FLEXIROAM LIMITED — Annual Report 2019

May 29, 2019

Flexiroam Limited ABN 47 090 671 819 and its Controlled Entities Appendix 4E – Preliminary Final Report for the Year Ended 31 March 2019

		Year ended	Year ended	Year ended
	% Increase /	31 Mar 2019	31	Mar 2018
Results for announcement to market	(Decrease)	$		$
Revenue from ordinary activities	92%	5,695,544	2,969,873
Loss after tax from ordinary activities attributable
to members	-84%	(3,110,393)	(19,139,331)
Net loss for the period attributable to members	-84%	(3,110,393)	(19,139,331)
		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		(0.41)
Tangible asset backing per ordinaryshare – current	reporting period	222,714,501		(1.42)

Commentary on the Results for the Period

Financial Performance Review

Flexiroam has experienced another year of solid sales growth, with revenue increasing by 92% to $5.70 million (FY2018: $2.97 million). Flexiroam has continued its global sales expansion efforts, primarily through collaboration with international airlines and targeting existing subscribers to generate recurring revenue. As at the end of FY2019 Flexiroam had 260,000 subscribers (end FY2018: 131,000), an increase of 98% in the customer base.

Gross profit increased by 71% to $2.39 million (FY2018: $1.40 million). However, gross margin fell from 47% in FY2018 to 42% in the current year due to changes in revenue composition. The changes were brought about by the introduction of new data plans during the year, in line with the Company’s strategy of customizing its products to suit specific geographic segments and encourage increasing subscriber take-up. Notably, the popular Local Data Plan product (introduced in FY2018) performed well.

The loss for the year net of tax reduced significantly by 84% to $3.11 million (FY2018: $19.14 million) mainly due to intellectual property impairment and amortization charges incurred in FY2018 amounting to $16.2 million.

In line with improved cash revenue generation during the year, Flexiroam recorded an encouraging improvement to net cash flow from operating activities. The net outflow reduced by 59% to $1.0 million (FY2018: outflow of $2.45 million), reflecting the improved sales performance and an increased focus on cost efficiencies. During FY2019 the Company undertook a share placement to raise a total of $1.16 million in support of Flexiroam’s expansion strategy as well as for general working capital needs. Flexiroam ended FY2019 with cash reserves of $0.75 million (FY2018: $0.79 million).

Global Expansion

In pursuit of Flexiroam’s stated strategy to expand business globally, during the current financial year Flexiroam entered into a strategic collaboration agreement with Malaysia Airlines Berhad (“MAS”). Under the agreement, Flexiroam expects to distribute up to 6 million Flexiroam ConnectSIM to MAS’s international travellers. The ConnectSim packages are also distributed through other partnerships with airlines and affiliates such as Scoot, AirAsia and Agile Azur and these partnerships are expected to significantly increase Flexiroam’s global reach.

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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 2019

Latest Innovations - eSIM

Flexiroam continues to innovate and invest in Research and Development to stay ahead of the technology curve and maintain its competitiveness. During the year, Flexiroam launched its innovative eSIM product offerings to customers worldwide. Flexiroam’s eSIM allows users the unprecedented ability to switch carriers globally without any physical manipulation to the SIM card. This advancement effectively lowers the barrier to entry in acquiring global customers in a cost effective manner. Flexiroam, being an asset light business, sees its eSIM offerings as a significant game changer in its global expansion quest.

Prior Period Restatement

A reclassification has been made to prior period’s financial statements for the year ended 31 March 2018 to conform to the current year’s presentation. Specifically, a total of $639,931 related to materials cost, messaging and hosting and commissions in cost of sales have been reclassified to be included in operating expenses. There are also reclassifications between the operating expenses accounts for a more meaningful presentation of the results for the period. The reclassifications had no impact on results of operations previously reported.

Other restatements have also been made to prior period financial statements, including an adjustment to the unrealized foreign exchange gain or loss in prior years for the effects of changes in foreign exchange of intercompany accounts within the group. This results in the recognition in the profit or loss of an additional unrealized foreign exchange loss of $1,532,244 in FY2017 and an additional unrealized foreign exchange gain of $1,058,440 in FY2018. The prior year financial statements were also restated to record expenses incurred during the prior year that were recorded in the current year, amounting to $53,046.

