Transcription

1 My Net Fone Limited Annual Report 2007

2 Contents Board of Directors 2/ Company Profile, Vision & Values 3/ What is VoIP? 4/ Key Achievements 5/ Chairman s Review 6/ Managing Director s Review 7/ Business Highlights 10/ Directors Report 14/ Income Statement 21/ Balance Sheet 22/ Cash Flow Statement 23/ Statement of Changes in Equity 24/ Notes to the Financial Statements 25/ Directors Declaration 49/ Auditor s Independence Declaration 50/ Independent auditor s report 51/ ASX Additional Information 53/ Corporate information 55/ MyNetFone PowerSaver plan GOLD AWARD WINNER BEST VoIP PLAN, BUSINESS USER MONEY MAGAZINE, BEST OF THE BEST 2007 MyNetFone JumboSaver plan SILVER AWARD WINNER BEST VoIP PLAN, HOME USER MONEY MAGAZINE, BEST OF THE BEST 2007

3 Board of Directors 2 Mr Terry Cuthbertson B. Bus., CA Chairman A Chartered Accountant, previously partner with KPMG with extensive corporate finance expertise and knowledge. Also Director of S2Net Limited, Montec International Limited, Austpac Resources N.L. and Healthzone Limited. Director since March 2006 Mr Andy Fung B.E. MCom Managing Director Mr René Sugo B.Eng. (Hon) Technical Director Mr Michael Boorne Electronics Eng. Dip. NonExecutive Director Ms Catherine Ly B.Bus., CPA Chief Financial Officer Extensive experience in telecommunications. Formerly Director of Business Development of Lucent Technologies. Director of Symbio Networks Pty Ltd since Extensive experience in telecommunications. Formerly Technical Director of Lucent Technologies. Director of Symbio Networks Pty Ltd since A successful entrepreneur with extensive experience in combining technical expertise with commercial and corporate experience. Founder of Sprit Modems and Mitron Pty Ltd and previously a non Executive Director of Netcomm Ltd. Company Secretary since July 2006 Director since March 2006 Director since March 2006 Director since December 2006

4 Company Profile 3 My Net Fone Limited (ASX: MNF), listed on the Australian Securities Exchange, is Australia s leading broadband VoIP service provider. Headquartered in Sydney, Australia, the company provides voice and broadband services for customers to make and receive phone calls over any type of broadband Internet connection. The company s mission is to help customers save on their phone bills, deliver excellent customer service and offer innovative service offerings. Vision To revolutionise how our customers communicate and enhance their communication experiences by delivering innovative solutions with superior value and quality customer service. Values Superior Customer Service Excellent Quality Value for money To be recognised by our customers, employees and shareholders as the most innovative and customercentric communications provider in Australia. Innovation Team work Integrity Passion To be an employer of choice and provide our employees with relevant training, career development opportunities and a great environment in which to work.

5 What is VoIP? 4 VoIP or Voice over IP is a new communication technology which converts voice into packets of data. Unlike conventional voice services which require a dedicated connection, the data packets in VoIP are transmitted over Internet based networks and are reassembled at the receiving end. Subscribers make or receive VoIP calls via their broadband connection, which may be DSL, cable or broadband wireless. These calls are then sent via the Internet to the receiving subscriber anywhere in the world. A VoIP subscriber uses the VoIP service just like a conventional phone service. What is convergence? Convergence is the integration of voice, data, Internet and business applications on one network. The implementation and maintenance of convergence is more cost effective than separate traditional networks. The circuit switched network (voice), dedicated private line network (data) and the Internet can all be combined into a single network connection, eliminating the need to continue to invest in separate legacy data or voice platforms. Internet Benefits of VoIP Wall Socket Cost saving: VoIP service can significantly reduce communication costs by providing low call rates, low monthly fees and free onnet calls DSL/Cable Modem Router Convergence: Convergence is the integration of voice, data and Internet; delivering convenience and flexibility Enhanced Features: VoIP delivers range of enhanced features to customers Voice Adaptor Telephone Why is VoIP important? The continuing advance in computer power and software development, coupled with the abundance of bandwidth and the ubiquitous nature of the Internet, is causing a paradigm shift towards convergence of voice, data, video and multi media services. Previously, separate standalone networks were built and operated to deliver different types of services, resulting in a myriad of incompatible systems and processes. My Net Fone Limited is well positioned to capitalise on the industry shift to VoIP and convergence all systems and processes have been developed for the specific purpose of delivering efficient and quality VoIP services.

