Indoor Skydive Australia Group Limited Annual Report 2017

Plain-text annual report

INDOOR SKYDIVE AUSTRALIA GROUP LIMITED ABN: 39 154 103 607 2017 1 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTCONTENTS CHAIRMAN’S REPORT DIRECTORS’ REPORT 04 07 REMUNERATION REPORT (AUDITED) 13 AUDITOR’S INDEPENDENCE DECLARATION FINANCIAL REPORT ADDITIONAL INFORMATION CORPORATE DIRECTORY 25 26 70 73 Cover: “Be A Superhero” campaign captured the imagination of Australia in 2017. One of our amazing Junior iFLYERS, Carissa, shows us her own Superhero pose This page: AirRider is bringing the dream of flight to Asia later this year, and the Choi-Lee family and friends can’t wait! 2 REPORTLogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT3 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTChairman’s Report In 2017 ISA Group took its first steps towards becoming an international owner and operator of indoor skydiving facilities. Development commenced on our first international facility, AirRider 1 Utama in Malaysia, and the Group launched its distinctive AirRider brand for the international market. We also continued the roll out of our Australian iFLY facilities with iFLY Perth commencing operations in December 2016. These key events are detailed in this Annual Report. FIRST INTERNATIONAL FACILITY ISA Group has partnered with Bandar Utama City Sdn Bhd (1 Utama) to establish its first international indoor skydiving facility in Kuala Lumpur, Malaysia. 1 Utama operates one of the largest shopping centres in the world and is currently implementing an extension to connect the centre to Kuala Lumpur’s MTR rail network. AirRider 1 Utama will be an integral part of the new building enjoying easy access from the existing centre, local transport hubs and the new purpose built rail station. AirRider 1 Utama is located a convenient 15 minutes from the centre of Kuala Lumpur. AirRider 1 Utama is the result of a long and detailed due diligence, planning and development process. An MOU was signed in December 2016. The MOU established the commercial terms of the joint venture and paved the way for a final agreement and the commencement of construction. By partnering with 1 Utama, ISA Group leveraged strong local knowledge and expertise, reduced capital exposure for the Group’s first international facility and, importantly, secured a purpose built site in a key high thoroughfare location. AirRider 1 Utama is scheduled to open at the end of 2017. AIRRIDER In preparation for the Group’s international facilities launch a new brand, AirRider, was developed. AirRider is a contemporary and engaging brand designed to reflect the stimulating nature of indoor skydiving and the skills and expertise that can be learned through participation in the sport. The brand colours have been chosen to reflect the Group’s Australian heritage while appealing to the target audience. Market testing was undertaken as part of the development to ensure the brand resonated with key segments of the Asian market. AirRider is wholly owned by ISA Group and will be used in Group facilities operated throughout South East Asia, China and Hong Kong. As the Group develops its international offering, the AirRider brand will be used to signal to customers the quality of the experience they will receive, regardless of location, and the brand will offer assurance of the highest safety standards. INVESTMENTS IN SYSTEMS AND GROWTH ISA Group has continued to grow throughout the year. There has been a strong focus redeveloping and implementing improved systems and processes. A key initiative has been the development of international systems to enable a seamless offering to multiple locations in a variety of currencies and languages. The customer experience interface with the booking and sales system has also been reviewed and refined to improve the effectiveness on our “mobile first” digital initiatives. KEN GILLESPIE CHAIRMAN 4 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTAn international booking system will be rolled out over the coming months with AirRider 1 Utama being the first ISA Group facility to employ indoor skydiving specific systems. On completion of the AirRider 1 Utama deployment the systems will be able to be implemented across our other indoor skydiving facilities. STABLE AUSTRALIAN OPERATIONS 2017 has also been an exciting year for our Australian operations. Building on the lessons learnt from earlier construction and operations experience, ISA Group opened its first indoor skydiving facility in Perth. iFLY Perth was delivered ahead of schedule despite a challenging Australian construction environment. iFLY Perth opened to the public on 14 December 2016. Experiences gained from the Group’s east coast facilities ensured that iFLY Perth had few teething problems and was immediately able to operate as a polished, high standard concern. Opening just as the school holiday period commenced, iFLY Perth experienced high levels of occupancy and has continued to be very well received by the Perth community. iFLY Downunder, located in Penrith NSW, continues to be our flagship operation. With its large flying chamber, talented coaches and its hosting of the Australian Indoor Skydiving Championships each year, it appeals to the professional and enthusiast market. The chamber allows these groups to develop their outdoor expertise and skills by utilising the exacting simulation provided by our indoor facility. Through our strong partnership with the Australian Parachute Federation (APF) a new world first indoor/outdoor skydiving training program has been implemented. Our iFLY Gold Coast facility caters to the tourist market. It is located in the iconic Surfer’s Paradise and is central to tourist accommodation and public transport. A number of efficiencies were implemented across the Group in 2017 and these have resulted in iFLY Gold Coast’s performance improving throughout the course of the year. NEXT STEPS The Group remains focussed on our stated strategic intent of growth and expansion into South East Asia, China and Hong Kong. The Group will continue to seek opportunities to grow the AirRider brand across the region and build a reputation for the delivery of a superior customer experience with an ongoing commitment to safety. ISA Group is exploring a number of potential opportunities across the region. As with each of the Group facilities any expansion will be subject to detailed due diligence including site feasibility and assessment, market analysis and the implementation of risk mitigation strategies. A second Sydney indoor skydiving facility at EQ, Moore Park in the Eastern Suburbs is being considered. Further work aimed at understanding construction and lease costs and their impact of the delivery of an acceptable rate of return is a current focus. The Group has not declared a dividend for the 2017 financial year. We do not anticipate there being a dividend declared while the Company’s focus is on growth. Thank you for your ongoing support of our Company. I encourage you to read the remainder of this Annual Report, including the financial performance, and invite you to attend our Annual General Meeting in October 2017. KEN GILLESPIE CHAIRMAN 5 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTCHAIRMAN’S REPORT KEN GILLESPIE AC, DSC, CSM Chairman WAYNE JONES Director & Chief Executive Officer DANNY HOGAN MG Director & Chief Operations Officer STEPHEN BAXTER Non-Executive Director 6 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTSchool kids playing in the wind at iFLY Gold Coast as part of their STEM educational visit DIRECTORS’ REPORT 7 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTDirectors’ Report Your Directors are pleased to present their report on the consolidated entity (referred to hereafter as ISA Group) consisting of Indoor Skydive Australia Group Limited (the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2017. DIRECTORS The individuals listed below were Directors of the Company at all times during the year and at the date of this Directors’ Report, unless otherwise stated: Ken Gillespie AC, DSC, CSM Chairman – Non-Executive Appointed 18 October 2012 One of Australia’s most distinguished career soldiers, Lieutenant General (retired) Ken Gillespie, AC, DSC, CSM, is the Chairman of ISA Group. Ken is on the Board of Directors of leading local defence manufacturer, Airbus Asia Pacific Group, and ASX listed, Senetas Limited. He is also Chair of the Council of the Australian Strategic Policy Institute, an internationally recognised Canberra based think tank, on the advisory board of Veolia Waste and a board member of the not-for-profit, ANZAC Research Institute. Ken also provides advice to the NSW Government in his role as Co-ordinator of Rural & Regional Infrastructure of NSW. Ken, served with the Australian Defence Force for over 43 years, and was Chief of Army for three years before his retirement in June 2011. Previously he had served as Land Commander Australia and Vice Chief of the Australian Defence Force. During the year Ken was a member of the Remuneration & Nomination Committee (Chairman until 23 August 2016) and the Audit & Risk Committee until the Committee structure was revised in May 2017. Wayne Jones Director & Chief Executive Officer Appointed 4 November 2011 Wayne served for 21 years in the Australian Defence Force and was part of the highly acclaimed Special Air Service Regiment for the last 14 years of his career. Wayne holds various senior instructor qualifications and has been at the forefront of Australian Military Freefall development and training over the past 10 years. He is still involved in the training of special forces troops and he continues to participate in the sport of skydiving at the highest levels. Wayne is a member of the Australian Institute of Company Directors. 8 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTDanny Hogan MG Director & Chief Operations Officer Appointed 4 November 2011 David Murray AO Former Non-Executive Director Appointed 3 February 2014 Resigned 25 April 2017 Danny enlisted in the Australian Regular Army in 1991, and in 1997 was selected for further service within the Special Air Service Regiment. He has been recognised and awarded for his actions and leadership during his 21 year military career including receiving the Medal for Gallantry. He was selected and completed a two year military exchange in the USA with two of the USA’s elite Special Forces Commands. While in the USA he gained his freefall parachuting qualifications and developed a very strong background in the use of vertical wind tunnel simulation training. Danny was a highly qualified senior dive instructor within the Special Air Service Regiment. Danny is a member of the Australian Institute of Company Directors. Steve Baxter Non-Executive Director Appointed 13 August 2012 Former Australian Regular Army electronics technician turned successful entrepreneur, Steve is the founder of early Internet Provider SE Net and co-founder of telecommunications infrastructure company, Pipe Networks Ltd. In 2008 he moved to the USA and joined Google Inc deploying high speed telecommunication infrastructure, before returning to Australia. Steve is known for his entrepreneurial skills and appears on the popular TV show “Shark Tank”. He is the founder of Brisbane based not-for-profit River City Labs - an early stage and start-up co-working space for tech and creative companies. Steve is a former director of Other Levels Limited (resigned 31 December 2016) and Vocus Communications Limited (resigned 22 February 2016). Prior to the restructure of our Committees, Steve was Chairman of the Remuneration & Nomination Committee (from 23 August 2016) and a member of the Audit & Risk Committee (from 23 August 2016 when he stepped down from the role as Chairman) Former Chief Executive Officer of Commonwealth Bank of Australia and Chairman of the Australian Government Future Fund, David has over 40 years’ experience in banking and financial services. He was appointed an Officer of the Order of Australia in 2007 for services to the finance sector nationally and internationally through strategic leadership and policy development, to education through fostering relations between educational institutions, business and industry, and to the community as a supporter and fundraiser. David is Chairman of the Butterfly Foundation. Kirsten Thomson Non-Executive Director Appointed 21 June 2016 Resigned 25 April 2017 Kirsten Thomson has over 20 years’ experience in the fields of funds management and equities research. She has demonstrated strong success in a broad range of strategic challenges including competing business models, challenging economic cycles and differing and emerging commercial approaches to doing business in Australia and abroad. Prior to her resignation Kirsten was Chairman of the Audit & Risk Committee and a member of the Remuneration & Nomination Committee. COMPANY SECRETARY Fiona Yiend General Counsel & Company Secretary Appointed 16 October 2013 Fiona Yiend is an experienced company secretary with has over 8 years’ experience in the listed environment. She holds a Bachelor of Arts, Bachelor of Laws (Hons), Graduate Diploma in Applied Finance and Investments, Graduate Diploma in International Law and a Graduate Diploma in Applied Corporate Governance. She is also a member of the Australian Corporate Lawyers Association (ACLA). 9 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTDIRECTOR’S REPORT DIRECTORS’ MEETINGS The number of meetings of the Directors’ and Audit & Risk Committee that Directors were eligible to attend and the number of meetings attended by each Director during the year are listed below. There were no Remuneration & Nomination Committee meetings held in the period. In May/June 2017 ISA Group restructured its Committees so that Committee matters will, for the present, be dealt with by the full Board in accordance with the appropriate Committee Charter and governance processes. BOARD AUDIT AND RISK COMMITTEE Eligible to Attend Attended Eligible to Attend Attended Ken Gillespie Wayne Jones Danny Hogan Stephen Baxter David Murray Kirsten Thomson 12 12 12 12 10 10 11 12 12 11 10 10 2 2 1 2 2 1 DIRECTORS’ SHAREHOLDINGS The following table sets out each Director’s relevant interest in shares and options in shares of ISA Group as at the date of this report. No Director has any relevant interest in shares or options in shares of a related body corporate of ISA Group as at the date of this report. DIRECTOR Ken Gillespie Wayne Jones Danny Hogan Stephen Baxter NUMBER OF SHARES AND NATURE OF INTEREST Indirect interest in 436,142 shares held by Sector West Pty Ltd ATF Gillespie Family Trust Indirect interest in 16,060,000 shares held by Excalib-air Pty Ltd, indirect interest in 350,000 shares held by Project Flight Pty Ltd ATF Wayne Jones Superannuation Fund, indirect interest in 14,000 shares held by Project Gravity Pty Ltd, indirect interest in 2,627,307 shares held by Project Gravity Pty Ltd ATF Jones Family Trust Indirect interest in 16,060,000 shares held by Excalib-air Pty Ltd, indirect interest in 200,000 shares held by Hogan Superannuation Fund, indirect interest in 2,187,833 shares held by Australian Indoor Skydiving Pty Ltd ATF Hogan Family Trust Indirect interest in 17,039,475 shares held by Birkdale Holdings (QLD) Pty Ltd 10 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTDIVIDENDS No dividends were declared during the period. PRINCIPAL ACTIVITIES ISA Group owns and/or operates Indoor Skydiving Facilities across Australia and South East Asia. It operates three Indoor Skydiving Facilities in Australia; iFLY Downunder (Penrith NSW), iFLY Gold Coast and iFLY Perth. ISA Group has an agreement for lease for its fourth Australian Indoor Skydiving Facility at Entertainment Quarter, Moore Park Sydney. ISA Group is currently developing its first Indoor Skydiving Facility in South East Asia. Located at 1 Utama, Kuala Lumpur Malaysia, AirRider 1 Utama is due to open by the end of 2017 and will be operated under our unique international “AirRider” brand. Negotiations with a number of potential partners continue in relation to other opportunities in South East Asia, China and Hong Kong. REVIEW OF OPERATIONS With the opening of iFLY Perth, ISA Group’s operations have focussed on group stability and consolidation. With 3 operating facilities in Australia, ISA Group is now well positioned to increase performance and promote organic growth. In the last 6 months of the financial year the operational focus has been on implementing efficiencies and driving EBITDA margin performance. Tailored offerings have been developed at each of our facilities to capitalise on local opportunities and market trends. In the second half of the year iFLY Gold Coast operations have started to see an increase in EBITDA margin. Work in this area is continuing and performance is expected to improve into financial year 2018. iFLY Downunder continues to perform well with a strong base of professional flyers. iFLY Perth has performed strongly since its opening ahead of schedule on 14 December 2016. Its overall performance is similar to iFLY Downunder. For the year ended 30 June 2017, ISA Group reported earnings before interest, tax, depreciation and amortisation of $1,233,517 excluding share based payments and lease straight lining expense (2016: loss of $140,409). ISA Group reported a net loss after tax of $891,290 (2016: loss of $1,506,760). To fully understand our results, please refer to the full financial statements and explanatory notes included in this Annual Report. CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the affairs of the Company during the financial year which have not been disclosed to the market. SUBSEQUENT EVENTS Since the reporting date the Board of Directors has resolved to issue 4,150,000 unlisted options as a long term incentive to eligible employees (incentive options). 1,950,000 incentive options were issued to eligible employees on 24 August 2017 and 2,200,000 incentive options will be issued to the Company’s executive directors subject to shareholder approval. The incentive options have an exercise price of $0.35 and expire on 23 August 2021. 50% of the incentive options will vest after 2 years of continuous service and 50% after 3 years of continuous service from 24 August 2017. On 4 September 2017 the Company entered into a binding Memorandum of Understanding with Avest Capital Company Limited to enable the Company to conduct further due diligence and to establish a commercial framework for the development and operation of indoor skydiving facilities in China including Hong Kong under ISA Group’s AirRider brand. See ASX Announcement made on 4 September 2017 for further details. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations or the state of affairs of the consolidated group in future financial years. FUTURE DEVELOPMENTS Our focus on the growth and development of indoor skydiving facilities across Australia, South East Asia, China and Hong Kong continues. In the opinion of the Directors, disclosure of any further information regarding business strategies and future development of ISA Group would be unreasonably prejudicial to the Company. REMUNERATION REPORT (AUDITED) The Remuneration Report set out from page 13 forms part of this Directors’ Report. INTERESTS IN ISA GROUP SECURITIES Details of the ISA Group securities issued during the year, and the number of ISA Group securities on issue as at 30 June 2017 are detailed in Note 15 of the Financial Statements and form part of this Directors’ Report. With the exception of performance rights which are discussed in the Remuneration Report, ISA Group did not have any options on issue as at 30 June 2017. 