FLEXIROAM LIMITED — Annual Report 2018

May 29, 2018

Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

		Year ended	Year ended	Year ended
	% Increase /	31 Mar 2018	31 Mar	2017
Results for announcement to market	(Decrease)	$	$
Revenue from ordinary activities	46%	2,969,873	2,037,336
(Loss)/profit from after tax from ordinary activities
attributable to members	11%	(5,787,643)	(5,208,445)
(Loss)/profit attributable to members	11%	(5,787,643)	(5,208,445)
		Franked	Amount	per
**Dividend Information **	Amount per share share
Dividend – current reporting period	Nil		Nil
Dividend –previous reporting period	Nil		Nil
Tangible Asset Backing per Ordinary Share		Shares	Cents
Tangible asset backing per ordinary share – previous reporting period		193,689,501		1.6
Tangible asset backing per ordinaryshare – current reporting period		193,689,501		0.4

Commentary on the Results for the Period

Reclassification

A reclassification has been made to prior period’s financial statements for the year ended 31 March 2017 in order to conform to the current year’s presentation. Specifically, a total of $400,613 related to network costs which was included in cost of sales had been reclassified to be included in marketing expenses. The network costs of $400,613 were incurred as a result of free data promotion distributed for customer acquisition activities effort through various marketing campaigns. The reclassification had no impact on results of operations previously reported.

Restatement

During the year ended 31 March 2018, the management reviewed the classification of X-Microchip as an item of property, plant and equipment in the statement of financial position. Based on the review, the management concluded that it would be more appropriate to classify X-Microchips as inventory to be expensed when the X-Microchips were distributed. Accordingly, the year ended 31 March 2017 accounts were restated to reflect the reclassification. The impact of the restatement was an increase of net loss for year ended 31 March 2017 by $73,100.

	YEAR ENDED 31 MARCH 2017 $	(INCREASE) / DECREASE $	YEAR ENDED 31 MARCH 2017 $
(Previous Policy) (Restated) Loss for the period (5,135,345) (73,100) (5,208,445)

For more details please refer to the consolidated statement of profit or loss, the consolidated statement of financial position, consolidated statement of cash flow, Note 3 and Note 5.

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

Financial Performance Review

Throughout FY2018, Flexiroam has been actively carrying out its strategy to create an international network of local wholesale distributors. This strategy has succeeded in increasing the geographical spread of Flexiroam to 243 partners and sub-partners from 45 countries. These partnerships increase Flexiroam’s physical exposure and accessibility and establish a strong foothold in other countries.

Flexiroam has also increased its exposure to frequent travellers through partnerships with airlines such as KLM Royal Dutch Airlines, Korean Air, and Scoot Airlines thus widening its user base.

Apart from increasing geographical reach, Flexiroam also focused on developing Flexiroam X with innovations and updates. Flexiroam continues its effort to expand its service coverage to over 130 countries. Flexiroam’s official mobile application has also evolved throughout the year to provide the best user experience. The Flexiroam X App is available in 4 different languages making it user friendly for its diversified international user base.

These strategies have successfully expanded Flexiroam’s user base and created a favourable effect on the total revenue which shows an overall increase of 46%. The growth is largely driven by high recurring transactions from the consumer segment which constitute 71% of total sales with a growth of 408% as compared with the prior year.

Increase in user base results in an overall increase in total direct cost by 109% with network cost being the major contributing factor which comprises 74% of the total direct cost and an increase of 94% over the previous year. This results from the organic increase in the number of active users. Other direct costs such as x-microchip cost and commissions have increased by 345% and 101%, respectively as a result of partnerships described above.

Total operating cost fell by 7% as a result of optimization of sales and marketing strategy and streamlining of research and development activities focusing on a more effective and efficient way of achieving best results. Marketing cost and research and development cost decreased by 9% and 41% respectively, as compared with the previous year.

The loss for the period has slightly increased by 11% over the prior year primarily due to nonoperating factors such as an increase in finance expenses and foreign exchange losses and decrease in other income.

Audit

This Preliminary Final Report is based on the Annual Financial Report which is in the process of being audited.