Audit

This Preliminary Final Report is based on accounts which are in the process of being audited. It is likely the audit report will be subject to an emphasis of matter in relation to the Company’s ability to continue as a going concern.

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Jefrey Ong Managing Director Signed this 30[th] day of May 2019

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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 2019

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2019

	NOTE	YEAR ENDED 31 MARCH 2019 $	YEAR ENDED 31 MARCH 2018 $
Revenue 2 Cost of sales Gross profit / (loss) Interest received Foreign exchange gains / (losses) Gain from disposal of AFS shares Other income Administration and operating expenses Marketing expenses Research and development Staff costs Depreciation and amortisation Allowance for doubtful debtors Fixed asset written off Finance expenses Impairment of intellectual property 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) 5,695,544 2,969,873 (3,301,447) (1,571,585)
		2,394,097 1,398,288
		2,101 29,928 311,972 977,317 - 63,854 50 3,971 (721,716) (815,561) (3,613,758) (3,323,148) (485,483) (377,830) (552,125) (571,256) (75,575) (1,933,410) - (8,493) (43,392) - (326,564) (225,909) - (14,357,082)
		(3,110,393) (19,139,331) - -
		(3,110,393) (19,139,331)
		(489,608) 691,585 - (72,636)
		(489,608) 618,949
		(3,600,001) (18,520,382)
		$(0.01) $(0.10)

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 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2019

	NOTE	AS AT 31 MARCH 2019 $	AS AT 31 MARCH 2018 $
CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventory 3 Other assets Total current assets NON-CURRENT ASSETS Plant and equipment Total non-current assets Total Assets CURRENT LIABILITIES Trade and other payables 4 Deferred revenue 5 Borrowings Total current liabilities NON-CURRENT LIABILITIES Borrowings Total non-current liabilities Total Liabilities Net Assets EQUITY Issued capital 6 Reserves Accumulated losses Total equity		(Restated) 748,247 792,446 94,845 63,918 219,806 13,644 2,726 63,551
		1,065,624 933,559
		116,980 217,522
		116,980 217,522
		1,182,604 1,151,081
		2,148,774 1,107,060 2,177,388 791,917 15,508 15,117
		4,341,670 1,914,094
		11,875 26,692
		11,875 26,692
		4,353,545 1,940,786
		(3,170,941) (789,705)
		37,429,139 36,268,139 (2,208,993) (1,716,615) (38,391,087) (35,341,229)
		(3,170,941) (789,705)

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 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2019

	ISSUED CAPITAL $	OPTION AND PERFORMANCE RIGHTS RESERVE $	FOREX TRANSLATION RESERVE $	AVAILABLE- FOR-SALE RESERVE $	ACCUMULATED LOSSES $	TOTAL $
Balance at 1 April 2017 Impact of prior period error adjustments Adjusted 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 Balance at 1 April 2018 Impact of changes in accounting standards Adjusted balance 1 April 2018 Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year Shares issued during the year Balance at 31 March 2019	36,268,139 299,993 (4,240,437) 72,636 (14,669,654) 17,730,677 - - 1,532,244 - (1,532,244) -
	36,268,139 299,993 (2,708,193) 72,636 (16,201,898) 17,730,677 - - - - (19,139,331) (19,139,331) - - 691,585 (72,636) - 618,949
	- - 691,585 (72,636) (19,139,331) (18,520,382)
	36,268,139 299,993 (2,016,608) - (35,341,229) (789,705)
	36,268,139 299,993 (2,016,608) - (35,341,229) (789,705) - - (2,770) - 60,535 57,765
	36,268,139 299,993 (2,019,378) - (35,280,694) (731,940) - - - - (3,110,393) (3,110,393) - - (489,608) - - (489,608)
	- - (489,608) - (3,110,393) (3,600,001) 1,161,000 - - - - 1,161,000
	37,429,139 299,993 (2,508,986) - (38,391,087) (3,170,941)

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 2019

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2019

	NOTE	YEAR ENDED 31 MARCH 2019 $	YEAR ENDED 31 MARCH 2018 $
Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest paid Interest received Net cash flows used in operating activities 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 Proceeds from issue of share capital 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) 7,081,703 3,379,875 (7,752,124) (5,637,557) (326,564) (225,909) 2,101 29,928
		(994,884) (2,453,663)
		(14,473) (17,594) - 74,054
		(14,473) 56,460
		1,161,000 - (15,092) (13,358)
		1,145,908 (13,358)
		136,551 (2,410,561) 792,446 3,145,770 (180,750) 57,237
		748,247 792,446

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 2019

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.