11 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTDIRECTOR’S REPORT ENVIRONMENTAL REGULATION ISA Group is not subject to any significant environment regulation under any law of the Commonwealth or of a State or Territory. DIRECTORS’ AND OFFICERS’ INSURANCE During the financial year, ISA Group has paid premiums to insure all Directors and Officers against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of a director or officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. In accordance with common commercial practice, the insurance policy prohibits disclosure of the nature of the liability insured against and the amount of the premium. NON-AUDIT SERVICES The Directors have considered and are satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: • all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and Directors’ Report Directors’ Report NON-AUDIT SERVICES NON-AUDIT SERVICES The Directors have considered and are satisfied that The Directors have considered and are satisfied that The Directors and Company Secretary of ISA Group are also the provision of non-audit services during the year the provision of non-audit services during the year party to a deed of access and indemnity. is compatible with the general standard of is compatible with the general standard of The Company has not otherwise, during or since the financial independence the imposed by for auditors independence the Corporations Act 2001. The Directors are satisfied Corporations Act 2001. The Directors are satisfied year, indemnified or agreed to indemnify an officer or auditor of the Company or any related body corporate against a the services disclosed below did not that the services disclosed below did not liability incurred by such an officer or auditor. compromise the external auditor’s independence compromise the external auditor’s independence for the following reasons: for the following reasons: imposed by for auditors The fees paid or payable to Grant Thornton Audit Pty Ltd for non-audit services provided during the year ended 30 June 2017 were $7,800. • the nature of the services provided does not compromise the general principles relating to auditor independence in The fees paid or payable to Grant Thornton Audit accordance with APES 110: Code of Ethics for Professional Pty Ltd for non-audit services provided during the Accountants set by the Accounting Professional and Ethical year ended 30 June 2017 were $7,800. Standards Board. AUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION The Auditor’s independence declaration at page x forms part of this Directors’ Report. The fees paid or payable to Grant Thornton Audit Pty Ltd for non-audit services provided during the year ended 30 June The Auditor’s independence declaration at page x 2017 were $7,800. forms part of this Directors’ Report. ROUNDING OF AMOUNTS ROUNDING OF AMOUNTS the the Board prior the Board prior AUDITOR’S INDEPENDENCE DECLARATION ISA Group is not an entity to which ASIC Legislative ISA Group is not an entity to which ASIC Legislative The Auditor’s independence declaration at page x forms part Instrument 2016/199 applies. Accordingly, Instrument 2016/199 applies. Accordingly, of this Directors’ Report. amounts in the financial statements and annual amounts in the financial statements and annual reports have been rounded to the nearest dollar reports have been rounded to the nearest dollar ROUNDING OF AMOUNTS not the nearest thousand dollars. not the nearest thousand dollars. ISA Group is not an entity to which ASIC Legislative Instrument 2016/199 applies. Accordingly, amounts in the financial statements and annual reports have been rounded to the nearest dollar not the nearest thousand dollars. PROCEEDINGS ON BEHALF OF THE COMPANY - all non-audit services are reviewed and all non-audit services are reviewed and No person has applied to the court under section 237 of the approved by to approved by to Corporations Act 2001 for leave to bring, or intervene in, commencement to ensure they do not commencement to ensure they do not proceedings on behalf of any entity within ISA Group. integrity and adversely affect integrity and the adversely affect objectivity of the auditor; and objectivity of the auditor; and AUDITOR - the nature of the services provided does Grant Thornton Audit Pty Ltd was appointed as ISA Group’s ISA Group does not currently have any on-market ISA Group does not currently have any on-market not compromise the general principles auditor on 24 January 2017 and continues in office until the buy-back of shares. buy-back of shares. relating to auditor independence in 2017 Annual General Meeting. Shareholders will be asked to accordance with APES 110: Code of Ethics approve the appointment of Grant Thornton Audit Pty Ltd as for Professional Accountants set by the auditor at the 2017 Annual General Meeting in accordance Accounting Professional and Ethical with section s327C of the Corporations Act 2001. Standards Board. the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. BUY BACK ISA Group does not currently have any on-market buy-back of shares. BUY BACK BUY BACK that - - This Directors’ Report is made in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act. This Directors’ Report is made in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act. This Directors’ Report is made in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act. On behalf of the Board On behalf of the Board On behalf of the Board Ken Gillespie Chairman 26 September 2017 KEN GILLESPIE CHAIRMAN Ken Gillespie 26 September 2017 Chairman Sydney 26 September 2017 Sydney Sydney 12 WAYNE JONES DIRECTOR & CHIEF EXECUTIVE OFFICER Wayne Jones Director & Chief Executive Officer Wayne Jones Director & Chief Executive Officer Indoor Skydive Australia Group Limited Indoor Skydive Australia Group Limited 2017 Annual Report 2017 Annual Report 12 12 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT REMUNERATION REPORT 1313 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTRemuneration Report REMUNERATION REPORT Dear Shareholder I am pleased to present to you the ISA Group 2017 Remuneration Report. This report sets out the remuneration strategy and outcomes for the financial year ended 30 June 2017. Towards the end of each financial year the Directors of ISA Group review our remuneration strategy for the prior year against operational performance and formulate our remuneration strategy for the coming year. We take into account a number of factors including the delivery of strategic outcomes and the performance of the business, as well as market factors that influence remuneration and impact retention strategies. In June 2016, ISA Group determined that due to the impact of the delay of the opening of our Gold Coast facility and the need to focus on delivering the Perth facility the Key Management Personnel (KMP) would not receive a remuneration increase for the 2017 financial year. We also took the opportunity to consider the focus of each of our KMP and restructured roles as appropriate. We have a strong and talented management team which is committed to delivering our strategic and operational goals. Our remuneration strategy is designed to drive performance and provide reasonable and fair market remuneration. I believe we are achieving this and our KMP continues to strive to increase shareholder value and grow the company’s operations and performance. As always, we welcome your feedback on our remuneration strategy and seek your ongoing support to drive performance. Yours sincerely Ken Gillespie Chairman of the Board 1. Introduction This Remuneration Report for the year ended 30 June 2017 forms part of the ISA Group Directors’ Report and has been audited in accordance with the Corporations Act 2001. The Remuneration Report details remuneration information for the KMP of ISA Group comprising the Non- Executive Directors, Executive Directors and the senior executives responsible for planning, directing and controlling the activities of ISA Group. 2. Remuneration Governance ISA Group implements strong corporate governance practices to ensure that it’s remuneration strategy, policies and practices promote shareholder growth through the achievement of strategic and operational goals while fairly rewarding employees. Consideration of Remuneration & Nomination Matters ISA Group implements a corporate governance system whereby all remuneration matters are considered by a ‘one up’ manager for approval. This system is implemented across the Company and ensures that no individual determines their own remuneration or the remuneration of their direct reports. In the case of the Chief Executive Officer and his direct reports all remuneration matters are submitted to the Board for consideration and, if appropriate, approval. Where appropriate external advice is obtained for the benefit of the Board in considering remuneration matters. This advice can take the form of remuneration benchmarking, remuneration consultancy, tax or financial consultancy services. The approval of remuneration matters is restricted to non-executive directors only. 14 Indoor Skydive Australia Group Limited 2017 Annual Report 14 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Remuneration Report Dear Shareholder I am pleased to present to you the ISA Group 2017 Remuneration Report. This report sets out the remuneration strategy and outcomes for the financial year ended 30 June 2017. Towards the end of each financial year the Directors of ISA Group review our remuneration strategy for the prior year against operational performance and formulate our remuneration strategy for the coming year. We take into account a number of factors including the delivery of strategic outcomes and the performance of the business, as well as market factors that influence remuneration and impact retention strategies. In June 2016, ISA Group determined that due to the impact of the delay of the opening of our Gold Coast facility and the need to focus on delivering the Perth facility the Key Management Personnel (KMP) would not receive a remuneration increase for the 2017 financial year. We also took the opportunity to consider the focus of each of our KMP and restructured roles as appropriate. We have a strong and talented management team which is committed to delivering our strategic and operational goals. Our remuneration strategy is designed to drive performance and provide reasonable and fair market remuneration. I believe we are achieving this and our KMP continues to strive to increase shareholder value and grow the company’s operations and performance. As always, we welcome your feedback on our remuneration strategy and seek your ongoing support to drive performance. Yours sincerely Ken Gillespie Chairman of the Board 1. Introduction This Remuneration Report for the year ended 30 June 2017 forms part of the ISA Group Directors’ Report and has been audited in accordance with the Corporations Act 2001. The Remuneration Report details remuneration information for the KMP of ISA Group comprising the Non- Executive Directors, Executive Directors and the senior executives responsible for planning, directing and controlling the activities of ISA Group. 2. Remuneration Governance ISA Group implements strong corporate governance practices to ensure that it’s remuneration strategy, policies and practices promote shareholder growth through the achievement of strategic and operational goals while fairly rewarding employees. Consideration of Remuneration & Nomination Matters ISA Group implements a corporate governance system whereby all remuneration matters are considered by a ‘one up’ manager for approval. This system is implemented across the Company and ensures that no individual determines their own remuneration or the remuneration of their direct reports. In the case of the Chief Executive Officer and his direct reports all remuneration matters are submitted to the Board for consideration and, if appropriate, approval. Where appropriate external advice is obtained for the benefit of the Board in considering remuneration matters. This advice can take the form of remuneration benchmarking, remuneration consultancy, tax or financial consultancy services. The approval of remuneration matters is restricted to non-executive directors only. Remuneration Report REMUNERATION REPORT Prior to May 2017, the corporate governance processes were conducted through the Remuneration & Nomination Committee. Since that time remuneration matters are considered by the Board of Directors (Executive Directors excluded) under the auspices of the Remuneration & Nomination Committee Charter which is available at www.indoorskydive.com.au. Remuneration Recommendations ISA Group engages independent external consultants to provide advice and assistance in relation to remuneration from time to time as required. During the period, we received preliminary advice on long term incentives to drive performance in 2018 and the following years. This advice is continuing and relates to future remuneration. No remuneration recommendations from independent remuneration advisors were received in relation to the 2017 financial year. Hedging of Remuneration ISA Group KMP and their closely related parties are prohibited from hedging or otherwise reducing or eliminating the risk associated with equity based incentives. 3. Key Management Personnel The KMP for ISA Group for 2017 comprise the Non-Executive Directors, Executive Directors and the senior executives responsible for planning, directing and controlling the activities of ISA Group. Executive KMP Wayne Jones Executive Director & Chief Executive Office Non-Executive Directors: Ken Gillespie Chair Stephen Baxter Director Danny Hogan Executive Director & Chief Operations Officer Former KMP: Salesh Nischal Chief Financial Officer (appointed 10 May 2017) Brett Sheridan Chief Commercial Officer Fiona Yiend General Counsel & Company Secretary A short profile of the Executive KMP follows: David Murray Director until 25 April 2017 Kirsten Thomson Director until 25 April 2017 Stephen Burns Chief Financial Officer until 17 May 2017 Wayne Jones Director & Chief Executive Officer Wayne Jones is the Chief Executive Officer of ISA Group and was appointed to the role on the foundation of the company in November 2011. He has been one of the key forces behind the successful establishment of ISA Group. Wayne holds formal qualifications in Project Management, Business, Security and Risk Management and Management (Financial Management) and is a Member of the Australian Institute of Company Directors. He has over 21 years’ experience in leading teams and delivering results. Prior to establishing ISA Group Wayne was a Commander within the Special Air Service Regiment and responsible for the development and performance of teams in changing environments. Indoor Skydive Australia Group Limited 14 2017 Annual Report Indoor Skydive Australia Group Limited 2017 Annual Report 15 15 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT REMUNERATION REPORT Remuneration Report Danny Hogan Director & Chief Operations Officer Salesh Nischal Chief Financial Officer Brett Sheridan Chief Commercial Officer Fiona Yiend General Counsel & Company Secretary Danny Hogan is the Chief Operations Officer of ISA Group and a founder of the company. His primary responsibilities are the Company’s operations including the designing, development and construction of our indoor skydiving facilities. Danny is a Member of the Australian Institute of Company Directors and is qualified in Military Freefall Parachuting Operations and was a highly qualified senior dive instructor within the Special Air Service Regiment. Prior to establishing ISA Group Danny was a highly decorated member of the Special Air Service Regiment and received the distinguished Medal of Gallantry. Danny has proven expertise in VWT operations and the ability to lead teams and manage complex environments. Joining the company in May 2017, Salesh Nischal has 20 years of extensive financial and operational experience in the ASX reporting environment within large diverse organisations. He also has a proven ability to improve operations, impact business growth and accomplish sustainable profit growth through achievements in strategic outcomes, financial management, cost control management, internal controls and productivity/ efficiency improvements. With experiences in building, and leading business transformation, Salesh has delivered significant achievements in strategy execution, risk management, treasury management, tax planning, acquisitions and divestments, and IT systems developments. Salesh is committed to maximising long-term shareholder value, ensuring a balanced portfolio of growth initiatives and maintaining the highest level of integrity and transparency. Salesh holds a Bachelor of Arts degree in accounting and has CPA qualifications. Brett Sheridan joined ISA Group in May 2013 in the role of Chief Marketing Officer and became the Chief Commercial Officer in July 2016. Prior to that time, Brett provided ISA Group with contracting services and has been involved with the Company since its inception. Brett is responsible for driving customer demand, increasing brand recognition and analysing market opportunities as well as driving future growth and the strategic direction of the Company. Brett is an experienced marketer with over 15 years association with the tourism and leisure industry and over 10 years of entrepreneurial experience. Brett’s key expertise is to deliver business growth which he has proven repeatedly in the past. Fiona Yiend joined ISA Group in September 2013 as General Counsel and Company Secretary. She is responsible for managing ISA Group’s legal matters, corporate governance and board administration. Fiona holds a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia (formerly Chartered Secretaries Australia), Graduate Diplomas in International Law and in Applied Finance and Investment and a Bachelor of Laws (second class honours) and Bachelor of Arts. Fiona’s formal qualifications are complemented by over 8 years’ experience as General Counsel and Company Secretary of ASX listed entities. Profiles of Non-Executive Directors can be found on pages 8 and 9. 4. Remuneration Principles, Strategy and Outcomes Remuneration principles ISA Group’s remuneration strategy is based on the following principles: • • Retain Top Talent – As ISA Group operates in a unique environment with a limited pool of talent ISA Group seeks to retain the high calibre people it has identified. Align rewards with business performance – ISA Group seeks to align remuneration rewards with business performance through the use of “at risk” remuneration and the assessment of performance. 16 Indoor Skydive Australia Group Limited 2017 Annual Report 16 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Remuneration Report REMUNERATION REPORT Remuneration Report • • Support the execution of business strategy – ISA Group seeks to motivate employees to execute our aggressive growth strategy by setting performance objectives in line with strategic outcomes. Fairness, equity and consistency – ISA Group implements a consistent, transparent process for remuneration review and structures remuneration to achieve equity for like positions taking into account performance and tenure. These principles are applied as we assess remuneration in the context of the operational demands of the business, the labour market we operate in, and the returns to shareholders. Remuneration Strategy ISA Group’s remuneration strategy for 2017 focused on driving performance to achieve three operating indoor skydiving facilities. Short term incentives were used to focus on achieving financial results with long term incentives designed to encourage the retention of key employees over the high growth period. The following table sets out the mix of remuneration types and their alignment to our remuneration strategy: Fixed Remuneration Short-Term Incentive (STI) Long Term Incentive (LTI) Consists of Base salary Annual cash payment subject to the achievement of financial targets Participation in the ISA Group Performance Rights Plan Rewards for Experience, skills, capability and performance. Achieving set financial outcomes for the financial year. Tenure over a long term period Is Fixed At Risk At Risk Reviewed annually Wholly dependent on achieving the set financial targets Wholly dependent on achieving the set tenure requirements Brett is an experienced marketer with over 15 years association with the tourism and leisure industry and over 10 years of entrepreneurial experience. Brett’s key expertise is to deliver business growth which he has proven repeatedly in the past. Determined by Retention of individual over a course of time. Review of individual performance, experience and capability within the context of the overall business performance. Performance against predetermined financial targets. STI is only payable if the financial targets are achieved. It includes an initial target and a stretch target to encourage continued performance. Danny Hogan Danny Hogan is the Chief Operations Officer of ISA Group and a founder of the Director & Chief company. His primary responsibilities are the Company’s operations including the designing, development and construction of our indoor skydiving facilities. Operations Officer Danny is a Member of the Australian Institute of Company Directors and is qualified in Military Freefall Parachuting Operations and was a highly qualified senior dive instructor within the Special Air Service Regiment. Prior to establishing ISA Group Danny was a highly decorated member of the Special Air Service Regiment and received the distinguished Medal of Gallantry. Danny has proven expertise in VWT operations and the ability to lead teams and manage complex environments. Salesh Nischal Chief Financial Officer Joining the company in May 2017, Salesh Nischal has 20 years of extensive financial and operational experience in the ASX reporting environment within large diverse organisations. He also has a proven ability to improve operations, impact business growth and accomplish sustainable profit growth through achievements in strategic outcomes, financial management, cost control management, internal controls and productivity/ efficiency improvements. With experiences in building, and leading business transformation, Salesh has delivered significant achievements in strategy execution, risk management, treasury management, tax planning, acquisitions and divestments, and IT systems developments. Salesh is committed to maximising long-term shareholder value, ensuring a balanced portfolio of growth initiatives and maintaining the highest level of integrity and transparency. Salesh holds a Bachelor of Arts degree in accounting and has CPA qualifications. Brett Sheridan Brett Sheridan joined ISA Group in May 2013 in the role of Chief Marketing Officer and Chief Commercial became the Chief Commercial Officer in July 2016. Prior to that time, Brett provided ISA Officer Group with contracting services and has been involved with the Company since its inception. Brett is responsible for driving customer demand, increasing brand recognition and analysing market opportunities as well as driving future growth and the strategic direction of the Company. Fiona Yiend Fiona Yiend joined ISA Group in September 2013 as General Counsel and Company General Counsel Secretary. She is responsible for managing ISA Group’s legal matters, corporate & Company Secretary governance and board administration. Fiona holds a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia (formerly Chartered Secretaries Australia), Graduate Diplomas in International Law and in Applied Finance and Investment and a Bachelor of Laws (second class honours) and Bachelor of Arts. Fiona’s formal qualifications are complemented by over 8 years’ experience as General Counsel and Company Secretary of ASX listed entities. Profiles of Non-Executive Directors can be found on pages 8 and 9. 