Delta Drone International Limited
ABN 17 618 678 701
ANNUAL REPORT FOR THE YEAR ENDED
31 DECEMBER 2020
CONTENTS
Corporate Directory(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)
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Chairman(cid:146)s Letter(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)..(cid:133)(cid:133)(cid:133)(cid:133)
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CEO(cid:146)s Letter(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)...(cid:133)(cid:133)(cid:133)(cid:133) 3
Directors(cid:146) Report(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)..(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).
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Auditor(cid:146)s Independence Declaration(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).. 17
Consolidated Statement of Profit or Loss and Other Comprehensive income(cid:133)(cid:133).(cid:133)(cid:133)(cid:133)(cid:133) 18
Consolidated Statement of Financial Position(cid:133)(cid:133)..(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).
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Consolidated Statement of Changes in Equity(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)..(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)..(cid:133)..(cid:133) 20
Consolidated Statement of Cash Flows(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)..(cid:133)(cid:133). 21
Notes to the consolidated financial statements.(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133)..(cid:133)(cid:133).. 22
Directors(cid:146) Declaration(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)..(cid:133) 54
Independent Auditor(cid:146)s Report(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133) 55
ASX Additional Information(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133)(cid:133).(cid:133)(cid:133).(cid:133) 59
CORPORATE DIRECTORY
Directors
B. Gen (ret.) Eden Attias
Executive Chairman
Mr Christopher Clark
Chief Executive Officer
Mr Dan Arazi
Non-Executive Director
Mr Stephen Gorenstein
Non-Executive Director
Mr Chris Singleton
Non-Executive Director
Company Secretary
Mr Stephen Buckley
Registered Office (Australia)
Level 27, 101 Collins Street
Melbourne VIC 3000
Email: contact@dlti.com.au
Web: www.dlti.com.au
Auditors
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
Legal Advisers (Australia)
Arnold Bloch Leibler
Level 21
333 Collins Street
Melbourne VIC 3000
Share Registry
Automic Registry Services
Level 2, 267 St Georges Terrace
Perth WA 6000
Legal Advisers (Israel)
Legal Advisers (South Africa)
Shibolet
Museum Tower
4 Berkowitz Street
Rodl & Partner
1 Eastgate Lane
Bedfordview
Tel Aviv Israel 6423806
South Africa 2007
Tel: 1300 288 664 (Within Australia) | +61 2 9698 5414 (Outside Australia)
Fax: +61 8 9321 2337
Email: hello@automic.com.au
Web: www.automic.com.au
Securities Exchange Listing
ASX Limited
Level 40, Central Park
152-158 St Georges Terrace
Perth WA 6005
ASX Code
DLT (formerly PRZ)
1
CHAIRMAN’S LETTER
Dear Shareholders
On behalf of the Board of Directors, I am honoured to present the FY20 Annual Report for Delta Drone International (ASX:
DLT).
This year was transformational. The COVID-19 pandemic continues to test economies, businesses, and communities globally
and alters the way the world operates. It is forcing companies to re-evaluate how they do things, and is fast-tracking the
acceptance of the efficiencies that commercial drone use provides - which positions Delta Drone International for growth.
While the world transforms towards a new way of working, transformation is also a key theme across all touchpoints of our
business. Despite the pandemic, we seized the opportunity to combine two world-leading, yet complementary, drone
industry companies to provide fully outsourced drone services to large and fast-growing target markets.
After strong support for the capital raise from domestic and international investors, Delta Drone International recommenced
trading on the ASX on 31 December 2020 after raising $5 million.
Our newly formed entity is using the funds raised to develop a truly international drone services company by expanding our
operations into Australia to service the vast enterprise mining and agriculture sectors, along with growing our operations
throughout Africa. We will continue to focus on our research and development capabilities through our state-of-the-art R&D
and integration centre and our dedicated team of R&D experts.
With full support from the Board of Directors, former CEO of Delta Drone South Africa, Christopher Clark is leading Delta
Drone International through its growth trajectory as Chief Executive Officer.
Chris has an extensive track record of strategically driving innovation and profit in the technology sector with a wealth of
knowledge of the global drone industry. He and his family have now relocated to Australia to support the organisation’s
Australian operations and place Delta Drone International on an accelerated revenue path in the region.
This year, we experienced a growing adoption of drone technology and an appetite for Delta Drone International’s fully
outsourced services. With our renewed focus on Australia, we are well placed to continue to execute our growth strategy.
On behalf of the Board, thank you for your support throughout 2020. As the world embarks on a new journey towards urban
drone operations, I look forward to updating you on the role Delta Drone International plays in revolutionising the way mining
and agriculture companies conduct complex aerial data capture and embrace drone technology across other aspects of their
sector, and in turn deliver strong results for our shareholders.
Eden Attias
Executive Chairman
2
CEO’S LETTER
To our Stakeholders,
As we continue to navigate the global challenges of 2021, it is my pleasure to share with you Delta Drone International’s
achievements and key milestones for 2020.
Delta Drone International remains one of the largest ‘drones-as-a-service’ operators in Africa; servicing the world’s leading
enterprise mining and agriculture companies.
This year we strengthened our market position by expanding into new territories and new verticals of the business; solidifying
our now truly global operations.
The strategic merger of two industry-leading drone companies - Delta Drone South Africa and ParaZero – has us well placed
to enter the Australian market and bring our unique suite of problem-solving solutions to even more international customers.
This, with the continued support of our management team of drone and business professionals; drawn from industries across
the globe and experts in their own right.
Despite COVID-19, Delta Drone International generated $3.4 million in revenue, driven by consistent annuity income from
large-scale mining customers. We have a strengthened balance sheet from the capital raise as part of the Company’s re-
listing, with $5.2 million of cash in the bank, which enables us to execute our growth plans and capitalise on the adoption of
drones in commercial settings.
At an operational level we celebrated multiple achievements throughout the year, including new customer contract wins,
OEM integrations and the continuous development of next- generation technologies.
Our ParaZero patented autonomous parachute technology, SafeAir, remains the industry leader in flight safety systems;
meeting all key metrics used by civil aviation authorities to determine if a drone can fly safely over people. By installing Delta
Drone International’s SafeAir system, 117 waivers were granted by civil aviation authorities around the world for businesses
to legally fly drones over people, including the New York Times. We take great pride in this milestone as this is the largest
number of waivers obtained by any business globally and is a testament to our research and development team’s dedication
to safety and compliance.
In December 2020, The U.S Department of Transportation -– Federal Aviation Administration (FAA) announced stricter
protocols for obtaining ‘Operations Over People Waivers’ with Delta Drone International one of few companies still with
compliant safety systems. This leaves us well placed to take advantage of the demand for systems that meet these new, and
stricter, safety standards.
Post the financial year end, we are seeing significant demand for our services and expertise including:
•
•
•
•
Becoming the first organisation to provide specialised Remote Pilot License (RPL) drone courses in Africa in
conjunction with the University of Pretoria;
Expanding our operations into Zambia to deliver a specialised agricultural project for leading multinational
agriculture services company, Syngenta;
Signing a significant OEM integration deal with Fortune 500 company, Doosan, and;
Expanding our services remit by providing aerial security services for a large mining customer in Africa.
Looking ahead, I am excited to embark on my new journey in Australia to provide our unique ‘drones-as-a-service’ model to
enterprise mining and agriculture businesses, as well as connecting with like-minded drone companies. We are already in
extensive discussions with several businesses – a positive sign for fast growth in the new region.
3
I would like to thank all our valued stakeholders for their support in 2020 including:
o Delta Drone Group (France) for its support and vision in making our merger possible - as we build out a
global drone business;
o Our staff and contractors – it is an honour to work with such loyal and tenacious colleagues, who together
believe in the long-term vision of this business and the exciting opportunities ahead.
And lastly, I would like to thank you, our shareholders, for joining our organisation through its next stage of growth. I am
confident our strong business offering combined with a wider social acceptance of drone technology will ensure our company
stays relevant and profitable into the future and delivers strong results for years to come.
Christopher Clark
Chief Executive Officer
4
DELTA DRONE INTERNATONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
DIRECTORS(cid:146) REPORT
Your Directors present their report, together with the financial statements of Delta Drone International Limited ((cid:147)the
Company(cid:148) or (cid:147)Delta Drone(cid:148)) (ASX: DLT) and its controlled entities ((cid:147)the Group(cid:148)) for the financial year ended 31 December
2020.
Directors
The names and the particulars of the Directors of the Company during or since the end of the financial year are:
Name
B. Gen (ret.) Eden Attias
Mr Christopher Clark
Mr Dan Arazi
Mr Stephen Gorenstein
Title
Executive Chairman
Appointed
13 June 2018
Chief Executive Officer
3 December 2020
Non-Executive Director
13 June 2018
Non-Executive Director
17 October 2018
Mr Chris Singleton
Non-Executive Director
1 January 2019
Principal Activities
Delta Drone is a multi-national drone-based data service and technology solutions provider for the mining, agricultural and
engineering industries. It provides aerial surveying and mapping, security and surveillance and blast monitoring and fragment
analysis through a fully-outsourced service with AI and fast data turnaround that allows enterprise customers to focus on
operations on the ground while the Delta Drone takes care of everything in the air, including compliance and maintenance.
Delta Drone has in-house enabling proprietary technology, an R&D and integration centre and specialist expertise in
designing, developing and providing best-in-class autonomous safety systems for commercial drones used for drone
deliveries, drone flights for crowd monitoring in urban areas as well as (cid:145)beyond visual line of sight(cid:146) (BVLOS) missions.
While the COVID-19 pandemic did have an impact on the business, the overall business remained resilient due to long-term
annuity contracts with mining customers, considered essential to national economies.
Dividends
There were no dividends paid or recommended during the financial year ended 31 December 2020 (2019: nil).
Operating and financial review
Unless otherwise stated, all figures in this report are in the Company(cid:146)s presentation currency, the Australian Dollar ((cid:147)$(cid:148)).
During the year ended 31 December 2020, Delta Drone International Limited incurred a loss of $115,391 (2019: profit of
$157,429). The Company had net assets of $11,466,885 (2019: net liabilities of $616,161) and cash and cash equivalents of
$5,182,923 (2019: $784,604). The 2019 comparative figures represent results of Delta Drone South Africa (Pty) Ltd and its
wholly owned subsidiaries.
Significant changes in the state of affairs
Acquisition of Delta Drone South Africa (Pty) Ltd
On 3 December 2020, shareholders of Delta Drone International Limited (formerly ParaZero Limited) approved the acquisition
of Delta Drone South Africa (Pty) Ltd ((cid:147)DDSA(cid:148)) from Delta Drone SA (a public company incorporated in France) pursuant to
which the Company acquired 100% of the issued capital in DDSA ((cid:147)Transaction(cid:148)). The Transaction, which became effective
on 22 December 2020 has been accounted for as a reverse acquisition under the accounting standards. DDSA is identified as
the accounting acquirer (legal acquiree) and Delta Drone International Limited is the accounting acquiree (legal acquirer). As
such, the consolidated financial statements will be issued under the name of DLT but described in the notes as a continuation
of the financial statements of DDSA.
5
DELTA DRONE INTERNATONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
The terms of the Transaction were as follows:
The issue of 203,512,750 shares to Delta Drone SA to acquire 100% of the issued capital of DDSA.
The issue of 45,000,000 Performance Shares to Delta Drone SA which will convert to new shares according to the
following milestones:
o Class A: 20,000,000 Class A Performance Shares with each Class A Performance Share entitling Delta
Drone SA to subscribe for one fully paid ordinary share in the capital of the Company if DDSA achieves
consolidated revenue (for the avoidance of doubt, only DDSA and excluding the Company) for any full
financial year (being 1 January to 31 December) during the three-year term of the Class A Performance
Share of not less than US$3.2 million ((cid:147)First Performance Milestone(cid:148));
o Class B: 15,000,000 Class B Performance Shares with each Class B Performance Share entitling Delta
Drone SA to subscribe for one fully paid ordinary share in the capital of the Company if DDSA enters into
at least two binding contracts with Australian based mining companies (being companies that conduct
mining, exploration or extraction services) for the provision of drone survey or mapping solutions services
to those mining companies in Australia ((cid:147)Services(cid:148)) and DDSA receives not less than US$1,000,000 (based
on audited accounts) of verified revenue in aggregate from such executed contracts received within the
three-year term of the Performance Shares for its Services ((cid:147)Second Performance Milestone(cid:148)); and
o Class C: 10,000,000 Class C Performance Shares with each Class C Performance Share entitling Delta
Drone SA to subscribe for one fully paid ordinary share in the capital of the Company if during the three
year term of the Class C Performance Shares, the Company announces to the ASX that DDSA has
expanded the services of its business offering (being the provision of drone survey and mapping solutions)
into a new geographic location outside of Australia, Israel, South Africa, Ghana and Namibia and achieved
a revenue in that new geographic location of not less than US$1,000,000 ((cid:147)Third Performance
Milestone(cid:148)).
