Indoor Skydive Australia Group Limited
ABN: 39 154 103 607
For the year ended 30 June
ANNUAL
REPORT
2018
CORPORATE DIRECTORY
Directors
Jon BRETT
Steve BAXTER
Danny HOGAN
Wayne JONES
James SPENCELEY
Simon WARD
Company Secretary
Salesh NISCHAL and Fiona YIEND
Registered Office
Principal Place of Business
Share Register
Auditor
Indoor Skydive Australia Group Limited
Level 2
201 Miller Street
North Sydney NSW 2060
Indoor Skydive Australia Group Limited
Level 2
201 Miller Street
North Sydney NSW 2060
Boardroom Pty Limited
Level 12
225 George Street
Sydney NSW 2000
Felsers, Chartered Accountants
t/as Accru Felsers
Level 6
1 Chifley Square
Sydney NSW 2000
Bankers
Westpac Banking Corporation
Stock exchange listing code:
IDZ
Website
www.indoorskydive.com.au
2
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
CONTENTS
Directors’ Review
Directors’ Report
Remuneration Report
(Audited)
4-5
6-11
12-21
Auditor’s Independence 23
Declaration
Financial Reports
Notes to the Financial
Statements
24-27
28-62
Directors’ Declaration
63
Independent Auditor’s
Report
64-68
Additional Information
70-72
Front Page:
Instructor Dave flies in iFLY Perth.
This Page:
A First Time Flyer Enjoys a High Fly in Penrith.
DIRECTORS’ REVIEW
The 2018 financial year concluded with very mixed results.
A number of key initiatives were achieved including
increasing the investment in our Australian operations team
to drive performance and the development of systems
and processes focused on the customer experience.
However, the achievements of 2018 where overshadowed
by the dispute with SkyVenture International Limited and
the consequences arising from the resolution of that
dispute. During the year, ISA Group’s operations suffered
as a result of management being focused on the dispute
and the impairments and costs flowing from the settlement
achieved after year end have significantly impacted the
Company’s financial results. All costs associated with the
settlement have been provisioned for in the 2018 financial
statements.
The focus in 2019 will be to reduce overhead costs and
debt levels while increasing earnings from our existing
facilities.
2018 Financial Performance
For the year ended 30 June 2018, ISA Group reported
a statutory loss before interest, tax, depreciation and
is particularly
amortisation of $6,387,289 This
disappointing as without the legal fees, AirRider impairment
and dispute settlement costs the underlying result was a
positive $2,293,178. This compares to $982,510 in 2017.
result
On 24 September 2018 ISA Group and SkyVenture
entered into a Deed of Settlement which resolved all
issues between them and resets the foundations of the
relationship.
As a result of the settlement ISA Group agreed that it
will pay SkyVenture’s Australian and US legal fees and
repay the amounts received from SkyVenture in relation
to our Perth and Gold Coast facilities. These costs of the
settlement are being funded by promissory notes provided
by SkyVenture.
SkyVenture Relationship Going Forward
The relationship between ISA Group and SkyVenture is
strong. At an operational level both parties have always
and will continue to engage in good faith to drive the
performance of indoor skydiving facilities.
One of the beneficial outcomes of the dispute with
SkyVenture is that both parties now understand the
relationship between them and have agreed to work
more closely together going forward. As part of the
settlement SkyVenture has agreed to provide ISA Group
with preferential pricing for the purchase of vertical wind
tunnel equipment going forward and ISA Group has
confirmed its commitment to SkyVenture and the iFLY
franchise. Consistent with its commitment to iFLY, ISA
Group has agreed to surrender the AirRider brand.
Dispute with SkyVenture
Sound Business Model
The dispute with SkyVenture centred around whether
ISA Group, through any of its entities, could enter into a
contract for the supply of a vertical wind tunnel from a
third party supplier anywhere in the world. ISA Group, after
taking into account appropriate advice, understood that
it could. When the Malaysian opportunity arose, based
on this understanding, ISA Group proceeded to use a
different suppler for the vertical wind tunnel. The arbitrator
of the dispute did not agree. There were a number of
ancillary arguments raised throughout the dispute process
however the key operational issue focused on the supply
of vertical wind tunnel equipment.
On 19 July 2018 the arbitrator issued a partial final award
that contained his findings on the application of the
contracts between ISA Group and SkyVenture and found
that ISA Group’s Australian operating facilities were in
breach of their purchase and license agreements. At that
time settlement discussions were well advanced but had
not been concluded.
the arbitrator’s decision disrupted
Receipt of
the
settlement negotiations and it took some time to get them
back on track.
ISA Group’s operations are founded on a sound proven
business model. Many of the costs associated with each
indoor skydiving facility are fixed or able to be reliably
estimated resulting in returns being driven by utilisation.
With focused committed management high margins can
be achieved at a facility level.
Throughout 2018 ISA Group has invested in each of its
Australian facilities to increase management expertise
facilitate a smoother customer
and capability, to
experience and to break into new market segments.
While there is a time lag between the implementation of
these changes and their benefits, ISA Group is starting to
see new customers from the inbound tourist market, held
the first commercial indoor skydiving instructor course
and increased the alignment of tunnel flying with outdoor
skydiving enthusiasts.
Board Renewal
ISA Group has a clear strategy for the way ahead and has
used the last few months to establish a board of directors
with the appropriate skills and expertise to deliver that
strategy.
4
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT independent
Jon Brett joins the board as Chairman bringing a high
level of financial acumen,
leadership
and a sharp analytical mind. He is joined by James
Spenceley, an experienced entrepreneur who is skilled
at delivering growth through corporate transactions and
organic development and building start-up ventures into
successful stable operations. Simon Ward has also joined
the Board reflecting the strong relationship between ISA
Group and SkyVenture and providing up to the minute
knowledge of the vertical wind tunnel industry and indoor
skydiving. Continuity and stability is maintained through
the continued services of Steve Baxter, Wayne Jones and
Danny Hogan as directors.
Looking Ahead
The focus for 2019 will be to reduce corporate overheads,
to repay debt and to achieve sustainable growth. Our
growth focus continues to be Australia, South East Asia,
China and Hong Kong over the medium to long term. In
the short term, ISA Group’s primary focus will be on current
operations and considering all options to maximise
shareholder value.
Junior Flyer Millie is Excited for Her Next Flight
5
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT DIRECTORS’
REPORT
VFS Team practising for the Australian Open
DIRECTORS’ REPORT
Your Directors 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 2018.
Internet Provider SE Net and co-founder of
early
telecommunications
Pipe
Networks Ltd. In 2008 he moved to the USA and joined
Google Inc deploying high speed telecommunication
infrastructure, before returning to Australia.
infrastructure company,
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:
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 and Vocus Communications Limited.
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.
Wayne served as Interim Chairman between 6 August
2018 and 24 September 2018 while the process of selecting
a Chairman and appointing additional non-executive
directors was conducted.
Danny Hogan MG
Director & Chief Operations Officer
Appointed 4 November 2011
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
Jon Brett
Chairman – Non-Executive
Appointed 24 September 2018
Jon Brett has extensive experience in the areas of
management, operations, finance and corporate
advisory. Jon was an executive director of Investec
Wentworth Private Equity. Jon has served as the managing
director of a number of publicly listed companies, including
Techway Limited which pioneered internet banking in
Australia. Jon is an experienced non-executive director
and served as a non-executive director on Vocus Group
Limited and was an integral part in helping Vocus grow
from a small cap ASX company to an ASX 100 company.
He served as the non-executive deputy president of the
National Roads and Motoring Association and has been
Chairman of the Audit & Risk Committees for a number of
different ASX listed companies.
In the last three years Jon has been a director of Vocus
Group Limited, Godfreys Limited and The PAS Group
Limited.
Jon is highly qualified and has a B.Acc, B.Com, M. Com
CA(SA).
James Spenceley
Non-Executive Director
Appointed 24 September 2018
James Spenceley
is an experienced entrepreneur,
company director and CEO with a track record of
organic and acquisition related value creation. He is
the founder and former CEO of Vocus Communications,
an ASX100 business and now Australia’s 4th largest
telecommunications company. James is the Chairman
of Airtasker and former owner of the Illawarra Hawks
basketball team. He is co-founder and CEO of MHOR asset
management, an Australian small capital investment
fund, and twice been recognised as an EY Entrepreneur
of the Year award winner.
Former Australian Regular Army electronics technician
turned successful entrepreneur, Steve is the founder of
James is currently Chairman of Silver Heritage Group
Limited and Chairman of AirTasker. In the last three years
7
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT DIRECTORS’ REPORT
James was an executive director of Vocus Communications
Limited.
Simon Ward
Non-Executive Director
To be appointed
As International President of iFLY and a director of
SkyVenture International Limited, Simon Ward has a
detailed understanding of
the developments and
innovation occurring in the manufacture of vertical wind
tunnels. Simon founded the indoor skydiving industry in
the United Kingdom and brings over 13 years experience
in the operation of indoor skydiving facilities. He is a senior
member of the SkyVenture and iFLY leadership team and
works with franchisees worldwide to drive the performance
of indoor skydiving facilities.
