annual report 2018 - surf lakes · well and producing surfable waves, will generate significant...

ANNUAL REPORT 2018

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 sA B N 5 5 6 1 3 3 7 2 9 5 5

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

JOINT MESSAGE FROM THE CHAIRMAN AND CEO

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Dear Shareholders,

We live in exciting times for Surf Lakes. We are seeing the evolution of an era where consumers are increasingly wanting to buy an ‘experience’ and not just a product. With air travel becoming cheaper and easier, consumers are also keen to look for a ‘destination’ experience. The international market for destination-style theme parks is predicted to grow globally during the next 3 years by more than 6% pa to over US$60 billion. Surf Lakes is at the edge of this pool and poised to dive in and we intend to make a splash.Although we are already well into the 2019 financial year, we want to give shareholders an overview what has happened so far and what is yet to come.

IN REVIEW - TECHNOLOGICAL BREAKTHROUGHIn October 2018, we proved that our unique and innovative technology works by creating the first man-made surfable waves in Australia at our R & D facility. It truly was an historic moment, not just for Surf Lakes, but for the ‘man-made’ wave surfing industry. However, our technology was not just an Australian first, but a world first! Surf Lakes showed that we can generate waves concentrically with at least 4 different breaks each splitting left and right. Never has any wave generating machine been able to create surfable waves for 8 people simultaneously. This equates to increased revenue potential for the prospective operator of a Surf Lakes wave park because they can have a minimum of 2 to 4 times as many paying surfers as our nearest competitor.The news, and footage, of our achievement literally went around the world and was reported in major newspapers in several countries and has generated over 200 enquiries. We currently have several potential operators keen to get started, pending successful testing of the device following replacement of the conrod.

CURRENT PROJECT - CONROD REPAIRWhilst the conrod did malfunction, we are ecstatic about all the things that went well during the tests – from water stabilisation rates, waves shape and height, efficiency of the device and many other successful results. It is important to keep in mind that the purpose of building a prototype is to test the device and our design before we roll out the commercial product to operators. Except for the damaged component, the device’s performance exceeded our expectations in almost every area.In January 2019, we embarked upon our conrod repair project with the objectives of completing the repair as quickly as possible and at the same time reducing the risk of other failures occurring in the future. To reduce this risk we have engaged engineers who had no involvement in the initial prototype design and build to review the entire design and to conduct a forensic examination on the damaged component and the circumstances which caused the damage. Once this review and examination is complete, the conrod (and any other components) will be redesigned, rebuilt and the device reconstructed and recommissioned. It is anticipated that this will be completed in the 2nd quarter of the 2019 calendar year.

LOOKING FORWARD - SALES FORECASTS In FY19, we find ourselves in a transition from a start-up to a commercial operation. The company currently has a number of potential licensees keen to commit to building a Surf Lake contingent upon successful testing of the repaired device.Based on the conrod repair programme and the level of interest of potential licensees we have a business plan incorporating our first sale prior to 30 June 2019, with another 4-6 sales in FY20.

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 sA B N 5 5 6 1 3 3 7 2 9 5 5


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BUILDING CAPABILITY We are planning for an influx of work and activity to follow the successful re- test of our device. This planning work commenced in 2018.We are putting into place systems and personnel to handle multiple sales and multiple projects simultaneously in different locations around the world. To this end, the Surf Lakes Board appointed a Chairman with experience and track record in undertaking large-scale engineering projects around the globe.Importantly, we have freed up our Founder, Aaron Trevis, to take our vision to the world in his role as Director Commercial and Technology . To facilitate this we have moved our CFO, Mal Borgeaud, into the combined roles of CEO and CFO. Mal brings commercial and corporate experience and track record to both these roles .We also recently hired an experienced and professional project manager and have identified and commenced discussions with others who we believe have the skill and experience necessary to assist in developing our capabilities to deliver on multiple future projects. We hope to make further announcements in this regard in the very near future.

