Why wait for the future.
Annual Report 2010
Quickstep Holdings Limited
Corporate Directory
Directors
Mr Mark Bernard Jenkins
Chairman
Mr Philippe Marie Odouard
Managing Director
Mr Dale Edwin Brosius
Executive Director
Mr Deryck Fletcher Gow Graham
Executive Director
Mr Peter Chapman Cook
Non-executive Director
Mr Errol McCormack (AO)
Non-executive Director
Mr David Singleton
Non-executive Director
Company Secretary
Mr Phillip MacLeod
Principal Office
136 Cockburn Road
North Coogee WA 6163
Telephone: 61 8 9432 3200
Facsimile: 61 8 9432 3222
Email: info@quickstep.com.au
www.quickstep.com.au
Registered Office
136 Cockburn Road
North Coogee WA 6163
Auditors
KPMG Chartered Accountants
235 St Georges Terrace
Perth WA 6000
Solicitors
Cochrane Lishman London House
216 St Georges Terrace
Perth WA 6000
Patent Attorney
Watermark
21st Floor, 77 St Georges Terrace
Perth WA 6000
Share Registry
Security Transfer Registrars Pty Ltd
770 Canning Highway
Applecross WA 6153
Stock Exchange
ASX Limited
Exchange Plaza, 2 The Esplanade
Perth WA 6000
To listen live to the Managing Director’s Report during
Quickstep’s AGM and for replay thereafter go to:
www.brr.com.au/event/69756
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releases. Email: info@quickstep.com.au
ASX Code: QHL
Contents
Chairman’s Report
Managing Director’s Report
Financial Report
- Directors’ Report
- Corporate Governance Statement
- Consolidated Statement of Comprehensive Income
- Consolidated Statement of Financial Position
- Consolidated Statement of Change in Equity
- Consolidated Statement of Cash Flows
- Notes to and forming part of the Financial Statements
- Directors’ Declaration
- Auditor’s Independence Declaration
- Independent Auditor’s Report
Shareholder Information
2
4
9
10
24
27
28
29
31
32
69
70
71
73
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Chairman’s Report
The signing of these
MoU’s puts Quickstep on
the cusp of joining the
global defence sector,
with potential to reap
the benefits for many
decades to come.
2010 Overview
Cash inflows exceed
$2 million
Cash balance as at
30 June 2010
$22.2 million
Furthermore, we are now seeing
other defence related manufacturing
opportunities presented to us, based on
our position in the Australian market.
This puts the Company in a truly exciting
position - Australia has a requirement that
some JSF parts be manufactured locally,
and our shareholders can be proud that
Quickstep is now positioned as the only
Australian-based supplier of aerospace-
grade composites with the manufacturing
capacity and technical know-how to meet
the requirements of the JSF program.
Quickstep remains on-track to sign a
Long Term Agreement in relation to the
JSF contracts in the near future and start
production and revenue generation in
early 2012. Whilst there have been the
procedural delays involved with such a
large international project, the production
start date remains the same and Quickstep
is positioned to meet that requirement.
In parallel with our JSF initiatives, the
2010 financial year has seen cash inflows
from contracts, grants and interest
income exceed $2 million. This growth is
testament to Quickstep’s success in selling
its technology, and demonstrates that
the adoption of the patented Quickstep
Process within the international composites
industry is gathering momentum. You
can find further detail on our success in
this area in Philippe Odouard’s Managing
Director’s Report.
This income, together with additional
funding secured through a successful
capital raising and the exercise of options
over the course of the year, has provided
Quickstep with a consolidated group
cash and short-term deposits balance
as at 30 June 2010 of $22.2 million - a
strong position from which to deliver
future growth.
Dear Shareholder,
I am pleased to report that 2010 has
been a pivotal year for Quickstep, with
the Company making significant progress
towards achieving its goal of targeting
contracts within the international
aerospace and defence industries.
Of greatest significance was the
signing of two landmark Memoranda
of Understanding (MoU’s) with global
aerospace corporations, Lockheed
Martin, Northrop Grumman and BAE
Systems. These MoU’s set in train the
qualification processes necessary to
secure approximately $700 million worth
of potential contracts to manufacture
components for the multi-nation F-35 Joint
Strike Fighter (JSF) program.
These MoU’s represents a genuine
quantum leap for Quickstep.
The international defence industry is one
of the most difficult industries in the
world to gain access to – the barriers
to entry are high and the approval
process for new technologies can take
many years. However, the rewards are
significant. Typical contracts can last well
over 20 years and defence is one of the
few sectors not impacted by economic
boom and bust cycles.
The signing of these MoU’s puts Quickstep
on the cusp of joining the global defence
sector, with potential to reap the benefits
for many decades to come.
Against this backdrop, the bulk of our
efforts since signing the MoU’s have
therefore been focused on preparing
our organisation for JSF manufacturing,
according to the timetable agreed with
Lockheed Martin and Northrop Grumman.
These preparations are proceeding to
plan. As a result, Quickstep is increasingly
recognised throughout the international
aerospace industry as having established
a manufacturing facility and aerospace
team that are unrivalled by any other
independent group in Australia.
2
Quickstep Holdings Limited
With the Company now poised to
secure JSF manufacturing contracts, and
first production on track for 2012, the
forthcoming financial year looks set to
represent a truly landmark period for
Quickstep as we make the transition into
aerospace and defence manufacturing.
In light of this impending transition, we
have recently announced the appointment
of two new high profile Non-Executive
Directors - Air Marshal Errol McCormack
(Ret’d) AO and Mr David Singleton - to
the Quickstep Board, both of whom bring
very significant experience in the fields of
aerospace and defence contracting.
Errol McCormack served in the Royal
Australian Air Force for 39 years, retiring
in 2001 as Chief of Air Force with the
rank of Air Marshal. Since his retirement
from the RAAF he has established
a company providing consultancy
services for multi-national companies
working with the Australian Department
of Defence. He has outstanding
contacts throughout the Australian
and international defence industries,
and significant experience in assisting
companies such as Quickstep in defence
contracting and government liaison.
David Singleton is currently Chief Executive
of Poseidon Nickel and was formerly CEO
of Clough Engineering. However his core
contribution to the Quickstep Board will
be based on his significant experience
in the global aerospace industry, having
held numerous senior roles with BAE
Systems (British Aerospace) and several
British defence manufacturers. He brings a
wealth of experience and strategic vision in
international aerospace business, defence
contracting, technology-based products
and ASX-listed companies.
Chairman’s Report
On behalf of the Board, I am absolutely
delighted to welcome these two high
calibre directors to our team as we embark
on this historic period in the Company’s
growth.
Yours Sincerely,
Mark Jenkins
Chairman
...the forthcoming
financial year looks set to
represent a truly landmark
period for Quickstep as
we make the transition
into aerospace and
defence manufacturing.
Annual Report 2010
3
Managing Director’s Report
First JSF part delivery is
scheduled for early 2012
and we have achieved all
the milestones to start
generating revenue as
planned by then.
Dear Shareholder,
The 2010 financial year has been an
outstanding period for Quickstep, with the
Company firmly cementing its position at
the forefront of the ‘next generation’ of
suppliers to the global aerospace industry.
As outlined in last year’s Annual Report,
we have a three-pronged approach to
gaining new business:
One
Targeting manufacturing contracts
utilising a range of manufacturing
solutions including traditional
manufacturing technologies such
as autoclaves and ‘next generation’
technologies such as our patented
Quickstep Process.
Two
Licensing our Quickstep Process
technology to Original Equipment
Manufacturers (OEM’s) and their
suppliers, and providing them with
Quickstep machines and support
services.
Three
Conducting Research and
Development on Quickstep and
associated technologies where
possible on a paid basis on behalf of
customers to validate its suitability
for their needs and/or develop the
technology to meet their specific
requirements.
I am pleased to report that the Company
is proceeding well on all three fronts, with
a number of significant achievements over
the year.
Targeting of aerospace
manufacturing contracts
»
»
»
»
»
»
Memorandum of Understanding signed
with Lockheed Martin Corporation
and Northrop Grumman Systems
Corporation in November 2009
intended to secure approximately $700
million worth of potential contracts to
manufacture components for the new
multi-nation Joint Strike Fighter (JSF)
program over 22 years.
MoU paves the way for the execution
of a Long Term Agreement (LTA)
between the companies for Quickstep
to supply 19,325 composite doors and
access panels. The LTA is on-track to be
signed in the near future.
Quickstep may supply up to 21 different
JSF components, including lower side
skins, maintenance access panels, F2
fuel tank cover, lower skin and in-board
weapons bay doors. These parts will
all be exported to the United States
for incorporation into the Joint Strike
Fighters globally.
First JSF part delivery is scheduled for
early 2012 and we have achieved all the
milestones to start generating revenue
as planned by then.
These contracts could generate annual
turnover of $50 million by 2015.
A second MoU was signed with
Melbourne-based Marand Precision
Engineering in November 2009 that
could lead to a contract worth up to
$50 million to supply composite Vertical
Tail (VT) skins for the JSF. Marand would
be the supplier of fully assembled VT to
BAE Systems in the UK.
4
Quickstep Holdings Limited
»
To assist with targeting aerospace
and defence contracts in the United
States, Quickstep has incorporated
a new subsidiary company based
in Dayton, Ohio, called ‘Quickstep
Composites LLC’. The new company
will operate from Quickstep’s existing
North American development site in
Dayton, with Quickstep’s US Manager
Dale Brosius appointed President. It
follows the completion of an initial
3-year collaboration agreement with
the National Composite Center (NCC)
in Dayton, which enabled Quickstep
to evaluate the prospective market.
Following the completion of this initial
three year term, we now have ample
confidence in the potential of the US
market to establish a formal subsidiary
and deal directly with the various tiers
of the composites industry.
Preparations for JSF
manufacturing
»
»
»
A major upgrade to Quickstep’s North
Coogee manufacturing facility is now
underway to prepare for aerospace-
grade manufacturing.
Numerous items of new manufacturing
equipment have been installed and
commissioned, and Quickstep has
completed the necessary steps to be
compliant with International Traffic in
Arms Regulations (ITAR), an essential
prerequisite to work with US defence
technology.
Quickstep was set a deadline to be
ready to manufacture demonstration
and qualification panels for JSF by
October 2010 to enable Northrop
Grumman to test our capability. The
first skill development panels have
now been produced – according to the
required deadline – using all Quickstep
company equipment and procedures.
»
»
»
Northrop Grumman representatives
have visited Quickstep’s North Coogee
manufacturing facility during planned
management, technical and executive
reviews and are holding regular phone
conferences with Quickstep to discuss
and review progress.
Northrop Grumman requested that a
group of Quickstep employees visit their
American manufacturing headquarters
to receive training on the methods,
tools and processes for the manufacture
of JSF parts. This visit occurred in
September 2010.
As a signatory to the international JSF
program, Australia has a requirement
to provide Industry Participation to
the Australian industry, and Quickstep
is now positioned as one of the
few Australian-based suppliers of
aerospace-grade composites with the
manufacturing capacity and technical
know-how to meet the requirements of
the JSF program.
Quickstep Process activities
»
The U.S Air Force has committed to
a Phase II R&D program aimed at
qualifying the use of our patented
Quickstep Process to manufacture
composite materials used in the JSF
program. The project is being funded by
the U.S Air Force and supported by lead
JSF contractor, Lockheed Martin, due
to the potential ability of the Quickstep
Process to reduce JSF manufacturing
costs. For Quickstep, it is a step
towards licensing the Company’s
proprietary technology to the largest
and one of the most visible aircraft
programs in the world. The Phase II
research has been deemed critical by
the Air Force and has therefore been
awarded one of the highest levels
of funding available under the U.S
Managing Director’s Report
The U.S Air Force has
committed to a Phase
II R&D program aimed
at qualifying the use of
our patented Quickstep
Process to manufacture
composite materials used
in the JSF program.
Annual Report 2010
5
Managing Director’s Report
Cash inflows from R&D
contracts and grants and
interest income exceeded
$2 million for the 2010
financial year showing
Quickstep’s successful
growth in selling its
technology.
»
Department of Defense Small Business
Innovation Research (SBIR) program,
with a US$2.6 million base contract
and potential US$1.4 million follow-
on option (US$4 million total program
authorisation).
Quickstep has identified and
validated a major new opportunity
for the Quickstep Process with the
development of Binder Activation
– a new processing technique
with important applications in the
aerospace industry. The Quickstep
Process has been fully validated for
Binder Activation and has been found
to provide major cost efficiencies
compared to its competitors. Because
Binder Activation is classified as a
non critical operation by aerospace
companies, it does not need the
lengthy and expensive qualification
process that a new curing technology
requires. It can therefore be used for
commercial applications immediately
and Quickstep is ready to licence its
technology and supply its equipment to
commence manufacturing.
»
Quickstep’s European subsidiary
company, Quickstep GmbH in Germany,
has secured paid development contracts
with a total value of over $500,000
including further collaborative work
with a large number of European
aerospace companies. The projects
include paid development work on the
manufacture of integrated parts in one
cure cycle, as well as composite repair
solutions.
»
Quickstep GmbH is also undertaking
confidential projects on behalf of Airbus
UK and CTRM Malaysia; development
of ballistic panels using the Quickstep
Process; and development work for
infusion technologies and Quickstep
Process curing.
»
»
Good progress has been achieved
throughout the year to design and
test our new generation Quickstep
machine that now provides a reliable,
maintainable industrial machine that
can be introduced in the manufacturing
lines of our clients.
Our research on Resin Spray Transfer
supported by the $2.6M Climate Ready
Grant has also progressed satisfactorily
with specific resins formulated,
equipment to spray identified, tested
and ordered and contacts having
been progressed with the automotive
industry which is showing a growing
interest in the technology. Design of a
fully automatic production line has also
progressed showing great promise for
the automotive market.
»
Cash inflows from R&D contracts and
grants and interest income exceeded
$2 million for the 2010 financial year
showing Quickstep’s successful growth
in selling its technology.
Corporate
»
In December 2009 and January 2010
Quickstep completed a two-phase
capital raising to fund development
activities in preparation for JSF
manufacturing work. The raising
comprised a placement of 22.1
million shares at a price of 52 cents
per share to raise $11.492 million
(before transaction costs), as well as a
Share Purchase Plan to the Company’s
existing shareholders. This SPP closed
over-subscribed and successfully raised
approximately $12.8 million. The
placement and SPP were managed by
State One Stockbroking Ltd.
6
Quickstep Holdings Limited
Quickstep is now well-recognised as having
one of the most advanced aerospace
manufacturing facilities in Australia,
and our proprietary Quickstep Process
is increasingly recognised throughout
the industry as being at the forefront of
‘next generation’ advanced composites
manufacturing.
Next year will see continued investment in
capital equipment and staff as Quickstep
focuses on consolidation of the JSF
program and gets closer to deliveries and
cash flow generation. Quickstep will also
progress potential orders for the Quickstep
Process as it matures with a number of our
partners like CTRM, EDAG, Eurocopter,
Airbus and the US DoD.
With these credentials, and with the
Company expecting to sign the Long Term
Agreement in relation to the JSF contracts
in the near future, I am confident we are
exceptionally well positioned to become
a supplier to the aerospace and defence
industries and deliver further exciting
developments for our shareholders well
into the future.
Philippe Odouard
Managing Director
»
»
»
At the time of the Quickstep’s Initial
Public Offering in 2005, the Company
issued 7,500,000 unlisted options to
shareholders with an expiry date of
15th April 2010 and an exercise price
of 25 cents. While a small number of
options had earlier been exercised,
most of the outstanding options were
exercised between January and April
2010, increasing share capital by
around $1.4 million.
At 30 June 2010 the consolidated
group’s cash and short-term deposits
stood at $22,225,823, an increase of
$19,409,947 over the previous year.
A substantial investment has been
made in development of the Quickstep
team. Staff numbers have increased
substantially to meet the requirements
of these activities with about 30
people joining the company during the
financial year. This includes Mr John
Johnson, our new CFO who brings a
lot of expertise in the aerospace and
composite arena; Mr Ari Vihersaari,
VP Global Business Development who
comes from the composite industry in
Finland; Mr Sebastien Godbille, GM
Quickstep Systems who established
the composite facility of Australian
Aerospace in Brisbane recently; Mr
Shane Bennett, Procurement and
Logistics specialist with 20 years
experience in aerospace and Mr Gary
Beaton, Quality Manager who comes
from an aerospace background in
Sydney. The team is now ready to
deliver JSF manufacturing contracts, as
well as to address other opportunities
in manufacturing and Quickstep Process
industrialisation.
In conclusion, the 2009/10 financial year
has been a landmark period for Quickstep,
with the Company taking major steps
forward in each of our three business
growth strategies.
Managing Director’s Report
...our proprietary
Quickstep Process is
increasingly recognised
throughout the industry
as being at the forefront
of ‘next generation’
advanced composites
manufacturing.
Annual Report 2010
7
8
Quickstep Holdings Limited
Financial Report
For the year ended 30th June 2010
Annual Report 2010
9
Directors’ Report
D I R E C T O R S ’ R E P O R T
The Directors present their report together with the financial statements of the Group, being Quickstep Holdings
Limited (the “Company”) and its subsidiaries, for the financial year ended 30 June 2010 and the auditor‟s report
thereon.
1. Directors
The Directors of the Company at any time during or since the end of the financial year are:
Mr Mark Bernard Jenkins, B. Comm., Grad. Dip. Bus.
Independent Chairman - appointed as director on 14 July 2005; appointed as Chairman 13 March 2007
Mr Jenkins, aged 46, has over 20 years consulting, operational/financial management and business development
experience in professional services firms (chartered accountants), investment banking, government agencies and
public companies.
