Good morning. I'm David Krall, the Chair of Audinate Group. I'm speaking to you from my home in California, where we're currently experiencing an internet outage. As a result, I'm addressing you via phone instead of video conference. Nevertheless, I'm still delighted to welcome you to the Annual General Meeting of shareholders of Audinate. The time is now 9:30 A.M. in Sydney, and as we have a quorum of members present, I declare the Annual General Meeting open. Joining me today is our CEO, Aidan Williams, and our non-executive directors, Tim Finlayson, Alison Ledger, Roger Price, and John Dyson. We also have our CFO and Company Secretary, Rob Goss. Helen Hamilton-James, representing the company's external auditor, Deloitte Touche Tohmatsu, is also in attendance.
Today, we are very pleased to welcome those of you participating online through our first virtual meeting platform, provided by our share registrar, Link Market Services Limited. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Due to the current COVID-19 pandemic, we thought it is prudent to take steps to discourage a physical public gathering and encourage attendance online. We hope that holding a virtual meeting will assist to further curb the spread of the COVID-19 virus and encourage greater participation and engagement amongst our shareholders going forward. If we experience any technical issues today, a short recess or an adjournment may be required, depending on the number of shareholders being affected. If this occurs, I shall advise you accordingly.
Before we proceed to the formal business of the meeting, I will give a short address, and I will then ask Aidan Williams, our CEO, to address you. Voting on the resolutions will be conducted by way of poll. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. You will be able to vote directly any time between the start of the meeting at 9:30 A.M. Sydney time and the closure of voting, as announced at the end of the meeting. Once you have registered, your voting card will appear with all of the resolutions to be voted on by shareholders at the meeting, as set out in the notice of meeting. To cast your vote, simply select one of the options. I now declare voting open on all items of business. Please submit your votes at any time.
I will give you a warning before I move to close voting at the conclusion of all items of business. After Aidan's presentation, we will formally step through each of the voting resolutions. Following the voting, general business questions will be taken. Shareholders participating online through the virtual meeting website can submit their questions online. Please click on the Ask Question button, type your question, and click Submit. I encourage shareholders attending online and who have questions to send the questions through as soon as possible. Questions can be submitted at any time. Please note that while you can submit questions from now on, we will not address them until the relevant time in the meeting. Please also note that your questions may be moderated, or if we receive multiple questions on one topic, amalgamated together.
Due to time constraints, we may run out of time to answer all your questions. Shareholder questions received prior to the meeting will be addressed during the general business questions. Before our CEO, Aidan Williams, addresses us, I would like to welcome our directors that have joined us here virtually today and would like to make a few comments. There is little doubt that the COVID-19 crisis has made financial year 2020 a particularly tumultuous period for even the most seasoned CEOs. Even with all the operational and day-to-day challenges that have arisen from this once-in-a-generation event, Aidan has done a fantastic job continuing to progress Audinate's growth strategy. The board have all been impressed by the mature and calm manner in which Aidan has balanced the immediate tactical demands of the business with an ongoing focus on strategic imperatives.
We are also fortunate to have a level of depth, experience, and expertise within our executive leadership team that have made an invaluable contribution in supporting Audinate's growth. On behalf of the board, I would like to recognize and thank Aidan, the executive leadership team, and the entire staff of Audinate for their persistence, dedication, and teamwork in the extremely challenging and demanding environment that we have experienced this year. I would also like to thank all our shareholders for their continued commitment and support. After year-end, Audinate completed an AUD 40 million equity raise, which has provided growth capital and de-risked the business from ongoing uncertainties and impacts of COVID-19. This capital injection also enhances our ability to consider strategic acquisitions.
The placement raised AUD 28 million at a 5.1% discount to the five-day VWAP, and a further AUD 12 million was raised via an SPP at a 2% discount to the VWAP, both representing low levels of dilution for shareholders and strongly oversubscribed. During the year, the business has continued to make good progress in achieving its medium-term objectives, despite the challenging environment in the second half.
The uptake of our new Dante products has been particularly encouraging, with the number of design wins across Dante Video, Dante Embedded Platform, Dante Application Library, and Dante IP Core representing a strong market endorsement of these products. Notably, the Dante Embedded Platform introduces the capability for an end user to add Dante to an existing AV product in the field. This is a significant step in the evolution of our business model, and something we expect will aid the proliferation of our technology.