FINANCIAL POSITION During FY18, our investors gave us tremendous support with contributions of just over A$8M in shareholder funds. A combination of new and existing investors have also contributed over A$4m so far this financial year. Because of these contributions and the efforts of the Surf Lakes team, we were able to capitalise much of the 2018 expenditure on the prototype, showing a Development asset of around A$6.4M at 30 June 2018. As a result, our Balance Sheet has grown to show net assets of just under A$8m (up from A$0.4m last year). For the construction work during the current financial year we will be looking to capitalise a similar amount this year which we trust will improve our Balance Sheet once again.Despite the increased activity that occurred in FY18, we were able to slightly reduce administration and overheads compared with FY17. In the current financial year, we expect to see a considerable increase as we build our personnel capacity for our move to commercial operations .We anticipate that we will continue to need shareholder support for a good portion of the first half of 2019 calendar year until the device is repaired and sales flow. We are fortunate to have a wonderful cohort of shareholders who are closely engaged with the company and its progress. We are tremendously grateful for your continued support.Our achievements to date have been reliant on the commitment and hard work of a small but dedicated group of individuals, employees and contractors, led by our Founder Aaron Trevis. We thank them all for giving Surf Lakes a start and now momentum. The current, and slightly larger, Surf Lakes team is committed and dedicated to delivering the best waves to our vision to bring waves to the world and to build relationships with our future customers as well as to bring great results to our shareholders.We firmly believe that executing our strategy is the best way to achieve our overall vision. We look forward to delivering on our strategy during the coming financial year as we undertake some of the most exciting projects in the world.

Paul Hardy Chairman

Malcolm BorgeaudCEO

CONTENTS

Joint message from the Chairman and CEO 02

Directors' Report 05

Auditor's Independence Declaration 08

Financial Report 09

Consolidated Statement of Profit or Loss and Other Comprehensive Income

10

Consolidated Statement of Financial Position 11

Consolidated Statement of Changes in Equity 12

Consolidated Statement of Cash Flow 13

Notes to the Financial Statements 14

Directors' Declaration 24

Independent Auditor's Report 25


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DIRECTOR’S REPORT

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DIRECTOR’S REPORT

DIRECTORSThe names of the directors in office at any time during or since the end of the year are:

• Aaron James Trevis• Christopher John Hawley• Reuben James Buchanan• Paul Munten (appointed on 30 August 2017; resigned on 16 April 2018)• Paul Hardy (appointed on 1 November 2018)• Malcolm Borgeaud (appointed 8 January 2019)

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 $1,184,555 (2017: $1,584,619).This represents a 30% decrease on the loss reported for the year ended 30 June 2017. The significant improvement was largely from improved management of costs. Further discussion of the consolidated group’s operations is provided below.(i) ResearchThe Group designs wave pools and the components needed to produce the waves. The Group was successful in raising $8,138,900 in capital during 2018 to help pay for the construction of full scale test facility near Yeppoon. Construction was completed in early October and the Group produced its first waves at the test facility by mid October 2018.(ii) DevelopmentA total of $6,408,100 of the design and construction expenditure has been included in the statement of financial position as an intangible asset as a fully functioning test facility which will provide 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 increased by 1800% from $404,221 at 30 June 2017 to $7,680,129 at 30 June 2018. This increase has largely resulted from the following factors:

• Proceeds from share issues raising $8.138m; and• Utilisation of these funds to construct and develop our full size test facility

The Directors believe the consolidated group is in a relatively strong financial position given we are yet to begin revenue producing operations.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS During the year, a wholly owned subsidiary (Surf Lakes International Pty Ltd) was incorporated on 16 May 2018. No significant changes in the consolidated group’s state of affairs occurred during the financial year.

PRINCIPAL ACTIVITIES The principal activities of the consolidated group during the course of the year were research and development, design, construction and operation of wave pools.No significant change in the nature of these activities occurred during the year.

