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ANNUAL REPORT

2020

ANNUAL REPORT

2020

ANNUAL REPORT

2020

S u r f L a k e s H o l d i n g s L t d a n d C o n t r o l l e d E n t i t i e s A B N 5 5 6 1 3 3 7 2 9 5 5

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CONTENTS

Annual report 04

Directors' Report 08

Financial Report 11

Auditor's Independence Declaration 12

Consolidated Statement of Profit or Loss and Other Comprehensive Income 13

Consolidated Statement of Financial Position 14

Consolidated Statement of Changes in Equity 15

Consolidated Statement of Cash Flow 16

Notes to the Financial Statements 17

Directors' Declaration 31

Independent Auditor's Report 32

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ANNUAL REPORT


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Dear Shareholders,

Whilst this is the annual report on the 2019-2020 financial year, there have also been very positive developments since 1 July 2020, so we will share some of these and we encourage you to receive and read our newsletter “Making Waves” and the special shareholder updates.

THE 2019-2020 FINANCIAL YEAR CAN BE SUMMARISED AS FOLLOWS:We completed the conrod repair for the prototype at Yeppoon and during the testing that ensued in late 2019, we hit our target wave face height of 2.4m at the Island break and conducted five demonstrations for very excited groups of investors and potential licensees. The images and video resulting from the tests have been absolutely essential for ongoing promotion of our product.In August 2019 we had a change of direction with the board so Charles Foster joined as Chair, with John Diddams and Troy Warfield joining as NED’s, to strengthen our strategic governance and business development capacity.The original temporary liner however had failed in numerous parts of the lake, so we drained the lake and after rain delays in January/February 2020, we spent the time during early Covid lockdown to make improvements including trialling a very promising new liner material, in preparation for next round of testing. We managed Covid-19 with cautious budgeting and Care & Maintenance plan, whilst raising capital to allow the liner repair.We started working with Don McKenzie from Adizes group, to help us navigate growth from “start up” to become a mature organisation. Many improvements points have been implemented and the team culture is strong as we grow, which lays a great foundation for the growth ahead.

During the FY 2020, we:• Raised $4.83m• Finished with a Loss of $5.16mWe continued to receive hundreds of inquiries from across the world and completed the year with one sold licence and seven Exclusive Territory agreements in place.

PROGRESS SINCE 1 JULY 2020 We have since concluded license sales for Nevada and San Diego (East).We completed the liner repair at Yeppoon and achieved the highest stroke to date of 4.5m from design of 6m stroke, so there is even more capacity to demonstrate. The overhead barrels at the Island were called by commentators as the largest man-made waves ever produced or ridden.

The beach break bathymetry had also been improved and showed wonderful waves. The resulting video and images have been well received and an ABC news report was picked by Yahoo news, creating a viral social media response with over 8M views.

ANNUAL REPORT


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AARON TREVISCEO

CHARLES FOSTERCHAIRMAN

With such widespread PR, in the three months leading up to October 2020, we received more than 184 inquiries, on top of the hundreds of inquiries we have been working with through the 2019-20 year, and have appointed Bryan Gile as Sale Director – Americas. Bryan speaks English, Portuguese and Spanish so is very helpful and proving to be a valuable asset. We are currently finalising contracts for sale agents (commission only) for other regions and expect to confirm more project ETA sales in the coming year.

We also were placed on the cover of Surfing Life magazine after they conducted a board test at Yeppoon. Quite an honour for the team.

TEAMIn addition to his board duties, Troy Warfield has also been serving as interim Global Sales Director, overseeing the appointment of sales agents in various regions. His global experience and network is proving to be valuable.As mentioned above, Bryan Gile has joined full-time as Sales Director for the Americas and will be based in San Diego from November 2020.Jacki Patterson has recently joined us as full-time Site Coordinator to manage the Yeppoon site. Max Moore is serving as an advisor for liner and related materials so we have enjoyed working with Max and looking forward to ongoing improvements in our methods.Cara Campbell has joined us in the Gold Coast office to replace Karol as she takes extended maternity leave. Talon Clemow has joined us to coordinate media content and has produced the amazing new corporate video and other materialDon McKenzie from Adizes group has been advising on organisational development, helping us integrate as a team, organise effectively and ensure ideas and improvements are captured and executed well. Adizes help companies grow and navigate the typical life cycles of organisations. Very grateful for Don and the insights from Adizes.

SALES We have now sold three full licences (Los Angeles, Nevada & San Diego) and five options (ETAs) (Bournemouth UK, Midlands UK, Sunshine Coast, Oahu & Tennessee (subject to funding) as at the date of this report, with many more pending in various regions.There are five projects that wish to commence construction in 2021 one in Australia, two in North America and two in South America, but we expect that with approval delays from Covid, this should result in one commenced project in 2021 (most likely Qld), and a prioritised delivery plan following on. Covid-19 has affected some projects of course and limited travel to inspect the prototype. However, it has also resulted in more interest as governments and entrepreneurs seek to stimulate economies and prepare for the opening of borders.