Initially qualifying as a chartered accountant in Australia, his career includes two extended periods in London and
has involved successful and extensive investment, commercial, financial and government dealings in Australia,
Asia, the United States and Europe. Mr Jenkins has also been involved as an advisor and investor in early stage
technology companies, taking them through the initial funding and commercialisation stages.
Mr Jenkins holds a Bachelor Degree in Commerce from the University of WA and a Graduate Diploma in
Business from Curtin University. He has also been involved in numerous professional development programs,
including Cranfield University in England.
Mr Philippe Marie Odouard
Managing Director - appointed 23 October 2009
Mr Odouard, aged 55, has significant management experience within the global aerospace and defence sectors –
both of which are primary target markets for Quickstep‟s technology. Before joining Quickstep and since 2005, Mr
Odouard has held a dual role with Thiess Pty Ltd – one of Australia‟s largest infrastructure and services
contractors – as Senior Manager of Strategy and Business Development: Defence, and Project Director for the
A$3 billion Melbourne desalination plant.
Prior to joining Thiess, Mr Odouard held a number of senior manager positions within Thomson-CSF (now Thales
Group) - a world leader in platforms and systems for the aerospace, defence and security markets. During his
time with Thomson, which included roles in both Australia and Europe, Mr Odouard negotiated and managed long
term contracts with major global aerospace and defence groups including major developments and technology
transfers. Significantly, Mr Odouard managed the Minehunter project, which at the time was the largest user of
composites in Australia. In addition, Mr Odouard negotiated and managed significant contracts with Eurocopter
when they sold the all-composite Tiger helicopter to the Australian Defence forces.
In 1977 Mr Odouard graduated with a Masters of Science in Business from École des Hautes Études
Commerciales de Paris.
Mr Dale Edwin Brosius, B. Sc. (Chem. Eng.), MBA
Executive Director and Chief Operating Officer for the Americas and Europe - appointed 13 August 2004
Mr Brosius, aged 52, as the Chief Operating Officer is responsible for the commercial development of the
Company‟s technology in Europe and the Americas. He brings extensive practical experience in the composites
field, having led composites-oriented businesses in the US and Europe, with a strong emphasis on materials. He is
based near Detroit, Michigan.
Mr Brosius spent eight years with Dow Chemical, in manufacturing and commercial development roles, with a focus
on automotive composites. He then spent twelve years in various commercial and general management roles at
Fiberite and Cytec Fiberite, gaining considerable exposure to advanced composites processes and applications in
aerospace, sporting goods, and industrial markets.
In 1999 Mr Brosius created a successful consulting business serving manufacturers of composite materials,
equipment and parts manufacturers worldwide. During this time he obtained a thorough understanding of the global
market and developed numerous relationships at the original equipment manufacturer (OEM) and supplier levels.
Mr Brosius is active in leadership levels in key composites professional associations and is the author of over forty
published articles in the field.
In 1979 Mr Brosius graduated with a Bachelor of Science in Chemical Engineering from Texas A&M University, and
in 1990 earned his MBA from the University of Phoenix.
10
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Directors’ Report
Mr Deryck Fletcher Gow Graham, Dip. Co. Dir.
Executive Director (not classified as Independent) - appointed 16 June 2001
Mr Graham, aged 49, has over 20 years‟ experience in senior management, administration and marketing
positions.
His experience includes five years as Managing Director of an ASX listed company that designed, developed,
manufactured and distributed hardware and software products for the broadcasting and entertainment industries.
He has been a director of Eagle Aircraft Australia Limited, where he held the role of Marketing Director. Since
1986, Mr Graham has been involved in the composites and aerospace industries.
Mr Graham is also a founder and adviser to emerging technology companies in the mining, civil engineering and
software development industries.
Mr Graham holds the executive position of Business Development Manager – Australia
Mr Graham holds a Diploma of Company Directors from the Australian Institute of Company Directors.
Mr Peter Chapman Cook, M. Pharm., FRMIT, PhC., MPS, MRACI, C.Chem., MAICD.
Independent Non-Executive Director - appointed 14 July 2005
Mr Cook, aged 63, has extensive business experience, both within Australia and overseas.
Prior to his current appointments as Managing Director and Chief Executive Officer of Biota Holdings Limited, Mr
Cook has held the positions of Managing Director and Chief Executive Officer of Orbital Corporation Limited,
Chief Executive Officer of Faulding Hospital Pharmaceuticals, President of Ansell‟s Protective Products Division,
Deputy Managing Director of Invetech and Director of Research and Development for Nicholas Kiwi. He has had
extensive experience in the commercialisation of innovation, both in new and established markets. He also has
extensive experience in mergers and acquisitions, particularly with technology-based companies and has a strong
manufacturing background.
Mr Cook has over ten years of international commercial experience in Europe, USA and Asia, where he has both
lived and worked. He holds a Masters Degree in Pharmacy and post graduate qualifications in Management from
RMIT University.
Air Marshal Errol John McCormack, AO
Independent Non-Executive Director - appointed 11 August 2010
Air Marshal McCormack, aged 69, has extensive experience as a Senior Commander in the Royal Australian Air
Force.
Errol McCormack served in the Royal Australian Air Force for 39 years, retiring in 2001 as Chief of Air Force with
the rank of Air Marshal. During his period of service he commanded at unit, wing and command level, held staff
positions in capability development, operations and educational posts and attended both RAAF and Joint
Services Staff Colleges. His overseas postings included flying tours in Vietnam, Thailand, Malaysia and
Singapore, an exchange tour with the US Air Force flying the RF4C, Air Attaché Washington and Commander
Integrated Air Defence System in the Five Power Defence Agreement between Malaysia, Singapore, UK, New
Zealand and Australia.
Since his retirement from the RAAF he has established a company providing consultancy services for multi-
national companies working with the Australian Department of Defence.
He is also Non-Executive Chairman of Chemring Australia Pty Ltd, a countermeasures and pyrotechnic
manufacturing company based in Victoria, and consults for Chemring Group PLC and General Electric Military
Engines.
His pro-bono work includes Chairman of the Board of the Williams Foundation, an RAAF Association think- tank
supporting development of Australian military aviation policy. He is a member of the Royal Aeronautical Society
and the Australian Institute of Company Directors.
2. Company Secretary
Mr Peter John Williams, B.Bus., FCPA, MAICD.
Mr Williams, aged 53, resigned from the position of company secretary in November 2009. Mr Williams is a
senior finance professional with over 30 years commercial experience gained both domestically and
internationally. He joined Quickstep after two years with ASX listed biodiesel producer, Mission NewEnergy
Limited where he was Finance Director and Company Secretary.
Annual Report 2010
11
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Mr Phillip James MacLeod B.Bus., ASA.
Mr MacLeod, aged 45, was appointed to the position of company secretary on 13 November 2009. Mr MacLeod
has over 20 years commercial experience and has held the position of company secretary with listed companies
since 1995. Mr MacLeod has provided corporate, management and accounting services to domestic and
international public companies involved in the technology, resources, healthcare and property industries.
Mr MacLeod holds a Bachelor Degree in Business from Edith Cowan University and is an associate member of
CPA Australia having qualified as a CPA.
3. Directors’ Meetings
The number of Directors‟ meetings (including meetings of committees of Directors) and the number of meetings
attended by each of the Directors of the Company during the financial year are:
Director
Mr M B Jenkins
Mr P M Odouard
Mr D E Brosius
Mr D F G Graham
Mr P C Cook
Mr E J McCormack
Board
Meetings
B
A
Audit
Committee
Meetings
B
A
Remuneration
Committee
Meetings
B
A
Nominations
Committee
Meetings
B
A
8
8
8
8
8
-
8
8
7
8
7
-
2
-
-
-
2
-
2
-
-
-
2
-
2
2
2
2
2
-
2
2
2
2
2
-
2
2
2
2
2
-
2
2
2
2
2
-
A - number of meetings held during the time the Director held office during the year
B - number of meetings attended
4. Principal Activities
During the financial year, the principal activities of the Group consisted of:
building the capability and capacity of the organisation to achieve accredited supplier status with Northrop
Grumman in relation to the Joint Strike Fighter (“JSF”) project;
working closely with potential customers through the international network of Quickstep „Centres of
Excellence‟ to qualify the Quickstep Process as a viable and effective alternative to traditional autoclave-
based composite manufacturing techniques;
development work and securing initial small-scale prototype contracts to accelerate entry to the global
aerospace sector;
further expansion of the Group‟s existing portfolio of international research and development alliances and
partnerships with major aerospace, industrial and automotive groups and their Tier One suppliers;
coordination of a cohesive strategic plan for the Group‟s global Research & Development initiatives; and
expansion of the global management team to ensure that the Group is positioned to take full advantage of
new business opportunities as they arise.
5. Results
The Group incurred a loss after tax of $10,970,613 for the year ended 30 June 2010 (2009: loss of $8,620,973).
6. Operating Review
A review of operations and activities for the financial year is set out in the Managing Director‟s Review.
7. Dividends
No dividend has been declared or paid by the Company to the date of this report.
12
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
8. Environmental Regulation
Directors’ Report
The Group‟s activities to date have not been subject to any particular and significant environmental regulation
under Laws of either the Commonwealth or a State or Territory. The Directors are not aware of any material
breach of environmental regulations as they relate to the Group.
9. Events Subsequent to Reporting Date
Since the close of the financial period the Group has entered into purchase agreements for:
a 5-axis precision milling machine for €1,761,261 for delivery in the last quarter of the 2011 financial year;
and
the supply of technical assistance and training from Northrop Grumman in order to achieve fundamental
capability in relation to the JSF project to the value of US$2,489,922.
Other than the matters referred to above or in the financial statements, there has not arisen in the interval
between the end of the financial year and the date of this report any item, transaction or event of a material and
unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the
Group, the results of those operations, or the state of affairs of the Group, in future financial years.
10. Likely Developments
The Group‟s key areas of focus for the 2010/2011 financial year will include:
seeking to achieve accredited supplier status with Northrop Grumman through anticipated completion of:
(i)
(ii)
(iii)
(iv)
(v)
the capital expenditure program to support initial production;
quality accreditation of processes and products;
the establishment and accreditation of supplier network;
the training and development of staff; and
the signing of long term supply agreements.
securing contracts in the aerospace and defence industries using both traditional autoclave and new
technology Quickstep processing;
maintaining a strategic global marketing campaign to potential customers through our international showcase
sites and pilot production facilities;
conducting paid or self-funded commercially focussed research & development on new composite structures
and materials for the aerospace and defence sectors; and
working to secure early cash-flow generating contracts.
Capital commitments of the Group pertaining to the above are set out in Notes 27 and 33 in the financial
statements. Note 1(d) in the financial statements also sets out the updated future operating cash flow
requirements on the Group‟s financial position.
Further information about likely developments in the operations of the Group and the expected results of those
operations in future financial years has not been included in this report because disclosure of the information
would be likely to result in unreasonable prejudice to the Group.
11. Directors’ Interests
The relevant interest of each Director in the shares, rights and options at the date of this report is as follows:
Director
Shares
Options
Rights
Mr M B Jenkins
Mr P M Odouard
Mr D E Brosius
Mr D F G Graham (1)
Mr P C Cook (2)
Mr E McCormack(3)
-
1,851,852
600,000
26,651,526
137,946
19,000
-
1,397,624
-
-
-
-
-
882,353
-
-
-
-
Annual Report 2010
13
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
11. Directors’ Interests (cont’d)
1. The registered holder of the shares is Decta Holdings Pty Ltd. Decta Holdings Pty Ltd is trustee for a
discretionary trust. Mr Graham is a potential beneficiary of that trust.
2. The registered holder of the shares is Bond Street Custodians Limited as custodian for the Lloyds Wharf Super
Fund of which Mr Cook is a trustee.
3. The registered holder of the shares is Aviops Pty Ltd for which Mr McCormack is a director.
12. Share Options and Rights
During the financial year, 1,851,852 options were granted and vested under the Quickstep Employee Incentive
Plan (“EIP”) (2009: nil) to the CEO, Mr Philippe Odouard, as part of his remuneration. These options were
exercised on 23 September 2010. A further 1,397,624 options were granted to Mr Odouard during the financial
year but with vesting based on future conditions. No other options have been granted during or since the end of
the financial year.
During or since the end of the financial year, the Company granted rights for no consideration over unissued
ordinary shares in the Company to the following key management personnel of the Group as part of their
remuneration:
Executives
Mr W Beckles
Ms M Withers
Mr S Godbille*
Mr A Vihersaari*
Exercise
Price
$0.00
$0.00
$0.00
$0.00
Number of Rights
468,750
276,000
267,605
250,000
Rights for Mr Beckles and Ms Withers were granted during the financial year. The rights for Mr Godbille and Mr
Vihersaari were granted since the end of the financial year. None of these rights have vested during or since the
end of the financial year.
* Mr S Godbille and Mr A Vihersaari were appointed as executives subsequent to 30 June 2010.
Unissued shares under option and rights
At the date of this report, unissued ordinary shares of the Company under options and rights are:
Exercise Price
$0.00
Number of
Shares
3,542,332
These options and rights do not entitle the holders to participate in any share issue of the Company or any other
body corporate.
Shares issued on exercise of options and rights
During the financial year, the Company issued ordinary shares as a result of the exercise of options and rights as
follows (there were no amounts unpaid on the shares issued):
Number of
Shares
Amount paid on
each Share
5,735,619
200,000
800,000
$0.25
$0.26
$0.00
14
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
13. Indemnification and Insurance of Officers
Indemnification
Directors’ Report
The Group has indemnified the Directors (as named above) and all executive officers of the Group and of any
related body corporate against any liability incurred as a Director, secretary or executive officer to the maximum
extent permitted by the Corporations Act 2001.
The Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer of the
Group or of any related body corporate against a liability incurred as an officer.
Insurance Premiums
The Group has paid a premium in respect of a directors and officers liability insurance policy, insuring the directors of
the Company, the company secretary and all executive officers of the Company and Group against a liability
incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The
directors have not included details of the nature of the liabilities covered or the amount of the premium paid in
respect of the directors‟ and officers‟ liability and legal expenses‟ insurance contracts, as such disclosure is
prohibited under the terms of the contract.
14. Non-audit Services
During the financial year, KPMG, the Group‟s auditor, has not performed any additional services to their statutory
duties.
15. Lead Auditor’s Independence Declaration
The lead auditor‟s independence declaration as required under Section 307C of the Corporations Act 2001, which
forms part of this Directors‟ Report for the financial year ended 30 June 2010, is set out on page 70.
16. Remuneration Report - Audited
The remuneration report is set out under the following main headings:
A: Principles used to determine the nature and amount of remuneration
B: Service agreements
C: Details of remuneration
D: Share-based compensation
E: Analysis of bonuses in remuneration
F: Other benefits
Remuneration is referred to as compensation throughout this report.
A. Principles of compensation
Key management personnel have authority and responsibility for planning, directing and controlling the activities
of the Group. Key management personnel comprise the directors of the Company and executives for the Group
including the five most highly remunerated Company and Group executives. The Board has established a
remuneration committee which assists the Board in formulating policies on and in determining:
the remuneration packages of executive directors, non-executive directors and senior executives; and
cash bonuses and equity based incentive plans, including appropriate performance hurdles, total
payments proposed and plan eligibility criteria.
If necessary, the committee obtains independent advice on the appropriateness of remuneration packages given
trends in comparable companies and in accordance with the objectives of the Group. The Corporate Governance
Statement provides further information on the role of this committee.
Compensation levels for key management personnel of the Group are competitively set to attract and retain
appropriately qualified and experienced directors and executives. The remuneration structures are designed to
attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader
outcome of creation of value for shareholders. Compensation packages include a mix of fixed compensation,
short term incentives and equity-based compensation as well as employer contributions to superannuation funds.
Shares and options may only be issued to directors subject to approval by shareholders in general meeting.
The Group does not have any scheme relating to retirement benefits for its key management personnel.
Annual Report 2010
15
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report (cont’d)
A. Principles of Compensation (cont’d)
Fixed compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis), as well as employer
contributions to superannuation funds.
Compensation levels are reviewed annually through a process that considers individual achievement of objectives
and overall performance of the Group. Compensation is also reviewed in the event of promotion or significant
change in responsibilities.
Short-term incentives
Certain key management personnel receive short-term incentives (“STI”) in the form of cash and/or shares. Each
year, the remuneration committee considers the appropriate targets and key performance indicators (“KPIs”). The
committee is also responsible for assessing whether the KPIs are met. The remuneration committee
recommends the total incentive to be paid to the individuals for approval by the Board.
Other than as disclosed in this report, there have been no performance-linked payments made by the Group to
key management personnel.
Equity-based compensation (long-term incentives)
Equity-based long-term incentives were previously provided to key management personnel via the Quickstep
Holdings Limited Employee Share Option Scheme (“ESOS”) (refer to note 31 to the financial statements). The
incentives are provided as options over ordinary shares of the Company and are provided to key management
personnel based on their position within the Group. Such incentives are considered to promote continuity of
employment. As at 30 June 2010, all options granted from the ESOS have been exercised or lapsed.
Long-term incentives may be provided to key management personnel via the Quickstep Employee Incentive Plan
(“EIP”) (refer to note 31 to the financial statements). The incentives are provided as options over ordinary shares
of the Company and the plan is open to eligible employees of the Group. The incentives are considered to
promote continuity of employment and encourage superior performance.
Non-executive directors’ fees
Total remuneration for all non-executive directors, last voted upon by shareholders at the 2005 Annual General
Meeting, is not to exceed $300,000 per annum. Fees are set with reference to fees paid to non-executive directors
of comparable companies. Currently, the Company‟s Chairman, Mr Jenkins, is entitled to receive $120,000 per
annum and the other non-executive directors, Mr Cook and Air Marshal McCormack, receive $59,500 per annum
and $60,000 per annum, respectively.