EVENTS SUBSEQUENT TO THE ENDO OF THE REPORTING PERIODThe following significant events have occurred since the end of the financial year:• On 5 July 2018, Surf Lakes Holdings Ltd incorporated a new subsidiary company and as a result holds all the

issued shares in Mulara Site Pty Ltd. This company was set up to employ a small casual unskilled workforce to assist on-site during the construction of our test facility.

• On 9 October 2018 construction on the Test Facility at Yeppoon was completed and the wave pool began to fill with water. The company produced its first waves at the Test Facility on Monday 22nd October.

Your directors present this report on the company for the financial year ended 30 June 2018.


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• On 26 October 2018 the conrod of the device malfunctioned and as at the date of this report the test facility is not operational. A forensic analysis, redesign, rebuild and reconstruction project is still underway. It is anticipated that this project will be completed in the 2nd half of FY2019.

• From 1 July 2018 to 27 November 2018 the company received further capital contributions of $3,668,007.• Convertible notes due to mature in December 2018 were subsequently converted to shares except for $100,000

which was settled and paid in cash.• On 8th January 2019, Malcolm Borgeaud was appointed as Chief Executive Officer.• Subsequent to year end, the company has received further capital contributions of $6,346,936

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

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

SHARE OPTIONSNo options over issued shares or interests in the group were granted during or since the end of the financial year and there were no options outstanding at the date of this report.

DIRECTORS BENEFITS No 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.

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:

Paul Hardy Chairman

Malcolm BorgeaudDirectorDated: 21 February 2019

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AUDITOR’S INDEPENDENCE DECLARATION


Tel: +61 7 3237 5999Fax: +61 7 3221 9227www.bdo.com.au

Level 10, 12 Creek St Brisbane QLD 4000GPO Box 457 Brisbane QLD 4001Australia

DECLARATION OF INDEPENDENCE BY M CUTRI TO THE DIRECTORS OF SURF LAKES HOLDING LTD

As lead auditor of Surf Lakes Holdings Ltd for the year ended 30 June 2018, I declare that, to the best

of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in

relation to the audit; and

2. No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Surf Lakes Holdings Ltd and the entities it controlled during the period.

M Cutri

Director

BDO Audit Pty Ltd

Brisbane, 21 February 2019

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050

110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by

guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

FINANCIAL REPORT


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Consolidated Group Note 2018 2017 $ $Other Income 3 483,011 301Employee benefits expense (30,913) -Advertising expense (75,566) (91,436)Depreciation and amortisation expense (5,499) (876)Professional fees (913,465) (315,132)Research and development expense (479,022) (667,066)Travel and accommodation expense (129,638) (11,888)Finance costs (1,570) (5,028)Loss on sale of assets - (340,606)Other expenses (31,893) (152,888)Loss before income tax (1,184,555) (1,584,619) Income tax (expense) benefit - - Loss for the year (1,184,555) (1,584,619) Other compressive income - -Total comprehensive loss for the year (1,184,555) (1,584,619)

Consolidated Group

Note 2018 2017

$ $

Other Income 3 483,011 301

Employee benefits expense (30,913) -

Advertising expense (75,566) (91,436)

Depreciation and amortisation expense (5,499) (876)

Professional fees (913,465) (315,132)

Research and development expense (479,022) (667,066)

Travel and accommodation expense (129,638) (11,888)

Finance costs (1,570) (5,028)

Loss on sale of assets - (340,606)

Other expenses (31,893) (152,888)

Loss before income tax (1,184,555) (1,584,619)

Income tax (expense) benefit - -

Loss for the year (1,184,555) (1,584,619)

Other compressive income - -

Total comprehensive loss for the year (1,184,555) (1,584,619)