6 Key Achievements June 07 5 Financial year 06/07 % change from last year Paying customers as of June 07 35, % Gross revenue $3,275, % Gross margin $747, % Revenue per employee $93,600 20% Percentage of enterprise vs residential customers

7 Chairman s Review 6 This 2006/07 period is the first full financial year that My Net Fone Limited has been in operation following its successful listing on the ASX in May During this period, the company has firmly established itself as one of the leading providers of VoIP services in the Australian market and has experienced substantial growth in all its business segments. The company s gross revenue and gross profit for the year grew to $3,275,942 (2006: $1,603,436) and $747,963 (2006: $142,958) respectively. The number of paying customers reached 35,000 in June, representing a 180% increase to the same time last year. The deferred revenue for the year increased to $437,539 as compared to $217,926 in 2006 an increase of 100.8%. The deferred revenue comprised of call credits deposited by customers into their accounts for making phone calls. The revenue will be recognised once the customers have progressively used up the call credits. The business gross margin increased across the product line while the operating expenses remained reasonably static. The company made a loss of $3,250,320 which includes a $700,000 share base expense which arose from the valuation of the options by an independent professional valuer in accordance with accounting standards. These options were granted in the February Extraordinary General Meeting. The company s net trading loss is $2,550,320. During the year, Mr Michael Boorne joined the board as a non Executive Director. Mr Boorne brings with him many years of experience in the telecom and IT sector of the Australian industry combining technical expertise with commercial flair and corporate management. We look forward to his valuable contributions to providing strategic input to the board. We expect the My Net Fone business continues to grow strongly in the new financial year with customer signups increasing steadily every month. The company will have a range of new generation service features which will attract more customers to join the service as well as lifting the ARPU (average spend per user). My Net Fone s cash burn is decreasing and is moving towards positive territory. While My Net Fone continues to build a creditable and reputable brand within its resource constraint, the company is very well aware of the highly competitive nature of the Australian market and is never complacent about what it must do to win and keep its customers. The 2006/07 was a successful year for the company with gross revenue doubled and customer numbers trebled. I want to thank the executive team, Andy Fung, Rene Sugo and Catherine Ly for providing the leadership to successfully grow the business and manage the internal resources efficiently. I also would like to thank my fellow Director Mr Boorne for his contributions to the board. Last but not least, my sincere thanks to the many shareholders for their continued support and commitments to the company Terry Cuthbertson Chairman