Ken Gillespie AC, DSC, CSM
Former Chairman – Non-Executive
Appointed 18 October 2012
Resigned 6 August 2018
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.
COMPANY SECRETARY
Salesh Nischal
Chief Financial Officer & Company Secretary
Appointed Company Secretary on 24 September 2018
Salesh Nischal has 21 years of extensive financial and
operational experience in the ASX reporting environment
within large diverse organisations. He has experience
performing company secretarial work as part of the
finance function. He has a proven ability to implement
financial risk management, cost control management
and internal controls. Salesh holds a Bachelor of Arts
degree in accounting and has CPA qualifications.
8
Fiona Yiend
General Counsel & Company Secretary
Appointed 16 October 2013
Resigned 27 September 2018
Fiona Yiend
is an experienced company secretary
with over 9 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 Association of Corporate Counsel (ACC).
DIRECTORS’ MEETINGS
The number of Directors’ meetings that Directors were
eligible to attend and the number of meetings attended
by each Director during the year are listed below.
Board
Eligible to
Attend
Attended
Wayne Jones
Danny Hogan
Steve Baxter
Ken Gillespie
12
12
13
13
11
11
13
13
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.
Director
Number of Shares and Nature of
Interest
Wayne Jones
Indirect interest in 16,060,000 shares
held by Excalib-air Pty Ltd, indirect
interest in 325,000 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. Direct interest in
1,100,000 unlisted Options with an
exercise price of $0.35, subject to
vesting conditions being met, and
an expiry date of 23 August 2021.
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT DIRECTORS’ REPORT
Director
Danny
Hogan
Steve Baxter
Jon Brett
James
Spenceley
Ken Gillespie
Number of Shares and Nature of
Interest
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.
Direct interest in 1,100,000 unlisted
Options with an exercise price of
$0.35, subject to vesting conditions
being met, and an expiry date of 23
August 2021.
Indirect interest in 17,039,475 shares
held by Birkdale Holdings (QLD) Pty
Ltd. Contractual right to be issued
6,000,000 unlisted options with an
exercise price of $0.25 and an expiry
date of 18 June 2020 conditional on
receipt of shareholder approval.
Nil
Nil
Indirect interest in 436,142 shares
held by Sector West Pty Ltd ATF
Gillespie Family Trust
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.
DIVIDENDS
No dividends were declared during the period.
PRINCIPAL ACTIVITIES
ISA Group owns and operates Indoor Skydiving Facilities.
ISA Group has three operating Australian Indoor Skydiving
Facilities; iFLY Downunder (Penrith NSW), iFLY Gold Coast
and iFLY Perth.
In early 2018 ISA Group, in partnership with 1 Utama,
opened its first international first Indoor Skydiving Facility in
Kuala Lumpur, Malaysia. The Malaysian facility operates
under the brand AirRider 1 Utama.
REVIEW OF OPERATIONS
The financial year ended 30 June 2018 was a challenging
year for ISA Group with lower than expected performance
across the industry and difficult trading conditions in the
last half of the year.
Against this backdrop, ISA Group implemented a number
its Australian
of efficiencies and restructures across
operations to drive revenue while continuing to provide
an optimal customer experience. The operations were
also impacted by senior management’s need to focus
on an arbitration proceeding in the second half of the
year which resulted in some revenue generating activities
being deferred.
ISA Group’s Malaysian facility opened to the public in the
second half of the financial year under the AirRider brand.
As part of the settlement with SkyVenture International
Limited referred to below, ISA Group has committed
to deliver growth projects under the iFLY or SkyVenture
brands and to use SkyVenture VWT equipment on a
worldwide basis. Accordingly, ISA Group has impaired all
investment in the AirRider brand and will seek to transfer all
management agreements and other economic benefits
associated with the Malaysian facility to SkyVenture.
For the year ended 30 June 2018, ISA Group reported
statutory loss before interest, tax, depreciation and
amortisation was $6,387,289. The underlying EBITDA
(excluding legal fees, AirRider impairment and dispute
settlement costs) is $2,293,178. This compares to $982,510
in 2017.
ISA Group’s initial focus going forward is on driving the
performance of our operations, establishing a stable
reliable level of performance and creating efficient
customer focused experiences.
Through the revitalised partnership with SkyVenture, ISA
Group will be able to access preferential pricing and
bespoke fit for purpose VWT models to support our future
growth. The growth focus continues to be Australia, South
East Asia, China and Hong Kong over the medium to long
term. In the short term, ISA Group’s primary focus will be
on current operations.
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.
9
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT DIRECTORS’ REPORT
SUBSEQUENT EVENTS
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 2018 are detailed in Note 16 of the Financial
Statements and form part of this Directors’ Report.
As at 30 June 2018 ISA Group had 3,500,000 employee
and executive director unlisted options on issue with an
exercise price of $0.35, tenure based vesting conditions
and an expiry date of 23 August 2021.
As at 30 June 2018 ISA Group had a contractual obligation
to issue 6,000,000 unlisted options with an exercise price
of $0.25 and an expiry date of 18 June 2020 to Birkdale
Holdings (QLD) Pty Ltd subject to shareholder approval.
ISA Group intends to request shareholder approval of the
issue of the options at the 2018 Annual General Meeting.
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.
The Directors and Company Secretary of ISA Group are
also party to a deed of access and indemnity.
The Company has not otherwise, during or since the
financial year, indemnified or agreed to indemnify an
officer or auditor of the Company or any related body
corporate against a liability incurred by such an officer or
auditor.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the court under section 237 of
the Corporations Act 2001 for leave to bring, or intervene
in, proceedings on behalf of any entity within ISA Group.
On 19 July 2018 ISA Group received a partial final arbitral
award from the Arbitrator of the dispute with SkyVenture
International Limited. The award addressed the question
of liability only and did not address remedy, costs or any
quantum. After receipt of the award ISA Group and
SkyVenture International Limited agreed to a settlement
which addressed all issues between them. The settlement
provides for ISA Group to pay SkyVenture for its legal costs,
to transfer all ownership in the AirRider brands and the
management agreements and other economic benefits
associated with the Malaysian facility to SkyVenture.
SkyVenture has committed under the settlement to supply
ISA Group with specialist vertical wind tunnel equipment
at preferential prices to support ISA Group’s future growth.
is
funded by Promissory Notes
The settlement
for
US$3,789,933 from SkyVenture International Limited. The
loans under the promissory notes have a 2-year term with
the first year comprising interest payments only. For so
long as ISA Group is listed, up to US$1,619,219.99 of the
loan amount may be converted into ISA Group ordinary
shares from 60 days after the effective date of the note
at a conversion price of US$0.079. The maximum number
of shares that may be issued on conversion is 20,496,455
which is within ISA Group’s capacity to issue under Listing
Rules 7.1.
FUTURE DEVELOPMENTS
ISA Group’s initial focus going forward is on driving the
performance of our operations, establishing a stable
reliable level of performance and creating efficient
customer focused experiences.
Through our revitalised partnership with SkyVenture, ISA
Group will be able to access preferential pricing and
bespoke fit for purpose VWT models to support our future
growth. Our growth focus continues to be Australia, South
East Asia, China and Hong Kong over the medium to long
term. In the short term ISA Group’s primary focus will be on
current operations.
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 12 forms part
of this Directors’ Report.
10
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
DIRECTORS’ REPORT
AUDITORS
Felsers Chartered Accountants trading as Accru Felsers
was appointed as ISA Group’s auditor on 13 June 2018
and continues in office until the 2018 Annual General
Meeting. Shareholders will be asked to approve the
appointment of Felsers Chartered Accountants as auditor
at the 2018 Annual General Meeting in accordance with
section s327C of the Corporations Act 2001.
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
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.
-
The fees paid or payable to Felsers Chartered Accountants
for non-audit services provided during the year ended 30
June 2018 were $7,500.
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s Independence Declaration at page 23
forms part of this Directors’ Report.
ROUNDING OF AMOUNTS
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.
BUY BACK
ISA Group does not currently have any on-market buy-
back of shares.
STATEMENT OF CORPORATE GOVERNANCE
ISA Group’s Statement of Corporate Governance for the
year ended 30 June 2018 is available at
http://www.indoorskydiveaustralia.com.au/
skydivecompany/charters-and-policies/.
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
Wayne Jones
Director & Chief Executive Officer
26 September 2018
Sydney
11
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
REMUNERATION
REPORT
Amy Watson Wows the Crowd with Her Freestyle Routine
REMUNERATION REPORT
1. Introduction
This Remuneration Report for the year ended 30 June 2018 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’s remuneration strategy has been designed to promote shareholder growth by setting strategic and operational
targets for at risk remuneration while maintaining a base salary that fairly rewards employees.
Consideration of Remuneration & Nomination Matters
All remuneration matters across ISA Group are reviewed by a ‘one up’ manager to ensure that no single individual is
determining remuneration. 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. Since April 2017 remuneration matters
have been 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. ISA Group received preliminary advice on long term incentives to drive performance in 2018
and the following years. This advice formed the foundation of ISA Group’s long term incentive which utilises premium
priced options.