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

For the year ended 30 June 2018

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME


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Consolidated Group

Note 2018 2017

$ $

ASSETS

Current Assets

Cash and cash equivalents 2,842,627 109,967

Trade and other receivables 1,102 210,000

Tax assets 5 331,648 80,287

Other asset 6 260,000 -

Total Current Assets 3,435,377 400,254

NON-CURRENT ASSETS

Property, plant and equipment 7 155,427 73,900

Intangible assets 8 6,645,981 166,111

Total Non-Current Assets 6,801,408 240,011

Total Assets 10,236,785 640,265

LIABILITIES

Current Liabilities

Trade and other payables 9 1,344,703 236,044

Borrowings 10 1,210,000 -

Provision 1,953 -

Total Current Liabilities 2,556,656 236,044

Total Liabilities 2,556,656 236,044

Net Assets 7,680,129 404,221

EQUITY

Issued capital 11 10,345,277 2,206,377

Reserves 12 444,631 123,068

Retained earnings (3,109,779) (1,925,244)

Total Equity 7,680,129 404,221

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

CONSOLIDATED STATEMENT OF F INANCIAL POSIT ION


As at 30 June 2018

Consolidated Group Note 2018 2017 $ $Other Income 3 483,011 301Employee benefits expense (30,913) -Advertising expense (75,566) (91,436)Depreciation and amortisation expense (5,499) (876)Professional fees (913,465) (315,132)Research and development expense (479,022) (667,066)Travel and accommodation expense (129,638) (11,888)Finance costs (1,570) (5,028)Loss on sale of assets - (340,606)Other expenses (31,893) (152,888)Loss before income tax (1,184,555) (1,584,619) Income tax (expense) benefit - - Loss for the year (1,184,555) (1,584,619) Other compressive income - -Total comprehensive loss for the year (1,184,555) (1,584,619)

For the Year Ended 30 June 2018

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Issued capital Retained earning

Reserves Total equity

$ $ $ $

Balance at 1 July 2016 - - - -

Loss for the year - (1,584,619) - (1,584,619)

Total comprehensive income for the period - (1,584,619) - (1,584,619)

TRANSACTION WITH OWNERS IN THEIR CAPACITY AS OWNER:

Provision Unlimited adjustment (Note 13) - (340,605) - (340,605)

Shares issued (Note 11) 2,206,377 - - 2,206,377

Share – based payment (Note 12) - - 123,068 123,068

2,206,377 (340,605) 123,068 1,988,840

As at 30 June 2017 2,206,377 (1,925,224) 123,068 404,221

Issued capital Retained losses

Reserves Total equity

$ $ $ $

Balance at 1 July 2017 2,206,377 (1,925,224) 123,068 404,221

Loss for the year - (1,184,555) - (1,184,555)

Total comprehensive income for the period 2,206,377 (3,109,779) 123,068 (780,334)

TRANSACTION WITH OWNERS IN THEIR CAPACITY AS OWNER:

Shares issued (Note 11) 8,138,900 - - 8,138,900

Share-based payment (Note 12) - - 321,563 321,563

8,138,900 - 321,563 8,460,463

As at 30 June 2018 10,345,277 (3,109,779) 444,631 7,680,129

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 Balance at 1 July 2016

2018 2017

Note $ $

CASH FLOWS FROM OPERATING ACTIVITES

Interest received 3,982 299

Receipts from customers and government refunds

1,144,889 -

Payments to suppliers and employees (1,241,229) (1,398,587)

Interest paid - (5,028)

GST Paid (279,292) -

Net cash used in operating activities 19 (371,650) (1,403,316)

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for intangible assets (6,479,871) (166,110)

Payments for property, plant and equipment (86,282) (74,776)

Net cash used in investing activities (6,566,153) (240,886)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares 8,460,463 1,754,169

Proceeds from borrowings – other 1,210,000 -

Net cash provided by financing activities 9,670,463 1,754,169

Net increase in cash held 2,732,660 109,967

Cash and cash equivalents at beginning of financial year

109,967 -

Cash and cash equivalents at end of financial year 2,842,627 109,967

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

For the Year Ended 30 June 2018

CONSOLIDATED STATEMENT OF CASH FLOW


The consolidated financial statements and notes represent those of Surf Lakes Holdings Ltd and Controlled Entity (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 4th February 2019 by the directors of the company.