Adoption of New and Revised Australian Accounting Standards

Standards and Interpretations applicable to 31 March 2019

a. AASB 15 “Revenue from Contracts with Customers”

In the year ended 31 March 2019, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current year reporting period.

As a result of this review, the Group adopted the following new and revised Australian Accounting Standards from 1 April 2018. The new and amended Standards are not expected to have a significant impact on the Group’s financial statements except as disclosed below.

AASB 15 “Revenue from Contacts with Customers” is a new Standard introduced by AASB to replace AASB 118. The core principle in AASB 15 is that an entity recognises revenue to depict the transfer of promised goods and/or services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and/or services. In other words, revenue is recognised when a customer obtains control of a good and/or services and thus has the ability to direct the use and obtain benefits from the goods and/or services.

The Group elected to apply the modified retrospective approach of adopting AASB 15. The Group applied the Standard in full for the current reporting period. In respect of the prior periods, the Group retained the prior-period figures as reported under the previous standards and recognised the cumulative effect of applying AASB 15 to all contracts that have not been completed at the beginning of the reporting period as an adjustment to the opening balance of equity.

Upon the adoption of AASB 15, the Group recognised an additional deferred revenue from the sale of x-licenses to the corporate partners on the statement of financial position and additional revenue from expected breakage amount in proportion to the pattern of rights exercised by the customer. The effects of such adjustment in revenue were reflected to the opening balance of equity of the current year.

The statement of financial position as at 1 April 2018 was restated resulting to a decrease in deferred revenue and increase in equity of $57,765.

b. AASB 9 “Financial Instruments”

AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities. The Group concluded that adoption of the new Standard has no material impact on the financial statements of the Group.

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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 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 REVENUE

	YEAR ENDED 31 MARCH 2019 $	YEAR ENDED 31 MARCH 2018 $
Corporate sales1 Consumer sales2	685,022 874,482 5,010,522 2,095,391
	5,695,544 2,969,873

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 INVENTORY

	AS AT 31 MARCH 2019 $	AS AT 31 MARCH 2018 $
Opening balance Purchases Transfer to profit and loss Closing balance	13,644 201,048 1,097,190 246,309 (891,028) (433,713)
	219,806 13,644

NOTE 4 TRADE AND OTHER PAYABLES

	AS AT 31 MARCH 2019 $	AS AT 31 MARCH 2018 $
Trade and other payables Accrual of expenses	1,890,419 772,356 258,355 334,704
	2,148,774 1,107,060

NOTE 5 DEFERRED REVENUE

	AS AT 31 MARCH 2019 $	AS AT 31 MARCH 2018 $
Corporate sales Consumer sales Reconciliation Opening Adjustment related to AASB 15 adoption Net additions Foreign exchange translation effects Closing balance	985,085 7,561 1,192,303 784,356
	2,177,388 791,917
	791,917 389,959 (57,765) - 1,381,808 397,785 61,428 4,173
	2,177,388 791,917

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.

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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 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 ISSUED CAPITAL

	Number	$
Ordinary shares issued (net of share issue costs) Reconciliation Balance at 1 April 2017 Movements for the period Balance at 31 March 2018 Balance at 1 April 2018 Share issue - 22 August 2018 [a] Balance at 31 March 2019	222,714,501 37,429,139
	193,689,501 36,268,139 - -
	193,689,501 36,268,139
	193,689,501 36,268,139 29,025,000 1,161,000
	222,714,501 37,429,139

[a] On 22 August 2018, the Company successfully completed a capital raising of $1.16m by the issue of 29,025,000 ordinary fully paid shares at an issue price of $0.04 each. The Placement was within the Company’s 15% share issue capacity under ASX Listing Rule 7.1.

Dividends

No dividends were paid or proposed during the year ended 31 March 2019 (31 March 2018: $nil).

NOTE 7 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.

During the year, the Group changed the geographical segment presentation in order to provide a more meaningful and useful information to the Chief Operating Decision Maker.

As at 31 March 2019, the Group operated in one business segment being the telecommunication business segment and 7 geographical market segments, namely the telecommunications market in Africa, Asia, Europe, North America, South America, Oceania, and Antarctica.

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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