Product development requires new business infrastructure to accordingly, it's pleasing to see the progress Audinate has made this year in terms of code protection and in-field licensing and enablement. The fulfillment of these capabilities is an essential strategic objective for the year ahead. The establishment of a manufacturing line in Malaysia was initiated to address the imposition of U.S. tariffs on Chinese imports. Following the emergence of the COVID-19 crisis, this provided critical business continuity and allowed us to maintain supply as many others experienced disruption. The opening of our office in the Philippines amid COVID-19 was another important step in building out the business platform to support growth and achieve operational efficiencies. We have made important progress in the video market this year, delivering our Dante AV product design suite to customers in April.
Securing several design wins, facilitating a demo of the first Dante Video camera by Bolin, and launching the authorized implementer program to enable the production of white labeled Dante Video products. The launch of the first Dante Video products by our customers will be another milestone we expect to achieve in the year ahead. The milestones Audinate achieves in the near term will position the company and our stakeholders to benefit from the economic recovery to come. We retain a strong conviction in our business and strategy to enable a transformation of the AV industry. Again, I would like to express my gratitude to the Audinate team and all of our shareholders for their continued commitment and support throughout this challenging year. I'd now like to welcome Aidan Williams, our Chief Executive Officer, to address you.
Thank you, David. If you have not yet pressed the play button on the video box, you may want to do that if you would like to see my face talking. Hopefully you should see the slides on the screen, but you will also have a live video box as well, and you may want to press the play button as well. If we move to slide five. The next slide. Good morning, everyone. Thank you for joining our AGM today, and for Audinate, this is the first live AGM for us. This is a new experience for all of us. Thank you for joining us.
I think, probably many of you would be familiar with Audinate as a company and our background, but I just want to touch briefly on what we do, in case there's some new people on the call. Audinate is a technology company. Our technology distributes audio and video signals across computer networks. The market that we play in is audio-visual systems. These are usually AV systems that get put into buildings in some sense. We supply audio and video networking technology to manufacturers of AV equipment, and our technology ends up being used in buildings like the one you can see on screen there. I also wanted to emphasize that FY 2020 has been a big year for Audinate with the launch of our first video product. Pretty much all our products to date have been audio products and audio networking products.
It's definitely a major milestone for Audinate, in the last financial year for us to have launched our first video product. If we can go to the next slide, which is slide six. Again, this is a slide that's probably familiar to many people. I just want to touch on this briefly. The key thing I think to understand is there's really two big trends going on in the AV industry. One is that first bullet there, that networked digital connectivity is replacing point-to-point wiring for the installation and delivery of AV systems. The guts of those AV systems are becoming software rather than hardware. Instead of there being a physical box or a hardware product that's delivered and installed into a building, more and more of those systems are becoming software-oriented.
Those two broad trends of networking replacing analog cabling and software replacing hardware AV systems are really driving a next wave of industry transformation. As a technology company that provides networking to manufacturers, we are kind of uniquely positioned to be able to capitalize on that sort of fundamental transformation in the AV industry. As we've talked about on a number of occasions, we see our addressable market in kind of three chunks. One is the digital audio networking piece, where the majority of our products are. Video networking is obviously a next step for us in expanding our addressable market. Again, a key milestone this year was developing and offering a video solution to the market, and particularly having design wins for that video solution.
The last thing I want to touch on this slide is really point towards the software and services segment that's on this addressable market. This is really just to remind you of the long-term strategy for Audinate, which is really around capitalizing on those software-based AV systems to be able to provide platform products and services that you could think of as really app-ifying AV. Converting AV installations and applications into a kind of an app in some form that you can deliver in a software form. That's the long-term value for Audinate, is really around those platform products and services. If we move to the next slide. Slide number seven. There's a number of financial highlights on here, and I'm going to zap through these pretty quickly, given that we've already talked to these on a couple of previous occasions.
In terms of revenue, our revenue in Australian dollars was up 7.1% over FY 2019, but this was largely related to exchange rate benefits that we saw. Audinate buys and sells in US dollars. Our US dollar revenue was essentially flat, and that really reflects the impact of things like coronavirus on our revenue. For us, I think it was a good result to be flat with respect to the general uncertainty of what was going on in the market. I'm going to talk a little bit more about the trading conditions we've seen a bit later in the presentation. We also saw an improvement in gross profit margin, and that was to do really with increased software sales, royalties, things like Dante Domain Manager and retail software. Again, just to remind you of our long-term strategy to provide more in the way of software-based Dante solutions.