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AARON TREVISCEO

CHARLES FOSTERCHAIRMAN

We now have more than 650 inquiries and the team are busy every week with meetings and growing interest. It takes time for groups to conduct their reviews and make decisions, but we have eight projects on the priority list for project delivery, followed by another 16 that have ETAs pending. Some of that 16 can actually move faster than the first list, so we will update project announcements as soon as we can. We will continue to push for sales, whilst building the project delivery capacity.Gold Coast project is moving forward with DA process and Reuben Buchanan is leading the efforts with Place Design and Lewis Glynn from APP to get a DA submitted ASAP.Yeppoon site land owner Tony Champion has agreed to sell us 100 acres, subject to DA, to allow the Yeppoon project to be commercialised, so we are investigating this option alongside other projects.

SHEC REPORT (Safety, Health, Environment and Community) Covid-19 brought us the time to rectify the liner at Yeppoon and refine the beach break bathymetry.With the new liner and fresh water, we had perfect conditions for filming in August 2020. The new liner performed well, although at the join of old and new, there were some issues so the Yeppoon site will never be ideal until it is rebuilt as commercial site in future.With Covid-19 restrictions, we operated under a social distancing plan and took extra precautions with hygiene to ensure safety of visitors.The Sea Q Board Riders club in Yeppoon have been an integral part of our testing with lifeguard volunteers and assistance around the site. Special thanks to the Livingstone Shire for allowing us to operate demonstrations.

CURRENT FINANCIAL POSITIONWe concluded the recent convertible note offer in September 2020 and with ETA and contract sales growing, we expect to maintain a strong cash runway throughout 2021. We have engaged Numada Group to take over from the excellent work done by Axstra Capital up until now and who strongly performed in the 2019-20 year, for corporate advisory and capital raising, so they are pursuing an interim round.Through Covid restrictions from March 2020 to June 2020, the board wisely operated on a “care and maintenance” budget to ensure we had 12 months of cash reserves. Whilst we are operating under normal budget conditions now, we will continue to hold at least 12 months of cash reserves. Thank you once again for your ongoing support and encouragement. These are exciting days for Surf Lakes and the entire team is working very hard to honour your commitment to the company. We look forward to sharing more good news as it arrives in 2021.


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D IRECTOR’S REPORT


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D IRECTOR’S REPORTYour directors present this report on the company for the financial year ended 30 June 2020.

DIRECTORSThe names of the directors in office at any time during or since the end of the year are: Aaron James TrevisChristopher John Hawley (resigned 30 July 2019) Reuben James BuchananPaul Hardy (resigned 30 July 2019)Malcolm Borgeaud (resigned 30 July 2019) Geoff Austen ( resigned 30 July 2019) Charles Foster (appointed 31 July 2019)John Diddams (appointed 1 November 2019)Troy Warfield (appointed 19 April 2020)Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

REVIEW OF OPERATIONSThe consolidated loss of the consolidated group for the financial year after providing for income tax amounted to $5,159,619 (2019: $4,078,868).This represents an increase on the loss reported for the year ended 30 June 2019. The significant change was the result of repairs to the prototype at Yeppoon. Further discussion of the consolidated group’s operations is provided below.The Group designs wave pools and the components needed to produce the waves. The Group was successful in raising $4,827,436 in capital during 2020 to help pay for repairs and upgrades to the full scale test facility near Yeppoon.This is a fully functioning test facility which is providing evidence to potential acquirers before agreeing to purchase our designs and know-how. It is anticipated that the test facility, simply by functioning well and producing surfable waves, will generate significant revenue and profits sufficient to support the current cost-based valuation.

FINANCIAL POSITIONThe net assets of the Group have decreased by 9% from $12,864,475 at 30 June 2019 to $11,721,224at 30 June 2020. This decrease has largely resulted from the following factors:− Increase in liabilities due to issuance of convertible notes to raise funds− Contract liabilities arising from the deferral of revenue recognition on contracts entered during the year− Utilisation of these funds to construct and develop our full size test facilityThe Directors believe the consolidated group is in a reasonable financial position given the current stage of development of the technology and business.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRSNo significant changes in the consolidated group’s state of affairs occurred during the financial year.

PRINCIPAL ACTIVITIESThe principal activities of the consolidated group during the course of the year were research and development, design, construction and operation of wave pools, and sale of territory agreements for use of the technology.No significant change in the nature of these activities occurred during the year.

EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIODThe following events have occurred since the end of the financial year:• Nevada territory sold for total USD$250,000• Liner repair completed & Lake filled in July 2020• Testing Day 6 on the 7th of August 2020 achieved a 4.3m machine stroke height• Testing & Demonstration Day held on the 21st to the 22nd of August 2020 achieved a 4.48 machine stroke height• San Diego territory sold for total USD$250,000• AUD$100,000 to date raised via share issues• AUD$2.245m to date raised via convertible note issue

Except for those matters disclosed above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONSThe group will continue to pursue its strategic objectives moving into the operational phase of its life cycle and seek to sell licences to operate the Surf Lakes equipment around the world and to maximise shareholder return.

ENVIRONMENTAL REGULATIONThe group’s operation are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory.


CHARLES FOSTERCHAIRMANDated: 27 October 2020

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DIVIDENDS No dividends were declared or paid since the start of the financial year.

SHARE OPTIONSUnissued ordinary shared under option as the date of this report as follows:Grant date Expiry date Exercise price Number under optionApril 2020 23 April 2025 $0.20 2,000,000

DIRECTORS BENEFITSDirector $ AmountAaron Trevis 220,706Chris Hawley* 2,917John Diddams 80,000Malcolm Borgeaud* 76,536Paul Hardy* 8,528Reuben Buchanan 123,640Troy Warfield 21,489Total 533,816

*Resigned prior to year endNo director has received or has become entitled to receive, during or since the financial year, a benefit because of a contract made by the group or related body corporate with a director, a firm which a director is a member or an entity in which a director has a substantial financial interest at terms that wouldn’t be considered normal commercial terms and conditions.

INDEMNIFYING OFFICER OR AUDITORNo indemnities have been given or agreed to be given or insurance premiums paid or agreed to be paid, during or since the end of the financial year, to any person who is or has been an officer or auditor of the group.

PROCEEDINGS ON BEHALF OF COMPANYNo person has applied for leave of Court to bring proceedings on behalf of the group or intervene in any proceedings to which the group is a party for the purpose of taking responsibility on behalf of the group for all or any part of those proceedings. The group was not a party to any such proceedings during the year.

AUDITORS INDEPENDENCE DECLARATIONA copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 has been included.

Signed in accordance with a resolution of the Board of Directors:

FINANCIALREPORT


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AUDITOR’S INDEPENDENCE DECLARATION


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For the year ended 30 June 2020

Consolidated Group

Note 2020 2019

$ $

Sales 73,658 171,716

Other income 3 83,866 270,396

Employee benefits expense (868,550) (735,271)

Advertising expense (314,215) (275,937)

Depreciation and amortisation expense (144,426) (56,282)

Professional fees (730,182) (745,999)

Research and development expense (74,175) (37,956)

Repairs and maintenance (2,837,754) (2,265,600)

Travel and accommodation expense (88,554) (132,632)

Finance costs (37,542) (93,418)

Other expenses (213,839) (177,885)

Loss before income tax (5,151,713) (4,078,868)

Income tax (expense) benefit - -

Loss for the year (5,151,713) (4,078,868)

Other compressive income - -

Total comprehensive loss for the year (5,151,713) (4,078,868)

The above consolidated statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


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Consolidated Group

Note 2020 2019

$ $

ASSETS

Current assets

Cash and cash equivalents 954,695 1,371,509

Trade and other receivables 205,499 72,935

Tax assets 5 84,007 169,847

Other asset 6 - 260,000

Total Current Assets 1,244,201 1,874,291

Non-Current Assets

Other assets 6 273,849 -

Property, plant and equipment 7 285,607 366,186

Intangible assets 8 12,373,867 12,199,074

Right-of-use assets 9 285,245 -

Total Non-Current Assets 13,218,568 12,565,260

Total Assets 14,462,769 14,439,551

LIABILITIES

Current Liabilities

Trade and other payables 10 790,661 1,349,576

Lease liabilities 9 86,071 -

Borrowings 11 200,000 200,000

Provision 31,210 25,500

Total Current Liabilities 1,107,942 1,575,076

Non-Current Liabilities

Lease liabilities 9 189,883 -

Borrowings 11 830,000 -

Contract liabilities 12 624,745 -

Total Non-Current Liabilities 1,644,628 -

Total Liabilities 2,752,570 1,575,076

Net Assets 11,710,199 12,864,475

EQUITY

Issued capital 13 24,050,559 20,053,122

Retained earnings (12,340,360) (7,188,647)

Total Equity 11,710,199 12,864,475

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF F INANCIAL POSIT IONAs at 30 June 2020


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For the Year Ended 30 June 2020

Issued capital Retained losses

Total equity

$ $ $

Balance at 1 July 2018 10,789,908 (3,109,779) 7,680,129

Loss for the year - (4,078,868) (4,078,868)

Total comprehensive income for the period 10,789,908 (7,188,647) 3,601,261

TRANSACTION WITH OWNERS IN THEIR CAPACITY AS OWNER:

Shares issued (Note 12) 8,304,434 - 8,304,434

Share-based payment (Note 12) 958,780 - 958,780

9,263,214 - 9,263,214

As at 30 June 2019 20,053,122 (7,188,647) 12,864,475

Issued capital Retained losses

Total equity

$ $ $

Balance at 1 July 2019 20,053,122 (7,188,647) 12,864,475

Loss for the year - (5,151,713) (5,151,713)

Total comprehensive income for the period 20,053,122 (12,340,360) 7,712,762

TRANSACTION WITH OWNERS IN THEIR CAPACITY AS OWNER:

Shares issued (Note 12) 3,263,604 - 3,263,604

Share-based payment (Note 12) 733,833 - 733,833

3,997,437 - 3,997,437

As at 30 June 2020 24,050,559 (12,340,360) 11,710,199

The above consolidated changes in equity should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


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Consolidated Group

2020 2019

Note $ $

CASH FLOWS FROM OPERATING ACTIVITES

Interest received 4,733 270,396

Receipts from customers 677,072 261,684

Receipts from government rebates and grants 53,740 -

Interest and other finance costs paid (37,542) (93,418)

Payments to suppliers and employees (5,567,723) (3,384,080)

18 (4,794,636) (2,945,418)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for intangible assets (298,017) (5,553,093)

Payments for property, plant and equipment (71,956) (267,041)

Net cash used in investing activities (369,973) (5,820,134)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares 3,997,437 7,094,434

(Repayment)/Proceeds from borrowings – other 750,358 200,000

Net cash provided by financing activities 4,747,795 7,294,434

Net (decrease)/increase in cash held (416,814) (1,471,118)

Cash and cash equivalents at beginning of financial year 1,371,509 2,842,627

Cash and cash equivalents at end of financial year 954,695 1,371,509

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

For the Year Ended 30 June 2020

CONSOLIDATED STATEMENT OF CASH FLOW


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NOTES TO THE CONSOLIDATED FINACIAL STATEMENTSFor the Year Ended 30 June 2020

The consolidated financial statements and notes represent those of Surf Lakes Holdings Ltd and Controlled Entities (the ‘Group’). Surf Lakes Holdings Ltd is a company limited by shares, incorporated and domiciled in Australia.The separate financial statements of the parent entity, Surf Lakes Holding Ltd, have not been presented within this financial report as permitted by the Corporations Act 2001.The financial statements were authorised for issue on 27 October 2020 by the directors of the company.

Note 1: Summary of Significant Accounting Policies

Basis of PreparationThe financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards – Reduced Disclosure Requirements of the Australian Accounting Standards Board and the Corporations Act 2001. The company is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Material accounting policies adopted in the preparation of the financial statements are presented below and have been consistently applied unless stated otherwise.The financial statements except for cash flow information, have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non- current assets, financial assets and financial liabilities. The amounts presented in the financial statements have been rounded to the nearest dollar.The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

New or amended Accounting Standards and Interpretations adoptedThe Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

AASB 16 LeasesIn the current year, the Group has applied AASB 16 Leases (“AASB 16) for the first time.AASB 16 supersedes AASB 117 Leases (“AASB 117”). The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.AASB 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short- term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The Group adopted AASB 16 using the modified retrospective method of adoption with 1 July 2019 being the date of initial application. Under the modified retrospective method of adoption, the Group has adjusted only the current year as though AASB 16 had always been applied with no restatement being made to prior period comparative information.On transition to AASB 16, the Group measured all leases with over 12 months of lease term previously classified as operating leases under AASB 117 at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to the leases recognised in the statement of financial position immediately before the date of initial application.These lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 5.25%.


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Note 1: Summary of Significant Accounting Policies (Continued)

Note 1: Summary of Significant Accounting PolicieNew or amended Accounting Standards and Interpretations adopted (continued)The impact of adoption was as follows:

1 July 2019$

Operating lease commitments as at 1 July 2019 (AASB 117) 150,000

Less: operating leases not subject to IFRS 16 -

Plus: additional future lease payments for expected extension options

150,000

Plus: operating leases not included in prior year commitments 91,743

Discounted using the entity’s incremental borrowing rate (36,147)

Lease liability recognised at 1 July 2019 355,596

The lease liability is split between the following balances:

Current lease liability 79,643

Non-current lease liability 275,953

Total lease liability recognised at 1 July 2019 355,596

A right-of-use asset is recognised at the date of initial application at an amount equal to the lease liability adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the Statement of Financial Position immediately before the date of initial application. This is summarised below:

1 July 2019$

Right-of-use asset (recognised at 1 July 2019) 355,596

Total right-of-use asset 355,596

(a) Going ConcernAs at 30 June 2020 the company had cash reserves of $954,695 (30 June 2019: $1,371,509), net current assets of $136,259 (30 June 2019: $299,215) and net assets surplus of $11,702,293 (30 June 2019:$12,864,475). The ability of the group to continue as a going concern is principally dependent upon one or more of the following:• the ability of the Company to raise additional capital in the future;• the successful development and commercialisation of its product; and• generate sales to fund operationsThese conditions give rise to material uncertainty which may cast significant doubt over the group’s ability to continue as a going concern. The directors believe that the going concern basis of preparation is appropriate due to the following reasons:• To date the Company has funded its activities through capital raising and it is expected that the Company will be able to

fund its future activities through further issuances of ordinary shares;• During the year, the Company has entered into an exclusivity agreement with its first customer and received the full

payment of the relevant fee• Subsequent to year end a further $2.245m funds have been raised and a further $5m is planned to be raised in the

coming monthsShould the group be unable to continue as a going concern, it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial report. This financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary should the group be unable to continue as a going concern.

(b) Principles of ConsolidationThe group’s financial statements incorporate all of the assets, liabilities and results of the Parent (Surf Lakes Holdings Ltd) and its subsidiaries. Note 13 includes the details of these subsidiaries.). The Parent has control of its subsidiary’s. The Parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Refer to Note 2 for Parent entity information.The assets, liabilities and results of its subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Inter-company transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.


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(c) Property, Plant and EquipmentEach class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant and EquipmentPlant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than its estimated recoverable amount, the carrying amount is written down immediately to its estimated recoverable amount and impairment losses recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss in the financial period in which they are incurred.

Leasehold ImprovementLeasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter.

DepreciationThe depreciable amount of all fixed assets including buildings and capitalised leased assets, is depreciated on a straight line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use.Depreciation is recognised in profit or loss.The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset Depreciation Rate

Plant and equipment 10 – 50%

Leasehold improvement 50%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are recognised in profit or loss when the item is derecognised. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

(d) Right-of-use assetsA right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any re-measurement of lease liabilities.

The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.

(e) Intangible assets other than Goodwill Research and developmentExpenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably.Capitalised development costs are amortised on a systematic basis matched to the future economic benefits over the useful life of the project.

Patents and trademarksPatents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life ranging from 15 to 20 years commencing once the product they relate to has been completed.


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(f) Financial InstrumentsInitial Recognition and MeasurementFinancial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. For financial assets, this is the date that the entity commits itself to either purchase or sell the asset (ie trade date accounting is adopted).Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are recognised as expenses in profit or loss immediately.

Classification and Subsequent MeasurementFinancial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method.The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss.The Group does not designate any interests in subsidiaries, associates or joint ventures as being subject to the requirements of Accounting Standards specifically applicable to financial instruments.

(i) Financial assets at fair value through profit or lossFinancial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying amount included in profit or loss.

(ii) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.

ImpairmentAt the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s).In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point.

In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account.When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered.

DerecognitionFinancial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.


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(f) Financial Instruments (Continued)ClassificationThe Group classifies its financial assets in the following measurement categories:• those to be measured subsequently at fair value (either through OCI, or through profit or loss), and• those to be measured at amortised cost.The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The Group reclassifies debt investments when and only when its business model for managing those assets changes.

MeasurementAt initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Measurement of cash and cash equivalents and trade and other receivables are measured at amortised cost.

Debt instrumentsSubsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely

payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instrumentsThe Group subsequently measures all equity investments at fair value. The Group measures its investments in equity instruments at FVPL.Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss as applicable.

ImpairmentUnder the adoption of AASB 9 the Group’s accounting for impairment losses relating to financial assets is now on a forward looking basis using the expected credit losses (ECL) approach. For trade receivables and contract assets, the Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Group has established a provision matrix that is based on the Group’s historical credit losses against the receivables ageing profile.Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

(g) Cash and cash equivalentsCash and cash equivalents comprise cash balances, deposits at call which are readily convertible to cash on hand and are subject to insignificant risk of changes in value and short-term liquid investments which can be converted to cash within three months.

(h) Trade and other receivablesTrade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.Other receivables are recognised at amortised cost, less any allowance for expected credit losses.


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(i) Impairment of Non-Financial AssetsAt the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information, including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits.If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal and value in use to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

(j) Contract assetsContract assets are recognised when the consolidated entity has transferred goods or services to the customer but where the consolidated entity is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes.

(k) Customer fulfilment costsCustomer fulfilment costs are capitalised as an asset when all the following are met: (i) the costs relate directly to the contract or specifically identifiable proposed contract; (ii) the costs generate or enhance resources of the consolidated entity that will be used to satisfy future performance obligations; and (iii) the costs are expected to be recovered. Customer fulfilment costs are amortised on a straight-line basis over the term of the contract.

(l) Trade and other payablesThese amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which remain unpaid. These amounts are unsecured and are usually paid within 30 days of recognition. The notional amount of the creditors and payables is deemed to reflect fair value.