Hedging of Remuneration
ISA Group’s 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 2018 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
Danny Hogan
Non-Executive Directors:
Executive Director & Chief
Executive Officer
Executive Director & Chief
Operations Officer
Ken Gillespie*
Chair
Stephen Baxter
Director
Salesh Nischal
Chief Financial Officer
Fiona Yiend
General Counsel &
Company Secretary
Profiles of KMP can be found on page 7 and 8.
* Resigned 6 August 2018 at which time Wayne Jones
assumed the role of Interim Chairman until 24
September 2018.
13
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT REMUNERATION REPORT
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.
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 returns to shareholders.
Remuneration Strategy
ISA Group’s remuneration strategy for 2018 focused on driving the delivery of operation, strategic and growth
strategies. Short term incentives were used to focus on achieving key deliverables to the ISA Group strategic plan with
long term incentives designed to encourage the retention of key employees and promote shareholders interest.
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
Rewards for
Experience, skills, capability
and performance.
Annual cash payment
subject to the achievement
of strategic targets
Participation in the ISA
Group Employee Incentive
Option Plan
Achieving set outcomes
for the financial year
including financial targets,
operational milestones and
strategic developments.
Tenure over a long term
period. As the options
have a premium built into
the exercise price the
employee only benefits if
an increase in shareholder
value is achieved.
Is
Fixed
At Risk
At Risk
Reviewed annually
Wholly dependent on
achieving the set financial
targets
Determined by
Review of individual
performance, experience
and capability within the
context of the overall
business performance.
Performance against
predetermined targets.
STI is only payable if the
targets are achieved. It
includes an initial target
and a stretch target for
each category of target
to encourage continued
performance.
Wholly dependent on
achieving the set tenure
requirements and being
“in the money” during the
exercise period.
Retention of individual
over a course of time with
premium exercise price set
to require an increase in
shareholder value before a
benefit is received.
14
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
REMUNERATION REPORT
Remuneration Outcomes for Executive KMP
The remuneration received by Executive KMP in 2018 and 2017 is set out below.
Short Term Benefits
Post
Employment
Benefits
KMP
Year
Salary
STI
Non
Monetary
Superannuation
Long
Term
Benefits
Long
Service
Leave
Other
Termination
Share
Based
Payments
Options/
Rights
$
$
$
$
$
$
$
Total
$
Wayne Jones
CEO
Danny Hogan
COO
Salesh Nischal
CFO1
Fiona Yiend
General
Counsel/
Company
Secretary
Brett
Sheridan
CCO2
2018
218,759
2017
208,725
2018
218,759
2017
208,725
2018
176,550
2017
16,975
2018
185,038
2017
146,578
2018
103,615
2017
178,200
Stephen Burns
Former CFO3
2017
179,675
1 Appointed CFO on 10 May 2017
2 Resigned 8 January 2018
3 Resigned effective 17 May 2017
-
-
-
-
-
-
-
-
-
-
-
15,090
20,782
8,943
19,829
16,571
20,782
16,020
19,829
-
-
16,773
1,613
7,560
17,579
4,019
13,925
9,439
7,372
-
9,812
16,929
17,692
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,034
267,665
51,212
288,709
13,034
269,146
51,212
295,786
15,788
209,111
-
18,588
15,788
225,965
30,537
195,059
-
122,866
30,537
233,038
(29,788)
167,579
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 36% of base salary plus long term incentives which are assessed over a three year period. Other executives have short
term incentives of up to 25% of their base at risk in each financial year in addition to long term incentives assessed over
a three year period.
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.
15
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT REMUNERATION REPORT
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.
Short Term Incentive Structure
The key features of ISA Group’s STI Plan are outlined below:
What is the purpose of the STI?
STI performance targets drive executives to focus on achieving ISA Group’s
performance goals in relation to current operations, future operations and the
strategic plan.
Who participates?
All Executive KMP and selected senior executives.
How much can be earned under
the STI Plan?
The target STI opportunity for KMP is between 14% to 18% of base salary
depending on the role. For stretch/over performance, KMP can earn a total STI of
25% to 36% of base salary.
What are the performance
conditions?
The performance criteria is:
Current Operations (50%) – EBITDA targets
Future Operations (25%) – Milestones in relation to the Malaysian project to be
achieved by set dates
Strategic Plan (25%) - Milestones in relation to international growth plan to be
achieved by set dates
Over what period is it measured?
Performance is measured over the 12 month period from 1 July to 30 June.
How is it paid?
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).
When and how is it reviewed?
The STI is reviewed annually in line with the review of remuneration and the setting
of the upcoming financial budget.
Who assesses performance
against targets?
The targets are objective measures which are assessed by the Board. Financial
measures are assessed against the Company’s audited financial accounts. The
Board approves all STI assessments and payments.
What are the clawback
provisions?
None
16
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT REMUNERATION REPORT
Short term Incentive Outcomes
For 2018, 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?
The LTI aligns employee interest with shareholder interest with a focus on
increasing shareholder value.
Who participates?
Participants are the KMP who drive the growth strategy of ISA Group.
What is the vehicle?
Awards are in the form of premium priced options in accordance with the ISA
Group Employee Incentive Option Plan.
If performance hurdles related to tenure are met the options will vest. Once
vested, each option entitles the employee to purchase one share in ISA Group for
$0.35.
What are the performance
conditions and what is the
performance period?
The performance hurdles are split into two tranches with 50% of the options
vesting on continuous employment with the Company for 2 years and 50% of the
options vesting on continuous employment with the Company for 3 years.
Vested options only provide a financial benefit to the employee if the exercise
price of $0.35 is lower than the ISA Group share price on the ASX during the
exercise period.
What are the service conditions? An employee must be continuously employed with the Company for options to
vest. Termination of employment prior to vesting causes the options to lapse.
How is it paid?
Subject to meeting the performance hurdles the options vest. Once vested each
option can be exercised to purchase one fully paid ordinary ISA Group share for
$0.35.
How are performance conditions
set?
The performance conditions were set by the Board after considering the
appropriate incentive and conditions to align employee and shareholder
interests.
What happens if a change of
control occurs?
If a change in control event occurs vested options may be exercised for shares
in the acquiring company with appropriate adjustments provided that the
Company, employee and acquiring company agree.
What are the clawback
provisions?
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
options lapse or that any vested but unexercised options lapse.
17
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT REMUNERATION REPORT
Long Term Incentive Awards and Outcomes
During 2018 the following options were issued under the ISA Group Employee Incentive Option Plan. Each vested option
entitles the holder to purchase one ordinary ISA Group share for the exercise price of $0.35. Shareholder approval was
granted to the issue of options to Wayne Jones and Danny Hogan on 21 November 2017.
Employee
Options
Exercise
Price
Vested
Vesting Date
Tranche 1 (50%)
Vesting Date
Tranche 2
(50%)
Expiry Date
Value of
Option on
Grant Date
Wayne Jones
1,100,000
$0.35
No
24 August 2019
24 August 2020
23 August 2021
3.55 cents
Danny Hogan
1,100,000
$0.35
No
24 August 2019
24 August 2020
23 August 2021
3.55 cents
Salesh Nischal
650,000
$0.35
No
24 August 2019
24 August 2020
23 August 2021
7.29 cents
Fiona Yiend
650,000
$0.35
No
24 August 2019
24 August 2020
23 August 2021
7.29 cents
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
Notice required to be
given to the Company for
termination by Employee
Termination Payments
Wayne Jones
Director and CEO
Danny Hogan
Director and COO
Salesh Nischal
Chief Financial
Officer
Fiona Yiend
General Counsel &
Company Secretary
October 2012
Ongoing 6 months
October 2012
Ongoing 6 months
May 2017
Ongoing 6 Weeks
September 2013 Ongoing 6 Weeks
5. Non-Executive Director Remuneration
6 months’ notice for termination
by Employer and legislative
entitlements on redundancy.
6 months’ notice for termination
by Employer and legislative
entitlements on redundancy.
6 weeks’ notice for termination
by Employer and legislative
entitlements on redundancy.
6 weeks’ notice for termination
by Employer and 6 months on
redundancy.
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 2018 was $125,417 (FY17: $210,192).
Approach to setting Non-Executive Director Remuneration
Non-Executive Directors receive fixed remuneration in the form of a fee. The fee is set taking into account the conditions
at the time of the director’s appointment, the director’s skills and expertise and the role to be performed by the director.
18
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT REMUNERATION REPORT
Non-Executive Directors do not receive variable remuneration or other performance-related incentives.
The Non-Executive Director fees were not increased in 2018. The Non-Executive Directors fees for the last two financial
years are set out below.
Financial Year
Salary and Fees
Bonus
Share based
payments
Stephen Baxter
Ken Gillespie*
2018
2017
2018
2017
David Murray**
2017
Kirsten
Thompson**
2017
* Resigned 6 August 2018
** Resigned 25 April 2017
40,417
55,000
85,000
85,000
29,727
40,465
-
-
-
-
-
-
-
-
-
-
-
-
Total
40,417
55,000
85,000
85,000
29,727
40,465
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.
