing our
people, building facilities, working toward
regulatory compliance and developing IP.
We have had the advantage of being able
to leverage New Zealand’s horticulture
heritage to develop value from plant
cultivation and genetics to build export
strategies from seed to sale. With
established global leaders and markets,
we can assess international distribution
partners on purpose, performance, and
evidence before working with them.
There is potential for New Zealand’s
medicinal cannabis industry to become a
contributor to our economy and export
earnings, but there is a long road ahead.
With the New Zealand market in its infancy,
we have continued to lay the foundations
to achieve our export strategy, provide
a clear path to revenue and move into
commercialisation.
Capital Structure
Our largest milestone to date was achieved
in October 2020, when the company was
listed on the NZX. We became the only
NZX-listed company headquartered in Te
Tairāwhiti, and the first founded by a Māori
community. The IPO was oversubscribed
and raised $20m of new capital to fund
the company’s next stage of development,
support the achievement of sustainable
revenue and accelerate growth.
2021 Annual Report
9
Te Ripoata a te
Heamana
Chairman’s Report
I am proud to share that, although the
business is still young, our shareholding
turnover has been relatively small. Our
shareholders are on the journey with us.
They understand that we are building long-
term resilience, and this takes time. I would like
to thank all our investors for their continued
confidence in our business and express my
gratitude for their ongoing support.
Our People
This year, our recruitment strategy saw us
making key hires of people who know how to
breed, grow, manufacture and commercialise
plant-derived pharmaceuticals. The New
Zealand biotechnology sector is small and
only a fraction of the global cannabis industry
produces pharmaceutical-grade medicines.
So, recruitment of expertise can be a
challenge, but, equally, New Zealand’s
reputation, lifestyle and our opportunity to
become world-leaders in this industry has
seen us attract international talent to
Te Tairāwhiti.
Recruiting Chief Commercial Officer, Dr Andi
Grant and Product Development Manager,
Dr Dawn Smith were important new hires
for the business. The company’s credibility
in the pharmaceutical space relies heavily on
building our people to spearhead our research
and development (R&D) programme, which is
fundamental in getting the company towards
commercialisation.
International Markets
Our business remains focused on its
‘doable’ export strategy. In July, we signed
a sales agreement with Nimbus Health, an
independent pharmaceutical wholesaler in
Germany. Under the agreement Rua is the
exclusive New Zealand supplier to Nimbus;
together we will bring unique cannabis
medicines to German patients.
Consumption of medicinal cannabis is now
legal in over 40 countries. The market is
expected to be worth over $62.6b by 2024
1
.
With New Zealand being just a small part
of that, it’s important that we connect our
cultivation expertise and good horticultural
practices with experienced international
suppliers who can distribute our product
further afield. Germany is an extremely strong
market, with annual sales of flower in 2021
exceeding those in 2020 by more than 30%
2
.
Whilst our strategy includes identifying other
high-growth international markets, Germany
remains a core pillar in our strategy and will
be key to our future financial performance.
Good Manufacturing Practice (GMP)
GMP certification of Rua’s products and
facilities is a pre-requisite for both local and
export sales into global markets. It is the global
standard for all pharmaceuticals and achieving
this will ensure that we can manufacture
a product that is consistently safe and of
pharmaceutical grade quality. It is a milestone
the business has been working towards for
more than two years. In November 2020,
we began the formal certification process,
working closely alongside Medsafe and we
remain confident that we will be granted our
certification.
Cultivation Partners
We remain committed to building our
cultivation partner network to supply us with
additional high-grade cannabinoid material to
enable us to expand production. This strategy
allows the company to keep its focus firmly on
its manufacturing, research and development,
building intellectual property and securing
partnership agreements with high-growth
markets. We have laid the foundations to build
a cultivation partner network and this will be a
key focus for the year ahead.
NZ Medicinal Cannabis
As a sunrise industry, the medicinal cannabis
sector is populated by a large number of
developing businesses seeking to establish
each of their positions, with most focusing
on developing cultivation capability. With the
ongoing capital requirements considerable,
we can assume that not all will succeed. Those
that do will need to develop differentiated
product and access international markets,
which requires meeting stringent GMP
standards. As a result, we will likely see
some consolidation of the industry. Rua is in a
strong position to lead the sector and further
strengthen its core capabilities.
On behalf of the Board, I would like to express
thanks to all our staff, shareholders and
partners. It has been a year of transformation
and growth, set against a challenging
backdrop of the industry’s evolving regulatory
environment. We look forward to the year
ahead, delivering key milestones across the
seed to sale journey.
Trevor Burt
Chairman
1 Prohibition Partners - “The Global Cannabis Report”
2 Market Data – The German Cannabis Market – Q2 2021.
CEO’s Report
Te Ripoata a te
Kaiwhakahāere
Tēna tatou e hika ma, ko te hao o te ngākau
e noho ora ana koutou katoa. Kei te mihi ki
a koutou e tautoko ana i tenei kamupene.
Kei te kōkiri tonu mātou i te kaupapa i
wawatatia mo te kamupene, ā ki taku titiro
he tōtika te hāere o te waka, kei te anga
whakamua matou o Rua.
Our focus at Rua Bioscience over the last
12 months has been on developing new
products and markets, optimising our
cultivation and processing capabilities,
creating unique plant and product IP all
while developing the capability and
capacity of our team.
Despite the many challenges we have faced,
we are pleased with our progress as we
prepare to enter local and global medicinal
cannabis markets and begin to develop
long-term opportunities across the medicinal
cannabis value chain.
Global Export Strategy
Our focus on the German market as our
first export opportunity continues to
be reinforced as the right decision, with
record amounts of dried flower (9,249 kg in
2020)
3
being imported into the country. It
is estimated that over one million German
cannabis patients will have access to
medicinal cannabis by 2024 and that the
market will be worth 7.7b by 2028
4
. We
have teamed up with Canadian consulting
company KOMAND, who are experts in
cannabis business strategy as we look to
further develop our strategy in Germany and
look for new market opportunities across
Europe and Asia Pacific.
GMP Certification
Closer to home, the New Zealand Medicinal
Cannabis Regulations came into effect on
1 April 2020, operationalising the Medicinal
Cannabis Scheme. Meeting the minimum
quality standards has been challenging for
both local and international companies in
3 BfArM (The German Federal Institute for Drugs and Medical Devices).
4 Forbes, 2021. How Big Is Germany’s Medical Cannabis Market?
2021 Annual Report
11
the sector delaying the availability of new
products in New Zealand. We began our
GMP certification process in November
2020 and, while achieving GMP certification
has been considerably slower than we had
originally anticipated for several reasons,
many of which were outside of our control,
we are confident we will obtain final
approval soon.
Cultivation and Supply
Cultivation at our indoor facility at
Mangaoporo, near Ruatorea, is progressing
well and as planned. We have also completed
an outdoor study cultivation trial, which
is now being expanded upon. We have
always been clear on the importance and
need for cultivation partners to expand our
capacity and increase biomass supplies.
We have a number of MoUs and small
supply agreements in place with a variety of
cultivators as we look to test and develop
different cannabinoid products. This will also
allow work to expand in our manufacturing
facility as we look to extract, test and
develop full spectrum oil products.
Research and Development
Research and development is a critical
component of the pharmaceutical industry
value chain. To this end, we have a number
of collaborations in place with universities,
government and private institutions. Most
recently, we announced a ground-breaking,
two-year research programme with the
University of Waikato to investigate the
application of hyperspectral technology in
the cultivation and assessment of medicinal
cannabis, potentially paving the way for Rua
to enter New Zealand’s booming agritech
sector. Current testing methods present
significant challenges for commercial
cannabis growers as they require destruction
of the flower, are expensive and, with a
longer time to turn around results, delays
decision making. If this technology works in
the way we expect, it has the potential to
revolutionise our own cultivation practices
and transform how the international
medicinal cannabis industry manages,
assess and qualifies its crops.
Our People and Community
Rua was founded in Ruatorea to support
local economic development and we
remain committed to Te Tairāwhiti. In FY21
our recruitment strategy has focused on
two equally critical components, firstly
building a capable, qualified and committed
team that will propel the company towards
commercialisation of our products, and to
create highly skilled and well paid opportunities
for the people of Te Tairāwhiti.
We have attracted a number of highly skilled
people in the last 12 months including Dr Andi
Grant as Chief Commercial Officer, Dawn
Smith as Product Development Manager, and
Len Walker as Head of our Cultivation facility
at Mangaoporo. Of the company’s 30 team
members at FY21 year end, 15 have whānau
connections or whakapapa to Te Tairāwhiti.
These team members work at all levels of
the organisation.
Looking Ahead
While the company’s primary commercial
focus is on developing global markets we
have always been committed to supporting
a sustainable sector here in Aotearoa. As
the market develops, we believe a profitable,
sustainable and patient-focused New Zealand
industry would benefit from some simple
regulatory changes.
They include:
1. Subsidies for cannabis-derived medicines.
2. Provisional consent for medicines with
Phase 1 and Phase 2 clinical trial data.
3. The availability of low dose CBD as a
pharmacy-only medicine.
4. ACC and MSD
5
funding of legitimate
medicinal cannabis prescriptions for
their clients.
5. Government recognition of the production
standards and requirements of each export
jurisdiction on a case-by-case basis.
Rua Bioscience is a pharmaceutical company
aiming to be a leading producer 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 our next stage
of growth, building long term-resilience and
accelerating growth.
We are excited by the next phase of our
journey and what lies ahead, possible because
of our committed stakeholders and partners.
In particular, thank-you to the entire Rua team:
the Board for your guidance and support, the
team for your dedication and commitment, and
the unwaivering support of your whānau.
Rob Mitchell
CEO
5 Accident Compensation Corporation and Ministry of
Social Development.
12
Our People
Trevor
Burt
Anna
Stove
Independent Non-Executive
Director
Ringatohu Whakatū Pū Pehe Kē
Dip Nursing
Anna has a successful 25+ year track record leading
and driving transformational change within the
pharmaceutical sector. She has held various senior
executive roles within NZ, the Asia Pacific and
Europe, most recently as NZ General Manager
for GlaxoSmithKline. She has a strong passion for
improving the quality of life for all and to improve
the outcome of businesses through driving strategic
growth and best practice governance.
Anna is a Director of Pacific Edge Ltd and Deputy
Chair of TAB New Zealand. Her previous governance
roles include Chair of Global Women NZ, Director
of Medicines New Zealand, Vice-Chair of Pukekohe
Park and Vice-Chair of Shooting Star Hospice built
in London, UK. Anna has been a director of Rua
since May 2019.
Te Poari Ringatohu
Board of Directors
Rua Bioscience’s Board of Directors brings together some of New Zealand’s most
experienced business people who collectively have the skills and attributes to govern
the Company in the interests of shareholders. They possess a wealth of domestic and
international expertise and are heavily invested in the Rua kaupapa.
Independent Non-Executive
Chairman
Heamana Whakatū Pū Wehe Kē
BSc Chemistry
Trevor brings extensive corporate executive and
governance experience to Rua Bioscience, having
served in global executive roles with a Fortune 500
company, on the boards of innovative agricultural
companies such as NZX-listed PGG Wrightsons,
Silver Fern Farms and Market Gardeners NZ, and
as Chair of Lyttleton Port and Ngai Tahu Holdings
and the New Zealand Lamb Company. Trevor was
appointed as Director and Chairman of Rua in
August 2019.
2021 Annual Report
13
Brett
Gamble
Panapa
Ehau
Martin
Smith
Non-Executive Director
Ringatohu Whakatū Pū Wehe Kē
BCom Accounting and Finance,
Chartered Accountant (CA)
Brett is an investment and finance specialist with
global connectivity having lived and worked in USA,
UK, Australia, and New Zealand. He is currently CEO
of Tailorspace and Executive Director of Alvarium
Investments (NZ). Brett is also a current Director of
Alvarium Investments Australia, Mike Greer Homes,
Mojo Coffee and Mobile Medical Technologies
and was previously Chair of Enable Networks and
a director of Southbase Construction. Brett also
Chairs a South Island based cancer charity Chalky
Carr Trust. Brett was appointed a Director of Rua in
November 2019.
Executive Director, Co-Founder
BBS Management, PG Dip Marketing
Co-founder of Rua Bioscience, Panapa also
established New Zealand’s first tertiary training
course for cannabis cultivation via the Eastern
Institute of Technology. From Ruatorea, with a degree
in management, Panapa is a co-founder of numerous
social enterprises and holds governance roles across
numerous for-profit and charitable organisations.
Panapa lives in Te Tairāwhiti and has a focus on
developing economic opportunities alongside his
people. He has been a Director of Rua since its
inception in October 2017.
Independent Non-Executive
Director
Ringatohu Whakatū Pū Pehe Kē
BCom Marketing, MInstD
Martin is a professional director with more than 25
years’ experience in the consumer goods sector. He
is the former Chief Executive of L’Oreal NZ and is a
previous Regional Director for L’Oreal Asia Pacific,
Western Europe, Africa, India and the Middle East.
He has worked in London, Paris and Shanghai. Martin
was also on the board of a leading NZ cancer charity
for several years. He is a graduate of the University
of Michigan Advanced School of Management, a
commerce graduate of the University of Auckland
and a Member of the NZ Institute of Directors. Martin
has been a Director of Rua since November 2018.
Kaiwhakaū /Ringatohu
Ngāti Uepohatu, Ngāti Porou
14
Our People
Our Executive Team strives for operational excellence with an
unwavering focus on our company’s crucial deliverables.
Chief Executive Officer
Kaiwhakahāere Matua
PG Dip Business
Rob is a highly experienced senior executive, having
spent over 35 years in leadership roles for major global
pharmaceutical companies, based both overseas
and in New Zealand. He was a Senior Vice President,
Head of Asia Pacific for The Medicines Company and
Senior Vice President, Global Innovation Group Leader
– Infectious Disease, based in New Jersey, USA. Prior
to that Rob spent 18 years with Swiss pharmaceutical
company F Hoffman La Roche (Roche), including
roles as Managing Director of Roche Products (NZ),
General Manager Roche Thailand and most recently
as Head of Global Product Strategy, Roche based in
San Francisco. Before joining Rua, Rob was CEO of NZ
diagnostic healthcare start-up Caldera Health Limited.
Rob started with Rua in February 2020.
Innovation and Regulation,
Co-Founder
BDes, PG Dip Education
As a member of the Ministerial Advisory Group that
developed the regulations for New Zealand, Manu
has been recognised as one of New Zealand’s most
trusted authorities on medicinal cannabis. He has
represented New Zealand at the United Nations, has
contributed to the development of regulations in other
countries, presented at the UK House of Commons
and at a range of global cannabis and pharmaceutical
industry events. Manu has been elected three times by
industry peers as Chair of the New Zealand Medical
Cannabis Council. As Co-Founder and first CEO, he
recruited a skilled team to establish Rua Bioscience as
a sustainable business with global reach. Manu became
an employee in August 2018.
Ngā Pou Matua
Senior Management
Rob
Mitchell
Manu
Caddie
Kaiwhakaū / Kaihautu - Innovation and Regulation
Ngāti Pūkenga, Ngāti Hauā
2021 Annual Report
15
Chief Financial Officer
Āpiha Kaiwhakahāere Pūtea. Ngāti Ruanui
CA, BCom, PG Dip Business
Hamish grew up on a sheep farm in Te Tairāwhiti and is
a Chartered Accountant with previous roles in business
advisory, assurance and information systems for PwC
and BDO. He is experienced in working with start-ups
and has been deeply involved in developing the NZ
cannabis industry. Hamish joined Rua in August 2018.
Chief Commercial Officer
Āpiha Kaihoko Matua
PhD Molecular Neurobiology
Andi has carved out an international career
commercialising medical innovations in the
pharmaceutical and biotech industries. She came to
Rua from Janssen Cilag Pty NZ, where she was the
Market Access Manager commercialising innovative
medicines for NZ patients. Her global experience
includes senior business development roles at Incyte
and Galapagos, as Management Director of Living Cell
Technologies and at Roche as Government Affairs and
Public Policy Manager. Andi joined Rua in June, 2021.
Chief Research Officer
Āpiha Kairangahau Matua
PhD Food Microbiology
Born and raised in Germany, Jess joined the team at
Rua, having discovered the East Coast while travelling.