We expect that gross margin will further increase in the years to come as we continue to deliver software-based Dante solutions. We also undertook another capital raise. The combination of the two capital raises from last year and this year puts us in a very strong position from a balance sheet point of view, allowing us to both ride out any uncertainty on the whole coronavirus side with respect to revenue, but also to invest in our long-term strategy, and to continue to grow the business over the longer term. Broadly speaking, financial result, Well, it was at flat associated with the impacts of coronavirus. On the other hand, our operational metrics for FY 2019 were excellent. You can see there that we've achieved a total of 2,800 Dante-enabled products on the market.
This is up from about, I think it's 2,100 products we had on the market last year. We're tracking very well with that. Keep in mind that those products are leading indicators that generate repeat revenue for us going forward as people buy those products. We also had a very busy season with respect to training. You can see there were 57,000 professionals trained on some form of Dante during FY 2020. We consciously tried to take advantage of the fact that a number of AV professionals have been at home. That has been an opportunity for us to really ramp up our training and get them engaged in that. Also, I think it was very pleasing to see that we had a 21% increase in the number of OEMs shipping Dante product.
You might have thought that if perhaps we were not having trade shows and there might have been reduced investment, that sort of stuff, I think it was very pleasing for us that a number of our OEMs launched something like 700 products over that financial year, and a very large number of those were launched in effectively the last two quarters of the year. This is after coronavirus basically came into play. A couple of our major trade shows were in and around when coronavirus had an impact, and we still saw large numbers of products being launched, which was great. The final operational metric I just want to, again, emphasize is that key milestone of launching of our first video product and also getting a number of design wins.
Having manufacturing customers actually decide that they want to use that technology in their products. If we can move to the next slide. This is definitely a slide that's, I guess, a favorite. This is slide eight, and you can see on this slide it's a chart of the number of Dante products over time and its comparison with a number of different competitive offerings in the market, which are often compared to Dante. There's two key things that I want to talk to on this. One is that it's continuing to grow, growing up and to the right, which is obviously great. You can think of this as the size of the product catalog that an integrator can buy from.
There are 2,800 products of every type, shape, and variety, so that people building AV systems based on our networking technology have all of the brands that they like, all of the different kinds of products they like. The final thing I want to talk about on this slide really is just to remind you again of the network effect, the economic network effect that's associated with the interoperability of this ecosystem. All these Dante products are interoperable, and so that represents a substantial barrier to entry for these competitive technologies that you see along the bottom. That network effect continues to grow as we continue to increase the number of Dante products that are available on the market. If we can go to the next slide nine.
On this slide, there's a fairly large grab bag of operational metrics associated with the business in terms of marketing. I don't want to go through all of them. I just want to touch on a few things on this slide. We talked about training of people with Dante. You can see there was a large increase in the number of people trained using Dante. The key thing about that is that we found that if we provide education to integrators and we get them to actually use the Dante technology, then they're much more likely to buy Dante products and specify those Dante products in AV systems in the future. There is a connection between training, things like webinars, the online training that we do and increase usage of Dante. That's obviously a major emphasis for us.
One of the big things that we did in the year was to expand the number of languages. We're now offering training in nine languages, and we now have eight Audinate trainers. Eight staff based in five countries around the world, responsible for delivering this type of training going forward. Also, we're updating our training content to include Dante Video as well. Okay. If we move to the next slide, which is slide 10. Slide 10 is really talking to, we engaged a consulting called Futuresource to provide us with some market information around the size and growth of the networked audio market over time. You can see a chart there which represents Futuresource's view on how many networked audio units there would be with respect to time and what the future projections there are with that.
You can see that in 2020, there's a bit of a dip down, well, it's a fairly substantial dip down, which is really related again, to the impact of coronavirus. Before you look at that dip down and then immediately jump to the conclusion that that was the direct impact to Audinate's business, I'd just encourage you to just hold on for a second, because we are going to talk about impacts to Audinate's trading in the next slide. Don't read this as being a direct one-for-one map to what has happened to Audinate. The key thing about this data really is it's allowing us to look ahead a bit more and to get an independent view on where the audio networking market is going to go over time.
You can see if you look at that 2020 to 2024 growth trend, that's something like a tripling in volume over that period. We would expect to get a pretty large chunk of that, given that we're one of the major providers of networking technology to the AV industry. A couple of other points to make on this. The research doesn't really factor in what would happen with technology innovation. Audinate is a technology company. These consulting guys are really looking at the market as is with all of the products. I would anticipate that, as Audinate continues to push into software-based implementations of Dante and really executes on our strategy to reduce the marginal cost of adding Dante to a bunch of products, then I would expect that our penetration into a broader range of products will grow.