2014
2015
2016
2017
2018
Revenue
1,212,643
6,431,444
8,155,888
12,271,081
13,880,529
Net Profit/(Loss)
after Tax
(2,714,016)
(1,903,921)
(1,506,760)
(891,290)
(10,140,582)
Share price at 30
June
0.68
0.45
0.40
0.20
0.12
19
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT REMUNERATION REPORT
Performance rights holdings of KMP
During the period 2013 to 2017 ISA Group used performance rights as a long term incentive tool. The last issue of shares
on the exercise of vested performance rights occurred at the beginning of the 2018 financial year.
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 2017
Granted as
remuneration
Rights exercised
Rights lapsed
Rights Forfeited Balance at 30
June 2018
Wayne Jones
228,554
Danny Hogan
228,554
Salesh Nischal
-
Fiona Yiend
129,054
Brett Sheridan
129,054
Option holdings of KMP
-
-
-
-
-
228,554
228,554
-
129,054
129,054
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Details of the option holdings of KMP are set out below. Non-Executive Directors are not granted options as part of their
remuneration:
Balance at 1
July 2017
Granted as
remuneration
Rights exercised
Rights lapsed
Rights Forfeited Balance at 30
-
-
-
-
June 2018
1,100,000
1,100,000
650,000
650,000
650,000
-
Wayne Jones
Danny Hogan
Salesh Nischal
Fiona Yiend
Brett Sheridan
-
-
-
-
-
1,100,000
1,100,000
650,000
650,000
650,000
-
-
-
-
-
-
-
-
-
-
20
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL 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 2018
Ken Gillespie
Chairman*
436,142
Steve Baxter
Wayne Jones
Danny Hogan
Salesh Nischal
Non-Executive
Director
Chief Executive
Officer & Director
Chief Operations
Officer & Director
Chief Financial
Officer
17,039,475
18,797,753
18,219,279
-
Fiona Yiend
General Counsel &
Company Secretary
140,000
-
-
-
-
Brett Sheridan
Chief Commercial
Officer**
550,000
129,054
* Resigned 6 August 2018
** Resigned 8 January 2018
-
-
228,554
228,554
-
129,054
436,142
17,039,475
19,026,307
18,447,833
-
269,054
679,054
2017 Annual General Meeting (AGM)
At the Company’s AGM in November 2017, 98.43% of votes received were in favour of adopting the remuneration report.
Related Party Transaction
On 19 June 2018 ISA Group entered into agreements for a $3m loan facility from Birkdale Holdings (QLD) Pty Ltd ATF
the Baxter Family Trust, a company associated with Steve Baxter. The term of the loan is 2 years and it is supported by
a second ranking general security agreement. As part of the loan agreements ISA Group will issue 6,000,000 options
with an exercise price of $0.25 and an expiry date of 2 years from the date of issue. The issue of the options is subject to
shareholder approval which will be sought at the 2018 Annual General Meeting.
21
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT AUDITOR’S INDEPENDENCE DECLARATION
Sarah Yates puts on a Show for the Crowds
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
To the Directors of Indoor Skydive Australia Group Limited
In accordance with the requirements of section 307 of the Corporations Act 2001, as lead auditor for the
audit of Indoor Skydive Australia Group Limited for the year ended 30 June 2018, I declare that, to the
best of my knowledge and belief, there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
Felsers
Chartered Accountants
Michael Kersch
Partner
Sydney
26 September 2018
23
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME For the year ended 30 June 2018
Revenue
Cost of sales
Gross profit
Other income
Selling and marketing expenses
Administration expenses
Impairment of AirRider brand
Legal expense
Dispute settlement costs
Other expenses
Loss before Interest and Tax
Finance income
Finance expense
Net financing costs
Share of loss from joint venture entities
Loss Before Tax
Income tax (expense)/benefit
Loss After Tax
Other comprehensive income
Exchange differences on translation
of foreign operations
Note
3
3
3 (a)
3 (b)
10
4
Consolidated Group
2018
$
2017
$
13,880,529
12,271,081
(2,575,301)
(2,464,687)
11,305,228
9,806,394
396,753
45,478
(5,183,269)
(4,602,987)
(2,627,648)
(2,520,068)
(3,532,751)
(1,560,123)
(8,324,865)
615
(558,598)
(557,983)
(339,583)
(9,222,431)
(918,151)
(10,140,582)
(4,731,189)
(4,354,932)
-
-
-
(1,432,046)
(666,295)
7,373
(383,317)
(375,944)
-
(1,042,239)
150,949
(891,290)
805
-
Total comprehensive loss for the year
(10,139,777)
(891,290)
Earnings per share
From continuing operations:
Basic earnings per share (cents)
Diluted earnings per share (cents)
24
24
(7.42)
(7.42)
(0.68)
(0.68)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in
conjunction with the Notes to the financial Statements.
24
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION As at 30 June 2018
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
Investment in joint venture entities
Intangible asset
Deferred tax asset
Other financial asset
TOTAL NON-CURRENT ASSETS
Notes
5
6
7
8
10
11
4, 1(s).ii
7
Consolidated Group
2018
$
2017
$
953,541
105,473
83,156
130,890
1,273,060
1,706,457
917,777
74,105
42,489
2,740,828
42,151,324
43,965,692
206,329
264,350
1,249,487
197,440
44,068,930
-
773,304
2,167,638
209,245
47,115,879
TOTAL ASSETS
45,341,990
49,856,707
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
12
13
14
15
14
15
16
3,997,700
1,231,797
1,886,317
425,288
7,541,102
9,081,123
6,338,337
15,419,460
3,655,064
1,907,300
472,312
276,558
6,311,234
10,267,198
818,289
11,085,487
22,960,562
17,396,721
22,381,428
32,459,986
40,810,939
58,450
(18,487,961)
22,381,428
40,466,917
340,448
(8,347,379)
32,459,986
The Consolidated Statement of Financial Position should be read in conjunction with the Notes to the
Financial Statements.
25
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY For the year ended 30 June 2018
Share Capital
Reserves
Accumulated
Total
$
$
$
$
Losses
Balance at 1 July 2017
Share issue on exercise of performance
40,466,917
344,022
rights
Employee share based payment
performance rights
Issue of share options
Comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
-
-
-
-
-
340,448
(344,022)
3,574
57,645
-
805
805
(8,347,379)
32,459,986
-
-
-
-
3,574
57,645
(10,140,582)
(10,140,582)
-
805
(10,140,582)
(10,139,777)
Balance at 30 June 2018
40,810,939
58,450
(18,487,961)
22,381,428
Balance at 1 July 2016
34,648,455
658,164
(7,456,089)
27,850,530
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 year
Total comprehensive loss for the year
5,665,005
(342,131)
495,588
-
-
-
-
-
(495,588)
177,872
-
-
-
-
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
The Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements.
26
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
CONSOLIDATED STATEMENT OF
CASH FLOWS For the year ended 30 June 2018
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Grant income received
Interest received
Finance costs
Consolidated Group
2018
$
2017
$
Note
14,946,055
(13,508,159)
-
615
(558,598)
14,523,197
(12,023,796)
24,875
7,373
(383,317)
Net cash inflows from operating activities
18
879,913
2,148,332
Cash Flows From Investing Activities
Purchase of property, plant and equipment
Payments for investment in joint venture
Payment for intangible assets
(106,485)
(545,107)
(1,263,202)
(9,389,457)
-
(517,477)
Net cash outflows from investing activities
(1,914,794)
(9,906,934)
Cash Flows From Financing Activities
Proceeds from issue of securities
Proceeds from borrowings
Repayment of borrowings
Share issue costs
-
1,500,000
(1,218,035)
-
5,665,005
2,493,302
(901,718)
(342,131)
Net cash inflows from financing activities
281,965
6,914,458
Net decrease in cash held
(752,916)
(844,144)
Cash and cash equivalents at beginning of year
1,706,457
2,550,601
Cash and cash equivalents at end of year
5
953,541
1,706,457
The Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements.
27
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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 2018 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.
28
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Basis of Accounting
The Group incurred a loss for the year after tax of $10,140,582 (2017: loss of $891,290) and has a net current deficiency in
assets of $6,268,042. Included within current liabilities are deferred revenue of $1,231,797 that will be realised as revenue
once the service has been delivered to the customer. Therefore, excluding this balance, the Group has an adjusted
current asset deficiency position of $5,036,245 at 30 June 2018.
The following matters have been considered by the directors in determining the appropriateness of the going concern
basis of preparation in the financial statements:
i) in July and August 2018, the consolidated entity received the balance of $1,500,000 in funding from Birkdale
Holdings (QLD) Pty Ltd. As a result, the consolidated entity will have sufficient working capital to enable it to
meet its objectives and financial obligations.
ii) the consolidated entity generated net operating cash inflow for the financial year ended 30 June 2018 of
$879,913 (2017: $2,148,332). Excluding the legal costs that have been paid in financial year 2018, net operating
cash flow was $1,679,146. Management expect that the operating costs will be further reduced in the
succeeding financial year as a result of the restructuring of its operations, which further increases operating
cash flows.
iii) in September 2018, the consolidated entity has entered into a settlement that is funded by Promissory
Notes for US$3,789,933 from SkyVenture International Limited. The loans under the promissory notes have a
2-year term with the first year comprising interest payments only. For so long as ISA Group is listed, up to
US$1,619,219.99 of the loan amount may be converted into ISA Group ordinary shares from 60 days after the
effective date of the note at a conversion price of US$0.079.
iv) the Westpac Banking Corporation has agreed to consolidate all loan facilities and to increase the term of
the loan to be repaid over a 7 year term which will result in reduction in the monthly loan repayment amounts.