If a Performance Milestone is not satisfied within three years of the date of issue of the Performance Shares, then the relevant
Performance Shares will automatically lapse.
Broker Shares: 6,000,000 fully paid ordinary shares to Cukierman & Co Investment House Ltd for having introduced
the Company and DDSA to one another ((cid:147)Broker Shares(cid:148)). The deemed issue price per share is A$0.04 with an
implied value of A$240,000.
Further information on the Transaction is detailed in Notes 2 and 4 of the financial statements.
Capital raising
The Company raised $5,000,000 (before transaction costs) pursuant to a Prospectus via an offer of 125,000,000 fully paid
ordinary shares at an issue price of $0.04 per share.
Board changes
Following the acquisition of DDSA, Mr Christopher Clark was appointed as Chief Executive Officer and Mr Eden Attias reverted
to Executive Chairman. Messrs Dan Arazi, Stephen Gorenstein and Chris Singleton continued their role as Non-Executive
Directors.
New ASX Ticker Code
The Company changed its ASX Ticker Code to DLT (formerly PRZ).
6
DELTA DRONE INTERNATONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
Information on Directors
B. Gen (ret.) Eden Attias Executive Chairman
Qualifications
Bachelor of Arts in Computer Science, Master of Arts in Public Administration
Experience
Brigadier General (ret.) Attias was nominated as Israel(cid:146)s first Ministry of Defense attachØ to Ottawa,
Canada. He has a distinguished military resume, having served in Israeli(cid:146)s Air Force as a pilot and as
a leader in numerous positions for over 30 years, achieving the rank of Brigadier General.
Interest in Shares and
Options at the date of
this report
559,717 Ordinary Shares,
37,106 unlisted options expiring 24 June 2024 exercisable at $0.1125
5,598,837 Options expiring 13 June 2023 exercisable at $0.0027
Directorships held in
other listed entities (last
3 years)
None
Mr Christopher Clark
Chief Executive Officer (cid:150) appointed 3 December 2020
Qualifications
Bachelor of Accounting, Master of Business Administration
Experience
Mr Clark has been involved in the mining services sector for over 10 years in South Africa, beginning
with technology and communication projects for mining giant Anglo American. Mr Clark has
spearheaded the development of the DDSA business across Africa, including Ghana and Namibia,
and has set up new business verticals in agriculture and executive training.
Interest in Shares and
Options at the date of
this report
Nil
Directorships held in
other listed entities (last
3 years)
None
Mr Dan Arazi
Non-Executive Director
Qualifications
Bachelor of Economics and History
Experience
Mr Arazi is a serial entrepreneur and has been involved in a number of start-ups in Israel, most
particularly in the telecom and internet space. He was a leading film producer in Israel and has been
a member of the Board of Israeli Film Council. He is currently the Chairman of the Israel AeroClub
Gliding Association and the President of the Keiretsu Forum, the Israeli Chapter of the 100+ Angels
Club. Mr Arazi is also a co-founder and executive at Orckit Communications (NASDAQ: ORCT).
Interest in Shares
and Options at the
date of this report
Directorships held in
other listed entities
(last 3 years)
359,800 Ordinary shares
25,956 unlisted options expiring 24 June 2024 exercisable at $0.1125
None
7
Mr Stephen
Gorenstein
Qualifications
Experience
DELTA DRONE INTERNATONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
Non-Executive Director
BSc (Hons) Geology and Geophysics, Masters in Accounting and Finance
Mr Gorenstein has over 17 years(cid:146) experience in the capital markets including analyst roles at both
Goldman Sachs and Merrill Lynch. He was formerly the Regional Head of Asia Pacific Metals and
Mining at Bank of America Merrill Lynch. Mr Gorenstein has extensive networks in the Australian
capital markets and is active in cross border transactions particularly sourcing high-quality
technology companies from Israel looking to establish themselves in Australia. Mr Gorenstein is a
director of Jindalee Partners.
Interest in Shares
and Options
Directorships held in
other listed entities
(last 3 years)
400,000 Ordinary Shares
37,106 unlisted options expiring 24 June 2024 exercisable at $0.1125
White Rock Minerals Limited (ceased 1 February 2021)
Sky N Space Co Ltd
Mr Chris Singleton
Non-Executive Director
Qualifications
B.Ed. Industrial Arts
Mr Singleton has extensive international experience in Oil & Gas, Manufacturing, Technology,
Telecommunications and Service Industries. He is currently the Managing Director of Minaret Capital,
a provider of corporate advisory and growth strategies to Australian businesses. Mr Singleton has
held numerous directorship roles with public and private companies and has successfully founded
and sold business including: Votel, a service provider acquired by Vodafone, B Digital, that was funded
by Australian Capital Equity and eventually acquired by Soul Pattinson; Managing Director of Impress
Energy, acquired by Beach Petroleum and recruitment solutions, Total Staffing Solutions and
UltimateSkills, that were both acquired by Humanis Group.
200,000 Ordinary Shares
18,553 unlisted options expiring 24 June 2024 exercisable at $0.1125
Cycliq Group Limited (ceased 7 May 2019)
Experience
Interest in Shares
and Options (Held
at date of
resignation)
Directorships held
in other listed
entities (last 3
years)
Information on Company Secretary
Mr Stephen Buckley Company Secretary
Qualifications
Experience
GAICD
Mr Buckley has over 39 years(cid:146) experience in financial markets and is a director of Governance
Corporate Pty Ltd, a company specialising in providing company secretarial, corporate governance and
corporate advisory services. In the 20 years prior to starting his own business, Mr Buckley has held
executive and senior leadership roles in partnership management and business development.
8
DELTA DRONE INTERNATONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
Meetings of Directors
The following table sets out the number of directors(cid:146) meetings held during the financial year and the number of meetings
attended by each director. During the financial year, 16 board meetings were held.
Eden Attias
Christopher Clark (i)
Dan Arazi
Stephen Gorenstein
Chris Singleton
(i) Appointed on 3 December 2020
DIRECTORS(cid:146) MEETINGS
Held
Attended
16
1
16
16
16
16
1
15
14
15
Options
At the date of this report, the number of Options on issue are as follows:
Expiry Date
13 June 2023
13 June 2021
17 April 2024
24 June 2024
Issue Date
13 June 2018
13 June 2018
17 April 2019
24 June 2019
5 November 2024
5 November 2019
Exercise Price
A$0.0027
A$0.30
A$0.1125
A$0.1125
A$0.09
Number of Options
7,590,418i
4,000,000ii
955,480iii
953,544iv
948,053v
14,447,495
i Replacement options to replace the options held by employees of ParaZero Israel under an employee option scheme adopted by
ParaZero Israel at a date prior to its entry into the Acquisition in the prior year.
ii Options issued to lead manager and seed investors.
iii Options issued pursuant to a Placement.
iv Options issued pursuant to a Placement.
v Options issued pursuant to a Placement.
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
There were no shares issued during the financial year as a result of exercise of an option. Subsequent to the end of the
financial year and on 10 February 2021, 579,201 shares were issued at $0.0027 per share on the exercise of options (2019:
nil).
Proceedings on Behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to
which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings.
The Company was not a party to any such proceedings during the year.
9
DELTA DRONE INTERNATONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
Indemnification and insurance of directors and officers
During the year, Delta Drone paid a premium to insure directors and officers of the Group. The liabilities insured are legal
costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity
as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such
proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the
improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause
detriment to the Group.
Details of the amount of the premium paid in respect of the insurance policies is not disclosed as such disclosure is prohibited
under the terms of the contract.
The Company has agreed, to the extent permitted by law, to indemnify each director and Company Secretary of the Company
against any and all reasonable liabilities incurred in respect of or arising out of any act in the course of their role as an officer
of the Company.
Environmental Regulations
In the normal course of business, there are no environmental regulations or requirements that the Company is subject to.
Likely Developments and Expected Results of Operations
The Group continues to be a drone-based data service and technology solutions provider for the mining, agricultural and
engineering industries. It provides aerial surveying and mapping, security and surveillance and blast monitoring and fragment
analysis through a fully-outsourced service and fast data turnaround that allows enterprise customers to focus on their
operations on the ground while DLT takes care of everything in the air, including compliance and maintenance.
Events after the reporting period
On 4 February 2021, the Company announced that it was to become the first organisation to provide specialised Remote Pilot
License (RPL/RePL) drone courses in Africa in conjunction with the University of Pretoria. First student intake is scheduled in
April 2021.
On 10 February 2021, 579,201 shares were issued as a result of the exercise of 579,201 unquoted options with an exercise
price of $0.0027. The shares are held by a Trustee under a holding lock provision for 12 months following their issue.
On 15 February 2021, the Company announced it had expanded operations into Zambia to deliver a specialised agricultural
project for leading multinational agriculture services company, Syngenta.
On 25 February 2021, the Company announced that it had signed a confidential security service contract with a multi-national
mining organisation for air surveillance at one of its African locations. Whilst the client and location could not be disclosed
for security reasons, the initial six-month contract (with option to renew) will generate $340,000 revenue to DLT(cid:146)s subsidiary,
Rocketmine, for providing unmanned aerial vehicle (UAV) surveillance services.
On 2 March 2021, the Company announced that it had signed its largest multinational OEM (original equipment
manufacturer) integration deal with industrial equipment world-leader, Doosan Mobility Innovation. The multi-phase project
to generate initial revenue in excess of $150,000 and will include R&D coordination, system architecture, design, ground
deployment testing, system finalisation and ASTM F3322-18 (American Society for Testing and Materials) testing and
certification.
On 10 March 2021, the Company issued 625,000 shares at a value of $0.031 per share to Pitt Street Research in lieu of a cash
payment for providing research services. The shares are being held under a voluntary escrow arrangement until 9 March 2022
and the securities have had a holding lock placed on them to restrict them from trading.
10
DELTA DRONE INTERNATONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
The impact of the coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact,
positive or negative, after the reporting period. The timing, extent of the impact and recovery from COVID-19 on our
employees, customers and suppliers is unknown at this stage. The full impact of COVID-19 outbreak continues to evolve as
at the date of this report. As such, the Group is unable to estimate the effects of the COVID-19 outbreak on the Group(cid:146)s
financial position, liquidity and operations in the 2021 financial year.
There were no other material events after the reporting period other than the above.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, BDO Audit (WA) Pty Ltd, as part of the
terms of its engagement agreement against claims by third parties arising from their report on the financial report. No
payment has been made to indemnify BDO Audit (WA) Pty Ltd during or since the end of the financial year.
Non-audit Services
During the year, BDO Audit (WA) Pty Ltd, the Company(cid:146)s auditor provided non-audit services of $60,600 in relation to the
Independent Limited Assurance Report for inclusion in the Company(cid:146)s Prospectus.
The directors are satisfied that the provision of non-audit services during the financial year by the auditor (or by another
person or firm on the auditor(cid:146)s behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services do not compromise the external auditor(cid:146)s independence requirements of
the Corporations Act 2001 for the following reasons:
All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor(cid:146)s own work, acting in a management or decision-making capacity for the
Company, acting as an advocate for the Company or jointly sharing economic risks and rewards.
Full details or the auditor(cid:146)s remuneration can be found within the financial statements at Note 9.
Corporate Governance
At Delta Drone International Limited, we aim to entrench good corporate governance practices throughout the entire
Company. This is the collective responsibility of the Board and all levels of management. At Delta Drone, we seek to apply
our policies and charters in a manner consistent with our Statement of Values. The Company(cid:146)s Corporate Governance
Statement can be found on the Company(cid:146)s website at www.dlti.com.au. The Corporate Governance Plan, incorporating the
charters and policies, was adopted by the Board on 4 February 2020 and is current as at the date of this report.
Auditor(cid:146)s Independence Declaration
The auditor(cid:146)s independence declaration for the year ended 31 December 2020 has been received and can be found on page
17 of the financial report.
11
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
Remuneration Report (Audited)
This remuneration report for the year ended 31 December 2020 outlines the remuneration arrangements of the Group in
accordance with the requirements of the Corporations Act 2001 (Cth), as amended (Act) and its regulations. This information
has been audited as required by section 308(3C) of the Act.
The remuneration report is presented under the following sections:
Introduction
1.
2. Remuneration governance
3. Executive remuneration arrangements
4. Non-executive director fee arrangements
5. Details of remuneration
6. Additional disclosures relating to equity instruments
7.
8. Other transactions and balances with KMP and their related parties
9. Voting of Shareholders at last year(cid:146)s annual general meeting
Loans to/from key management personnel (KMP) and their related parties
1.
Introduction
Key Management Personnel (KMP) have authority and responsibility for planning, directing and controlling the major
activities of the Group. KMP comprise the directors of the Company and identified key management personnel.
Compensation levels for KMP are competitively set to attract and retain appropriately qualified and experienced directors
and executives. The Board may seek independent advice on the appropriateness of compensation packages, given trends in
comparable companies both locally and internationally and the objectives of the Group(cid:146)s compensation strategy.