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Jefrey Ong Managing Director Signed at Kuala Lumpur on this 30th day of May 2018

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities

Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2018

	NOTES	YEAR ENDED 31 MARCH 2018 $	YEAR ENDED 31 MARCH 2017 $
Revenue 2 Cost of sales 3 Gross profit / (loss) Interest received Foreign exchange gains / (losses) Gain from disposal of AFS shares Other income Administration and operating expenses 4 Marketing expenses Research and development Staff costs Depreciation and amortisation Allowance for doubtful debtors Finance expenses Loss before income tax Income tax expense Loss for the year/period Other comprehensive loss Items that may be re-classified to profit or loss: Foreign exchange translation Revaluation of available-for-sale assets Total other comprehensive loss, net of tax Total comprehensive loss for the year/period Loss per share (basic and diluted)		(Restated) 2,969,873 2,037,336 (2,211,516) (1,059,203)
		758,357 978,133
		29,928 91,964 (81,123) 445,140 63,854 - 3,971 14,881 (879,722) (778,303) (2,218,688) (2,447,001) (377,894) (641,820) (918,514) (843,219) (1,933,410) (1,961,224) (8,943) (33,252) (225,909) (37,613)
		(5,787,643) (5,212,314) - 3,869
		(5,787,643) (5,208,445)
		2,056,692 (2,579,357) (72,636) 72,636
		1,984,056 (2,506,721)
		(3,803,587) (7,715,166)
		$(0.03) $(0.03)

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018

	NOTES	AS AT 31 MARCH 2018 $	AS AT 31 MARCH 2017 $
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventory 5 Available-for-sale financial assets Other assets Total current assets NON-CURRENT ASSETS Intellectual property 6 Plant and equipment 7 Total non-current assets Total Assets CURRENT LIABILITIES Trade and other payables Deferred revenue 8 Borrowings Total current liabilities NON-CURRENT LIABILITIES Borrowings Deferred tax Total non-current liabilities Total Liabilities Net Assets EQUITY Issued capital 9 Reserves Accumulated losses Total equity		(Restated) 792,446 3,145,770 63,918 68,537 13,644 201,048 - 82,836 63,551 75,852
		933,559 3,574,043
		14,663,251 14,631,983 217,522 240,931
		14,880,773 14,872,914
		15,814,332 **18,446,957 **
		1,053,516 276,992 791,917 389,959 15,117 12,666
		1,860,550 679,617
		26,692 36,663 - -
		26,692 36,663
		1,887,242 716,280
		13,927,090 17,730,677
		36,268,139 36,268,139 (1,883,752) (3,867,808) (20,457,297) (14,669,654)
		13,927,090 17,730,677

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2018

	ISSUED CAPITAL $	OPTION AND PERFORMANCE RIGHTS RESERVE $	FOREX TRANSLATION RESERVE $	AVAILABLE- FOR-SALE RESERVE $	ACCUMULATED LOSSES $	TOTAL $
Balance at 1 April 2016 Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year Share-based payments Balance at 31 March 2017 (Restated) Balance at 1 April 2017 Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year Balance at 31 March 2018	35,863,139 704,993 (1,661,080) - (9,461,209) 25,445,843 - - - - (5,208,445) (5,208,445) - - (2,579,357) 72,636 - (2,506,721)
	- - (2,579,357) 72,636 (5,208,445) (7,715,166)
	405,000 (405,000) - - - -
	36,268,139 299,993 (4,240,437) 72,636 (14,669,654) 17,730,677
	36,268,139 299,993 (4,240,437) 72,636 (14,669,654) 17,730,677 - - - - (5,787,643) (5,787,643) - - 2,056,692 (72,636) - 1,984,056
	- - 2,056,692 (72,636) (5,787,643) (3,803,587)
	36,268,139 299,993 (2,183,745) - (20,457,297) 13,927,090

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2018

	NOTES	YEAR ENDED 31 MARCH 2018 $	YEAR ENDED 31 MARCH 2017 $
Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest paid Interest received Net cash flows (used in)/provided by operating activities 10 Cash flows from investing activities Purchase of plant and equipment Proceeds from disposal of AFS shares Net cash flows (used in)/provided by investing activities Cash flows from financing activities Repayment of advances Borrowings - payments Net cash flows (used in)/provided by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Foreign exchange fluctuations on opening cash balances Cash and cash equivalents at the end of the year		(Restated) 3,379,875 2,438,762 (5,638,052) (5,916,119) (225,909) (37,613) 29,928 91,964
		(2,454,158) (3,423,006)
		(17,594) (34,401) 74,054 -
		56,460 (34,401)
		- (12,485) (13,358) (12,678)
		(13,358) (25,163)
		(2,411,056) (3,482,570) 3,145,770 6,709,288 57,732 (80,948)
		792,446 3,145,770