Non-executive directors do not receive performance related compensation. Directors‟ fees cover all main board
activities and membership of committees.
B. Service agreements
Key management personnel have entered into service agreements. The employment contracts outline the
components of compensation paid to the key management personnel and are reviewed on an annual basis.
Mr Philippe Odouard, Managing Director, entered into an executive services agreement with the Group effective
from 13 October 2008. The agreement specified the duties and obligations to be fulfilled by Mr Odouard in his
role as Managing Director and Chief Executive Officer of the Group. The remuneration paid to Mr Odouard under
the agreement for the financial year ended 30 June 2010 was $303,656 (2009: $217,250), with the ability to
qualify for cash and share-based bonuses to be determined annually by the remuneration committee, subject to
the Group achieving planned targets. On termination by the Group, Mr Odouard shall be paid a sum equal to 12
months of his annual salary package, a prorated annual bonus at the Board‟s discretion, and accrued annual
leave. There is no entitlement to termination payment in the event of removal for misconduct. A cash bonus of
$56,250 has been accrued in respect of the year ended 30 June 2010 (2009: $30,000 cash). The actual amount
paid for the bonus accrued in the prior financial year was $40,625. Mr Odouard has the ability to earn a loyalty
bonus based on years of service for the Company which will be paid with shares in the Company. His total
entitlement is 882,353 shares, with one third vesting on 22 November 2010 and two thirds vesting on 26
November 2011.
16
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report – Audited (cont’d)
B.
Service agreements (cont’d)
Directors’ Report
On 30 March 2010, Mr Odouard accepted an offer of 3,249,476 options from the Quickstep Employee Incentive
Plan (“EIP”) in accordance with the resolutions passed at the 2009 Annual General Meeting. The number of
options granted was calculated partly with reference to the volume weighted average of the ASX quoted price for
QHL shares on the date of Mr Odouard‟s appointment (16.2 cents) and partly with reference to the volume
weighted average of the ASX quoted price for QHL shares at 31 July 2009 (31.8 cents). The options will vest at
various times if prescribed performance hurdles relating to an increase in share value are achieved. The fair
value of the options, as calculated under the accounting standards, takes into account various assumptions
including the likelihood of the options vesting and the projected share price at the time of vesting. Further details
relating to this grant are set out in section 16C(i) of this report. The fair value of the options granted is $1,065,322
of which $782,511 has been recorded as an expense in the financial statements for the portion attributable to the
current financial year as required by accounting standards.
Mr Dale Brosius, Executive Director and Chief Operating Officer for the Americas and Europe, has entered into an
executive services agreement with the Group effective from 1 September 2005. The agreement specifies the
duties and obligations to be fulfilled by Mr Brosius in his role as Chief Operating Officer for the Americas and
Europe. The remuneration payable to Mr Brosius under the agreement is US$188,100 per annum, with the ability
to qualify for a cash bonus subject to the Group achieving planned targets. A cash bonus of A$26,041 has been
accrued in respect of the year ended 30 June 2010 (2009: A$14,000). After currency conversion, the actual
amount paid for the bonus accrued in the prior financial year was A$10,234. The agreement continues until
terminated in accordance with the terms contained therein. On termination by the Group, Mr Brosius shall be paid
a sum equal to one half of his annual remuneration package and a prorated annual bonus measured in
accordance with his agreement. There is no entitlement to termination payment in the event of removal for
misconduct.
Mr Deryck Graham (Jnr) entered into a services agreement with the Group effective from 5 January 2009. The
agreement specifies the services to be performed in the areas of Business Development and Marketing. The
remuneration paid to Mr Graham under the agreement for the financial year ended 30 June 2010 was $110,000
(2009: $79,000), with the ability to qualify for cash based bonuses to be determined annually by the CEO. A cash
bonus of $16,800 has been accrued in respect of the year ended 30 June 2010 (2009: nil). The actual bonus
amount paid for the prior financial year was $7,440. The agreement continues until terminated in accordance with
the terms contained therein.
Mr Andrew (Drew) Myers, Head of Engineering and Chief Operating Officer, Australia, resigned effective 15
February 2010. He had entered into a contract of employment which specified the duties and responsibilities to
be fulfilled in his role. The agreement included the ability to earn performance-based bonuses to be determined
annually by the CEO. Due to resignation, no cash bonus was accrued for the year ended 30 June 2010 (2009:
$13,000). The actual amount paid for the bonus accrued in the prior financial year was $10,189. On 9 December
2009, 28,438 ordinary shares were issued to Mr Myers with a fair value of $10,181 representing the remainder of
the 2009 performance-based bonus. Mr Myers received 800,000 shares, which vested on formally signing his
contract of employment. The shares were issued pursuant to the agreement on 1 October 2009.
Dr Jens Schlimbach, Joint CEO, Quickstep GmbH, provides services to the Group in accordance with an
agreement effective 1 January 2009. After currency conversion, the monthly charge for Dr Schlimbach is
approximately A$12,805. For the year ended 30 June 2010 a cash bonus of A$12,605 (2009: A$14,000) and a
share-based bonus of A$12,605 (2009:nil) for which the number of shares will be determined by the market value
on the actual date of issue, have been accrued. After currency conversion, the actual amount paid for the bonus
accrued in the prior financial year was approximately A$9,625.
Mr Peter Williams, Chief Financial Officer and Company Secretary had entered into a contract of employment with
effect from 8 September 2008 which specified the duties and responsibilities to be fulfilled in his role. Mr Williams
resigned on 13 November 2009. The agreement included the ability to earn performance-based bonuses
determined annually by the CEO. Due to resignation, no cash bonus has been accrued in respect of the year
ended 30 June 2010 (2009: $14,000). The actual amount paid for the bonus accrued in the prior financial year
was $18,847. On 9 December 2009, 52,602 ordinary shares were issued with a fair value of $18,832
representing the remainder of the 2009 performance-based bonus. Mr Williams had the ability to earn a loyalty
bonus based on years of service for the Company which was to be paid with shares in the Company. His
resignation was prior to the full vesting of the shares and therefore his entitlement to these shares was forfeited.
Annual Report 2010
17
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report – Audited (cont’d)
B.
Service agreements (cont’d)
Mr John Johnson, Chief Financial Officer, entered into an executive services contract on 10 December 2009 for a
six month period. The daily charge for Mr Johnso n is $1,000. The agreement continues until terminated
according to the terms contained therein. This agreement has been extended for a further six months from 14 July
2010.
Mr Woodville Beckles, Operations Manager, entered into an executive contract of employment on 1 September
2009. The agreement continues until terminated in accordance with the terms contained therein. On termination
by the Group, Mr Beckles shall be paid a sum equal to 6 months of his annual salary package, a prorated annual
bonus at the Board‟s discretion, and accrued annual leave. There is no entitlement to termination payment in the
event of removal for misconduct. The agreement includes the ability to earn performance-based bonuses to be
determined annually by the CEO. For the year ended 30 June 2010 a cash bonus of $14,531 and a share-based
bonus of A$14,531 for which the number of shares will be determined by the market value on the actual date of
issue, have been accrued. Mr Beckles has the ability to earn a loyalty bonus based on years of service for the
Company which will be paid with shares in the Company. His total entitlement is 468,750 shares amounting to a
fair value of $150,000, with one third vesting on 1 September 2011 and two thirds vesting on 1 September 2012.
Ms Michelle Withers, Human Resources Manager, entered into an executive contract of employment on 1
October 2009. The agreement continues until terminated in accordance with the terms contained therein. On
termination by the Group, Ms Withers shall be paid a sum equal to 6 months of her annual salary package, a
prorated annual bonus at the Board‟s discretion, and accrued annual leave. There is no entitlement to termination
payment in the event of removal for misconduct. The agreement includes the ability to earn performance-based
bonuses to be determined annually by the CEO. For the year ended 30 June 2010 a cash bonus of $11,344 and a
share-based bonus of $11,344 for which the number of shares will be determined by the market value on the
actual date of issue, have been accrued. Ms Withers has the ability to earn a loyalty bonus based on years of
service for the Company which will be paid with shares in the Company. Her total entitlement is 276,000 shares
amounting to a fair value of $88,320, with one third vesting on 1 October 2011 and two thirds vesting on 1
October 2012.
Mr Gary Beaton, Quality Manager, entered into an executive contract of employment on 3 February 2010. The
agreement continues until terminated in accordance with the terms contained therein. On termination by the
Group, Mr Beaton shall be paid a sum equal to 1 month of his annual salary package, a prorated annual bonus at
the Board‟s discretion, and accrued annual leave. There is no entitlement to termination payment in the event of
removal for misconduct. The agreement includes the ability to earn performance-based bonuses to be determined
annually by the CEO. No bonus has been accrued for the year ended 30 June 2010 due to the period of service
from appointment to the end of the financial year.
Mr Sebastien Godbille, General Manager of Quickstep Process Systems, entered into an executive contract of
employment effective from 12 July 2010. The agreement continues until terminated in accordance with the terms
contained therein. On termination by the Group, Mr Godbille shall be paid a sum equal to 3 months of his annual
salary package, a prorated annual bonus at the Board‟s discretion, and accrued annual leave. There is no
entitlement to termination payment in the event of removal for misconduct. The agreement includes the ability to
earn performance-based bonuses to be determined annually by the CEO. Mr Godbille has the ability to earn a
loyalty bonus based on years of service for the Company which will be paid with shares in the Company. His total
entitlement is 267,605 shares amounting to a fair value of $69,577, with one third vesting on 12 July 2012 and two
thirds vesting on 12 July 2013.
Mr Ari Vihersaari, Vice President of Global Business Development, provides services to the Group in accordance
with an agreement effective 1 July 2010. After currency conversion, the monthly charge for Mr Vihersaari is
approximately A$15,000. The agreement continues until terminated according to the terms contained therein. The
agreement includes the ability to earn performance-based bonuses to be determined annually by the CEO. Mr
Vihersaari has the ability to earn a loyalty bonus based on years of service for the Company which will be paid
with shares in the Company. His total entitlement is 250,000 shares amounting to a fair value of $67,500, with
one third vesting on 1 July 2012 and two thirds vesting on 1 July 2013.
The overall level of key management personnel‟s compensation takes into account the progress of the Group
towards the attainment of its business plan, including its progress towards commercialised operations. The at risk
component of remuneration of key management personnel takes into account achievements against corporate
objectives such as share price, order intake, profitability, cash position, business unit specific performance and
position specific targets aligned to the corporate business plan.
18
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report – Audited (cont’d)
C.
Details of remuneration
Directors’ Report
Details of the nature and amount of each major element of the remuneration of each director of the Company and
each of the five named Company executives and relevant Group executives who received the highest
remuneration and other key management personnel of the Group for the year are:
Short Term
Post
Employ-
ment
Share-based
Payments
Salary /
fees
$
STI cash
bonus
$
Year
Non-
monetary
benefits
$
Super-
annuation
benefits
$
Term-
ination
Benefits
$
Total
Shares
$
Options &
rights
$
Total
$
Value of
options
as
proportion
of
remuneration
%
Proportion of
remuneration
performance
related
%
Directors
Executive
Mr P M Odouard
2010
2009
275,229
199,390
66,875
30,000
-
-
342,104
229,390
28,427
17,860
Mr D E Brosius
2010
210,295
22,275
1,798
234,368
1,980
2009
264,033
14,000
Mr D F G Graham
2010
110,000
24,240
2009
79,000
Non-executive
Mr M B Jenkins
2010
119,542
2009 131,458*
Mr P C Cook
2010
59,500
2009
59,500
Executives
-
-
-
-
-
Mr A M Myers
(resigned 15 February 2010)
2010
99,289
(2,811)
2009
163,020
13,000
Dr J Schlimbach
2010
153,663
8,230
2009
178,343
14,000
Mr P J Williams
(resigned 13 November 2009)
2010
67,875
4,847
2009
149,848
14,000
Mr J F Johnson
(appointed 10 December 2009)
2010
138,101
-
Mr W Beckles
(appointed to executive
1 September 2009)
Ms M A Withers
(appointed to executive
1 October 2009
2010
150,000
14,531
2010
89,078
11,344
Mr G S Beaton
(appointed 3 February 2010)
2010
41,449
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
278,033
134,240
79,000
119,542
131,458
59,500
59,500
-
-
-
-
-
-
-
96,478
9,853
176,020
17,304
161,893
192,343
-
-
72,722
7,805
163,848
13,486
138,101
-
164,531
15,188
100,422
6,482
41,449
3,730
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
134,240
18.1%
-
-
-
-
-
-
-
-
-
-
10,181
816,776
1,187,307
38,732
285,982
-
-
-
-
-
-
-
-
-
236,348
278,033
79,000
119,542
131,458
59,500
59,500
116,512
71.4%
10.5%
9.4%
5.0%
-
-
-
-
-
6.3%
4.0%
-
128,000
321,324
12,605
-
-
-
174,498
11.9%
192,343
7.3%
18,832
(34,590)
64,769
36.6%
-
-
34,590
211,924
6.6%
-
138,101
-
14,531
48,240
242,490
12.0%
11,344
25,582
143,830
15.8%
-
-
45,179
-
Notes in relation to the table of remuneration:
* During the prior year Mr Jenkins was paid amounts relating to prior periods that he was entitled to but had not
claimed.
Annual Report 2010
65.9%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report – Audited (cont’d)
C.
Details of remuneration (cont’d)
(1) In accordance with the terms of Mr Odouard‟s employment contract, he is entitled to receive 882,353 fully
paid shares with one third vesting on 22 November 2010 and two thirds vesting on 26 November 2011.
A fair value of $34,265 (2009: $38,732) has been recorded as an expense in the financial statements for the
portion attributable to the current financial year. A fair value of 13 cents per share was used for the purposes
of this valuation, being the ASX quoted price of QHL shares at the grant date of the rights.
Additionally, on 30 March 2010 Mr Odouard accepted an offer of 3,249,476 options from the Quickstep
Employee Incentive Plan (“EIP”) in accordance with the resolutions passed at the 2009 Annual General
Meeting. The number of options granted was calculated partly with reference to the volume weighted
average of the ASX quoted price for QHL shares on the date of Mr Odouard‟s appointment (16.2 cents) and
partly with reference to the volume weighted average of the ASX quoted price for QHL shares at 31 July
2009 (31.8 cents). The options will vest at various times if prescribed performance hurdles relating to an
increase in share value are achieved. The fair value of the options, as calculated under the accounting
standards, takes into account various assumptions including the likelihood of the options vesting and the
projected share price at the time of vesting. The fair value of the options granted is $1,065,322 of which
$782,511 has been recorded as an expense in the financial statements for the portion attributable to the
current financial year as required by accounting standards. As at 30 June 2010, 1,851,852 options had
vested and were exercisable.
Earliest possible vesting
date
Tranche 1 - 30/06/09
Tranche 2 - 30/06/10
Tranche 3 - 30/06/11
Tranche 4 - 30/06/12
Total
Fair value per option
at grant date
Total fair value
No. of options
($)
($)
925,926
925,926
925,926
471,698
3,249,476
0.3500
0.3480
0.3150
0.2700
324,074
322,222
291,667
127,359
1,065,322
Tranche 1 had fully vested at the grant date of 30 March 2010 and therefore the fair value is based on the
ASX quoted price for QHL shares at grant date of the options. The Monte-Carlo simulation was used to
determine the fair value of Tranches 2, 3 and 4 which include future market performance conditions.
(2) In accordance with the terms of Mr Williams‟ employment contract, he was entitled to receive 411,765 fully
paid shares with one third vesting on 22 November 2010 and two thirds vesting on 26 November 2011.
A fair value of ($34,590) (2009: positive $34,590) has been recorded as a negative expense in the financial
statements due to Mr Williams‟ resignation in the current financial year, prior to the vesting of the
abovementioned shares. A fair value of 29 cents per share was used for the purposes of this valuation,
being the ASX quoted price of QHL shares at the grant date of the rights.
(3) In accordance with the terms of Mr Beckles employment contract, he is entitled to receive 468,750 fully paid
shares with one third vesting on 1 September 2011 and two thirds vesting on 1 September 2012.
A fair value of $48,240 has been recorded as an expense in the financial statements for the portion
attributable to the current financial year. A fair value of 32 cents per share was used for the purposes of this
valuation, being the ASX quoted price of QHL shares at the grant date of the rights.
(4) In accordance with the terms of Ms Withers employment contract, she is entitled to receive 276,000 fully paid
shares with one third vesting on 1 October 2011 and two thirds vesting on 1 October 2012.
A fair value of $25,582 has been recorded as an expense in the financial statements for the portion
attributable to the current financial year. A fair value of 32 cents per share was used for the purposes of this
valuation, being the ASX quoted price of QHL shares at the grant date of the rights.
(5) The Short Term Incentive (“STI”) in 2010 is comprised of an accrued cash bonus which fully vested in 2010
plus adjustments to the accrued STI for the year ended 30 June 2009 for actual amounts paid during the
2010 financial year.
(6) Share based payments classified as Shares are comprised of shares issued as cash bonuses relating to
2009 plus an accrual of shares to be issued relating to bonuses for the 2010 financial year.
20
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report – Audited (cont’d)
D.
Share based compensation
Options
Directors’ Report
Mr Odouard was granted as compensation during the reporting period options from the EIP. Refer to the table
below for further details.
Number of options
granted during 2010
Grant date
Fair value per option
at grant date ($)
Vested during the
year
Executives
Mr P Odouard
Mr P Odouard
Mr P Odouard
Mr P Odouard
925,926
925,926
925,926
471,968
30/3/2010
30/3/2010
30/3/2010
30/3/2010
$0.3500
$0.3480
$0.3150
$0.2700
925,926
925,926
-
-
The above options have an exercise price of $nil and an expiry date of 30 March 2017.
Details of the vesting profile of the options granted are detailed below.