Key management personnel covered in this report are as follows:
Name
Eden Attias
Christopher Clark
Dan Arazi
Stephen Gorenstein
Chris Singleton
Title
Appointed
Executive Chairman (i)
13 June 2018
Chief Executive Officer
3 December 2020
Non-Executive Director
13 June 2018
Non-Executive Director
17 October 2018
Non-Executive Director
1 January 2019
(i) Mr Attias was Chief Executive Officer and Chairman from his appointment date till 3 December 2020. He reverted to Executive Chairman
position on 3 December 2020.
2. Remuneration governance
The Directors believe the Company is not currently of a size nor are its affairs of such complexity as to warrant the
establishment of a separate remuneration committee. Accordingly, all matters are considered by the full Board of Directors,
in accordance with a remuneration committee charter.
During the financial year ended 31 December 2020, the Company did not engage any remuneration consultants.
3. Executive remuneration arrangements
The compensation structures are designed to attract suitably qualified candidates, reward the achievement of strategic
objectives, and achieve the broader outcome of creation of value for shareholders. Compensation packages may include a
mix of fixed compensation, equity-based compensation, as well as employer contributions to superannuation funds. Shares
and options may only be issued subject to approval by shareholders in a general meeting.
12
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
At the date of this report the Company has two (2) appointed executives, Mr Eden Attias as Executive Chairman and
Christopher Clark as Chief Executive Officer. The terms of their Executive Services Agreement with Delta Drone are
summarised in the following table.
Executive Name
Eden Attias
Christopher Clark
Agreement summary
Executive salary of $225,000.
Reimbursement of reasonable business expenses incurred in the ordinary course of the business in
accordance with the Group(cid:146)s reimbursement policies.
The Agreement is terminable by either party on 90 days(cid:146) notice but may be terminated immediately
where either party commits a material breach of the Agreement, including for not performing the
services under the Agreement.
Effective 1 March 2021, a total remuneration package of $195,000 per annum including statutory
superannuation. During the financial year 2020, Mr Clark was employed in an executive position
with Delta Drone South Africa (Pty) Ltd. Mr Clark was paid a monthly base fee of R67,536 together
with monthly allowances of approximately R32,239 per month.
Participation in the Company(cid:146)s incentive programs.
Reimbursement of reasonable business expenses incurred in the ordinary course of the business in
accordance with the Group(cid:146)s reimbursement policies.
The Agreement may be terminated by either party giving four (4) months(cid:146) notice and the Agreement
may be terminated immediately if Mr Clark is engaged in conduct justifying summary dismissal.
Non-compete and non-solicitation restraints in place for up to six months following cessation of
employment.
At this stage the Board does not consider the Group(cid:146)s earnings or earnings-related measures to be an appropriate key
performance indicator (KPI). In considering the relationship between the Group(cid:146)s remuneration policy and the consequences
for the Company(cid:146)s shareholder wealth, changes in share price are analysed as well as measures such as successful completion
of business development and corporate activities.
Performance Conditions Linked to Remuneration
The Group maintains an Option Plan known as ParaZero Limited 2018 Employee Share Option Plan ((cid:147)Plan(cid:148)) to provide ongoing
incentives to Eligible Participants of the Company. Eligible Participants include:
a Director (whether executive or non-executive) of any Group Company;
a full or part time employee of any Group Company;
a casual employee or contractor of a Group Company; or
a prospective participant, being a person to whom the Offer was made but who can only accept the Offer if arrangement
has been entered into that will resulting in the person becoming an Eligible Participant.
The Board adopted the Plan to allow Eligible Participants to be granted Options to acquire shares in the Company.
The purpose of the Plan is to provide an incentive, in the employment or service or directorship of Delta Drone and its
subsidiaries, persons of training, experience and ability to attract new employees, directors or consultants whose services
are considered valuable, to encourage the sense of proprietorship of such persons and to stimulate the active interest of such
persons in the development and financial success of the Company by providing them with opportunities to purchase shares
in the Company. No Options were issued to executives under the Plan during the 2020 financial year (2019: nil).
4. Non-executive director fee arrangements
The Board policy is to remunerate non-executive directors at a level to comparable companies for time, commitment, and
responsibilities. Non-executive directors may receive performance related compensation. Directors(cid:146) fees cover all main Board
activities and membership of any committee. The Board has no established retirement or redundancy schemes in relation to
Non-executive directors.
The maximum aggregate amount of fees that can be paid to non-executive directors is presently limited to an aggregate of
$300,000 per annum and any change is subject to approval by shareholders at the General Meeting. Fees for non-executive
directors are not linked to the performance of the Company. However, to align directors(cid:146) interests with shareholder interests,
directors are encouraged to hold shares in the Company.
13
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
Total fees for non-executive directors for the financial year were $120,000 (2019: $132,347) and cover main Board activities
only. Non-executive directors may receive additional remuneration for other services provided to the Group. All non-
executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter
summarises the board policies and terms, including remuneration, relevant to the office of director.
5. Details of Remuneration
The Key Management Personnel of Delta Drone includes the current and former directors of the Company and Key
Management Personnel of Delta Drone during the year ended 31 December 2020.
31 December 2020
Directors:
E. Attias
C. Clark (ii)
D. Arazi
S. Gorenstein
C. Singleton
Total
Short term salary,
fees &
commissions
$
Post-
employment
retirement
benefits
$
Other
Share-based
payments (i)
Total
Performance
based
remuneration
$
$
$
192,021
82,538
40,000
40,000
40,000
394,559
-
770
-
-
-
-
37,526
-
-
-
770
37,526
-
-
-
-
-
-
192,021
120,834
40,000
40,000
40,000
432,855
-
-
-
-
-
-
(i) Share-based payment expense is recorded pro-rata over the vesting period. Refer to Section 6 Additional disclosures
relating to equity instruments for further information on share-based payments granted to directors and key management
during the year.
(ii) Appointed 3 December 2020. The remuneration for 31 December 2020 represents remuneration paid to Mr Clark for
the financial year 2020 whilst a director of Delta Drone South Africa (Pty) Ltd. Other remuneration includes pension, medical
and life insurances and other statutory employment benefits.
31 December 2019
Directors:
Eden Attias
Dan Arazi
Stephen Gorenstein
Charis Law (ii)
Chris Singleton
Total
Short term salary,
fees &
commissions
$
Post-
employment
retirement
benefits
$
Other
Share-based
payments (i)
Total
Performance
based
remuneration
$
$
$
263,216
25,680
40,000
26,667
40,000
395,563
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
263,216
25,680
40,000
26,667
40,000
395,563
-
-
-
-
-
-
(i) Share-based payment expense is recorded pro-rata over the vesting period. Refer to Section 6 Additional disclosures
relating to equity instruments for further information on share-based payments granted to directors and key management
during the year.
(ii) Ceased 1 September 2019.
14
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
6. Additional disclosures relating to equity instruments
KMP Shareholdings
The number of ordinary shares in Delta Drone held by each KMP of the Group during the financial year is as follows:
31 December 2020
Balance at start
of the year
Shares issued
during the year
Other changes
during the year
Balance at
end of the year
Directors:
Eden Attias
Christopher Clark (i)
Dan Arazi
Stephen Gorenstein
Chris Singleton
Total
559,717
-
359,800
400,000
200,000
1,519,517
(i) Appointed 3 December 2020.
KMP Options Holdings
-
-
-
-
-
-
-
-
-
-
-
-
559,717
-
359,800
400,000
200,000
1,519,517
The number of options over ordinary shares held by each KMP of the Group during the financial year is as follows:
31 December 2020
Directors:
Eden Attias
Chris Clark (ii)
Dan Arazi
Stephen Gorenstein
Chris Singleton
Total
Balance at
start of the
year
Issued
during the
year
Other
changes (i)
Balance at end
of the year
Vested and
exercisable
Unvested and
unexercisable
23,635,943
-
25,956
637,106
618,553
24,917,558
-
-
-
-
-
-
(18,000,000)
-
-
(600,000)
(600,000)
(19,200,000)
5,635,943
-
25,956
37,106
18,553
5,717,558
5,635,943
-
25,956
37,106
18,553
5,717,558
-
-
-
-
-
-
(i) Amounts in (cid:145)Other changes(cid:146) refers to cancellation of Performance Options on 25 September 2020.
(ii) Appointed 3 December 2020.
Terms and conditions of share-based payment arrangements
No share-based payment expenses were recorded in the 2020 financial year (2019: nil)
Loans to/from key management personnel (KMP) and their related parties
7.
There were no loans to/from key management personnel and their related parties in the 2020 (2019: nil).
8. Other transactions and balances with KMP and their related parties
Transactions with related parties are entered into on terms equivalent to those that prevail in arm(cid:146)s length transactions. The
Group had no other transactions with members of the Group(cid:146)s key management personnel and/or their related parties during
the year.
9. Voting of shareholders at last year(cid:146)s annual general meeting
The Company received 99.97% (cid:147)Yes(cid:148) votes cast on its Remuneration Report for the 2019 financial year. The Company did
not receive any specific feedback at the Annual General Meeting regarding its remuneration policies.
THIS IS THE END OF THE AUDITED REMUNERATION REPORT
15
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
This Directors’ Report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations
Act 2001.
On behalf of the Directors
Christopher Clark
Chief Executive Officer
Perth, 31 March 2021
16
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF DELTA DRONE
INTERNATIONAL LIMITED
As lead auditor of Delta Drone International Limited for the year ended 31 December 2020, I declare
that, to the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Delta Drone International Limited and the entities it controlled during
the period.
Dean Just
Director
BDO Audit (WA) Pty Ltd
Perth, 31 March 2021
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Revenue
Cost of sales
Gross profit
Other income
Gains from disposal of assets
Employee benefits expenses
Sales and marketing expenses
General and administrative expenses
Amortisation of intangible assets
Depreciation expenses
(Loss)/profit before finance expenses
Finance income
Finance expenses
(Loss)/profit before income tax
Income tax expense
(Loss)/profit for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences
Total comprehensive income for the year
(Loss)/profit for the year attributable to:
Owners of Delta Drone International Limited
Non-controlling interest
Total comprehensive income for the year attributable to:
Owners of Delta Drone International Limited
Non-controlling interest
Note
2020
$
2019
$
5
3,369,115
3,525,073
(1,398,727)
(1,532,040)
1,970,388
1,993,033
68,519
20,332
(822,905)
(8,572)
(1,082,800)
(51,983)
(125,152)
(32,173)
26,292
(23,064)
(28,945)
(86,446)
(115,391)
6
16
14
6
7
111,257
29,631
(850,565)
(225,377)
(690,963)
(88,777)
(133,931)
144,308
37,255
(15,677)
165,886
(8,457)
157,429
454,230
338,839
(35,309)
122,120
(183,959)
68,568
(115,391)
271,243
67,596
338,839
128,289
29,140
157,429
93,038
29,082
122,120
(Loss)/earnings per share
Basic and diluted (cents per share)
10
(0.001)
0.001
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with
the accompanying notes.
18
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Deposits
Inventory
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Right-of-use assets
Intangible assets
Goodwill
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Bank overdraft
Lease liability
Other financial liability
Borrowings
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Other financial liability
Deferred tax liability
Lease liability
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Foreign currency translation reserve
Accumulated losses
Equity attributable to owners of the parent
Non-controlling interest
TOTAL EQUITY
Note
11a
12
13
14
17
16
15
7
18
17
20
19
20
7
17
21
22
22
23
2020
$
2019
$
5,182,923
964,746
35,531
490,315
6,673,515
480,289
177,304
4,702,730
2,259,414
50,930
7,670,667
14,344,182
922,600
80,683
79,194
39,969
506,839
1,629,285
364,201
761,169
122,642
1,248,012
2,877,297
784,604
675,663
17,968
17,596
1,495,831
573,064
202,462
87,019
667,590
81,758
1,611,893
3,107,724
116,477
-
87,106
-
3,354,742
3,558,325
-
25,926
139,634
165,560
3,723,885
11,466,885
(616,161)
12,904,061
(968,570)
419,845
(963,472)
11,391,864
75,021
11,466,885
1,159,854
(968,570)
(35,357)
(779,513)
(623,586)
7,425
(616,161)
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
19
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2020
Issued capital
Reserves
Foreign currency
translation reserve
Accumulated losses
A$
99
-
-
-
1,159,755
-
1,159,854
1,159,854
-
-
-
5,563,284
6,815,530
(634,607)
12,904,061
A$
A$
A$
-
-
-
-
-
(968,570)
(968,570)
(968,570)
-
-
-
-
-
-
(106)
-
(35,251)
(35,251)
-
-
(907,820)
128,289
-
128,289
-
-
(35,357)
(779,513)
(35,357)
-
455,202
455,202
-
-
-
(779,513)
(183,959)
-
(183,959)
-
-
-
(968,570)
419,845
(963,472)
Total attributable to
Equity Holders of
the Company
A$
(907,809)
128,289
(35,251)
93,038
1,159,755
(968,570)
(623,586)
(623,586)
(183,959)
455,202
271,243
5,563,284
6,815,530
(634,607)
11,391,864
The above Consolidated Statements of Changes in Equity should be read in conjunction with the accompanying notes.