Jess started her career as a pharmacist in Germany,
having gained a licence to practice as a Pharmacist
after completing her studies at the Eberhard Karl
University of Tübingen in Germany. She started
her PhD in Pharmaceutical Technology in Austria,
developing new drug delivery systems, and completed
her PhD in Food Microbiology at Massey University.
Jess came to Rua from Leaderbrand in 2019.
Chief Operating Officer
Āpiha Kaitohutohu Matua
BSc, PG Dip Business
Paul has held a range of leadership positions in
business strategy and development, including
roles as General Manager of Corson Grain and as
a Business Unit Manager at Fletcher Building. In
his current role at Rua, Paul is responsible for the
development of the GMP facilities and managing
aspects of the company’s day-to-day operations.
Paul joined Rua in February 2019.
Hamish
White
Dr Andrea
Grant
Dr Jessika
Nowak
Paul
Naske
16
Our Roadmap
JAN
▶
HCCL renamed
Hikurangi Cannabis
Company.
AUG
▶
First private
company in NZ to receive a
research licence.
AUG
▶
Research/breeding
programme established
in Ruatorea.
NOV
▶
$7M of capital raised
from wholesale investors.
AUG
▶
$2M of capital raised
from Waiapu Investments
Ltd. via crowdfunding.
20
18
Te Ara o Rua
Our Roadmap
Rua Bioscience was born out of a
desire to increase the wellbeing of
whānau and the whenua by providing
sustainable, safe, well-paid employment
to the people of Te Tairāwhiti,
particularly Ruatorea.
Our story began in 2015 when
Hikurangi Takiwa Trust (a local hapū
entity) was looking at ways to contribute
to local wellbeing. The hapū focused on
education, Te Reo me ona Tikanga and
conservation projects, but economic
development was the elephant in the room.
Two key issues were pressing - how to create
more opportunities for whānau to earn good
incomes and how to create the types of
jobs that would attract whānau home to live
on the whenua and close to their marae.
After a series of community hui, five
locals (including Rua Co-Founders Manu
Caddie and Panapa Ehau) agreed to form
a social enterprise - Hikurangi Enterprises
Limited (HEL). With a focus on high value,
environmentally sustainable opportunities,
HEL set about researching Kānuka and Kina.
HEL created a partnership with New Zealand
Nutraceuticals Ltd (NZNL), a company co-
owned by Manu Caddie. The new partnership
was called Hikurangi Bioactives Limited
Partnership. With additional Government
funding, research was undertaken and
progress made towards commercial
opportunities including hemp, which
HEL was licensed to cultivate in 2016.
And the rest, as they say, is history...
2021 Annual Report
17
OCT
▶
HCCL
renamed and rebranded
to Rua Bioscience.
DEC
▶
Govt passes
regulatory scheme for
medicinal cannabis in
New Zealand.
DEC
▶
$4M additional
capital raised.
MAR
▶
Binding
sales agreement with
Nimbus Health.
AUG
▶
Gisborne
manufacturing facility
completed. Commercial
licence to grow and supply
cannabis-derived medicines
granted.
OCT
▶
Ruatorea cultivation
facility commissioned.
FEB
▶
$3M of capital
raised from WIL via
crowdfunding.
OCT
▶
$20M of additional
capital raised at IPO.
20
19
20
20
20
21
NOV
▶
Rua began its GMP
certification process.
20
18
FEB
▶
First trial export
to Germany.
APR
▶
Recruited Chief
Commercial Officer Andi
Grant, who commenced
her position in June.
M AY
▶
Recruited
Product Development
Manager Dawn Smith.
JUN
▶
Hyperspectral
Imaging project with
the University of
Waikato announced.
18
Our Values
Nga Uara
Our Values
Ponotanga
We value diversity and act with integrity.
Whakawhanaungatanga
We collaborate for success.
These pou underpin everything we do as a successful, sustainable and trusted
partner that creates value for our people.
Māuitanga
We’re future-focused, celebrating courage, curiosity and innovation.
Oranga
We’re passionate about the health of whānau and our whenua.
2021 Annual Report
19
Frazer Elliott
Ngāti Porou
Process Operator
A peek inside the restricted area of our
Gisborne-based facility.
20
Our Strategy
Te Rautaki o Rua
Our Strategy
Strategic Focus
Objectives
• Create unique, sustainable and
protected IP and cultivation
techniques
• Develop commercially viable
varieties of cultivars
• Use research partners to develop IP
Creating Unique
Product and Plant IP
Developing New
Products and Markets
Optimising Cultivation
and Processing
Developing our People
• Create new, protected product
formulations
• Develop new, attractive markets
• Achieve sustainable revenue
• Achieve operational excellence in
cultivation and processing techniques
• Develop cultivation partnerships to
expand production
• Obtain licences and approvals for all
processes, products and markets
• Build a capable and committed team
• Create employment pathways for
Te Tairāwhiti residents
Pete Sollitt
Ngāti Porou
Grower Technician
Darylene Rogers
Ngāti Porou
Kaiarahi, Community Engagement Coordinator
2021 Annual Report
21
With dedication and determination, Rua Bioscience has gone from a dream to reality.
While the environment within which we operate is ever-evolving, our mission remains
constant – to maximise the potential of the emerging medicinal cannabis industry to
enhance health, heal our lands and restore prosperity to the indigenous communities of
which we are a part.
Our customers have a trusted,
high value range of New Zealand
cannabinoid medicines.
Our people have the best
job in the world in the
best place in the world.
Rua Bioscience is a
trusted partner that is
sustainable, successful
and creates value for our
people, communities and
shareholders.
Impacts
22
Highlights for the Year
Māwhiti mai ki nga Hua Nui
Results at a Glance
In FY21, Rua built solid foundations for growth – developing the partnerships, places,
processes and people we need to create a sustainable medicinal cannabis business model.
Our commitment to creating shareholder value has seen us working on two fronts - preparing
to enter local and global medicinal cannabis markets in 2022 as well as developing long-term
opportunities across the medicinal cannabis value chain.
Cash and
Investments
Investment in Property,
Plant and Equipment
Funds Raised
Investment in R&D
Other Income
Loss after tax
$16.4M
$6.17M
$20M$451K
$1.9M-$4.42M
Nga Piki o te Tau
Highlights for the Year
2021 Annual Report
23
Māwhiti mai ki nga
Whakatutukitanga
Achievements at a Glance
Successfully listed on NZX.
Built facilities in Ruatorea and
Tūranga /Gisborne.
Signed exclusive New Zealand supplier sales
agreement with Nimbus Health in Germany.
Received commercial licence to grow and supply
cannabis-derived medicines.
Exported first sample medicinal
cannabis flower to Germany.
Attracted key staff critical to the
commercialisation of Rua operations.
Announced first globally ground-breaking
agritech project, the development of
hyperspectral imaging with the University
of Waikato.
Developed the Rua Sustainability Framework.
Advanced in GMP Certification of our Gisborne
manufacturing facility and first product.
24
Highlights for the Year
FY21 Takenga Pūtea
FY21 Fundamentals
Rua completed the year with net assets of
$28.8m, including $16.4m of total cash
and investments.
Consistent with being an early stage
pharmaceutical company, our investment
in R&D during 2021 was $1.9m.
Total investment in property, plant and
equipment was $6.17m, with key areas
of this investment being our cultivation
centre in Ruatorea and our extraction and
manufacturing facility in Gisborne, both
of which are key to entering our
commercial phase.
Other income was $0.45m, predominantly
made up of R&D grants related to our
planned projects.
Rua’s loss after tax was $4.4m,
representing a loss of $6.2m before tax,
offset by a $1.8m income tax credit.
Our FY21 results are in line with expectations
as we continue to invest in the development
of our product portfolio as well as
establishing the systems and processes
in both our cultivation and manufacturing
operations.
Nga Piki o te Tau
Highlights for the Year
2021 Annual Report
25
Gisborne’s manufacturing facility.
26
Scientific Insights
Mātau Pūtaiao
Scientific Insights
Research on the endocannabinoid system
(ECS) is one of the most promising avenues
for new therapeutics in medicine at the
moment. In a recent study, Prohibition
Partners
6
identified at least 30 late-stage
clinical trials using cannabinoid therapeutics,
noting they expect to see the development
of a range of new cannabinoid therapeutics
approved across the globe in the coming
decade.
How Cannabis Works
According to the same report, there is
increasing evidence of the safety and
efficacy of cannabinoids for many conditions
- with tens of millions of people already
using cannabinoids medicinally each year.
Cannabinoids are the active ingredients
found in cannabis. They interact with ECS,
which regulates functions like memory,
appetite, immunity and inflammation
responses.
There are two kinds of receptors in the ECS:
• CB1 receptors are concentrated in the
central nervous system. They target
motor control, thought and memory
processing, appetite, pain perception
and mood. They are the mostly widely
expressed G-protein coupled receptors
in the brain.
• CB2 receptors are mostly found in the
peripheral organs and immune system.
They target the cardiovascular system,
immune responses and inflammation.
They are predominantly found in the
membranes of cells of the immune
system but also in other tissues.
The two most widely researched and
abundant cannabinoids are THC and CBD,
both of which bind to CB1 and CB2 receptors
in different ways with different effect:
• THC is responsible
for the psychoactive
effects of cannabis
and binds with the
cannabinoid receptors
in the brain. Evidence
suggests that THC
exhibits medicinal
properties that are
useful in treating
chemotherapy-related
nausea, pain and
spasticity.
• CBD is non-psychoactive and
binds more freely with the body’s
cannabinoid receptors. CBD
exhibits wide-ranging properties
potentially useful for health and
wellness, including anti-anxiety,
anti-inflammatory, anti-pain and
neuroprotective effects. CBD has been
proven to be a safe treatment for
several conditions, including several
forms of epilepsy.
A search of ClinicalTrials.Govt using the
terms Cannabis and Pain brings up 102
studies that are either recruiting, active
or complete. Some conditions for which
cannabis is not currently widely used
are being investigated such as ocular
conditions, dermal conditions and
behavioural conditions such as
Tourette syndrome.
THC Molecule
6 Prohibition Partners, 2021. The Pharmaceutical Cannabis Report Edition Two.
2021 Annual Report
27
Researchers are also determining the
therapeutic potential of other minor
cannabinoids that hold a lot of promise,
recognising there is still a lack of hard
evidence. These include cannabinol
(CBN), cannabichromene (CBC),
and tetrahydrocannabivarin (THCV).
Cannabigerol (CBG) is attracting a lot of
interest as a minor cannabinoid with the
potential to have a major impact. It is non-
psychoactive and is psychoactive and is
being investigated for its potential to kill or
slow bacterial growth, reduce inflammation,
inhibit cell growth in tumour/cancer cells, and
promote bone growth.
Cannabidiol prescription in clinical
practice: an audit of my first 400 patients
in New Zealand
In 2020, a study of the first 400 patients
prescribed medical cannabis in Aotearoa
7
suggested potential benefits for thousands of
patients beyond currently recognised uses.
The study was a collaboration between the
University of Auckland and GP Dr Graham
Gulbransen, who opened the first medical
cannabis clinic in Aotearoa. Researchers
examined the records of 400 patients
assessed for treatment at Dr Gulbransen’s
West Auckland clinic Cannabis Care.
Patients were prescribed CBD oil for a range
of indications including non-cancer chronic
pain symptoms, mental health symptoms,
neurological symptoms and cancer symptoms.
Research found that CBD could markedly
ease symptoms in a range of hard-to-treat
conditions. Patients with non-cancer pain
symptoms reported significant improvement
in their mobility and ability to complete their
usual activities, as well as less pain, anxiety and
depression. Patients with mental health-related
symptoms experienced improvements in their
ability to carry out their usual activities and
reduced pain, anxiety and depression. Overall,
patients with cancer-related pain reported
less pain.
Of the first 400 patients, 250 gave feedback
on their satisfaction with CBD. 70% (175)
reported it was good, very good or excellent;
while 30% (75) reported no benefit from CBD
use. Adverse side-effects, which included
sedation and vivid dreams, were reported by
25 out of 253 patients (10%), while two
(0.8%) reported a worsening of a
pre-existing condition.
The study was published in the British Journal
of General Practice Open.
Medical research is increasingly revealing the health benefits of
cannabinoid-based medicines. Working in partnership with nature,
we’re unlocking the power of the cannabis plant to enhance and
restore health – naturally, safely and effectively.
CBD Molecule
The Endocannabinoid
System
CB1 Receptors
CB2 Receptors
7 Gulbransen, 2020. Medicinal Cannabis for Chronic Pain, Anxiety, Insomnia
and Opioid Overuse: Review of my First 200 CBD Prescriptions in Aotearoa Nz.
28
Industry Insights
Mātauranga Ahumahi
Industry Insights
Global Pharma Increasingly
Placing Faith in the Science
of Cannabinoids
There is no doubt the international
pharmaceutical industry is increasingly looking
to high-quality medicinal cannabis as a source
of new products for unmet patient needs and
ongoing sustainable revenue.
February’s announcement that Irish
pharmaceutical company, Jazz
Pharmaceuticals (NASDAQ: JAZZ), would
purchase medical cannabis company
(NASDAQ: GWPH) for $US7.2b was a very
positive sign for our industry – a global
pharmaceutical company placing increasing
faith in the science of the cannabinoid
platform.
The purchase remains the largest acquisition in
the cannabis industry and the most significant
move by a pharma company into cannabis;
demonstrating that pharmaceutical companies
recognise cannabinoid-based medicines’
current and future potential. GW Pharma’s
CEO, Justin Gover praised the industry’s
ability to demonstrate that “the cannabinoid
platform is a real and compelling science with
significant growth potential.”
German Market Continues
to Grow
In March 2020, Rua Bioscience became the
first New Zealand company to announce a
binding export agreement to be the exclusive
New Zealand supplier of medicinal cannabis
products to German distributor Nimbus Health
– a leading supplier of pharmaceutical-grade
medicinal cannabis products for patients.
In this financial year, Rua completed its first
trial export to Germany, testing its packaging
and export processes by sending 70g of dried
flower to Nimbus. As we build toward our first
export revenue, the German market remains
Europe’s most mature medicinal cannabis
market.
Clinicians can prescribe medicinal cannabis
for a variety of conditions and a great
number of these prescriptions are paid for
(reimbursed) by Statutory Health Insurers. It
is currently the largest single market for GMP
(pharmaceutical) grade cannabis globally.
In the year ending 30 June 2021, 313,500
prescriptions for medicinal cannabis products
were reimbursed for German patients, valued
at $298m (€177m). These reimbursed sales are
complimented by a substantive private paying
market that has an estimated additional value
of $169m (€100m).
MARKET SHARE OF CANNABIS
DRUGS IN GERMANY
50%
40%
30%
20%
10%
JANM AYSEPFEBJUNOCTMARJULNOVAPRAUGDEC
Flower
Full Spectrum Extract
Other - Pharmaceuticals
2021 Annual Report
29
The Exponential Rise
of Extraction
Like many vertically integrated (seed to
sale) cannabis companies, Rua has invested
significantly in plant and equipment across the
cannabis production chain, allowing complete
control of cultivation, R&D, extraction,
manufacturing, and our business’s
retail segments.
While the company’s primary commercial focus is on developing
global markets, we have always been committed to supporting a
sustainable sector here in Aotearoa.
8 Market Data – The German Cannabis Market – Q2 2021.
9 Prohibition Partners (2021). The Cannabis Extraction Report. London: Prohibition Partners.
This integrated model also gives us flexibility,
allowing Rua to diversify our revenue
streams as market opportunities arise. Our
investment in extraction capability and the
Vitalis Supercritical Carbon Dioxide Extraction
machine is a case in point; the latest research
suggesting some exciting opportunities in the
global extraction market.
According to Prohibition Partners recent
report
9
, extraction is one of the most active
areas of innovation and growth within the
rapidly expanding global cannabis market.
Analysts expect to see an exponential increase
in sales for extract-based products across
emerging markets in Europe, with sales
expected to reach $2.51b (€1.5b) by 2024.
In Germany, the market for extracted oils is
expected to reach $1.6b in the same period.
With our investment in extraction technology,
combined with the Nimbus distribution
agreement which includes both flower and
oil products, Rua is well positioned to take
advantage of this growth.
