Nuheara Strengthens Global Leadership In Smart Hearing Healthcare Market with 4th Consecutive Quarter Of Growth.

HIGHLIGHTS:

• Nuheara increases March 2020 quarter cash receipts to $1.23M.
• Quarterly sales are up 35% on December 2019 quarter ($910K) and 171% up on September 2019 quarter ($452K).
• Year to date 2020FY unit sales now exceeds total unit sales for 2019FY
• Launched 3rd generation IQbuds² MAX in January at CES 2020 in Las Vegas, USA where it was globally recognised with 3 innovation awards
• IQbuds² MAX unit sales for the quarter exceeded 2,500 units at an Average Sales Price (ASP) above$450.
• 100% of sales for the quarter were derived from Nuheara’s Direct-To-Consumer (DTC) sales channel with 76% of all orders being international.
• Nuheara’s DTC sales model proves its robustness amid global COVID-19 retail disruption with a Return on Advertising Spend (ROAS) of 2.5x.

30 April 2020 – Perth, Australia

Nuheara Limited (ASX: NUH) (Company or Nuheara), is pleased to provide its Quarterly Report for the quarter ended 31 March 2020.

The quarter was dominated by the launch and pre-sale campaign for Nuheara’s next generation product, IQbuds² MAX.

Cash receipts for the quarter, including IQbuds² MAX pre-sales, which are recognised as revenue when shipped, were $1.227M, approximately 35% higher than the December 2019 quarter ($910K) and 171% higher than the September 2019 quarter ($452K).

Improved sales results have been achieved almost exclusively via the Company’s Direct-To-Consumer (DTC) online sales platform, further validating the sales model’s ability to reach and transact with global customers. The DTC model is proving to be a viable alternative as traditional hearing clinics and retailers shutter around the world with the advent of the COVID-19 crisis. Nuheara also continues to pursue other traditional sales channels in accordance with its business strategy, including partnerships and distributor relationships in the healthcare sector to extend brand awareness and drive further sales.

Importantly, the Company has maintained a Return on Advertising Spend (ROAS) of 2.5x for the quarter despite the COVID-19 business disruptions, demonstrating the scalability and suitability of Nuheara’s DTC platform.

Another milestone was reached during the quarter when year to date unit sales, including IQbuds² MAX pre-sales, exceeded total units sold for the whole of FY19.

Payments for the quarter included a deposit paid on mass production of IQbuds² MAX, one off costs for the CES launch, development and pre-production of IQbuds² MAX (including some delays), and costs associated with the transfer of production facilities from previous contract manufacturer in China to the new contract manufacturer in Malaysia.

Related party payments of $250K were paid during the period, which represents non-executive Director fees, and salaries paid to executive Directors.

The Company maintained a strong cash balance of $2.15M at 31 March 2020.

LAUNCH OF IQBUDS² MAX

On 5 January 2020 at the Consumer Electronics Show (CES) in Las Vegas, Nuheara launched its next generation of hearable technology: IQbuds² MAX.

Built on Nuheara’s innovative new smart-hearing platform, the IQbuds² MAX feature hybrid Active Noise Cancellation and unique features for personalising and enhancing the wearer’s soundscape. The IQbuds² MAX hearing buds are available for pre-order for AUD$449. Shipping is expected to commence in May.

Nuheara redesigned the IQbuds² MAX from the ground up with its latest acoustic technology, which enhances normal hearing and allows users to fine-tune their sound environment. Nuheara’s EarID technology and Speech in Noise Control (SINC) provides wearers with unrivaled customisation and control over their personal hearing experience, so they can enjoy music, phone calls, conversations or silence wherever they go.

Significant IQbuds² MAX developments from the previous platform include:

True Personalisation — Nuheara’s EarID technology uses a convenient mobile app to assess a wearer’s hearing and automatically calibrate the buds to their personal hearing profile. EarID uses the clinically-validated NAL-NL2 hearing and fitting procedure, providing research-grade hearing customisation without the need to visit audiology specialists.
Hybrid Active Noise Cancellation — With the most advanced form of ANC, IQbuds² MAX uses three microphones to analyse and process sounds both inside and outside the ear.
Situational Sound — Nuheara’s proprietary Speech in Noise Control (SINC) adds unique sound controls for each situation.
Advanced Digital Signal Processing — IQbuds² MAX triple-core DSP system delivers optimal hearing fidelity and reduces occlusion to deliver the most natural enhanced sound ever in a hearing bud.
Sonic Accuracy — A large 9.2mm dynamic driver with vented acoustical design provides pitch-perfect sound fidelity.