Number of
options granted Grant date
% vested in
year
%
forfeited
in year
(A)
Financial years in
which grant vests
Directors
Mr P Odouard
3,249,476
30/3/2010
57.0%
-
2010,2011 & 2012
(A)
The % forfeited in the year represents the reduction from the maximum number of options available to
vest due to performance criteria not being achieved.
Exercise of options granted as compensation
During the reporting period no shares were issued on the exercise of options previously granted as compensation
nor did any options lapse.
Rights to shares
Messrs Beckles and Withers were granted as compensation during the reporting period rights to shares offered
through their executive services agreements. Refer to the table below for further details.
Number of rights
granted during 2010
Grant date
Fair value per right at
grant date ($)
Vested during the
year
Executives
Mr W Beckles
Ms M Withers
468,750
276,000
1/09/2009
1/10/2009
$0.32
$0.32
-
-
Annual Report 2010
21
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report – Audited (cont’d)
D. Share based compensation (cont’d)
Details of the vesting profile of the rights to shares granted as remuneration to each key management person of
the Group and each of the Company executives and Group executives are detailed below.
Number of
rights granted
Grant date
% vested in
year
%
forfeited
in year
(A)
Financial years
in which grant
vests
882,353
13/10/2008
411,765
468,750
276,000
8/09/2008
1/09/2009
1/10/2009
-
-
-
-
-
2011 & 2012
100%
-
-
-
2012 & 2013
2012 & 2013
Directors
Mr P Odouard
Executives
Mr P Williams
Mr W Beckles
Ms M Withers
(A)
The % forfeited in the year represents the reduction from the maximum number of rights available to vest
due to performance criteria not being achieved.
Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including options and rights granted as
compensation to a key management person) have been altered or modified by the issuing entity during the
reporting period or the prior period.
E. Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director of
the Company and each of the five named Company executives and relevant Group executives and other key
management personnel of the Group are detailed below:
Short-term incentive bonus
Included in
remuneration
% forfeited in
year
$ (A)
% vested in
year
66,875
22,275
24,240
(2,811)
8,230
4,847
14,531
11,344
75%
59%
56%
-
72%
-
78%
84%
(B)
25%
41%
44%
-
28%
-
22%
16%
Directors
Mr P Odouard
Mr D Brosius
Mr D Graham
Executives
Mr A Myers
Dr J Schlimbach
Mr P J Williams
Mr W Beckles
Ms M Withers
(A)
Amounts included in remuneration for the financial year represent the amount that vested in the financial
year based on achievement of Group and/or personal goals and satisfaction criteria. No amounts vest in
future financial years in respect of the bonus schemes for the 2010 year. The amounts included in
remuneration for the current reporting period include variances to the 2009 bonus paid during the current
reporting period compared to the bonus accrual made in the prior reporting period.
22
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
16. Remuneration Report – Audited (cont’d)
E. Analysis of bonuses in remuneration (cont’d)
Directors’ Report
(B)
The amounts forfeited are due to the Group and/or personal performance or service criteria not being met
in relation to the current financial year.
F. Other benefits
During the 2008 financial year, Mr Brosius received an unsecured loan of $100,000 from the Company. The loan
was initially for a period of 6 months at a commercial rate of interest but had subsequently been extended until 30
September 2009. The balance of the loan was fully repaid on 16 October 2009.
Dated at Perth, Western Australia this 28th day of September 2010.
Signed in accordance with a resolution of the Directors:
P M Odouard
Managing Director
Annual Report 2010
23
Corporate Governance Statement
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
This statement summarises the corporate governance practices adopted by the Board. Quickstep‟s intention is to
continue to adopt appropriate policies and procedures outlined in the “Corporate Governance Principles and
Recommendations Second Edition” issued by the ASX Corporate Governance Council in August 2007 and as
revised from time to time, to the extent that they are appropriate for a company of Quickstep‟s size.
The Board‟s Charter identifies its key objectives as:
•
•
•
increasing shareholder value;
safeguarding shareholders‟ rights and interests; and
ensuring the Company is properly managed.
The Board is responsible for:
•
•
•
•
•
•
•
guiding the development of an appropriate culture and values for the Group through the
establishment and review of Codes of Conduct and policies and procedures to enforce ethical
behaviour and provide guidance on appropriate work methods;
monitoring financial performance including approval of the annual and half-year financial
statements and liaison with the Company‟s auditors;
appointment of, and assessment of the performance of the Chief Executive Officer;
monitoring managerial performance;
ensuring that an appropriate set of internal controls is implemented so that significant risks
facing the Company and its controlled entities have been identified;
reporting to shareholders and regulatory authorities; and
making all decisions outside the scope of powers and authorities otherwise delegated.
Day-to-day management of the Group‟s affairs and the implementation of the corporate strategy and policy
initiatives are delegated by the Board to the Managing Director and senior executives.
B O A R D C O M P O S I T I O N A N D M E M B E R S H I P
During the financial year, the Board was comprised of two non-executive directors, one of whom is the
Chairperson, and three executive directors. Subsequent to the end of the financial year an additional non-
executive director has been appointed.
The Company‟s Constitution provides that the number of directors shall not be less than three and not more than
nine. There is no requirement for any share holding qualification.
The Board, through its Nominations Committee, is responsible for establishing criteria for Board membership,
reviewing Board membership and identifying and nominating directors. Board membership is regularly reviewed to
ensure the Board has an appropriate mix of qualifications, skills and experience. Directors appointed by the Board
hold office only until the next Annual General Meeting and are then eligible for re-appointment.
Directors, (other than the Managing Director) are eligible for reappointment by shareholders, no later than the
third anniversary following their last appointment. Subject to the requirements of the Corporations Act, there is no
maximum period of service as a director.
The Managing Director may be appointed for any period and on any terms the Directors, through its Nomination‟s
and Remuneration‟s Committees, identify as appropriate, although they shall be guided by current market practices
and rates.
The Board has established three Committees; Audit, Remuneration and Nominations, to assist with effective
governance.
A U D I T C O M M I T T E E
During the financial year, the Audit Committee was comprised of the independent non-executive directors. The
Audit Committee meets at least twice per year and its key roles are to:
•
•
•
monitor the integrity of the financial statements of the Group;
review significant financial reporting judgements; and
recommend to the Board the appointment of external auditors.
24
Quickstep Holdings Limited
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
Corporate Governance Statement
A U D I T C O M M I T T E E ( c o n t ’ d )
The Audit Committee is chaired by Mr M B Jenkins, who has both relevant financial qualifications and business
experience required for this role.
R E M U N E R AT I O N C O M M I T T E E
The Remuneration Committee is comprised of the full Board. The Chairperson must be one of the non-executive
directors. The committee meets at least twice per year.
The function of the committee is to assist the Board in formulating policies on and in determining:
•
•
the remuneration packages of executive directors, non-executive directors and senior
executives; and
cash bonuses and equity based incentive plans, including appropriate performance hurdles and
total payments proposed.
The Remuneration Committee is chaired by Mr P Cook. Attendance at Remuneration Committee meetings held
during the financial year is disclosed in the Directors‟ Meetings section of the Directors Report.
N O M I N AT I O N S C O M M M I T T E E
The Nominations Committee is comprised of the full Board. The Chairperson of the committee is also Chairman
of the Board. The committee meets on an as needed basis and at least once per year.
The role of the committee, within the limits required by the Company‟s Constitution, is to:
•
•
•
determine the size and composition of the Board;
select new directors and senior executives; and
establish the evaluation methods used in determining the performance of directors and senior
executives.
D I R E C T O R P E R F O R M A N C E E V A L U A T I O N
The performance of the Board and the various committees is formally reviewed annually by the full Board. The
performance of each director is continually monitored by the Chairman and the other directors and is reviewed by
each director with the Chairman. The performance of the Chairman is reviewed by the other directors and the
results discussed with the Chairman by a nominated director.
E T H I C AL S T A N D A R D S
Quickstep is aware of its Corporate Governance responsibilities and seeks to operate to the highest ethical
standards. Quickstep has established the following policies and codes to ensure that ethical standards are
understood by all of its associates and are followed at all times:
Code of Conduct
An Employee Code of Conduct has been developed and applies to all directors, managers, employees and
contractors. The code specifies the standards of behaviour and the following principles embody the Code:
To act with integrity and professionalism in the performance of duties and be scrupulous in the
proper use of Quickstep Technologies Pty Ltd information, funds, equipment and facilities;
To edify the company and colleagues when dealing with customers, visitors, suppliers and
shareholders;
To exercise fairness, equity, proper courtesy, consideration and sensitivity in all dealings in the
course of carrying out duties;
To avoid real, apparent or perceived conflicts of interest; and
To increase shareholder value within an appropriate framework to safeguard the rights and
interests of the Company‟s shareholders and the financial community.
Trading in Company Securities
Directors, officers and employees who wish to trade in Company securities must have regard to the statutory
provisions of the Corporations Act 2001 dealing with insider trading. Furthermore, directors and officers are
required to observe Blackout Periods in accordance with ASX rulings and to seek the approval of the Chairman
prior to undertaking transactions at any other time.
Annual Report 2010
25
Corporate Governance Statement
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
E T H I C AL S T A N D A R D S ( c o n t ’ d )
Director’s Disclosure Obligations
This policy is included in the Code of Conduct to ensure trading in the Company‟s securities is conducted on a fair
basis. Quickstep directors are obliged (subject to specific exceptions) to advise the ASX of any information that a
reasonable person would expect to have material effect on the price or value of the Company‟s issued securities.
I N D E P E N D E N T P R O F E S S I O N AL A D V I C E
Individual directors have the right, in connection with their duties and responsibilities as directors, to seek
independent professional advice at the Company‟s expense. With the exception of expenses for legal advice in
relation to a director‟s rights and duties, the engagement of outside advisors is subject to prior approval of the
Chairman, which will not be unreasonably withheld.
SHAREHOLDER PARTICIPATION
The Board encourages participation of shareholders at the Annual General Meeting. In addition, Quickstep
proactively provides additional information with its quarterly reports to the ASX and periodically produces
Shareholder newsletters to update on the latest developments and results for the Group.
I D E N T I F Y I N G A N D M AN A G I N G R I S K
The Board oversees the establishment, implementation and review of the Group‟s risk management systems
which have been established by management for assessing, monitoring and managing operational, financial
reporting and compliance risks.
Appropriate risk management strategies and procedures are developed to mitigate any identified risks to the
business. The procedures include identifying the context, registering, analysing, evaluating, treating, monitoring
and escalating the identified risks accordingly.
The Chief Executive Officer and Chief Financial Officer have declared, in writing to the Board that they have
evaluated the effectiveness of the Group‟s financial disclosure, controls and procedures and have concluded that
they are operating efficiently and effectively.
A S X G U I D E L I N E S O N C O R P O R AT E G O V E R N A N C E
Pursuant to ASX Listing Rule 4.10.3, the Company advises that it has followed the best practice
recommendations set by the ASX Corporate Governance Council except as identified below:
Principle of Good Corporate Governance
and Best Practice Recommendations
Reasons if not adopted
2.1 A majority of the board should be independent
directors:
4.2 The audit committee should be structured so that
it:
consists only non-executive directors
consists of a majority of independent directors
is chaired by an independent chair who is
not chair of the board
has at least three members.
The Company notes that the Board consists of 6
directors, 3 of whom are executives and 3 who
are non-executives who are considered to be
independent which
includes an additional
independent Director appointed subsequent to
the end of the financial year. The structure is
considered appropriate at this stage of the
Company‟s development but
is continually
under review.
The chair of the Audit Committee is the chair of
the Board. This utilises the appropriate skills of
the directors and is considered sufficient and
appropriate for the Company‟s present size and
level of activity. Two members are considered
sufficient and appropriate for the Company‟s
present size and level of activity.
26
Quickstep Holdings Limited
C O N S O L I D AT E D S T AT E M E N T O F C O M P R E H E N S I V E I N C O M E
F O R T H E Y E A R E N D E D 3 0 J U N E 2 01 0
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2010
Revenue
Cost of sales
Gross profit
Other income
Administration and corporate expenses
Marketing expenses
Operational expenses
Research and development expenses
Other expenses
Loss from operating activities
Financial income
Financial expense
Net financing income
Loss before income tax
Income tax benefit
Loss for the period
Other comprehensive income, net of income tax
Foreign currency translation difference for
foreign operations
i)
Note
2010
$
2009
$
5
5
6
8
9
25
448,322
314,667
(108,491)
(129,515)
339,831
185,152
1,064,787
(4,741,921)
(657,024)
(5,192,167)
(2,063,720)
(115,355)
201,033
(2,687,264)
(977,652)
(3,443,005)
(793,677)
(2,002,562)
(11,365,569)
(9,517,975)
669,153
(812,286)
(143,133)
689,477
(120,995)
568,482
(11,508,702)
(8,949,493)
538,089
328,520
(10,970,613)
(8,620,973)
(127,995)
49,187
Total comprehensive income for the period
(11,098,608)
(8,571,786)
Loss attributable to:
Owners of the company
Total comprehensive income attributable to:
Owners of the company
(10,970,613)
(8,620,973)
(11,098,608)
(8,571,786)
Earnings per share
Basic loss (cents/share) for Quickstep Holdings Ltd
11
5.41
5.31
There is no material dilutive effect of potential ordinary shares
The consolidated statement of comprehensive income is to be read in conjunction with the accompanying notes.
Annual Report 2010
27
Consolidated Statement of Financial Position
C O N S O L I D AT E D S T AT E M E N T O F F I N A N C I AL P O S I T I O N
A S A T 3 0 J U N E 2 0 1 0
For the year ended 30 June 2010
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Employee benefits
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Note
ii)
iii)
2010
$
2009
$
12
13
14
15
16
17
18
20
21
22
20
21
12,225,823
1,156,488
76,673
10,238,422
496,385
2,815,876
650,655
115,475
-
294,178
24,193,791
3,876,184
8,091,182
381,503
7,026,016
171,322
8,472,685
7,197,338
32,666,476
11,073,522
3,626,875
9,890
119,892
964,188
9,890
63,626
3,756,657
1,037,704
471,093
8,242
889,934
2,508,124
TOTAL NON-CURRENT LIABILITIES
479,335
3,398,058
TOTAL LIABILITIES
4,235,992
4,435,762
NET ASSETS
28,430,484
6,637,760
EQUITY
Share capital
Other reserves
Accumulated losses
TOTAL EQUITY
23
24
25
62,296,410
1,060,484
(34,926,410)
30,146,119
447,438
(23,955,797)
28,430,484
6,637,760
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
28
Quickstep Holdings Limited
Consolidated Statement of Changes in Equity
For the year ended 30 June 2010
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Annual Report 2010
29
Consolidated Statement of Changes in Equity
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Quickstep Holdings Limited
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C O N S O L I D AT E D S T AT E M E N T O F C AS H F L O W S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0
Consolidated Statement of Cash Flows
For the year ended 30 June 2010
Note
2010
$
2009
$
Cash flows from operating activities
Cash receipts in the course of operations
Interest received
Interest paid
Research and development tax offset rebate and
government grants
Cash paid to suppliers and employees
292,608
390,753
(269,787)
237,809
409,711
(2,832)
1,390,484
(9,375,034)
1,042,952
(7,440,240)
Net cash used in operating activities
28
(7,570,976)
(5,752,600)
Cash flows from investing activities
Acquisition of plant and equipment
Acquisition of intangibles
Investment in term deposit
Employee loan repaid / (provided)
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of shares
Payment of transaction costs
Proceeds from convertible loans
Convertible note issue costs
Finance lease payments
Net cash from financing activities
Net (decrease) / increase in cash and cash
equivalents
Effects of exchange rate changes on cash held in
foreign currencies
(1,723,741)
(226,000)
(10,000,000)
-
(4,690,732)
-
-
54,000
(11,949,741)
(4,636,732)
25,907,412
(836,294)
4,000,000
-
(9,890)
-
-
2,700,000
(178,200)
(9,890)
29,061,228
2,511,910
9,540,511
(7,877,422)
(130,564)
385,683
Cash and cash equivalents at 1 July
2,815,876
10,307,615
Cash and cash equivalents at 30 June
12
12,225,823
2,815,876
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
Annual Report 2010
31
Notes to and forming part of the Financial Statements
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
For the year ended 30 June 2010
F O R T H E Y E A R E N D E D 3 0 J U N E 2 01 0
1.
Significant accounting policies
(a)
Reporting entity
Quickstep Holdings Limited (“the Company”) is a company domiciled in Australia. The consolidated financial
statements of the Company as at and for the year ended 30 June 2010 comprise the Company and its subsidiaries
(together referred to as the “Group” and individually as “Group Entities”). The Group is primarily involved in the
manufacture of composite components for the aerospace industry, and continuing research and development in
composite manufacturing processes.
(b)
Basis of preparation
Statement of compliance
The consolidated financial statements are general purpose financial statements, which have been prepared in
accordance with the Australian Accounting Standards (”AASBs”) (including Australian interpretations) adopted by
the Australian Accounting Standards Board (”AASB”) and the Corporations Act 2001. The consolidated financial
statements of the Group comply with the International Financial Reporting Standards (”IFRS”) and interpretations
adopted by the International Accounting Standards Board.
The financial statements were approved by the Board of Directors on 24th September 2010.
Basis of measurement
The financial statements are prepared on the historical cost basis except for items outlined in note 2.
Use of estimates and judgements
The preparation of financial statements in conformity with AASBs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of
the revision and future periods if the revision affects both current and future periods.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying
accounting policies that have the most significant effect on the amount recognised in the financial statements are
described in the following notes:
Note 17 – Recoverable amount of property, plant and equipment
Note 20 – Royalties payable
Note 31 – Share-based payments
Changes in accounting policies
Starting as of 1 July 2009, the Group has changed its accounting policies in the following areas:
Determination and presentation of operating segments
Presentation of financial statements
(c)
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by all entities in the Group, except as
explained in notes 1(b),1(i), 1(u) and 1(v) which address changes in accounting policies.