The reason for this transition to extract-based
products is quite logical: extracts are more
‘pharmaceutical’ than flower; the dosage is
easier to control; concentrations are more
precise; and the product formats are more
familiar for prescribers and patients.
Consistent with our findings when
investigating our extraction options with
Callaghan Innovation, Co2 extraction is
fast becoming the method of choice for
the industry. Its solvent-free process offers
clean and pure extracts ideal for high-quality
pharmaceutical products. And, because our
extraction machine will be operated under
GMP conditions in a certified GMP facility, we
are well-placed to extract to the demanding
German pharmacopoeia.
The market for dried cannabis flower
specifically continued to grow robustly in
Germany, with annual sales in 2021 exceeding
those in 2020 by more than 30%. As at June
2021, annual sales for dried flower alone stand
at $92m (€54m) per year
8
.
Commentators expect Germany’s domestic
supply chain to continue to grow in 2021. The
country will continue to import products from
various sources and is usually the first place
any product appears on the European market.
30
Industry Insights
Pioneering the
New Zealand Industry
New Zealand’s regulatory framework, the
Medicinal Cannabis Scheme, took effect
on 1 April 2020 enabling the research,
manufacture, and supply of medicinal
cannabis products in New Zealand. The
introduction of the scheme also enabled a
dynamic new industry, with companies such
as Rua pioneering this emerging sector.
Reliable data on the use of medicinal
cannabis in New Zealand is limited. However
data released by the Ministry of Health
under the Official Information Act shows
that the number of packs of medical
cannabis prescribed and supplied in New
Zealand is growing at an average rate
of 250% annually. The number of packs
supplied in New Zealand in the year to 30
June 2021 was over 40,000; compared to
just 2,000 in 2018. This growth is in spite of
patient’s ability to access medicinal cannabis
being constrained by a lack of available
products, limited prescriber understanding
of the clinical benefits of medicinal
cannabis and the absence of government
reimbursement. Rua‘s priority remains to
bring a range of products to the NZ market
as well as working with the industry towards
removing these additional barriers to
patient access.
As the market develops, we believe a
profitable, sustainable and patient-focused
New Zealand industry could be hugely
encouraged by some simple
regulatory changes.
Mātauranga Ahumahi
Industry Insights
The top five industry game-changers we
continue to advocate for on behalf of
the New Zealand industry:
1. Subsidies for cannabis-derived medicines.
2. Provisional consent for medicines
with Phase 1 and 2 clinical trial data,
enabling some marketing to
healthcare professionals.
3. Low-dose CBD (which has a low-risk
profile) available over the
pharmacy counter.
4. ACC and MSD funding of legitimate
medicinal cannabis prescriptions for
their clients.
5. New Zealand Government recognition
of the production standards and
requirements of each export jurisdiction
on a case-by-case basis.
CBD PRODUCTS SUPPLIED
PER ANNUM TO THE NZ
MARKET
201920202021
6,993
21,964
40,282
2021 Annual Report
31
Emma McIldowie
Quality Control Manager
Inside the lab in Gisborne’s
manufacturing facility.
32
Creating Value
Hanga Wāriu
Creating Value
Working Towards GMP
Our commitment to operational excellence
in cultivation and processing is key to our
aspiration to become a world-class medicinal
cannabis company. A critical building block for
any NZ-based pharmaceutical company
is GMP certification.
GMP is a globally recognised set of minimum
standards that describe the systems that
manufacturers of medicines must have in place
to ensure their products are consistently safe
and of acceptable quality. GMP certification
of our facilities and products is a prerequisite
for commercial production, and resulting sales
into local and global markets.
Rua began the multi-stage GMP certification
process in November 2020 and had expected
to achieve certification by late April 2021.
When validation samples destined for
Melbourne and Canada were held up in
international Customs pressure was placed on
our timeframes. In May 2021, we announced a
delay to our GMP certification.
In the months since, Rua has continued
to work closely with Medsafe to achieve
certification and at pace to meet the
heightened demand for medicinal cannabis
products both globally and in Aotearoa.
We anticipate having product available for
New Zealand patients as a prescription-
only medicine in 2022, once product is GMP
certified and we have completed Medsafe’s
New Medicines Application process and
Ministry of Health’s Quality Standard
assessment. We also anticipate exports to
Germany through our New Zealand exclusive
agreement with Nimbus Health in the
near future.
Rob Mitchell, CEO, and
Natasha West, Quality Assurance
Associate, Inside our Gisborne-
based manufacturing facility.
2021 Annual Report
33
Exploring Opportunities in
the $2.5b Global Cannabis
Testing Industry
The company’s intellectual property strategy
focuses on identifying long-term opportunities
right across the medicinal cannabis value
chain. Our ongoing work in hyperspectral
imaging with the University of Waikato is a
recent example.
In June 2021, 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
global cannabis testing industry to be worth
around $2.5b (US$1,806m) by 2025
10
.
However, current analytical methods present
significant challenges for commercial cannabis
growers. Testing requires the destruction of
some product, is expensive, and the longer
turn-around of results means delays in
decision-making.
Our researchers anticipate real-time
monitoring using hyperspectral imaging will
change all that, with the potential to transform
the way the global medicinal cannabis industry
qualifies, assesses and manages its crops.
At the end of our two-year proof-of-concept
project, we hope to prototype an automated,
near-infrared imaging system that will enable
the on-site assessment of individual cannabis
plants in real-time without destroying
any product.
We expect this will revolutionise our internal
cultivation practices and position us well to
develop and market world-class agritech for
the global cannabis industry.
10 Markets and Markets, 2021. 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.
When we reflect on what we’ve achieved in FY21, the whakatauki he kai kei a matou ringa
springs to mind. We’ve worked diligently and with a profound sense of responsibility to
deliver across our key strategic priorities, focusing on the immediate needs of the business
while creating future opportunities.
Ellis Tattersfield
Ngāti Porou
Cultivation Supervisor
Inspecting young plants in
the Mangaoporo facility,
grown for the hyperspectral
imaging project.
34
Creating Value
Hanga Wāriu
The Path to World-Class
Product
While our commercial team assesses and
develops markets around the globe, much
closer to home, our cultivation team focuses
on establishing the commercially viable
varieties we will use to create world-class
products. This has been the key focus of the
cultivation team in FY21.
The first step in the process was the selection
of potential commercial cultivars.
The Mangaoporo-based team began
commercial crop trials in November with a
selection of 45 plants. The plants were grown
from New Zealand-grown seed sourced
from the illicit market, which is provided by
the Misuse of Drugs (Medicinal Cannabis)
Amendment Act 2018. Those plants were
extensively tested - assessed for their
agronomic and phytochemical characteristics
with a view to selecting one or two to go
through to commercial production.
In March, the cultivation team selected two
mother plants, vigorous cultivars with strong
flowering potential that perform well in
our unique indoor environment. These two
cultivars will likely become the backbone of
our dried flower business.
In April, the cultivation team embarked on
growing the first of many engineering and
validation crops. These crops are a critical
part of our commercialisation process and
are designed to test the production systems
at Mangaoporo. Rua’s goal is to grow indoor
to Good Agricultural and Collecting Practices
(GACP) standards and dry to GMP standards
from this facility.
Indoor growing, of course, presents
challenges. The entire climate is man-made,
micro-managed and adjusted to suit the
plant’s needs throughout its lifecycle – light,
temperature, humidity, water, and nutrient
levels are all monitored and controlled 24
hours a day. Engineering tests allow the team
to refine their processes over several harvests
and collate supporting data before validating
those processes by growing a series of crops
to the same growing environment.
With one trial complete and another three in
progress, Rua is pleased with the headway
made in cultivation. Having selected our
initial cultivars and advanced so far through
the trial crop process within 12 months of
commissioning our Mangaoporo facility
is remarkable. It sees us aligned with our
commercial strategy and places us on
track to deliver our first revenue through our
New Zealand exclusive agreement with
Nimbus Health.
Local Expertise Meets International
Know-How
Supporting the team through the exacting
process of establishing our cultivation
regime is Jeremy Plumb, who is recognised
as a global expert on biological controls and
precision horticulture for cannabis. Jeremy
has developed sound cultural practices of the
highest discipline in large-scale cultivation
environments and provides a wealth of
experience to complement our local growers
familiar with growing practices in the
Tairāwhiti context.
What is GACP?
In 2003, the World Health Organization
(WHO) developed the GACP guidelines,
creating a single global framework to ensure
appropriate and consistent quality in the
cultivation and production of medicinal
plants and herbs.
2021 Annual Report
35
As a business focusing on commercialising unique cannabis cultivars, our crop
growing programme is an essential activity, and the resulting genetics are some of
our most important assets.
Jeremy Plumb, examining an
early Rua crop.
Mexico
Canada
Britain
Luxembourg
UruguaySouth Africa
36
Creating Value
Hanga Wāriu
Creating Value
Developing Sustainable
Offshore Markets
Consumption of medicinal cannabis is now
legal in over 40 countries. The market is
expected to be worth over $62.6b by 2024
11
.
Rua has a clear path to revenue and an export-
led strategy targeting major high-standard
GMP medicinal cannabis markets. As well as
ensuring New Zealand patients are amongst
the first to access our medicines, Germany
remains a core focus - its size, expected
growth, and favourable market dynamics
present unparalleled opportunities for the
company. Rua is also actively exploring other
international markets where our high quality,
GMP-grade medicinal cannabis products have
the potential to be market leaders.
Whilst there has been immense progress in the
legalisation of medical cannabis in countries
around the world, there is no “one size fits all”
approach to what activities and product types
are permitted in each country, which medical
conditions cannabis may be used for, who can
prescribe medicinal cannabis and who pays
for it. At the same time, rules and regulations
are changing rapidly across the globe as each
country grapples with its own cultural, political
and medical climates in determining its laws
around medicinal cannabis use.
Rua works with a small group of international
advisors to stay ahead of market
developments internationally and position
itself to capitalise on revenue generating
opportunities. In particular, we are focused on
European and Asia Pacific countries where
regulations require any imported products to
meet high quality GMP standards. In addition
to our unique cultivars, it is the achievement
of this GMP standard that will set our products
apart from the other, lower value products
available in non-GMP countries.
We have stratified our target markets into Tier
1 and Tier 2 opportunities and are executing
our business development plans in order to
extend our distribution beyond Germany and
New Zealand in the medium term.
Underpinning this is the development of
a world-class team focused on realising
the company’s commercial aspirations and
delivering value for our Shareholders.
Cannabis Legalisation to March 2021
12
11 Prohibition Partners.
The Global Cannabis Report.
12 The Economist, March 2021.
* In exceptional circumstances
† Includes countries with potential upcoming legalisation or upcoming pilot programme
Medical and
Recreational adult
use legalised†
Available via import*
Production legalised
Treatment legalised
2021 Annual Report
37
38
Recruiting for the Future
Ngā Whakaurunga Āmua
Recruiting for the Future
In May, we welcomed Product Development
Manager, Dr Dawn Smith, into the Rua whānau.
Dawn comes with a proven track record in
the development of pharmaceuticals, medical
devices, packaging and new products.
Dawn joined Rua after a decade at Scion, first
as Research Leader Polymers and Composites,
and most recently as Portfolio Leader
Bioproducts and Packaging. Notably she was
responsible for setting Scion’s strategy for
funding, investment, and collaboration out to
2030, has served on WASTEMINZ’s Organics
Steering Committee and Scion’s Sustainability
Committee. Dawn also co-authored a
number of peer-reviewed journal articles, has
registered a variety of patents related to her
PhD in Polymer Science and has nine years
in product development of medical devices
before moving to NZ.
Dawn is responsible for developing innovative
Rua products for evolving markets - taking
product concepts and ideas, and developing
the processes that will enable the successful
development of medicines.
Dawn was closely followed by Dr Andi Grant
who joined the team as our Chief Commercial
Officer in June. Andi’s was a key appointment.
Her task is to drive the company’s domestic
and global expansion.
Andi brings 20 years of business development
experience in the pharmaceutical and biotech
industries globally. She comes to Rua from
Janssen Cilag Pty NZ (the pharmaceutical
business of Johnson & Johnson), where she
was the Market Access Manager responsible
for commercialising innovative medicines to
NZ patients.
Andi’s global experience in biotech
includes senior business development
roles at Incyte and Galapagos, both during
their early stages of transitioning to fully
integrated pharmaceutical companies, as
well as Management Director of Living Cell
Technologies. She will also add value to the
company’s global commercial discipline, her
experience garnered from working with global
pharmaceutical stalwarts including Janssen
and Roche.
Expanding our
Commercial Capability
Dr Dawn Smith
Product Development
Manager
Dr Andi Grant
Chief Commercial Officer
2021 Annual Report
39
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.
Bringing Talent Home
Our focus on recruiting the best naturally
creates great opportunities for people
within the region as well as whānau
looking for the chance to return home.
Though Len Walker’s family moved away
for work (as many of that generation did),
the East Coast, Te Araroa and Waipiro Bay
have been a constant for the Walker
family. They lived in the area when mahi
allowed, spent every summer with whānau
at Waipiro and, eventually, Len’s parents
- Ginger and Jackie - retired to Parera
(Horoera).
However, Len (Ngāti Porou, Aitanga-a-
Hauiti, Te Whānau-a-Apanui), stayed away
a little longer, raising a family and carving
out a career in the dairy industry, first
at the Tui Co-operative Dairy Company,
Pahiatua, then with the NZ Dairy Research
Institute in Palmerston North (now
Fonterra Research). In 2000, Len moved
to Edendale (Southland, Te Waipounamu),
as a Production Supervisor, then as
Process Projects Manager and Production
Manager for Milk Powder operations, then
Operational Excellence. After achieving his
MBA, Len’s work included troubleshooting,
commissioning, and operating various
production plants including Open Country,
Miraka and Westland Milk Products.
With us since October, Len oversees the
company’s Ruatorea-based cultivation
facility. He says relocating back home has
been a most welcomed and wonderful
opportunity – both challenging and
inspirational.
Len Walker
Ngāti Porou, Aitanga-a-Hauiti, Te Whānau-a-Apanui
Cultivation Manager
40
Towards Sustainability
In 2019, Rua Bioscience became a member
of the Global Cannabis Partnership
(GCP) - an initiative designed to make the
cannabis industry equitable, sustainable and
accountable. This initiative of 40+ companies
included the biggest names in the cannabis
industry and required a commitment to
address 12 impact areas in Environmental,
Social and Governance issues.
Staff worked with sustainability consultant
Daniel King to identify a range of goals,
measures and initiatives under each of the
12 impact areas.
In doing so, Rua cemented its commitment as
an ethical and sustainable cannabis business,
developing the Rua Sustainability Framework.
As well as aligning with the United Nations
Global Compact Sustainable Development
Goals (SDGs) our bespoke Rua Sustainability
Framework will take our practice and our
responsibility to community a step further,
underpinning our goal to lead the global
industry as an ethical and sustainable
cannabis business.
Whai Hua mo Apōpō
Towards Sustainability
2021 Annual Report
41
No Poverty
Rua chose to base its business
in Ruatorea, a remote
community with a small
population that has not seen
any significant industrial investment for over
100 years. The community has experienced
significant population and economic decline
since the 1960s and Rua founders wanted to
help reverse that trend. That’s why we based
our operations in Ruatorea and creating
employment in this community remains a core
commitment of the company. To date, half of
our staff have whānau connections to iwi of
Te Tairāwhiti.
Our evolving grower partner programme
is designed to ensure local whānau and
landowners will be represented in our
value chain. We prioritise the free, prior
and informed consent of mana whenua
throughout the lifecycle of projects, taking
into account the Waitangi Tribunal’s report
on Wai 262.
Zero Hunger
Cannabis seeds are a
functionally valuable and
healthy food resource.
Rua has been working with seed collectors
and farmers in Nepal and community-led
initiatives to support and preserve genetic
diversity, as well as knowledge regarding
the cannabis plant. Rua has also supported
hemp crops being differentiated from
psychoactivity-related crops using the ratio
methodology proposed by the United Nations
Office on Drugs and Crime (UNODC).
Good Health and Wellbeing
Our HR policies encourage
healthy lifestyles; providing
services, resources and
information to help employees
to fulfill their roles. We provide excellent
working conditions and actively support
working parents. We recognise illness
manifests itself in a range of both physical and
mental conditions and no matter the illness,
focus on enabling our people to be the best
they can be at all times.