Note 1: Summary of Significant Accounting PoliciesBasis 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.

(a) Going Concern As at 30 June 2018 the company had cash reserves of $2,842,627, net current assets of $878,721 and net assets surplus of $7,680,129. 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; and• the successful development and commercialisation of its product.These 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;• Subsequent to year end, the company has received further capital contributions of $6,346,936.

(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 subsidiary (Surf Lakes International Pty Ltd). The Parent has control of its subsidiary. 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 10 for further details. The assets, liabilities and results of its subsidiary is 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.

(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.

(d) Property, Plant and EquipmentPlant 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.


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NOTES TO THE CONSOLIDATED FINACIAL STATEMENTS

Note 1: Summary of Significant Accounting Policies (Continued)(d) Property, Plant and Equipment (Continued)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

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.

(e) Intangible assets other than GoodwillResearch 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. (f) Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset – but not the legal ownership – are transferred to entities in the consolidated group, are classified as finance leases.Finance leases are capitalised by recording an asset and a liability at the lower of the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense.Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses on a straight-line basis over the lease term.Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

(g) 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.


N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S ( C O N T I N U E D )

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Note 1: Summary of Significant Accounting Policies (Continued)(g) Financial Instruments (Continued) Classification and Subsequent Measurement (Continued)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.

(h) 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.



P . 1 6

Note 1: Summary of Significant Accounting Policies (Continued)(h) Impairment of Non-Financial Assets (Continued)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.

(i) 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.

(j) Cash and Cash EquivalentsCash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 12 months or less, and bank overdrafts. Bank overdrafts or other small credit facilities are shown within borrowings in current liabilities on the statement of financial position.

(k) Revenue and Other IncomeRevenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue.Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument.All dividends received shall be recognised as revenue when the right to receive the dividend has been established. (l) Revenue and Other IncomeRevenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period and where the outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.Investment property revenue is recognised on a straight-line basis over the period of the lease term so as to reflect a constant periodic rate of return on the investment.All revenue is stated net of the amount of goods and services tax (GST).

(m) Trade and Other ReceivablesTrade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets.Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(g) for further discussion on determination of impairment losses.

(n) Trade and Other PayablesTrade and other payables represent the liabilities for goods and services received by the Group that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

(o) 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.



P . 6 1P . 1 7

Note 1: Summary of Significant Accounting Policies (Continued)(p) New Accounting Standards for Application in Future PeriodsAccounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below:

New / revised pronouncements

Nature of change Application date to the Group

Impact to the Group

AASB 9: Financial Instruments and associated Amending Standards

The AASB has issued the complete AASB 9. The new standard includes revised guidance on the classification and measurement of financial assets, including a new expected credit loss model for calculating impairment, and supplements the new general hedge accounting requirements previously published. This supersedes AASB 9 (issued in December 2009-as amended) and AASB 9 (issued in December 2010).

30 June 2019 The group does not foresee any significant impact to the net profit and net assets as a result of applying this new accounting standard.

AASB 15: Revenue from Contracts with Customers

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time.

30 June 2019 The group does not foresee any significant impact to the net profit and net assets as a result of applying this new accounting standard.

AASB 16: Leases AASB 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases onto its balance sheet in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its balance sheet for most leases.There are some optional exemptions for leases with a period of 12 months or less and for low value leases.Lessor accounting remains largely changed from AASB 117.

30 June 2020 The group has not yet assessed the full impact of this Standard.

(q) 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.

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 the 2019 and 2020 years sufficient to justify the current value of the asset.