Certain comparative amounts have been reclassified to conform with the current year‟s presentation (see note 4).
32
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
1.
Significant accounting policies (cont’d)
(d)
Financial position
The Group has incurred a loss after tax for the year of $10,970,613 (2009: loss $8,620,973). The Group has a
surplus in working capital at 30 June 2010 of $20,437,134 (2009: surplus $2,838,480).
During the past 12 months ended 30 June 2010, Quickstep has:
accessed additional sources of funding through:
a placement of shares (net of costs) of $10,655,706;
two draw downs, each of $2,000,000 under the $10,000,000 Convertible Loan Facility with
InvestOne Financial Advisory Est., a related company of Al Farida Investments Company
LLC, headquartered in Abu Dhabi, United Arab Emirates. These draw downs were converted
to equity during the period.
a share purchase plan which closed in January 2010 raising $12,765,559
the exercising of share options that raised $1,485,885;
signed two Memorandums of Understanding relating to the production of parts for the Joint Strike
Fighter Program. Subject to the attainment of accreditation and completion of contractual agreements,
it is expected that these will result in production income from 2012 onwards.
converted $2,700,000 of convertible notes during the period.
The Group also continues to actively seek opportunities for the sale of Quickstep machines and licensing of its
associated technology, as well as outsourced composite manufacturing contracts.
These activities, in the opinion of Directors, warrant the ongoing commitments of the Group‟s financial resources to
enable future profitable operations. Such operations are expected to enable recovery of the Group‟s investment in
property, plant and equipment and intangible assets.
The Group will continue to invest in the development of its production capability. Existing and planned capital
expenditure commitments for 2011, together with anticipated working capital outflows are anticipated to deplete
existing cash reserves and therefore it is likely that additional sources of funds may be required. Given the recent
success of the Company in fund raising activities, initial discussion with potential sources of funds, anticipated
ongoing support of key investors and fund raising alternatives available, directors anticipate that funding will be
obtained as required.
For the reasons discussed above, the Directors are confident that the Group will be able to continue its operations
into the foreseeable future.
(e)
Basis of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Quickstep
Holdings Limited (“Company” or “parent entity”) as at 30 June 2010 and the results of all subsidiaries for the year
then ended. Quickstep Holdings Limited and its subsidiaries together are referred to in the financial statements as
the consolidated entity or the Group.
A subsidiary is any entity controlled by the Company. Control exists where the Company has the power, directly
or indirectly, to govern the financial and operating policies of another entity so as to obtain benefits from its
activities. Subsidiaries are fully consolidated from the date on which control is transferred to the Group, and de-
consolidated from the date that control ceases.
Intragroup balances and any recognised gains and losses or income and expenses arising from intragroup
transactions, are eliminated in preparing the consolidated financial statements.
Associates and jointly controlled entities (equity accounted investees)
Associates are those entities in which the Group has significant influence, but not control, over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of
the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group
has joint control, established by contractual agreement and requiring unanimous consent for strategic financial
and operating decisions. Associates and jointly controlled entities are accounted for using the equity method
(equity accounted investees) and are initially recognised at cost. The Group‟s investment includes goodwill
identified on acquisition, net of any accumulated impairment losses.
Annual Report 2010
33
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
1.
Significant accounting policies (cont’d)
(e) Basis of consolidation (cont’d)
Associates and jointly controlled entities (equity accounted investees) (cont’d)
The consolidated financial statements include the Group‟s share of the income and expenses and equity
movements of equity accounted investees, after adjustments to align the accounting policies with those of the
Group, from the date that significant influence or joint control commences until the date that significant influence
or joint control ceases. When the Group‟s share of losses exceeds its interest in an equity accounted investee,
the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of
Associates and jointly controlled entities (equity accounted investees) (cont’d)
further losses is discontinued except to the extent that the Group has an obligation or has made payments on
behalf of the investee.
(f)
Foreign currency
These consolidated financial statements are presented in Australian Dollars, which is the Company‟s functional
currency and the functional currency of the majority of the Group.
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to
Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on
translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated
to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition, are translated to Australian dollars at exchange rates at the reporting date. The income and
expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to
Australian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised directly in equity. Since 1 July 2004, the Group‟s date of transition to
AASBs, such differences have been recognised in the foreign currency translation reserve (“FCTR”). When a
foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to the statement
of comprehensive income.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign
operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form
part of a net investment in a foreign operation and are recognised directly in equity in the FCTR.
(g)
Financial instruments
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other
financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade
date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial
assets that is created or retained by the Group is recognised as a separate asset of liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial assets: held-to-maturity financial assets, and loans and
receivables.
34
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
1.
Significant accounting policies (cont’d)
(g)
Financial instruments (cont’d)
(i) Non-derivative financial assets (cont’d)
Held-to-maturity financial assets
If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are
classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are
measured at amortised cost using the effective interest method, less any impairment losses. Any sale or
reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity
would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group
from classifying investment securities as held-to-maturity for the current and the following two financial years.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest
method, less any impairment losses.
Loans and receivables comprise trade and other receivables. Trade and other receivables are stated at their
amortised cost less impairment losses.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with
an original maturity of three months or less. For the purposes of the cash flow statement, cash consists of cash
and short-term deposits as defined above, net of outstanding bank overdrafts.
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are
recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the
instrument. The Group derecognises a financial liability when its contractual obligations are discharged or
cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Group has a legal right to offset the amounts and intends either to
settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial liabilities: loans and borrowings, and trade and other
payables.
Trade and other payables, other than royalties payable, are stated at their amortised cost
Royalties payable are royalties due under contracts and are on initial recognition recorded at fair value utilising
discounted cash flows and then subsequently recorded at amortised cost (refer note 20).
(iii) Share Capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity, net of any tax effects.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
(iv) Compound financial instruments
Compound financial instruments issued by the Group comprise convertible notes and convertible loans that can
be converted to share capital at the option of both the holder and issuer, provided certain pre-existing conditions
are met. The number of shares to be issued does not vary with changes in their fair value.
Annual Report 2010
35
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
1. Significant accounting policies (cont’d)
(g) Financial instruments (cont’d)
(iv) Compound financial instruments (cont’d)
The liability component of a compound financial instrument is recognised initially at the fair value of a similar
liability that does not have an equity conversion option. The equity component is recognised initially at the
difference between the fair value of the compound financial instrument as a whole and the fair value of the liability
component. Any directly attributable transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at
amortised cost using the effective interest method. The equity component of a compound financial instrument is
not re-measured subsequent to initial recognition.
Interest, dividends, losses and gains relating to the financial liability are recognised in profit or loss. Distributions
to the equity holders are recognised against equity, net of any tax benefit.
(h)
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation (see below) and any impairment in
value (see accounting policy (l)). The cost of self-constructed assets includes the cost of materials, direct labour and
an appropriate proportion of production overheads.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within
“other income” in profit or loss.
Depreciation
Depreciation is recognised as an expense in the statement of comprehensive income on a reducing balance basis
over the estimated useful life of the asset. The depreciation rates used for each class of depreciable asset for the
current and prior years are:
Class of Fixed Asset
Plant and factory equipment
Office equipment
(i)
Intangible assets
Research and development
Depreciation Rate
6.67% to 37.50%
6.67% to 50.00 %
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the statement of comprehensive income as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production
of new or substantially improved products and processes, is capitalised if the product or process is technically
feasible, the Group has sufficient resources to complete development and the Group is able to demonstrate how the
product or process will generate future economic benefits.
Expenditure which may be capitalised includes the cost of materials, direct labour and an appropriate proportion of
overheads. Other development expenditure is recognised in the statement of comprehensive income as an expense
as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation (see below) and
impairment losses (see accounting policy (l)).
Goodwill
Change in accounting policy
As from 1 July 2009, the Group has adopted the revised AASB 3 Business Combinations (2008) and the amended
AASB 127 Consolidated and Separate Financial Statements (2008). Revised AASB 3 and amended AASB 127
have been applied prospectively to business combinations with an acquisition date on or after 1 July 2009.
The change in accounting policy had no impact on earnings per share.
Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as
equity holders and therefore no goodwill is recognised as a result of such transactions.
36
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
1.
(i)
Significant accounting policies (cont’d)
Intangible assets (cont’d)
Goodwill (cont’d)
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the
carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an
investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity
accounted investee.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see below)
and impairment losses (see accounting policy (l)).
Amortisation
Amortisation is recognised as an expense in the statement of comprehensive income on a straight-line basis over
the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with
indefinite useful lives are tested for impairment at each balance sheet date. Other intangible assets are amortised
from the date that they are available for use. The estimated useful lives in the current and comparative periods
are as follows:
Licences, patents and rights to technology
Royalty buy-back
Capitalised development costs
Software
10 years
10 years
5 – 10 years
2 ½ years
(j)
Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair
value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and the leased assets are not recognised on the Group‟s statement of financial
position.
(k)
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(l)
Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is
impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events
have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount, and the present value of the estimated future cash flows discounted at the original
effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment
loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss.
Annual Report 2010
37
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
1. Significant accounting policies (cont’d)
(l)
Impairment (cont’d)
Non-financial assets
The carrying amounts of the Group‟s assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, the asset‟s recoverable amount is estimated.
For goodwill and intangible assets that have indefinite useful lives or are not yet available for use, the recoverable
amount is estimated annually.
An impairment loss is recognised whenever the carrying amount of an asset of its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in the statement of comprehensive income unless the asset
has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that
previous revaluation with any excess recognised through the statement of comprehensive income.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of
any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the
other assets in the unit (group of units) on a pro rata basis.
An impairment write down to goodwill may not be reversed in future years. In respect of other assets, impairment
losses recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset‟s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
(m) Employee entitlements
Wages, salaries, annual leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave and other entitlements represent present
obligations resulting from employees‟ services provided to reporting date, and are calculated at undiscounted
amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date
including related on-costs, such as, workers compensation insurance and payroll tax.
Provisions made in respect of other employee entitlements which are not expected to be settled within 12 months
(such as long service leave) are measured as the present value of the estimated future cash outflows to be made
by the Group in respect of services provided by employees up to the reporting date.
Share-based payment transactions
An expense is recognised for all equity-based remuneration and other transactions, including shares, rights and
options issued to employees and directors. The fair value of equity instruments granted is recognised, together
with a corresponding increase in equity, over the period in which the performance and/or service conditions are
fulfilled, ending on the date on which the relevant employees become fully entitled to the award („vesting date‟).
The amount recognised is adjusted to reflect the actual number of shares and options that vest, except for those
that fail to vest due to market conditions not being met. The fair value of equity instruments granted is measured
using a generally accepted valuation model, taking into account the terms and conditions upon which the equity
instruments were granted. The fair value of shares, options and rights granted is measured based on relevant
market prices at the grant date.
(n)
Revenue
Revenue from sale of goods is recognised in the statement of comprehensive income when persuasive evidence
exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have
been transferred to the buyer, recovery of consideration is probable, the associated costs and possible return of the
goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of
revenue can be measured reliably. Revenue from the rendering of a service is recognised in the income statement
in proportion to the stage of completion of the transaction at balance sheet date. The stage of completion is
assessed by reference to analysis of work performed.
To the extent to which amounts are received in advance of the provision of the related services, the amounts are
recorded as unearned income and credited to the statement of comprehensive income as earned.
Licence fee revenue is recognised on an accruals basis when the Group has the right to receive payment under the
relevant agreement and has performed its obligations.
38
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
1.
Significant accounting policies (cont’d)
(o) Government grants
Government grants are recognised initially as deferred income where there is a reasonable assurance that the grant
will be received and all grant conditions will be met. Grants that compensate the Group for expenses incurred are
recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are
recognised. Grants that compensate the Group for the cost of an asset are recognised in profit or loss on a
systematic basis over the useful life of the asset.
(p)
Lease payments
Payments made under operating leases are recognised in the statement of comprehensive income on a straight-
line basis over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as
to produce a constant periodic rate of interest on the remaining balance of the liability.
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A
specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified
asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to
control the use of the underlying asset.
(q)
Finance income and finance costs
Finance income comprises interest income and is recognised in the statement of comprehensive income as it
accrues, using the effective interest method.
Finance costs comprise interest payable on borrowings calculated using the effective interest method, dividend
income, transaction costs, unwinding discounting of provisions and foreign exchange gains and losses. The
interest expense component of finance lease payments is recognised in the statement of comprehensive income
using the effective interest method.
(r)
Income tax
Income tax on statement of comprehensive income for the periods presented comprises current and deferred tax.
Income tax is recognised in the profit or loss except to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantially enacted
at reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax provides for temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The following temporary differences are not
provided for: goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit,
and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
Quickstep Holdings Limited and its subsidiaries have unused tax losses. However, no deferred tax balances have
been recognised, as it is considered that asset recognition criteria have not been met at this time.
(s) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where
the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from,
or payable to, the ATO is included as a current asset or liability in the statement of financial position.
Annual Report 2010
39
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
1.
Significant accounting policies (cont’d)
(s) Goods and services tax (cont’d)
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows
arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as
operating cash flows.
(t)
Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares, which comprise share options and rights granted and convertible notes and
convertible loans on issue.
(u)
Segment reporting
Determination and presentation of operating segments
As of 1 July 2009 the Group determines and presents operating segments based on the information that internally
is provided to the CEO, who is the Group‟s chief operating decision maker. This change in accounting policy is
due to the adoption of AASB 8 Operating Segments. Previously operating segments were determined and
presented in accordance with AASB 114 Segment Reporting. The new accounting policy in respect of segment
operating disclosures is presented as follows.
Comparative segment information has been re-presented in conformity with the transitional requirements of such
standard. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no
impact on earnings per share.
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Group‟s other components. All operating segments‟ operating results are regularly reviewed by the Group‟s CEO
to make decisions about resources to be allocated to the segment and assess its performance, and for which
discrete financial information is available.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the
Company‟s headquarters), head office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment,
and intangible assets other than goodwill.
(v)
Presentation of financial statements
The Group applies revised AASB 101 Presentation of Financial Statements (2007), which became effective as of
1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner
changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of
comprehensive income.
Comparative information has been re-presented so that it also is in conformity with the revised standard. Since
the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.
Key amendments to the Corporations Act 2001 were given royal assent on 28 June 2010 which removed the
requirement to include full parent entity financial statements when preparing consolidated financial statements.
This amendment is applicable for financial years ended 30 June 2010 and therefore parent entity financial
statements are not included in this report. Disclosures regarding the parent entity are included in Note 32.
40
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
1.
Significant accounting policies (cont’d)
(w) New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been identified as those which may
impact the entity in the period of initial application. They are available for early adoption at 30 June 2010, but
have not been applied in preparing these financial statements.
AASB 9 Financial Instruments includes requirements for the classification and measurement of financial
assets resulting from the first part of Phase 1 of the project to replace AASB 139 Financial Instruments:
Recognition and Measurement. AASB 9 will become mandatory for the Group‟s 30 June 2014 financial
statements. Retrospective application is generally required, although there are exceptions, particularly if
the entity adopts the standard for the year ended 30 June 2012 or earlier. The Group has not yet
determined the potential effect of the standard.
AASB 124 Related Party Disclosures (revised December 2009) simplifies and clarifies the intended
meaning of the definition of a related party and provides a partial exemption from the disclosure
requirements for government-related entities. The amendments, which will become mandatory for
Group‟s 30 June 2012 financial statements, are not expected to have any impact on the financial
statements.
AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual
Improvements Process affect various AASBs resulting in minor changes for presentation, disclosure,
recognition and measurement purposes. The amendments, which become mandatory for the Group‟s 30
June 2011 financial statements, are not expected to have a significant impact on the financial
statements.
AASB 2009-10 Amendments to Australian Accounting Standards - Classification of Rights Issue [AASB
132] (October 2010) clarify that rights, options or warrants to acquire a fixed number of an entity‟s own
equity instruments for a fixed amount in any currency are equity instruments if the entity offers the rights,
options or warrants pro-rata to all existing owners of the same class of its own non-derivative equity
instruments. The amendments, which will become mandatory for the Group‟s 30 June 2011 financial
statements, are not expected to have any impact on the financial statements.
AASB 2009-14 Amendments to Australian Interpretation - Prepayments of a Minimum Funding
Requirement - AASB 14 make amendments to Interpretation 14 AASB 119 - The Limit on a Defined
Benefit Asset, Minimum Funding Requirements removing an unintended consequence arising from the
treatment of the prepayments of future contributions in some circumstances when there is a minimum
funding requirement. The amendments will become mandatory for the Group‟s 30 June 2012 financial
statements, with retrospective application required. The amendments are not expected to have any
impact on the financial statements.
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments addresses the accounting by an
entity when the terms of a financial liability are renegotiated and result in the entity issuing equity
instruments to a creditor of the entity to extinguish all or part of the financial liability. IFRIC 19 will
become mandatory for the Group‟s 30 June 2011 financial statements, with retrospective application
required. The Group has not yet determined the potential effect of the interpretation.
2.
Determination of fair values
A number of the Group‟s accounting policies and disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Where applicable, further information about the assumptions
made in determining fair values is disclosed in the notes specific to that asset or liability.
(a)
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at
the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.
Annual Report 2010
41
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
2.
Determination of fair values (cont’d)
(b)
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the
liability component of convertible notes and loans, the market rate of interest is determined by reference to similar
liabilities that do not have a conversion option. For finance leases the market rate of interest is determined by
reference to similar lease agreements.