(m) Contract liabilitiesContract liabilities represent the consolidated entity’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer.

(n) Refund liabilitiesRefund liabilities are recognised where the consolidated entity receives consideration from a customer and expects to refund some, or all, of that consideration to the customer. A refund liability is measured at the amount of consideration received or receivable for which the consolidated entity does not expect to be entitled and is updated at the end of each reporting period for changes in circumstances. Historical data is used across product lines to estimate such returns at the time of sale based on an expected value methodology.

(o) Lease liabilitiesA lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.

(p) Employee BenefitsShort-term employee benefitsProvision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled.The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as part of current trade and other payables in the statement of financial position.


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(p) Employee Benefits (Continued)Share-based paymentsEquity-settled and cash-settled share-based compensation benefits are provided to employees.Equity-settled transactions are awards of shares, or options over shares that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price.The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.

The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.

The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:• during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the

expired portion of the vesting period.• from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the

reporting date.All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability.

Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification.

If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.

If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification.

(q) Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from or payable to the ATO, are presented as operating cash flows included in receipts from customers or payments to suppliers.

(r) Issued capitalOrdinary shares are classified as equity.Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(s) Critical Accounting Estimates and JudgementsThe directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.


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(s) Critical Accounting Estimates and Judgements (Continued)Key EstimateImpairment of development assetThe Group assesses impairment at the end of each reporting period by evaluating the conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions.No impairment has been recognised in respect of capitalised Development Costs at the end of the reporting period. The directors believe that the reported amount will be used to produce sales and design revenue in future years sufficient to justify the current value of the asset.

Lease termThe lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the consolidated entity’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The consolidated entity reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances.

Incremental borrowing rateWhere the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.

(t) Comparative figuresWhen required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

Note 2: Parent InformationThe following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards.

STATEMENT OF FINANCIAL POSITION 2020 2019

ASSETS $ $

Current Assets 389,189 1,717,559

Non-current Assets 13,211,923 12,677,701

TOTAL ASSETS 13,461,346 14,395,260

2020 2019

LIABILITIES $ $

Current Liabilities 1,091,692 1,519,855

Non-current liabilities 1,019,883 -

TOTAL LIABILITIES 2,111,575 1,519,855

2020 2019

EQUITY $ $

Issued Capital 24,050,559 20,053,122

Retained earnings (12,561,022) (7,177,717)

TOTAL EQUITY 11,489,537 12,875,405

GuaranteesSSurf Lakes Holdings Ltd has not entered into any guarantees, in the current or previous financial year, in relation to liabilities of its subsidiary.


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Note 3: Other Income Consolidated Group

2020 2019

$ $

Refund and Rebates 20,470 -

Other Income 58,663 -

Interest income 4,733 270,396

Total Other Income 83,866 270,396

Note 4: Key Management Personnel CompensationThe totals of remuneration paid to key management personnel (KMP) of the Group during the year are as follows:

Consolidated Group

2020 2019

$ $

Key management personnel compensation 297,242 289,754

Note 5: Tax asset Consolidated Group

2020 2019

CURRENT $ $

GST Refundable 84,007 169,847

Total current tax asset 84,007 169,847

Note 6: Other asset Consolidated Group

2020 2019

CURRENT $ $

Deposit - 260,000

- 260,000

NON-CURRENT

Deposit 273,849 -

273,849 -

The deposit relates to a security deposit and rental bond for the site of the testing facility near Yeppoon. During the year, the option to extend the lease of the Yeppoon site for a further 5 year term was taken.

Note 7: Property, Plant and Equipment Consolidated Group

2020 2019

LAND $ $

Freehold Land – at cost - 78,460

Total Land - 78,460

LEASEHOLD IMPROVEMENTS

Leasehold improvements 23,770 -

Less: Accumulated depreciation - -

Total Leasehold Improvements 23,770 -

PLANT AND EQUIPMENT

Plant and equipment – at cost 397,824 349,638

Less: Accumulated depreciation (135,987) (61,912)

Total Plant and Equipment 261,837 287,726

Total Property, Plant and Equipment 285,607 366,186


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Note 7: Property, Plant and Equipment (Continued)Note 7 (a) - Movements in carrying amounts Movement in carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year

Total Leasehold Improvements

Plant and Equipment

Total

Balance at 1 July 2018 78,460 - 76,969 155,429

Additions - - 267,039 267,039

Depreciation expenses - - (56,282) (56,282)

Carrying amount at 30 June 2019 78,460 - 287,726 366,186

Additions - 23,770 48,186 71,956

Disposals/ Write-off (78,460) - - (78,460)

Depreciation expenses - - (74,075) (74,075)