4. Remuneration Principles, Strategy and Outcomes Remuneration principles ISA Group’s remuneration strategy is based on the following principles: • • Retain Top Talent – As ISA Group operates in a unique environment with a limited pool of talent ISA Group seeks to retain the high calibre people it has identified. Align rewards with business performance – ISA Group seeks to align remuneration rewards with business performance through the use of “at risk” remuneration and the assessment of performance. Indoor Skydive Australia Group Limited 2017 Annual Report 16 Indoor Skydive Australia Group Limited 2017 Annual Report 17 17 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT REMUNERATION REPORT Remuneration Report Remuneration Outcomes for Executive KMP The remuneration received by Executive KMP in 2017 and 2016 is set out below. Short Term Benefits Post Employment Benefits Long Term Benefits KMP Year Salary STI Non Mone- tary Super- annuation Long Service Leave Share Based Payments Rights Total Other Term- ination $ $ $ $ $ $ $ $ Wayne Jones CEO 2017 208,725 20163 207,995 Danny Hogan COO 2017 208,725 20163 207,995 Brett Sheridan CCO 2017 178,200 20163 177,692 Fiona Yiend GC/CS 2017 146,578 Salesh Nischal CFO1 Stephen Burns Former CFO2 20163 130,477 2017 16,975 2017 179,675 20163 176,105 - - - - - - - - - - - 8,943 19,829 12,674 19,760 16,020 19,829 18,276 19,760 7,372 16,929 8,097 16,880 4,019 13,925 6,338 12,395 - - - 1,613 17,692 16,730 - - - - - - - - - - - - - - - - - - - - - - 51,212 288,709 199,036 439,465 51,212 295,786 199,036 445,067 30,537 233,038 36,956 239,625 30,537 195,059 34,207 183,417 - 18,588 (29,788) 167,579 69,738 262,573 1 Appointed CFO on 10 May 2017 2 Resigned effective 17 May 2017 3 2016 comparative amounts have been updated to reflect the straight lining of performance rights on issue to KMP. Executive Remuneration Structure Remuneration Mix Fixed annual remuneration provides a “base” level of remuneration. Short and long-term variable incentives (“at risk”) reward executives for meeting and exceeding pre-determined targets. The targets for at-risk rewards is linked to clear measurable targets which the Company considers are significant to achieving our strategic plan and delivering shareholder returns. The percentage of at risk remuneration varies between executives based on the extent to which they are in a position to directly influence company performance. The executive directors at risk remuneration comprises short term incentives of 40% of base salary plus long term incentives which are assessed over a two year period. Other executives have short term incentives of up to 30% of their base at risk in each financial year in addition to long term incentives assessed over a two year period. 18 Indoor Skydive Australia Group Limited 2017 Annual Report 18 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Remuneration Report Remuneration Outcomes for Executive KMP The remuneration received by Executive KMP in 2017 and 2016 is set out below. Short Term Benefits Benefits Benefits Other Payments Post Employment Long Term Share Based KMP Year Salary STI Non Mone- tary Super- annuation Long Term- Service ination Rights Total Leave REMUNERATION REPORT Remuneration Report Fixed Remuneration Fixed remuneration consists of cash salary, superannuation and other limited non-monetary benefits. The levels are set to attract and retain qualified, skilled and experienced executives and are determined based on comparable market data, the skills and experience of the individual executive and the accountability and responsibility of the role. Following an independent external remuneration review in 2013 which identified that ISA Group Executive KMP remuneration was within the bottom quartile compared to its comparator group, ISA Group has been moving fixed remuneration closer to the median level. However due to impact of the late opening of the Gold Coast facility ISA Group determined not to increased fixed remuneration for the KMP for the 2017 financial year. $ $ $ $ $ $ $ $ Short Term Incentive Structure The key features of ISA Group’s STI Plan are outlined below: 2017 208,725 8,943 19,829 51,212 288,709 What is the purpose of the STI? 20163 207,995 12,674 19,760 199,036 439,465 STI performance targets drive executives to focus on achieving ISA Group’s performance goals and rewards executives for achieving or exceeding those goals. 2017 208,725 16,020 19,829 51,212 295,786 Who participates? All Executive KMP and selected senior executives. 20163 207,995 18,276 19,760 199,036 445,067 How much can be earned under the STI Plan? 2017 178,200 7,372 16,929 30,537 233,038 20163 177,692 8,097 16,880 36,956 239,625 What are the performance conditions? 2017 146,578 4,019 13,925 30,537 195,059 20163 130,477 6,338 12,395 - - - 1,613 17,692 16,730 34,207 183,417 - 18,588 (29,788) 167,579 69,738 262,573 Over what period is it measured? How is it paid? When and how is it reviewed? Who assesses performance against targets? The target STI opportunity for KMP is between 14% to 18% of base salary depending on the role. For stretch/over performance, KMP have the ability to earn an additional 11% to 18% of base salary. No STI is payable unless minimum financial targets relating to Group EBITDA are achieved. The Stretch target is also measured against EBITDA. Performance is measured over the 12 month period from 1 July to 30 June. STI payments are made on the achievement of reaching targets (ie payments are not made progressively). If targets are reached the full STI is paid. If the target is achieved but the stretch target is not, no payment or partial payment is made for exceeding the target. The Executive must be an employee and not serving out a notice period when the payment of an STI is made. Payment occurs after conclusion of the end of year audit (usually September). The STI is reviewed annually in line with the review of remuneration and the setting of the upcoming financial budget. The targets are objective financial measures which are assessed against the Company’s audited financial accounts. The Board approves all STI assessments and payments. What are the clawback provisions? None Indoor Skydive Australia Group Limited 2017 Annual Report 18 Indoor Skydive Australia Group Limited 2017 Annual Report 19 19 - - - - - - - - - - - Wayne Jones CEO Danny Hogan COO Brett Sheridan CCO Fiona Yiend GC/CS Salesh Nischal 2017 16,975 CFO1 Stephen Burns Former CFO2 2017 179,675 20163 176,105 1 Appointed CFO on 10 May 2017 2 Resigned effective 17 May 2017 KMP. Executive Remuneration Structure Remuneration Mix - - - - - - - - - - - - - - - - - - - - - - 3 2016 comparative amounts have been updated to reflect the straight lining of performance rights on issue to Fixed annual remuneration provides a “base” level of remuneration. Short and long-term variable incentives (“at risk”) reward executives for meeting and exceeding pre-determined targets. The targets for at-risk rewards is linked to clear measurable targets which the Company considers are significant to achieving our strategic plan and delivering shareholder returns. The percentage of at risk remuneration varies between executives based on the extent to which they are in a position to directly influence company performance. The executive directors at risk remuneration comprises short term incentives of 40% of base salary plus long term incentives which are assessed over a two year period. Other executives have short term incentives of up to 30% of their base at risk in each financial year in addition to long term incentives assessed over a two year period. LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT REMUNERATION REPORT Remuneration Report Short term Incentive Outcomes For 2017, the STI performance targets were not met. All Executive KMP forfeited 100% of their STI award. Long Term Incentive Structure The key features of the ISA Group Long Term Incentive (LTI) are outlined below: What is the purpose of the LTI? Who participates? What is the vehicle? What are the performance conditions and what is the performance period? What are the service conditions? How is it paid? How are performance conditions set? What happens if a change of control occurs? The LTI drives executives to achieve certain outcomes that are considered important to the growth of the ISA Group. Participants are the Executive KMP and select senior executives who drive the growth strategy of ISA Group. Awards are in the form of performance rights under the ISA Group Performance Rights Plan. If performance hurdles are met performance rights vest and the employee will be allocated the relevant number of shares. An employee granted performance rights is not legally entitled to shares in ISA Group before the rights vest. Once vested, each right entitles the employee to receive one share in ISA Group. Performance Rights issued to Executive KMP in FY2016 were not subject to performance conditions. They were subject to a service condition only as the Board considered at the time of issue that the retention of KMP during the early stages of the Company’s growth was an important outcome. No Performance Rights were issued to Executive KMP in FY2017. In 2012 as part of the employment of the CEO and COO (Founding Directors), the Company committed to issue certain rights to the Founding Directors on completion certain milestones. The final tranche of incentives for the Founding Directors was based on the performance of our first indoor skydiving in the 2016 financial year. This milestone was assessed and vested in September 2017 following the completion of the 2016 audit process. Performance Rights issued to Executive KMP in FY2016 were subject to a service condition of continued services with ISA Group from Grant Date until 1 July 2017. Subject to meeting the performance hurdles the performance rights vest. Once vested the performance rights can be exercised on the basis of one fully paid ordinary ISA Group share for each performance right. The performance conditions are set by the Board after considering the appropriate conditions to drive a particular outcome aligned. If a change in control event occurs unvested performance rights will vest where, in the Board’s absolute discretion, pro rata performance is in line with the performance criteria applicable to those performance rights over the 20 Indoor Skydive Australia Group Limited 2017 Annual Report 20 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT For 2017, the STI performance targets were not met. All Executive KMP forfeited 100% of their STI award. The key features of the ISA Group Long Term Incentive (LTI) are outlined below: What are the clawback provisions? REMUNERATION REPORT Remuneration Report Remuneration Report Short term Incentive Outcomes Long Term Incentive Structure What is the purpose of the LTI? Who participates? What is the vehicle? period from date of grant to the date of the change in control event. If in the reasonable opinion of the Board a participant in the LTI has acted fraudulently or dishonestly or is in material breach of his or her obligations to ISA Group then the Board in its absolute discretion may determine that any unvested rights lapse, that any shares issued pursuant to performance rights in these circumstances are forfeited, or where the shares issued to the performance rights have been sold require the participant to pay to ISA Group all or part of the net proceeds of sale. Long Term Incentive Awards and Outcomes During 2017 the Founding Directors were each entitled to 391,856 performance rights which vested for exceeding pre-determined targets in relation to the financial performance of the Penrith Indoor Skydiving Facility. The following table sets out the performance rights issued to KMP in July 2015 which vested in July 2017 following the satisfaction of performance hurdles. Name Vested Performance Rights Wayne Jones Danny Hogan Brett Sheridan Fiona Yiend 228,554 228,554 129,054 129,054 Summary of Executive Contracts Executive contracts set out remuneration details and other terms of employment for each individual executive. The key provisions of the KMP contracts relating to terms of employment and notice periods are set out below. Contractual terms vary due to the timing of contracts, individual negotiations and different market conditions. Date of contract Term of contract Termination Payments Notice required to be given to the Company for termination by Employee Wayne Jones Director and CEO October 2012 Ongoing 6 months Danny Hogan Director and COO October 2012 Ongoing 6 months 6 months’ notice for termination by Employer and legislative entitlements on redundancy. 6 months’ notice for termination by Employer and legislative entitlements on redundancy. Indoor Skydive Australia Group Limited 2017 Annual Report 20 Indoor Skydive Australia Group Limited 2017 Annual Report 21 21 What are the performance conditions and Performance Rights issued to Executive KMP in FY2016 what is the performance period? were not subject to performance conditions. They were The LTI drives executives to achieve certain outcomes that are considered important to the growth of the ISA Group. Participants are the Executive KMP and select senior executives who drive the growth strategy of ISA Group. Awards are in the form of performance rights under the ISA Group Performance Rights Plan. If performance hurdles are met performance rights vest and the employee will be allocated the relevant number of shares. An employee granted performance rights is not legally entitled to shares in ISA Group before the rights vest. Once vested, each right entitles the employee to receive one share in ISA Group. subject to a service condition only as the Board considered at the time of issue that the retention of KMP during the early stages of the Company’s growth was an important outcome. No Performance Rights were issued to Executive KMP in FY2017. In 2012 as part of the employment of the CEO and COO (Founding Directors), the Company committed to issue certain rights to the Founding Directors on completion certain milestones. The final tranche of incentives for the Founding Directors was based on the performance of our first indoor skydiving in the 2016 financial year. This milestone was assessed and vested in September 2017 following the completion of the 2016 audit process. Performance Rights issued to Executive KMP in FY2016 were subject to a service condition of continued services with ISA Group from Grant Date until 1 July 2017. Subject to meeting the performance hurdles the performance rights vest. Once vested the performance rights can be exercised on the basis of one fully paid ordinary ISA Group share for each performance right. What are the service conditions? How is it paid? How are performance conditions set? The performance conditions are set by the Board after considering the appropriate conditions to drive a particular outcome aligned. What happens if a change of control occurs? If a change in control event occurs unvested performance rights will vest where, in the Board’s absolute discretion, pro rata performance is in line with the performance criteria applicable to those performance rights over the LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT REMUNERATION REPORT Remuneration Report Salesh Nischal CFO Brett Sheridan CCO May 2017 Ongoing 6 Weeks May 2013 Ongoing 6 Weeks Fiona Yiend General Counsel & Company Secretary September 2013 Ongoing 6 Weeks 6 weeks’ notice for termination by Employer and legislative entitlements on redundancy. 6 weeks’ notice for termination by Employer and 6 months on redundancy. 6 weeks’ notice for termination by Employer and 6 months on redundancy. 5. Non-Executive Director Remuneration Approved Fee Pool Non-Executive Director fees are determined within a maximum directors’ fee pool limit. The directors’ fee pool was set in 2012 as $500,000. No director’s fees are paid to Executive Directors, Wayne Jones and Danny Hogan. Total non-executive remuneration paid during 2017 was $210,192. Approach to setting Non-Executive Director Remuneration Non-Executive Directors receive fixed remuneration in the form of a base fee plus fees for membership or chairing Board Committees. The Chairman’s base fee has been calculated such that no additional fees are paid for committee membership. Non-Executive Directors do not receive variable remuneration or other performance-related incentives. The Non-Executive Director fees were not increased in 2017. The Non-Executive Directors fees for the last two financial years are set out below. Financial Year Salary and Fees Bonus Share based payments Total Ken Gillespie Stephen Baxter David Murray * Kirsten Thomson* * Resigned 25 April 2017 2017 2016 2017 2016 2017 2016 2017 2016 85,000 84,530 55,000 55,000 29,727 40,000 40,465 - - - - - - - - - - - - - - - - - 85,000 84,530 55,000 55,000 29,727 40,000 40,465 - 22 Indoor Skydive Australia Group Limited 2017 Annual Report 22 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT REMUNERATION REPORT Remuneration Report 6. Other Statutory Disclosures ISA Group’s Financial Performance The table below sets out ISA Group’s earnings and movements in shareholder wealth over the last 5 years. 20131 2014 2015 2016 2017 Revenue - 1,212,643 6,431,444 8,155,888 12,271,081 Net Profit/(Loss) after Tax (914,571) (2,714,016) (1,903,921) (1,506,760)2 (891,290) Share price at 30 June 0.43 0.68 0.45 0.40 0.20 1 ISA Group listed on the ASX on 18 January 2013. 2 The 30 June 2016 Net Profit/Loss after Tax has been restated. Refer to Note 1(t). Performance rights holdings of KMP Non-executive Directors do not hold performance rights. Details of the performance rights holdings of other KMP are set out below: Balance at 1 July 2016 Granted as remuneration Rights exercised Rights lapsed Rights Forfeited Balance at 30 June 2017 Wayne Jones 548,409 Danny Hogan 548,409 Brett Sheridan 129,054 Salesh Nischal - Fiona Yiend 129,054 Stephen Burns 129,054 - - - - - - 319,855 319,855 - - - - - - - - - - - - - - - 228,554 228,554 129,054 - 129,054 129,054 - Salesh Nischal May 2017 Ongoing 6 Weeks 6 weeks’ notice for Remuneration Report CFO CCO Brett Sheridan May 2013 Ongoing 6 Weeks Fiona Yiend General Counsel & Company Secretary 2013 September Ongoing 6 Weeks termination by Employer and legislative entitlements on redundancy. 6 weeks’ notice for termination by Employer and 6 months on redundancy. 6 weeks’ notice for termination by Employer and 6 months on redundancy. 5. Non-Executive Director Remuneration Approved Fee Pool Non-Executive Director fees are determined within a maximum directors’ fee pool limit. The directors’ fee pool was set in 2012 as $500,000. No director’s fees are paid to Executive Directors, Wayne Jones and Danny Hogan. Total non-executive remuneration paid during 2017 was $210,192. Approach to setting Non-Executive Director Remuneration Non-Executive Directors receive fixed remuneration in the form of a base fee plus fees for membership or chairing Board Committees. The Chairman’s base fee has been calculated such that no additional fees are paid for committee membership. Non-Executive Directors do not receive variable remuneration or other performance-related incentives. The Non-Executive Director fees were not increased in 2017. The Non-Executive Directors fees for the last two financial years are set out below. Financial Salary and Bonus Share based Total payments Year 2017 2016 2017 2016 2017 2016 2017 2016 Ken Gillespie Stephen Baxter David Murray * Kirsten Thomson* * Resigned 25 April 2017 Fees 85,000 84,530 55,000 55,000 29,727 40,000 40,465 - - - - - - - - - - - - - - - - - 85,000 84,530 55,000 55,000 29,727 40,000 40,465 - Indoor Skydive Australia Group Limited 2017 Annual Report 22 Indoor Skydive Australia Group Limited 2017 Annual Report 23 23 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT REMUNERATION REPORT Remuneration Report Shareholdings of KMP The shareholding of the KMP including their associates is as follows: KMP Role Interest in shares held at 1 July 2017 Interest in shares acquired /(disposed) during the period Interest in shares issued on exercise of vested performance rights during the period Balance at 30 June 2017 Ken Gillespie Chairman 396,668 39,474 Steve Baxter Non-Executive Director 17,000,001 39,474 - - 436,142 17,039,475 Wayne Jones Chief Executive Officer & Director 18,241,423 164,474 391,856 18,797,753 Danny Hogan Chief Operations Officer & Director 17,827,423 Salesh Nischal Chief Financial Officer - Brett Sheridan Chief Commercial 550,000 Officer - - - Fiona Yiend General Counsel & Company Secretary 177,555 (37,555) Stephen Burns Former Chief Financial Officer 334,474 86,316 391,856 18,219,279 - - - - - 550,000 140,000 420,790 2016 Annual General Meeting (AGM) At the Company’s AGM in October 2016, 98.28% of votes received were in favour of adopting the remuneration report. Related party Transaction No related party transactions were entered into with KMP during 2017. 