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 2018 2017

$ $

ASSETS

Current Assets 3,326,484 400,254

Non-current Assets 6,801,528 240,011

TOTAL ASSETS 10,128,012 640,265

LIABILITIES

Current Liabilities 2,556,657 236,044

TOTAL LIABILITIES 2,556,657 236,044

EQUITY

Issued Capital 10,345,275 2,329,445

Reserves 444,632 -

Retained earnings (3,218,552) -

TOTAL EQUITY 7,571,355 404,221



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Note 2: Parent Information (Continued)GuaranteesSurf Lakes Holdings Ltd has not entered into any guarantees, in the current or previous financial year, in relation to liabilities of its subsidiary.

Note 3: Other Income Consolidated Group

2018 2017

$ $

R&D Refund 429,029 1

Licence Fees 50,000 -

Interest income 3,982 300

Total Other Income 483,011 301

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

2018 2017

$ $

Key management personnel compensation 204,499 172,869

Other KMP Transactions

For details of other transactions with KMP, refer to Note 16.

Note 5: Tax asset Consolidated Group

2018 2017

CURRENT $ $

Input tax credit - 28,330

TFN withholding tax 539 140

GST Refundable 331,109 51,817

Total current tax asset 331,648 80,287

Note 6 Other asset Consolidated Group

2018 2017

CURRENT $ $

Deposit 260,000 -

The deposit relates to a security deposit and rental bond for the site of the testing facility near Yeppoon.

Note 7: Property, Plant and Equipment Consolidated Group

2018 2017

LAND $ $

Freehold Land – at cost 78,460 72,196

Total Land 78,460 72,196

PLANT AND EQUIPMENT

Plant and equipment – at cost 82,597 2,580

Less: Accumulated depreciation (5,630) (876)

Total Plant and Equipment 76,967 1,704

Total Property, Plant and Equipment 155,427 73,900



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

Land Plant and Equipment Total

Balance at 1 July 2016 72,196 2,580 74,776

Additions - (876) (876)

Depreciation expenses 72,196 - 72,196

Carrying amount at 30 June 2017 72,196 1,704 73,900

Additions 6,264 80,019 86,281

Depreciation expenses - (4,754) (4,754)

Carrying amount at 30 June 2018 78,460 76,968 155,427

Note 8: Intangible Assets

Consolidated Group

2018 2017

$ $

Trademarks and licences at cost 237,880 166,110

Intellectual property rights 1 1

Development asset 6,408,100 -

Carrying amount 6,645,981 166,111

(a) Movements in carrying amounts Movement 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 2016 - - - -

Additions 166,110 1 - 166,111

Amortisation expense - - - -

Carrying amount at 30 June 2017 166,110 1 - 166,111

Additions 71,770 - 6,408,100 6,479,870

Amortisation expense - - - -

Carrying amount at 30 June 2018 237,880 1 6,408,100 6,645,981

(b) – Patents & trademarks Patents and trademark expenditure has not been amortised as there is yet to be a finished product / design for the patents / trademarks to attach to.

(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 $1.



P . 2 0

Note 9: Trade and Other Payables Consolidated Group

CURRENT 2018 2017

$ $

Accounts Payable 1,339,051 -

Accruals and other payables 5,652 236,044

1,344,703 236,044

Note 10: Borrowings Consolidated Group

CURRENT 2018 2017

$ $

Convertible Notes 1,210,000 -

The convertible notes were issued during the year and matures within six months from commencement date with interest of 10%.

Note 11: Issued Capital

Consolidated Group

CURRENT 2018 2017

$ $

260,315,860 (2017: 181,830,357) fully paid ordinary shares 10,345,277 2,206,377

(a) Ordinary Shares No. No.

At the beginning of the reporting period 181,830,357 -

Shares issued during the year:

-At various times throughout the year 78,485,503 181,830,357

At the end of the reporting period 260,315,860 181,830,357

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 12: Reserves Share Based Payment Reserve The share based payment reserve relates to shares issued to suppliers for services received in lieu of cash payment during the year.