The directors are of the opinion that no asset is likely to be realised for an amount less than the amount at which it is
recorded in the financial statements as at 30 June 2018. Accordingly, no adjustments have been made to the financial
statements relating to the recoverability and classification of the asset carrying amounts or the amounts and classification
of liabilities that might be necessary should the consolidated entity not continue as a going concern.
A cash flow forecast for the next 12 months prepared by management has indicated that the consolidated entity
will have sufficient cash assets to be able to meet its debts as and when they fall due. The directors are satisfied that
the consolidated entity is able to meet its working capital liabilities through the normal cyclical nature of receipts and
payments.
As a result, the financial report has been prepared on a going concern basis.
29
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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.
30
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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.
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.
31
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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.
32
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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 11 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.
33
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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.
34
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
Impairment testing is performed annually for intangible assets with indefinite lives and intangible assets not yet
available for use.
k.
Employee Benefits
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 premium priced options in accordance with Indoor Skydive Australia Group Limited
Employee Incentive Option Plan. The fair value of the option 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 to determine the number of options that are
expected to become exercisable. If performance hurdles related to tenure are met, the options will vest if the
exercise price of $0.35 is achieved. 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 options granted for rights with non-market based performance criteria are measured using the
Black-Scholes option pricing methodology which is the approach typically used for valuing options which may
be exercised, once vested, at any time up until expiry.
Upon exercise of options, the proceeds received net of any directly attributable transaction costs are allocated
to contributed equity.
l.
Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of
the reporting period.
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 required 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).
35
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)
Interest revenue is recognised on an accruals basis using the effective interest method.
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
Inventories 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
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.
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.
36
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
ii. Deferred Tax Asset
In future years, the Group is expected to generate taxable income that will utilise the deferred tax balance.
The directors have recognised a deferred tax asset to the extent of deductible temporary differences. Due
to several years of losses, there is some doubt as to whether the tax benefit from unused tax losses will be
recouped. The directors have therefore deemed it is prudent not to recognise a deferred tax asset for tax
losses. This may be reversed in future years if it becomes probable that sufficient taxable income will be
generated.
iii. Exclusive Territory Development Agreement Recognition and Amortisation
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.
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.
In the current year, the Group has fully impaired the carrying value of this intangible asset considering the
arbitrator’s findings that the Group’s Australian operating facilities were in breach of the purchase and license
agreements.
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 2018, $797,913 of Gift Card Revenue is recognised (2017: $494,388). The key assumption
in measuring the liability for gift cards and vouchers is the expected redemption rates by customers, 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% (2017: 8.73%) after consideration of the associated risks. The
discount rate reflects 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 accumulative effect of discounting on
the site restoration provision is included within finance costs in the statement of comprehensive income.
37
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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.
New and amended standards and interpretations
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:
Reference
Title
Summary
AASB 15
Revenue from
Contracts with
Customers
AASB 9
Financial
Instruments
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
1 July 2018
Expected Impact
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.
38
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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.
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 comprehensive loss for the year
2018
$
2017
$
1,059,762
35,055,595
36,115,357
2,609,813
14,485,115
17,094,928
1,301,227
39,486,508
40,787,734
385,842
10,780,173
11,166,015
40,810,939
57,645
(21,848,155)
19,020,429
40,466,917
340,448
(11,185,646)
29,621,719
(10,662,509)
(10,662,509)
(1,258,610)
(1,258,610)
Contingent liabilities
The parent entity does not have any contingent liabilities as at 30 June 2018.
Contractual commitments
Other than amounts disclosed in the financial statements, the parent entity has no additional
contractual commitments as at 30 June 2018.
39
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 3: REVENUE AND EXPENSES
Revenue
VWT revenue – rendering of services
Other sales
2018
$
13,221,607
658,922
13,880,529
2017
$
11,047,575
1,223,506
12,271,081
Other sales revenue relates to cafeteria income, merchandise income and sub-let 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
176,220
220,533
396,753
2018
$
861,722
4,321,547
5,183,269
2018
$
1,937,576
1,434,800
1,047,549
57,645
125,417
4,602,987
24,875
20,603
45,478
2017
$
770,305
3,960,884
4,731,189
2017
$
1,648,805
1,313,899
994,066
177,872
220,290
4,354,932
40
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 4: INCOME TAX (EXPENSE)/BENEFIT
Income tax (expense)/benefit
Current income tax:
Current income tax charge
Deferred tax:
2018
$
2017
$
104,482
25,259
Relating to origination and reversal of temporary differences
Income tax (Expense)/ Benefit
(1,022,633)
(918,151)
125,690
150,949
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 2018 is as follows:
Accounting loss before income tax
At the statutory income tax rate of 27.5% (2017: 30%)
Share of results of joint venture
Tax losses not recognised
Non-deductible expenses for tax purposes:
Entertainment expenses
Share based payments
Amortisation expenses
Dispute settlement costs
Impairment of AirRider brand
Other exempt income
Other non-deductible expenses
Effect of lower tax rates in Malaysia
Income Tax Expense/ (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
2018
$
(9,222,431)
(2,536,168)
81,500
1,666,342
4,950
15,852
28,141
971,507
722,603
(48,460)
-
11,884
918,151
80,797
1,168,691
1,249,487
-
1,249,487
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
The Group has tax losses that arose in Australia for which no deferred tax asset of $1,666,342 is recognised on the Statement
of Financial Position. The tax losses are available indefinitely for offsetting against future taxable profits of the Group.
NOTE 5: CASH AND CASH EQUIVALENTS
Cash at bank and on hand
2018
$
953,541
953,541
2017
$
1,706,457
1,706,457
41
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 6: TRADE RECEIVABLES AND OTHER ASSETS
Trade receivables
Other receivables
Prepaid expenses
2018
$
38,885
9,400
57,188
105,473
2017
$
27,959
808,514
81,304
917,777
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
2018
$
130,890
197,440
328,830
2017
$
42,489
209,245
251,734
Other financial assets relate 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
2018
Cost
2017
2018
2017
2018
2017
Depreciation
Carrying Value
Vertical wind tunnel building Infrastructure
Balance at Beginning of year
Acquisitions / depreciation
Disposals / transfers
Balance at end of year
32,338,525
22,631,045
(1,354,288)
(767,506)
30,984,237
21,863,539
28,446
55,373
8,262,704
1,444,776
(804,106)
(586,782)
(775,660)
-
-
55,373
7,675,922
1,444,776
32,422,344
32,338,525
(2,158,394)
(1,354,288)
30,263,950
30,984,237
Vertical wind tunnel equipment
Balance at Beginning of year
12,763,735
7,401,038
(1,058,479)
(464,051)
11,705,256
83
-
193,085
5,169,612
(701,621)
(594,428)
(701,538)
-
-
-
12,763,818
12,763,735
(1,760,100)
(1,058,479)
11,003,718
11,705,256
6,936,987
(401,343)
5,169,612
Acquisitions / depreciation
Disposals / transfers
Balance at end of year
42
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 8: PROPERTY PLANT AND EQUIPMENT (CONT)
2018
2017
2018
2017
2018
2017
Cost
Depreciation
Carrying Value
IT Equipment
Balance at Beginning of year
Acquisitions / depreciation
Disposals / transfers
Balance at end of year
666,502
21,911
254,242
942,655
491,266
173,611
1,625
666,502
(222,694)
(145,402)
-
(94,139)
443,808
(128,555)
(123,491)
-
254,242
574,559
397,127
45,056
1,625
443,808
(368,096)
(222,694)
Furniture and fittings
Balance at Beginning of year
Acquisitions / depreciation
598,281
34,322
461,202
294,490
Disposals / transfers
-
(157,411)
(227,723)
(106,449)
-
(118,687)
(165,806)
56,770
370,558
(72,127)
342,515
128,684
-
(100,641)
Balance at end of year
632,603
598,281
(334,172)
(227,723)
298,431
370,558
Office Equipment
Balance at Beginning of year
21,268
Acquisitions / depreciation
Disposals / transfers
729
-
300
20,968
-
(4,034)
(7,297)
-
(27)
(4,007)
-
17,234
(6,568)
-
273
16,961
-
Balance at end of year
21,997
21,268
(11,331)
(4,034)
10,666
17,234
Capital Work in Progress
Balance at Beginning of year
444,599
8,529,771
Acquisitions / depreciation
-
444,599
Disposals / transfers
Balance at end of year
(444,599)
(8,529,771)
-
444,599
-
-
-
-
-
-
-
-
444,599
8,529,771
-
444,599
(444,599)
(8,529,771)
-
444,599
Total
Balance at Beginning of year
46,832,910
39,514,622
(2,867,218)
(694,277)
43,965,692
38,070,212
Acquisitions / depreciation
85,491
9,389457
(1,764,875)
(1,479,578)
(1,679,384)
7,909,879
Disposals / transfers
(134,984)
(2,071,169)
-
56,770
(134,984)
(2,014,399)
Balance at end of year
46,783,417
46,832,910
(4,632,093)
(2,867,218)
42,151,324
43,965,692
43
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 9: INTEREST IN SUBSIDIARIES
Set out below are the Group’s subsidiaries at 30 June 2018. 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
Incorporation
Indoor Skydiving Penrith Holdings Pty Ltd
Australia
Indoor Skydiving Penrith Pty Ltd
Indoor Skydiving Gold Coast Pty Ltd
ISA FLIGHT Club 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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
2018
%
100
100
100
100
100
100
100
100
100
2017
%
100
100
100
100
100
100
100
100
100
44
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 10: INTEREST IN JOINT VENTURE ENTITIES
a)
b)
The Group has a 40% interest in LeisureWorld Assets Sdn. Bhd., a joint venture involved in owning an indoor skydive
facility in Kuala Lumpur, Malaysia. The Group’s interest in LeisureWorld Assets Sdn. Bhd. is accounted for using the
equity method.