24 Indoor Skydive Australia Group Limited 2017 Annual Report 24 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Remuneration Report Shareholdings of KMP The shareholding of the KMP including their associates is as follows: KMP Role Interest in Interest in Interest in shares Balance at 30 shares held shares acquired at 1 July 2017 issued on exercise of June 2017 /(disposed) vested during the performance period rights during the period Ken Gillespie Chairman 396,668 39,474 Steve Baxter Non-Executive Director 17,000,001 39,474 436,142 17,039,475 Wayne Jones Chief Executive Officer 18,241,423 164,474 391,856 18,797,753 Danny Hogan Chief Operations 17,827,423 391,856 18,219,279 & Director Officer & Director Officer Officer Salesh Nischal Chief Financial Officer - Brett Sheridan Chief Commercial 550,000 Fiona Yiend General Counsel & 177,555 (37,555) Company Secretary Stephen Burns Former Chief Financial 334,474 86,316 - - - - - - - - - - 550,000 140,000 420,790 AUDITOR’S INDEPENDENT DECLARATION Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Indoor Skydive Australia Group Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Indoor Skydive Australia Group Limited for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. 2016 Annual General Meeting (AGM) At the Company’s AGM in October 2016, 98.28% of votes received were in favour of adopting the GRANT THORNTON AUDIT PTY LTD Chartered Accountants remuneration report. Related party Transaction No related party transactions were entered into with KMP during 2017. P J Woodley Partner - Audit & Assurance Sydney, 26 September 2017 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Indoor Skydive Australia Group Limited 2017 Annual Report 24 25 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Erica shows why our High Fly product is super-popular. FINANCIAL REPORT 26 26 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTCONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 Consolidated Statement of Profit or Loss and other Comprehensive Income For the year ended 30 June 2017 Revenue Cost of sales Gross Profit Other Income Selling and marketing expenses Administration expenses Other expenses Note 3 3 3 (a) 3 (b) Consolidated Group 2017 $ 2016 Restated * $ 12,271,081 (2,464,687) 9,806,394 8,155,888 (1,703,943) 6,451,945 45,478 188,389 (4,731,189) (4,354,932) (1,432,046) (3,115,827) (4,317,659) (867,632) Earnings Before Interest and Tax (666,295) (1,660,784) Finance Income Finance expense Loss Before Tax 7,373 (383,317) (1,042,239) 26,255 (124,614) (1,759,143) Income tax benefit 4 150,949 252,383 Loss After Tax (891,290) (1,506,760) Other comprehensive income for the year, net of tax - - Total comprehensive loss for the year (891,290) (1,506,760) Earnings per share From continuing operations: Basic earnings per share (cents) Diluted earnings per share (cents) 23 23 (0.68) (0.68) (1.26) (1.26) The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the Notes to the financial Statements. * Certain amounts shown here do not correspond to the 2016 financial statements and reflect adjustments made. Refer to Note 1 (t). Indoor Skydive Australia Group Limited 2017 Annual Report 27 27 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 Consolidated Statement of Financial Position As at 30 June 2017 Consolidated Group 2017 2016 Restated * Notes $ $ ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other financial asset TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible asset Deferred tax asset Other financial asset TOTAL NON-CURRENT ASSETS 5 6 7 8 10 4, 1(s).ii 7 1,706,457 917,777 74,105 42,489 2,740,828 43,965,692 773,304 2,167,638 209,245 47,115,879 Restated as at 1 July 2015* $ 5,647,175 561,334 44,927 - 6,253,436 2,550,601 688,525 59,794 - 3,298,920 38,070,213 426,378 2,016,689 - 40,513,280 23,881,098 710,630 1,764,304 - 26,356,032 TOTAL ASSETS 49,856,707 43,812,200 32,609,468 LIABILITIES CURRENT LIABILITIES Trade and other payables Deferred revenue Borrowings Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Share capital Reserve Accumulated losses TOTAL EQUITY 11 12 13 14 13 14 15 3,655,064 1,907,300 472,312 276,558 6,311,234 3,445,188 1,016,439 711,584 575,378 5,748,589 2,042,848 1,280,530 - 383,852 3,707,230 10,267,198 818,289 11,085,487 8,436,342 1,776,739 10,213,081 - 26,836 26,836 17,396,721 15,961,670 3,734,066 32,459,986 27,850,530 28,875,402 40,466,917 340,448 (8,347,379) 32,459,986 34,648,455 658,164 (7,456,089) 27,850,530 33,639,681 1,185,050 (5,949,329) 28,875,402 The Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements. * Certain amounts shown here do not correspond to the 2016 financial statements and reflect adjustments made. Refer to Note 1 (t). 28 Indoor Skydive Australia Group Limited 2017 Annual Report 28 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Consolidated Statement of Financial Position As at 30 June 2017 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017 Consolidated Statement of Changes in Equity For the year ended 30 June 2017 TOTAL ASSETS 49,856,707 43,812,200 32,609,468 Consolidated Group 2017 2016 Restated * Notes $ $ Restated as at 1 July 2015* $ 1,706,457 917,777 74,105 42,489 2,550,601 688,525 59,794 5,647,175 561,334 44,927 2,740,828 3,298,920 6,253,436 8 10 7 4, 1(s).ii 43,965,692 773,304 2,167,638 209,245 47,115,879 38,070,213 23,881,098 426,378 2,016,689 710,630 1,764,304 40,513,280 26,356,032 - - - - - - 3,655,064 1,907,300 472,312 276,558 6,311,234 3,445,188 1,016,439 711,584 575,378 5,748,589 2,042,848 1,280,530 383,852 3,707,230 10,267,198 818,289 11,085,487 8,436,342 1,776,739 10,213,081 26,836 26,836 32,459,986 27,850,530 28,875,402 40,466,917 340,448 (8,347,379) 32,459,986 34,648,455 33,639,681 658,164 (7,456,089) 1,185,050 (5,949,329) 27,850,530 28,875,402 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other financial asset TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible asset Deferred tax asset Other financial asset TOTAL NON-CURRENT ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Deferred revenue Borrowings Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Provisions TOTAL NON-CURRENT LIABILITIES NET ASSETS EQUITY Share capital Reserve Accumulated losses TOTAL EQUITY 5 6 7 11 12 13 14 13 14 15 TOTAL LIABILITIES 17,396,721 15,961,670 3,734,066 The Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Financial * Certain amounts shown here do not correspond to the 2016 financial statements and reflect adjustments Statements. made. Refer to Note 1 (t). Balance at 1 July 2016 Shares issued during the year Share issue costs Share issue on exercise of performance rights Employee share based payment performance rights Comprehensive income Loss for the period Total comprehensive loss for the year Issued Capital $ 34,648,455 Share based payments reserve $ 658,164 Accumulated losses $ (7,456,089) 5,665,005 (342,131) - - 495,588 (495,588) 177,872 Total $ 27,850,530 5,665,005 (342,131) - 177,872 - - - - - - (891,290) (891,290) (891,290) (891,290) Balance at 30 June 2017 40,466,917 340,448 (8,347,379) 32,459,986 Balance at 1 July 2015 Adjustment Balance at 1 July 2015 – Restated* 33,639,681 - 33,639,681 1,185,050 - 1,185,050 (5,738,626) (210,703) (5,949,329) 29,086,105 (210,703) 28,875,402 Shares issued on exercise of performance rights Employee share based payment performance rights Comprehensive income Loss for the year Prior period adjustment Total comprehensive loss for the year 1,008,774 (1,008,774) 481,888 - - - 481,888 - (1,314,903) (191,857) (1,314,903) (191,857) - (1,506,760) (1,506,760) - - - - - - Balance at 30 June 2016 – Restated* 34,648,455 658,164 (7,456,089) 27,850,530 The Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements. * Certain amounts shown here do not correspond to the 2016 financial statements and reflect adjustments made. Refer to Note 1 (t). Indoor Skydive Australia Group Limited 2017 Annual Report 28 Indoor Skydive Australia Group Limited 2017 Annual Report 29 29 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Consolidated Statement of Cash Flows As at 30 June 2017 Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Grant income received Interest received Finance costs Consolidated Group Note 2017 $ 14,523,197 (12,023,796) 24,875 7,373 (383,317) 2016 $ 8,133,131 (7,861,681) 51,750 26,255 (76,335) Net cash inflows from operating activities 17 2,148,332 273,120 Cash Flows From Investing Activities Purchase of property, plant and equipment Realisation of term deposits Payment for intangible assets (9,389,457) - (517,477) (12,370,007) 1,325,556 (284,252) Net cash outflows from investing activities (9,906,934) (11,328,703) Cash Flows From Financing Activities Proceeds from issue of securities Proceeds from borrowings Repayment of borrowings Share issue costs 5,665,005 2,493,302 (901,718) (342,131) - 9,147,926 - - Net cash inflows from financing activities 6,914,458 9,147,926 Net decrease in cash held (844,144) (1,907,657) Cash and cash equivalents at beginning of period Effects of exchange rate changes 2,550,601 - 4,321,619 136,639 Cash and cash equivalents at end of period 5 1,706,457 2,550,601 The Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements. 30 Indoor Skydive Australia Group Limited 2017 Annual Report 30 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 These consolidated financial statements and notes represent those of Indoor Skydive Australia Group Limited and Controlled Entities (the Consolidated Group or Group). The separate financial statements of the parent entity, Indoor Skydive Australia Group Limited have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements were authorised for issue on 26 September 2017 by the Directors of the Company. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Indoor Skydive Australia Group Ltd is the Group’s ultimate parent company. Indoor Skydive Australia Group Ltd is a public company listed on the Australian Stock Exchange and domiciled in Australia. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. 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 as issued by the International Accounting Standards Board. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Net cash inflows from financing activities 6,914,458 9,147,926 Basis of Accounting The Group incurred a loss for the year after tax of $891,290 (2016: loss of $1,506,760) and has a net current deficiency in assets of $3,570,406. Included within current liabilities are deferred revenue of $1,907,300 that will be realised as revenue once the service has been delivered to the customer. Included within trade and other payables as outlined in Note 11 is an investment amount of $2,000,000 by iFly Australia Pty Ltd which is expected to be settled through the issue of equity in the relevant subsidiaries of ISA group. Therefore, excluding these two balances, the Group has an adjusted net positive current asset position of $336,894 at 30 June 2017. The Group has generated positive cash flows from operations during the year of $2,148,332 (2016: $273,120). As a result, the financial report has been prepared on a going concern basis. Consolidated Statement of Cash Flows As at 30 June 2017 Cash Flows From Operating Activities Receipts from customers Payments to suppliers and employees Grant income received Interest received Finance costs Consolidated Group Note 2017 $ 2016 $ 8,133,131 (7,861,681) 51,750 26,255 (76,335) 14,523,197 (12,023,796) 24,875 7,373 (383,317) Net cash inflows from operating activities 17 2,148,332 273,120 Cash Flows From Investing Activities Purchase of property, plant and equipment Realisation of term deposits Payment for intangible assets (9,389,457) (12,370,007) - (517,477) 1,325,556 (284,252) Net cash outflows from investing activities (9,906,934) (11,328,703) Cash Flows From Financing Activities Proceeds from issue of securities Proceeds from borrowings Repayment of borrowings Share issue costs 5,665,005 2,493,302 (901,718) (342,131) 9,147,926 - - - Net decrease in cash held (844,144) (1,907,657) Cash and cash equivalents at beginning of period Effects of exchange rate changes 2,550,601 - 4,321,619 136,639 Cash and cash equivalents at end of period 5 1,706,457 2,550,601 The Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements. Indoor Skydive Australia Group Limited 2017 Annual Report 30 Indoor Skydive Australia Group Limited 2017 Annual Report 31 31 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) a. Principles of Consolidation The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Indoor Skydive Australia Group Limited at the end of the reporting period. A controlled entity is any entity over which Indoor Skydive Australia Group Limited has the ability and right to govern the financial and operating policies so as to obtain benefits from the entity’s activities. Where controlled entities have entered or left the Group during the year, the financial performance of those entities is included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 9 to the financial statements. In preparing the consolidated financial statements, all intragroup balances and transactions between entities in the consolidated group have been eliminated in full on consolidation. Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are reported separately within the equity section of the consolidated statement of financial position and statements showing profit or loss and other comprehensive income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date. b. Income Tax The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and deferred tax expense/(benefit). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are 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 as unused tax losses. Current and deferred income tax expense/(benefit) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, 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 and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. 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. 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) a legally enforceable right of set-off exists; and (b) 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. 32 Indoor Skydive Australia Group Limited 2017 Annual Report 32 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) Tax Consolidation - Australia The Company and its wholly-owned Australian resident entities have formed a tax consolidated group with effect from 1 November 2011 and will therefore be taxed as a single entity from that date. The Company is the head entity within the tax-consolidated group. Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using a modified stand-alone tax allocation methodology. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the controlled entities are assumed by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax-consolidated group in conjunction with any tax funding arrangements. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head company only. The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and c. Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Plant and Equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(j) for details of impairment). The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) a. Principles of Consolidation The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Indoor Skydive Australia Group Limited at the end of the reporting period. A controlled entity is any entity over which Indoor Skydive Australia Group Limited has the ability and right to govern the financial and operating policies so as to obtain benefits from the entity’s activities. Where controlled entities have entered or left the Group during the year, the financial performance of those entities is included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 9 to the financial statements. In preparing the consolidated financial statements, all intragroup balances and transactions between entities in the consolidated group have been eliminated in full on consolidation. Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are reported separately within the equity section of the consolidated statement of financial position and statements showing profit or loss and other comprehensive income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date. b. Income Tax deferred tax expense/(benefit). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are 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 as unused tax losses. Current and deferred income tax expense/(benefit) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, 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 and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. 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. 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) a legally enforceable right of set-off exists; and (b) 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. Indoor Skydive Australia Group Limited 2017 Annual Report 32 Indoor Skydive Australia Group Limited 2017 Annual Report 33 33 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) Depreciation The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Office equipment Furniture and fittings IT equipment Useful Life 3 years 5 years 5 years Vertical wind tunnel building infrastructure 40 years Vertical wind tunnel equipment 20 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. 34 Indoor Skydive Australia Group Limited 2017 Annual Report 34 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) Depreciation The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Office equipment Furniture and fittings IT equipment Useful Life 3 years 5 years 5 years Vertical wind tunnel building infrastructure 40 years Vertical wind tunnel equipment 20 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) d. Intangibles Exclusive Territory Development Agreement Acquired intangibles are capitalised on the basis of the costs incurred to acquire and install the specific licence. Refer to Note 10 for further information. Development Costs Internally generated intangibles including capitalised development costs on individual projects that are recognised as an intangible asset when the Group can demonstrate that the asset will generate future economic benefits and can be measured reliably. Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following recognition requirements: • • • • • the development costs can be measured reliably the project is technically and commercially feasible the Group intends to and has sufficient resources to complete the project the Group has the ability to use or sell the asset; and the asset will generate probable future economic benefits. Development costs not meeting these criteria for capitalisation are expensed as incurred. Costs that are directly attributable include employees’ (other than Directors’) costs incurred on development. Expenditure on the research phase of projects is recognised as an expense as incurred. Subsequent measurement Intangible assets are not amortised but tested for impairment annually either individually or at cash generating unit level. When an intangible asset is disposed of, the gain or loss on disposal is determined as the difference between the proceeds and the carrying amount of the asset, and is recognised in profit or loss within other income or other expenses. e. Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset – but not the legal ownership – are transferred to entities in the consolidated group, are classified as finance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term. Indoor Skydive Australia Group Limited 2017 Annual Report 34 Indoor Skydive Australia Group Limited 2017 Annual Report 35 35 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) f. Foreign Currency Transactions and Balances Functional and Presentation Currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. Transactions and Balances Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. 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 in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. g. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits available on demand with banks and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the statement of financial position. h. Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. Payables expected to be settled within 12 months of the end of the reporting period are classified as current liabilities. All other liabilities are classified as non- current liabilities. i. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. j. Impairment of Assets At the end of each reporting period, the Group 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. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. 