Balance at 1 January 2019
Profit/(loss) for the year
Other comprehensive loss
Total comprehensive income/(loss) for
the year
Transactions with owners in their
capacity as owners:
Conversion of DD SA (French Joint
Stock Company) loan to equity
Transactions under common control
Balance at 31 December 2019
Balance at 1 January 2020
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for
the year
Transactions with owners in their
capacity as owners:
Reverse Acquisition (refer to Note 4)
Issue of shares
Share issue costs
Balance at 31 December 2020
Non-controlling
interest
Total Equity
A$
(21,657)
29,140
(58)
29,082
-
-
7,425
7,425
68,568
(972)
67,596
-
-
-
75,021
A$
(929,467)
157,429
(35,309)
122,120
1,159,755
(968,570)
(616,161)
(616,161)
(115,391)
454,230
338,839
5,563,284
6,815,530
(634,607)
11,466,885
20
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Payments to suppliers and employees
Interest received
Finance expenses
Taxes paid
Note
2020
A$
2019
A$
3,761,123
4,512,607
(3,483,788)
(3,484,544)
26,292
(2,918)
-
37,255
(15,677)
(52,224)
Net cash from operating activities
11b
300,709
997,417
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment
Proceeds on disposal of plant and equipment
Cash acquired on acquisition of subsidiary
4
Payments for deposits (equipment and rental)
Net cash (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from the issue of shares
Repayment of lease liabilities
Repayment of borrowings
Net cash from/(used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Impact of movement in foreign exchange rates
(339,117)
(311,956)
91,376
247,104
(19,876)
50,145
2,036
-
(20,513)
(259,775)
4,395,356
-
(112,563)
(69,179)
(167,707)
(242,543)
4,115,086
(311,722)
4,395,282
425,920
784,604
353,809
3,037
4,875
Cash and cash equivalents at the end of the financial year
11a
5,182,923
784,604
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes
21
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 1: GENERAL INFORMATION
These consolidated financial statements cover Delta Drone International Limited ((cid:147)the Company(cid:148) or (cid:147)Delta Drone(cid:148)) and its
controlled entities as a consolidated entity (also referred to as Group). Delta Drone is a company limited by shares,
incorporated and domiciled in Australia. The Group is a for-profit entity. The financial report is presented in Australian Dollar
((cid:147)$(cid:148)) unless stated otherwise.
The financial statements were authorised for issue by the board of directors on 31 March 2021.
NOTE 2: BASIS OF PREPARATION
These financial statements are general purpose financial statements which have been prepared in accordance with Australian
Accounting Standards (AASBs) (including Australian interpretations) adopted by the Australian Accounting Standard Board
(AASB) and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has concluded
would result in financial statements containing relevant and reliable information about transactions, events and conditions.
Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with
International Financial Reporting Standards.
The financial statements, except for cash flow information, have been prepared on an accruals basis and are based on
historical costs, modified, where applicable, by the measurement at fair value of financial assets and financial liabilities. The
amounts presented in the financial statements have been rounded off to the nearest dollar unless stated otherwise.
Going Concern
These consolidated financial statements have been prepared on the going concern basis, which contemplates the continuity
of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business.
On 22 December 2020, the Company announced that it had raised $5,000,000 (before transaction costs) pursuant to a
Prospectus via an offer of 125,000,000 fully paid ordinary shares at an issue price of $0.04 per share, with the funds to be
utilised or the Group(cid:146)s drone-based data services and technology activities. As at 31 December 2020, the Group had
$5,182,923 in cash and cash equivalents.
The Directors of the Company are of the opinion that the Group is in a position to carry on operations for the foreseeable
future and that it will be able to realise its assets and discharge its liabilities in the normal course of business.
Significant estimates, judgements and key assumptions
The preparation of financial statements in conformity with AASBs 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 ongoing
basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods
affected.
Reverse Acquisition
On 3 December 2020, shareholders of Delta Drone International Limited ((cid:147)Delta Drone(cid:148) or (cid:147)DLT(cid:148)) (formerly ParaZero Limited)
approved the acquisition of Delta Drone South Africa (Pty) Ltd ((cid:147)DDSA(cid:148)) from Delta Drone SA (a public company incorporated
in France) pursuant to which the Company acquired 100% of the issued capital in DDSA ((cid:147)Transaction(cid:148)). The Transaction,
which became effective on 22 December 2020 has been accounted for as a reverse acquisition under the accounting
standards. DDSA is identified as the accounting acquirer (legal acquiree) and Delta Drone International Limited is the
accounting acquiree (legal acquirer).
22
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
As such, the consolidated financial statements will be issued under the name of DLT but described in the notes as a
continuation of the financial statements of DDSA. The comparative information for the year ended 31 December 2019 is that
of DDSA.
The implications of the acquisition by DDSA on the financial statements are as follows:
(i) Statement of Profit or Loss and other Comprehensive Income
The statement of profit or loss and other comprehensive income comprises the total comprehensive income for the 12
months ended 31 December 2020 for DDSA and its wholly owned subsidiaries; for the period 22 December 2020 to 31
December 2020 for DLT.
The statement of profit or loss and other comprehensive income for the year ended 31 December 2019 comprises the
results of DDSA and its wholly owned subsidiaries only.
(ii) Statement of Financial Position
The statement financial position as at 31 December 2020 represents the combination of DDSA and its wholly owned
subsidiaries with DLT.
The statement of financial position as at 31 December 2019 represents DDSA and its wholly owned subsidiaries as at 31
December 2019.
(iii) Statement of Change in Equity
The statement of changes in equity comprises:
-
-
-
the equity balance of DDSA at the beginning of the financial year (1 January 2020).
the total comprehensive income/loss for the financial year and transactions with equity holders being 12 months
for DDSA and its wholly owned subsidiaries and for the period 22 December 2020 to 31 December 2020 for DLT.
the equity balance of the combined DDSA and its wholly owned subsidiaries and DLT.
The statement of changes in equity comparatives comprise the full financial year for DDSA and its wholly owned
subsidiaries for the 12 months ended 31 December 2019.
(iv) Statement of Cash Flows
The statement of cash flows comprises:
-
-
the cash balance of DDSA and its wholly owned subsidiaries at the beginning of the financial year (1 January 2020).
the transactions for the financial year for DDSA and its wholly owned subsidiaries for the 12 months ended 31
December 2020 and for DLT from 22 December 2020 to 31 December 2020.
The statement of cash flows comparative comprises the full financial year of DDSA and its wholly owned subsidiaries for
the year ended 31 December 2019.
Determination of a Business
The Transaction above has been accounted for as a business combination. A business is an integrated set of activities and
assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower
costs or other economic benefits directly to investors or other owners, members or participants. Delta Drone International
Limited is deemed to meet this criterion and accordingly has been accounted for as a business.
Business combinations
Business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and
contingent liabilities assumed are initially estimated by the Group taking into consideration all available information at the
reporting date. Fair value adjustments on the finalisation of the business combination accounting are retrospective, where
applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and
amortisation reported.
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the
provision is assessed by taking into account recent sales experiences, the ageing of inventories and other factors that affect
inventory obsolescence.
23
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
Share based payments
The Group initially measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires
determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant.
The estimate also requires determination of the most appropriate inputs to the valuation model including the expected life
of the option, volatility and dividend yield and making assumptions about them, as well as an assessment of the probability
of achieving non-market based vesting conditions.
Fair value of long -term liabilities
Israeli Innovation Authority grants: The Group measured its liability on governmental grant received, each period, based on
discounted cash flows derived from the Group(cid:146)s anticipated revenues. The grant is repayable upon the Group commencing
product commercialisation and generating revenue from sale of product, with repayments being based on 3% of each dollar
of revenue. As required by AASB 9 Financial Instruments, the liability has been recognised at fair value on initial recognition
and subject to management(cid:146)s estimate of discount rate and the timing and quantity of future revenues.
Taxation
Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised in the
consolidated statement of financial position. Deferred tax assets, including those arising from unrecouped tax losses, capital
losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered,
which is dependent on the generation of sufficient future taxable profits.
Assumptions about the generation of future taxable profits depend on management(cid:146)s estimates of future cash flows.
Judgements are also required about the application of income tax legislation. These judgements and assumptions are subject
to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact
the amount of deferred tax assets and deferred tax liabilities recognised in the statement of financial position and the amount
of other tax losses and temporary differences not yet recognised.
In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require
adjustments, resulting in a corresponding credit or charge to the income statement.
USA Licenses, Technology and Customer Relationships Intangibles
The USA Licenses, Technology and Customer Relationships intangibles were acquired as part of the business combination
(refer to note 4 for additional details). The contracts and relationships are recognised at their fair value at the date of
acquisition and are subsequently amortised on a straight line based on the timing of projected cash flows of the contracts
over their estimated useful lives. The fair value of the intangibles was determined using the following key assumptions:
Assumed level of future revenue
Assumed present value of net expected cash flows
Impairment
Judgement is required in assessing whether goodwill has suffered any impairment on an annual basis. In assessing
impairment, management estimates the recoverable amount of each asset or cash-generating unit (CGU) based on expected
future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future
operating results and the determination of a suitable discount rate. Refer to note 15 for further information.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the Group based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the Group operates. As address in the financial report, the
full impact of COVID-19 outbreak continues to evolve as at the date of this report. As such, the Group is unable to estimate
the effects of the COVID-19 outbreak on the Group(cid:146)s financial position, liquidity and operations in the 2021 financial year.
24
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December
2020. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if
and only if the Group has:
Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the
investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group(cid:146)s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the statement of profit or loss and other comprehensive income from
the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of
the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line
with the Group(cid:146)s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating
to transactions between members of the Group are eliminated in full on consolidation.
A change in ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the
Group loses control over a subsidiary, it:
De-recognises the assets (including goodwill) and liabilities of the subsidiary;
De-recognises the carrying amount of any non-controlling interests;
De-recognises the cumulative translation differences recorded in equity;
Recognises the fair value of the consideration received;
Recognises the fair value of any investments retained;
Recognises any surplus or deficit in profit and loss; and
Reclassifies the parent(cid:146)s share of components previously recognised in OCI to profit or loss or retained earnings, as
appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.
b)
Income Tax
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable
income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured
at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects
movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when
the tax relates to items that are credited or charged directly to equity.
25
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been
fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition
of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement
also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or
liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures,
deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be
controlled and it is not probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and
liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended
that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods
in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
c)
Leases
The Group as a lessee
At inception of a contract, the Group assesses if the contract contains characteristics of a lease. If there is a lease present, a
right-of-use asset and a corresponding liability are recognised by the Group where the Group is a lessee. However, all
contracts that are classified as short-term leases (i.e., leases with a remaining lease term of 12 months or less) and leases of
low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease.
Initially, the lease liability is measured at the present value of the lease payments still to be paid at the commencement date.
The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the
Group uses incremental borrowing rate.
Lease payments included in the measurement of the lease liability are as follows:
-
-
-
-
-
-
fixed lease payments less any lease incentives;
variable lease payments that depend on the index of the rate, initially measured using the index or rate at the
commencement date;
the amount expected to be payable by the lessee under residual value guarantees;
the exercise price of purchase options if the lessee is reasonably certain to exercise its options;
lease payments under extension profits, if the lessee is reasonably certain to exercise its options; and
payments of penalties for terminating the lease, if the lease term reflects the exercise of options to terminate the
lease.
26
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
The right-of-use assets comprise the initial measurement of the corresponding liability, any lease payments made at or before
the commencement date and initial direct costs. The subsequent measurement of the right-of-use asset is at cost less
accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest.
Where a lease transfers ownership of the underlying asset or the costs of the right-of-use asset reflects that the Group
anticipates exercising a purchase option, the specific asset is depreciated over the useful life of the underlying asset.
d) Financial Instruments
Initial recognition and measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party
to the contractual provisions of the instrument. Financial instruments are initially measured at fair value plus transaction
costs where the financial instrument is not classified as at fair value through profit or loss. Transaction costs related to
instruments classified at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments
are classified and measured as set out below:
Classification and subsequent measurement
(i) Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet with the following conditions (and are not
designated as FVPL):
o
they are held within a business model whose objective is to hold the financial assets and collect its
contractual cash flows; and
o
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
(ii) Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.
Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is
derecognised.
(iii) Loans and borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method. The component of the
convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial
position, net of transaction costs.
On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an
equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a
finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in
shareholders equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option
is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss.
27
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
Derivative instruments
The Group does not trade or hold derivatives.
Financial guarantees
The Group has no material financial guarantees.
Impairment
At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been
impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred
(cid:145)loss event(cid:146)) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can
be reliably estimated. Evidence of impairment may include indications that the debtor or a group of debtors is experiencing
significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flow expires or the asset is transferred to
another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated
with the asset.
Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The
difference between the carrying value of the financial liability extinguished or transferred to another party and the fair
value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
e)
Impairment of non-financial assets
At the end of each reporting period, the Directors assesses whether there is any indication that an asset may be impaired.
The assessment will include the consideration of external and internal sources of information, including dividends received
from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits.
If any such indication exists, an impairment test is carried out on the asset by comparing the asset(cid:146)s recoverable amount,
being the higher of its fair value less costs to sell and its value in use, to the asset(cid:146)s carrying amount. Any excess of the
asset(cid:146)s carrying amount over its recoverable amount is recognised immediately in profit or loss. Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating
unit to which the asset belongs.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
f)
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits available on demand with banks with original maturity of three
months or less.
g) Trade receivables
Trade receivables, which generally have 0-60-day terms, are recognised and carried at original invoice amount. Collectability
of trade receivables is reviewed on an ongoing basis. An impairment provision will be recognised when there is objective
evidence that Company will not be able to collect the receivable. Bad debts will be written off when identified.
28
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
h)
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the average
principle and includes expenditure incurred in acquiring the inventories and the costs incurred in bringing them to their
existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
i)
Revenue recognition
Revenue is recognised based on the five-step model outlined in AASB 15 Revenue from Contracts with Customers.
The Group derives its revenue from:
-
-
rendering of services; and
rental income.
Revenue from rendering of services and rental income
Revenue from the transfer of services and rental income is recognised over time.
j) Depreciation
Depreciation is a systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount
is the cost of the asset, less its residual value. An asset is depreciated from the date it is ready for use, meaning the date it
reaches the location and condition required for it to operate in the manner intended by management.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of the fixed
asset item, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied
in the assets.
The estimated useful lives for the current and comparative periods are as follows:
Computers (cid:150) 3 years
Furniture and equipment (cid:150) 3-17 years
Leasehold improvements (cid:150) the shorter of the lease term and the useful life
Buildings (cid:150) 2-3 years
Leasehold land (cid:150) Over lease period
Leased property and licenses (cid:150) 10%
Plant and equipment (cid:150) 10%-67%
Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if
appropriate.
k) Goods and Services Tax (GST)/Value Added Tax (VAT)
Revenues, expenses, and assets are recognised net of the amount of GST/VAT, except where the amount of GST/VAT
incurred is not recoverable from the Australian Tax Office (ATO)/Israeli Tax Authority (ITA)/South African Revenue Service
(SARS).
Receivable and payables are stated inclusive of the amount of GST/VAT receivable or payable. The net amount of the
GST/VAT recoverable from, or payable to, the ATO/ITA/SARS is included with other receivables and payables in the
statement of financial position. Cash flows are presented in the statement of cash flows on a gross basis, except for the
GST/VAT component of investing and financing activities, which are disclosed as operating cash flows.
29
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
l)
Employee Benefits
Post-employment benefits
Israel
The liability for severance pay is in accordance with obligations under Israeli employment law (Section 14 of the Severance
Compensation Act 1963). All Israeli based employees are included under Section 14 and are entitled only to monthly
deposits, at a rate of 8.33% of their monthly salary, made in the employee(cid:146)s name with insurance companies or pension
funds. Under Israeli employment law, payments in accordance with Section 14 release the Company from any future
severance payments. The funds are made available to the employee at the time the employer-employee relationship is
terminated, regardless of the cause of termination. The severance pay liabilities and deposits under Section 14 are not
reflected in the statement of financial position as the severance pay risks have been irrevocably transferred to the insurance
companies or severance funds.
South Africa
The Basic Conditions of Employment Act ((cid:147)Act(cid:148)) applies to all South African employees. The basic conditions of employment
contained in the Act form part of the contract of employees covered by the Act. Some, but not all, basic conditions of
employment may be varied by individual or collective agreements in accordance with provisions of the Act. A retrenched
employee is entitled to at least 1 week(cid:146)s pay for each completed year of ongoing service. However, the employer must pay
the retrenched employee the amount specified in any policy or his/her employment contract, if that amount is larger. All
staff are entitled to group risk cover.
Short term employee benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided or upon the actual absence of the employee when the benefit is not accumulated.
The employee benefits are classified, for measurement purposes, as short-term benefits or as other long-term benefits
depending on when the Group expects the benefits to be wholly settled.
m) Equity-settled compensation
The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair
value of the instruments issued and amortised over the vesting periods. The fair value of performance right options is
determined using the satisfaction of certain performance criteria (Performance Milestones). The number of shares option
and performance rights expected to vest is reviewed and adjusted at the end of each reporting period such that the amount
recognised for services received as consideration for the equity instruments granted is based on the number of equity
instruments that eventually vest. The fair value is determined using either a Black Scholes or Monte Carlo simulation model
depending on the type of share-based payment.
n) Trade and other payables
Liabilities for trade creditors and other amounts carried at cost which is the fair value of the consideration to be paid in the
future for goods and services received, whether or not billed to the Group. Interest, when charged by the lender, is
recognised as an expense on an accruals basis.
o) Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is
probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are
measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.
30
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
p) Equity and reserves
Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of
shares are deducted from share capital, net of any related income tax benefits. The option reserve records the value of
share-based payments.
q) Foreign currency transactions and balances
Functional and presentation currency
The functional currency of each entity within the Group is measured using the currency of the primary economic
environment in which that entity operates. The consolidated financial statements are presented in Australian dollars.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured
at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured
at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items are recognised in the profit or loss.
Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive
income to the extent that the underlying gain or loss is recognised other comprehensive income, otherwise the exchange
difference is recognised in profit or loss.
Group companies
The financial results and position of foreign operations whose functional currency is different from the Group(cid:146)s presentation
currency are translated as follows:
assets and liabilities are translated at year-end exchange rates prevailing at that reporting period;
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars
are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement
of financial position. These differences are recognised in the profit or loss in the period in which the operation is disposed
of.
r)
Segment information
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of
Directors (the chief operating decision makers) in assessing performance and in determining the allocation of resources.
The Group(cid:146)s sole operating segment is consistent with the presentation of these consolidated financial statements.
s)
Share-based payments
Share-based payments are measured at the fair value of goods or services received or the fair value of the equity
instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded
at the date the goods or services are received. The fair value of options is determined using the Black-Scholes pricing model.
The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that
the amount recognised for services received as consideration for the equity instruments granted is based on the number
of equity instruments that eventually vest.
31
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
t)
Earnings per share
Basic earnings per share is calculated by dividing:
the profit attributable to member of the parent entity, excluding any costs of servicing equity other than ordinary
shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year (if any).
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares;
and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
u) Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business
combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred
by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued in
the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except
that:
deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised
and measured in accordance with AASB 112 Income Taxes and AASB 119 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into or replace share-based payment arrangements of the acquiree
are measured in accordance with AASB 2 Share-based Payment at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 Non-current Assets Held
for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests
in the acquiree, and the fair value of the acquirer(cid:146)s previously held equity interest in the acquiree (if any) over the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed exceeds the sum of the consideration
transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer(cid:146)s previously held
interest in the acquiree (if any), the excess is recognised immediately in the profit or loss as a bargain purchase.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the
entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’
proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is
made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when
applicable, on the basis specified in another Standard.
Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes
in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively,
with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the (cid:145)measurement period(cid:146) (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition date.
32
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as
equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity.
Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance
with AASB 9 Financial Instruments, or AASB 137 Provisions, Contingent Liabilities and Contingent Assets as appropriate, with
the corresponding gain or loss being recognised in profit or loss.
Where a business combination is achieved in stages, the Group(cid:146)s previously held equity interest in the acquiree is remeasured
to its acquisition date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income
are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect
new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have
affected the amounts recognised as of that date.
v) Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business
less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group(cid:146)s cash-generating units (or groups of cash-
generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when
there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the
carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit
and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss
for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent
periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
w)
Intangible Assets
Intangible assets acquired in a business combination have been identified as US licenses, Technology and Customer
Relationships and are recognised separately from goodwill at their fair value at the acquisition date. The estimate useful lives
for each of the three identified categories are:
USA licenses
Technology
Customer Relationships
8 years
8 years
10 years
Intangible assets with finite lives are amortised over the useful life and assessed for impairment at each reporting period or
whenever there is an indication that the intangible asset may be impaired. The amortisation period and amortisation method
are reviewed at least each financial year end. Changes in the expected useful life or flow of economic benefits intrinsic in the
asset are an accounting estimate. The amortisation charge on intangible assets with finite lives is recognised in the statement
of profit or loss and other comprehensive income.
33
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (cont(cid:146)d)
x) Research and development expenses
Research and development expenses are recognised in profit or loss when incurred. An intangible asset arising from a
development project or from the development phase of an internal project is recognised if the Group can demonstrate the
technical feasibility of completing the intangible asset so that it will be available for use or sale; the Group(cid:146)s intention to
complete the intangible asset; and the Group(cid:146)s ability to measure reliably the expenditure attributable to the intangible asset
during its development. Since the Group(cid:146)s research and development projects are often subject to regulatory approval
procedures and other uncertainties, the conditions for the capitalisation of costs incurred before receipt of approvals are not
normally satisfied, and, therefore, research and development expenses are recognised in profit or loss when incurred.
y) Right of Use Assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the
end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit
or loss as incurred.
z) Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in its normal
operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting
period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in its normal operating cycle; it is held primarily for
the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right
to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as
non-current.
Deferred tax assets and liabilities are always classified as non-current.
aa) Comparatives
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for
the current financial year.
34
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 4: ACQUISITION OF DELTA DRONE SOUTH AFRICA (PTY) LTD
Reverse Acquisition
On 3 December 2020, shareholders of Delta Drone International Limited ((cid:147)DLT(cid:148)) approved the acquisition of 100% of the
issued capital of Delta Drone South Africa (Pty) Ltd ((cid:147)DDSA(cid:148)) from Delta Drone SA (a public company incorporated in France)
((cid:147)Acquisition(cid:148)). On 22 December 2020, the Company completed the Acquisition of DDSA in exchange for 203,512,750
ordinary shares in the Company.
Refer to Note 2 for further information.
The Acquisition has been accounted for on a provisional basis. As at the date of acquisition (22 December 2020), the assets
and liabilities of the Company were as follows:
a)
Assets and Liabilities at Acquisition Date
Cash and cash equivalents
Inventory
Other current assets
Other non-current assets
Loan ceded by Delta Drone SA (France)
Trade and other payables
Other current liabilities
Loan from third party
Other non-current liabilities
Convertible notes
Net liabilities of DLT at acquisition date
b) Deemed consideration
2020
$
247,104
480,850
284,255
82,337
2,185,882
(1,251,044)
(80,652)
(502,631)
(404,172)
(1,088,235)
(46,306)
The consideration was the issue of shares in DLT (legal parent) which was deemed to be A$5,563,284 based on the following:
Ordinary shares of DLT (formerly ParaZero Limited) prior to Acquisition
Share price based on capital raising per Prospectus
Deemed consideration
c)
d)
Purchase Price to be allocated
Allocation of Purchase Price
US License
Deferred tax liability (i)
Technology
Deferred tax liability (i)
Customer Relationships
Deferred tax liability (i)
Goodwill
139,082,099
$0.04
$5,563,284
$5,609,590
1,569,000
(251,000)
734,000
(117,000)
2,376,000
(380,000)
1,678,590
5,609,590
(i) Based on a corporate tax rate of 16%. The Group has reported provisional amount for goodwill as part of the purchase of
DDSA.
35
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 5: REVENUE
Disaggregation of revenue from contracts with customers:
Rendering of services
Rental income
Total
Timing of revenue recognition
At a point in time
Over time
Total
All revenue recognised was derived in Africa.
NOTE 6: EXPENSES
Loss before income tax from continuing operations includes the following
specific expenses:
General and administration expenses:
-
-
-
-
-
-
-
Total general and administration expenses
Consulting and professional expenses
IT expenses
Legal expenses
Insurances
Occupancy expenses
Advertising and marketing
Other expenses
Finance expenses:
-
-
-
-
Total finance expenses
Interest and bank fees
Interest on lease liabilities
Exchange rate differences
Related parties(cid:146) interest
2020
$
2019
$
1,992,126
1,376,989
3,369,115
1,462,477
2,062,596
3,525,073
-
3,369,115
3,369,115
-
3,525,073
3,525,073
2020
$
467,655
157,916
74,534
19,435
68,243
154,559
140,458
1,082,800
4,207
15,058
572
3,227
23,064
2019
$
122,629
144,789
78,271
20,415
22,564
18,544
283,751
690,963
31
15,646
-
-
15,677
36
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 7: INCOME TAX
The legal parent is incorporated and domiciled in Australia where the applicable tax rate is 26% (2019: 27.5%). The
applicable tax rate in Israel is 23% (2019: 23%) and in South Africa is 28% (2019: 28%).