That this set of unit numbers is really reflecting the status quo as at 2020. I would expect that as time goes on and we innovate more, particularly in the software space and making smaller, lower cost implementations of Dante, then we will be able to get into a much wider range of products. The final thing I wanted to point out from this is really that the installed commercial vertical market segment, which is the one that Futuresource has pointed out as the fastest growing vertical, that is a market in which Audinate is quite strong. That augurs very well for our long-term future as well. If we move to the next slide 11. This is really providing more commentary on our Q1 performance and what's been happening in the business, particularly in the light of coronavirus.
Certainly, this is versus us providing our forecasts broadly for the end of the financial year, which is subject to potentially substantial uncertainty. When we talk to our FY 2021 results, we didn't provide a full FY 2020 forecast. We basically committed that we would continue to communicate over time and provide information quarter- by- quarter on what's been happening for us in the business. Where we are, as you can see, there's a chart on the right-hand side, which is really revenue in U.S. dollars, month by month from the beginning of this calendar year. I think really this is due to a combination of good momentum in corporate conferencing and higher education, and just generally, that initial peak impact from things like lockdown has gone away. I think broadly, many countries are managing coronavirus better.
We see good momentum from June and on. We are, however, experiencing challenging conditions in live sound and large events. As you can imagine, things like stadiums, sporting events, conferencing, stuff like that, it's still the case that many of those activities are restricted. Any equipment that's sold into those live sound theater or conferencing markets is currently pretty depressed. That tends to impact on us through things like the sales of Brooklyn modules, which are relatively high revenue, high dollar amount modules for us. On the other hand, we have a fairly broad product mix. Not only are we exposed to live sounds, but we're obviously exposed to corporate conferencing and higher education, which have been going really well.
We've seen strong growth in adapter products, Ultimo, Broadway, and retail software sales. A lot of that is being driven by things like corporate conferencing, higher education, and just, I think, an increased interest in doing things in the home, particularly retail software. Brooklyn revenue, as I mentioned, is down on the prior comparable period, really reflecting exposure to live sound. That's offset against the increase in growth in all those other products that were listed there. Where that kind of nets out is that our unaudited revenue for the first quarter of FY 2021 was $5.2 million. I think that's a reasonable result for us so far through the year. I think it's too early to tell whether that trajectory will continue for the rest of the financial year.
I think we've provided this information, to give you a view on how things are tracking. I think it remains to be seen what the remainders of the quarter of this year. I'd like to hope that the worst is behind us. Every day the news seems to bring different sorts of things and I think there's some fundamental uncertainty ahead of us. What are we up to this year and what are we looking at from the next quarters on? I think it's time for us to be thinking once again about prudent return to investing for growth. This really reflects the confidence that we have in our longer term strategy, and the fact that we've now executed a capital raise, and we've got plenty of balance sheet strength and cash in the bank.
We're intending to return to prudent growth here, but with keeping an eye on cash burn as well. Our expectation is that we'll be adding around 10 roles globally over the remainder of FY 2021. There will likely be a further incremental OpEx associated with mainly a combination of bonus provisions. In the previous financial year, we did not pay bonuses to employees given the revenue decline that we had. However, with the return to revenue, if that continues on through the year, as we are expecting the revenue performance to probably not return to the worst of May 2020 again. We are budgeting actually to be paying bonuses in some form over FY 2020. There's also some expenditure there in structuring the business for growth, so investing in things like business systems in order to enable us to scale.
As we go forward through FY 2021, we will be providing further updates as the year unfolds. If we come to the final slide, that's slide 12. Really this is a summary which has been consistent for some time. It's really fitting with our long-term strategy that we've had for some time. In terms of medium term priorities, I really just want to call out two of those there. One is that investing to double Audinate's engineering and R&D functions over two years. We've been engaged since the first capital raise we had from July 2019. We've been engaged in investing in things like video and our software platform capabilities. This has required us to be thinking about doubling our engineering and R&D capacity.
COVID-19 certainly put a bit of a brake on that as we were concerned to make sure that we were controlling things like cash burn. Given that we now have cash in the bank, I think it's time for us to be thinking about investing again. Obviously, it's going to be prudent for us to continue to watch cash burn as well. Likewise, I think putting in place business infrastructure to support long-term growth, there will be some additional spend on that as well, and that's really setting us up for the long term, is the way I would see that. In terms of more near-term objectives for things like FY 2021, I think there's three that I'd like to call out on this slide. Again, we've talked to these previously as well. One key thing is to drive design wins.