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 intangible assets with indefinite lives and intangible assets not yet available for use. 36 Indoor Skydive Australia Group Limited 2017 Annual Report 36 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 f. Foreign Currency Transactions and Balances Functional and Presentation Currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. Transactions and Balances Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. 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 in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. Cash and cash equivalents include cash on hand, deposits available on demand with banks and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. Payables expected to be settled within 12 months of the end of the reporting period are classified as current liabilities. All other liabilities are classified as non- g. Cash and Cash Equivalents statement of financial position. h. Trade and Other Payables current liabilities. i. Goods and Services Tax (GST) Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. j. Impairment of Assets At the end of each reporting period, the Group 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. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. 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 intangible assets with indefinite lives and intangible assets not yet available for use. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) k. Employee Benefits NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within a year have been measured at the amounts expected to be paid when the liability is settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. Liabilities for long service leave are recognised when employees reach a qualifying period of continuous service. Liabilities and expenses for bonuses are recognised where contractually obliged or where there is a past practice that has created a constructive obligation. Share-based Payments Share-based compensation benefits are provided to certain employees (including key management personnel) via the Indoor Skydive Australia Group Limited Performance Rights Plan. The fair value is measured at grant date and is recognised over the period the services are received, which is the expected vesting period during which the employees would become entitled to exercise the performance rights. Non-market vesting conditions are included in assumptions about the number of performance rights that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of performance rights expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if performance rights ultimately exercised are different to that estimated on vesting. The fair value of performance rights granted for rights with non-market based performance criteria are measured using the binomial option pricing methodology which is the approach typically used for valuing rights which may be exercised, once vested, at any time up until expiry. Upon exercise of performance rights, the proceeds received net of any directly attributable transaction costs are allocated to contributed equity. Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of l. Provisions GST incurred is not recoverable from the Australian Taxation Office (ATO). 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. Make good provisions are recognised on a systematic basis over the life of the lease, based on the most reliable evidence available at reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be requited in settlement is determined by considering the class of obligations as a whole. The provision is discounted to its present value, where the time value of money is material. m. Revenue and Other Income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. When the inflow of consideration is deferred, it is included in the Statement of Financial Position as a current liability. Revenue from the sale of goods and services is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership and the cessation of all involvement in those goods and services. For gift card revenue, refer to Note 1(s)(iv). Interest revenue is recognised on an accruals basis using the effective interest method. Indoor Skydive Australia Group Limited 2017 Annual Report 36 Indoor Skydive Australia Group Limited 2017 Annual Report 37 37 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) n. Deferred Revenue Income relating to future periods is initially recorded as deferred revenue, and is then recognised as revenue over the relevant periods of admission or rendering of other services. o. Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(j) for further discussion on the determination of impairment losses. p. Inventories nventories are valued at the lower of cost and net realisable value. Cost is determined using the weighted average cost method, after deducting any purchase settlement discount and including logistics expenses I incurred in bringing the inventories to their present location and condition. q. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. r. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group has retrospectively applied an accounting policy, made a retrospective restatement or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed. Refer to Note 1(t). s. Critical Accounting Estimates and Judgements i. Useful lives, Residual Values and Classification of Property, Plant and Equipment There is a degree of judgement required in estimating the residual values and useful lives of the Property, Plant and Equipment. There is also a degree of judgement required in terms of the classification of such Property, Plant and Equipment. The Group’s main assets at present comprise the Vertical Wind Tunnel (VWT) Equipment and its related Building Infrastructure. The construction of these assets are typically foreseen in the lease agreements, however the Board has exercised their judgement in determining that the nature of these assets are that of buildings and equipment, rather than leasehold improvements. To this extend, the Board has confirmed the useful life of the Buildings to be 40 years and VWT equipment to be 20 years and the residual values of both these classes of assets to be nil. ii. Deferred Tax Asset In the current year, the Group is expected to generate a taxable income that will utilise the deferred tax balance. It is probable that the balance of unused tax losses will be recouped in future years, the directors have recognised a deferred tax asset to the extent of the tax losses and deductible temporary differences. 38 Indoor Skydive Australia Group Limited 2017 Annual Report 38 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 assets. p. Inventories q. Borrowing Costs Income relating to future periods is initially recorded as deferred revenue, and is then recognised as revenue over the relevant periods of admission or rendering of other services. o. Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(j) for further discussion on the determination of impairment losses. nventories are valued at the lower of cost and net realisable value. Cost is determined using the weighted average cost method, after deducting any purchase settlement discount and including logistics expenses I incurred in bringing the inventories to their present location and condition. Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. r. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group has retrospectively applied an accounting policy, made a retrospective restatement or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed. Refer to Note 1(t). s. Critical Accounting Estimates and Judgements i. Useful lives, Residual Values and Classification of Property, Plant and Equipment There is a degree of judgement required in estimating the residual values and useful lives of the Property, Plant and Equipment. There is also a degree of judgement required in terms of the classification of such Property, Plant and Equipment. The Group’s main assets at present comprise the Vertical Wind Tunnel (VWT) Equipment and its related Building Infrastructure. The construction of these assets are typically foreseen in the lease agreements, however the Board has exercised their judgement in determining that the nature of these assets are that of buildings and equipment, rather than leasehold improvements. To this extend, the Board has confirmed the useful life of the Buildings to be 40 years and VWT equipment to be 20 years and the residual values of both these classes of assets to be nil. ii. Deferred Tax Asset In the current year, the Group is expected to generate a taxable income that will utilise the deferred tax balance. It is probable that the balance of unused tax losses will be recouped in future years, the directors have recognised a deferred tax asset to the extent of the tax losses and deductible temporary differences. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) n. Deferred Revenue iii. Exclusive Territory Development Agreement Recognition and Amortisation NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 On 20 December 2013 an Exclusive Territory Development Agreement was entered into between the Company and iFly Australia Pty Ltd (iFly) to exclusively develop projects in Australia and New Zealand for which iFly would receive 2,500,000 shares in the company (IDZ.ASX). iFly is the Australian subsidiary of SkyVenture International, our vertical wind tunnel supplier. The agreement has created an intangible asset which is expected to create a future economic benefit. This intangible asset must be initially valued at cost, in accordance with AASB 138. The cost is calculated as $1,500,000, being the fair value of the shares granted to iFly, at the IDZ close price of $0.60 at 20 December 2013. The term of the agreement is limited, and the asset is therefore classified as a finite life intangible asset. An intangible asset with a finite life is to be amortised over its useful life. The amortisation method selected should reflect the pattern over which the asset’s future economic benefit is expected to be consumed. If that pattern cannot be determined reliably, the straight-line method is to be used. The amortisation period and method for an intangible asset with a finite useful life are to be reviewed at least at the end of each annual reporting period. If the expected useful life or expected pattern of consumption of the future economic benefit is different from previous estimates, the period or method is to be revised. As at the reporting date, there is no change to the previous estimates. An accelerated amortisation rate of 40% diminishing value has been used against this intangible asset. This reflects the expected consumption of benefits under the agreement. Although it is conceivable that the agreement could run to the full term of 20 years, management expect that the majority of the benefit will be achieved over an initial period of four years through the delivery of the four tunnels for which deposits have been paid to SkyVenture International. iv. Gift Card Revenue Gift card revenue from the sale of gift cards is recognised when the card is redeemed for the purchase of flight time (Flight Revenue), or when the gift card is no longer expected to be redeemed (Gift Card Revenue). At 30 June 2017, $494,388 of Gift Card Revenue is recognised (2016: $704,947). The key assumption in measuring the liability for gift cards and vouchers is the expected redemption rates by customers with a portion recognised upfront, which are reviewed based on historical information. Any reassessment of expected redemption rates in a particular period impacts the revenue recognised from expiry of gift cards and vouchers (either increasing or decreasing). Any foreseeable change in the estimate is unlikely to have a material impact on the financial statements. v. Site Restoration Provisions for site restoration obligations are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. In the current year, the Group has recognised a provision for site restoration for its three tunnels. To this extent, an estimate of the costs to remove the VWT’s and its related Building Infrastructure has been determined based on current costs using existing technology at current prices. Management used the services of an expert and determined the cost to restore the sites. These costs were projected forward at a 2.5% inflationary escalation and then discounted back at 8.73% (2016: 2.5%), which is a change in estimate from the prior year, after consideration of the associated risks. The discount rate has been amended to reflect the time value of money and risks specific to the operation of the tunnels. The site restoration asset is depreciated over the remainder of each extended lease period being 40 years in the case of each of iFLY Downunder (Penrith), iFLY Gold Coast and iFLY Perth. The unwinding of the effect of discounting on the site restoration provision is included within finance costs in the statement of comprehensive income. Indoor Skydive Australia Group Limited 2017 Annual Report 38 Indoor Skydive Australia Group Limited 2017 Annual Report 39 39 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) vi. Capitalisation of Internally Developed Intangible Assets Distinguishing the research and development phases of a new project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. t. Prior Period Adjustment Lease Straight lining In prior years, the Group has entered into lease agreements with associated rent incentives for each of its tunnels. These lease agreements have an initial term of 20 years with renewal at the option of the Group, giving an extended lease period of 40 years. In the current year, the Group conducted a detailed review of the terms and conditions of its lease agreements and discovered an error in the accounting treatment of the rent incentives. The treatment has been corrected by restating each of the affected financial statement line items for the prior period, as follows: Statement of Profit or Loss and other Comprehensive Income Previously Reported 2016 $ Adjusted Restated 2016 $ $ Administration expenses 4,043,577 274,082 4,317,659 Income tax benefit Loss after tax 170,158 82,225 252,383 (1,314,903) (191,857) (1,506,760) Basic Earnings Per Share Diluted Earnings Per Share (1.10) (1.10) (0.16) (0.16) (1.26) (1.26) Statement of Financial Position Deferred tax asset Provision – current 1,844,162 172,527 2,016,689 195,260 380,118 575,378 Provision – non current 1,581,770 194,969 1,776,739 Net Assets 28,253,090 (402,560) 27,850,530 Retained Earnings (7,053,529) (402,560) (7,456,089) The change did not have an impact on Other Comprehensive Income for the period or the Group’s operating, investing and financing cash flows. 40 Indoor Skydive Australia Group Limited 2017 Annual Report 40 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) vi. Capitalisation of Internally Developed Intangible Assets NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT) u. New and amended standards and interpretations Distinguishing the research and development phases of a new project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. At the date of this financial report the following standards and interpretations, which may impact the entity in the period of initial application, have been issued but are not yet effective: t. Prior Period Adjustment Lease Straight lining Reference Title Summary In prior years, the Group has entered into lease agreements with associated rent incentives for each of its tunnels. These lease agreements have an initial term of 20 years with renewal at the option of the Group, giving an extended lease period of 40 years. In the current year, the Group conducted a detailed review of the terms and conditions of its lease agreements and discovered an error in the accounting treatment of the rent incentives. The treatment has been corrected by restating each of the affected financial statement line items for the prior period, as follows: Statement of Profit or Loss and other Comprehensive Income Previously Reported 2016 $ Adjusted Restated 2016 $ $ AASB 15 Revenue from Contracts with Customers AASB 9 Financial Instruments Administration expenses 4,043,577 274,082 4,317,659 170,158 82,225 252,383 Income tax benefit Loss after tax (1,314,903) (191,857) (1,506,760) AASB 16 Leases This Standard establishes principles (including disclosure requirements) for reporting useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. This Standard supersedes both AASB 9 (December 2010) and AASB 9 (December 2009) when applied. It introduces a “fair value through other comprehensive income” category for debt instruments, contains requirements for impairment of financial assets, etc. This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Application date Expected Impact 1 July 2018 Not expected to have a material impact. 1 July 2018 Expected to change disclosures in the year of adoption. 1 July 2019 The Group is yet to assess the effect. Basic Earnings Per Share Diluted Earnings Per Share (1.10) (1.10) (0.16) (0.16) (1.26) (1.26) Statement of Financial Position Deferred tax asset Provision – current 1,844,162 172,527 2,016,689 195,260 380,118 575,378 Provision – non current 1,581,770 194,969 1,776,739 Net Assets 28,253,090 (402,560) 27,850,530 Retained Earnings (7,053,529) (402,560) (7,456,089) The change did not have an impact on Other Comprehensive Income for the period or the Group’s operating, investing and financing cash flows. Indoor Skydive Australia Group Limited 2017 Annual Report 40 Indoor Skydive Australia Group Limited 2017 Annual Report 41 41 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 2: PARENT INFORMATION The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. 2017 $ 2016 $ Statement of Financial Position Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Equity Issued capital Share based payments reserve Retained earnings Total Equity Statement of Profit or Loss and Other Comprehensive Income Total loss before tax Total comprehensive loss Contingent liabilities 1,301,227 2,344,392 39,486,508 32,362,426 40,787,734 34,706,818 385,842 10,780,173 1,042,041 8,436,342 11,166,015 9,478,383 40,466,917 34,648,255 340,448 658,164 (11,185,646) (10,077,984) 29,621,719 25,228,435 (1,258,610) (1,677,969) (1,258,610) (1,677,969) The parent entity does not have any contingent liabilities as at 30 June 2017. Contractual commitments Other than amounts disclosed in the financial statements, the parent entity has no additional contractual commitments as at 30 June 2017. 42 Indoor Skydive Australia Group Limited 2017 Annual Report 42 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 2: PARENT INFORMATION The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. 