IQBUDS² MAX PRE-ORDERS SURPASS $1M

In February, eight weeks after launch, Nuheara announced that IQbuds² MAX pre-orders had surpassed $1M. Nuheara has achieved this result with a significant uplift in the Average Selling Price (ASP) achieved for all orders now exceeding $450 per unit. 76% of all orders have been placed by international (non-Australian) customers and of those, 68% are from the US.

RELEASE OF NEXT GENERATION APP

The $1M pre-order sales milestone also coincided with the release of Nuheara’s next generation app on both the Apple App Store and Google Play portals. This is the third major release of the IQbuds app and represents an all-new design backed by millions of hours of IQbuds listening experience and user feedback and testing.

The new app is a generational leap forward in usability and design. It has been specifically designed to improve the customer experience and provide a framework for future app features and upgrades.

The app has been designed to be compatible with all Nuheara’s IQbuds and IQstream offerings, so existing users of IQ products will benefit from the new release.

$2.5M CONVERTIBLE NOTE SECURITY

In January, the Company announced that it had executed an agreement for a 24-month $2.5M funding (Funding Agreement) with the Lind Global Macro Fund, LP, an entity managed by The Lind Partners (together Lind), a New York-based institutional fund manager.

The funding was provided as a secured convertible note with a 24-month term, the proceeds of which will be used, along with Nuheara’s current cash, to fund the mass production and marketing of the IQbuds2 MAX and working capital requirements.

The Funding Agreement includes provisions that allow for conversion of securities outstanding to Lind into fully paid ordinary shares in the capital of the Company, optional cash payments by the Company or early repayment, without penalty and subject to Lind’s buy back conversion rights for up to 33% of the outstanding face value. A lock-up provision restricts conversion into shares for 120 days after the closing date.

Lind has invested $2.5M into Nuheara who have issued a secured redeemable convertible security with a face value of $3.0M. Nuheara has the right to redeem at any time without penalty, which, if repaid within 180 days, the face value will be reduced to $2.85M.

COVID-19 BUSINESS IMPACT

The global COVID-19 pandemic resulted in major economic disruption around the world during the quarter. This included a Government imposed lock down in Malaysia including the manufacturing sector. This resulted in the temporary suspension of manufacturing and delivery of IQbuds² MAX orders which remained in place at the end of the quarter. The Malaysian Government has since begun lifting certain COVID-19 restrictions, and Nuheara announced on 14 April that manufacturing has recommenced with deliveries expected to commence in May.

Nuheara responded to the COVID-19 crisis with the implementation of several temporary business stabilisation measures to ensure that the company is well positioned operationally and financially to manage the economic uncertainty and business interruption.

In addition to recommended workplace protocols related to staff safety, the company also implemented significant cost reduction measures including standing down staff in non-essential functions and reducing senior executive and Board remuneration by 50%. These measures will be reviewed at 30 June.

MINERAL ASSETS

Nuheara’s portfolio of mining assets consists of net smelter royalties located in Northern Peru (El Molino Gold Project and part of the El Galeno Copper Gold Project, currently owned under joint venture by China Minmetals Corporation and Jiangxi Copper) and in Western Australia (Mt Ida South/Quinns gold projects, currently owned by Alt Resources Ltd).

The Western Australian royalty is under contract for sale by way of a binding Royalty Sale and Purchase Agreement with SilverStream SEZC (Silverstream) and Vox Royalty Australia Pty Ltd (Vox), as announced post Quarter end on 3 April 2020.

Vox will purchase the royalty for total aggregate consideration of US$200,000, satisfied by:

• the issue to Nuheara of US$100,000 of SilverStream shares on or about the commencement of trading of SilverStream on the TSX or equivalent exchange (anticipated in Q2 2020) at its listing price per share; and
• US$100,000 in cash payable within seven days of SilverStream listing on the TSX or equivalent exchange.


This announcement has been approved for release by the  Nuheara Board.


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