(a) The numerical reconciliation of income tax expense to the prima facie tax
payable is as follows:
Loss/(profit) from ordinary activities before income tax expense
Prima facie tax benefit on loss/profit from ordinary activities
Movement in unrecognised temporary differences
Movement in temporary differences
Tax effect of current year losses for which no deferred tax asset has been
recognised
Tax effect of losses utilised
Effect of different tax rate of group entities operating in different jurisdictions
Income tax expense
(b) Recognised temporary differences
Deferred Tax Assets (at 28%)
Capital allowances
Leases
Provisions
Carry forward foreign tax losses
Deferred Tax Liabilities (at 28%)
Prepayments
Capital allowances
Brand name
Licenses to operate
Domain, manuals and processes
Deferred tax liabilities (at 16%)
US License
Technology
Customer Relationships
(c) Unrecognised temporary differences
Deferred Tax Assets (at 26%)
Blackhole expenditure
Patent costs
Accrued expenses
Capital raising costs
Carry forward revenue tax losses
Net unrecognised deferred tax asset
Tax losses
2019
$
165,886
45,619
-
(26,546)
-
(26,700)
(830)
(8,457)
-
6,785
9,988
64,985
81,758
-
(1,560)
(4,322)
(17,287)
(2,757)
(25,926)
-
-
-
-
2020
$
(28,945)
(7,526)
18,228
(88,707)
14,645
(19,045)
(4,041)
(86,446)
2,201
6,869
4,362
37,498
50,930
(2,496)
-
(2,025)
(8,099)
(549)
(13,169)
(251,000)
(117,000)
(380,000)
(748,000)
176,781
431
27,820
275,442
570,935
1,051,409
Unused tax losses for which no deferred tax asset has been recognised will be subject to the Company satisfying the
requirements imposed by regulatory taxation authorities. The benefits of deferred tax assets will only be recognised if:
- Future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
- The conditions for deductibility imposed by tax legislation continue to be complied with; and
- No changes in tax legislation adversely affect the Company in realising the benefit.
37
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 8: RELATED PARTY TRANSACTIONS
a) Key Management Personnel Compensation
The totals of remuneration paid to KMP during the year are as follows:
Short-term salary and fees
Social benefits
Total KMP Compensation
2020
$
394,559
38,296
432,855
2019
$
243,457
-
243,457
(b) Loans from key management personnel (KMP) and their related parties
There were no loans between the Group and its directors or key management personnel during the year ended 31 December
2020 (2019: nil).
(c) Loans from other related parties
As at 31 December 2020, Delta Drone International Limited held a loan payable balance of $506,838, which was owed to
Delta Drone SA (France), a related party which holds a majority shareholding in the Company. The loan bears an interest of
10% per annum. This loan balance was repaid in full post-year end.
NOTE 9: AUDITOR(cid:146)S REMUNERATION
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non-related audit firms:
Audit services
-
-
-
Auditing and reviewing the financial reports (cid:150) Australia
Auditing and reviewing the financial reports (cid:150) Israel
Auditing and reviewing the financial reports (cid:150) South Africa
Other non-audit services
-
Investigating Accountant(cid:146)s Report (BDO) (cid:150) Australia
NOTE 10: (LOSS)/EARNINGS PER SHARE
2020
$
35,463
24,008
36,319
95,790
60,600
60,600
2020
$
2019
$
47,381
26,317
-
73,698
-
-
2019
$
(Loss)/earnings per share (EPS)
a)
(Loss)/earnings used in calculation of basic EPS and diluted EPS
(183,959)
128,289
b) Weighted average number of ordinary shares outstanding during the
year used in calculation of basic and diluted loss per share
144,191,756
135,675,167
The weighted average number of ordinary shares outstanding (the denominator of the EPS calculation) for the year ended
31 December 2019 has been adjusted to reflect the reverse acquisition.
NOTE 11a: CASH AND CASH EQUIVALENTS
Cash in hand and at bank
Total cash and cash equivalents in the statement of cash flows
2020
$
5,182,923
5,182,923
2019
$
784,604
784,604
The Group(cid:146)s exposure to the risks associated with cash are disclosed in Note 26.
38
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 11b: RECONCILIATION OF LOSS AFTER TAX TO NET CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit for the year
Profit on sale of assets
Interest received
Finance costs
Movement in right-of-use assets
Movement in lease liabilities
Foreign exchange movement on plant and equipment
Expected credit loss allowance
Depreciation and amortisation
Changes in assets and liabilities
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventory
(Decrease)/increase in trade and other payables
Cash flow (used in) operating activities
2020
$
2019
$
(28,945)
165,886
(20,332)
(26,292)
23,064
25,158
87,659
585
(5,019)
177,135
(289,083)
(472,719)
829,498
300,709
(29,631)
(37,255)
15,677
15,810
60,592
3,183
6,914
222,708
500,427
(15,114)
88,220
997,417
Non-cash investing and financing activities
On 3 December 2020, shareholders of Delta Drone International Limited approved the acquisition of Delta Drone South Africa
(Pty) Ltd ((cid:147)DDSA(cid:148)) from Delta Drone SA (a public company incorporated in France). On 22 December 2020, DLT issued
203,512,750 shares to DDSA to acquire 100% of the issued capital of DDSA. The Company also issued 45,000,000 Performance
Shares. Further information is detailed in Notes 2 and 4.
There were no other non-cash investing and financing activities.
NOTE 12: TRADE AND OTHER RECEIVABLES
CURRENT
Trade receivables
Expected credit loss allowance
Prepaid expenses
Other receivables
2020
$
605,332
(7,946)
160,541
206,819
964,746
2019
$
659,167
(46,917)
14,629
48,784
675,663
Classification as trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. They are generally due for settlement within 30 to 60 days and therefore are all classified as current. Trade
receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant
financing components when they are recognised at fair value. The Group holds the trade receivables with the objective
to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective
interest method.
The net carrying value of trade and other receivables is considered a reasonable approximation of fair value. The Group(cid:146)s
exposure to the risks associated with trade and other receivables are disclosed in Note 26.
39
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 12: TRADE AND OTHER RECEIVABLES (cont(cid:146)d)
The ageing of amounts due is as follows:
0 (cid:150) 30 days
30 (cid:150) 60 days
60 (cid:150) 90 days
90 (cid:150) 120 days
120+ days
Reconciliation of expected credit loss provision:
Opening balance
Reversed during the year
The expected credit loss provision has been determined based on the
following rates:
0 (cid:150) 30 days
30 (cid:150) 60 days
60 (cid:150) 90 days
90 (cid:150) 120 days
NOTE 13: INVENTORY
Inventory at cost (i)
2020
$
354,523
222,063
7,361
9,037
12,348
605,332
2020
$
46,917
(38,971)
7,946
2020
0.22%
0.34%
21.82%
6.29%
2019
$
313,925
241,784
50,858
34,881
17,719
659,167
2019
$
53,973
(7,056)
46,917
2019
4.69%
8.43%
29.90%
0.95%
2020
$
2019
$
490,315
17,596
(i) The increase in inventory arises mainly from the Acquisition which amounts to $480,850 held by ParaZero Israel. For the
Group(cid:146)s accounting policy on inventory, please refer to note 3(h).
40
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 14: PLANT AND EQUIPMENT
Cost
Accumulated depreciation
Net carrying amount
31 December 2020
Survey equipment
Furniture and fixtures
Motor vehicles
Office equipment
IT equipment
Leasehold improvements
Opening
balance
$
-
24,924
12,259
12,353
101,471
35,644
2020
$
2019
$
1,662,122
1,434,017
(1,181,833)
(860,953)
480,289
573,064
Additions
$
Disposals
$
Foreign
exchange
movements
$
Depreciation
(i)
$
31,762
40,202
12,339
4,483
17,398
14,195
(3,150)
(957)
(1,492)
(5,556)
(14,227)
-
(4,629)
-
(12,801)
(5,755)
(3,360)
(2,811)
(53,375)
(28,925)
(68,990)
(6,163)
Closing
balance
$
18,961
56,221
20,281
12,533
46,711
16,285
108,159
-
Drone accessories
67,203
126,060
(4,802)
(11,312)
Small assets
Drones
-
6,163
-
-
318,647
108,319
(1,925)
(39,605)
(201,604)
183,831
Other fixed assets
Capital works in progress
563
-
-
17,019
-
-
(73)
-
(203)
-
287
17,019
573,064
377,940
(12,283)
(75,445)
(382,987)
480,289
(i) A total of depreciation expense of $382,987 has been allocated between costs of sale ($257,835) and depreciation expense
($125,152) in the statement of profit or loss and other comprehensive income.
Additions
Disposals
Foreign
exchange
movements
Opening
balance
$
298
31 December 2019
Survey Equipment
$
-
Furniture and fixtures
19,225
9,770
Motor vehicles
Office equipment
IT equipment
Leasehold improvements
Drone accessories
Small assets
Drones
-
13,844
10,361
4,192
132,072
59,909
(11,254)
60,288
79,378
-
7,429
66,464
4,945
-
(559)
-
357,840
151,823
(9,124)
Other fixed assets
772
-
-
680,234
318,376
(20,937)
Depreciation
$
(301)
(4,328)
(1,693)
(2,245)
(80,101)
(33,287)
(77,997)
(4,890)
Closing
balance
$
-
24,924
12,259
12,353
101,471
35,644
67,203
-
(188,976)
318,647
(228)
563
(394,046)
573,064
$
3
257
108
45
845
1,214
83
55
7,084
19
9,437
(i) A total of depreciation expense of $394,046 has been allocated between costs of sale ($260,115) and depreciation expense
($133,931) in the statement of profit or loss and other comprehensive income.
41
-
-
-
-
$
-
-
-
-
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 15: GOODWILL
31 December 2020
Goodwill (cid:150) Rocketmine South Africa (Pty) Ltd
Goodwill (cid:150) Rocketmine Limited
Opening
balance
$
655,298
12,292
Additions
$
-
-
Goodwill (cid:150) Delta Drone International Limited
-
1,678,590
31 December 2019
Goodwill (cid:150) Rocketmine South Africa (Pty) Ltd
Goodwill (cid:150) Rocketmine Limited
667,590
1,678,590
635,289
11,916
647,205
-
-
-
Impairment
loss
$
Foreign exchange
movement
$
Total
$
-
-
-
-
-
-
-
(85,168)
(1,598)
570,130
10,694
-
1,678,590
(86,766)
2,259,414
20,009
376
20,384
655,298
12,292
667,590
Additional information
The recoverable amount of all cash-generating units is based on the higher of its value-in-use or fair value less costs to sell
which require use of assumptions. For the purpose of impairment testing, goodwill is allocated to two (2) cash-generating
units (CGU), being Delta Drone South Africa and ParaZero Israel. In assessing goodwill impairment for the year ended 31
December 2020, both CGUs used a discounted cash flow model in accordance with the value-in-use (VIU) method, which
reflect the present value of the future cash flows expenditure to be derived from each CGUs. The significant inputs and key
assumptions used by management within the discounted cash flow model for both CGUs are:
Delta Drone South Africa (Pty) Ltd:
Discount rate (pre-tax): risk in the industry and country in which it operates (cid:150) 16.3%.
Revenue growth: relevant to the market conditions and business plan (cid:150) 31.4%.
Budgeted gross profit rate: based on past performance and management(cid:146)s expectations for the future (cid:150) 54.7%.
Long term growth rate: typically consistent with the long-term growth rate of the economic environment or country in
which it operates.
ParaZero Israel
The cash flows for future financial years of the model are based on the 2021 budget as prepared by management.
Short term growth rate of 25%.
Operating profit ratio to revenue of 35%.
Cost of capital for the valuation of intangible assets of 20%.
Applicable tax rate of 16%.
The directors and management have engaged a third-party appraiser who performed a sensitivity analysis of the discount
rate applied and as a result of the analysis performed have determined that no impairment charge is to be recognised for the
year ended 31 December 2020.