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 BASIS OF PREPARATION

These financial statements include the financial statements of Flexiroam Limited (“the Company”) and its subsidiaries Flexiroam Sdn Bhd and Flexiroam Asia Limited (“the Group”). These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Australian Accounting Standards are equivalent to International Financial Reporting Standards (“IFRS”). Compliance with Australian Accounting Standards ensures that these financial statements comply with International Financial Reporting Standards.

Except for the cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected financial assets and financial liabilities.

NOTE 2 REVENUE

	YEAR ENDED 31 MARCH 2018 $	YEAR ENDED 31 MARCH 2017 $
Corporate sales1 Consumer sales2	874,482 1,625,093 2,095,391 412,243
	2,969,873 2,037,336

1 Corporate sales consist of business to business transactions involving local and foreign travel agencies.

2 Consumer sales consist of business to consumer transactions involving local and foreign travellers.

NOTE 3 COST OF SALES

	YEAR ENDED 31 MARCH 2018 $	YEAR ENDED 31 MARCH 2017 $
Network costs X-Microchip costs Material costs Commissions	(Restated) 1,627,257 [a]840,138 433,713 97,512 5,459 49,203 145,087 72,350
	2,211,516 1,059,203

a The amount of $400,613 which was related to costs of acquiring subscribers had been reclassified as marketing expenses to be reflected as an element of indirect costs.

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities

Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 ADMINISTRATION AND OPERATING EXPENSES

	YEAR ENDED 31 MARCH 2018 $	YEAR ENDED 31 MARCH 2017 $
Office equipment and general maintenance Others costs Professional fees Rental Software and stationery Talent and recruitment Travelling and transportation Utilities	9,035 8,656 97,053 33,130 418,775 416,155 185,217 197,001 52,791 32,582 46,681 21,261 28,490 44,623 41,680 24,895
	879,722 778,303

NOTE 5 INVENTORY

	AS AT 31 MARCH 2018 $	AS AT 31 MARCH 2017 $
Opening balance Purchases Distribution Closing balance	(Restated) 201,048 - 246,309 298,560 (433,713) (97,512)
	13,644 201,048

NOTE 6 INTELLECTUAL PROPERTY

	AS AT 31 MARCH 2018 $	AS AT 31 MARCH 2017 $
Carrying value opening balance Amortisation Foreign exchange translation effects Carrying value closing balance	14,631,983 18,494,452 (1,863,138) (1,895,854) 1,894,406 (1,966,615)
	14,663,251 14,631,983

The intellectual property asset is known as Flexiroam Malaysia, an international roaming service for travellers who travel overseas to gain access to high speed cellular data without having to change SIM card. It operates on a sophisticated integrated network of services, forming a unified system now known as Flexiroam X.

Flexiroam intellectual property is an intangible asset with a finite life of 10 years and stated at cost. It comprises of patent filings on its core technology and brand trademarks across 5 countries.

Due to sustained reported operating losses which constitute an indicator of impairment, the management has undertaken impairment test in intellectual property. The recoverable amount, which is based upon five-year cash flow forecasts at a discount rate of 10% per annum, is in excess of the carrying value of the assets. No allowance for impairment loss on assets is therefore required.

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 PROPERTY, PLANT AND EQUIPMENT