(c)
Share-based payment transactions
The fair value of the Employee Share Options Scheme (“ESOS”) and Employee Incentive Plan (“EIP”) are
measured using Monte Carlo Simulations. The fair value of the share rights is measured using the Black-Scholes
formula. For both methodologies, measurement inputs include share price on measurement date, exercise price
of the instrument, expected volatility (based on weighted average historic volatility adjusted for expected changes
expected due to publicly available information), weighted average expected life of the instruments (based on
historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate
(based on government bonds). In the case of the EIP, market performance conditions attaching to the grant are
taken into account in the Monte Carlo Simulation in determining fair value. Service and non-market performance
conditions attached to the ESOS and EIP transactions are not taken into account in determining fair value.
3.
Financial risk management
(a)
Overview
The Group has exposure to the following risks from their use of financial instruments:
credit risk
liquidity risk
market risk.
This note presents information about the Group‟s exposure to each of the above risks, their objectives, policies
and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures
are included throughout these financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework and is responsible for developing and monitoring risk management policies.
Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Group‟s activities. The Group, through training
and management standards and procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.
The Group Audit Committee oversees how management monitors compliance with the Group‟s risk management
policies and formally documented procedures and reviews the adequacy of the risk management framework in
relation to the risks faced by the Group.
(b)
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group‟s receivables from customers and cash
balances and deposits.
Trade and other receivables
The Group‟s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The
demographics of the Group‟s customer base, including the default risk of the industry and country in which
customers operate, has less of an influence on credit risk. Geographically, other than in Australia for amounts due
from the Australian Taxation Office, there is no concentration of credit risk. Goods are generally sold subject to
retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The Group
does not require collateral in respect of trade and other receivables.
42
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
3. Financial risk management (cont’d)
(b)
Credit risk (cont’d)
Cash balances and deposits
The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that
have a credit rating of at least A1 from Standard & Poor‟s. Given these high credit ratings, management has
assessed the risk that counterparties fail to meet their obligations as low.
(c)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group‟s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquid
assets to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group‟s reputation.
Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a
period of at least 12 months, including the servicing of financial obligations; this excludes the potential impact of
extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Group holds cash
reserves raised during the financial year from a share placement, draw downs of funds from a convertible note
facility, and a share purchase plan.
(d)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect
the Group‟s income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising the return. The
Group does not enter into derivatives in order to manage market risks.
Interest rate risk
The Group is exposed to interest rate risk predominantly on cash balances and deposits. Given the relatively
short investment horizon for these, management has not found it necessary to establish a policy on managing the
exposure of interest rate risk.
Currency risk
The Group is exposed to currency risk on sales, purchases and cash holdings that are denominated in a currency
other than the respective functional currencies of Group entities, primarily the Australian dollar (“AUD”), Euro
(“EUR”) and US Dollar (“USD”). The currencies in which these transactions primarily are denominated are AUD,
EUR and USD.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its
net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to
address short-term imbalances.
The Group‟s investment in its German and US subsidiaries are not hedged as the currency positions are
considered to be long-term in nature.
(e)
Capital management
The Group‟s objectives when managing capital are to safeguard the Group‟s ability to continue as a going
concern, so as to maintain a strong capital base sufficient to maintain future development in accordance with the
business strategy. In order to maintain or adjust the capital structure, the Group may return capital to
shareholders or issue new shares. The Group‟s focus has been to raise sufficient funds through equity and/or
compound financial instruments so as to fund its working capital and commercialisation of technology
requirements.
There were no changes in the Group‟s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
Annual Report 2010
43
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
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Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
4. Segment Reporting (cont’d)
Reconciliations of reportable segment revenues, profit or loss and liabilities
Revenues
Total revenue for reportable segments
Elimination of inter-segment revenue
Consolidated revenue
Profit or loss
Total loss for reportable segments
Unallocated amounts: other corporate expenses
Consolidated loss
Assets
Total assets for reportable segments
Consolidation total assets
Liabilities
Total liabilities for reportable segments
Consolidated total liabilities
Major Customers
Consolidated
2010
$
2009
$
716,820
(268,498)
314,667
-
448,322
314,667
(8,170,738)
(2,799,875)
(8,224,153)
(396,820)
(10,970,613)
(8,620,973)
32,666,476 11,073,522
32,666,476 11,073,522
4,235,992
4,435,762
4,235,992
4,435,762
Three customers have contributed approximately $356,224 (79.5%) (2009: $62,822 (20.0%)) of the Group‟s total
external revenues. This amount is comprised of $205,040 (2009: $62,822) from a German segment customer,
$75,551 (2009: nil) from an Australian segment customer, and $75,634 (2009: nil) from a USA segment customer.
5.
Revenue and income
Sales
Total revenue from operating
activities
Other income
Income from government grants
Note
Consolidated
2010
$
2009
$
448,322
314,667
448,322
314,667
1,064,787
201,033
Income from government grants includes $1,060,937 (2009: $108,515) received for an approved Climate Ready
Grant from AusIndustry, a division of the Department of Innovation, Industry, Science and Research. The grant is
assisting the Group to develop the Quickstep Resin Spray Technology (“RST”).
6.
Other expenses
Impairment of property, plant & equipment
Impairment of intangible assets
Other
17
18
-
-
115,355
1,374,447
264,197
363,918
115,355
2,002,562
Annual Report 2010
45
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
7.
Personnel expenses
Wages and salaries
Other associated personnel expenses
Increase in liability for annual leave
Expense of share based payments
8.
Finance income and expense
Recognised in profit or loss
Interest income
Net foreign exchange gain
Finance income
Finance lease interest paid
Convertible note interest
Convertible loan costs
Amortisation of convertible note costs
Amortisation of convertible loan costs
Net foreign exchange loss
Interest expense on liabilities measured at amortised cost
Finance expense
Note
Consolidated
2010
$
2009
$
31
3,715,612
572,788
56,266
923,499
2,871,202
331,869
27,737
201,322
5,268,165
3,432,130
669,153
-
669,153
(2,868)
(190,248)
(306,571)
(105,535)
(156,164)
(2,568)
(48,332)
(812,286)
352,986
336,491
689,477
(2,832)
(76,671)
-
(15,158)
-
-
(26,334)
(120,995)
Net finance income
(143,133)
568,482
Recognised in other comprehensive income
Foreign currency translation differences for foreign operations
Finance income recognised in other comprehensive income,
net of tax
Attributable to:
Owners of the company
Finance income recognised in other comprehensive income,
net of tax
9.
Income tax
(a)
Income tax benefit
The major components of income tax benefit are:
Current income tax benefit
Adjustments in respect of current income tax of previous
years
Income tax benefit reported in the consolidated income
statement
(127,995)
49,187
(127,995)
49,187
(127,995)
49,187
(127,995)
49,187
(537,062)
(328,520)
(1,027)
-
(538,089)
(328,520)
46
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
9. Income Tax (cont’d)
(b) Numerical reconciliation between tax benefit and
pre-tax net loss
A reconciliation between tax benefit and the product of
accounting loss before income tax multiplied by the Group‟s
applicable income tax rate is as follows:
Consolidated
2010
$
2009
$
Loss before tax from continuing operations
(11,508,702)
(8,949,493)
At the statutory income tax rate of 30%
Expenditure not allowable for income tax purposes
R&D concession uplift
Adjustments in respect of current income tax of previous years
Effect of different tax rate for overseas subsidiaries
Deferred tax asset not brought to account
Income tax benefit
(3,452,611)
394,458
-
(1,027)
194,647
2,326,444
(2,684,848)
94,565
(52,685)
-
218,985
2,095,463
(538,089)
(328,520)
Tax losses not brought to account
(c)
Unused tax losses for which no deferred tax asset has been
recognised:
Potential at 30% (2009: 30%)
Temporary differences not brought to account
(d)
Deferred tax assets/(liabilities):
Accrued income
Interest receivable
Prepayments
Other provisions
Borrowing costs
Deductible capital raising costs and blackhole expenditure
Property, plant and equipment
Deferred tax assets not recognised
7,141,312
4,693,482
-
(83,520)
(25,356)
210,727
25,311
381,571
540,537
(1,049,270)
-
(2,670)
-
(20,089)
96,009
24,288
328,731
518,105
(944,374)
-
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets
have not been recognised in respect of these items because it is not probable that future taxable profit will be
available against which the Group can utilise the benefits therefrom.
(e)
Tax consolidation legislation
Quickstep Holdings Limited and its 100% owned Australian resident subsidiaries have not formed a tax consolidated
group.
10.
Auditor’s remuneration
Amounts received or due and receivable by
the auditor for:
Audit services
KPMG – current year
KPMG – under-accrual from prior year
74,500
26,450
43,088
7,709
100,950
50,797
Annual Report 2010
47
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
11.
Loss per share
The calculation of basic loss per share at 30 June 2010 was based on the loss attributable to ordinary
shareholders of $10,970,613 (2009: $8,620,973) and a weighted average number (W.A.N.) of ordinary shares
outstanding during the financial year ended 30 June 2010 of 202,961,683 (2009: 162,446,305) calculated as
follows:
2010
2009
Note
Actual No.
W.A.N.
Actual No.
W.A.N.
Issued ordinary shares 1 July
Effect of shares issued
Effect of conversion of notes
Effect of share options exercised
23
162,446,305
48,534,976
33,500,000
5,935,619
162,446,305
24,877,605
14,216,438
1,421,335
162,446,305 162,446,305
-
-
-
-
-
-
Issued ordinary shares at 30 June
23
251,416,900
202,961,683
162,446,305 162,446,305
There is no material dilutive effect of potential ordinary shares.
Note
Consolidated
2010
$
2009
$
12.
Cash and cash equivalents
Cash at bank and on hand
Short-term bank deposits
13.
Trade and other receivables
Current
Trade receivables
Other receivables
- R&D tax offset rebate and government
grants receivable
- GST and VAT receivable
- accrued interest
- FBT receivable
- other
14.
Inventories
Raw materials and consumables
15. Other financial assets
Held-to-maturity investments
7,225,823
5,000,000
2,815,876
-
12,225,823
2,815,876
228,701
72,986
577,060
302,002
39,978
8,052
695
368,520
209,149
-
-
-
1,156,488
650,655
76,673
115,475
10,238,422
-
A 180 day term deposit for $10,000,000 with an interest rate of 5.92% matures on 3 August 2010.
16. Other current assets
Prepayments
Deferred costs of borrowing
Loan to key management personnel
48
21
29
292,549
235,569
203,836
-
-
58,609
496,385
294,178
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
17.
Property, plant & equipment
Consolidated
Plant &
Equipment
Assets Under
Construction
$
$
Office
Furniture &
Equipment
$
Total
$
Costs
Balance at 1 July 2008
2,852,474
1,652,879
525,791
5,031,144
Additions
Transfers
2,543,627
2,079,422
47,598
4,670,647
244,955
(244,955)
-
-
Effect of movements in exchange rates
17,045
-
7,384
24,429
Balance at 30 June 2009
5,658,101
3,487,346
580,773
9,726,220
Balance at 1 July 2009
5,658,101
3,487,346
580,773
9,726,220
Additions
Transfers
515,886
1,123,172
172,265
1,811,323
2,241,551
(2,246,854)
5,303
-
Transfer to intangible assets
(159,940)
(159,940)
Effect of movements in exchange rates
(77,001)
(1,221)
(34,014)
(112,236)
Balance at 30 June 2010
8,338,537
2,362,443
564,387
11,265,367
Depreciation and impairment losses
Balance at 1 July 2008
Depreciation for the year
Impairment losses (i)
625,211
432,631
-
-
126,040
751,251
137,531
570,162
1,106,719
235,802
31,926
1,374,447
Effect of movements in exchange rates
4,299
-
45
4,344
Balance at 30 June 2009
2,168,860
235,802
295,542
2,700,204
Balance at 1 July 2009
Depreciation for the year
Transfers
Transfer to intangible assets
2,168,860
235,802
295,542
2,700,204
534,840
(627)
-
-
-
-
-
75,710
610,550
627
-
(111,915)
(111,915)
(7,958)
(24,654)
Effect of movements in exchange rates
(16,696)
Balance at 30 June 2010
2,686,377
235,802
252,006
3,174,185
Carrying Amounts
At 1 July 2008
At 30 June 2009
At 1 July 2009
At 30 June 2010
2,227,263
1,652,879
399,751
4,279,893
3,489,241
3,251,544
285,231
7,026,016
3,489,241
3,251,544
285,231
7,026,016
5,652,160
2,126,641
312,381
8,091,182
(i) In the previous financial year, impairments of property, plant and equipment in prior year were recognised on
certain machines held by the Group, and minor property, plant and equipment and office furniture and fittings that
are not expected to be recoverable. The recoverable amount of these assets were determined with reference to
their fair value less costs to sell, which has been deemed to be nil.
Annual Report 2010
49
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
18.
Intangibles
Costs
Patents &
Rights
$
Royalty
Buy-Back
$
Technology
$
Consolidated
Computer
Software
Goodwill
Total
$
$
Balance at 1 July 2008
649,027
94,419
1,320,970
Balance at 30 June 2009
649,027
94,419
1,320,970
Balance at 1 July 2009
649,027
94,419
1,320,970
Additions
Transfer from property,
plant & equipment
-
-
-
159,940
-
-
-
226,000
175,000
2,239,416
175,000
2,239,416
175,000
2,239,416
-
-
226,000
159,940
Balance at 30 June 2010
649,027
94,419
1,320,970
385,940
175,000
2,625,356
Amortisation and impairment losses
Balance at 1 July 2008
482,078
47,214
Amortisation for the year
33,390
9,442
Impairment losses (i)
-
-
792,579
264,194
264,197
Balance at 30 June 2009
515,468
56,656
1,320,970
Balance at 1 July 2009
515,468
56,656
1,320,970
-
-
-
-
-
175,000
1,496,871
-
-
307,026
264,197
175,000
2,068,094
175,000
2,068,094
Amortisation for the year
33,390
9,442
Transfer from property, plant
& equipment
-
-
-
-
21,012
111,915
-
-
63,844
111,915
Balance at 30 June 2010
548,858
66,098
1,320,970
132,927
175,000
2,243,853
Carrying amounts
At 1 July 2008
At 30 June 2009
At 1 July 2009
At 30 June 2010
166,949
47,205
528,391
133,559
37,763
133,559
37,763
100,169
28,321
-
-
-
-
-
-
253,013
-
-
-
-
742,545
171,322
171,322
381,503
(i) An impairment loss of $264,197 has been recognised in the other expenses in the income statement for the
year ended 30 June 2009 in respect to the Technology intangible asset. The forecast future cash flows of the
Group are expected to arise through the design and production of composite parts using the recently acquired
plant and machinery, rather than the existing technology which was being amortised over a five-year period.
The recoverable amount of the asset has been determined with reference to the fair value less costs to sell, which
is deemed to be nil.
50
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
19. Group entities
Parent entity
Quickstep Holdings Limited
Controlled entities
Quickstep Technologies Pty Ltd
Quickstep Operations Pty Ltd *
QuickBoats Pty Ltd
Quickstep GmbH
Quickstep Composites LLC *
*These entities were established during the year.
20.
Trade and other payables
Current
Unsecured trade payables
Sundry payables and accrued expenses
Royalties payable (i)
Non-current
Royalties payable (i)
Country of
incorporation
Entity interest
2010
Entity interest
2009
Australia
Australia
Australia
Australia
Germany
USA
100%
100%
100%
100%
100%
100%
-
100%
100%
-
Consolidated
2010
$
2009
$
111,190
2,865,685
650,000
3,626,875
188,740
569,497
205,951
964,188
471,093
889,934
(i) On 21 July 2005, a Heads of Agreement was executed between Quickstep Holdings Limited (“QHL”), Quickstep
Technologies Pty Ltd (“QTPL”) and VCAMM Limited which agreed the value of services provided by VCAMM to
the Group during the period 1 July 2003 to 30 June 2005 and which formalised arrangements that existed before
30 June 2005 between the parties. The agreed consideration for services provided was $1,790,000, which was
satisfied by the grant of 2,160,000 ordinary fully paid shares in QHL (issued at $0.25 per share), with the balance
of $1,250,000 to be paid to VCAMM on a quarterly basis from total cash revenues received by QTPL on a
percentage basis (varying from 4% to 7% of QTPL‟s cash revenues for the period), subject to a maximum annual
repayment of $650,000. The discount rate that has been used to calculate the royalties payable is 8.46%.
21.
Loans and borrowings
Current
Finance lease liabilities
Non-current
Finance lease liabilities
Convertible notes (net of transaction costs)
Consolidated
2010
$
2009
$
9,890
9,890
8,242
18,132
-
2,489,992
8,242
2,508,124
At 30 June 2009 13,500,000 convertible notes were on issue at $0.20 per note to raise funds of $2,700,000. The
notes had an 11% coupon rate and were convertible into ordinary shares on 27 March 2012 on the basis of 1
share for 1 convertible note. On 17 February 2010 the Company redeemed all the outstanding notes when the 5-
day volume weighted average price of shares remained above $0.30 for a continuous period of more than 3
months. A portion of convertible notes was classified as equity ($46,966).
Annual Report 2010
51
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
21. Loans and borrowings (cont’d)
Quickstep has also entered into a $10,000,000 Convertible Loan Agreement on 5 March 2009. Tranches of up to
$2,000,000 can be drawn in intervals of at least 90 days, at Quickstep‟s discretion, with the first $2,000,000 being
available 60 days after execution of the agreement (5 March 2009). The term of the facility is 2 years from the
date of the agreement. No interest is payable on the loan. The lender may elect to convert all or part of the
outstanding balance of the loan into Quickstep shares at an issue price of $0.20 per share at any time. On expiry
of the loan, the lender may elect to convert the outstanding balance of the loan into Quickstep shares or seek
repayment of the outstanding loan balance. Two drawings of $2,000,000 were made during the period (2009: nil).