This is to basically get design wins for all of our new software products, for things like Dante Video, but also all of the mature audio products that we have on the market as well. Even if there aren't necessarily so many unit sales, the key thing for us internally to do is to prime the pump for economic recovery by getting manufacturers to design more products that have Dante in them. When recovery occurs, people can buy those products, and that will generate repeat revenue for Audinate. We also want to capitalize on our initial launch of Dante Video, so we need to broaden out our Dante Video product offerings. On the audio side of things, we have chips, we have modules, we have software implementations. Ultimately, we have a very large toolbox for audio.
We need to build the right kind of toolbox on the video side of things. We've launched our first Dante Video product. A priority for FY 2021 is then to build out a series of other relevant video products as well. Finally, I just want to touch on M&A opportunities with the capital raise. Clearly that puts us in a position to be able to look at M&A opportunities. I think there are opportunities out there, and we're basically looking at any opportunities that are coming our way. We will provide updates as and when things happen with respect to that, as needed throughout the financial year. Finally, I guess in summary, I think it's been, as David said, I think tumultuous is a good word. It has been a tumultuous year. I think we've had a good year in a number of ways.
Like David, I would very much like to thank Audinate's executive staff. I think there's no way that we would've got through without the talent that we have and for the efforts that people put in. Audinate staff more generally. I think it's been a year where we've really asked a lot of people, and the people have been very flexible, very adaptable, and very diligent. Certainly as people have gone home, we've still managed to be productive. We've managed to deliver all sorts of things this year with a workforce that's been spread over a number of different locations, and there's been quite a bit of disruption. I definitely want to echo David's thanks to the broader Audinate staff, as well as the executive team. With that's all I have to say, and back to Rob.
Thanks, Aidan. Ladies and gentlemen, we've now come to the formal part of the business. Matters requiring resolution, which are outlined in the notice of meeting. Meeting dated 11th of September 2020 was circulated to members, and I will take the notice of meeting as being read. The resolutions for consideration today may only be voted on by shareholders, proxy holders, and shareholder company representatives. Shareholders online through the virtual meeting website have the opportunity to ask questions on each matter being put to the shareholders. Moving to the resolution, I would like to advise that the chairman, David Krall, intends to vote all undirected proxies in favor of all resolutions. Each resolution set out in the notice of meeting is considered as an ordinary resolution, and as such, must be approved by a simple majority of votes cast by shareholders entitled to vote and voting on the resolution.
As each resolution is tabled, a slide will show the results with the proxy votes on the screen. I'll now pause and see if there are any questions relating to the procedures of the meeting.
No. No questions.
Very good. We'll now move to the business of the meeting. To receive and consider the financial report, the Directors' Report, and the independent Auditor's Report of the company for the financial year ended 30 June 2020. A copy of the Annual Report was made available on the company's website, the ASX platform, and was sent to those shareholders who requested it. I will take the reports as read. In advance of the meeting, we did receive some questions from one shareholder, which I will now address as follows. Question one. Remuneration Report, page 22 of the Annual Report. Could you clarify if the table is statutory pay, or is this actual pay? Share-based Payments, LTI. Is this actual received or cost to the company?
In accordance with AASB 2, the value of the share-based payments included in the table is based on the fair value of the long-term incentive at grant date, which is then expensed over the service period of the grant, lately three years. It does not represent the actual amount received by the KMP, as this amount will differ based on the share price when the incentive vests at the end of the service period and is issued as shares. Question two. Note four, operating segment on page 45 of the annual report. The top 10 companies represent approximately 43% of revenue. Largest company is 11%. Please explain if this is one contract, i.e. per company or multiple contracts. How comfortable does the company feel given the large percentage by 10 only? Is this a subscription type cloud-based service or one-off payments? How well are debts collected?
The concentration of revenue in part reflects the nature of the industry, with a small number of manufacturers generating the majority of sales of AV equipment. Over time, as there is more broad spread adoption of the technology and a larger number of Dante products available, we expect this concentration will decrease. We bill customers based on the receipt of their purchase orders. Larger repeat customers are on credit terms, but if significantly in arrears, we can withhold supply, which is an effective lever given our technology is a critical manufacturing input. Smaller or newer customers are required to pre-pay. Overall, our debtors days around 30 days with very little experience of bad debts. At this point, Audinate does not offer any cloud-based services. Question three. Key audit matters on page 71 of the annual report. Capitalized development costs are approximately AUD 10.5 million.
Are development costs ongoing? What sort of annual costs are predicted? Capitalized costs represent the internal and external costs associated with developing new Audinate products for our customers, which we then expense as amortization over a three-year period. As we continue to build out our product suite and services, we expect to continue to invest in these activities. Further information on how this amount has trended over time is set out on page 12 of the FY 2020 investor presentation, which was lodged with the ASX on the 20th of August. I'll now just check whether there are any other questions received in respect of the financial report.