Carrying amount at 30 June 2020 - 23,770 261,837 285,607

Note 8: Intangible Assets Consolidated Group

2020 2019

$ $

Trademarks and licences at cost 570,126 395,333

Intellectual property rights 1 1

Development asset 11,803,740 11,803,740

Carrying amount 12,373,867 12,199,074

Note 8 (a) Movements in carrying amountsMovement in carrying amounts for intangibles between the beginning and the end of the current financial year

Trademarks and Licence

Intellectual property rights

Development Asset

Total

Balance at 1 July 2018 237,880 1 6,408,100 6,645,981

Additions 157,453 - 5,395,640 5,553,093

Amortisation expense - - - -

Carrying amount at 30 June 2019 395,333 1 11,803,740 12,199,074

Additions 174,793 - - 174,793

Amortisation expense - - - -

Carrying amount at 30 June 2020 570,126 1 11,803,740 12,373,867

Note 8 (b) – Trademarks and LicencesTrademarks and licences expenditure has not been amortised as there is yet to be a finished product / design for the patents / trademarks to attach to.

Note 8 (c) – Intellectual property rightsSurf Lakes Holdings limited received Intellectual Property Rights relating to the wave pool technology from the another company on 1 July 2016. As testing was still underway and no tangible or saleable product had been produced as a result, the directors valued the intellectual property at its cost, $1.

Note 9: Right-of-use assets and Lease liabilities Consolidated Group

RIGHT-OF-USE ASSETS2020

$2019

$

Land and buildings – right-of-use 355,596 -

Less: Accumulated depreciation (70,351) -

Carrying amount 285,245 -


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Note 9: Right-of-use assets and Lease liabilities (continued) Consolidated Group

2020 2019

LEASE LIABILITIES $ $

CURRENT 86,071 -

Lease liabilities 86,071 -

NON-CURRENT 189,883 -

Lease liabilities 189,883 -

Note 10: Trade and Other Payables Consolidated Group

2020 2019

CURRENT $ $

Accounts Payable 635,293 676,734

Accruals and other payables 155,368 672,842

790,661 1,349,576

Note 11: Borrowings Consolidated Group

2020 2019

$ $

CURRENT 200,000 200,000

Equipment financing 200,000 200,000

NON-CURRENT 830,000 -

Convertible notes 830,000 -

The equipment financing loan of $200,000 was obtained from Charles Foster Pty Ltd ATF Foster Family Superannuation Fund, a related party to the company. The loan is secured over the equipment purchased and attracting an interest rate of 15%pa. The term of the loan was originally 12 months, expiring in April 2020. From April 2020 this loan is now payable on demand and no request for payment has been made.$830,000 of Unsecured Convertible Notes was received in FY2020. Subsequent to year end a further $2.245m of Convertible Notes was received. A total of $3.075m has been received under this Convertible Note raising.

Note 12: Contract Liability Consolidated Group

2020 2019

$ $

Exclusivity Fee 550,000 -

ETA Fee 74,745 -

624,745 -

The above Contract Liabilities are amounts that have been invoiced to licensees and that have been paid, but cannot be treated as revenue due to the requirements of AASB15 Revenue from Contracts with Customers.


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Note 13: Issued Capital

Consolidated Group

2020 2019

$ $

339,590,518 (30 June 2019: 318,389,080) fully paid ordinary shares 24,050,559 20,053,122

(a) Ordinary Shares No. No.

At the beginning of the reporting period 318,389,080 260,315,860

Shares issued during the year:

- Capital raised at various times throughout the year 17,321,069 50,819,237

- Share Based Payment raised at various times throughout the year1 3,880,369 7,253,983

At the end of the reporting period 339,590,518 318,389,080

1The share based payment relates to shares issued to suppliers for services received in lieu of cash payment during the year.Ordinary shareholders participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

Note 14: Interests in Subsidiariesa. Information about Principal SubsidiariesThe subsidiaries listed below have share capital consisting solely of ordinary shares, which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by the Group. Each subsidiary’s principal place of business is also its country of incorporation or registration.

Ownership interest held by the Group

Proportion of non-controlling interest

2020 2019 2020 2019

Name of subsidiary Principal place of business (%) (%) (%) (%)

Surf Lakes International Pty Ltd Broadbeach, QLD, Australia 100% 100% - -

Mulara Site Pty Ltd Broadbeach, QLD, Australia 100% 100% - -

Surf Lakes Gold Coast Pty Ltd Broadbeach, QLD, Australia 100% - - -

Surf Lakes Equipment Pty Ltd Broadbeach, QLD, Australia 100% - - -

Note 15: Events After the Reporting PeriodThe following events have occurred since the end of the financial year:• Nevada territory sold for total USD$250,000• Liner repair completed & Lake filled in July 2020• Testing Day 6 on the 7th of August 2020 achieved a 4.3m machine stroke height• Testing & Demonstration Day held on the 21st to the 22nd of August 2020 achieved a 4.48 machine stroke height• San Diego territory sold for total USD$250,000• AUD$100,000 to date raised via share issues• AUD$2.245m to date raised via convertible note issueExcept for those matters disclosed above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years.