Our Diversity and Inclusion Policy ensures
fair and equitable treatment of all staff. We
have strict health and safety procedures
that protect all staff.
Quality Education
Rua respects the universal
right to education, aligning
our business and education
priorities to that of our
community by actively encouraging the
region’s rangatahi into higher education.
More information can be found in the
Community Engagement section of this
report.
Gender Equality
The company’s HR and
Diversity and Inclusion
Policies embed the
principles of gender equality
for employees and governing bodies
throughout our operations. Rua encourages
the participation of women in decision
making and governance at all levels of the
business. We are committed to continually
increasing the diversity of governance and
management as we are convinced it will
produce the most successful outcomes for
all Rua stakeholders.
Clean Water and Sanitation
Rua recognises water as a
valuable resource, and is
working with mana whenua to
understand the impact of our
operations and our water footprint across
our value chain. Our goal is to minimise
any adverse effects on water quality and
effectively respond to any identified adverse
impacts.
Affordable and Clean Energy
Rua works consistently to
off set the impact of our
growing operations. Rua buys
its power from companies
that generate from 100% renewable energy
sources and is investigating the use of other
renewable and green energy technologies.
42
Towards Sustainability
Decent Work and
Economic Growth
Rua Bioscience was born
out of a dream to increase
the wellbeing of whānau
and the whenua by providing sustainable,
safe, well-paid employment to the people
of Te Tairāwhiti, particularly Ruatorea.
Our Community Development programme
demonstrates our commitment to creating
productive local employment.
We’re also passionate collaborators, willingly
sharing our journey, skills and expertise with
others within our industry and with other
businesses within the region.
Industry, Innovation
and Infrastructure
Rua has taken a life-cycle
approach in investing and
developing our new facilities in
Gisborne and Ruatorea. The team considered
social, economic and environmental impacts
on the whole lifecycle of the infrastructure,
using these impact assessments as the basis
for supply chain choices and interactions
with stakeholders.
Reduced Inequalities
Rua addresses inequalities by
providing opportunities for
safe, well-paid work across the
region. Our evolving grower
partner programme is designed to ensure local
whānau and landowners will be represented
in our value chain, so as to contribute to their
income growth.
The company’s HR and Diversity and
Inclusion policies encourage fair and equitable
treatment of all staff and embed appropriate
processes and protocols for hiring staff and
managing grievances.
Sustainable Cities
and Communities
By providing good-quality, well-
paid jobs within the region, Rua
hopes to be part of a sustainable
solution to economic development within
Te Tairāwhiti.
As a Māori-founded enterprise, we are
committed to enhancing the cultural and
natural heritage of Te Tairāwhiti, respecting the
culture, values and languages of
mana whenua.
Rua has integrated risk management into
business models and practices to increase
business resilience, protecting livelihoods and
productive assets throughout our supply chain.
Responsible Consumption
and Production
Rua has incorporated sustainable
development into its business
vision, policies and strategies
and is developing sustainability targets and
indicators across products and services.
We are working to understand sustainable
management and resource efficiency in all
operations.
Climate Action
Originally formed when Rua was
part of the GCP, our Responsible
Cannabis Framework has been
developed as a relevant industry
standard for addressing
climate change.
Life Below Water
Rua is taking responsibility
for waste and wastewater
generated, as well as any other
sources of pollution as a result of
our business activities.
2021 Annual Report
43
Life on Land
Work is being undertaken to
assess and prevent any actual
or potential negative impacts on
soil, wildlife, ecosystems and the
food chain.
Peace, Justice and
Strong Institutions
Rua maintains the notion of “do
no harm”, ensuring that business
operations do not have an
adverse effect on the regions where
we operate.
Rua has prioritised and undertaken active
engagement with active engagement with
its community through our Community
Engagement Programme.
44
Impact
Rua Sustainability Framework
The Rua Sustainability Framework, guides our
sustainability programme for the foreseeable
future. It will shape the way we engage with
stakeholders; support sustainable decision-
making processes at all levels of the company;
shape business strategy; guide innovation;
drive better performance; create value and
attract investment.
Our priorities for FY22 are outlined on page 45.
Hamish Harris
Ngāti Porou, Nga Puhi
Plant Health Specialist
Annual Report
45
Impact Area ActionTarget FY22
Environmental Carbon audit and transition
plan adopted.
Toitū Envirocare carbon audit
completed and transition
plan approved.
Develop sustainable packaging policy
that focuses on waste minimisation,
reusable and recyclable
packaging options.
Sustainable packaging policy
adopted and recyclable
packaging options that
meet EU Pharmacopoeia fully
investigated.
Seek GACP certification for all
cultivation sites.
GACP certification
process undertaken for
Mangaoporo site.
Social Support the New Zealand Medicinal
Cannabis Council (NZMCC) prescriber
education programme.
Contribution made
to NZMCC prescriber
education programme.
Establish a system to measure numbers
of jobs created, patients supported
and overall community impact. The
reporting will provide transparency to
management, board, shareholders and
community.
Community impact
monitoring framework
established.
Create opportunities for community
members to have internships, work
experience, etc.
Two internships supported at
Rua or partner organisations.
Two work experience
opportunities completed.
Six scholarships provided
including two post-graduate
scholarships.
Develop mechanism for illicit varieties
to enter legal market with ongoing
benefit to original growers supplying
the genetics and knowledge.
Mechanism for illicit
varieties to enter legal market
established.
Governance Add a Code of Ethics to Code
of Conduct.
Code of Ethics and Ethics
Complaint Process added
to Code of Conduct.
Ensure ethics training is part of
induction and ongoing PD for all staff.
Ethics training completed
by all staff.
Develop and implement anti-corruption
policy to avoid the use of ‘facilitation
payments’, doing business with
companies that use unethical practices to
achieve their goals and similar practices
that violate human rights or other
principles of good governance
and ethical practices.
Anti-corruption
policy adopted.
Support efforts to end Modern Slavery
by developing a policy designed to
ensure the company is not involved
in Modern Slavery.
Modern Slavery
policy adopted.
Diversity and inclusion training as part
of ongoing PD for all staff.
All staff complete diversity
and inclusion training.
46
Community Engagement
Rua Bioscience Community Engagement and
Capability Development Programme
Tenei te Tira hou e Haramai Nei
Inspiring the Next Generation of East Coast Scientists,
Researchers, Inventors and Entrepreneurs
Our local community is the cornerstone
of our company. Rua is born from hapū
economic development initiatives, our
whānau being the first to invest in this
tenacious medicinal cannabis start-up.
Regular communication with our community
and development of local capabilities are
key driving factors for Rua Bioscience.
We know employment opportunities for
rangatahi in Ruatorea and on the Coast
are limited. The main industries of farming
and forestry can have a negative impact on
soil conservation and freshwater systems -
education and health services provide some
other employment but overall wages are
relatively low. Rua Bioscience is keen to help
increase the number and range of jobs
in the community.
We have high levels of poverty and low
levels of academic achievement. The level of
formal qualifications shows Māori on the East
Coast post-secondary school fall behind the
Gisborne District statistics and fall well short
of the national average.
As a company, we want to improve these
negative statistics and have developed
the community capability development
Our commitment to community includes
regular face-to-face meetings and
correspondence in the form of quarterly
community roadshows. At these, we report
on developments within the company and
the industry within which we work.
programme to aid that. Rua has shown its
commitment by allocating $50,000 in this
financial year. Trust Tairāwhiti also backed
our programme with a contribution of
$50,000 to support our work over 2021 and
2022. With this contribution, we will be able
to maximise the impact of our initiatives.
The programme started in 2020, offering
scholarships for rangatahi residing
on the East Coast. We supported five
students from Te Tairāwhiti to undertake
Tertiary study in 2021. We also provided
an internship in partnership with the NZ
Institute of Plant & Food Research for a
Māori student going into her third year of
University study in plant biology.
This year, we have put in place the
building blocks for a number of other
exciting initiatives.
Whakapā atu ki te Iwi Whānui
Community Engagement
2021 Annual Report
47
Rua will soon launch our medicinal cannabis
Industry Career Guide for locals interested in
acquiring the relevant skills and experience
to enter the industry. The Rua whānau has
contributed significantly to this by providing
insight into their personal and professional
journeys. This will be followed by a visual
series focused on career pathways within the
medicinal cannabis and wider pharmaceutical
industry. Both the printed guide and visual
series are designed to inspire rangatahi to
follow in the footsteps of the amazing team
we have here at Rua.
Additional activities will see that Rua is active
within the East Coast school community –
careers expos, school visits and hosted visits
to our facilities all top of the list.
We are also leveraging the relationships that
we have made for the benefit of all. We’re
building a programme of visits to Tertiary
education providers and research institutes for
the next generation of East Coast scientists,
researchers, inventors and entrepreneurs.
Into the future, we also hope to open
our doors further with a post graduate
programme, and hope this extends to
internships across the motu.
In doing so, we hope to be part of a bigger
movement of locally-owned businesses
committed to building community capability
and increasing local employment options
in high value sectors. We recognise we are
not the first to work in this space in our
community, and we’re sure we won’t be
the last.
Our programme will be reviewed at the end
of 2022, at which time we will assess our
impact and consider future investment
and improvements.
Recipients of the Rua Bioscience 2020 Scholarships meet with the Rua team (from left) Panapa Ehau (Rua Bioscience Co-founder and
Director), Darylene Rogers (Rua Bioscience Kaiārahi Community Development Coordinator), Te Keepa Wanoa (Te Waha o Rerekohu Area
School), Heneriata Whangapirita-Bishop (Te Kura Kaupapa Māori o Te Waiū o Ngāti Porou), Hunaara Waerehu (Te Kura Kaupapa Māori o Te
Waiū o Ngāti Porou), Paenoa Pahuru-Huriwai (Te Kura Kaupapa Māori o Kawakawa Mai Tawhiti), Beritane Milner (Tolaga Bay Area School),
Tiana Whatarau (Ngata Memorial College), Rob Mitchell (Rua Bioscience CEO).
48
Financial Statements
Nga Ripoata Putea
Financial Statements
2021 Annual Report
49
Index to the Financial
Statements
Independent Auditor’s Report
Statement of Profit or Loss and Other Comprehensive Income
Statement of Changes in Equity
Statement of Financial Position
Statement of Cash Flows
Notes forming part of the Financial Statements
Other Information
Code of Corporate Governance
Shareholder Information
Directory
50
54
55
56
57
58
94
114
122
50
Financial Statements
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.
2021 Annual Report
51
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.
52
Financial Statements
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.
2021 Annual Report
53
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 assurancebut 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
54
Financial Statements
Statement of Profit or Loss and Other
Comprehensive Income
For the year ended 30 June 2021
Note2021
$
2020
$
Restated
Research and development expenses6(1,897,126)(1,289,662)
Other expenses6,20(4,744,082)(3,053,818)
Operating loss before net financing income(6,641,208)(4,343,480)
Other income5450,971727,948
Interest income47,56035,716
Interest expense(9,699)(3,230)
Interest expense - leases(21,859)(14,523)
Net finance income16,00217,963
Loss before tax (6,174,235)(3,597,569)
Income tax credit7,201,756,275784,517
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.
2021 Annual Report
55
Note
Share
capital
Share
option
reserve
Accumulated
losses
Total
equity
$$$$
Opening balance at 1 July 201912,480,242-(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 capital7,000,948--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
6,442,671336,108-6,778,779
Balance at 30 June 202018,922,913336,108(4,868,243)14,390,778
Opening balance at 1 July 202018,922,913336,108(4,868,243)14,390,778
- Correction of prior period error20-(75,800)86,98311,183
Restated opening balance at 1 July 202018,922,913260,308(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 capital20,000,000--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
18,495,586354,459-18,850,045
Balance at 30 June 202137,418,499614,767(9,199,220)28,834,046
The above statements should be read in conjunction with the accompanying notes.
Statement of Changes in Equity
For the year ended 30 June 2021
56
Financial Statements
Statement of Financial Position
As at 30 June 2021
Note2021
$
2020
$
Restated
Current assets
Cash and cash equivalents 43,359,4793,937,501
Other receivables 13605,927800,837
Prepayments110,52781,998
Investments 413,041,549-
Total current assets 17,117,4824,820,336
Non-current assets
Property, plant and equipment 106,174,6105,658,360
Goodwill114,000,0004,000,000
Right-of-use lease assets 12929,897252,955
Other receivables1375,000197,256
Deferred tax asset 7,202,554,480798,205
Total non-current assets 13,733,98710,906,776
Total assets 30,851,46915,727,112
Current liabilities
Trade and other payables 14510,167578,182
Employee benefit liabilities 15233,862169,406
Lease liabilities 4,12133,95868,935
Borrowings 410,76278,169
Deferred grant income-91,636
Share-based payment liability20286,64712,277
Total current liabilities 1,175,396998,605
Non-current liabilities
Borrowings4-10,762
Lease liabilities4,12810,120190,928
Share-based payment liability2031,907124,856
Total non-current liabilities 842,027326,546
Total liabilities2,017,4231,325,151
Net assets 28,834,04614,401,962
Equity
Share capital 1637,418,49918,922,913
Accumulated losses (9,199,220)(4,781,260)
Share option reserve20614,767260,308
Total equity 28,834,04614,401,961
The financial statements on pages 54 to 93 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.
2021 Annual Report
57
Statement of Cash Flows
For the Year Ended 30 June 2021
Note2021
$
2020
$
Cash flows from operating activities
Grant income received691,261182,790
Payments to suppliers and employees(5,138,432)(3,810,610)
Net cash inflows/(outflows) from operating activities8(4,447,171)(3,627,820)
Cash flows from Investing activities
Interest income69,27747,619
Proceeds from sale of plant and equipment15,7392,400
Proceeds from maturing investments2,001,4202,000,000
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 shares20,000,0007,000,948
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 activities818,302,9406,362,841
Net increase/(decrease) in cash and cash equivalents(578,022)(235,621)
Cash and cash equivalents at beginning of year3,937,5014,173,122
Cash and cash equivalents at end of year43,359,4793,937,501
The above statements should be read in conjunction with the accompanying notes.
58
Financial Statements
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 register 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).
(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
2021 Annual Report
59
2. Basis of preparation (continued)
• 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.
(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.
60
Financial Statements
2. Basis of preparation (continued)
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.
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.
2021 Annual Report
61
2. Basis of preparation (continued)
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.
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.
62
Financial Statements
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
Financial
Assets at
Amortised
Cost
Financial
Liabilities
at Amortised
Cost
Total
Carrying
Amount
Fair
Value
2021$$$$
Investments13,041,54913,041,549(a)
Cash and cash equivalents3,359,4793,359,479(a)
Other Receivables75,00075,000(a)
Trade and other payables(510,167)(510,167)(a)
Borrowings (10,762)(10,762)(b)
Lease liabilities(944,078)(944,078)(c)
Total16,476,028(1,465,007)
2020$$$$
Cash and cash equivalents3,937,5013,937,501(a)
Trade and other payables(578,182)(578,182)(a)
Borrowings (88,931)(88,931)(b)
Lease liabilities(259,863)(259,863)(c)
Total3,937,501(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.
2021 Annual Report
63
(a) Standard & Poor’s, Moody’s, Fitch.
4. Financial instruments - Risk Management (continued)
(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.
(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:
Credit rating
(a)
Cash and cash
equivalentsInvestmentsTotal
30 June 2021$$$$
KiwibankA1, AA3,359,47913,041,54916,401,028
Total3,359,47913,041,54916,401,028
30 June 2020
$$$$
KiwibankA1, AA3,937,501-3,937,501
Total3,937,501-3,937,501
Interest rates on interest bearing cash and cash equivalents and investments range between
0.35% - 1.00% (2020: 1.00% - 3.45%).
64
Financial Statements
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).
(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.
2021 Annual Report
65
4. Financial instruments - Risk Management (continued)
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:
(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.
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.