The Group has a 60% interest in LeisureWorld Escapades Sdn. Bhd., a joint venture operating and managing the
indoor skydive facility in Kuala Lumpur, Malaysia officially launched on 24 January 2018. The Group’s interest in
LeisureWorld Escapades Sdn. Bhd. is accounted for using the equity method.
The following table illustrates the summarised financial information of the Group’s 40% investment in LeisureWorld Assets
Sdn. Bhd. and 60% investment in LeisureWorld Escapades Sdn. Bhd:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Group’s carrying value of the investment
Revenue
Cost of sales
Administration expenses
Finance costs
Loss before tax
Income tax benefit
Loss for the period
Group’s share of the loss for the period
30 June 2018
LeisureWorld Assets
Sdn. Bhd
LeisureWorld
Escapades Sdn. Bhd
4,581,349
5,425,005
44,653
9,474,211
487,490
194,996
321,278
6,494
197,492
111,392
18,888
11,333
Period from 24 January 2018 to 30 June 2018
LeisureWorld Assets
LeisureWorld
Sdn. Bhd
Escapades Sdn. Bhd
184,891
-
(300,179)
(115,732)
(231,020)
-
(231,020)
(92,408)
349,257
(136,871)
(624,345)
-
(411,959)
-
(411,959)
(247,175)
45
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 11: INTANGIBLE ASSET
Development
Costs
Exclusive Territory
Development
Cost
At 1 July 2016
Additions – Internally developed
At 30 June 2017
Additions – Internally developed
Transfer to Property, Plant and Equipment
At 30 June 2018
Amortisation
At 1 July 2016
Amortisation
At 30 June 2017
Amortisation
Impairment
At 30 June 2018
Net Book Value
At 30 June 2018
At 30 June 2017
$
-
517,477
517,477
1,457,040
(254,242)
1,720,275
-
-
-
-
1,455,925
1,455,925
264,350
517,477
Agreement
$
1,500,000
-
1,500,000
-
-
1,500,000
1,073,622
170,551
1,244,173
102,331
153,496
1,500,000
-
255,827
Total
$
1,500,000
517,477
2,017,477
1,457,040
(254,242)
3,220,275
1,073,622
170,551
1,244,173
102,331
1,609,421
2,955,925
264,350
773,304
The Exclusive Territory Development Agreement was entered into during the 2014 year and was valued at cost.
An accelerated amortisation rate of 40% has been used against the Exclusive Territory Development Agreement intangible
asset, amortised from 20 December 2013.
In the current year, the Group has fully impaired the carrying value of the Exclusive Territory Development 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).
The impairment of the development cost in the current year related to the AirRider brand which has been fully impaired.
The carrying value of the development cost relates to the cost incurred in relation to projects initiated in China.
46
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 12: TRADE AND OTHER PAYABLES
Trade payables
Other accruals
Other payables
2018
$
1,267,853
2,729,847
-
3,997,700
2017
$
407,894
1,247,170
2,000,000
3,655,064
Other payable relates to amounts owing to iFLY Australia Pty Ltd under their rights under the Exclusive Territory Development
Agreement. Under the Deed of Settlement with SkyVenture International Limited, other payable of $2,000,000 has been
included in the promissory note and included as part of dispute settlement provision.
NOTE 13: DEFERRED REVENUE
Deferred revenue
2018
$
1,231,797
1,231,797
2017
$
1,907,300
1,907,300
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 or gift card revenue is recognised in accordance with historical
redemption rates.
47
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 14: BORROWINGS
Current Liabilities
Westpac debt facility (a)
Non - Current Liabilities
Westpac debt facility (a)
Loan from Birkdale Holdings (QLD) Pty Ltd (b)
2018
$
1,886,317
1,886,317
7,581,123
1,500,000
9,081,123
2017
$
472,312
472,312
10,267,198
-
10,267,198
a) 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
ISA FLIGHT Club 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
ISA FLIGHT Club 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.
b) The company has in place a loan facility of $3,000,000 with Birkdale Holdings (QLD) Pty Ltd, a company associated
with Steve Baxter, Director of Indoor Skydive Australia Group Limited, with an undrawn amount of $1,500,000 at year
end. The term of the loan is 24 months with full repayment at expiry.
48
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 15: PROVISIONS
Current Provisions
Non Current Provisions
Total
2018
$
425,288
6,338,337
6,763,625
2017
$
276,558
818,289
1,094,847
Provision
Provision for
Provision for
Provision for
Provision for
Total Provisions
for Dispute
Employee
Lease Straight
Site Restoration
Onerous Lease
Settlement
Benefits
Lining
$
-
$
$
$
223,970
648,222
222,655
$
-
$
1,094,847
Carrying amount 1 July 2017
Additional provisions
3,532,751
262,891
Transfer from payables
2,000,000
-
Amount utilised
-
(215,386)
Carrying amount 30 June 2018
5,532,751
Current
Non-current
-
5,532,751
Carrying amount 1 July 2016
-
Additional provisions
Change in estimates
-
-
271,475
268,985
2,490
195,260
345,819
-
-
-
(30,916)
617,306
35,168
582,138
19,438
100,000
3,915,080
-
-
-
-
2,000,000
(246,302)
242,093
100,000
6,763,625
21,135
100,000
425,288
220,958
-
6,338,337
Amount utilised
-
(317,109)
Carrying amount 30 June 2017
-
Current
Non-current
-
-
223,970
223,970
-
(28,506)
648,222
33,151
615,072
-
222,655
19,437
203,218
575,087
1,581,770
101,641
62,693
-
(1,421,808)
-
-
-
-
-
-
-
2,352,117
510,153
(1,421,808)
(345,615)
1,094,847
276,558
818,289
Provisions for Employee Benefits
a)
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.
Provision for Lease Straight Lining
b)
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.
Provision for Site Restoration
c)
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.
49
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 16: SHARE CAPITAL
136,696,514 (2017: 135,884,625) fully paid ordinary shares
Share issue costs
a.
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
2018
$
42,803,385
(1,992,446)
40,810,939
2018
No.
135,884,625
-
811,889
136,696,514
2018
No.
811,889
-
-
(811,889)
-
2017
$
42,459,363
(1,992,446)
40,466,917
2017
No.
120,193,004
14,907,909
783,712
135,884,625
2017
No.
1,845,496
-
(249,895)
(783,712)
811,889
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.
Capital Management
c.
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.
50
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 17: CAPITAL AND LEASING COMMITMENTS
a)
Operating Lease Commitments
Non-cancellable operating leases contracted for but not
recognised in the financial statements
Payable – minimum lease payments:
- Not later than 12 months
- Between 12 months and five years
- Later than five years
2018
$
2017
$
861,571
3,072,662
24,063,733
27,997,966
857,821
3,170,156
24,856,067
28,884,044
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 for but not
recognised in the financial statements
-
-
-
-
51
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 18: CASH FLOW INFORMATION
Reconciliation of Cash Flow from Operations with Loss after Income Tax
2018
$
2017
$
Loss after income tax
Non-cash flows in loss:
- Share based payments
- Impairment
- Share of loss from joint venture
- Unwind of make good discount
- Depreciation expense
- Amortisation expense
Changes in assets and liabilities:
- (increase)/decrease in trade and term receivables
- (increase)/decrease in prepaid expenses
- (increase)/decrease in other financial assets
- (increase)/decrease in deferred tax asset
- increase/(decrease) in trade payables and accruals
- increase/(decrease) in deferred revenue
- increase/(decrease) in provisions
Cash flow provided by operations
Other Non-Cash Transactions
Capital expenditure
Depreciation & Amortisation
Other non-cash expense
(10,140,582)
(891,290)
57,645
2,627,648
339,583
19,438
1,764,875
172,701
(10,926)
24,116
(160,351)
918,151
2,296,270
(675,503)
3,646,848
879,913
1,369,687
1,937,576
57,645
177,872
-
-
(20,968)
1,434,796
214,009
20,361
374,196
(229,830)
(150,948)
227,428
890,861
101,845
2,148,332
9,906,934
1,648,805
177,872
52
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 19: RELATED PARTY TRANSACTIONS
a.