Very good. We will now move to the resolutions for voting. The first resolution is to consider, and if thought fit, pass the following as an ordinary resolution of the company to reelect Mr. David Krall as director. Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. The directors, with Mr. Krall abstaining, unanimously recommend shareholders vote in favor of this resolution. The resolution is set out on the screen. If there are any questions, please click on the Ask Question button, type your question, and click Submit.
Given that we have no questions on this resolution, I will now put to the meeting Resolution 1, and here are the proxies. Please now select either for, against, or abstain for Resolution 1 on the voting card. I will pause and give shareholders the opportunity to vote if they have not already done so earlier. The second resolution is to consider, and if thought fit, pass the following as an ordinary resolution of the company, to re-elect Mr. Roger Price as a director. Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. The directors, with Mr. Price abstaining, unanimously recommend shareholders vote in favor of this resolution. The resolution is set out on the screen. If there are any questions, please click on the Ask Question button, type your question, and click Submit.
No questions.
Given we have no questions and no further discussion, I will now put to the meeting Resolution 2, and here are the proxies. Please now select either for, against, or abstain for Resolution 2 on the voting card, as I once again briefly pause to give shareholders the opportunity to vote. The next resolution of the meeting is regarding the Audinate Remuneration Report. Under the Corporations Act, listed companies are required to include the remuneration report within the directors' report. The 2020 Remuneration Report is available on the company's website and was posted to shareholders on request. I will take the remuneration report as read. Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. This vote is advisory only and is not binding on the company.
I would like to advise shareholders that Audinate Group Limited will disregard any votes, as stated in the voting exclusion statement related to Resolution 3, as set out in the notice of meeting. In the interest of governance, the board does not make a recommendation to shareholders in relation to this resolution. The resolution is set out on the screen. If there are any questions, click the Ask Question button, type your question, and submit.
No questions.
As we have no questions, I will now put to the meeting Resolution 3, and here are the proxies. Please now select either for, against, or abstain for Resolution 3 on the voting card as I once again briefly pause. The fourth resolution is the approval to issue securities under the long-term incentive plan. Approval of Resolution 4 will mean that any issue of securitie s under the long-term incentive plan during the three-year period after the AGM will not use up any of Audinate's 15% capacity to issue equity securities without shareholder approval under ASX Listing Rule 7.1. However, notwithstanding this exception, an issue of equity securities under the plan to directors or their associates will require shareholder approval under Listing Rule 10.14, as such persons are deemed related parties of the company.
If shareholders do not approve Resolution 4, the issue of securities under the plan will be included in calculating Audinate's 15% capacity under ASX Listing Rule 7.1, effectively decreasing the number of equity securities the company can issue without shareholder approval over the 12-month period following the issue of securities. Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. I would like to advise shareholders that Audinate Group Limited will disregard any votes, as stated in the voting exclusion statement related to Resolution 4, as set out in the notice of meeting. The directors unanimously recommend shareholders vote in favor of this resolution. The resolution is set out on the screens. Are there any questions?
No questions.
In which case, I will now put to the meeting Resolution 4, and here are the proxies. Please now select either for, against, or abstain for Resolution 4 on the voting card, as I once again briefly pause. The next item of business is the approval of the issue of performance rights to the CEO, Mr. Aidan Williams. Details of Mr. Williams' remuneration package as CEO and the basis upon which the remuneration was determined are set out in the remuneration report, which can be found in the company's annual report. The directors consider that the proposed issue of performance rights is an integral part of effectively rewarding and incentivizing executive management in a manner that aligns the interests of management with shareholders, and is a key component of an appropriately structured remuneration package for Mr. Williams.
Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. The directors, with Mr. Williams abstaining, unanimously recommend shareholders vote in favor of this resolution. I would like to advise shareholders that Audinate Group Limited will disregard any votes as stated in the voting exclusion statement related to Resolution 5A as set out in the notice of meeting. The resolution is once again set out on the screen. Are there any questions?
No questions.
In which case I will now put to the meeting Resolution 5A, and here are the proxies. Please now select either for, against, or abstain for Resolution 5A on the voting card, as I once again briefly pause. The next resolution relates to the accelerated pro rata vesting of Mr. Williams' 2020 LTI award in limited circumstances in the event that Mr. Williams ceases to be employed by the company as specified in the terms of the award. These circumstances include retirement, redundancy, death, or permanent incapacity. Resolution 5B is conditional on shareholder approval of Resolution 5A being obtained. Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting. The directors, with Mr. Williams abstaining, unanimously recommend shareholders vote in favor of this resolution.