	FURNITURE & FITTINGS $	OFFICE EQUIPMENT $	COMPUTER $	RENOVATION $	MOTOR VEHICLE1 $	BEAMER2 $	TOTAL $
AT COST As at 1 April 2016 Additions Foreign exchange effects As at 31 March 2017 Additions Adjustments Foreign exchange effects As at 31 March 2018 ACCUMULATED DEPRECIATION As at 1 April 2016 Depreciation expense Foreign exchange effects As at 31 March 2017 Depreciation expense Adjustments Foreign exchange effects As at 31 March 2018 CARRYING AMOUNT As at 31 March 2017 As at 31 March 2018	10,169 28,032 12,465 157,170 96,116 42,987 346,939 - 8,610 14,368 11,422 - - 34,400 (1,149) (3,690) (2,282) (18,447) (10,856) (4,855) (41,279)
	9,020 32,952 24,551 150,145 85,260 38,132 340,060 - 214 9,762 7,617 - - 17,593 (6) 167 (94) - - - 67 1,267 4,658 4,243 21,702 11,967 5,352 49,189
	10,281 37,991 38,462 179,464 97,227 43,484 406,909
	1,397 8,891 1,714 22,339 8,009 358 42,708 1,924 6,650 3,880 30,645 18,201 4,070 65,370 (279) (1,424) (439) (4,457) (2,053) (297) (8,949)
	3,042 14,117 5,155 48,527 24,157 4,131 99,129 1,889 6,969 6,548 32,943 17,916 4,006 70,271 (6) 107 (34) - - - 67 588 2,586 1,281 9,623 4,920 922 19,920
	5,513 23,779 12,950 91,093 46,993 9,059 189,387
	5,978 18,835 19,396 101,618 61,103 34,001 240,931
	4,768 14,212 25,512 88,371 50,234 34,425 217,522

1Motor vehicle is used as security for the borrowings.

2 Beamer is a wireless router device which acts as a WiFi hotspot that can be connected to a cellular network and provide internet access to other devices.

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 DEFERRED REVENUE

	AS AT 31 MARCH 2018 $	AS AT 31 MARCH 2017 $
Corporate sales Consumer sales Reconciliation Opening balance Net additions Foreign exchange translation effects Closing balance	7,561 153,108 784,356 236,851
	791,917 389,959
	389,959 754 397,785 389,293 4,173 (88)
	791,917 389,959

Advance billing to customers that give rise to provisions for unearned revenue in respect of services which have not been rendered as at the end of the reporting period.

NOTE 9 ISSUED CAPITAL

	**Number **	$
Ordinary shares issued (net of share issue costs) Reconciliation Balance at 1 April 2016 Share issue – 5 April 20161 Balance at 31 March 2017 Balance at 1 April 2017 Movements for the period Balance at 31 March 2018	193,689,501 36,268,139
	190,989,501 35,863,139 2,700,000 405,000
	193,689,501 36,268,139
	193,689,501 36,268,139 - -
	193,689,501 36,268,139

1 On 5 April 2016, following Shareholder approval obtained on 30 March 2016, 2,700,000 fully paid ordinary shares were issued to Jefrey Ong (and/or his nominees) for his contribution to the Company’s achievement of a $6 million revenue milestone.

Fully paid ordinary shares carry one vote per share and carry the right to dividends. Ordinary shares participate in dividends and the proceeds on winding up of the Company 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.

Dividends

No dividends were paid or proposed during the year ended 31 March 2018 (31 March 2017: $nil).

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Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 CASH FLOW INFORMATION

Reconciliation of loss for the year/period to net cash flows from operating activities

	AS AT 31 MARCH 2018 $	AS AT 31 MARCH 2017 $
Loss for the period Depreciation and amortisation Forex movements Gain from disposal of AFS shares Decrease in trade and other receivables Increase in inventory (Increase)/Decrease in other assets Increase/(Decrease) in trade and other payables Increase in deferred revenue Increase/(Decrease) in deferred tax Net cash from operating activities	(Restated) (5,787,642) (5,208,446) 1,933,410 1,961,224 81,125 (494,025) (63,854) - 4,619 28,813 187,403 (201,047) 12,300 (69,645) 776,524 175,276 401,957 389,205 - (4,361)
	(2,454,158) (3,423,006)

NOTE 11 SEGMENT REPORTING

AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about the components of the group that are regularly reviewed by the Chief Operating Decision Maker in order to allocate resources to the segment and to assess its performance.

The Group’s operating segments have been determined with reference to the monthly management accounts used by the Chief Operating Decision Maker to make decisions regarding the Company’s operations and allocation of working capital. Due to the size and nature of the Group, the Board as a whole has been determined as the Chief Operating Decision Maker.

As at 31 March 2018, the Group operated in one business segment being the telecommunication business segment and three geographical market segments, namely the telecommunications market in Malaysia, Singapore and other countries where each country have contributed less than 10% to total sales for the current period.

During the current year, the Chief Decision Maker has been reviewing operations and making decisions based on the supply and provision of telecommunications as a single operating unit. Internal management accounts are consequently prepared on this basis.

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