As at 30 June 2021
Up to 3
Months
Between
3 and 12
months
Between
1 and 2
year
Between
2 and 5
years
Over
5 yearsTotal
$$$$$$
Trade and other payables510,167----510,167
Borrowings10,832----10,832
Lease liabilities43,367130,102147,470330,910479,7441,131,593
Total564,366130,102147,470330,910479,7441,652,592
As at 30 June 2020$$$$$$
Trade and other payables578,182----578,182
Borrowings 10,83232,49710,83250,830-104,992
Lease liabilities20,82662,47883,30481,15156,250304,009
Total609,84094,97594,136131,98156,250987,183
66
Financial Statements
5. Other Income (continued)
The Company currently receives government grants in the form of general and COVID-19 related
employee wage subsidies received from the Ministry of Social Development (MSD); and, research
and development (R&D) tax losses cash out and R&D tax incentive credits, received from the
Inland Revenue Department (IRD).
R&D tax losses cash out and R&D tax incentive credits are accounted for as government grant
income as opposed to income tax credits as the benefit is independent of the taxable profit
or tax liability where Company is eligible for a cash refund; specific conditions exist for the
Company, the R&D activities and the expenditure to be eligible for the tax credits; and the tax
credits are not structured as an additional deduction in computing taxable profit.
R&D tax losses cash out is earned by cashing in R&D losses for the year and is repaid by the
Company to the IRD from future taxable income or by paying R&D repayment tax if a loss
recovery event occurs. R&D tax incentive credits that are not cashed out have no expiry, subject
to shareholder continuity, and are carried forward and utilised against future taxable profits.
As at the 22 October 2020, the Company was no longer eligible for R&D tax loss cash outs.
The Company has reasonable assurance at the reporting date that the R&D tax incentive will be
received and all attached conditions will be complied with. The Company expects to receive the
losses cash out and tax credit when the return is filed subsequent to the end of the reporting
period.
There are no unfulfilled conditions relating to the MSD grant income.
Revenue and other income streams recognised by the Company include:
20212020
$$
Research and development grant income 357,366567,488
COVID-19 wage subsidy91,636135,654
Other grant income-24,080
Total government grant income449,002727,222
Gain on sale of property, plant and equipment-726
Other Income1,969-
Total other income450,971727,948
2021 Annual Report
67
20212020
$$
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 57,1 9 3 50,237
Quality 182,427 280,845
Office expenses 72,689 45,174
Personnel costs20 2,479,916 1,681,016
Marketing costs related to IPO 175,147 -
Foreign exchange loss 1,266 1,265
Total expenses6,641,2084,343,480
Included in the above:
Employee benefit expense
- Short term benefits (wages and salaries)2,406,5671,821,262
- Defined contribution plan64,93549,494
- Share-based payment expense20602,466397,442
Total employee benefit expense3,073,9682,268,198
Research and development expenses
- Direct costs296,803288,576
- Indirect costs1,600,3231,001,086
Total research and development expenses1,897,1261,289,662
6. Expenses
(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.
68
Financial Statements
6. Expenses (continued)
(ii) Fees paid to auditors
Fees paid to auditors include payments to PricewaterhouseCoopers for the following:
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.
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.
20212020
$$
Audit and review of the financial statements
- Audit of the financial statements60,13247,7 75
- Review of half year financial statements27, 6 3 58,925
Total audit and review fees87,76756,700
Other services
- Business valuation services-19,950
Total other services-19,950
Total fees paid to auditors87,76776,650
2021 Annual Report
69
7. Income Tax (continued)
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:
20212020
$$
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 deferred tax expense/(credit)(1,756,275)(784,517)
70
Financial Statements
(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:
20212020
$
$
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 purposes116,95356,134
- 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)
20212020
$
$
Restated
Opening as at 1 July 798,20513,688
Recognised in profit and loss
- Recognition of temporary difference 62,089 168,143
- Recognition of tax losses 1,673,717 616,374
- Adjustment from prior years 20,469 -
1,756,275 784,517
Closing as at 30 June2,554,480798,205
7. Income Tax (continued)
(ii) Reconciliation of income tax expense/(credit)
The reconciliation of income tax expense/(credit) is presented below:
2021 Annual Report
71
7. Tax expense (continued)
(v) Deferred tax
Details of the deferred tax asset and liability amounts recognised in profit or loss are as follows:
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.
Employee
entitlementsBuildings
Lease
liabilities
and
Right-of-
use lease
assets
Share-
based
payments
– cash
settled
Share-
based
payments
– equity
settled
Carried
forward
tax lossesTotal
$$$$$$$
As at 1 July 201912,756-932---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 202030,92237,6921,93451,00194,110616,374832,033
As at 1 July 202030,92237,6921,93451,00194,110616,374832,033
Correction - - - (12,604) (21,224) - (33,828)
As at 1 July 2020 -
Restated
30,92237,6921,93438,39772,886616,374798,205
Amounts recognised
- In profit or loss937(53,075)2,03650,79861,3931,694,1861,756,275
- In OCI-------
At 30 June 202131,859(15,383)3,97089,195134,2792,310,5602,554,480
72
Financial Statements
8. Notes Supporting Statement of Cash Flows
(i) Reconciliation of net operating cash flows to profit/loss
20212020
$
$
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 & Equipment596,698149,634
- Add back: Depreciation – RoU lease asset97,90465,179
- 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 & Equipment4,396-
- Add back: Share-based payment expense535,879397,442
- Deduct: Cash settled portion of salary sacrifice(66,587)-
- Add back: Interest expense31,5581 7,75 3
- 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)
260,03349,820
- Increase/(decrease) in employee benefit liabilities64,45725,551
- 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)
2021 Annual Report
73
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 2021NON-CASHNON-CASHCASHCASHCASH
Opening
New
leases
Unpaid
accrued
lease
payments
Payment
of prior
year
accrued
interestDrawdownPaymentClosing
$$$$$$$
Borrowings 88,931 - - - - (78,169) 10,762
Lease
liabilities
259,863 774,846 (7,717)- - (82,914) 944,078
348,794 774,846 (7,717)- - (161,083) 954,840
30 June 2020NON-CASHNON-CASHCASHCASHCASH
Opening
New
leases
Unpaid
accrued
lease
payments
Payment
of prior
year
accrued
interestDrawdownPaymentClosing
$$$$$$$
Borrowings93,182---44,200(48,451)88,931
Lease
liabilities
123,618197,845-(1,691)-(59,909)259,863
216,800197,845-(1,691)44,200(108,360)348,794
74
Financial Statements
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).
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.
The 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.
* Number of shares has been retrospectively restated for the prior period to reflect the 5.882 share split completed on 15 September 2020.
Numerator20212020
$
$
Restated
(Loss) for the year and earnings (basic and diluted EPS) 20(4,417,960)(2,813,052)
20212020
DenominatorNo. sharesNo. shares
Weighted average number of shares (basic and diluted EPS)127,393,23097,481,881*
2021 Annual Report
75
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.
76
Financial Statements
10. Property, plant and equipment (continued)
Buildings
and fitout
Cultivation
containers
Office
equipment
Plant and
equipmentVehicles
Capital
worksTotal
Year ended
30 June 2021
$$$$$$$
Opening net
book value
2,103,929 160,781 79,227 920,254 77,116 2,317,053 5,658,360
Additions - - 73,028 - 19,503 1,040,553 1,133,084
Depreciation charge (303,192) (14,356) (33,216) (213,317) (32,617) - (596,698)
Disposals - (17,223) (208) - (2,705) -(20,136)
Transfers 2,598,849 - 6,162 566,705 - (3,171,716)-
Closing net
book value
4,399,586 129,202 124,993 1,273,642 61,297 185,890 6,174,610
Cost 4,718,203 159,197 185,219 1,540,443 157,874 185,890 6,946,826
Accumulated
depreciation
(318,617) (29,995) (60,226) (266,801) (96,577) - (772,216)
Net book
amount
4,399,586 129,202 124,993 1,273,642 61,297 185,890 6,174,610
Buildings
and fitout
Cultivation
containers
Office
equipment
Plant and
equipmentVehicles
Capital
worksTotal
Year ended
30 June 2020
$$$$$$$
Opening net
book value
-147,48028,01560,528104,082185,221525,326
Additions232,890-20,4758,11820,0005,002,8605,284,343
Depreciation charge(15,425)(15,994)(20,411)(50,839)(46,966)-(149,635)
Disposals
(net book value)
--(1,674)---(1,674)
Transfers1,886,46429,29552,822902,447-(2,871,028)-
Closing net
book value
2,103,929160,78179,227920,25477,1162,317,0535,658,360
Cost2,119,354178,825106,724973,739143,8722,317,0535,839,567
Accumulated
depreciation
(15,425)(18,044)(27,497)(53,485)(66,756)-(181,207)
Net book
amount
2,103,929160,78179,227920,25477,1162,317,0535,658,360
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.
2021 Annual Report
77
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 28th 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).
78
Financial Statements
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.
2021 Annual Report
79
(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.
12. Leases (continued)
(i) Lease related balances as at period end, and amounts for the period
20212020
Expenses and income in the period$$
Depreciation
- Leases of property (land and buildings)68,72260,791
- Vehicles29,1824,388
Interest expense21,85914,520
Balance sheet and cash flow statements
Carrying amount of Right-of-use asset
- Leases of property (land and buildings)853,155204,692
- Vehicles76,74248,263
Additions to Right-of-use assets774,846197,845
Total cash outflow related to leases101,01076,121
80
Financial Statements
13. Other Receivables
14. Trade and Other Payables
20212020
Note
$
$
Non-trade receivables75,000-
Financial assets classified as amortised cost4
75,000-
GST receivable85,861124,386
Accrued interest income--
Withholding tax receivable1,68323,400
Government grants receivable
- Research and development tax credit508,581581,712
- COVID Wage subsidy-70,296
- Other9,8021,043
Other receivables605,927800,837
Government grants receivable
- Research and development tax credit-197,256
Other receivables (non-current portion) -197,256
Total other receivables 680,927998,093
20212020
Note
$
$
Trade payables453,388512,014
Accruals
56,77966,168
Financial liabilities classified as amortised cost4510,167578,182
Total Trade and other payables510,167578,182
2021 Annual Report
81
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.
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.
* 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.
20212020
$
$
Short term employee benefits payable
-Wages and salaries99,83749,020
-Accrual for annual and sick leave
130,475118,497
230,312167,516
Defined contribution plan payable3,5501,889
Total employee benefit liabilities233,862169,406
20212020
Number
Number
Opening shares17,003,096 12,990,000
Shares issued
- 4,013,096
Total pre-share split*17,003,09617,003,096
Effect of share split*83,009,129N /A
Shares issued**40,250,366-
Total share capital 140,262,59117,003,096
82
Financial Statements
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.
(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:
20212020
$
$
Restated
Directors fees248,700235,894
Short-term employee benefits961,677669,448
Defined contribution plan payments23,74720,267
Share-based payment expense500,128258,418*
Total key management personnel compensation 1,734,2521,184,027*
Nature of
transactions
Transaction
amount
Amounts
receivable
(payable)
$$
30 June 2021
Alvarium Investments (NZ) LimitedPurchases1,492-
EECOMS LtdPurchases22,778-
Hikurangi Enterprises LimitedPurchases27,00027,000
Mitchel Family TrustPurchases6,7351,250
30 June 2020
Digital Accounting LimitedPurchases972-
EECOMS LtdPurchases13,1181,940
Mitchel Family TrustPurchases220220
* 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.
2021 Annual Report
83
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.
84
Financial Statements
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
As reportedAdjustment
2020
Restated
$$$
Non-current assets
Deferred tax asset832,033(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 reserve336,108(75,800)260,308
2020
As reportedAdjustment
2020
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)
(ii) Impact to statement of profit or loss and other comprehensive income for the year to
30 June 2020
* Employee benefit expense – Personnel costs (Note 6).
Employee benefit expense – Share-based payment expense (Note 6).
** Deferred tax (Note 7).
2021 Annual Report
85
20. Share-based payments (continued)
(b) Correction of prior period error (continued)
(iii) Impact to share option balances
(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.
Issue #1
No.
Issue #2
No.
Issue #3
No.Total
Opening (1 July 2019)----
- Options issued (As reported)408,00075,00042,564525,564
- Options vested (As reported)(51,000)(4,750)-(55,750)
Adjustment51,0004,750-55,750
Options vested (Restated)----
Options forfeited (As reported)(51,000)(4,750)-(55,750)
Closing (30 June 2020) (Restated)357,00070,25042,564469,814
Closing (30 June 2020) (As reported)306,00065,50042,564414,064
86
Financial Statements
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
No.
Issue #2
No.
Issue #3
No.Total
Opening (1 July 2020) (Restated)*357,00070,25042,564469,814
- Net share-split impact1,742,874342,961207,8022,293,637
- 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
Issue #1
No.
Issue #2
No.
Issue #3
No.Total
Opening (1 July 2020) (Restated)*----
- New options vested--250,366250,366
- Options exercised --(250,366)(250,366)
Closing (30 June 2021)----
(ii) Vested share options balances outstanding
* Refer to Correction of Prior Period Error above.
2021 Annual Report
87
20. Share-based payments (continued)
(e) Specific ESOP details – Issue #1
(i) Originally issued
Tranche
[Vesting period]
Vesting conditions2021
Number
2020
Number
Tranche 1
[25 months]
Non-market performance conditions relating to
developing the company’s intellectual property
(IP), licencing the IP, and supplying GMP-grade
biomass
1
.
N/A
1
102,000
Tranche 2
[25 months]
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
1
.
N/A
1
102,000
Tranche 3
[25 months]
To be confirmed for each party prior to 5
September 2020
2
.
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.
88
Financial Statements
20. Share-based payments (continued)
(e) Specific ESOP details – Issue #1 (continued)
(ii) Currently issued
Tranche
[Vesting period]
Vesting conditions2021
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.
285,277N/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.
285,277N/A
2
Tranche 3C
[25 months]
2
Non-market performance conditions relating to
the Company achieving EU GMP certification
within a prescribed timeframe.
285,277N/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.
285,277N/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.
142,63925,500
Tranche 4B
[25 months]
1
Non-market performance conditions relating
to establishment of a commercialisation plan
between the company and a specified target
entity.
142,63925,500
Tranche 4C
[25 months]
1
Non-market performance conditions relating
to the company achieving various medicinal
cannabis licences and authorities.
142,63925,500
Tranche 4D
[25 months]
1
Non-market performance conditions relating to
board-approved cash-flow and funding plans
being confirmed.
142,63925,500
Tranche 4E
[25 months]
1
Service condition.285,27751,000
* 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.
2021 Annual Report
89
Equity settledCash-settled
ESOP Issue #1: Tranche 3A
– 3D, and 4A – 4E
2021202020212020
Option pricing model usedBlack-ScholesBlack-ScholesBlack-ScholesBlack-Scholes
Weighted average
share price
• Tranche 4A – 4E $0.30$2.120.41$2.12
• Tranche 3A – 3D$0.50$2.120.41$2.12
Exercise price$nil$nil
Weighted average
contractual life (in days)
• Tranche 4A – 4E 93848184549
• Tranche 3A – 3D 184549184549
Volatility
• Tranche 4A – 4E 96%96%78%81%
• Tranche 3A – 3D80%81%78%81%
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:
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.
90
Financial Statements
20. Share-based payments (continued)
(f) Specific ESOP details – Issue #2
(i) Originally issued
Tranche
[Vesting period]
Vesting conditions2021
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.
117,64028,000
* 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.
2021 Annual Report
91
20. Share-based payments (continued)
f) Specific ESOP details – Issue #2 (continued)
(ii) Currently issued
Tranche
[Vesting period]
Vesting conditions2021
Number*
2020
Number
Tranche3A
[30 months]
4
Non-market performance conditions relating
to the Company receiving NZ Medsafe “Good
Manufacturing Practice” (GMP) within a
prescribed time frame.
29,410N/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.
29,410N/A
4
Tranche 3C
[30 months]
4
Non-market performance conditions relating to
the Company achieving EU GMP certification
within a prescribed timeframe.
29,410N/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.
29,410N/A
4
Tranche 4
[30 months]
To be confirmed for each party prior to 1
October 2021.
117,64028,000
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.
11,0292,375
Tranche 5B
[30 months]
3
Non-market performance conditions relating
to establishment of a commercialisation plan
between the company and a specified target
entity.
11,0292,375
Tranche 5C
[30 months]
3
Non-market performance conditions relating
to the company achieving various medicinal
cannabis licences and authorities.
11,0292,375
Tranche 5D
[30 months]
3
Non-market performance conditions relating to
board-approved cash-flow and funding plans
being confirmed.