2017 $ 2016 $ Statement of Financial Position Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total Liabilities Equity Issued capital Retained earnings Total Equity Share based payments reserve Total loss before tax Total comprehensive loss Contingent liabilities Statement of Profit or Loss and Other Comprehensive Income The parent entity does not have any contingent liabilities as at 30 June 2017. Contractual commitments commitments as at 30 June 2017. Other than amounts disclosed in the financial statements, the parent entity has no additional contractual 1,301,227 2,344,392 39,486,508 32,362,426 40,787,734 34,706,818 385,842 10,780,173 1,042,041 8,436,342 11,166,015 9,478,383 40,466,917 34,648,255 340,448 658,164 (11,185,646) (10,077,984) 29,621,719 25,228,435 (1,258,610) (1,677,969) (1,258,610) (1,677,969) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 3: REVENUE AND EXPENSES Revenue VWT revenue – rendering of services Other sales Other sales revenue relates to cafeteria income and merchandise income. Other Income Grant Income Other Included in the expenses are the following: a) Selling and Marketing Expenses Marketing expenses Employment expenses b) Administrative Expenses Depreciation and amortisation expenses Occupancy expenses Employment expenses Share based payments Directors’ fees 2017 $ 11,047,575 1,223,506 12,271,081 24,875 20,603 45,478 2017 $ 770,305 3,960,884 2016 $ 6,812,248 1,343,640 8,155,888 51,750 136,639 188,389 2016 $ 674,293 2,441,534 4,731,189 3,115,827 2017 $ 1,648,805 1,313,899 994,066 177,872 220,290 2016 $ 1,038,487 1,039,428 1,577,608 481,888 180,248 4,354,932 4,317,659 Indoor Skydive Australia Group Limited 2017 Annual Report 42 Indoor Skydive Australia Group Limited 2017 Annual Report 43 43 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 4: INCOME TAX BENEFIT Income tax benefit Current income tax: Current income tax charge Deferred tax: Relating to origination and reversal of temporary differences Income tax benefit reported in the Statement of Profit and Loss 2017 $ 2016 $ 25,259 125,690 150,949 152,352 100,031 252,383 A reconciliation of income tax expense applicable to accounting loss before income tax at the statutory income tax rate to income tax expense at the company’s effective income tax rate for the year ended 30 June 2017 is as follows: Accounting loss before income tax At the statutory income tax rate of 30% (2016: 30%) Non-deductible expenses for tax purposes: Entertainment expenses Share based payments Amortisation expenses Other non-deductible expenses Income Tax Benefit Deferred tax assets (timing difference) comprises of: Share issue costs Accruals and provisions Deferred tax asset (timing difference) brought to account Deferred tax asset (tax losses) brought to account Total deferred tax brought to account NOTE 5: CASH AND CASH EQUIVALENTS Cash at bank and on hand 2017 $ (1,042,239) (312,672) 3,525 53,362 51,164 53,672 (150,949) 185,278 408,299 593,577 1,574,061 2,167,638 2016 $ (1,759,143) (527,743) 2,128 144,566 85,276 43,390 (252,383) 208,330 181,751 390,081 1,626,608 2,016,689 2017 $ 2016 $ 1,706,457 2,550,601 1,706,457 2,550,601 44 Indoor Skydive Australia Group Limited 2017 Annual Report 44 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 4: INCOME TAX BENEFIT Income tax benefit Current income tax: Current income tax charge Deferred tax: Relating to origination and reversal of temporary differences Income tax benefit reported in the Statement of Profit and Loss A reconciliation of income tax expense applicable to accounting loss before income tax at the statutory income tax rate to income tax expense at the company’s effective income tax rate for the year ended 30 June 2017 is as follows: Accounting loss before income tax At the statutory income tax rate of 30% (2016: 30%) Non-deductible expenses for tax purposes: Entertainment expenses Share based payments Amortisation expenses Other non-deductible expenses Income Tax Benefit Deferred tax assets (timing difference) comprises of: Share issue costs Accruals and provisions Deferred tax asset (timing difference) brought to account Deferred tax asset (tax losses) brought to account Total deferred tax brought to account NOTE 5: CASH AND CASH EQUIVALENTS Cash at bank and on hand 2017 $ 2016 $ 25,259 125,690 150,949 152,352 100,031 252,383 2017 $ (1,042,239) (312,672) 3,525 53,362 51,164 53,672 (150,949) 185,278 408,299 593,577 1,574,061 2,167,638 2016 $ (1,759,143) (527,743) 2,128 144,566 85,276 43,390 (252,383) 208,330 181,751 390,081 1,626,608 2,016,689 2017 $ 2016 $ 1,706,457 2,550,601 1,706,457 2,550,601 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 6: TRADE RECEIVABLES AND OTHER ASSETS Trade receivables Other receivables Prepaid expenses 2017 $ 27,959 808,514 81,304 917,777 2016 $ 48,320 184,705 455,500 688,525 All amounts are short- term. The carrying value is considered a reasonable approximation of fair value. The Group’s trade and other receivables have been reviewed for indicators of impairment. No impairment has been recognised and no receivables are past due. NOTE 7: OTHER FINANCIAL ASSETS Current Non- current 2017 $ 42,489 209,245 251,734 2016 $ - - - Other financial assets relates to costs associated with the bank loan facility. This financial asset is amortised over the period of the loan facility. NOTE 8: PROPERTY PLANT AND EQUIPMENT 2017 2016 2017 2016 2017 2016 Cost Vertical wind tunnel building Infrastructure Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year 1,444,776 22,631,045 10,265,176 8,262,704 12,365,870 Depreciation Carrying Value (767,506) (507,100) 21,863,539 9,758,076 (586,782) (260,406) 7,675,922 12,105,464 32,338,525 22,631,046 (1,354,288) (767,506) 30,984,237 21,863,540 - - - 1,444,776 - Vertical wind tunnel equipment Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year 7,401,038 193,085 5,169,612 12,763,735 3,601,031 (464,051) (165,835) 6,936,987 3,435,196 3,800,006 (594,428) (298,216) (401,343) 3,501,790 - - - 5,169,612 - 7,401,037 (1,058,479) (464,051) 11,705,256 6,936,986 Indoor Skydive Australia Group Limited 2017 Annual Report 44 Indoor Skydive Australia Group Limited 2017 Annual Report 45 45 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 8: PROPERTY PLANT AND EQUIPMENT (CONT) 2016 2017 Cost 2017 Depreciation 2016 2017 Carrying Value 2016 IT Equipment Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year Furniture and fittings Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year Office Equipment Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year 491,266 239,029 (94,139) (11,008) 397,127 228,021 173,611 252,237 (128,555) (83,131) 45,056 169,106 1,625 - 1,625 - 666,502 491,266 (222,694) (94,139) 443,808 397,127 461,202 224,401 (118,687) (10,334) 342,515 214,067 294,490 236,801 (165,806) (108,353) 128,684 128,448 (157,411) - 56,770 (100,641) - 598,281 461,202 (227,723) (118,687) 370,558 342,515 300 20,968 - 21,268 - 300 - 300 (27) - 273 (4,007) (26) 16,961 - - (4,034) (26) 17,234 - 274 - 274 Capital Work in Progress Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year 8,529,771 802,644 444,599 8,697,909 (8,529,771) (970,782) 444,599 8,529,771 - - - - - - - - 8,529,771 802,644 444,599 8,697,909 (8,529,771) (970,782) 444,599 8,529,771 Total Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year 39,514,622 15,132,281 (1,444,410) (694,277) 38,070,212 14,438,004 9,389457 25,353,123 (1,479,578) (750,132) 7,909,879 24,602,991 (2,071,169) (970,782) 56,770 - (2,014,399) (970,782) 46,832,910 39,514,622 (2,867,218) (1,444,409) 43,965,692 38,070,213 46 Indoor Skydive Australia Group Limited 2017 Annual Report 46 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 9: INTEREST IN SUBSIDIARIES Set out below are the Group’s subsidiaries at 30 June 2017. The subsidiaries listed below have share capital consisting solely of ordinary shares, which are held directly by the Group and the proportion of ownership interests held equals the voting rights held by the Group. Each subsidiary’s country of incorporation or registration is also its principal country of business. Subsidiaries Country of 2017 2016 Indoor Skydiving Penrith Holdings Pty Ltd Indoor Skydiving Penrith Pty Ltd Indoor Skydiving Gold Coast Pty Ltd Indoor Skydiving Adelaide Pty Ltd Indoor Skydiving Perth Pty Ltd ISAG Holdings D Pty Ltd ISAG Café Pty Ltd ISA Asia Holdings Pty Ltd* ISA Asia Operations Pty Ltd* Incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia % 100 100 100 100 100 100 100 100 100 % 100 100 100 100 100 100 100 - - * There were no material transactions in these entities during the current year. Notes to the Financial Statements For the year ended 30 June 2017 NOTE 8: PROPERTY PLANT AND EQUIPMENT (CONT) 2017 2016 2017 2016 2017 2016 Cost Depreciation Carrying Value 491,266 239,029 (94,139) (11,008) 397,127 228,021 173,611 252,237 (128,555) (83,131) 45,056 169,106 1,625 - 1,625 - 666,502 491,266 (222,694) (94,139) 443,808 397,127 IT Equipment Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year Furniture and fittings Balance at Beginning of year Acquisitions / depreciation Balance at end of year Office Equipment Balance at Beginning of year Acquisitions / depreciation Disposals / transfers Balance at end of year Balance at Beginning of year Acquisitions / depreciation Balance at end of year Total Balance at Beginning of year Acquisitions / depreciation Balance at end of year Capital Work in Progress - - - 461,202 224,401 (118,687) (10,334) 342,515 214,067 294,490 236,801 (165,806) (108,353) 128,684 128,448 Disposals / transfers (157,411) - 56,770 (100,641) 598,281 461,202 (227,723) (118,687) 370,558 342,515 300 - - - (27) - 273 - 20,968 300 (4,007) (26) 16,961 274 21,268 300 (4,034) (26) 17,234 274 Disposals / transfers (8,529,771) (970,782) 444,599 8,697,909 444,599 8,529,771 8,529,771 802,644 8,529,771 802,644 - - - - 444,599 8,697,909 (8,529,771) (970,782) 444,599 8,529,771 39,514,622 15,132,281 (1,444,410) (694,277) 38,070,212 14,438,004 9,389457 25,353,123 (1,479,578) (750,132) 7,909,879 24,602,991 Disposals / transfers (2,071,169) (970,782) 56,770 - (2,014,399) (970,782) 46,832,910 39,514,622 (2,867,218) (1,444,409) 43,965,692 38,070,213 - - - - - Indoor Skydive Australia Group Limited 2017 Annual Report 46 Indoor Skydive Australia Group Limited 2017 Annual Report 47 47 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 10: INTANGIBLE ASSET Cost At 1 July 2015 Additions At 30 Jun 2016 Additions At 30 June 2017 Amortisation At 1 July 2015 Amortisation At 30 Jun 2016 Amortisation At 30 June 2017 Net Book Value At 30 June 2017 At 30 June 2016 Development Costs Exclusive Territory Development Agreement Total - - - 1,500,000 1,500,000 - 0 1,500,000 1,500,000 517,477 - 517,477 517,477 1,500,000 2,017,477 - - - - - 789,370 284,252 789,370 284,252 1,073,622 1,073,622 170,551 170,551 1,244,173 1,244,173 517,477 - 255,827 426,378 773,304 426,378 The Exclusive Territory Development Agreement was entered into during the 2014 year and was valued at cost. The fair value of $1,500,000 at acquisition represents the value of the shares granted to iFly Australia Pty Limited under the Exclusive Joint Territory Agreement, being 2,500,000 shares at a close price of $0.60 on grant date (20 December 2013). An accelerated amortisation rate of 40% has been used against the Exclusive Territory Development Agreement intangible asset, amortised from 20 December 2013. An accelerated method has been used to reflect the expected consumption of benefits under the agreement. Development expenditure on individual projects are recognised as an intangible asset when the Group can demonstrate that the asset will generate future economic benefits and can be reliably measured. Refer to Note 1(d). 48 Indoor Skydive Australia Group Limited 2017 Annual Report 48 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 10: INTANGIBLE ASSET NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 11: TRADE AND OTHER PAYABLES Development Costs Exclusive Territory Development Agreement Total Trade payables Other accruals Other payables 2017 $ 407,894 1,247,170 2,000,000 3,655,064 2016 $ 561,130 884,058 2,000,000 3,445,188 In 2016, iFly Australia Pty Ltd exercised their rights under the Exclusive Territory Development Agreement to invest up to $1,000,000 in a subsidiary of the Company, Indoor Skydiving Perth Pty Ltd. The investment has been agreed to be set off against amounts owed to iFly Australia Pty Ltd for the purchase of equipment. As shares in the subsidiary have not yet been issued a non-controlling interest in the Group has not been recognised in the Group balance sheet as at the reporting date and is included in trade payables above. This is a separate transaction to the $1,000,000 investment made on similar basis by iFly Australia Pty Ltd in relation to Indoor Skydiving Gold Coast Pty Ltd in 2015 financial year. The shares of which are yet to be issued. Other payables above is therefore $2,000,000 which is expected to be settled through the issue of equity in subsidiaries. NOTE 12: DEFERRED REVENUE Deferred revenue 2017 $ 2016 $ 1,907,300 1,016,439 1,907,300 1,016,439 Deferred revenue primarily represents prepaid sales in respect of flight time purchased in advance. The sales are released to revenue at the time the services are rendered except the gift card revenue in relation to expected redemption rates. Cost At 1 July 2015 Additions At 30 Jun 2016 Additions At 30 June 2017 Amortisation At 1 July 2015 Amortisation At 30 Jun 2016 Amortisation At 30 June 2017 Net Book Value At 30 June 2017 At 30 June 2016 1,500,000 1,500,000 0 1,500,000 1,500,000 - - 517,477 517,477 517,477 1,500,000 2,017,477 789,370 284,252 789,370 284,252 1,073,622 1,073,622 170,551 170,551 1,244,173 1,244,173 517,477 255,827 426,378 773,304 426,378 - - - - - - - - - The Exclusive Territory Development Agreement was entered into during the 2014 year and was valued at cost. The fair value of $1,500,000 at acquisition represents the value of the shares granted to iFly Australia Pty Limited under the Exclusive Joint Territory Agreement, being 2,500,000 shares at a close price of $0.60 on grant date (20 December 2013). An accelerated amortisation rate of 40% has been used against the Exclusive Territory Development Agreement intangible asset, amortised from 20 December 2013. An accelerated method has been used to reflect the expected consumption of benefits under the agreement. Development expenditure on individual projects are recognised as an intangible asset when the Group can demonstrate that the asset will generate future economic benefits and can be reliably measured. Refer to Note 1(d). Indoor Skydive Australia Group Limited 2017 Annual Report 48 Indoor Skydive Australia Group Limited 2017 Annual Report 49 49 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 13: BORROWINGS Current Liabilities Westpac debt facility Non - Current Liabilities Westpac debt facility 2017 $ 2016 $ 472,312 472,312 711,584 711,584 10,267,198 10,267,198 8,436,342 8,436,342 The Company has in place a secured debt facility of $11,980,000 with Westpac Banking Corporation with an undrawn amount of $1,240,490. Interest payable on each component is based on current market rates, over a maximum 5 year term. Security provided is: Fully Interlocking Guarantee and Indemnity by: Indoor Skydive Australia Group Limited Indoor Skydiving Penrith Holdings Pty Ltd Indoor Skydiving Penrith Pty Ltd Indoor Skydiving Gold Coast Pty Ltd Indoor Skydiving Adelaide Pty Ltd Indoor Skydiving Perth Pty Ltd ISAG Holdings D Pty Ltd ISAG Café Pty Ltd Supported by General Security Agreement over all existing and future assets and undertaking by: Indoor Skydive Australia Group Limited Indoor Skydiving Penrith Holdings Pty Ltd Indoor Skydiving Penrith Pty Ltd Indoor Skydiving Gold Coast Pty Ltd Indoor Skydiving Adelaide Pty Ltd Indoor Skydiving Perth Pty Ltd ISAG Holdings D Pty Ltd ISAG Café Pty Ltd Mortgage over lease by Indoor Skydiving Penrith Holdings Pty Ltd. Flawed Asset Arrangement – deposits by Indoor Skydiving Penrith Holdings Pty Ltd over a deposits account held with Westpac Banking Corporation. 50 Indoor Skydive Australia Group Limited 2017 Annual Report 50 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 13: BORROWINGS Current Liabilities Westpac debt facility Non - Current Liabilities Westpac debt facility 2017 $ 2016 $ 472,312 472,312 711,584 711,584 10,267,198 10,267,198 8,436,342 8,436,342 The Company has in place a secured debt facility of $11,980,000 with Westpac Banking Corporation with an undrawn amount of $1,240,490. Interest payable on each component is based on current market rates, over a maximum 5 year term. Security provided is: Fully Interlocking Guarantee and Indemnity by: Indoor Skydive Australia Group Limited Pty Ltd Indoor Skydiving Penrith Holdings Indoor Skydiving Penrith Pty Ltd Indoor Skydiving Gold Coast Pty Ltd Indoor Skydiving Adelaide Pty Ltd Indoor Skydiving Perth Pty Ltd ISAG Holdings D Pty Ltd ISAG Café Pty Ltd Indoor Skydive Australia Group Limited Indoor Skydiving Penrith Holdings Pty Ltd Indoor Skydiving Penrith Pty Ltd Indoor Skydiving Gold Coast Pty Ltd Indoor Skydiving Adelaide Pty Ltd Indoor Skydiving Perth Pty Ltd ISAG Holdings D Pty Ltd ISAG Café Pty Ltd Supported by General Security Agreement over all existing and future assets and undertaking by: NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 14: PROVISIONS Current Provisions Non Current Provisions Total Carrying amount 1 July 2016 Additional Provisions Change in Estimates Amount Utilised Carrying amount 30 June 2017 Current Non-current Carrying amount 1 July 2015 Additional Provisions Amount Utilised Carrying amount 30 June 2016 Current Non-current 2017 276,558 818,289 1,094,847 2016 575,378 1,776,739 2,352,117 Provision for Employee Benefits $ Provision for Lease Straight Lining $ Provision for Site Restoration $ Total Provisions $ 195,260 345,819 - 575,087 1,581,770 2,352,117 101,641 62,693 510,153 - (1,421,808) (1,421,808) (317,109) (28,506) - (345,615) 223,970 223,970 648,222 222,655 1,094,847 33,151 19,437 276,558 - 615,072 203,218 818,289 109,683 269,294 (183,717) 195,260 195,260 301,005 - 410,688 276,738 1,581,770 2,127,802 (2,656) - (186,373) 575,087 1,581,770 2,352,117 380,118 - 575,378 - 194,969 1,581,770 1,776,739 a) Provisions for employee benefits The current portion for this provision includes the total amount accrued for annual leave entitlements that have vested due to employees having completed the required period of service. b) Provision for Lease Straight Lining Rental lease payments for operating the wind tunnels are expensed on a straight lining basis. All unamortised lease incentives in the form of rent free periods are recognised as provision. This provision is reduced by allocating lease payments between rental expenses and reduction of the provision over the remaining term of the lease. Mortgage over lease by Indoor Skydiving Penrith Holdings Pty Ltd. c) Provision for Site Restoration Flawed Asset Arrangement – deposits by Indoor Skydiving Penrith Holdings Pty Ltd over a deposits account held with Westpac Banking Corporation. This provision relates to present value of expected site restoration costs for three tunnels. These costs are projected forward to an extended lease period of 40 years using 2.5% inflationary escalation and discounted to present value at 8.73% after consideration of the associated risks. Indoor Skydive Australia Group Limited 2017 Annual Report 50 Indoor Skydive Australia Group Limited 2017 Annual Report 51 51 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 15: ISSUED CAPITAL 135,884,625 (2016: 120,193,004) fully paid ordinary shares Share issue costs Ordinary Shares At the beginning of the reporting period · Shares issued during the period · Performance rights exercised b. Performance Rights At the beginning of the reporting period: Performance rights issued during the year Performance rights lapsed during the year Performance rights exercised during the year 2017 $ 42,459,363 (1,992,446) 40,466,917 2016 $ 36,298,770 (1,650,315) 34,648,455 2017 No. 2016 No. 120,193,004 118,974,294 14,907,909 - 783,712 1,218,710 135,884,625 120,193,004 2017 1,845,496 - (249,895) (783,712) 811,889 2016 * 1,133,712 2,027,167 (96,673) (1,218,710) 1,845,496 * 2016 values include 85,000 Conditional Rights issued and exercised during the year. Performance rights are provided to certain employees (including key management personnel) via the Indoor Skydive Australia Group Limited Performance Rights Plan. The fair value is measured at grant date and is recognised over the period the services are received, which is the vesting period upon which the employees would become entitled to exercise the performance rights. The opening balance of 1,133,712 has also been updated to include remaining performance rights on issue from 2013 to KMP. c. Capital Management The Board controls the capital of the Group in order to generate long-term shareholder value and to ensure that the Group can fund its operations and continue as a going concern. The Board assesses the Group’s capital requirements based on the Company’s stage of operations, having regard to available debt funding and equity funding and seek to maintain a capital structure based on the lowest cost of capital available to the Group. The Board achieves this through the internal generation of capital and the management of debt levels and, if necessary, share issues. 