42
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 16: INTANGIBLES
31 December 2020
Brand names
Licenses to operate
Client contracts and relationships
Domain, manuals and processes
USA licenses
Technology
Customer relationships
31 December 2019
Brand names
Licenses to operate
Client contracts and relationships
Domain, manuals and processes
Reconciliation of intangible assets
31 December 2020
Brand names
Licenses to operate
Client contracts and relationships
Domain, manuals and processes
USA licenses
Technology
Customer relationships
31 December 2019
Brand names
Licenses to operate
Client contracts and relationships
Domain, manuals and processes
Cost
$
30,990
123,960
199,700
96,956
1,569,000
734,000
2,376,000
5,130,606
35,620
142,478
229,532
111,438
519,068
Accumulated
amortisation
Carrying value
$
(23,759)
(95,036)
(199,700)
(94,992)
(5,370)
(2,512)
(6,506)
(427,875)
(20,185)
(80,737)
(229,532)
(101,595)
(432,049)
$
7,231
28,924
-
1,963
1,563,630
731,488
2,369,494
4,702,730
15,435
61,741
-
9,843
87,019
Opening
balance
Additions through
Business
Combination
Foreign exchange
movement
Amortisation
Total
$
15,435
61,741
-
9,843
-
-
-
87,019
21,870
87,481
18,544
44,305
172,200
$
-
-
-
-
1,569,000
734,000
2,376,000
4,679,000
-
-
-
-
$
(2,005)
(8,022)
-
(1,278)
-
-
-
$
(6,199)
(24,795)
-
(6,602)
(5,370)
(2,512)
(6,506)
(11,305)
(51,984)
545
2,181
198
672
3,596
(6,980)
(27,921)
(18,742)
(35,134)
(88,777)
$
7,231
28,924
-
1,963
1,563,630
731,488
2,369,494
4,702,730
15,435
61,741
-
9,843
87,019
43
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 17: RIGHT-OF-USE ASSETS
BUILDINGS (cid:150) RIGHT-OF-USE
Cost (cid:150) opening balance
Net additions
Foreign exchange movement
Acquisition costs at 31 December
Accumulated depreciation (cid:150) opening balance
Depreciation for the year
Foreign exchange movement
Accumulated depreciation as of 31 December
Net book value as of 31 December
Amounts recognised in the Statement of Profit and Loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Total recognised in the Statement of Profit and Loss
Amounts recognised in the Statement of Cash Flows
Payments of principal portion of lease liabilities
Payments of interest portion of lease liabilities
Total cash outflow for leases
Changes in lease liabilities reported in financing activities
Opening balance
Total cash flows
Non-cash changes
Foreign exchange movement
-
-
Net additions
Interest expense
NOTE 18: TRADE AND OTHER PAYABLES
CURRENT
Trade payables
VAT
Accrued expenses
Other payables
2020
$
308,576
92,882
(32,778)
368,680
(106,113)
(91,737)
6,474
191,376
177,304
91,737
15,058
106,795
2019
$
267,427
41,149
-
308,576
(55,504)
(56,129)
5,519
106,114
202,462
56,129
15,647
71,776
(88,326)
(15,058)
(103,384)
(48,906)
(15,647)
(64,553)
226,740
(103,384)
(29,459)
92,882
15,058
201,837
2020
$
221,605
38,296
619,127
43,572
922,600
228,313
(64,553)
6,184
41,149
15,647
226,740
2019
$
36,989
33,116
13,825
32,547
116,477
The carrying values of trade payables and other payables are considered to approximate fair value. The Group(cid:146)s exposure
to the risks associated with trade and other payables are disclosed in Note 26.
44
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 19: BORROWINGS
CURRENT
Short-term loans (i)
2020
$
2019
$
506,839
506,839
3,354,742
3,354,742
(i) The 2020 figure represents a short-term bridge financing by way of an unsecured line of credit ((cid:147)loan(cid:148)) of $500,000
advanced by Delta Drone SA France with an interest rate of 10% per annum. The loan and the accrued interest were repaid
subsequent to the year end. The 2019 figure includes a loan from Delta Drone SA (France) which was assigned to Delta
Drone International Limited as part of the Acquisition. There are no changes to the terms and conditions of the assigned
loan. Refer to note 4 for more information.
The Group(cid:146)s exposure to the risks associated with borrowings are disclosed in Note 26.
NOTE 20: OTHER FINANCIAL LIABILITIES
CURRENT
Liability for Israel Innovation Authority Grants
NON-CURRENT
Liability for Israel Innovation Authority Grants
2020
$
39,969
364,201
2019
$
-
-
ParaZero Technologies ((cid:147)ParaZero Israel(cid:148)) (the Group(cid:146)s subsidiary) received funding from the Israeli Innovation Authority
(IIA) for its participation in research and development costs, based on budgets approved by the IIA, subject to the
fulfillment of specified milestones. ParaZero Israel is committed to pay royalties to the IIA on proceeds from sale of
products in the research and development of which the IIA participates by way of grants. According to the funding terms,
royalties of 3%-3.5% are payable on sales of developed products funded, up to 100% of the grant received by ParaZero
Israel, linked to the US dollar and bearing libor interest rate. In the case of failure of a financed project, ParaZero Israel is
not obligated to pay any such royalties to the IIA.
45
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 21: ISSUED CAPITAL
(a) Share Capital
500,800,731 (2019: 200) fully paid ordinary shares
(b) Movement in ordinary capital
Opening balance as at 31 December 2019
Movements during the year
Elimination of Delta Drone South Africa shares on Acquisition of DLT
Existing shares in DLT
Conversion of convertible notes
Conversion of convertible notes
Issue of shares to acquire Delta Drone South Africa
Issue of shares pursuant to Prospectus
Issue of Broker Shares
Capital raising costs
Closing balance as at 31 December 2020
(c) Capital Management
2020
$
2019
$
12,904,061
1,159,854
No. of shares
200
100
(300)
139,082,099
12,500,000
14,705,882
203,512,750
125,000,000
6,000,000
-
Total
$
1,159,854
575,530
-
-
500,000
500,000
5,563,284
5,000,000
240,000
(634,607)
500,800,731
12,904,061
Due to the nature of the Group(cid:146)s activities, the Group does not have ready access to credit facilities, with the primary source
of funding being equity raisings. Therefore, the focus of the Group(cid:146)s capital risk management is the current working capital
position against the requirements of the Group to meet research and development programs and corporate overheads.
The Group(cid:146)s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a
view to initiating appropriate capital raisings as required. Any surplus funds are invested with major financial institutions.
NOTE 22: RESERVES
Share-based payment reserve (i)
Foreign currency translation reserve (ii)
Predecessor accounting reserve (iii)
(i) Share-based payment reserve
2020
$
-
419,845
(968,570)
(548,725)
2019
$
-
(35,357)
(968,570)
1,003,927
Movements in share-based payment reserve
31 Dec 2020
Opening balance at 1 January 2020
Existing options in DLT
Elimination of share-based payment reserve on Acquisition
Cancellation of Performance Options (i)
Closing balance at 31 December 2020
No.
-
54,253,507
-
(39,226,811)
15,026,696
$
-
1,988,085
(1,988,085)
-
-
(i) On 25 September 2020, the Company cancelled a total of 39,226,811 Performance Options (16,085,363 Class A,
11,370,724 Class B and 11,770,724 Class C Performance Options).
(ii) Foreign currency translation reserve
The foreign currency translation reserve records exchange differences arising on translation from functional currency to
presentation currency.
(iii) Predecessor accounting reserve
The predecessor accounting reserve comprises the excess of purchase price over the fair value of net assets when the
common controlled entity, Drone Safety and Legal (Pty) Ltd was acquired by Delta Drone SA France.
46
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 23: ACCUMULATED LOSSES
Accumulated losses at the beginning of the financial year
(Loss)/profit for the year
Accumulated losses at the end of the financial year
NOTE 24: SHARE BASED PAYMENTS
2020
$
(779,513)
(183,959)
2019
$
(907,802)
128,289
(963,472)
(779,513)
During the year ended 31 December 2020, the Company recorded the following share-based payments, for which $nil
value was ascribed to as part of the Acquisition accounting:
The issue of 45,000,000 Performance Shares which will convert to new shares according to the following milestones:
o
o
O
Class A (cid:150) 20,000,000 Class A Performance Shares with each Class A Performance Share entitling Delta Drone
SA France to subscribe for one fully paid ordinary share in the capital of the Company if Delta Drone South
Africa achieves consolidated revenue (for avoidance of doubt, only Delta Drone South Africa and excluding
the Company) for any full financial year (being 1 January to 31 December) during the three-year term of the
Class A Performance Share of not less than US$3.2 million ((cid:147)First Performance Milestone(cid:148));
Class B (cid:150) 15,000,000 Class B Performance Shares with each class B Performance Share entitling Delta Drone
SA France to subscribe for one fully paid ordinary share in the capital of the Company if Delta Drone South
Africa enters into at least two binding contracts with Australian based mining companies (being companies
that conduct mining, exploration or extraction activities) for the provision of drone survey or mapping solution
services to those mining companies in Australia ((cid:147)Services(cid:148)) and Delta Drone South Africa receives not less
than US$1,000,000 (based on audited accounts) of verified revenue in aggregate form from such executed
contracts received within the three-year term of the Performance Shares for its Services ((cid:147)Second
Performance Milestone(cid:148)); and
Class C (cid:150) 10,000,000 Class C Performance Shares with each Class C Performance Share entitling Delta Drone
SA France to subscribe for one fully paid ordinary share in the capital of the Company if during the three-year
term of the Class C Performance Shares the Company announces to the ASX that Delta Drone South Africa has
expanded the services of its business offering (being the provision of drone survey and mapping solutions)
into a new geographic location outside of Australia, Israel South Africa, Ghana and Namibia and achieved a
revenue in that geographic location of not less than US$1,000,000 ((cid:147)Third Performance Milestone(cid:148)).
If a Performance Milestone is not satisfied within 3 years of the date of issue of the Performance Shares (being 22
December 2020), then the relevant Performance Shares will automatically lapse.
NOTE 25: OPERATING SEGMENTS
Segment Information
Identification of reportable segments
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are
regularly reviewed by the board of directors (the chief operating decision maker) in assessing performance and in determining
the allocation of resources. As at 31 December 2020, the Group(cid:146)s sole operating segment is consistent with the presentation
of these consolidated financial statements.
47
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 26: FINANCIAL INSTRUMENTS
(a) Capital management
The Group(cid:146)s objective when managing capital is to safeguard its ability to continue as a going concern so that it can continue
to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid,
return capital to shareholders, issue new shares or sell assets to reduce debt.
Given the nature of the business, the Group monitors capital on the basis of current business operations and cash flow
requirements. There were no changes in the Group(cid:146)s approach to capital management during the year.
(b) Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Deposits
Financial liabilities
Trade and other payables
Bank overdraft
Lease liabilities
Borrowings
Other financial liability
2020
$
5,182,923
964,746
35,531
2019
$
784,603
675,664
17,968
6,183,200
1,478,235
922,600
80,683
201,836
506,839
404,170
116,477
-
226,740
3,354,742
-
2,116,128
3,697,959
The fair value of the above financial instruments approximates their carrying values.
(c) Financial risk management policies
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note
describes the Group(cid:146)s objectives, policies and processes for managing those risks and the methods used to measure them.
Further quantitative information in respect of those risks is presented throughout these financial statements.
48
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 26: FINANCIAL INSTRUMENTS (cont(cid:146)d)
The board has overall responsibility for the determination of the Group(cid:146)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 Group(cid:146)s finance function. The Group(cid:146)s risk management
policies and objectives are therefore designed to minimise the potential impacts of those risks on the Group where such
impacts may be material. The board receives monthly financial reports through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the board is to
set policies that seek to reduce risk as far as possible without unduly affecting the Group(cid:146)s competitiveness and flexibility.
(d) Market risk
Market risk for the Group arises from the use of interest-bearing financial instruments. It is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes in interest rate (see (e) below).
(e) Interest rate risk management
The following table illustrates sensitivities to the Group(cid:146)s exposures to changes in interest rates. The table indicates the
impact on how profit and equity values reported at reporting date would have been affected by changes in the relevant risk
variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular
variable is independent of other variables.
Movement in
Profit
$
Movement in
Equity
$
Year ended 31 December 2020
+/-1% in interest rates
51,829
51,829
Year ended 31 December 2019
+/-1% in interest rates
785
785
(f) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of dealing with creditworthy counterparties and obtaining sufficient collateral, where
appropriate, as a means of mitigating the risk of financial loss from defaults. The Group(cid:146)s exposure and the credit ratings of
its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved
counterparties.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by
international credit-rating agencies.
Trade receivables comprise a concentrated customer base. Management evaluates credit risk relating to customers on an
ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating,
risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other
factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The
utilisation of credit limits is regularly monitored. Credit guarantee insurance is purchased when deemed appropriate.
(g) Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting
its obligations related to financial liabilities. The Group(cid:146)s approach to managing liquidity is to ensure, as far as possible, that
it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Group(cid:146)s reputation.
The Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash
flows.
49
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 26: FINANCIAL INSTRUMENTS (cont(cid:146)d)
The following are the contractual maturities of financial liabilities based on the actual rates at the reporting date excluding
interest payments:
2020
Interest
rate
Less than 6
months
6-12
months
$
$
1-2
years
$
2-5
years
Over 5
years
$
$
Total
contractual
cash flows
$
Trade and other
payables
Bank overdraft
Lease liabilities
Borrowings
-
3%
-
10%
922,600
80,683
79,194
506,839
1,589,316
-
-
-
-
-
-
-
122,642
-
122,642
-
-
-
-
-
-
-
-
-
-
922,600
80,683
201,836
506,839
1,711,958
Carrying
amount
$
922,600
80,683
201,836
506,839
1,711,958
Note: Other financial liability of $404,170 has not been included in the above table as timing of repayment is uncertain.