(i)
The Group’s main related parties are as follows:
Entities exercising control over the Group:
The ultimate parent entity is Indoor Skydive Australia Group Ltd.
(ii)
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.
(iii)
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.
(iv)
Other related parties:
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.
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.
During the year, a loan facility of $3,000,000 was made available from Birkdale Holdings (QLD) Pty Ltd, a
company controlled by Steve Baxter, Non-Executive Director of Indoor Skydive Australia Group Limited. The
drawn balance at 30 June 2018 was $1,500,000.
As part of the loan agreements ISA Group has agreed to issue 6,000,000 options with an exercise price of $0.25
and an expiry date of 2 years from date of issue. The issue of the options is subject to shareholder approval
which will be sought at the FY2018 Annual General Meeting.
The loan facility has been on an arm’s length basis with term of 2 years and is supported by a second ranking
general security agreement. This facility has been approved by Westpac primary financier of ISA Group.
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
There were no related party transactions during the comparative year.
53
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
c.
Key Management Personnel Compensation
The Key Management Personnel compensation included in employment expenses is as follows:
Consolidated Entity
Company
2018
$
2017
$
2018
$
2017
$
Short term employee benefits
1,076,798
1,185,424
1,076,798
1,185,424
Post employment benefits
Share based payments
85,728
57,644
89,817
133,710
85,728
57,644
89,817
133,710
1,220,170
1,408,951
1,220,170
1,408,951
NOTE 20: SHARE BASED PAYMENTS
Year Ended 30 June 2018
Under the Employee Incentive Option Plan, awards are made to executives who have an impact on the Group’s
Performance. Employee Incentive Option awards are delivered in the form of options over shares which vest over a period
of three years subject to meeting performance measures. The group uses share price as the performance measure.
The fair value of share options granted is estimated at the date of grant using a Black-Scholes valuation model, taking
into account the terms and conditions upon which the share options is equal to 145% of the volume weighted average
market price of shares on ASX for up to 5 trading days. The contracted term of the share options is four years and there
are no cash settlement alternatives for the employees.
The following table illustrates the reconciliation of share options during the year:
Numbers of Share Options
Outstanding as at 1 July 2017
Granted during the year
Forfeited during the year
Outstanding as at 30 June 2018
-
4,150,000
(650,000)
3,500,000
The following table lists the inputs to the model used for the Employee Incentive Option Plan for the year ended 30 June
2018:
24 Aug 2018
21 Nov 2018
Fair Value at grant/approval date (weighted average)
Share Price at grant/approval date
Exercise Price
Expected Volatility
Expected life (weighted average number of days)
Expected dividends
Risk-free rate (weighted average)
$0.24
$0.24
$0.35
50%
1,460
0%
2.66%
$0.17
$0.17
$0.35
50%
1,460
0%
2.66%
54
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
Year Ended 30 June 2017
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.
(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)
$0.59
Share Price at grant/approval date
Exercise Price
Expected Volatility
Expected life (weighted average number of days)
Expected dividends
Risk-free rate (weighted average)
5 day VWAP
$0.59
$0.00
50%
956
0%
2.95%
n/a
$0.68
$0.68
$0.00
50%
358
0%
2.58%
$0.68
$0.47
$0.47
$0.00
50%
730
0%
2.20%
$0.47
$0.38
$0.47
$0.00
50%
619
0%
2.83%
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 rights
Weighted-average exercise price
Outstanding at 30 June 2017
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding as at 30 June 2018
811,889
-
-
(811,889)
-
-
-
-
-
-
55
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 21: 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 22: 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.
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.
56
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
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
2018
$
953,541
953,541
2017
$
1,706,457
1,706,457
b.
Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise
meeting its obligations related to financial liabilities. The Group 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.
57
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 22: FINANCIAL RISK MANAGEMENT (CONT)
Financial liability and financial asset maturity analysis for the Consolidated Group.
Within 1 Year
1-5 Years
Over 5 Years
Total
2018
$
2017
$
2018
$
2017
$
2018
$
2017
$
2018
$
2017
$
Financial liabilities
due for payment
Borrowings
1,886,317
472,312
9,081,123
10,267,198
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
3,997,700
1,655,064
-
-
5,884,017
2,127,376
9,081,123
10,267,198
5,884,017
2,127,376
9,081,123
10,267,198
953,541
1,706,457
105,473
917,777
1,059,014
2,624,234
-
-
-
-
-
-
(4,825,003)
496,858
(9,081,123)
(10,267,198)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,967,440
10,739,510
3,997,700
1,655,064
14,965,140
12,394,574
14,965,140
12,394,574
953,541
1,706,457
105,473
917,777
1,059,014
2,624,234
-
(13,906,126)
(9,770,340)
Refer to Note 1 Basis of Accounting for matters that have been considered by the directors in determining the
appropriateness of the going concern basis for the preparation of the financial statements.
*Trade and other payables for 2017 financial year excludes SkyVenture investment balance of $2,000,000.
c.
Market risk
(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.
58
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
(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.
59
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 22: FINANCIAL RISK MANAGEMENT (CONT)
Year ended 30 June 2018
+/–1% in interest rates
+/–10% in devaluation of the AUD
Year ended 30 June 2017
+/–1% in interest rates
+/–10% in devaluation of the AUD
Profit
$ $
Equity
100,291
541,419
107,395
26,847
100,291
541,419
107,395
26,847
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.
60
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
2018
2017
Note
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Consolidated Group
$
$
$
$
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)
953,541
105,473
1,059,014
3,997,700
10,967,440
14,965,140
953,541
105,473
1,059,014
3,997,700
10,967,440
14,965,140
1,706,457
917,777
2,624,234
3,655,064
10,739,510
14,394,574
1,706,457
917,777
2,624,234
3,655,064
10,739,510
14,394,574
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 23: AUDITOR’S REMUNERATION
Remuneration of the auditor for:
–
–
–
–
Audit fees
Half year review
Taxation compliance
Other advisory services
2018
$
55,300
27,550
5,000
2,500
90,350
2017
$
62,500
25,500
5,300
2,500
95,800
The Group had a change in auditors. The auditor for financial year 2017 and half year 2018 was Grant Thornton.
The auditor for financial year 2018 was Felsers, Chartered Accountants.
61
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2018
NOTE 24: EARNINGS PER SHARE
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
2018
Cents
(7.42)
(7.42)
2018
$
(10,140,582)
(10,140,582)
(10,140,582)
No.
b.
Weighted average number of ordinary shares for basic EPS
136,640,752
Weighted average number of ordinary shares for diluted EPS
139,818,500
All performance rights on issue at 30 June 2018 are anti-dilutive.
NOTE 25: EVENTS AFTER REPORTING DATE
2017
Cents
(0.68)
(0.68)
2017
$
(891,290)
(891,290)
(891,290)
No.
131,633,571
136,633,571
On 19 July 2018, ISA Group received a partial final arbitral award from the Arbitrator of the dispute with SkyVenture
International Limited. The award addressed the question of liability only and did not address remedy, costs or any
quantum. After receipt of the award ISA Group and SkyVenture International Limited agreed to a settlement which
addressed all issues between them.
The settlement provides for ISA Group to pay SkyVenture for its legal costs, to transfer all ownership in the AirRider brands
and economic benefits associated with the Malaysian facility to SkyVenture. SkyVenture has committed under the
settlement to supply ISA Group with specialist vertical wind tunnel equipment at preferential prices to support ISA Group’s
future growth.
The settlement is funded by Promissory Notes for US$3,789,933 from SkyVenture International Limited. The loans under
the promissory notes have a 2-year term with the first year comprising interest payments only. For so long as ISA Group
is listed, up to US$1,619,219.99 of the loan amount may be converted into ISA Group ordinary shares from 60 days after
the effective date of the note at a conversion price of US$0.079. The maximum number of shares that may be issued on
conversion is 20,496,455 which is within ISA Group’s capacity to issue under Listing Rules 7.1.
Other than above, 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 26: CONTINGENT LIABILITIES
The Group does not have any contingent liabilities at the reporting date.
62
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
DIRECTORS’ DECLARATION For the year ended 30 June 2018
In the opinion of the Directors of Indoor Skydive Australia Group Limited:
a. the financial statements and notes, as set out on pages 24 to 62, 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 2018 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 2018.
This declaration is made in accordance with a resolution of the Directors.
For and on behalf of the Board
Wayne Jones
Director and Chief Executive Officer
26 September 2018
Sydney
63
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
Independent Audit Report to the members of Indoor Skydive Australia Group Limited
Report on the Audit of the Financial Report
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 2018, the consolidated statement
of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year then ended, and the notes to the 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:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for
the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report of the current period. These matters were addressed in the context of our audit of the financial report as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our report.