8 Managing Director s Review 7 I am pleased to report that the company achieved excellent results for the financial year of 2006/07. At the end of June, the company had over 35,000 paying customers, a 180% increase from the same time last year. Our gross revenue grew to $3,275,942 with gross profit to $747,963, compared with $1,603,436 and $142,958 respectively last financial year. The company made a net loss of $3,250,320 which includes a $700,000 share base expense which arose from the valuation of the options granted in the Extraordinary General Meeting in February. The gross margin has increased across the range of products. Business Highlights My Net Fone now offers a range of comprehensive service plans that address the needs of different customer and market segments. The company has plans that cater for customers just starting out who want to try VoIP for the first time as well as plans that are suited to experienced and heavy users. While the customer profile is still predominantly residential, the number of customers in the home office (SOHO) and business segments has increased significantly during the year. The increase is due to the introduction of the PRO plans as well as a range of enhanced features which business users have found useful in helping them to run their business more efficiently as well as saving costs. Business customers are also attracted to the MNF business solutions because they can utilise VoIP on a small scale initially to gain confidence in the quality and reap the cost benefits before implementing a wide scale deployment. My Net Fone customers can use the service with any broadband connection, typically DSL and cable. My Net Fone successfully implemented and delivered VoIP services to users with satellite broadband connections in regional and remote parts of Australia. The successful deployment of the service over satellite broadband with reasonable quality and reliability is a milestone to the company in delivering the benefits of VoIP to nearly every corner of Australia. My Net Fone launched the GlobalSaver service which was very well received by customers who make frequent calls to overseas destinations. Customers can make 10 cents untimed calls after 100 free calls to 30 different countries around the world including the US, UK, New Zealand, Hong Kong, China and Singapore. A highlight of the year was My Net Fone s successful participation in the leading IT&T trade exhibition CeBIT. The company s success was measured not just in terms of the exceptional sales achieved, but also the profile and brand awareness that resulted in during and after the event. My Net Fone had a stand that was not only professional and functional, but also well attended by visitors comprising novice as well as experienced VoIP users. The goodwill and creditability generated as a result of the company s presence at the exhibition has been invaluable to the MyNetFone brand as well as to the company. My Net Fone is very proud to have won Money magazine s Best of the Best 2007 Gold award for Best VoIP plan Business User and Silver award for the Best VoIP Plan Home User. The magazine worked with a range of Australian experts to develop its winners list, which covers more than 60 categories and over 300 individual products. My Net Fone won the Gold award in this category (i.e. Best VoIP Plans Business User) with the PowerSaver plan.

9 8 Internal Operations My Net Fone launched a new website which provides freshness to the brand and enables customers to navigate and obtain information easily about the company s products and services. The customer account portal has also been updated with an array of new features which include the ability for the customers to update their profile and change service plan without the need of contacting My Net Fone s customer service centre. We will continue to enhance and add new features to the portal. Customers will increasingly have control over how they want their service to be tailored to their own individual needs. We believe that the customer selfcontrol functions will become a key differentiating factor of the My Net Fone service. My Net Fone constantly develops and finetunes its internal systems and processes to deliver highly efficient, accurate and fast order fulfilment. Since My Net Fone sells a wide range of hardware devices and service plans, the company continually works on improving its provisioning and fulfilment processes and ensuring its customers can enjoy the service as soon as is practicable after placing their order. My Net Fone prides itself in delivering efficient and friendly customer service. The company regularly monitors key performance indicators (KPIs), enhances its processes and provides training and feedback to its staff with the aim of delivering a highquality and efficient service to its customers. We continue to develop and reinforce an ethos of service quality and a culture of doing it now and doing right the first time throughout the organisation. Going Forward With this year s results, My Net Fone has demonstrated a track record of exceptional growth. The company s brand awareness and profile in the market are continually increasing and its presence will even be stronger as time goes on. My Net Fone s strategies in the new financial year focus in the following areas: Increasing customer numbers Increasing ARPU (average spend per user) Maintaining the cost base Maintaining the quality and reliability of the service Developing additional marketing channels My Net Fone has plans to roll out a range of enhanced services and features which will attract new customers as well as increasing the ARPU. The company recently launched the new MyNetFone OntheGo service which enables My Net Fone to tap into the mobile market segment. The new MyNetFone Global Access service allows users without broadband connection to access My Net Fone s low call rates for the first time wherever they are on any phone and make calls to anywhere in the world. Global Access customers do not need to change their existing phone service provider and the service would not interfere with it.

10 9 Another recently launched feature that will increase the ARPU is the Follow Me feature of My Net Fone s Unified Messaging service. By simply using the MyNetFone My Account portal, customers can redirect their incoming calls to any service on the My Net Fone network or to a mobile or landline service on the public network within Australia or overseas. With this service customers have the ability to control their incoming calls to ring multiple destination numbers sequentially based on various options, or to deposit a voic which will be delivered to their desktop in realtime. Looking at the broadband market in Australia, the customer uptake is still continuing and is far from saturation. The percentage of VoIP users in relation to the total broadband market is still relatively small and the potential growth is therefore high. My Net Fone with its experience and track record is well positioned to take advantages of this growth. Without dedicated staff with the passion and commitment to customer service, no organisation would be able to survive, let alone grow in this increasingly competitive world. My Net Fone is very fortunate that its staff is highly motivated and committed to delivering quality products and customer service. The company regularly receives positive feedback and compliments from customers on their experiences with My Net Fone staff. I want to take this opportunity to thank our staff for their dedication and contributions as well as their passion in serving our customers. I have no doubt that the brand and services of My Net Fone will continue to grow in the new financial year and look forward to your continuing support. Andy Fung Managing Director