2019
Trade and other
payables
Lease liabilities
Borrowings
Interest
rate
Less
than 6
months
$
6-12
months
$
1-2
years
$
2-5
years
Over 5
years
$
$
Total
contractual
cash flows
$
Carrying
amount
$
-
-
2.5%
116,477
87,106
-
203,583
-
-
3,354,742
3,354,742
-
139,634
-
139,634
-
-
-
-
-
-
-
-
116,477
226,740
3,354,742
3,697,959
116,477
226,740
3,354,742
3,697,959
(h) Net fair value of financial assets and liabilities
Fair value estimation
Due to the short-term nature of the receivables and payables the carrying value approximates fair value.
(i) Foreign currency risk
The currency risk is the risk that the value of financial instruments will fluctuate due to change in foreign exchange rates.
Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency
that is not the Company(cid:146)s functional currency. The company is exposed to foreign exchange risk arising from various currency
exposures primarily with respect to the US Dollar (the functional currency of the Israeli subsidiary company), the New Israeli
Shekel, the Australian Dollar (functional currency of the Parent company) and the South African Rand (the functional currency
of the South African subsidiaries).
50
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 27: PARENT ENTITY FINANCIAL INFORMATION
The following information of the legal parent Delta Drone has been prepared in accordance with Australian Accounting
Standards and the accounting policies as outlined in Note 3.
(a)
Financial Position of Delta Drone International Limited
ASSETS
Current assets
Non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Non-current liabilities
TOTAL LIABILITIES
NET ASSETS
SHAREHOLDERS(cid:146) EQUITY
Issued capital
Reserves
Accumulated losses
SHAREHOLDERS(cid:146) EQUITY
2020
$
4,340,808
-
4,340,808
726,869
-
726,869
3,613,939
19,115,043
1,922,683
(17,423,787)
3,613,939
2019
$
2,139,252
1,769,731
3,908,983
2,592,822
125,229
2,718,051
1,190,932
1,184,883
-
6,049
1,190,932
(b) Statement of profit or loss and other comprehensive income
(Loss)/profit for the year
Total comprehensive loss
(17,429,836)
(17,429,836)
67,587
67,587
(c) Guarantees entered into by Delta Drone for the debts of its subsidiary
There are no guarantees entered into by Delta Drone.
(d) Contingent liabilities of Delta Drone
There were no contingent liabilities as at 31 December 2020 (2019: nil).
(e) Commitments by Delta Drone
There were no commitments as at 31 December 2020 (2019: nil).
NOTE 28: CONTINGENT LIABILITIES
The Group has no known contingent liabilities as at 31 December 2020 (2019: nil)
NOTE 29: DIVIDENDS PAID OR PROPOSED
The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend
to the date of this report.
51
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 30: CONTROLLED ENTITIES
The ultimate legal parent entity of the Group is Delta Drone International Limited, incorporated and domiciled in Australia.
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policies described in Note 3.
Controlled entities
Country of
Incorporation
Percentage Owned
2019(i)
2020
ParaZero Technologies
Israel
Delta Drone South Africa (Pty) Ltd (ii)
South Africa
Rocketmine South Africa (ii)
South Africa
Rocketmine Ghana (ii)
Ghana
100%
100%
74%
90%
100%
-
-
-
(i) The comparative information for the year ended 31 December 2019 is that of Delta Drone South Africa (Pty) Ltd and its
subsidiaries, Rockemine South Africa and Rocketmine Ghana. Refer to Note 2 and Note 4 for more information.
(ii) Refer to Note 4 for more information on the acquisition of these entities.
The proportion of ownership interest is equal to the proportion of voting power held.
NOTE 31: EVENTS AFTER THE REPORTING PERIOD
On 4 February 2021, the Company announced that it was to become the first organisation to provide specialised Remote Pilot
License (RPL/RePL) drone courses in Africa in conjunction with the University of Pretoria. First student intake is scheduled in
April 2021.
On 10 February 2021, 579,201 shares were issued as a result of the exercise of 579,201 unquoted options with an exercise
price of $0.0027. The shares are held by a Trustee under a holding lock provision for 12 months following their issue.
On 15 February 2021, the Company announced it has expanded operations into Zambia to deliver a specialised agricultural
project for leading multinational agriculture services company, Syngenta.
On 25 February 2021, the Company announced that it had signed a confidential security service contract with a multi-national
mining organisation for air surveillance at one of its African locations. Whilst the client and location could not be disclosed
for security reasons, the initial six-month contract (with option to renew) will generate $340,000 revenue to DLT(cid:146)s subsidiary,
Rocketmine, for providing unmanned aerial vehicle (UAV) surveillance services.
On 2 March 2021, the Company announced that it had signed its largest multinational OEM (original equipment
manufacturer) integration deal with industrial equipment world-leader, Doosan Mobility Innovation. The multi-phase project
to generate initial revenue in excess of $150,000 and will include R&D coordination, system architecture, design, ground
deployment testing, system finalisation and ASTM F3322-18 (American Society for Testing and Materials) testing and
certification.
On 10 March 2021, the Company issued 625,000 shares at a value of $0.031 per share to Pitt Street Research in lieu of a cash
payment for providing research services. The shares are being held under a voluntary escrow arrangement until 9 March
2022 and the securities have had a holding lock placed on them to restrict them from trading.
The impact of the coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact,
positive or negative, after the reporting period. The timing, extent of the impact and recovery from COVID-19 on our
employees, customers and suppliers is unknown at this stage. The full impact of COVID-19 outbreak continues to evolve as
at the date of this report. As such, the Group is unable to estimate the effects of the COVID-19 outbreak on the Group(cid:146)s
financial position, liquidity and operations in the 2021 financial year.
There were no other material events after the reporting period other than the above.
52
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020
NOTE 32: APPLICATION OF NEW AND REVISED AUSTRALIAN ACCOUNTING STANDARDS
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board ((cid:145)AASB(cid:146)) that are relevant to its operations and effective for an accounting period that begins on or after 1
January 2020.
New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to
the Group include:
AASB 2018-6 Amendments to Australian Accounting Standards (cid:150) Definition of a Business
This Standard amends AASB 3 Business Combinations. The amendments clarify that while businesses usually have
outputs, outputs are not required for an integrated set of activities and assets to qualify as business. To be
considered a business an acquired set of activities and assets must include, at a minimum, an input and a
substantive process that together significantly contribute to the ability to create outputs.
AASB 2018-7 Amendments to Australian Accounting Standards (cid:150) Definition of Material
This Standard amends AASB 101 Presentation of Financial Statements and AASB 108 Accounting Policies, Changes
in Accounting Estimates and Errors, and makes consequential amendments to several other pronouncements and
publications.
AASB 2019-1 Amendments to Australian Accounting Standards (cid:150) References to the Conceptual Framework
The amendments include consequential amendments to affected Australian Accounting Standards, Interpretations
and other pronouncements to reflect the issuance of the Conceptual Framework for Financial Reporting
(Conceptual Framework) by the AASB.
AASB 2019-3 Amendments to Australian Accounting Standards (cid:150) Interest Rate Benchmark Reform
The amendments in AASB 2019-3 modify specific hedge accounting requirements to allow hedge accounting to
continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments
affected by the current interest rate benchmarks are amended as a result of the ongoing interest rate benchmark
reforms.
AASB 2019-5 Amendments to Australian Accounting Standards (cid:150) Disclosure of the Effect of New IFRS Standards Not
Yet Issued in Australia
This Standard makes amendments to AASB 1054 Additional Australian Disclosures by adding a disclosure
requirement for an entity intending to comply with IFRS Standards to disclose information specified in paragraphs
30 and 31 of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors on the potential effect of
an IFRS Standard that has not yet been issued by the AASB.
New and revised Australian Accounting Standards and Interpretations issued but not yet effective
At the date of authorisation of the financial statements, the Group has not applied the following new and revised Australian
Accounting Standards, Interpretations and amendments that have been issued but are not yet effective:
Standard/amendment
Effective for annual reporting periods
beginning on or after
AASB 2020-5 Amendments to Australian Accounting Standards (cid:150) Insurance
Contracts
AASB 2020-8 Amendments to Australian Accounting Standards (cid:150) Interest Rate
Benchmark Reform Phase 2
AASB 2020-3 Amendments to Australian Accounting Standards (cid:150) Annual
Improvements 2018-2020 and Other Amendments
1 January 2023
1 January 2021
1 January 2022
53
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
DIRECTORS’ DECLARATION
In the Directors’ opinion:
1.
The consolidated financial statements and notes set out on pages 18 to 53 are in accordance with the Corporations
Act 2001, including:
a)
complying with Australian Accounting Standards, Corporations Regulations 2001 and other mandatory
professional reporting requirements, noting the matters documented in Note 1 (a);
b) giving a true and fair view, the Group’s financial position as at 31 December 2020 and of its performance for the
year ended on that date; and
2.
3.
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
This declaration has been made after receiving the declaration required to be made to the directors in accordance
with Section 295A of the Corporations Act 2001 for the financial year ended 31 December 2020.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the
Directors by:
Christopher Clark
Chief Executive Officer
Perth, 31 March 2021
54
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Delta Drone International Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Delta Drone International Limited(the Company) and its
subsidiaries (the Group), which comprises the consolidated statement of financial position as at
31 December 2020, the consolidated statement of profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial report, including a summary of significant accounting policies
and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an
Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form
part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. We have determined the matters described below to be the key
audit matters to be communicated in our report.
Accounting for Reverse Acquisition
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 4 of the financial report, on 22
Our procedures included but were not limited to:
December 2020, Delta Drone International Limited
(formerly ParaZero Limited) completed the acquisition
of Delta Drone South Africa (Pty) Ltd (‘DDSA’).
•
Obtaining an understanding of the transaction
including an assessment of the accounting acquirer
and whether the transaction constituted a business
The accounting of this acquisition is a key audit matter
or asset acquisition;
due to the accounting complexity of the arrangement
which is accounted for as DDSA (the accounting parent)
issuing a share-based payment in return for the net
assets acquired in the Company.
Furthermore, judgement is involved in the
determination of the value of the purchase
consideration settled by way of a share-based
payment.
Refer to Note 2, Note 4 and Note 21 of the financial
report for a description of the accounting policy and
•
•
•
Assessing management’s proposed accounting
treatment in accordance with applicable
accounting standards;
Evaluating the basis of the valuation of the share-
based payment (or fair value of consideration);
Checking the calculation of the share-based
payment, fair value of identifiable net assets
acquired, including any separately identifiable
intangible assets;
judgements applied to this transaction.
•
Considering whether any fair values or
adjustments to fair values have been dealt with in
accordance with generally accepted accounting
principles;
•
Assessing the adequacy of the related disclosures
in Note 2, Note 4 and Note 21 to the financial
report.
Recoverability of cash generating units (“CGUs”)
Key audit matter
How the matter was addressed in our audit
Note 15 and Note 16 of the financial report discloses
Our procedures included, but were not limited to:
the individual intangible assets and the assumptions
used by the Group in testing these assets for
impairment.
As required by Australian Accounting Standards, the
Group performs an annual impairment test for each
CGU to which goodwill and other intangible assets have
been allocated to determine whether the recoverable
amount is below the carrying amount.
This was determined to be a key audit matter because
of the significant judgement involved in determining
the recoverable amount of the relevant CGU.
•
•
•
•
•
Holding discussions with management regarding
the impairment testing methodology applied;
Assessing the appropriateness of the Group’s
categorisation of Cash Generating Units (‘CGUs’)
and the allocation of assets to the carrying value
of CGUs based on our understanding of the Group’s
business and the Group’s internal reporting;
Challenging key inputs used in managements
impairment assessment;
Assessing the fair value less costs of disposal of
each CGU in conjunction with our valuation
specialists; and
Assessing the adequacy of the related disclosures
in Note 15 and Note 16 to the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 31 December 2020, but does not include
the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group 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 Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards 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 this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 12 to 15 of the directors’ report for the
year ended 31 December 2020.
In our opinion, the Remuneration Report of Delta Drone International Limited, for the year ended
31 December 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Dean Just
Director
Perth, 31 March 2021
DELTA DRONE INTERNATIONAL LIMITED
ANNUAL REPORT 31 DECEMBER 2020
ASX ADDITIONAL INFORMATION
The shareholder information set out below was applicable as at 11 March 2021.
As at 11 March 2021, there were 753 holders of fully paid ordinary shares.
VOTING RIGHTS
The voting rights of the ordinary shares are as follows:
Subject to any rights or restrictions for the time being attached to any shares or class of shares of the Company, each member
of the Company is entitled to receive notice of, attend and vote at a general meeting. Resolutions of members will be decided
by a show of hands unless a poll is demanded. On a show of hands each eligible voter present has one vote. However, where
a person present at a general meeting represents personally or by proxy, attorney or representation more than one member,
on a show of hands the person is entitled to one vote only despite the number of members the person represents.
On a poll each eligible member has one vote for each fully paid share held.
There are no voting rights attached to any of the options and performance options that the Company currently has on issue.
Upon exercise of these options, the shares issued will have the same voting rights as existing ordinary shares.
TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest holders of Ordinary Fully Paid Shares are:
Holder Name
DELTA DRONE SA
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
THE TRUST COMPANY (AUSTRALIA) LIMITED
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