iFLY and ISAG Logos
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Sept 29th Update

Just 9 days after the initial press release, SkyVenture files arbitration over the contractual breaches. The proceedings are to be held in Austin, Texas - the home of SkyVenture. Despite the calls for ISAG to cease it's operational expansion into Malasyia and China, updates via the AirRider Facebook page show no signs of slowing. The tunnel is still announced for a December opening.

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This past week, iFLY published a press release announcing that the Indoor Skydiving Australia Group (ISAG) is in breach of contract. The release calls for the ISAG to correct course within 30 days.

Indoor Skydiving Australia Group Background

The ISAG opened the first vertical wind tunnel in Australia. The project, iFLY Downunder, opened location near Sydney in 2014. Since the launch of this location, the group has gone on two open two additional locations. One in the Gold Coast and one in Perth. All 3 locations are SkyVenture built and iFLY branded sites.

The Australian group also announced an iFLY location in Melbourne. The page on their website remains as it has for many years. It states: "ISA Group is in the process of completing the site identification and selection process for the iFLY Melbourne facility."

After the announcement of their project, iFLY corporate out of Austin, TX, announced that they would be building a project using the same name: iFLY Melbourne which is now due to open sometime in 2018. No additional progress on the ISAG's project has been observed.

Expansion Plans in Asia

Earlier this year, we received word of a new ISAG project in Selangor, Malaysia. The project, named AirRider Indoor Skydiving, was later announced as being constructed using Strojirna Litvinov technology. The departure from the iFLY branding and SkyVenture technology was a surprise to see.

As of September 10th, the group posted an announcement on their website stating that they would be expanding their operations. The statement discusses plans to open new locations across China, including Hong Kong.

Specifically, the post states that these new operations would exist under the newly created AirRider branding and "Each indoor skydiving facility will be tailored to the specific location using the most appropriate vertical wind tunnel equipment available for site."

This is territory that iFLY itself has been expanding into.

iFLY Issues a Press Release

Late last week, iFLY released an announcement stating that the ISAG was in breach of contract. The release states the details of the breach, and the potential consequences if not corrected within 30 days:

AUSTIN, Texas, Sept. 20, 2017 /PRNewswire/ -- iFLY Holdings, LLC and its subsidiary SkyVenture International, Ltd (collectively, "iFLY") today issued written notice to ASX listed Indoor Skydive Australia Group Limited (ASX: IDZ) and its affiliates (collectively, "ISAG") that ISAG is in material breach of various agreements between the parties.

As stated by ISAG in its 1 November 2012 Prospectus for its Initial Public Offering, each license agreement authorizing ISAG to operate iFLY vertical wind tunnels ("VWTs") in Penrith, Perth and the Gold Coast, "restricts ISAG from directly or indirectly acquiring access to VWTs from other suppliers (than iFLY) during the term of the agreement and for 2 years thereafter."

In return for access to proprietary iFLY systems, processes and know how, ISAG further promised not to compete with or assist others in competing with iFLY. Nevertheless, in public statements on 14 February 2017, 1 May 2017 and 4 July 2017, ISAG declared its intention to develop, construct and operate an indoor skydiving facility in Malaysia with equipment provided by a third-party manufacturer.  This constitutes a material breach of ISAG's various agreements with iFLY.

On 4 September 2017, ISAG further announced that it entered into a binding memorandum of understanding with a third party for development, construction and operation of indoor skydiving facilities across China, including Hong Kong.  Use of third party manufactured VWTs in such projects would also constitute a material breach of ISAG's various agreements with iFLY.

iFLY reserves all of its various legal rights in connection with this matter, including obtaining a court-ordered injunction to halt construction and operation of the proposed Malaysian facility. In addition, if these material breaches are not corrected within 30 days, iFLY has discretion to terminate the agreements and associated licenses and prohibit ISAG from further use of the Penrith, Perth and Gold Coast VWTs.  In that event, iFLY also has the right to prevent ISAG from using its highly regarded "iFLY" brand or any of iFLY's world-leading support, safety and training programs or operational expertise. In addition, iFLY holds numerous patents on the technology used in ISAG's and other competitor's wind tunnels, and iFLY fully intends to enforce its rights to prevent unauthorized use of its patented technology.

iFLY General Counsel Kevin Fiur commented, "iFLY's technology has brought the thrill of indoor skydiving to thousands of Australians.  We look forward to flying with many more in the months and years ahead.  iFLY intends to vigorously protect our rights, and we call on ISAG to do the right thing, honor their agreement, and work with us to grow the iFLY brand across Australia."

About iFLY Indoor Skydiving: Austin-based iFLY Holdings, LLC., is the world leader in design, manufacturing, sales and operations of wind tunnel systems for indoor skydiving. The company has flown more than 8,000,000 people in a dozen countries and at sea since launching the modern vertical wind tunnel industry in 1998. iFLY has more than 60 facilities operating worldwide with 28 wholly-owned in the US and has significant growth plans across the globe in the next 24 months. iFLY supports and utilizes the safety and training guidelines set out by the International Bodyflight Association (IBA) to ensure safety and progression of the sport of indoor skydiving.

Contact: Edelman, iflypr@edelman.com

SOURCE iFLY Holdings, LLC - Publishing Source

We would be surprised if this was an empty threat. iFLY has a standing history of aggressively pursuing new markets, and publicly fighting to protect their patents. They have also attempted to expand their operations in new areas, despite their own non-compete clauses. We even seen press-release battles that left us with little understanding of the actual outcome.

We have reached out to the Indoor Skydiving Australia Group for comments on the release. Further updates will be posted as they become available.

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