I would like to advise shareholders that Audinate Group Limited will disregard any votes as stated in the voting exclusion statement related to Resolution 5B, as set out in the notice of meeting. The resolution is set out on the screen. If there are any questions, please click on the Ask Question button, type your question, and click Submit.
No questions.
In which case I will now put to the meeting Resolution 5B. Here are the proxies. Please now select either for, against, or abstain for Resolution 5B on the voting card. Once again, there will be a brief pause. The final resolution for our meeting today relates to the ratification of the issue of shares on the 28th of July 2020, following the successful completion of a placement to sophisticated and professional investors, as announced to the market on 22nd of July 2020. The rationale and background to this proposed approval were set out in the notice of meeting. The company has no plans at present to raise further capital. This approval gives the board more flexibility should the need arise. Further details about the resolution are also contained in the explanatory memorandum that accompanied the notice of meeting.
The directors unanimously recommend shareholders vote in favor of this resolution. I would like to advise shareholders that Audinate Group Limited will disregard any votes as stated in the voting exclusion statement related to Resolution 6, as set out in the notice of meeting. The resolution is once again set out on the screen. Are there any questions?
Yes. We have received a question. The question is: Please explain why the company did not afford all shareholders an opportunity to participate in the issue of shares at a 5% discount to VWAP. This share issue resulted in dilution for all shareholders who were not invited to participate in the placement.
At which point, I think it's appropriate to direct this question to the chair.
Oh, he's asking. Go ahead.
Oh.
Sorry, Rob. I was on mute. Rob, did you feel like you could address that question?
Yeah. David, all shareholders were either afforded the opportunity to participate in the placement, and those that weren't able to participate in the placement were able to participate in the share purchase plan, and buy up to AUD 30,000 worth of shares, actually on favorable pricing, which was less than what shareholder who participated in the placement received. All shareholders were able to actually purchase shares on favorable terms. As it turns out, retail shareholders who participated in the share purchase plan received them on a more favorable basis than people who had participated in the original placement.
We also have a comment. "Thanks for the capital raise for retail, but pity about the scale back." There's no other questions in relation to this resolution.
Thank you for that. I guess, in a sense, I would like to apologize for the scale back. In another respect, we're grateful for the level of support and interest that we're receiving.
Indeed. Yeah.
If there are no further questions, I will now put to the meeting Resolution 6, and here are the proxies. Once again, now please select either for, against, or abstain for Resolution 6 on the voting card as of right now, and there'll be a brief moment. Ladies and gentlemen, that concludes our discussion on the items of business. In a couple of minutes, the voting system will be closed. Please ensure that you have cast your vote on all resolutions. The voting card remains editable until voting is closed. Once voting has been closed, all voting cards will automatically be submitted and cannot be changed.
Shareholders are reminded that they can submit their vote online until five minutes after the meeting closes, at which point, as we outlined at the beginning of the meeting, we will now take some time to respond to any other questions which have been raised through the platform.
Can we move on?
We have had a question. "Any further knowledge of or comment on digital speakers?
Digital speakers. I guess that's quite a potentially broad area. I think maybe I could address it in the following way. Loudspeakers are an integral part of AV systems. They're one of the most numerous components in AV systems, and they're also very cost sensitive. I think there's been a number of innovations in that area that are driving individual loudspeakers to be more digital over time. I think they're riding a technology cost curve down. From an Audinate perspective, that's one of those areas where if we can provide innovation in what we do, then we should be able to also ride that cost curve down with respect to implementing networking into a wider variety of our cost-effective speakers.
It's an area that we have R&D interest in, which is how do we continue to reduce the marginal cost of adding Dante to a given set of products. Initially, that's things like amplifiers. The further you go out, as speakers become more digital over time and have things like amplifiers built into them, then it's natural to extend our technology into those digital speakers as well.
We have another question. "Please explain the derecognition of tax losses.
I think I might refer that one to Rob.
Thanks. Yeah, certainly. The FY 2020 result did include the derecognition of tax losses that the business had generated over time. In part, the structure of our activities means that we do receive a very large deduction for R&D incentives. As a result, that means that as a group, we're not yet in the position of being at tax payable. With the impacts of COVID-19 and the general level of uncertainty about the next couple of years, we did derecognize those tax losses, such that they are no longer an asset on the balance sheet, and that had the impact of a large expense in the income tax payable line of the income statement. It doesn't mean that we lose the benefit of those tax losses.