52 Indoor Skydive Australia Group Limited 2017 Annual Report 52 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 16: CAPITAL AND LEASING COMMITMENTS a) Operating Lease Commitments Non-cancellable operating recognised in the financial statements Payable – minimum lease payments: leases contracted for but not - - - Not later than 12 months Between 12 months and five years Later than five years 2017 $ 2016 $ 857,821 3,170,156 24,856,067 28,884,044 715,442 3,056,308 25,624,310 29,396,060 The Group has entered into operating leases for occupancy of the vertical wind tunnels with extended lease terms of 40 years. b) Capital Commitments Subsidiary capital commitments contracted recognised in the financial statements for but not - - 6,857,855 6,857,855 Capital commitments for financial year 2016 related to the construction of the Perth tunnel. Notes to the Financial Statements For the year ended 30 June 2017 NOTE 15: ISSUED CAPITAL 135,884,625 (2016: 120,193,004) fully paid ordinary shares Share issue costs Ordinary Shares At the beginning of the reporting period · Shares issued during the period · Performance rights exercised b. Performance Rights At the beginning of the reporting period: Performance rights issued during the year Performance rights lapsed during the year Performance rights exercised during the year 2017 $ 42,459,363 (1,992,446) 40,466,917 2016 $ 36,298,770 (1,650,315) 34,648,455 2017 No. 2016 No. 120,193,004 118,974,294 14,907,909 - 783,712 1,218,710 135,884,625 120,193,004 2017 1,845,496 - (249,895) (783,712) 811,889 2016 * 1,133,712 2,027,167 (96,673) (1,218,710) 1,845,496 * 2016 values include 85,000 Conditional Rights issued and exercised during the year. Performance rights are provided to certain employees (including key management personnel) via the Indoor Skydive Australia Group Limited Performance Rights Plan. The fair value is measured at grant date and is recognised over the period the services are received, which is the vesting period upon which the employees would become entitled to exercise the performance rights. The opening balance of 1,133,712 has also been updated to include remaining performance rights on issue from 2013 to KMP. c. Capital Management The Board controls the capital of the Group in order to generate long-term shareholder value and to ensure that the Group can fund its operations and continue as a going concern. The Board assesses the Group’s capital requirements based on the Company’s stage of operations, having regard to available debt funding and equity funding and seek to maintain a capital structure based on the lowest cost of capital available to the Group. The Board achieves this through the internal generation of capital and the management of debt levels and, if necessary, share issues. Indoor Skydive Australia Group Limited 2017 Annual Report 52 Indoor Skydive Australia Group Limited 2017 Annual Report 53 53 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 17: CASH FLOW INFORMATION 2017 $ 2016 $ Reconciliation of Cash Flow from Operations with Loss after Income Tax Loss after income tax Non-cash flows in loss: - Share based payments - Gain/loss on FX revaluation (891,290) (1,506,760) 177,872 481,888 - (136,639) - Unwind of make good discount (20,968) - - Depreciation expense - Amortisation expense Changes in assets and liabilities: - (increase)/decrease in trade and term receivables - (increase)/decrease in prepaid expenses 1,434,796 214,009 20,361 374,196 740,924 345,842 241,335 - - (increase)/decrease in other financial assets (229,830) 72,107 - (increase)/decrease in deferred tax asset (150,948) (170,158) - increase/(decrease) in trade payables and accruals - increase/(decrease) in unearned revenue - increase/(decrease) in provisions Cash flow provided by operations 227,428 890,861 101,845 2,148,332 191,239 (264,091) 277,433 273,120 Other Non-Cash Transactions Capital expenditure 9,906,934 12,654,259 Depreciation & Amortisation 1,648,805 1,086,766 Other non-cash expense 177,872 481,888 54 Indoor Skydive Australia Group Limited 2017 Annual Report 54 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT - Unwind of make good discount (20,968) - Reconciliation of Cash Flow from Operations with Loss after Income Tax Notes to the Financial Statements For the year ended 30 June 2017 NOTE 17: CASH FLOW INFORMATION Loss after income tax Non-cash flows in loss: - Share based payments - Gain/loss on FX revaluation - Depreciation expense - Amortisation expense Changes in assets and liabilities: - (increase)/decrease in trade and term receivables - (increase)/decrease in prepaid expenses - increase/(decrease) in trade payables and accruals - increase/(decrease) in unearned revenue - increase/(decrease) in provisions Cash flow provided by operations 2017 $ 2016 $ (891,290) (1,506,760) 177,872 481,888 - (136,639) 1,434,796 214,009 20,361 374,196 227,428 890,861 101,845 2,148,332 740,924 345,842 241,335 - 191,239 (264,091) 277,433 273,120 - (increase)/decrease in deferred tax asset (150,948) (170,158) Other Non-Cash Transactions Capital expenditure Depreciation & Amortisation 1,648,805 1,086,766 Other non-cash expense 177,872 481,888 9,906,934 12,654,259 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 18: RELATED PARTY TRANSACTIONS a. The Group’s main related parties are as follows: (i) (ii) (iii) Entities exercising control over the Group: The ultimate parent entity is Indoor Skydive Australia Group Ltd. Key management personnel: Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity, are considered key management personnel. For details of disclosures relating to key management personnel, refer to the Remuneration Report. Entities subject to significant influence by the Group: An entity that has the power to participate in the financial and operating policy decisions of an entity, but does not have control over those policies, is an entity which holds significant influence. Significant influence may be gained by share ownership, statute or agreement. There are no such entities in the Group. Other related parties: (iv) Other related parties include entities controlled by the ultimate parent entity and entities over which key management personnel have joint control. - The entities disclosed in Note 9 are 100% owned subsidiary companies of the parent entity. Refer to Note 9 for further details. - (increase)/decrease in other financial assets (229,830) 72,107 b. Transactions with related parties: Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this Note. There were no related party transactions during the year (2016: Nil) Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. c. Key Management Personnel Compensation The Key Management Personnel compensation included in employment expenses is as follows: Consolidated Entity Company 2017 $ 2016 $ 2017 $ 2016 $ Short term employee benefits 1,185,424 1,125,179 1,185,424 1,125,17 Post employment benefits 89,817 85,525 89,817 85,525 Share based payments 133,710 538,973 133,710 538,973 1,408,951 1,749,677 1,408,951 1,749,677 Indoor Skydive Australia Group Limited 2017 Annual Report 54 Indoor Skydive Australia Group Limited 2017 Annual Report 55 55 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 19: SHARE BASED PAYMENTS On 27 November 2013 shareholders approved the Indoor Skydive Australia Group Limited Performance Rights Plan (Plan) at the 2013 Annual General Meeting. The Plan allows for the grant of performance rights to Directors and employees as part of the Company’s remuneration strategy. The performance rights carry neither rights to dividends, nor voting rights and may be exercised at any time from the date of vesting to the date of their expiry. Measurement of fair values (i) Equity-Settled Share-Based Payment Arrangements The fair value of equity instruments granted under the Plan has been, where appropriate, calculated using a binominal approximation option pricing model. Service and non-market performance conditions attached to the approvals or grants were not taken into account in determining the fair value. The inputs used in the calculation of the fair value at grant (or approval) date of the Equity-settled share-based payments were as follows: 27 November 2013 7 July 2014 7 July 2015 27 Oct 2015 Fair Value at grant/approval date (weighted average) Share Price at grant/approval date $0.59 $0.59 Exercise Price $0.00 Expected Volatility 50% Expected life (weighted average number of days) Expected dividends Risk-free rate (weighted average) 956 0% $0.68 $0.47 $0.38 $0.68 $0.00 50% 358 0% $0.47 $0.47 $0.00 50% 730 0% $0.00 50% 619 0% 2.95% 2.58% 2.20% 2.83% 5 day VWAP n/a $0.68 $0.47 n/a Reconciliation of outstanding share options The number and weighted-average exercise prices of equity instruments granted under the Plan were as follows: Outstanding at 30 June 2016 Granted during the year Forfeited during the year Exercised during the year Outstanding as at 30 June 2017 Number of rights 1,845,496 - (249,895) (783,712) 811,889 Weighted-average exercise price - - - - - 56 Indoor Skydive Australia Group Limited 2017 Annual Report 56 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 19: SHARE BASED PAYMENTS On 27 November 2013 shareholders approved the Indoor Skydive Australia Group Limited Performance Rights Plan (Plan) at the 2013 Annual General Meeting. The Plan allows for the grant of performance rights to Directors and employees as part of the Company’s remuneration strategy. The performance rights carry neither rights to dividends, nor voting rights and may be exercised at any time from the date of vesting to the date of their expiry. Measurement of fair values (i) Equity-Settled Share-Based Payment Arrangements The fair value of equity instruments granted under the Plan has been, where appropriate, calculated using a binominal approximation option pricing model. Service and non-market performance conditions attached to the approvals or grants were not taken into account in determining the fair value. The inputs used in the calculation of the fair value at grant (or approval) date of the Equity-settled share-based payments were as follows: 27 November 2013 7 July 2014 7 July 2015 27 Oct 2015 Fair Value at grant/approval date (weighted average) Share Price at grant/approval date Exercise Price $0.00 Expected Volatility 50% $0.59 $0.59 956 0% Expected life (weighted average number of days) Expected dividends Risk-free rate (weighted average) $0.68 $0.47 $0.38 $0.68 $0.00 50% 358 0% $0.47 $0.47 $0.00 50% 730 0% $0.00 50% 619 0% 2.95% 2.58% 2.20% 2.83% 5 day VWAP n/a $0.68 $0.47 n/a Reconciliation of outstanding share options The number and weighted-average exercise prices of equity instruments granted under the Plan were as follows: Number of Weighted-average exercise price Outstanding at 30 June 2016 Granted during the year Forfeited during the year Exercised during the year Outstanding as at 30 June 2017 rights 1,845,496 - (249,895) (783,712) 811,889 - - - - - NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 20: SEGMENT INFORMATION General Information Identification of reportable segments The Group’s operations are in one segment being the construction and operation of indoor skydiving facilities. The Group operates in one segment being Australia. All subsidiaries in the Group operate within the same segment. All three tunnels have been aggregated to one operating segment. Types of Products and Services by Segment The products and services will include a number of indoor skydiving facilities allowing human flight within a safe environment used by tourists, enthusiasts and military. NOTE 21: FINANCIAL RISK MANAGEMENT Financial Risk Management Policies The Board of Directors for, among other issues, manages financial risk exposures of the Group. The Board monitors the Group’s financial risk management policies and exposures and approves financial transactions within the scope of its authority. It also reviews the effectiveness of internal controls relating to commodity price risk, counterparty credit risk, currency risk, liquidity risk and interest rate risk. The Board meets on a regular basis. The Board’s overall risk management strategy seeks to assist the Group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of the use of hedging derivative instruments, credit risk policies and future cash flow requirements. Specific Financial Risk Exposures and Management The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk, foreign currency risk and other price risk (commodity and equity price risk). There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period. a. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counter parties of contract obligations that could lead to a financial loss to the Group. Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating, or in entities that the Board has otherwise assessed as being financially sound. Credit risk exposures The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period excluding the value of any collateral or other security held, is equivalent to the carrying amount and classification of those financial assets (net of any provisions) as presented in the statement of financial position. No collateral is held by the Group securing receivables. Indoor Skydive Australia Group Limited 2017 Annual Report 56 Indoor Skydive Australia Group Limited 2017 Annual Report 57 57 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) The Group only has significant concentrations of credit risk with any single counterparty in the form of its bankers, and therefore significant credit risk exposures to Australia. There are no trade and other receivables that are past due nor impaired. Credit risk related to balances with banks and other financial institutions is managed by the Board. which requires that surplus funds are only invested with counterparties with a Standard & Poor’s rating of at least AA–. The following table provides information regarding the credit risk relating to cash and term deposits based on Standard & Poor’s counterparty credit ratings. Cash and Term Deposits: Cash at bank and on hand b. Liquidity risk 2017 $ 1,706,457 1,706,457 2016 $ 2,550,601 2,550,601 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 manages this risk through the following mechanisms: – – – – – – – – preparing forward-looking cash flow forecasts in relation to its operating, investing and financing activities; using derivatives that are only traded in highly liquid markets; monitoring undrawn credit facilities; obtaining funding from a variety of sources; maintaining a reputable credit profile; managing credit risk related to financial assets; only investing surplus cash with major financial institutions; and comparing the maturity profile of financial liabilities with the realisation profile of financial assets. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet it liabilities when they become due. The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward. 58 Indoor Skydive Australia Group Limited 2017 Annual Report 58 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 The Group only has significant concentrations of credit risk with any single counterparty in the form of its bankers, and therefore significant credit risk exposures to Australia. There are no trade and other receivables that are past due nor impaired. Credit risk related to balances with banks and other financial institutions is managed by the Board. which requires that surplus funds are only invested with counterparties with a Standard & Poor’s rating of at least AA–. The following table provides information regarding the credit risk relating to cash and term deposits based on Standard & Poor’s counterparty credit ratings. 2017 $ 1,706,457 1,706,457 2016 $ 2,550,601 2,550,601 Cash and Term Deposits: Cash at bank and on hand b. Liquidity risk following mechanisms: activities; – – – – – – – – 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 manages this risk through the preparing forward-looking cash flow forecasts in relation to its operating, investing and financing using derivatives that are only traded in highly liquid markets; monitoring undrawn credit facilities; obtaining funding from a variety of sources; maintaining a reputable credit profile; managing credit risk related to financial assets; only investing surplus cash with major financial institutions; and comparing the maturity profile of financial liabilities with the realisation profile of financial assets. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet it liabilities when they become due. The table below reflects an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward. NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 Financial liability and financial asset maturity analysis for the Consolidated Group. Within 1 Year 2017 2016 1 to 5 Years 2017 2016 Over 5 Years 2017 2016 Total 2017 2016 $ $ $ $ $ $ $ $ Financial liabilities due for payment Borrowings Trade and other payables Total contractual outflows Total expected outflows Financial assets – cash flows realisable Cash and cash equivalents Trade and other receivables Total anticipated inflows Net inflow on financial instruments 472,312 711,584 10,267,198 8,436,342 1,655,064 1,445,188 - - 2,127,376 2,156,772 10,267,198 8,436,342 1,127,376 2,156,772 10,267,198 8,436,342 1,706,457 2,550,601 917,777 688,525 2,624,234 3,239,126 - - - - - - 496,858 1,082,354 (10,267,198) (8,436,342) - - - - - - - - 10,739,510 9,147,926 - 1,655,064 1,445,188 - 12,394,574 10,593,114 - 12,394,574 10,593,114 - - - 1,706,457 2,550,601 917,777 688,525 2,624,234 3,239,126 - (9,770,340) (7,353,988) * Trade and other payables excludes Skyventure investment balance of $2,000,000 that is expected to be settled through equity. Market risk c. (i) Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is not exposed to earnings volatility on floating rate instruments. The financial instruments that primarily expose the Group to interest rate risk are borrowings, cash and cash equivalents and term deposits. Interest rate risk is managed using a mix of fixed and floating rate debt where possible. Indoor Skydive Australia Group Limited 2017 Annual Report 58 Indoor Skydive Australia Group Limited 2017 Annual Report 59 59 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) (ii) Foreign exchange risk Most of the Group’s transactions are carried out in AUD. Exposures to currency exchange rates primarily arise from the purchase of vertical wind tunnel equipment from SkyVenture International, which is denominated in US dollars. To mitigate the Group’s exposure to foreign currency risk, non-AUD cash flows are monitored and forward exchange contracts are entered into in accordance with the Group’s risk management policies. Forward exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not expected to be offset by other currency transactions. Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. (iii) Other price risk Other price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices largely due to demand and supply factors (other than those arising from interest rate risk or currency risk) for commodities. The Group is not exposed to commodity price risk. The Group is not exposed to securities price risk on investments held for trading over the medium to longer terms. Sensitivity analysis The following table illustrates sensitivities to the Group’s exposures to changes in interest rates, and exchange rates. In respect of the exchange rates, the table summarises the sensitivity of the balance of financial instruments held at the reporting date to movement in the exchange rate of the US dollar to the Australian dollar, with all other variables held constant. The table indicates the impact on how profit and equity values reported at the end of the reporting period 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. 60 Indoor Skydive Australia Group Limited 2017 Annual Report 60 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) (ii) Foreign exchange risk Most of the Group’s transactions are carried out in AUD. Exposures to currency exchange rates primarily arise from the purchase of vertical wind tunnel equipment from SkyVenture International, which is denominated in US dollars. To mitigate the Group’s exposure to foreign currency risk, non-AUD cash flows are monitored and forward exchange contracts are entered into in accordance with the Group’s risk management policies. Forward exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not expected to be offset by other currency transactions. Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group. (iii) Other price risk Other price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices largely due to demand and supply factors (other than those arising from interest rate risk or currency risk) for commodities. The Group is not exposed to commodity price risk. The Group is not exposed to securities price risk on investments held for trading over the medium to longer terms. Sensitivity analysis The following table illustrates sensitivities to the Group’s exposures to changes in interest rates, and exchange rates. In respect of the exchange rates, the table summarises the sensitivity of the balance of financial instruments held at the reporting date to movement in the exchange rate of the US dollar to the Australian dollar, with all other variables held constant. The table indicates the impact on how profit and equity values reported at the end of the reporting period would have been affected by changes in the relevant risk variable that management considers to be These sensitivities assume that the movement in a particular variable is independent of other reasonably possible. variables. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) Year ended 30 June 2017 +/–1% in interest rates +/–10% in devaluation of the AUD Year ended 30 June 2016 +/–1% in interest rates +/–10% in devaluation of the AUD Profit $ 107,395 26,847 7,364 87 Equity $ 107,395 26,847 7,364 87 There have been no changes in any of the methods or assumptions used to prepare the above sensitivity analysis from the prior year. These movements are considered to be reasonably possible based on observation of current market conditions. Fair Values Fair value estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying amounts as presented in the statement of financial position. Fair value is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgement and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants. Differences between fair values and carrying amounts of financial instruments with fixed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the Group. Most of these instruments, which are carried at amortised cost (i.e. term receivables, held-to-maturity assets, loan liabilities), are to be held until maturity and therefore the fair value figures calculated bear little relevance to the Group. Indoor Skydive Australia Group Limited 2017 Annual Report 60 Indoor Skydive Australia Group Limited 2017 Annual Report 61 61 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) Consolidated Group Note Carrying Amount $ Fair Value $ Carrying Amount $ Fair Value $ 2017 2016 Financial assets Cash and cash equivalents Trade and other receivables Total financial assets Financial liabilities Trade and other payables Borrowings Total financial liabilities (i) (i) (i) (ii) 1,706,457 917,777 2,624,234 1,706,457 917,777 2,624,234 2,550,601 688,525 3,239,126 2,550,601 688,525 3,239,126 3,655,064 3,655,064 10,739,510 10,739,510 14,394,574 14,394,574 3,445,188 9,147,926 3,445,188 9,147,926 12,593,114 12,593,114 The fair values disclosed in the above table have been determined based on the following methodologies: (i) Cash and cash equivalents, term deposits, trade and other receivables, and trade and other payables are short-term instruments in nature whose carrying amount is equivalent to fair value. Trade and other payables exclude amounts provided for annual leave, which is outside the scope of AASB 139. (ii) Debt is recorded at the current carrying value which is considered equivalent to fair value. NOTE 22: AUDITOR’S REMUNERATION Remuneration of the auditor for: Grant Thornton Audit Pty Limited Audit fees Half year review Taxation compliance Other advisory services – – – – 2017 $ 2016 $ 62,500 25,500 5,300 2,500 95,800 60,000 23,000 3,000 450 86,450 The Group had a change in auditors. The auditor for financial year 2016 was RSM Australia Partners. 