11,0292,375
Tranche 5E
[30 months]
3
Service condition.22,0584,750
* 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.
92
Financial Statements
Equity settledCash-settled
ESOP Issue #2: Tranche 3A
– 3D, 4, and 5A – 5E
2021202020212020
Option pricing model usedBlack-ScholesBlack-ScholesBlack-ScholesBlack-Scholes
Weighted average
share price
• Tranche 3A – 3D $0.50-$0.41-
• Tranche 4$0.41$2.12$0.41$2.12
• Tranche 5A – 5E$0.36$2.12$0.41$2.12
Exercise price$nil$nil$nil$nil
Weighted average
contractual life (in days)
• Tranche 3A – 3D 6451,010549-
• Tranche 4 (from
reporting date – no
confirmed conditions)
6451,0106451,010
• Tranche 5A – 5E 549914549914
Volatility
• Tranche 3A – 3D 76%80%78%-
• Tranche 478%80%78%81%
• Tranche 5A – 5E80%81%78%81%
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:
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.
2021 Annual Report
93
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:
20212020
$$
Total assets30,851,46915,727,112
(less): Intangible assets(4,000,000)(4,000,000)
(less): total liabilities(2,017,423)(1,325,150)
Net tangible assets24,834,04610,401,962
Number of shares issued at balance date 140,262,59117,003,096
Net tangible assets per share 0.18 0.61
94
Statement of Corporate Governance
Statement of Corporate Governance for the year ended
31 June 2021 (FY21)
The board (Board) of Rua Bioscience Limited (Rua) is committed to ensuring that it has best
practice corporate governance principles in place. Rua is committed to developing its authentic
commitments to cultural, social and environmental wellbeing and conducting business in
line with Rua’s legal and regulatory obligations. High standards of business behaviour and
accountability are expected of all directors and staff.
Rua largely follows the recommendations set out in the NZX Corporate Governance Code
(Code). Rua listed on the NZX on 22 October 2020. The Board believes that its corporate
governance practices since listing are substantially in line with the Code recommendations.
Any exceptions are noted in the following section of this Annual Report.
The Board takes a continuous improvement approach to corporate governance. Its charters
and policies are reviewed on a regular basis. Rua’s policies and charters can be viewed on Rua’s
website on the investor portal at www.ruabio.com/investors.
This governance statement is current as at 30 June 2021.
Principle 1: Code of Ethical Behaviour
Code of Ethics
Rua adopted a written Code of Culture and Ethical Behaviour (Code of Ethics) prior to listing on
the NZX. The Code of Ethics is a statement of Rua’s core values and sets out expectations for
ethical decision making and personal behaviour for directors (Directors, and together the Board),
the Chief Executive (CEO) and his direct reports (Senior Management Team) and employees and
contractors (together, Rua’s People). The Code of Ethics is available to all of Rua’s People. The
Board requires all of Rua’s People to confirm that they have read, understood and complied with
the Code of Ethics. Rua’s HR manager is responsible for providing training for Rua’s People in
relation to the Code of Ethics. The Code of Ethics is available on Rua’s website.
Rua encourages Rua’s People to communicate any concerns about any area of Rua. Details
around reporting concerns and “whistle-blower” protection is set out in the Code of Ethics.
Tikanga Whakahāere
Kaporeihana
Statement of Corporate
Governance
2021 Annual Report
95
Ethical research, clinical trials and animal testing
Rua undertakes research on cannabinoid-containing plants and products. However, it does not
currently participate in clinical trials using humans or animals. No animal testing is undertaken.
Financial product dealing policy
Rua’s Financial Products Dealing Policy, along with the Financial Markets Conduct Act 2013,
imposes strict limitations and requirements on Directors, officers, employees and contractors
in dealing in Rua’s quoted financial products (Rua Shares). These limitations prohibit direct or
indirect dealing in Rua Shares while in possession of inside information and impose requirements
for seeking consent to trade. A duty of confidentiality is also imposed that protects the
dissemination and use of confidential company information.
No breaches of the Code of Ethics or the Financial Products Dealing Policy were reported in
the year.
Principle 2: Board Composition and Performance
Role and responsibilities
The Board is ultimately responsible for Rua’s strategic direction. The role, responsibilities,
composition and structure of the Board is detailed in the Board Charter. The Charter will be
reviewed at least annually. In carrying out its activities, the Board’s overriding responsibility is
to act transparently, fairly, diligently and in accordance with all applicable laws and regulations
including the NZX Listing Rules, the Companies Act, the Financial Markets Conduct Act, and
Rua’s constitution.
The Board has delegated authority for management of the business to the CEO, who in turn
has sub-delegated authority to other members of the Senior Management Team with specified
financial and non-financial limits for certain matters. All delegations are documented and
reviewed annually.
Nomination and appointment of directors
Rua’s Remuneration and Nominations Committee is responsible for nominating or
recommending Directors to the Board and the full Board has the opportunity to consider
candidates for appointment or reappointment. The Committee will review, from time to time, the
structure, size and composition of the Board and its committees to ensure it has an appropriate
mix of skills, qualifications, knowledge, experience and background. Rua will enter into a written
agreement with each newly appointed Director establishing the terms of their appointment. Rua
has written agreements with each Director outlining the terms of their appointment.
The number of elected Directors and the procedure for their retirement and election or re-
election at annual meetings is determined in accordance with Rua’s Constitution and the NZX
Listing Rules. The Constitution requires Rua to have a minimum of three Directors of whom two
are ordinarily resident in New Zealand. As at the date of this report the Board comprised five
Directors, all of whom are ordinarily resident in New Zealand.
When considering the re-election of an existing Director, the Remuneration and Nominations
Committee considers the length of service of the Director, and the Director’s performance on the
Board to date. It is the Board’s general expectation that a non-executive Director will hold office
for an aggregate period of approximately nine years (including re-elections).
A number of checks are undertaken before appointing a Director and putting them forward
to shareholders as a candidate for election as a Director. The Board endeavours to provide
shareholders with all relevant information to inform their decision on whether to elect or re-elect
a Director.
96
Statement of Corporate Governance
Each Director has experience, skills and expertise that are of value to Rua. These are disclosed on
pages 12 and 13 of this Annual Report. Directors’ interests are also disclosed on page 117 of this
Annual Report and their Rua shareholdings are on page 116 of this Annual Report.
Board diversity and skills
At Board level, diversity allows Rua to benefit from a range of different perspectives, which
leads to healthier debate and decision-making. The Board believes that it is important to have
a Board consisting of members with diverse backgrounds, experience and skills. The Board also
believes that the tenure of each of its members is important as it seeks to balance independent,
institutional knowledge gained through length of service and the importance of fresh
perspectives in decision-making.
Director independence
The number of elected Directors and the procedure for their retirement and election at annual
meetings is determined in accordance with Rua’s company constitution and the NZX Listing
Rules. There have been no changes to the Board’s membership since Rua was first listed on
the NZX.
In order for a Director to be independent, the Board has determined that they must not be
an employee of Rua or any of its subsidiaries and must have no disqualifying relationships.
Independence is determined by the Board, in accordance with the independence requirements
of the NZX Listing Rules and having regard to the factors described in the Code. Director
independence is monitored by the Board on an ongoing basis.
NZX Listing Rules require that there must at all times be at least three directors of whom two are
ordinarily resident in New Zealand and at least two are independent Directors.
Rua has five directors of whom three are considered to be independent. Those three are: the
Chair, Trevor Burt; Anna Stove and Martin Smith. Brett Gamble is CEO of Tailorspace which
owns 7.93% of Rua. Panapa Ehau is a Director, employee and co-founder of Rua and director of
Hikurangi Enterprises Ltd which owns 7.53% of Rua.
Directors are encouraged to undertake appropriate training and education to ensure they remain
current on how to best discharge their duty as a Director. The Senior Management Team provide
regular updates on relevant industry, regulatory and company issues.
Board performance and training
All Directors have access to executives to discuss issues or obtain information on specific
areas in relation to matters to be discussed at Board meetings, or other areas as they consider
appropriate.
The Chair meets regularly with Directors to discuss and assess individual performance of each
of the Directors. The Board will review and assess its performance as a whole on an annual basis
and in such a manner as the Board deems appropriate including retaining independent external
advisers.
The Board is satisfied that each Director has the necessary time available to devote to the
position, broadens the Board’s expertise and contributes relevant expertise in key functional
areas of the company.
The Board Committees and Directors, subject to the approval of the Chair of the Board, have the
right to seek independent professional advice at Rua’s expense, where the Board Committee or
individual deems it necessary to carry out its or their functions.
2021 Annual Report
97
Directors’ and officers’ insurance and indemnity
Rua has in place a Directors’ and Officers’ liability insurance policy which is underwritten by Vero
Liability Insurance Limited. This policy covers the Directors and Officers so that monetary loss
suffered by them, as a result of actions undertaken by them as Directors or Officers, is insured
to specified limits (and subject to legal requirements and/or restrictions). Directors annually
consider the cost to RUA of this insurance and in their view it is reasonable.
Diversity
Diversity at Rua refers to all the elements that make individuals unique from one another,
including, but not limited to, attributes or characteristics such as religion, ethnicity, language,
sexual orientation, disability, age, political opinion, employment status, family status and any
other ground for potential unlawful discrimination. It encompasses the ways Rua’s people differ
in terms of their education, life experience, job function, work experience, personality, location
and career responsibilities.
Rua is committed to equal employment opportunities and treating all individuals fairly and with
respect. Rua has a diverse workforce and we recognise that everyone has individual differences
which can be leveraged to create stronger teams and which will ultimately drive stronger
business performance.
Rua’s approach to diversity is outlined in its Diversity and Inclusion Policy, which is available on
Rua’s website.
Key areas of focus are:
• Attracting, selecting and retaining qualified and diverse applicants and aiming to have a
focus on ethnic and gender diversity.
• Remunerating and rewarding in an equitable manner on the basis of skill, knowledge
and merit.
• Maintaining a workplace that is accommodating of diverse and changing life situations and
enables employees to manage their work and lives through flexible working arrangements.
• Striving for a diverse representation of different groups in society across all levels of Rua’s
business and based on Rua’s origins and values (see the Code of Ethics for a description of
Rua’s values).
The HR Manager is responsible for providing advice in relation to diversity and inclusion and
support to the Board, managers and staff.
The Board does not currently have any set measurable objectives under the Diversity
and Inclusion Policy (as recommended under Recommendation 2.5 of the NZX Corporate
Governance Code). The Board has reviewed Rua’s diversity profile and considers that, at this
time, there is good diversity on the factors that are most relevant to Rua and its employees:
• Understanding and adoption of a bi-cultural working environment is deeply embodied within
Rua’s culture. All recent company publications include content in English and Māori.
• The make-up of the Board is sufficiently diverse for the purposes of forming a strong team,
providing specialised knowledge and expertise in relevant markets, and driving strong
business performance.
• Of the 30 employees, 16 are female and 14 are male.
• 25 employees have a tertiary or higher qualification
In the 2022 financial year the Board will consider the adoption of formal targets in order to set
measurable objectives.
98
Statement of Corporate Governance
Gender composition
The gender composition of Directors and the Senior Management Team was as follows:
Principle 3: Board Committees
The Board has delegated a number of its responsibilities to Committees to assist in the
execution of the Board’s responsibilities. The use of Committees allows issues requiring detailed
consideration to be dealt with separately by members of the Board with specialist knowledge
and experience, thereby enhancing the efficiency and effectiveness of the Board. However, the
Board retains ultimate responsibility for the functions of its Committees and determines their
responsibilities.
The Committees meet as required and have terms of reference (Charters), which have been
approved by the Board. The Charters can be found on Rua’s website. The Charters are reviewed
annually. Appointments to each Committee are made by the Board and membership is reviewed
annually.
Minutes of each Committee meeting are available to all members of the Board, who are
all entitled to attend any Committee meeting. Each Committee is empowered to seek any
information it requires from Rua’s People in pursuing its duties and to obtain independent legal
or other professional advice.
Special purpose committees may be formed when required to review and monitor specific
projects with the Senior Management Team or other executives.
Audit, Finance and Risk Management Committee
Members: Brett Gamble (Chair), Trevor Burt, Anna Stove
Purpose: The main purpose of this Committee is to assist the Board in providing
oversight of matters relating to audit, the internal audit programme, financial
reporting, financial management, risk management, among other things.
Meetings: At least three times a year
A quorum is two Committee members. The Committee undertakes an annual self-review of its
objectives and responsibilities and of its terms of reference and performance. This review was
undertaken and discussed with Rua’s Board during the financial year.
The chair of the Committee is not the Chair of the Board and is not an independent Director. The
NZX Corporate Governance principles recommend that the Audit, Finance and Risk Management
Committee will be chaired by an independent Director. Rua’s Board has considered the skills and
experience of the Board and have determined that despite not being considered an independent
Director, Brett Gamble is the most appropriate member of the Board to act as Chair of the Audit,
Finance and Risk Committee given his experience and qualifications in the area of finance.
Employees are invited to attend meetings when it is considered appropriate by the Committee.
The Chair of the Committee, at least once per year, meets with the auditors without any
representatives of management present and is encouraged to seek advice from external
consultants or specialists where the Committee considers that necessary or desirable.
As at 30 June 2021
PositionFemaleMale
Director1 (20%)4 (80%)
Senior Management Team2 (29%)5 (71%)
2021 Annual Report
99
Remuneration and Nominations Committee
Members: Martin Smith (Chair), Trevor Burt, Brett Gamble, Anna Stove
Purpose: To assist the Board in fulfilling its responsibilities in relation to the following
matters, amongst other things:
• Formal and transparent method for nominating and appointing Directors to
the Board and determining their remuneration.
• Appointment, remuneration, evaluation of, and succession planning in
relation to, the CEO.
• Review of the remuneration recommendations made by the CEO for the
Senior Management Team.
• Consideration and review of any incentive plans or payment targets and
calculations for the CEO and Senior Management Team.
• Review of the overall Rua-wide salary and incentive policies.
Meetings: At least twice a year
A quorum is two Committee members. Employees only attend meetings at the invitation of the
Committee. Membership of the Committee is reviewed annually.
Disclosure Committee
Members: Trevor Burt (Chair of the Board), Rob Mitchell (CEO), Hamish White (CFO), Brett
Gamble (Alternate as Audit, Finance and Risk Management Committee Chair)
Purpose: The Board has established this Committee to oversee Rua’s compliance
with its Continuous Disclosure Policy and, accordingly, has delegated the day-
to-day oversight of its continuous disclosure obligations to this Committee.
This Committee will be responsible for making the final decision as to whether
or not information requires disclosure to NZX, taking into account the
exceptions to the continuous disclosure obligations, and any timing
requirements for disclosure, described in Rua’s Continuous Disclosure Policy,
which is available on Rua’s website.
Meetings: As required
A quarterly report is to be provided to the Board on Rua’s compliance with the Continuous
Disclosure Policy and its continuous disclosure obligations.
Company Secretary
The Company Secretary is Hamish White, CFO. The Company Secretary is responsible for
supporting the proper functioning of the Board and ensuring the appropriate policies and
procedures are followed. The Company Secretary has a dual reporting line. On all governance
matters, the CFO reports directly to the Board, through the Chair. On operating and financial
matters, the CFO reports to the CEO.
100
Statement of Corporate Governance
Attendance at Board Meetings
Attendance at Board and Committee meetings during FY21 was:
Note: there were no meetings of the Disclosure Committee.
Takeover Protocols
A set of takeover protocols have been developed and formally adopted by the Board.
The protocols can be found on Rua’s website.
Board
Audit, Finance
and Risk
Management
Committee
Remuneration
and
Nominations
Committee
Disclosure
Committee
Eligible
to attend Attended
Eligible
to attend Attended
Eligible
to attend Attended
Eligible
to attend Attended
Trevor Burt1212332200
Brett Gamble12123322--
Martin Smith1212--22--
Anna Stove12123322--
Panapa Ehau1211------
Principle 4: Reporting and Disclosure
Rua is committed to keeping investors and the market informed of all material information
about Rua and its performance, in a timely manner, to ensure that trading in its shares takes
place in an efficient, competitive and informed market. In addition to all information required by
law and regulations, Rua also seeks to provide sufficient meaningful information to ensure its
investors, employees and other stakeholders, the communities within which Rua operates are
well informed.
