In a blow to the Australian tech industry, audio tech company Nuheara (ASX: NUH) has entered voluntary administration after failing to renegotiate its debt obligations. 

This decision comes after a protracted strategic review aimed at rescuing the Company, which has ultimately failed. The primary issue revolves around a $2.5 million convertible note held by Realtek Semiconductor Corporation, which is due to mature on September 7, 2024. Despite extensive negotiations, Nuheara was unable to secure a satisfactory commercial agreement with Realtek, leading to its current predicament.

Nuheara’s struggle to renegotiate its debt obligations has been compounded by its inability to finalise a Commercial and Royalty Agreement with Realtek, as outlined in a Memorandum of Understanding that was signed in May 2022. 

Realtek is best known as one of the world’s largest semiconductor companies which designs, tests, and distributes integrated circuits which are used in consumer electronics, computer systems and peripherals, and communication network hardware. Its $11 billion market cap makes Nuheara’s pale in comparison, standing at $20 million prior to their trading halt in February 2024 with shareholders having not been able to exit their investments since. 

Nuheara’s strategic review, announced in April 2024, was intended to pivot the Company’s business strategy. This included a reduction in new production and marketing expenditure to focus on developing new technologies in collaboration with Realtek and completing the next generation of the HP Hearing PRO product. As part of this restructuring, Nuheara reviewed its resource allocation and overall costs.

Despite these measures, the Company’s financial health continued to deteriorate. A recent media release in May detailed Nuheara’s efforts to streamline resources, including a temporary 60% reduction in the CEO Justin Miller’s salary and a capital raising effort that garnered $1.85 million from shareholders. These funds were intended to support the ongoing strategic review.

However, NUH shares have been in a trading suspension pending the lodgement of its half-yearly financial statements which still haven’t been lodged. It means the last set of audited financial statements published by Nuheara were for FY23 when the Company reported $1.9 million revenue, however its cost of those goods sold was $2.9 million. That was just the tip of an iceberg for the troubled audio tech company which ultimately logged a $12.6 million net loss after tax. 

Nuheara, founded in 2015, initially made waves in the tech world with its innovative hearing solutions. The company’s flagship product, the IQbuds, gained significant traction due to its unique features, including intelligent hearing and noise control capabilities. These wireless earbuds allowed users to blend their digital audio with the sounds of the world around them, providing a customised auditory experience.

Nuheara continued to innovate with products such as the IQbuds BOOST, designed specifically for those with mild to moderate hearing loss. This product garnered FDA approval as an over-the-counter hearing aid, further solidifying Nuheara’s position in the market. The HP Hearing PRO, a product developed in collaboration with Hewlett-Packard, marked another significant milestone, particularly with its substantial retail footprint in the US, including distribution in Walmart stores.

The appointment of administrators (KPMG) marks a pivotal moment for Nuheara. The administrators will now work to assess the Company’s financial situation and explore potential outcomes, including restructuring, asset sales, or finding a buyer. The immediate focus will be on securing the Commercial and Royalty Agreement with Realtek, which remains a critical component of the strategic review.