A portion of convertible loans was classified as equity ($724,898). The lender gave notice for conversion of the
$4,000,000 loan to 20,000,000 shares on 14 December 2009. On 13 January 2010, the Company issued these
shares in settlement of the loan.
In respect of the convertible loan, consulting costs of $600,000 were incurred and are being amortised over the
facility period of 2 years. The fees are payable in five equal instalments 7 days after the receipt of each draw
down from the facility. If Quickstep does not draw down on the totality of the facility by the end of the facility period,
and the lender is not in default of the agreement, Quickstep will be required to pay the balance of the fees to the
consultants.
Finance lease liabilities
Future
minimum
lease
payments
Interest
Present
value of
minimum
lease
payments
Future
minimum
lease
payments
Present
value of
minimum
lease
payments
Interest
2010
2010
2010
2009
2009
2009
Less than one year
12,478
2,588
Between one and five years
10,398
2,156
9,890
8,242
12,478
2,588
9,890
22,876
4,744
18,132
22,876
4,744
18,132
35,354
7,332
28,022
22.
Employee benefits
Current
Liability for annual leave
Consolidated
2010
2009
$
$
119,892
63,626
52
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
23. Contributed equity
(i)
Issued capital
Consolidated
2010
$
2009
$
251,416,900 (2009: 162,446,305 ) fully paid ordinary shares
62,296,410
30,146,119
The following movements in issued capital occurred
during the year:
2010
Note
No. of
shares
$
2009
No. of
shares
$
Balance at the beginning of the year
162,446,305
30,146,119
162,446,305
30,146,119
Shares issued for cash (a)
Shares issued on exercise of options (ii)
Shares issued on conversion of notes
Shares issued on conversion of loans
Shares issued on exercise of rights (b)
Shares issued to consultants (c)
Shares issued to executives as
remuneration
Transfer from convertible instrument reserve
Share issue and capital raising costs
21
21
31
24
47,305,022
5,935,619
13,500,000
20,000,000
800,000
1,348,914
24,421,527
1,485,885
2,653,034
3,275,102
128,000
279,667
81,040
-
-
29,012
771,864
(893,800)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at the end of the year
251,416,900
62,296,410
162,446,305
30,146,119
(a)
(b)
(c)
During the year, the Company issued 47,305,022 shares at issue prices varying from 25 cents to 52 cents
per share to raise $24,421,527.
During the year, the Company issued 800,000 shares pursuant to share-based payment arrangements
with certain key management personnel. The fair value of the rights at their grant date was 16 cents per
share.
During the year, the Company issued 1,348,914 shares to certain consultants with the fair value of
services provided being $279,667.
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are
fully paid.
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to
one vote per share at meetings of the Company. All shares rank equally with regard to the Company‟s residual
assets.
(ii) Options
Options granted during the year
During the financial year, the Company issued options as follows.
Expiry Date
Exercise Price
Number of Options
30 March 2017
$0.00
2010
3,249,476
2009
-
Annual Report 2010
53
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
23. Contributed equity (cont’d)
(ii) Options (cont’d)
Unissued shares under option
At 30 June, unissued ordinary shares of the Company under option are:
Expiry Date
Exercise Price
Number of Options
15 April 2010
16 June 2010
30 March 2017
$0.25
$0.26
$0.00
2010
-
-
3,249,476
2009
6,391,489
440,000
-
These options do not entitle the holders to participate in any share issue of the Company or any other body
corporate.
Exercise of options
During the financial year, the Company issued ordinary shares as a result of the exercise of options as follows
(there were no amounts unpaid on the shares issued):
Expiry Date
Exercise Price
Number of Options
15 April 2010
16 June 2010
$0.25
$0.26
2010
5,735,619
200,000
2009
Lapse of options
During the current financial year, the following options lapsed:
Expiry Date
Exercise Price
Number of Options
15 April 2010
16 June 2010
$0.25
$0.26
2010
655,870
240,000
2009
-
-
-
-
The options that lapsed on 15 April 2010 were subject to an underwriting agreement by State One Nominees Pty
Ltd. In accordance with that agreement, 655,870 shares were issued raising $163,968.
(iii) Rights
At 30 June, unissued ordinary shares of the Company under rights totalled 1,627,103 (2009: 2,094,118). The
rights are issued pursuant to executive services agreement and vest at various times in the future according to
years of service completed. The exercise price of the rights is nil and the rights are forfeited if employment is
terminated prior to the vesting date. Refer to Note 29(i).
54
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
24.
Reserves
Share based payments reserve
Balance at the beginning of the year
Grant of rights to shares to key management personnel
Grant of options to key management personnel
Transfer to issued capital on vesting of rights
Non-vestment of rights to shares by key management personnel
Success fee payable on convertible note agreement
Balance at the end of the year
Note
31
31
Consolidated
2010
$
2009
$
369,084
108,086
782,511
(128,000)
(34,590)
60,000
167,762
201,322
-
-
-
-
1,157,091
369,084
This reserve is used to record the fair value of options over ordinary shares and rights to ordinary shares granted
as consideration for services provided.
Foreign currency translation reserve
Balance at the beginning of the year
Foreign currency translation differences
Balance at the end of the year
31,388
(127,995)
(17,799)
49,187
(96,607)
31,388
The foreign currency translation reserve comprises foreign currency differences arising from the translation of
the financial statements of foreign operations.
Convertible instrument reserve
Balance at the beginning of the year
Issue of convertible instruments
Transaction costs
Transfer to issued capital on conversion of instruments
Balance at the end of the year
46,966
724,898
-
(771,864)
-
50,285
(3,319)
-
-
46,966
23
The convertible instruments reserve is used to record the equity component of the convertible instruments.
Total reserves
1,060,484
447,438
25.
Accumulated losses
Accumulated losses at the beginning of the year
Loss for the year
Accumulated losses at the end of the year
(23,955,797)
(10,970,613)
(15,334,824)
(8,620,973)
(34,926,410)
(23,955,797)
Annual Report 2010
55
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
26.
Financial instruments
Credit risk
Exposure to credit risk
The carrying amount of the Group‟s financial assets represents the maximum credit exposure. The Group‟s
maximum exposure to credit risk at the reporting date was:
Cash and equivalents
Held-to-maturity financial assets
Loan to related parties (i)
R&D tax offset rebate and government
grants receivable
Interest receivable
GST / VAT receivable
FBT receivable
Trade receivables
Other
Consolidated
2010
$
2009
$
12,225,823
10,238,422
-
2,815,876
-
58,609
577,060
39,978
302,002
8,052
228,701
695
368,520
-
209,149
-
72,986
-
23,620,733
3,525,140
(i) The related party loan was with Mr Dale Brosius, a key management personnel, and was unsecured.
As at 30 June 2010, other than a VAT receivable of $117,649, no financial asset was considered past due (2009:
nil).
At 30 June 2010, no financial asset is considered impaired (2009: nil).
The Group‟s maximum exposure to credit risk for loans and receivables at the reporting date by geographic region
was:
Australia
Germany
USA
Consolidated
2010
$
769,040
320,187
67,261
1,156,488
2009
$
588,963
120,301
-
709,264
56
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
26.
Financial instruments (cont’d)
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
Carrying
amount
Contractual
cash flows
6 mths or
less
6-12 mths
1-2 years
2-5 years
Consolidated
30 June 2010
VCAMM royalties payable
Trade and other payables
Finance lease liabilities
30 June 2009
VCAMM royalties payable
Trade and other payables
Finance lease liabilities
Convertible note
Currency risk
Exposure to currency risk
1,121,093
2,976,875
18,132
4,116,100
(1,141,304)
(2,976,875)
(24,689)
(4,142,868)
(325,000)
(2,976,875)
(6,733)
(3,308,608)
(325,000)
-
(6,733)
(331,733)
(491,304)
-
(11,222)
(502,526)
-
-
-
-
1,095,885
758,237
28,022
2,489,992
4,372,136
(1,143,404)
(758,237)
(38,156)
(2,700,000)
(4,639,797)
(102,976)
(758,237)
(6,733)
(148,500)
(1,016,446)
(102,976)
-
(6,733)
(148,500)
(258,209)
(650,000)
-
(24,689)
(297,000)
(971,689)
(287,453)
-
-
(2,106,000)
(2,393,453)
The Group‟s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
2010
Cash
Trade payables
Receivables
2009
Cash
Trade payables
Receivables
USD
EUR
50,566
(426,819)
93,398
(282,855)
146,060
(983,159)
320,187
(516,912)
USD
EUR
-
-
-
-
25,634
(103,088)
120,301
42,847
Annual Report 2010
57
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
26.
Financial instruments (cont’d)
Currency risk (cont’d)
The following significant exchange rates applied during the year:
Average Rate
Reporting Date
Spot Rate
2010
2009
2010
2009
0.8821
0.6355
0.7477
0.5420
0.8523
0.6979
0.8114
0.5751
USD
EUR
Sensitivity analysis
A 10 percent movement of the Australian dollar against the following currencies at 30 June would have increased
(decreased) profit or loss and equity on balances denominated in foreign currencies by the amounts shown below.
This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is
performed on the same basis for 2009.
2010
Profit / Loss
+10%
$
-10%
$
25,714
46,992
(31,428)
(57,435)
72,706
(88,865)
2010
Equity
+10%
$
(13,793)
(65,950)
(79,743)
-10%
$
16,858
80,606
97,464
2009
Profit / Loss
+10%
$
-
(3,895)
(3,895)
-10%
$
-
4,761
4,761
2009
Equity
+10%
$
-
(40,657)
(40,657)
-10%
$
-
49,692
49,692
USD
EUR
USD
EUR
Interest rate risk
Profile
At the reporting date the interest rate profile of the Group‟s interest-bearing financial assets/(liabilities) was:
Fixed rate instruments
Held-to-maturity term deposits
Loans to related parties
Convertible notes
Finance lease liabilities
Variable rate instruments
Cash and cash equivalents
Consolidated
2010
$
2009
$
10,238,422
-
-
(18,132)
10,220,290
-
58,608
(2,700,000)
(28,022)
(2,669,414)
12,225,823
2,815,876
58
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
26.
Financial instruments (cont’d)
Interest rate risk (cont’d)
Cash includes funds held in short term deposits and cheque accounts during the year, which earned a weighted
average interest rate 4.48% (2009: 5.35%).
The interest rates applicable to the Group‟s finance leases are 9.55% (2009: 9.55%).
Financial assets held-to-maturity includes a 180 day term deposit of $10,000,000 that is fixed interest bearing
earning interest at a rate of 5.92% per annum.
All other material financial assets and liabilities are non-interest bearing.
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss.
Therefore a change in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or
loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency
rates, remain constant. The analysis is performed on the same basis for 2009.
Effect in AUD
30 June 2010
Variable rate instruments
Cash flow sensitivity (net)
30 June 2009
Variable rate instruments
Cash flow sensitivity (net)
Fair values
The carrying amounts of financial assets and liabilities approximate fair value.
27.
Capital and other commitments
Operating lease commitments
Non-cancellable operating lease contracted for
but not capitalised in the financial statements.
Payable
- less than 1 year
- between 1 and 5 years
Consolidated
profit or loss
100 bp
increase
100 bp
decrease
122,258
122,258
(122,258)
(122,258)
28,159
28,159
(28,159)
(28,159)
Consolidated
2010
$
2009
$
240,389
20,834
237,087
267,940
261,223
505,027
The property lease is a non-cancellable lease with a 5-year term, with rent payable quarterly in advance. The
lease contains provisions for rent reviews on an annual basis, and a 5-year renewable option.
Annual Report 2010
59
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
27. Capital and other commitments (cont’d)
Capital commitments
The Group‟s commitments in respect of plant and equipment contracted for but not provided for are set out below:
Payable
- less than 1 year
Refer also to Note 33 on capital commitments subsequent to year end.
28.
Cash flow information
Reconciliation of cash flows from
operating activities to loss after
income tax:
Loss for the year
Adjustments for:
Amortisation of intangibles
Depreciation
Impairment of intangibles
Impairment of property, plant
& equipment
Amortisation of convertible
note costs
Amortisation of convertible
loan costs
Share based payment
expense
Convertible note interest
Foreign exchange gain
Finance costs
Operating loss before changes in
working capital
(Increase)/decrease in trade & other receivables
Decrease in inventories
(Increase)/decrease in other current assets
Increase/(decrease) in trade and other payables
Increase in employee benefits
Net cash used in operating activities
29.
Related parties
Key management personnel compensation
Consolidated
2010
$
2009
$
552,420
379,785
552,420
379,785
Note
Consolidated
2010
$
2009
$
18
17
18
17
8
8
8
8
8
(10,970,613)
(8,620,973)
63,844
610,550
-
307,026
570,162
264,197
-
1,374,447
105,535
15,158
156,164
-
1,224,687
-
2,568
48,332
201,322
76,671
(336,491)
20,565
(8,758,933)
(6,127,916)
(744,255)
38,802
(360,560)
2,197,704
56,266
491,366
2,991
56,581
(203,358)
27,736
(7,570,976)
(5,752,600)
The key management personnel compensation included in “personnel expenses” in note 7 is as follows:
Short-term employee benefits
Post-employment benefits
Share based payments
60
Consolidated
2010
$
1,665,351
73,465
923,499
2,662,315
2009
$
1,399,592
48,650
201,322
1,649,564
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
29. Related parties (cont’d)
Individual directors and executives compensation (key management personnel remuneration) disclosures
Information regarding individual directors‟ and executives‟ remuneration and some equity instruments disclosures
as permitted by Corporations Regulations 2M.3.03 is provided in the Remuneration Report section of the
Directors‟ Report.
Apart from the details disclosed in the Remuneration Report and below, no director has entered into a material
contract with the Company or the Group since the end of the previous financial year.
Loans to key management personnel and their related parties
Details regarding the aggregate of loans made, guaranteed or secured by any entity in the Group to key
management personnel and their related parties, and the number of individuals in each group, are as follows:
Opening
balance
$
Closing
balance
$
Interest not
charged
$
Number in
group at 30
June
Total for key management personnel 2010
58,609
-
Total for key management personnel 2009
103,708
58,609
-
-
1
1
Key management personnel transactions
A number of key management persons, or their related parties, hold positions in other entities that result in them
having control or significant influence over the financial or operating policies of those entities.
A number of those entities transacted with the Company or its subsidiaries during the financial year. The terms
and conditions of those transactions were no more favourable than those available, or which might reasonably be
expected to be available, on similar transactions to unrelated entities on an arm‟s length basis.
The aggregate amounts recognised during the year relating to key management personnel and their related
parties were as follows:
Director
Transaction
Note
Consolidated
2010
$
2009
$
Mr D Graham
Consulting services
(i)
34,019
50,537
(i)
A company associated with Mr Graham, Decta Holdings Pty Ltd, provided prototype design services,
patent portfolio management and development program coordination. Terms for such services were based
on market rates and amounts were payable on a monthly basis. No amounts were outstanding at 30 June
2010 (2009: nil).
Annual Report 2010
61
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
29. Related Parties (cont’d)
Equity holdings
Options and rights over shares
The movement during the reporting period in the number of options and rights over ordinary shares in Quickstep
Holdings Limited held, directly, indirectly or beneficially by each key management persons, including their
personally-related entities at 30 June 2010, are as follows:
(i) Rights
2010
Directors
Held at
1 July 2009
Granted as
compensation
Exercised
Other
changes*
Held at 30
June 2010
Vested during
the year
Vested and
exercisable
at
30 June
2010
Mr P Odouard
882,353
-
-
Executives
Mr A Myers
Mr P Williams
Mr W Beckles
Ms M Withers
800,000
411,765
-
-
-
-
468,750
276,000
(800,000)
-
-
-
-
-
(411,765)
-
-
882,353
-
-
468,750
276,000
-
-
-
-
-
-
-
-
-
-
* Other changes represent rights that were forfeited during the year
Held at
1 July 2008
Granted as
compensation
Exercised
Other
changes
Held at 30
June 2009
Vested during
the year
Vested and
exercisable
at
30 June
2009
2009
Directors
Mr P Odouard
Executives
Mr A Myers
Mr P Williams
(ii) Options
-
-
-
882,353
800,000
411,765
-
-
-
-
882,353
-
-
-
-
800,000
411,765
800,000
-
800,000
-
Held at
1 July 2009
Granted as
compensation
Exercised
Other
changes
Held at 30
June 2010
Vested during
the year
Vested and
exercisable
at
30 June
2010
2010
Directors
Mr P Odouard
-
3,249,476
-
-
3,249,476
1,851,852 1,851,852
There were no options granted to, or held by, key management persons, including their personally-related entities
in the previous financial period.
62
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
29. Related Parties (cont’d)
Equity holdings (cont’d)
Shares
The movement during the year in the number of ordinary shares held, directly, indirectly or beneficially by each
key management person, including their personally-related entities, is as follows:
Held at
1 July
Purchases
Disposals
Received
on exercise
of options/
rights
Issued as
compensation
Held at
30 June
2010
Directors
Mr P M Odouard
Mr D E Brosius
Mr M B Jenkins
Mr D F G Graham
Mr P C Cook
Executives
Mr A M Myers
Dr J Schlimbach
Mr P J Williams
Mr J F Johnson
Mr W Beckles
Ms M A Withers
Mr G S Beaton
2009
Directors
Mr P M Odouard
Mr D E Brosius
Mr M B Jenkins
Mr D F G Graham
Mr P C Cook
Mr N M Noble
Executives
Mr A M Myers
Dr J Schlimbach
-
800,000
-
38,651,529
344,300
-
-
-
-
-
-
-
-
-
-
-
28,846
-
-
-
20,000
-
-
-
-
(200,000)
-
(12,000,000)
(235,200)
-
-
-
-
-
-
-
-
-
-
-
600,000
-
26,651,529
137,946
-
-
-
-
-
-
-
800,000
-
-
-
-
-
-
828,438(1)
-
52,602(2)
-
-
-
-
n/a(1)
-
n/a(2)
20,000
-
-
-
Held at
1 July
Purchases
Disposals
Received
on exercise
of options
Issued as
compensation
Held at
30 June
-
800,000
-
41,335,730
344,300
4,270,350
-
-
-
-
-
1,210,972
-
-
-
(2,684,201) (3)
-
(556,416)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
800,000
-
38,651,529
344,300
n/a(4)
-
-
(1) On 1 October 2009, 800,000 ordinary fully paid shares were issued to Mr A Myers. On 9 December 2009, a
further 28,438 ordinary fully paid shares were issued. These were in accordance with the terms of the
Executive Service Agreement between the Company and Mr Myers. Mr A Myers ceased to be a key
management person on 15 February 2010.