64
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
Key audit matter
Revenue – Note 1 (s)(iv), 3, 13
The group recognised revenue derived from the sales
of goods and services as well as the sale of prepaid gift
cards.
Wind Tunnel Revenue for the year ended 30 June 2018
was $13,221,607. It was noted that the point-of-sale system
(Siriusware) used to record and track revenue receipts
is not integrated with the general ledger. We therefore
considered revenue to be a key audit matter given the
potential for revenue to be materially misstated when
posted via manual general ledger journal entries based
off the monthly summary extracted from Siriusware. Our
procedures were designed to corroborate our assessment
that revenue should be closely aligned to actual cash
identify manual adjustments made to
banked and
revenue for additional testing.
A portion of the revenue attributable to gift card sales is
recognised upfront using management’s internal estimates
of the historical redemption rates of the gift cards. As at
30 June 2018, gift card revenue or ‘breakage’ of $797,913
was recognised along with a corresponding deferred
revenue balance of $1,231,797. Given the management
judgement and inherent subjectivity in the development
and application of appropriate accounting policies in
compliance with Australian Accounting Standards as
well as adherence to proper cut-off procedures as to the
timing of the revenue, we believe this constitutes a key
audit matter.
Recovery of deferred tax assets – Note 1(s)(ii), 4
In accordance with Australian Accounting Standards,
deferred tax assets can only be recognised to the extent
that it is probable sufficient future taxable profits will be
generated to utilise the benefits associated with the
deferred tax assets through reductions in the tax payable
in future reporting periods. Gross deferred tax assets of
the Group for the year ended 30 June 2018 amounted to
$1,249,487, all arising from future deductible temporary
differences have been recognised. Due to several years
of losses, the directors have deemed it prudent not to
recognise a deferred tax asset of $1,666,342 on tax losses.
The balance of unused tax losses may be recouped in
future years.
Given the material amount of deferred tax assets
recognised or unrecognised and the judgement required
in determining their recoverability in accordance with
the Australian Accounting Standards, we believe this
constitutes a key audit matter.
How our audit addressed the key audit matter
Our audit procedures included, among others:
• Assessing whether the Group’s revenue recognition
policies were in compliance with Australian Accounting
Standards
• Evaluating the operating effectiveness of revenue
recognition
• Testing the appropriateness and accuracy of general
ledger revenue journals
• Reviewing the mathematical accuracy of management’s
calculation of the gift card revenue recognised and
tracing a sample of general journals posted to supporting
documentation;
• Evaluating the
reasonableness of management’s
estimates relating to gift card breakage rates including
corroborating management’s assertions
to historical
redemption rates; and
• Performing testing on a sample of sales at year end
to determine that 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 balances;
• involving our taxation specialists to assist in the 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.
65
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
Key audit matter
How our audit addressed the key audit matter
Impairment of non-current assets – Note 8, 11
As at 30 June 2018, the carrying amount of the group’s
totalled $264,350 and property,
intangible assets
plant and equipment totalled $42,151,324. Based on
the Group’s assessment of both external and internal
indicators of impairment, a resulting impairment charge
of $2,627,648 was posted to the Statement of Profit or
Loss relating to the cash-generating unit (CGU) of the
Group’s AirRider Brand, Malaysia.
We focused on this area due to the size of the intangible
the director’s
and PPE balances and because
assessment of the value in use (VIU) of the CGU’s
involves inherent judgement and subjectivity as to the
future cash flows and discount rates applied to them.
Provision for site restoration – Note 1 (s)(v), 15
The Group entered into long term 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 $242,093 for
the site restoration as at 30 June 2018 in accordance
with AASB 137 Provision, Contingent Liabilities and
Contingent Assets.
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.
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
consider all information about the future encompassing
at the least twelve months from the end of the
reporting period. The assessment is largely based on the
assumptions made by directors in formulating cash flow
forecasts, with key assumptions including the timing of
the future cash flows, operating results, capital raising
activities, any potential sale of assets and any capital
commitments.
Our audit procedures included, among others:
• Updating our understanding of managements
procedures for annual impairment testing
• Agreeing key assumptions such as discount rates and
revenue growth to supporting documentation and
reasonableness when compared with industry averages
and trends.
• Comparing cash flow projections
to historical
performance and observable trends corroborating any
deviations to third party evidence where applicable
Our audit procedures included, among 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 qualification and experience of
Management’s expert in relation to the valuation of the
restoration costs at their presents value to use as the basis
of the estimate; and
• Assessing the adequacy of the financial statement
disclosure.
Our audit procedures included, among others:
• Evaluation of the underlying data used as the basis of
cash flow projections prepared by management and
those charged with governance;
• Analysing the impact of potential 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 the Group’s
ability to continue as a going concern;
• Recalculation of the ability to meet debt covenant ratios
attached to existing facilities on the basis of budgeted
and forecasted figures prepared by management and
those charged with governance
• Obtaining and reviewing correspondence between
existing financiers and the Group to determine the options
available to the Group inclusive of variable debt facilities
• Evaluating the Group’s 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.
66
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
Other Information
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 2018 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 accordingly 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 on the other information obtained prior to the date of this auditor’s report, 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 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 includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 the financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
•
•
67
INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
•
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 13 to 21 of the directors’ report for the year ended 30
June 2018.
In our opinion, the Remuneration Report of Indoor Skydive Australia Group Limited, for the year ended 30 June 2018,
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.
Felsers
Chartered Accountants
Michael Kersch
Partner
Sydney
26 September 2018
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INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
A First Timer Flyer Masters Her Solo Skills
ADDITIONAL INFORMATION
The following information is current as at 5 September 2018:
1.
Shareholder Information
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
40
97
69
247
76
529
17,454
256,455
599,254
8,930,442
126,892,909
136,696,514
The number of shareholdings held in less than marketable parcels is 126.
The names of the substantial shareholders listed in the holding company’s register are:
Shareholder:
Number of Shares
Birkdale Holdings (QLD) Pty Ltd
Excalib-Air Pty Ltd
Challenger Limited
LHC Capital Partners Pty Ltd
CVC Limited
17,039,475
16,060,000
15,213,222
10,792,523
10,528,274
Paradice Investment Management Pty Ltd
8,826,251
Commonwealth Bank of Australia
7,750,431
% of Issued
Capital
12.47
11.97
11.13
7.94
7.7
6.58
5.67
Voting Rights
ISA Group has 136,696,514 ordinary shares on issue which are listed on the ASX. 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 also has 3,500,000 options on issue which are not listed on the ASX. Options do not give a holder the right to
vote at any meeting of ISA Group or to participate in any share issues.
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INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
ADDITIONAL INFORMATION
20 Largest Shareholders – Ordinary Shares
Name
BIRKDALE HOLDINGS (QLD) PTY LTD
EXCALIB-AIR PTY LTD
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
CVC LIMITED
UBS NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
QUAD INVESTMENTS PTY LTD
PROJECT GRAVITY PTY LTD
LYNDCOTE SUPER PTY LTD
IFLY AUSTRALIA PTY LIMITED
AUSTRALIAN INDOOR SKYDIVING PTY LTD
BNP PARIBAS NOMS PTY LTD
SABRE ONE INVESTMENTS PTY LTD
DRILL INVESTMENTS PTY LTD
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
NULIS NOMINEES (AUSTRALIA) LIMITED
SANDHURST TRUSTEES LTD
MR ALISTAIR DAVID STRONG
MR DAVID C SCICLUNA & MR ANTHONY A SCICLUNA
Number of
Ordinary Fully Paid
Shares Held
% Held of Issued
Ordinary Capital
17,039,475
16,060,000
15,140,261
12,739,938
10,528,274
9,300,000
8,642,768
5,927,540
2,916,667
2,627,307
2,521,667
2,500,000
2,187,833
1,281,390
1,001,277
1,000,000
891,474
757,000
688,834
600,000
600,000
12.465
11.749
11.076
9.320
7.702
6.803
6.323
4.336
2.134
1.922
1.845
1.829
1.601
0.937
0.732
0.732
0.652
0.554
0.504
0.439
0.439
114,951,705
84.093
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INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
ADDITIONAL INFORMATION
The name of the company secretary is Salesh Nischal and 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 3,500,000 incentive options on issue to 4 eligible employees and executive directors. The
incentive options are subject to vesting conditions relating to tenure, have an exercise price of $0.35 and expire
on 23 August 2021.
On 24 September 2018 ISA Group entered into loan agreements with SkyVenture which included a right to
convert amounts outstanding under the loans into ISA Group shares. For so long as ISA Group is listed,
SkyVenture may convert up to US$1,619,219.99 of the loan into ordinary shares at a conversion price of
US$0.079. The maximum number of shares that may be issued on conversion is 20,496,455 which is within ISA
Group’s capacity to issue under Listing Rule 7.1.
2.
3.
4.
5.
6.
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INDOOR SKYDIVE AUSTRALIA GROUP LIMITED2018 ANNUAL REPORT
Disability Ambassador Peter Pellegrini Takes Flight.
Indoor Skydive Australia Group Ltd
Level 2, 201 Miller Street
North Sydney NSW 2060
www.indoorskydive.com.au