Note 16: Related Party TransactionsThe Group’s main related parties are as follows:(a) Entities exercising control over the group: The ultimate parent entity, which exercises control over the group, is Surf Lakes Holdings Ltd.

(b) Key Management Personnel: Contingent LiabilitiesAny person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity is considered key management personnel.


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Note 16: Related Party Transactions (Continued)(c) Other related partiesOther related parties include close family members of key management personnel and entities that are controlled or jointly controlled by those key management personnel, individually or collectively with their close family members.

TRANSACTIONS WITH RELATED PARTIES:

Entity Related to Amount Good/Service provided

Axstra Capital Reuben Buchanan $110,951 Capital raising services

Teldar Capital Pty Ltd Reuben Buchanan $14,208 Directors/Consulting fees

Teldar Capital Pty Ltd Reuben Buchanan $47,000 Purchase of Surf Lakes Shares

Ad Foster Consultants Pty Ltd Charles Foster $11,004 Lease of testing site

AD Foster Family Trust Charles Foster $2,359 Interest on loan

AD Foster Family Trust Charles Foster $8,500 Exercise option for shares

Foster Family Super Fund Charles Foster $5,625 Interest on loan

Forster Family Super Fund Charles Foster $25,000 Issue of Convertible notes

IQ Energy Australia Pty Ltd Charles Foster $11,555 Contractor Hire

John Diddams CPA John Diddams $50,000 Directors fee

John Diddams CPA John Diddams $50,000 Subscription share agreement

Provision Trading Aaron Trevis $46,431 Directors/Manager fee

Engenuity Solutions Chris Hawley $105,498 Engineering services

PAYABLE TO RELATED PARTIES:

Entities related to: Amount

Charles Foster $20,564

Troy Warfield $21,489

Aaron Trevis $11,372

Reuben Buchanan $18,952

John Diddams $30,000

There were no receivables from related parties.

Loans to/from related parties:In the prior year Charles Foster Pty Ltd ATF Foster Family Superannuation Fund has provided a$200,000 equipment loan to the company secured over the equipment purchased and attracting an interest rate of 15%pa. The term of the loan was originally 12 months, expiring in April 2020. From April 2020 this loan is now payable on demand and no request for payment has been made.There were no other loans to or from related parties at the current and previous reporting date.

Terms and conditions:Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Note 17: CommitmentsNon-cancellable leases contracted are as follows:

Consolidated Group

2020 2019

Payable- Minimum lease payments: $ $

− Not later than 12 months - 25,000

− Between 12 months and 5 years - 125,000

- 150,000

Current year commitments is nil due to the adoption of AASB 16 Leases which results to the Company recognising a right-of-use assets and lease liabilities in the statement of financial position. Refer to Note 9 for details.RestrictionsThere are no significant restrictions over the Group’s ability to access or use assets, and settle liabilities, of the Group.


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Note 18: Contingencies There were no contingencies to report at balance date.

Note 19: Rconciliation of profit after income tax to net cash from operating activity

2020 2019

$ $

Loss after income tax expense for the year (5,159,619) (4,078,868)

Adjustment for:

Depreciation 144,426 56,282

Creditors settled with equity 733,833 958,780

Write-off of non-current assets 209,590 -

Changes in operating assets and liabilities

(Increase)/decrease in trade and other receivable (132,564) 89,968

(Increase)/decrease in other asset (13,849) -

Increase/(decrease) in trade and other payable (1,206,908) 4,873

Increase/(decrease) in contract liability 624,745 -

Increase/(decrease) in provision 5,710 23,547

Net Cash used in operating activities (4,794,636) (2,945,418)

Note 20: Non-cash investing and financing activities Consolidated Group

2020 2019

$ $

Right of use asset 355,596 -

Creditors settled with equity 733,833 958,780

1,089,429 958,780

Note 21: Company DetailsThe registered office and principal place of business of the company is:Surf Lakes Holdings Ltd5C/16 Queensland AveBroadbeach QLD 4218 AUSTRALIA

Consolidated Group


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In accordance with a resolution of the directors of Surf Lakes Holdings Ltd, the directors of the company declare that:1. The financial statements comprising the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Performance, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flow and accompanying notes are in accordance with the Corporations Act 2001 and:• comply with Australian Accounting Standards – Reduced Disclosure Requirements; and• give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on that

date of the consolidated group.2. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Charles FosterChairman

Dated: 27 October 2020

DIRECTOR’S DECLARATION


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AUDITOR’S INDEPENDENCE DECLARATION


PAGE 33


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annual report - surf lakes€¦ · annual report. surf lakes holdings ltd and controlled entities...

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