62 Indoor Skydive Australia Group Limited 2017 Annual Report 62 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Notes to the Financial Statements For the year ended 30 June 2017 Consolidated Group Note Carrying Amount Fair Value Carrying Amount Fair Value $ $ $ $ 2017 2016 Financial assets Cash and cash equivalents Trade and other receivables Total financial assets Financial liabilities Trade and other payables Borrowings Total financial liabilities (i) (i) (i) (ii) 1,706,457 1,706,457 2,550,601 2,550,601 917,777 917,777 688,525 688,525 2,624,234 2,624,234 3,239,126 3,239,126 3,655,064 3,655,064 3,445,188 3,445,188 10,739,510 10,739,510 9,147,926 9,147,926 14,394,574 14,394,574 12,593,114 12,593,114 The fair values disclosed in the above table have been determined based on the following methodologies: (i) Cash and cash equivalents, term deposits, trade and other receivables, and trade and other payables are short-term instruments in nature whose carrying amount is equivalent to fair value. Trade and other payables exclude amounts provided for annual leave, which is outside the scope of AASB 139. (ii) Debt is recorded at the current carrying value which is considered equivalent to fair value. NOTE 22: AUDITOR’S REMUNERATION Remuneration of the auditor for: Grant Thornton Audit Pty Limited Audit fees Half year review Taxation compliance Other advisory services – – – – 2017 $ 2016 $ 62,500 25,500 5,300 2,500 95,800 60,000 23,000 3,000 450 86,450 The Group had a change in auditors. The auditor for financial year 2016 was RSM Australia Partners. NOTE 21: FINANCIAL RISK MANAGEMENT (CONT) NOTE 23: EARNINGS PER SHARE NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Notes to the Financial Statements For the year ended 30 June 2017 Earnings per share (cents per share) From continuing operations: - basic earnings per share - diluted earnings per share a. Reconciliation of earnings to profit or loss: Loss Earnings used to calculate basic EPS Earnings used in the calculation of dilutive EPS Weighted average number of ordinary shares for basic EPS b. Weighted average number of ordinary shares for diluted EPS All performance rights on issue at 30 June 2017 are anti-dilutive. 2017 Cents 2016 Cents (0.68) (0.68) (1.26) (1.26) 2017 $ 2016 $ (891,290) (1,506,760) (891,290) (1,506,760) (891,290) (1,506,760) No. No. 131,633,571 119,673,163 136,633,571 119,673,163 NOTE 24: EVENTS AFTER REPORTING DATE Since the reporting date the Board of Directors has resolved to issue 4,150,000 unlisted options as a long term incentive to eligible employees (incentive options). 1,950,000 incentive options were issued to eligible employees on 24 August 2017 and 2,200,000 incentive options will be issued to the Company’s executive directors subject to shareholder approval. The incentive options have an exercise price of $0.35 and expire on 23 August 2021. 50% of the incentive options will vest after 2 years of continuous service and 50% after 3 years of continuous service from 24 August 2017. On 4 September 2017 the Company entered into a binding Memorandum of Understanding with Avest Capital Company Limited to enable the Company to conduct further due diligence and to establish a commercial framework for the development and operation of indoor skydiving facilities in China including Hong Kong under ISA Group’s AirRider brand. See ASX Announcement made on 4 September 2017 for further details. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years. NOTE 25: CONTINGENT LIABILITIES The Group does not have any contingent liabilities at the reporting date. Indoor Skydive Australia Group Limited 2017 Annual Report 62 Indoor Skydive Australia Group Limited 2017 Annual Report 63 63 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT DIRECTOR’S DECLARATIONS FOR THE YEAR ENDED 30 JUNE 2017 Directors’ Declarations For the year ended 30 June 2017 In the opinion of the Directors of Indoor Skydive Australia Group Limited: a. the financial statements and notes, as set out on pages 26 to 63, are in accordance with the Corporations Act 2001, including: i. ii. giving a true and fair view of the financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b. There are reasonable grounds to believe that Indoor Skydive Australia Group Limited will be able to pay its debts as and when they become due and payable. Note 1 includes a statement that the financial statements also comply with International Financial Reporting Standards. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2017. This declaration is made in accordance with a resolution of the Directors. For and on behalf of the Board Ken Gillespie Chairman 26 September 2017 Sydney Wayne Jones Director & Chief Executive Officer 64 Indoor Skydive Australia Group Limited 2017 Annual Report 64 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Directors’ Declarations For the year ended 30 June 2017 In the opinion of the Directors of Indoor Skydive Australia Group Limited: a. the financial statements and notes, as set out on pages 26 to 63, are in accordance with the Corporations Act 2001, including: giving a true and fair view of the financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and i. ii. Standards. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2017. This declaration is made in accordance with a resolution of the Directors. For and on behalf of the Board Ken Gillespie Chairman 26 September 2017 Sydney Wayne Jones Director & Chief Executive Officer INDEPENDENT AUDITOR’S REPORT b. There are reasonable grounds to believe that Indoor Skydive Australia Group Limited will be able to pay its debts as and when they become due and payable. Independent Auditor’s Report To the Members of Indoor Skydive Australia Group Limited Note 1 includes a statement that the financial statements also comply with International Financial Reporting Report on the audit of the financial report Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Opinion We have audited the financial report of Indoor Skydive Australia Group Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, 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: a Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance for the year ended on that date; and b 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 independence requirements of 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 (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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Indoor Skydive Australia Group Limited 2017 Annual Report 64 65 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT 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. Key audit matter How our audit addressed the key audit matter Deferred revenue – Note 1(s)(iv), 12 The Group recognises revenues derived from the sale of goods and services as well as the sale of prepaid gift cards. A portion of revenue relating to gift card sales is recognised upfront based on management’s estimate of historical redemption rates. The Group recognised gift card revenue of $494,000 for the year ended 30 June 2017 and, at year end, a deferred revenue balance of $1,907,000 is recorded as a current liability. This is a key audit matter given the management judgement involved in developing and applying appropriate accounting policies that comply with accounting standards and in determining the timing of revenue to be recognised. Recovery of deferred tax assets – Note 1(s)(ii), 4 Australian Accounting Standards require deferred tax assets to be recognised only to the extent that it is probable that sufficient future taxable profits will be generated in order for the benefits of the deferred tax assets to be realised. These benefits are realised by reducing tax payable on future taxable profits. The Group recognised gross deferred tax assets of $2,167,638 at 30 June 2017, of which $1,574,061 arises from tax losses carried forward. This is a key audit matter due to the magnitude of the deferred tax assets recognised and the judgment involved in determining the recoverability of the tax assets Our audit procedures included, among others: reviewing the mathematical accuracy of • management’s calculation of the gift card revenue recognised; • evaluating the reasonableness of management’s estimates relating to gift card breakage rates including corroborating management’s assertions to historical redemption rates disaggregated based on locations; and • performing testing on a sample of sales at year end to determine the revenues recorded relate to the appropriate period. Our audit procedures included, among others: • reviewing the tax calculations prepared by the Group; • evaluating the key assumptions used by the Group to determine its tax provisions; involving our taxation specialists to assist in this assessment of the determination of the tax bases. evaluating the assessment of the recoverability of its deferred tax assets; and assessing the Group’s taxation disclosures. • • • 66 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT Provision for site restoration – Note 1(s)(v), 14 The Group entered into long term tenant lease agreements at each of their tunnel facilities – Penrith, Gold Coast and Perth. There is a contractual obligation that the Group is responsible for restoring the site to its original condition at the conclusion of the lease. The Group has recognised a provision of $223,000 for site restoration as at 30 June 2017 in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets. There has been a change in accounting estimate for the calculation of the provision which has been applied prospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimated and Errors. This is a key audit matter due to the inherent complexity in estimating future restoration costs, particularly those that are forecast to be incurred several years in the future. Provision for lease incentives – Note 1(t), 14 The Group entered into four lease agreements at each of their tunnel locations and head office. The varying rent incentive offered within each agreement is required to be recognised on a straight line basis in accordance with AASB 117 Leases. The accounting for the straight-lining of lease incentives was incorrect in the prior period. This error has been disclosed in the 30 June 2017 financial statements and prior year comparatives have been restated. This is a key audit matter due to the material nature of the prior period error and the significant amount of time and senior resources dedicated to this matter during the current year audit. Our audit procedures included, amongst others: • reviewing the mathematical accuracy of the Group’s calculation; • • evaluating the key assumptions used by the Group in calculating the provision including the inputs to calculate the discount factor; reading the terms of the lease agreements to verify the Group’s rights and obligations; reviewing qualifications and experience of Management’s expert in relation to the valuation of the restoration costs at their present value to use as the basis of the estimate; and • • assessing the adequacy of financial statement disclosures. Our audit procedures included, amongst others: • reviewing prior auditor working papers as part of opening balance assessment; assessing the impact of the prior period accounting error identified; reviewing the mathematical accuracy of the Group’s calculation; reading the terms of the lease agreements to understand the Group’s rights and obligations; and • • • assessing the adequacy of financial statement disclosures. 67 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT Basis of Accounting - Note 1 In accordance with the Australian Accounting Standards, when assessing whether the going concern assumption is appropriate, management is required to take into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. This assessment is largely based on the assumptions made by the directors in their cash flow forecast. These forecasts include the directors’ assumptions regarding the timing of future cash flows, operating results, capital raising activities and any potential sale of assets. This assessment is largely based on the assumptions made by the directors in their cash flow forecast. These forecasts include the directors’ assumptions regarding the timing of future cash flows, operating results, capital raising activities and any capital commitments. Our audit procedures included, amongst others: • evaluating the underlying data used by (management/the directors) to generate the cash flow projections; • analysing the impact of reasonably possible changes in projected cash flows and their timing, to the projected periodic cash positions. • assessing the resulting impact on the ability of the Group to pay debts as and when they fall due and to continue as a going concern. The specific areas we focused on were informed from the results of our tests of the accuracy of previous Group cash flow projections and sensitivity analysis on key cash flow projection assumptions; • obtaining and reading correspondence with existing financiers to understand and assess the options available to the Group including available debt facilities, and assessing likelihood of compliance with terms of these facilities based on budgets and forecasts prepared by management; and • evaluating the Group’s basis of accounting disclosures in the financial report by comparing them to our understanding of the matter, the events or conditions incorporated into the cash flow projection assessment, the Group’s plans, and accounting standard requirements. Information Other than the Financial Report and Auditor’s Report Thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and our 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have 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 68 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT 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 at: http://www.auasb.gov.au/auditors_responsibilities/ar1.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 13 to 24 of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Indoor Skydive Australia Group Limited, for the year ended 30 June 2017, 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. GRANT THORNTON AUDIT PTY LTD Chartered Accountants P J Woodley Partner - Audit & Assurance Sydney, 26 September 2017 69 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT ADDITIONAL INFORMATION Additional Information Additional Information The following information is current as at 11 September 2017: Shareholder Information 1. Distribution of Shareholders Category (size of holding): 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Number Ordinary Shares 36 105 72 256 63 532 18,626 266,820 613,064 8,836,290 126,961,714 136,696,514 The number of shareholdings held in less than marketable parcels is 87. The names of the substantial shareholders listed in the holding company’s register are: Shareholder: Number of Shares % of Issued Capital Birkdale Holdings (QLD) Pty Ltd Excalib-Air Pty Ltd Challenger Limited LHC Capital Partners Pty Ltd Commonwealth Bank of Australia Paradice Investment Management Pty Ltd Voting Rights 17,039,475 16,060,000 15,213,222 10,792,523 10,182,782 8,826,251 12.47 11.97 11.13 7.94 7.49 6.58 ISA Group has ordinary shares on issue. The voting rights attached to each ordinary share is one vote per share when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. ISA Group has premium priced options which are not listed on the ASX. See Note 24 for further details. Premium priced options do not give a holder the right to vote at any meeting of ISA Group. 20 Largest Shareholders – Ordinary Shares Name Number of % Held of Issued Ordinary Fully Ordinary Capital NATIONAL NOMINEES LIMITED BIRKDALE HOLDINGS (QLD) PTY LTD EXCALIB-AIR PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED UBS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMS PTY LTD QUAD INVESTMENTS PTY LTD PROJECT GRAVITY PTY LTD LYNDCOTE SUPER PTY LTD CITICORP NOMINEES PTY LIMITED IFLY AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 AUSTRALIAN INDOOR SKYDIVING PTY LTD SABRE ONE INVESTMENTS PTY LTD DRILL INVESTMENTS PTY LTD JACK SUPER PTY LTD NULIS NOMINEES (AUSTRALIA) LIMITED MR ALISTAIR DAVID STRONG Paid Shares Held 17,544,994 17,039,475 16,060,000 14,719,148 12,751,718 8,646,414 5,927,540 3,200,376 2,916,667 2,627,307 2,521,667 2,521,601 2,500,000 2,300,711 2,187,833 1,001,277 1,000,000 889,474 757,000 600,000 117,713,202 12.835 12.465 11.749 10.768 9.328 6.325 4.336 2.341 2.134 1.922 1.845 1.845 1.829 1.683 1.601 0.732 0.732 0.651 0.554 0.439 86.113 70 Indoor Skydive Australia Group Limited 2017 Annual Report 70 Indoor Skydive Australia Group Limited 2017 Annual Report 71 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT ADDITIONAL INFORMATION Additional Information 20 Largest Shareholders – Ordinary Shares Name NATIONAL NOMINEES LIMITED BIRKDALE HOLDINGS (QLD) PTY LTD EXCALIB-AIR PTY LTD J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED UBS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMS PTY LTD QUAD INVESTMENTS PTY LTD PROJECT GRAVITY PTY LTD LYNDCOTE SUPER PTY LTD CITICORP NOMINEES PTY LIMITED IFLY AUSTRALIA PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 AUSTRALIAN INDOOR SKYDIVING PTY LTD SABRE ONE INVESTMENTS PTY LTD DRILL INVESTMENTS PTY LTD JACK SUPER PTY LTD NULIS NOMINEES (AUSTRALIA) LIMITED MR ALISTAIR DAVID STRONG Number of Ordinary Fully Paid Shares Held 17,544,994 17,039,475 16,060,000 14,719,148 12,751,718 8,646,414 5,927,540 3,200,376 2,916,667 2,627,307 2,521,667 2,521,601 2,500,000 2,300,711 2,187,833 1,001,277 1,000,000 889,474 757,000 600,000 117,713,202 % Held of Issued Ordinary Capital 12.835 12.465 11.749 10.768 9.328 6.325 4.336 2.341 2.134 1.922 1.845 1.845 1.829 1.683 1.601 0.732 0.732 0.651 0.554 0.439 86.113 71 71 Indoor Skydive Australia Group Limited 2017 Annual Report LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT ADDITIONAL INFORMATION Additional Information 2. 3. 4. 5. 6. The name of the company secretary is Fiona Yiend. The address of the principal registered office in Australia is Level 2, 201 Miller Street North Sydney NSW 2060 Telephone 02 9325 5900. The Register of Securities is held at Grosvenor Place, Level 12, 225 George Street, Sydney NSW 2000. Stock Exchange Listing Quotation has been granted for all 136,696,514 ordinary shares of ISA Group on all Member Exchanges of the Australian Securities Exchange Limited. Unquoted Securities ISA Group has 1,950,000 incentive options on issue to eligible employees and has resolved to issue 2,200,000 incentive options to the Company’s executive directors subject to shareholder approval. The incentive options are subject to vesting conditions, have an exercise price of $0.35 and expire on 23 August 2021. 72 Indoor Skydive Australia Group Limited 2017 Annual Report 72 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT Additional Information 2. 3. 4. 5. 6. 2000. Stock Exchange Listing Unquoted Securities The name of the company secretary is Fiona Yiend. The address of the principal registered office in Australia is Level 2, 201 Miller Street North Sydney NSW 2060 Telephone 02 9325 5900. The Register of Securities is held at Grosvenor Place, Level 12, 225 George Street, Sydney NSW Quotation has been granted for all 136,696,514 ordinary shares of ISA Group on all Member Exchanges of the Australian Securities Exchange Limited. ISA Group has 1,950,000 incentive options on issue to eligible employees and has resolved to issue 2,200,000 incentive options to the Company’s executive directors subject to shareholder approval. The incentive options are subject to vesting conditions, have an exercise price of $0.35 and expire on 23 August 2021. CORPORATE DIRECTORY Corporate Directory Directors Ken GILLESPIE Wayne JONES Danny HOGAN Steve BAXTER Company Secretary Fiona YIEND Registered Office Principle Place of Business Share Register Auditor Indoor Skydive Australia Group Ltd Level 2 201 Miller Street North Sydney NSW 2060 Indoor Skydive Australia Group Ltd Level 2 201 Miller Street North Sydney NSW 2060 Boardroom Pty Limited Level 12 225 George Street Sydney NSW 2000 Grant Thornton Audit Pty Ltd Level 17 383 Kent Street Sydney NSW 2000 Bankers Westpac Banking Corporation Stock exchange listing code: IDZ Website www.indoorskydive.com.au Indoor Skydive Australia Group Limited 2017 Annual Report 72 73 73 Indoor Skydive Australia Group Limited 2017 Annual Report LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT NOTES 74 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT75 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORTINDOOR SKYDIVE AUSTRALIA GROUP LIMITED ABN: 39 154 103 607 76 LogosBRAND IDENTITY | IDENTITY GUIDELINESJob No: ISA01Date: 3 / 07 / 2012Page: 2 ISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPISAGROUPINDOOR SKYDIVE AUSTRALIA GROUPINDOOR SKYDIVE AUSTRALIA GROUP LIMITED2017 ANNUAL REPORT

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