Rua’s Continuous Disclosure Policy sets out the principles and requirements that support
the commitment to timely and balanced disclosures. Day to day application of the policy is
delegated to the Disclosure Committee. The Board is responsible for approving and monitoring
internal and external financial and other reporting, including reporting to shareholders, NZX and
other stakeholders. Any release that includes disclosure of a profit projection or forecast requires
approval by the Chair of the Board, following consultation with Directors.
Directors in consultation with the Disclosure Committee consider at each Board meeting
whether there is any material information which should be disclosed to the market.
Financial Reporting
Rua’s Board is committed to ensuring integrity and timeliness in its financial reporting and in
providing information to the market and shareholders which reflects a considered view on the
present and future prospects of Rua.
A programme of clear, meaningful, timely and effective communications with shareholders is
centred around a comprehensive set of information regarding Rua’s operations and results being
available on Rua’s website and in shareholder reports.
2021 Annual Report
101
The Audit, Finance and Risk Management Committee oversees the quality and integrity of
external financial reporting including the accuracy, completeness, balance and timeliness
of financial statements. It reviews interim and annual financial statements and makes
recommendations to the Board concerning accounting policies, areas of judgement, compliance
with financial reporting standards, stock exchange and legal requirements, and the results
of the external audit. All matters required to be addressed and for which the Committee has
responsibility were addressed during the period under review.
All interim and full-year financial statements are prepared in accordance with relevant financial
standards.
For the financial year ended 30 June 2021, the Directors believe that proper accounting records
have been kept which enable, with reasonable accuracy, the determination of the financial
position of Rua and facilitate compliance of the financial statements with the Financial Markets
Conduct Act 2013.
The CEO and the CFO are required to provide a letter of representation to the Board
confirming that:
• Rua’s financial statements have been prepared in accordance with New Zealand Generally
Accepted Accounting Practice, are free of material misstatements, including omissions,
give a true and fair view of the financial performance and position of Rua and the financial
records have been properly prepared;
• the representations are based on a sound system of risk management, internal compliance
and controls that provide for the implementation of the policies adopted by the Board; and
• Rua’s risk management and internal control systems are operating effectively in all material
respects.
A letter of representation confirming those matters was received in relation to the FY21 financial
statements.
Non-Financial Reporting
Non-financial disclosures are made at least annually, including reporting of material exposure
to environmental, economic and social sustainability risks and other key risks. The Board is
committed to developing robust sustainability reporting and to measure and report on key
sustainability aspects affecting its business.
Rua has a number of initiatives supporting its focus on the environment, people and
communities. A process to measure carbon emissions and develop a formal environmental,
social and governance (ESG) framework is currently underway.
Rua’s inaugural Sustainability Report is included in this report at pages 40-45. Details are
provided of Rua’s initiatives in this area reported under the United Nations Global Compact
Sustainable Development Goals and Rua’s own Sustainability Framework. The report identifies
material sustainability topics, grouped under the headings Environmental, Social and
Governance. A programme of assessing climate risk has commenced and reporting under
the TCFD framework will be included in the next Annual Report.
Principle 5: Remuneration
Remuneration of Directors, CEO and the Senior Management Team is one of the key
responsibilities of the Remuneration and Nominations Committee. That Committee is also
responsible for reviewing and evaluating any incentives schemes and the overall company-wide
wage and salary position.
102
Statement of Corporate Governance
Rua’s Remuneration Policy applies to the Board and the Senior Management Team of Rua. The
Policy requires remuneration to be set at levels that recognise an individual’s market value and
that all of Rua’s remuneration decisions will be transparent, fair and reasonable and based on
merit, where appropriate. Rua does not discriminate on the grounds of gender, race, religion or
belief, disability, age, sexual orientation or gender identity. External advice has been sought to
ensure remuneration is benchmarked to the market for senior management positions and
Board positions.
Director remuneration
Director remuneration is made up of an annual base fee, an additional Chair fee (if applicable)
and some Directors are participants in Rua’s share option plan.
A director fee pool of $324,000 per annum was set for the 2021 financial year. Any increase to
that pool requires shareholder approval. The base fee for the Chair is $90,000 and for a director
is $45,000. Committee Chairs are paid a fee for the additional work the role requires. Members
of Committees are not paid an additional fee. Directors voluntarily chose to take a reduction in
fees of 30% to assist Rua’s 2021 cashflow as a result of the Covid-19 Pandemic. The lower fee is
shown in the table below.
The remuneration of Directors will be reviewed by the Remuneration and Nominations
Committee who will consider benchmarking data from similar listed companies, amongst
other information.
* In addition to his director’s fee, Panapa Ehau also receives a salary as an executive of Rua.
In FY21, his salary was $51,269, for a total remuneration (director’s fee and executive salary)
of $91,094.
Directors are entitled to be reimbursed for reasonable travel, accommodation and other
expenses incurred by them in connection with their attendances at meetings, or otherwise
in connection with the Business. No retirement benefits will be paid to any Director on their
retirement.
Senior Management Remuneration
Remuneration of the Senior Management Team, including the CEO, includes a mix of fixed
and variable components. This is intended to reward the CEO and nominated executives for
overall company and business unit performance against targets set by reference to appropriate
benchmarks and key performance indicators; align their interests with those of shareholders; and
ensure total remuneration is competitive by market standards.
Director Director’s fee
Audit, Finance
and Risk
Management
Committee fee
Nominations and
Remuneration
Committee feeTotal
Trevor Burt$81,000$81,000
Anna Stove$39,375$39,375
Brett Gamble$40,500
$4,500
(Committee Chair)
$45,000
Martin Smith$40,500
$3,000
(Committee Chair)
$43,500
Panapa Ehau$39,825$39,825*
2021 Annual Report
103
The current provisions are made up of the relevant employee’s base salary, cash allowances and
any direct non-cash benefits (together, making up the fixed remuneration) and participating in
Short Term Incentive schemes (STI) (subject to eligibility as determined by the Board).
The remuneration packages for the CEO and senior managers are all subject to Board approval,
following recommendations from the Nominations and Remuneration Committee.
The CEO and nominated executives receive their fixed annual remuneration in cash and a limited
range of prescribed benefits such as superannuation, motor vehicle and technology allowances.
The total employment cost of any remuneration package is considered in determining an
employee’s fixed annual remuneration.
The current STI Scheme is directly linked to the achievement of operational targets and are set
at the beginning of the financial year. The objective of the STI Scheme is to provide an additional
incentive to the executive to achieve the targets and ensure that the cost to Rua is flexible and
in line with the outcomes of the company for the current year. Actual STI Scheme payments
depend on achieving specific targets, determined by the Board to be aligned with targets
communicated to shareholders.
STI Scheme payments relating to the financial year ended 30 June 2021 are delivered as a
taxable cash bonus and are payable on completion of the financial year. It should be noted that
the level of remuneration detailed in this report for the CEO includes the bonus paid in the 2022
financial year relating to the 2021 financial year.
For the financial year ended 30 June 2021 the CEO was the only executive in the STI scheme. The
STI Scheme payment values are set as a percentage of base cash remuneration, being 20% (pro-
rata for 6 months) for the CEO for the financial year ended 30 June 2021.
For the financial year ended 30 June 2021, the CEO received $310,299 in fixed annual
remuneration. The STI Scheme payment for the CEO relating directly to the financial year was
$19,800, being 60% of his maximum available STI. The CEO participated in the Share Bonus offer,
this includes both equity and cash settled components and was $56,676. The CEO received other
benefits of $11,475.
Employee Remuneration
Amount of
Remuneration and
other benefits
Employees
$100,001 – $110,000 2
$130,001 – $140,0001
$140,001 – $150,000 2
$150,001 – $160,0001
$160,001 – $170,0002
The table above includes Bonus Shares that were vested and exercised during the period.
CEO remuneration is not included in this table as it is noted separately above.
104
Statement of Corporate Governance
Employee share ownership scheme
Rua has established an employee share ownership scheme to facilitate an increase in the level
of participation by directors and employees as shareholders, which improves the alignment of
interests with shareholders. Under the scheme, each eligible person was offered options which,
if vested and exercised, each convert into 5.882 ordinary shares.
The first grant of options under the ESOP was made in September 2019 (Issue 1), there are
currently 339,500 options that may vest related to this issue. An additional ESOP was made in
March 2020 (Issue 2) to new senior employees and there are a further 51,250 options that may
vest. Generally, these options will vest in 2 years from the grant date and be exercisable if the
participant remains employed or engaged by Rua and specified performance criteria
are achieved.
These options are exercisable at a nil exercise price and will expire if they are not exercised within
3 months of the vesting date. The consideration for which the options were issued is the services
provided and to be provided by the participating Directors and employees under the terms of
their engagement with Rua.
In May 2020, the Board invited selected employees to participate in a share bonus offer
(Bonus Offer). Under this Bonus Offer, rights to 250,366 Shares were granted to participating
employees.
Principle 6: Risk Management
The Board has overall responsibility for Rua’s system of risk management and internal control
and has procedures in place to provide control within the management and reporting structure.
The Audit, Finance and Risk Management Committee provides an additional and more
specialised oversight of company risks. The Audit, Finance and Risk Management Committee
Charter outlines the specific responsibilities of the Committee relating to risk management.
The Committee reviews and recommends to the Directors for approval Rua’s half year and
annual financial statements and advises the Board as to whether Rua’s financial statements
comply with applicable laws and regulations.
Financial reports are included in the pack prepared for review by the Board at each of its
meetings to enable it to monitor management’s performance against goals and objectives. The
responsibilities of the Audit, Finance and Risk Management Committee include the following:
• ensure that management is implementing, and reporting to the Committee on, Rua’s risk
management framework (including the maintenance of Rua’s risk register) and policies;
• report to the Board on the development of existing risks and the emergence of new risks;
• report to the Board on the main risks to Rua’s performance, how these main risks are being
managed under Rua’s risk management framework and on any incident involving fraud or
other breakdown of internal controls; and
• recommend to the Board whether the risk management processes as a whole are sufficient.
2021 Annual Report
105
Risk profiles which identify, assess, monitor and report Rua’s key business risks are formally
reviewed by the Board at least annually as part of the Board’s risk assessment process. These risk
profiles also identify the key risk mitigation strategies which are in place. A summary is below:
Key RiskDescription of Risk Mitigation
Failure
to secure
contracts to
supply key
markets
Rua has adopted a specific near-
term strategy which focuses
on the supply of GMP grade
medicinal cannabis into a small
number of key markets primarily
Germany, Australia and New
Zealand.
Rua’s future profits are therefore
dependent on wholesale buyers/
distributors in those markets
agreeing to take Rua products at
sustainable margins.
Rua has established relationships with
buyers in the EU (including under the
sales agreement with Nimbus Health
GmbH (Nimbus)) but execution of further
distribution contracts in European markets
will be contingent on proof that Rua is able
to supply EU-GMP product. Preliminary
discussions are progressing with Australian
and New Zealand distributors.
To mitigate the risk of market uncertainty
and customer concentration, Rua is
actively monitoring developments in
other key markets and ensures it receives
accurate and timely sales and market data
from reputable sources. Rua Business cases
will be developed to test the sustainability
of participation in those markets prior to
entry investment.
Rua has expended resources from this
capital raise to fund investment in Germany
and other international target markets
including building brand presence in those
markets. In the medium/longer term, Rua
proposes to use funds from sustainable
revenues to continue investment in target
markets and explore additional growth
markets for its particular products.
Rua has a contract to supply Nimbus but
is confident that other distributors would
take Rua supply if the Nimbus agreement
were prematurely terminated or not
renewed in the medium/long term.
Rua believes that its strategy to have
an exclusive arrangement with a single
distributor in the German market
represents the most efficient path to
establishing sustainable revenue flows.
Supplying multiple distributors would likely
result in less favourable commercial terms
than an exclusive arrangement.
106
Statement of Corporate Governance
Key RiskDescription of Risk Mitigation
Insufficient
capacity
to provide
for product
demand
Rua proposes to grow some
but not all of its own plants and
instead will rely on cultivation
partners for some of its supply
of biomass and dried flower. Rua
is relying on the plant genetics
that it has sourced to deliver a
premium product for the German
market. There is risk that its
internal or cultivation partner
production may not entirely
consist of biomass of sufficient
quality for this premium product.
Rua would struggle to source
third party supply of biomass
with the same plant genetics
if its partner production was
compromised in any way.
If Rua is unable to secure
sufficient biomass to meet the
raw material demands of its
customers, it may not be able
to fulfil supply contracts to key
markets.
Rua has signed multiple supply agreements
with cultivation partners. The volumes of
these supply contracts are small at this
stage. As Rua establishes its processes,
systems and sales opportunities it is
planned that these volumes will increase.
If Rua is unable to source sufficient
biomass at the required quality for
premium German product, it may be able
to repurpose lower quality biomass for a
more generic but lower value product. In
this case, Rua may face lower revenue and
margin opportunities compared to the
expected outcome under its current plan
to supply a premium product.
Failure
to meet
market and
regulatory
product
quality
standards
Rua is proposing a business
model which focuses on the high-
end medicinal cannabis market.
That focus means future revenues
will be dependent on delivering
high quality pharmaceutical
grade certified products reliably
and consistently.
Any quality control issues which
result in contaminated product
have the potential to mean
contracted products cannot
be supplied. This outcome
could subsequently undermine
Rua’s credibility in key markets
and result in a material risk to
sustainable revenues.
Rua is developing capability in
pharmaceutical grade cannabis cultivation
and medicine manufacturing. It is
recognised as an influential participant in
a reputable and innovative agri-sector in
New Zealand. It understands the critical
importance of establishing and maintaining
quality standards to provide premium
products. Rua intends to mitigate this
credibility risk by focusing on quality
and ensuring all required licences and
certifications are maintained.
There is a risk that consistently high quality
product may be more difficult to achieve
in the short term while cultivation and
production processes mature. Rua does
not believe that this risk is any greater in
the medium/longer term than it is now.
Rua has purpose-built cultivation,
laboratory and manufacturing facilities
which it intends to have GMP certified as
all pharmaceutical manufacturing must be.
Rua will only procure plant biomass from
growers who are able to comply with Rua’s
strict standards as stipulated in grower
supply agreements and consistently meet
quality control standards. Products will
be fully traceable to batches and source
material with rigorous quality testing and
audits throughout the supply chain.
2021 Annual Report
107
Key RiskDescription of Risk Mitigation
Regulatory
compliance
Medicinal cannabis markets in key
jurisdictions have seen significant
changes in recent years as
legislation and regulations have
developed. Authorities will
continue to monitor the benefits,
risks and regulation of products
and market participants and
seek to modify the regulatory
environment as each market
matures.
There is a risk that legislative
and regulatory changes,
interpretations or delays in
New Zealand and/or key export
markets could disrupt Rua’s
business plans and materially
impact on Rua’s competitive
strength in the global market.
Rua’s first focus for export is the
German market which requires
EU GMP certified product.
Obtaining and retaining licenses
is a critical requirement for Rua.
Rua places priority on monitoring
and meeting licensing conditions.
Rua proposes to remain agile while the
market matures and be positioned to
modify its business model to adapt to
unanticipated changes in legislation and/or
regulations.
Strong cross-party support currently exists
for increased access to medicinal cannabis
in New Zealand. There is no indication from
any party that a future government would
remove or substantively change provisions
of the Scheme that provide for domestic
production, supply and export.
Rua has taken an active interest in the New
Zealand legislation and regulations, and will
continue to provide ongoing feedback to
regulators in all jurisdictions Rua operates
in with regard to sector issues and
opportunities for improvement.
While Rua’s lack of EU GMP certification
is a risk now, it is not expected to impact
medium/longer term plans once NZ
GMP certification is attained. If NZ GMP
certification and EU recognition is delayed
significantly there may be an impact
on anticipated revenue timeframes and
this will add more urgency to securing
additional market access based on NZ
GMP certification.
Rua maintains strong systems that enable
Rua to strictly adhere to licence conditions
and minimum quality standards at all times.
Rua recently had its Medicinal Cannabis
license renewed for both sites.