(2) On 9 December 2009, 52,602 ordinary fully paid shares were issued to Mr P Williams in accordance with the
terms of the Executive Service Agreement between the Company and Mr Williams. Mr P Williams ceased to
be a key management person on 13 November 2009.
(3) On 14 August 2008, a related party of Mr D Graham (Decta Holdings Pty Ltd) disposed of 1,684,201 shares
via an on market trade and transferred an additional 1,000,000 shares in an off market transaction to Mr N
Noble.
(4) Mr N Noble ceased to be a key management person on 30 September 2008.
Annual Report 2010
63
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
30.
Equity accounted investees
On 1 May 2008 the Group acquired a 20 percent investment in QuickPipes Pty Ltd for the amount of $2. This
investee was established as an incorporated joint venture in conjunction with Vortex Pipes Ltd to research and
develop a composite pipe for industrial applications. At reporting date, the investee held no assets or liabilities
and had not entered into any transactions.
31.
Share based payments
The Company has established the Quickstep Holdings Limited Employee Share Option Scheme (“ESOS”) to
provide a means by which employees of the Group, including directors, upon whom the responsibilities for the
successful growth of the Group rest, can share in such growth, thereby strengthening their commitment to the
Group. Pursuant to the Scheme, and subject to any approvals required by the Corporations Act 2001 and the ASX
Listing Rules, the directors may, from time to time, resolve to grant such numbers of options, at such exercise price
to such employees of the Group as determined by the directors.
To date, only two option issues have been made pursuant to the Scheme. These were made to the retiring
directors in June 2005, Messrs Land and Smalley. Mr Land was issued 480,000 options and Mr Smalley 240,000
options. The options vested one month from the date of grant and were exercisable by 16 June 2010.
There are no voting or dividend rights attaching to the options. There are no voting rights attached to the
unissued ordinary shares. Voting rights will be attached to the unissued ordinary shares when the options have
been exercised.
During the year ended 30 June 2010, 200,000 options were exercised (2009: nil). The remaining 240,000 options
lapsed during the financial year (refer to note 23(ii)).
The Company has established the Quickstep Employee Incentive Plan (“EIP”). Under the EIP, the Board may
grant options to selected Quickstep employees on such terms as it determines appropriate. Participation in the
EIP is open to all employees of the Group, with the Board determining those employees eligible to participate in
each grant under the EIP. Each option is a conditional right to one Quickstep ordinary share, subject to the
satisfaction of the applicable performance conditions and payment of the exercise price (if any).
The EIP provides sufficient flexibility for the Board to grant short-term or long-term incentives to eligible
employees. That is, the performance conditions set by the Board may apply over the period of time the Board
determines appropriate in the circumstances. It is currently intended that the “short-term” grants under the EIP
will be in the form of an equity retention incentive, with the applicable performance condition based on the key
performance indicators set under the Company‟s short term incentive program, and that the “long term” grants will
be subject to performance criteria based on achieving total shareholder return targets over a three year period.
In general, the options will not vest until the performance criteria specified by the Board at the time of the grant
have been achieved and provided the participant remains a Group employee. If the performance criteria are not
satisfied at the end of the applicable performance period the options will lapse. The options may lapse in other
circumstances provided for in the EIP rules, including forfeiture where the employee engages in dishonest or
fraudulent conduct, where there is a change in control and where the employee ceases employment. Subject to
the rules and the terms of grant, options will lapse on the seventh anniversary of their grant date.
The number and weighted average exercise prices (“WAEP”) of options issued under the ESOS and EIP are as
follows:
Employee Share Option Scheme
Outstanding at 1 July
Exercised during the period
Forfeited during the period
Outstanding at 30 June
Exercisable at the end of the year
2010
Number
440,000
(240,000)
(200,000)
-
-
2010
WAEP
2009
Number
2009
WAEP
$0.26
$0.26
$0.26
-
-
440,000
$0.26
-
-
440,000
440,000
-
-
$0.26
$0.26
64
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
31. Share based payments (cont’d)
Employee Incentive Plan
Outstanding at 1 July
Granted during the period
Outstanding at the end of the year
2010
Number
-
3,249,476
3,249,476
Exercisable at the end of the year
1,851,852
2010
WAEP
2009
Number
2009
WAEP
-
$0.00
$0.00
$0.00
-
-
-
-
-
-
-
-
The options granted from the EIP in 2010 to Mr. Odouard are subject to performance conditions based on
achieving pre-set accumulated absolute Total Shareholder Return (TSR) targets over the applicable performance
period. In summary, TSR combines share price appreciation over a period and dividends paid during that period
to show the total return to shareholders over that period. For the purposes of the performance conditions
attached to the options, TSR will be calculated as the 45 day volume weighted average price (VWAP) of
Quickstep shares as at 30 June. This calculation has been adopted bearing in mind Quickstep‟s market
capitalisation and to ensure the performance hurdle and testing process remain appropriate in all the
circumstances.
Tranche 1 will be subject to a one-year performance condition, Tranche 2 will be subject to a two-year
performance condition and Tranches 3 and 4 will each be subject to a three year performance condition. In
respect of each of Tranches 1, 2 and 3 the performance period will commence on 1 July 2008. The performance
period for Tranche 4 will commence on 1 July 2009.
The specific TSR targets for each Tranche are set out below. The targets are calculated from an initial value of
$0.165 for each of Tranches 1, 2 and 3 and $0.25 for Tranche 4.
If the Threshold hurdle of TSR is achieved at a test date, 25% of the Options in the tranche will vest. If the Target
hurdle of TSR is achieved at a test date in any given year, 50% of Options in the tranche will vest. If the Stretch
hurdle of TSR is achieved at a test date in any given year 100% of Options in the tranche will vest. After the initial
vesting period, re-testing of the performance conditions occurs annually. However, the re-tested Options will be
tested at the same time and on the same basis as the subsequent tranche. Re-testing will occur over the longer
performance period and against the higher TSR hurdle. In respect of Tranche 4, re-testing will occur.
Earliest vesting date
Tranche 1-
30/6/09
Tranche 2-
30/6/10
Tranche 3-
30/6/11
Tranche 4-
30/6/12
% Vesting
2009
2010
2011
2012
TSR Hurdle VWAP as at 30 June
% Annual
Growth (TP)
Initial value
Threshold
Target
Stretch
5
8
12
25
50
100
$0.165
$0.170
$0.175
$0.181
$0.165
$0.179
$0.189
$0.203
$0.165
$0.188
$0.204
$0.227
$0.250
$0.290
$0.315
$0.352
Annual Report 2010
65
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
31. Share based payments (cont’d)
If Mr. Odouard ceases employment with the Quickstep Group due to death, disability, bona fide redundancy or
any other reason which may meet with the approval of the Board, the Board may determine that any unvested
options he holds will vest as at his date of cessation, having regard to such factors as the Board considers
relevant, including pro rata performance against the performance condition over the period from the grant date to
the date of cessation.
If he ceases employment in these circumstances and holds vested options he may exercise those options within
the 12 month period following his date of cessation (or, the remaining period until the expiry of the options, if less
than 12 months).
If he ceases employment for any other reason any unvested options he holds will lapse on his date of cessation
unless the Board determines otherwise, and any vested options must be exercised within 3 months.
Rights
Performance rights issued during 2010 were as follows:
Performance rights on issue July 1
Performance rights terminated
Performance rights exercised
Performance rights granted
Vesting conditions
2010
Number
2,094,118
(411,765)
(800,000)
744,750 Vest in two tranches provided the employee
remains with the Group. 1/3 vest 2 years from
the date granted, 2/3 vest 3 years from the date
granted.
Total performance rights on issue 30 June
1,627,103
Performance rights on issue July 1
Performance rights granted
Performance rights granted
2009
Number
-
Vesting conditions
800,000 Vest immediately on date of signing contract
1,294,118 Vest in two tranches provided the employee
remains with the Group. 1/3 vest 2 years from
the date granted, 2/3 vest 3 years from the date
granted.
Total performance rights on issue 30 June
2,094,118
Employee expenses
Shares
Share rights granted
Options
Consolidated
2010
$
67,492
73,496
782,511
2009
$
-
201,322
-
923,499
201,322
66
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
31. Share based payments (cont’d)
Employee expenses (cont’d)
The Company issued shares as a performance bonus to specific key management personnel (refer Note 29).
The Company has entered into executive service agreements with its executive directors and key management
personnel. During the year, pursuant to the Executive Services Agreements with certain key management
personnel, the Company has granted the rights over 744,750 shares with a fair value of $283,320. During the year,
$73,496 (2009: $201,322) was expensed in the income statement representing the services performed by the key
management personnel to 30 June 2010 as a percentage of the period to full vesting of the rights.
The fair value of share rights and shares granted is determined as the quoted price on the ASX of the shares of the
Company on the day of the grant.
On 30 March 2010, Mr Odouard accepted an offer of 3,249,476 options from the Quickstep Employee Incentive
Plan (“EIP”) in accordance with the resolutions passed at the 2009 Annual General Meeting. The number of
options granted was calculated partly with reference to the volume weighted average of the ASX quoted price for
QHL shares on the date of Mr Odouard‟s appointment (16.2 cents) and partly with reference to the volume
weighted average of the ASX quoted price for QHL shares at 31 July 2009 (31.8 cents). Some or all of the
options will vest if certain performance hurdles relating to an increase in share value are achieved at the
prescribed testing dates. The fair value of the options, as calculated under the accounting standards, takes into
account a range of assumptions including the likelihood of the options vesting and the projected share price at the
time of vesting (see below). The fair value of the options granted is $1,065,322 of which $782,511 has been
recorded as an expense in the financial statements for the portion attributable to the current financial year as
required by accounting standards. As at 30 June 2010, 1,851,852 options had vested and were exercisable.
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Total
Fair value per option
at grant date
Total fair value
No. of options
($)
($)
925,926
925,926
925,926
471,698
3,249,476
$0.3500
$0.3480
$0.3150
$0.2700
324,074
322,222
291,667
127,359
1,065,322
Whilst these options are fully vested, at balance date the options were yet to be issued.
Tranche 1 options had fully vested at the grant date of 30 March 2010 and therefore the fair value is based on the
ASX quoted price for QHL shares at grant date of the options. The Monte-Carlo simulation has been used to
value Tranches 2, 3 and 4 that had a future vesting condition at the grant date of the options. Assumptions used
in the valuation of the options in Tranche 2, 3 and 4 at grant date included:
Tranche
Grant Date
First testing date
Expiry date
2
3
4
30/3/2010
30/3/2010
30/3/2010
30/6/2010
30/6/2011
30/6/2012
30/3/2017
30/3/2017
30/3/2017
Share price at grant date
$0.35
$0.35
$0.35
Exercise price
Expected life (years)
Volatility
Risk free interest rate
Dividend yield
Annual Report 2010
Nil
0.3
80%
4.54%
0%
Nil
1.3
80%
4.66%
0%
Nil
2.3
80%
5.01%
0%
67
Notes to and forming part of the Financial Statements for the year ended 30 June 2010
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0 ( c o n t ’ d )
32.
Parent Entity
As at, and throughout, the financial year ending 30 June 2010 the parent company of the Group was Quickstep
Holdings Limited.
Results of the parent entity
Loss for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Share based payments reserve
Convertible notes reserve
Accumulated losses
Total equity
i)
Company
2010
$
2009
$
(11,098,608)
-
(8,544,824)
-
(11,098,608)
(8,544,824)
234,241
28,862,398
431,914
431,914
95,014
9,298,703
170,951
2,660,943
62,296,410
1,157,091
-
(35,023,017)
30,146,119
369,084
46,966
(23,924,409)
28,430,484
6,637,760
33.
Subsequent Events
Since the end of the financial period the Group has entered into purchase agreements for:
a 5-axis precision milling machine for €1,761,261 for delivery in the last quarter of the 2011 financial
year; and
the supply of technical assistance and training from Northrop Grumman in order to achieve fundamental
capability in relation to the Joint Strike Fighter (“JSF”) project to the value of US$2,489,922.
Other than the matters referred to above or in the financial statements, there have been no events subsequent to
balance date which would have a material effect on the Group‟s financial statements as at 30 June 2010.
68
Quickstep Holdings Limited
D I R E C T O R S ’ D E C L A R A T I O N
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 0
Directors’ Declaration for the year ended 30 June 2010
In the opinion of the directors of Quickstep Holdings Limited:
1.
(a)
the financial statements and notes and Remuneration Report in the Directors‟ Report, set out on
pages 27 to 68 and pages 15 to 23 respectively, are 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 2010 and their
performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including
the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b)
(c)
the financial statements comply with International Financial Reporting Standards as described in
Note 1 (b);
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2.
The directors have been given the declarations required by s.295A of the Corporations Act 2001 for the
financial year ended 30 June 2010.
Dated at Perth, Western Australia this 28th day of September 2010.
Signed in accordance with a resolution of the directors:
P M Odouard
Managing Director
Annual Report 2010
69
Auditor’s Independence Declaration
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
70
Quickstep Holdings Limited
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
T O T H E M E M B E R S O F Q U I C K S T E P H O L D I N G S L I M I T E D
Independent Auditor’s Report
Annual Report 2010
71
Independent Auditor’s Report
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
T O T H E M E M B E R S O F Q U I C K S T E P H O L D I N G S L I M I T E D ( c o n t ’ d )
72
Quickstep Holdings Limited
Shareholder Information
D E T A I L S O F S H A R E S A N D O P T I O N S A S A T 1 4 S E P T E M B E R 2 0 1 0 :
Voting rights
The voting rights attaching to ordinary shares are:
On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Options do not carry any voting rights.
Substantial shareholders
The names of substantial shareholders in the company and the number of shares to which each substantial
shareholder and their associates have a relevant interest are set out below:
Substantial Shareholder
Number of Shares
Washington H Soul Pattinson and Company Limited
Decta Holdings Pty ltd
28,797,570
26,651,529
On-Market buy back
There is no current on-market buy back.
Distribution schedules
Distribution of each class of security as at 14 September 2010:
Ordinary fully paid shares
Range
1 −
1,000
1,001 −
5,000
5,001 −
10,000
10,001 −
100,000
Holders
Units
472
1,150
1,086
2,431
236,370
3,693,339
9,238,398
76,629,608
100,001 − Over
251
161,619,185
%
0.09
1.47
3.67
30.48
64.28
Total
5,390
251,416,900
100.00
Options exercisable at $0.00 on or before 30 March 2017 (unlisted)
Range
1 −
1,000
1,001 −
5,000
5,001 −
10,000
10,001 −
100,000
100,001 − Over
Total
Holders
Units
%
−
−
−
−
1
1
−
−
−
−
−
−
−
−
3,249,476
3,249,476
100.00
100.00
Annual Report 2010
73
Shareholder Information
D E T A I L S O F S H A R E S A N D O P T I O N S A S A T 1 4 S E P T E M B E R 2 0 1 0 ( c o n t ’ d ) :
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 1,408 shares at $0.355 per share):
Holders
547
Units
328,211
Top holders
The 20 largest registered holders of each class of quoted security as at 14 September 2010 were:
Fully paid ordinary shares
Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
Washington H Soul Pattinson and Company Limited
Decta Holdings Pty Ltd
Romadak Pty Ltd
WSF Pty Ltd
State One Stockbroking Ltd
Boldbow Pty Ltd
Nicholas Michael Noble
Aileendonan Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited
10.
Mr Julius Solomons and Mrs Dianne Solomons
2,121,413
11.
Prunelle Holdings Pty Ltd
12.
Mr David Creighton Gellatly & Mrs Evelyn May Gellatly
13.
Equity Trustees Limited
14.
Equilibrium Pensions Limited
15.
Equity Trustees Limited
16.
Yarraandoo Pty Ltd
17.
Davmin Pty Ltd
18.
Maitland Trustees Limited
19.
Mr David Creighton Gellatly & Mrs Evelyn May Gellatly
20.
State One Holdings Pty Ltd
2,077,692
2,028,846
2,000,000
1,836,000
1,600,000
1,535,324
1,500,000
1,256,000
1,250,000
1,200,000
101,760,619
40.49
74
Quickstep Holdings Limited
No. of Shares
%
28,797,570
26,651,529
11.45
10.60
6,788,838
5,643,061
4,643,141
3,442,676
2,618,447
2,505,500
2,264,582
2.70
2.24
1.85
1.37
1.04
1.00
0.90
0.84
0.83
0.81
0.80
0.73
0.64
0.61
0.60
0.50
0.50
0.48
Annual Report 2010
Disclaimer: Many of the images used throughout this
Annual Report are meant as representative examples
of the markets being pursued by Quickstep. Unless
otherwise indicated, Quickstep has not licensed any
technology to the manufacturer of products shown in
this Annual Report.
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Quickstep Holdings Limited
136 Cockburn Road
North Coogee WA 6163
Australia
T. +61 8 9432 3200
F +61 8 9432 3222
E. info@quickstep.com.au
www.quickstep.com.au