Consolidated Group

2018 2017

$ $

Share-based payment reserve 444,631 123,068

Note 13: Provision Unlimited AdjustmentThis adjustment to equity is wholly related to the use of a scrip for scrip rollover at the incorporation of the company and the subsequent consolidation and deregistration of Provision Unlimited Pty Ltd. Initial work on the company’s technology was undertaken by Provision Unlimited Pty Ltd, a private company owned by the family of one of the directors (Mr Aaron Trevis). As interest in the technology grew the private company took on a small number of investors. Surf Lakes Holdings Ltd (SLH) was incorporated on 30 June 2016 and on 1 July 2016 all of the existing shareholders in the original company entered into a Deed of Agreement whereby SLH acquired 100% of the capital of Provision Unlimited Pty Ltd in exchange for issuing shares in SLH on a 1:1 basis. The initial number of shares issued under this arrangement was 12,652,731 with paid up capital of $365,275. After transferring the intellectual property and other assets to SLH it moved to close Provision Unlimited Pty Ltd. The amount of the adjustment is equivalent to the accumulated losses resulting from research and development work and other costs borne by Provision Unlimited Pty Ltd.



P . 2 1

Note 14: Interests in Subsidiaries(a) 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

2018 2017 2018 2017

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

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

(b) Significant RestrictionsThere are no significant restrictions over the Group’s ability to access or use assets, and settle liabilities, of the Group.

Note 15: Events After the Reporting PeriodThe following significant events have occurred since the end of the financial year:• On 5 July 2018, Surf Lakes Holdings Ltd incorporated a new subsidiary company and as a result holds all the issued shares

in Mulara Site Pty Ltd. This company was set up to employ a small casual unskilled workforce to assist on-site during the construction of our test facility.

• On 9 October 2018 construction on the Test Facility at Yeppoon was completed and the wave pool began to fill with water. The company produced its first waves at the Test Facility on Monday 22nd October.

• On 26 October 2018 the conrod of the device malfunctioned and as at the date of this report the test facility is not operational. A forensic analysis, redesign, rebuild and reconstruction project is still underway. It is anticipated that this project will be completed in the 2nd half of FY2019.

• From 1 July 2018 to 27 November 2018 the company received further capital contributions of $3,668,007.• Convertible notes due to mature in December 2018 were subsequently converted to shares except for $100,000 which was

settled and paid in cash.• On 8th January 2019, Malcolm Borgeaud was appointed as Chief Executive Officer. • Subsequent to year end, the company has received further capital contributions of $6,346,936.

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.

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.For details of disclosures relating to key management personnel, refer to Note 5: Key Management Personnel Compensation.

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

.



P . 2 2

Note 17: Commitments Non-cancellable operating leases contracted are as follows:

Consolidated Group

2018 2017

$ $

Payable- Minimum lease payments:

- Not later than 12 months 1 1

- Between 12 months and 5 years 125,000 1

The property lease is a non-cancellable lease with an initial 2 year term for $1 per annum and an option to extend for a further term of 7 years at $25,000 per annum. The initial term of 2 years is due to expire in August 2019 with the intention of exercising the option to extend.

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

Note 19: Reconciliation of profit after income tax to net cash from operating activity Consolidated Group

2018 2017

$ $

Loss after income tax expense for the year (1,184,555) (1,584,619)

Adjustment for:

Depreciation 5,499 876

Other adjustments on consolidation of subsidiary - 24,670

Changes in operating assets and liabilities

(Increase)/decrease in trade and other receivable (42,206) (80,287)

(Increase)/decrease in other asset (260,000) -

Increase/(decrease) in trade and other payable 1,108,659 236,044

Increase/(decrease) in provision 1,953 -

Net Cash used in operating activities (371,650) (1,403,316)