108
Statement of Corporate Governance
Key RiskDescription of Risk Mitigation
Inability
to create
and protect
intellectual
property
Rua attributes specific value to
its strategy to invest in research
and development of cannabinoid
based medicines. Its business
model relies on the creation
and protection of IP to achieve
medium and long-term success.
In the short term, any failure to
protect Rua’s existing IP, its plant
genetics and its know-how on
which near term revenues are
based could compromise Rua’s
competitive position and may
delay its path to breakeven.
Rua aims to develop protectable
IP in relation to the breeding,
cultivating, extracting,
formulating, manufacturing,
clinically trialling and marketing
of medicinal cannabis products.
If new IP is not created then
the potential value associated
with Rua’s focus on high quality,
innovative products may not be
realised.
There is a significant risk of
compromising Rua’s investment
by failing to adequately protect
IP owned by Rua.
Rua has developed an Intellectual Property
Strategy and undertaken regular reviews
to identify upcoming, existing or desired
IP and the appropriate protections
required for each. For example, trademarks
have been registered with appropriate
authorities, products under development
have been the subject of Freedom to
Operate searches, robust confidentiality
agreements are put in place before
discussing opportunities and business
plans with potential collaborators and
contractors, staff have clauses in their
employment agreements clarifying
IP considerations and IP rights and
responsibilities are clearly laid out in all
research and commercial agreements.
In the medium/longer term, Rua expects its
investment in research and development
of new cannabis based medicines and
other intellectual property will enhance its
competitive position and contribute new
revenue opportunities. Failure to realise
these opportunities could impact Rua’s
path to sustainable profitability.
Departing staff cannot unlearn information,
experiences and skills acquired during
their time with Rua, so a key strategy is to
retain our high calibre staff for as long as
possible by making their roles interesting,
meaningful and rewarding. Rua also aims
to secure documents and information
on departure of key staff as far as is
practicable.
2021 Annual Report
109
Key RiskDescription of Risk Mitigation
Low
Prescriber
Product
Knowledge
& Confidence
Rua has focused on a small
number of markets where
supplying to prescription
based clients is an integral part
of the market. If prescribers
are unaware of the range of
products Rua produces, then
those products are unlikely to
be recommended as options for
patients to help with their health
problems. Unapproved medicines
(those without clinical evidence
and regulatory registration)
cannot be marketed to patients
or prescribers or make any claims
as to efficacy. Low prescribing
rates in Rua’s chosen markets will
adversely impact Rua’s financial
performance.
Rua works with organisations and
individuals trusted by prescribers to
increase prescriber knowledge and build
product reputation.
Rua has market-entry plans for the first
three markets it plans to enter with
strategies to engage key stakeholders in
each jurisdiction and within the provisions
of relevant regulations.
Rua considers that its clinical development
program and collaborations with clinical
researchers will help to build prescriber
confidence in the products and Rua.
Failure to
adequately
prepare for
and manage
economic
and social
impacts of
Covid-19
pandemic
Covid-19 poses a serious global
public health threat and has
the potential to impact Rua’s
business plans.
International travel restrictions
may delay execution of
additional partner agreements
or accreditation of EU standards
for those partners seeking to
visit physical premises. These
restrictions could delay Rua’s
ability to establish revenue flows.
Rua’s plans are reliant on its
ability to deliver product to the
German market. If this market
were to become inaccessible for
an extended period of time, it
may compromise Rua’s plans for
sustainable revenue.
New Zealand is one of a small number of
countries whose initial pandemic response
has been effective in containing the spread
of Covid-19.
Strict border controls and quarantine
measures have been implemented in
New Zealand to minimise the risk of new
outbreaks. Exports of pharmaceuticals
have not been restricted to date.
While MBIE does not provide formal
accreditation of essential businesses,
MBIE has advised that aspects of the Rua
business may be essential and that Rua
may continue to supply critical products
and services to essential businesses.
While economic and trade impacts may
have lasting consequences, the Board’s
immediate focus will be on the health and
wellbeing of its staff.
Rua will continue to promote
recommended hygiene protocols at its
facilities and actively encourage staff to
self-isolate at home at the earliest sign of
symptoms.
Rua has established systems that enable
many staff to work remotely where
necessary.
110
Statement of Corporate Governance
Key RiskDescription of Risk Mitigation
Failure to
adequately
prepare for
and manage
economic
and social
impacts of
Covid-19
pandemic
Cont.
Rua will carefully monitor developments in
the pandemic domestically and overseas
to consider and respond to potential
impacts on the supply chain and possible
government imposed restrictions on the
movement of people and goods.
Crisis plans have been developed where required along with agreed protocols on actions to be
taken and external and internal communication protocols.
Occupational Health and Safety statistics and reported data from each business are reviewed
at each Board meeting. This includes serious and minor incidents along with near misses and
corrective actions and internal training schemes.
The Board as a whole is responsible for monitoring corporate risk assessment processes and this
is not delegated to a subcommittee. Staying safe, keeping others safe, and being corporately
responsible are fundamental to what we are as an organisation.
Health and safety
The Board receives reports at each Board Meeting on Rua’s health and safety performance,
including performance against plan, near miss reporting, progress with safety related initiatives
and reviewing lead and lag indicators of performance.
2021 Annual Report
111
Principle 7: Auditors
The Audit, Finance and Risk Management Committee monitors the ongoing independence,
quality and performance of the external auditors and audit partner rotation. The schedule to
the Audit, Finance and Risk Management Committee Charter establishes a framework for Rua’s
relationship with its external auditors in accordance with Recommendation 7.1 of the Code.
For the year ended 30 June 2021, PwC was Rua’s external auditor. Maxwell John Dixon has been
the audit engagement partner since 2019. Rotation of the audit engagement partner is required
at least every five years and the Board is to approve the continued engagement of the external
auditor on annual recommendation by the Committee.
The Committee pre-approves any non-audit work undertaken by PwC. Permitted services are
listed in the Schedule to the Audit, Finance and Risk Management Committee Charter. The cost
of audit services provided in the year ended 30 June 2021 was $87,767. Further details are set
out at page 118 of this annual report. No non-audit services were provided in financial year 2021.
The external auditors will attend the 2021 Annual Shareholders’ Meeting.
As set out in more detail in the Audit, Finance and Risk Management Committee Charter, the
roles of that Committee include the following:
• review and confirm the independence of the external auditor;
• review and approve, as necessary, services to be provided by the external auditor consistent
with the framework and any related fees;
• review the scope, functions and performance of the internal audit programme;
• review any significant matters reported by the internal audit programme and management
response;
• ensure that there is direct communication with the internal audit programme; and
• ensure that the internal audit programme is adequately resourced.
Internal audit
Rua has a number of internal controls overseen by the Audit, Finance and Risk Management
Committee to ensure the integrity of key financial and operational data. This includes data
access, internal financial controls, adequate resourcing, targeted internal audit programmes and
monitoring management’s response to external audit findings.
Rua’s internal audit programme has the following functions:
• generate reports for the use of management, including the Senior Management Team;
• monitor and evaluate internal controls, the effectiveness of Rua’s risk management and
identify any shortfalls in processes; and
• report to the Audit, Finance and Risk Management Committee on any significant identified
matters.
Due to the size of Rua’s operations, rather than operating a dedicated internal audit function,
directors review the Delegations Policy annually and pay close attention to matters raised by
PwC, the external auditor.
112
Statement of Corporate Governance
Principle 8: Shareholder Rights and Relations
Rua aims to promote open and regular communication with shareholders and interested
stakeholders. Rua seeks to encourage effective participation at Rua’s shareholder meetings
and distribute shareholder communications in accordance with the NZX Listing Rules and any
relevant legislation.
Rua uses a variety of channels and technologies to keep its shareholders informed and to allow
access to information, including market announcements through NZX, Computershare (Rua’s
share registry), the Rua website, shareholder and community roadshows, annual reports and
annual meetings of shareholders.
Options for shareholders and other stakeholders to communicate with it and with
Computershare are set out on the website. All market releases carry Rua’s contact
details. Rua responds to all shareholder communications within a reasonable timeframe.
Shareholders are actively encouraged to attend the annual meeting (whether in person or
electronically) and may raise matters for discussion at this event, and vote on major decisions
which affect Rua. Voting is by poll, upholding the ‘one share, one vote’ philosophy. Shareholders
are also able to vote by proxy ahead of meetings without having to attend those meetings.
If additional equity is sought, the Board will consider offering shares to existing shareholders on
a pro-rata basis before offering shares to other investors.
Notices of annual or special meetings of the shareholders are posted on Rua’s website as soon
as possible and at least 20 working days prior to the meeting.
In addition to shareholders, Rua has a wide range of stakeholders including communities in
Te Tairāwhiti and research and commercial partners. Rua maintains open channels for all
audiences, including its shareholders and stakeholders, as well as its own employees, brokers
and the broader investing community.
Rua has a number of policies which uphold stakeholder interests, including but not limited to
the Continuous Disclosure Policy and Financial Products Dealing Policy.
2021 Annual Report
113
114
Shareholder Information
RangeTotal HoldersUnits%Units
1 - 499370113,5170.08
500 - 999227167,2310.12
1,000 - 1,999350451,0260.32
2,000 - 4,9997662,418,8591.72
5,000 - 9,9993582,462,6381.75
10,000 - 49,99967612,927,3029.21
50,000 - 99,999704,695,0983.35
100,000 - 499,9996914,669,26010.45
500,000 - 999,99986,247,2514.45
1,000,000 Over1596,169,22968.53
Rounding0.02
Total2,909140,321,411100.00
Spread of Shareholders
As at 31 August 2021
Nga Kōrero mo nga
Kaipupuri Hea
Shareholder Information
2021 Annual Report
115
Rank
NameUnits% Units
1Fang Group Investment Limited23,584,93916.80
2Hikurangi Bioactives Limited Partnership17,616,59112.55
3Tailorspace Capital Limited11,129,3757. 9 3
4
New Zealand Depository Nominee Limited
<A/C 1 Cash Account>
9,992,1357.1 2
5Andrew Charles Williams7,756,8385.53
6FNZ Custodians Limited <DTA Non Resident A/C>6,753,2144.81
7Ridings Brothers Limited4,492,1963.20
8Custodial Services Limited <A/C 4>2,982,1842.12
9
Martin Walter Smith & Aneta Lisa Bird & Sara Maree
Lunam <Wakaroma A/C>
2,544,7321.81
10Forsyth Barr Custodians Limited <1-Custody>1,908,0191.36
11Pathfinder Caresaver - NZCSD1,778,1011.27
12Aoraki Holdings (No 2) Limited1,536,1231.09
13Joseph Davenport1,387,2700.99
14
Greg Antony Anderson & Nicola Marie Anderson
<The Orange A/C>
1,273,5100.91
15Yanling Huang1,210,0000.86
16
Masterportfolio Nominees Limited - NZCSD
<NZPT42>
998,0670.71
17
Je Long Trustee Company Limited
<The John E Long A/C>
773,3820.55
18Anna Kate Stove763,8960.54
18Breakaway Investments Limited763,8960.54
20Bruce Bennett Holm750,0700.53
Totals: Top 20 holders of ORDINARY SHARES (Total)
99,994,53871.24
Total Remaining Holders Balance40,376,87328.76
Top 20 Shareholders
As at 31 August 2021
116
Shareholder Information
Substantial Security Holdings
According to Notices given under the Financial Markets Conduct Act 2013, the following were
substantial security holders of Rua as at 30 June 2021.
Directors Security Holdings
Rua Bioscience securities in which each Director has a relevant interest
as at 30 June 2021 are:
Directors Security Dealings
During the year ended 30 June 2021 there were no Directors security transactions in respect
of section 148(2) of the Companies Act 1993 and sections 297(2) and 298(2) of the Financial
Markets Conduct Act 2013.
NameUnits% Units
Wakaroma A/C (Martin Smith)2,544,7321.81
Aoraki Holdings (No 2) Limited (Brett Gamble)1,536,1231.10
Anna Stove763,8960.54
Breakaway Investments Limited (Trevor Burt)763,8960.54
Panapa Ehau279,3920.20
Positano Holdings Ltd (Brett Gamble) 269,7910.19
Rank
NameUnits% Units
1Fang Group Investment Limited23,584,93916.80
2Hikurangi Bioactives Limited Partnership17,616,59112.55
3Tailorspace Capital Limited11,129,3757. 9 3
4
New Zealand Depository Nominee Limited
<A/C 1 Cash Account>
10,030,7737.1 5
5Andrew Charles Williams7,756,8385.53
2021 Annual Report
117
Directors Interests
The following are details of general disclosures of interest by directors holding office as at 30
June 2021, pursuant to section 140(2) of the Companies Act 1993. The director will be regarded
as interested in all transactions between Rua Bioscience and the disclosed entities.
NameCompanyPosition
Trevor BurtThe Lamb Company North AmericaChair
MHM Automation LtdChair
Market Gardeners LtdDirector
Landpower Group LtdDirector
Ben Gough Family TrustTrustee
Panapa EhauHikurangi Enterprises LtdDirector
Waiapu Investments LtdDirector
Hikurangi Huataukina TrustTrustee
Brett GambleAlvarium Investments (NZ) and Related CompaniesDirector/Shareholder
New Zealand Discretionary Investment
Management Services Limited
Director
Newton Ross LimitedDirector
Pathfinder Asset Management LimitedDirector
TailorspaceCEO
Mobile Medical Technology LtdDirector/Shareholder
Martin SmithDamar Industries LtdDirector
Reefton Distilling Company LtdDirector
Anna StovePacific Edge LimitedDirector
TAB NZDeputy Chair
Global Women NZChair
118
Shareholder Information
Changes in Director Interests
Directors made the following entries in the Directors Interests Register pursuant to section 140 of
the Companies Act 1993 during the year ended 30 June 2021:
DirectorInterests
Anna Stove
Appointed Director of Pacific Edge Ltd.
Appointed Deputy Chair of TAB NZ
Brett Gamble
Appointed Director New Zealand Discretionary Investment
Management Services Limited
Appointed Director Newton Ross Limited
Appointed Director Pathfinder Asset Management Limited
Donations
New Zealand Medical Cannabis Council 17,500
Medical Cannabis Awareness New Zealand 3,000
Make it Legal Aotearoa 2,000
TOTAL 24,670
Auditor Fees
Fees paid to the auditors include payments to PricewaterhouseCoopers for the following:
20212020
$$
Audit and review of the financial statements
- Audit of the financial statements60,13247,7 75
- Review of half year financial statements27, 6 3 58,925
Total audit and review fees87,76756,700
Other services
- Business valuation services-19,950
Total other services-19,950
Total fees paid to auditors87,76776,650
2021 Annual Report
119
Dividend Policy
The payment of dividends is not guaranteed, will be at the discretion of the Board, and
dependent on a number of factors.
These factors include the general business environment, operating results and the financial
condition of Rua, future funding requirements, any contractual, legal or regulatory restrictions on
the payment of dividends by Rua and any other factors the Board may consider relevant.
NZX Disclosures
Rua has not applied for nor relied on any NZX waivers during the financial year ending
30 June 2021.
120
2021 Annual Report
Nga Mokamoka o
te Kamupene
Contact Directory
Company Number
6484092
Issued Capital
140,262,591 Ordinary Shares
Registered Office
Rua Bioscience Limited
1 Commerce Place,
Awapuni, Gisborne 4071
Phone: 0800 RUABIO (782 246)
Shareholders
Listed on the NZX main board.
Share Registrar
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road,
Takapuna, Auckland 0622
Phone: +64 (9) 488 8700
Directors
Trevor Burt
Panapa Ehau
Brett Gamble
Martin Smith
Anna Kate Stove
Chief Executive Officer
Rob Mitchell
Auditors
PricewaterhouseCoopers
Legal Advisers
Lowndes Jordan
Level 15, 188 Quay Street
Auckland 1010
Phone: +64 (9) 309 2500
Website
ruabio.com
Facebook
facebook.com/ruabioscience
Instagram
instagram.com/ruabioscience
LinkedIn
linkedin.com/company/rua-bioscience
122
2021 Annual Report
Poipoiā te kākano kia puāwai
– Nurture the seed and it
will blossom.
2021 Annual Report
123
Tēnei te mihi ki a koutou ngā
kaitautoko o tēnei kamupene,
kei te kōkiri mātou i te
kaupapa kia tutuki ai nga
wawata i wawatatia.
www.ruabio.com
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.