At the point at which there is additional certainty about our ability to use them in the medium term, be that sort of three to five years, we are able to re-recognize them as an asset, at which time there is a benefit which is recognized through the income statement. It is a relatively, I guess, conventional thing that businesses do around considering the recognition and derecognition of tax losses. I think the final thing to conclude on in rounding out an answer is that neither the expense in derecognizing them nor the benefit that we receive in re-recognizing them at some point in the future will impact on any of the remuneration of the executive team or staff.
The next question: "Is the number of products a reasonable proxy for market penetration?
Yeah. I think that's an interesting question. I think it is a proxy. It's not a perfect proxy in that some products are much more popular than others. In terms of market penetration or the overall usage of networking technology, it can be the case that prominent brands with popular products end up influencing the total adoption of our networking technology perhaps disproportionately from the total number of available products that are on the market. I think it's useful as a proxy. I would call it more of a leading indicator.
Obviously, those products need to be on the market in order for there to be penetration, and they also need to be on the market in order for us to generate repeat revenue associated with them. I think it's not a perfect proxy, but it is a good proxy, and certainly one that we watch quite closely over time.
We've received a comment, "Please, in future, show percentages of the pre-cast vote when you show them. For example, 80%, 10%, et cetera. Thank you.
Yep, that's fine. We can take that on board. It's sort of a new world for all of us, but happy to make that change for next year.
Yeah.
A final question, "Please explain the scale back.
Yeah. I think.
Which? The retail scale back?
Yes.
Yes.
I imagine it would be the retail scale back. That's fine. I think, once again, that's one for me.
Maybe touch on the logic of how we got to the cap and the reach of the scale back to what proportion of shareholders.
Yeah, sure. A couple of things around what we did with the share purchase plan. One of the things to bear in mind is that the proportion of the raise, which was put through the SPP, was a lot higher this time. We did respond to very overwhelming level of interest that we received the first time. Retail shareholders should note that the proportion that we raised through the SPP was a lot higher proportion of the total raise than it was the first time. That was in recognition of the strong support that we received. In relation to the scale back, the way in which we did that differs to some other companies. There are two conventions which are applied around a scale back.
One is as a percentage of the bid, or alternatively, as we did, as a percentage of the individual shareholding. Effectively, what we did is we looked at the level of overall support and the amount of what that was as a percentage of the money that we wanted to raise. Effectively, what that meant is that shareholders with a larger shareholding received a higher proportion or a higher percentage of their bid. That is different to the way some other companies do it. Our view is that shareholders with shareholdings should be recognized and receive a benefit. It is a more equitable way of dealing with the scale back than simply scaling back someone who might own 100 shares and ask for AUD 30,000 and end up giving them the same as someone who owns 100,000 shares, giving them the same proportion.
Our view is that the approach taken is more equitable.
Okay. A further comment was received in relation to the scale back, noting that the first scale back was significantly higher than the second.
Yes, that's correct.
What you're saying.
Yes. I think it was certainly on our minds for the latest capital raise that we tried to and set out to provide a larger allocation to retail shareholders. It was a conscious choice to do that.
Okay. Another question, "Does the company intend to bring manufacturing onshore in light of the current economic situation in Australia?
Yeah. We have no plans to onshore electronic . The vast majority of our engineering takes place here in Sydney, Australia. A lot of our employment and engineers are based here in Sydney. Contract manufacturing is in two locations. One is in mainland China and the other is in Malaysia. This has enabled us to get some redundancy. It enables us to have supply chain confidence in that we've got two locations that are manufacturing. Also, the Malaysian option has provided us with the ability to ship goods from Malaysia to the U.S. and not have them subject to import tariffs from mainland China. We do have supply chain redundancy because of standing up that second manufacturing in Malaysia. We do not, at this time, have plans to provide contract manufacturing in Australia.
I think, if that was economic and we had somebody providing contract manufacturing services here in Australia, we would absolutely consider it. We have no plans ourselves to be a contract manufacturer. Thank you, everyone, for all of the interest in Audinate. In the interest of time, I think we need to conclude question time at this point. I would now like to hand back to our chair, David Krall, to conclude the meeting.
Thank you, Rob. Thanks, Rob and Aidan, for responding to the questions from our shareholders. On behalf of the board of Audinate, I'd like to thank all of our shareholders for your support. I now declare the meeting closed. The results of the poll will be announced to the ASX later today. Thank you for your attendance and participation in our meeting today.