Note 20: Company DetailsThe registered office of the company is:Surf Lakes Holdings Ltd8 / 249 Scottsdale DriveROBINA QLD 4226

The principal place of business is:Surf Lakes Holdings Ltd8 / 249 Scottsdale Drive ROBINA QLD 4226



P . 6 1P . 2 3

The directors of the company declare that:

The financial statements and notes are in accordance with the Corporations Act 2001 and:(a) comply with Accounting Standards and the Corporations Regulations; and(b) give a true and fair view of the company’s financial position as at 30 June 2018 and of its performance for the year ended on that date; 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.This declaration is made in accordance with a resolution of the Board of Directors.

Paul Hardy Chairman

Malcolm BorgeaudDirectorDated: 21 February 2019


DIRECTORS’ DECLARATIONP . 2 4


Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia

Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

INDEPENDENT AUDITOR'S REPORT

To the members of Surf Lakes Holdings Ltd

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Surf Lakes Holdings Ltd (the Company) and its subsidiaries (the

Group), which comprises the consolidated statement of financial position as at 30 June 2018, the

consolidated statement of profit or loss and other comprehensive income, the consolidated statement

of changes in equity and the consolidated statement of cash flows for the year then ended, and notes

to the financial report, including a summary of significant accounting policies and the directors’

declaration.

In our opinion the accompanying financial report of Surf Lakes Holdings Ltd, is in accordance with the

Corporations Act 2001, including:

(i) Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its

financial performance for the year ended on that date; and

(ii) Complying with Australian Accounting Standards – Reduced Disclosure Requirements and the

Corporations Regulations 2001.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under

those standards are further described in the Auditor’s responsibilities for the audit of the Financial

Report section of our report. We are independent of the Group in accordance with the Corporations

Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s

APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the

financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance

with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has been

given to the directors of the Company, would be in the same terms if given to the directors as at the

time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Material uncertainty related to going concern

We draw attention to Note 1 in the financial report which describes the events and/or conditions which

give rise to the existence of a material uncertainty that may cast significant doubt about the group’s

ability to continue as a going concern and therefore the group may be unable to realise its assets and

discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this

matter.

Surf Lakes Holdings Ltd and Controlled EntitiesABN 55 613 372 955Auditor's Independence Declaration

Tel: +61 7 3237 5999Fax: +61 7 3221 9227www.bdo.com.au

Level 10, 12 Creek St Brisbane QLD 4000GPO Box 457 Brisbane QLD 4001Australia

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.4

DECLARATION OF INDEPENDENCE BY M CUTRI TO THE DIRECTORS OF SURF LAKES HOLDING LTD

As lead auditor of Surf Lakes Holdings Ltd for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and2. No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Surf Lakes Holdings Ltd and the entities it controlled during the period.

M Cutri Director

BDO Audit Pty Ltd


P . 2 5

INDEPENDENT AUDITOR’S REPORT


P . 2 5

Other information

The directors are responsible for the other information. The other information obtained at the date of

this auditor’s report is information included in the Directors’ report, but does not include the financial

report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not

express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information

and, in doing so, consider whether the other information is materially inconsistent with the financial

report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information obtained prior to the date of this

auditor’s report, we conclude that there is a material misstatement of this other information, we are

required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a

true and fair view in accordance with Australian Accounting Standards – Reduced Disclosure

Requirements and the Corporations Act 2001 and for such internal control as the directors determine is

necessary to enable the preparation of the financial report that gives a true and fair view and is free

from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the group to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the

going concern basis of accounting unless the directors either intend to liquidate the Group or to cease

operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free

from material misstatement, whether due to fraud or error, and to issue an auditor’s report that

includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an

audit conducted in accordance with the Australian Auditing Standards will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material

if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the

Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:

http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf

This description forms part of our auditor’s report.

BDO Audit Pty Ltd

M Cutri

Director


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