11 2006/07 Business Highlights 10 My Net Fone delivers a comprehensive range of broadband phone and data solutions to business and residential market in Australia. In 2006/07 My Net Fone further developed product and service offerings for both markets, adding a range of enhanced service features and competitively priced plan choices to increase the value proposition, provide superior service to our customers and stay competitive in the market. Residential Segment My Net Fone s residential broadband phone service is available to our customers with a broadband Internet connection and delivers significant and often unbelievable savings on their phone bills. My Net Fone s residential service plans offer a wide choice to cover every possible need and budget ranging from no monthly service fee suitable for beginners trying out VoIP to plans offering free calls every month with low rates well suited to sophisticated and heavy users. In December 2006, My Net Fone won Money magazine s Best of the Best 2007 Silver award for Best VoIP plan Home User, for its JumberSaver service plan. In June 2007, My Net Fone lowered the entrycost to VoIP consumers by offering VoIP adaptors under $20. In July 2007, My Net Fone enhanced its MegaSaver service plan and added 100 free local/national calls to this already attractive service plan, delivering superior value for money for low call volume users. My Net Fone launched GlobalSaver. Customers can call 30 overseas contries around the world with untimed calls. These countries include New Zealand, the US, UK, Hong Kong, China, Singapore and many more, reaching 2.5 billion people or 40% of the world s population. My Net Fone provides New Zealand DID. Can I just say WOW. Quick activation and great quality phone calls.. Very impressed, keep up the great work Residential customer, March Been a VoIP user for the past 2 years and have found MNF to be the best so far with regard to reliability when making & receiving calls... thus far it s been a very pleasant experience. much more so than a traditional provider. Excellent work guys! Residential customer, March 2007.

12 2006/07 Business Highlights 11 Business Segment MNF Business Solutions offer a comprehensive range of voice and data solutions for business of all sizes, from small office/home office to large corporate users. We know business customers want to reduce their communications costs and demand quality, reliability and flexibility with little risk exposure. MNF Business Solutions are able to meet the stringent requirements of the business enterprises and reduce their telecommunications costs significantly while maximising productivity and efficiency. MNF Buiness Solutions deliver quality customised solutions based on customers unique business requirements, including a wide range of services from basic multiline VoIP service plans to premium phone and data services, high speed Internet and business applications all on one converged service. In December 2006, My Net Fone won Money magazine s Best of the Best 2007 Gold award for Best VoIP plan Business User, for its PowerSaver PRO service plan. In September 2006, My Net Fone launched a new suite of converged VoIP and Internet broadband solutions including hardware ranging from multiport gateways to the latest generation of IP PBX s, plus other modern telephony services essential for today s enterprises including private IP networks, managed firewall, 1300 numbers and lines, Interactive Voice Response (IVR), virtual office numbers, fax over IP and more. My Net Fone launched a range of new PRO services targeted at the SOHO and small business market. The new PRO services comprise multiple telephone lines on one low cost monthly rental with free calls included every month. My Net Fone launched an innovative mobile VoIP service, MyNetFone OnTheGo, which users can make MyNetFone VoIP calls with supported Nokia mobile devices. Historically OnCall Communications has been with traditional providers for all of our landlines... We have moved all fixed services across to MyNetFone, and have found the call quality, redundancy, technical expertise and service second to none. MyNetFone has allowed us to expand our business with very little capital outlay. Moreover, MyNetFone has not only exceeded all expectations but have also managed to reduce our monthly phone bill by over 40%. James Stewart, Director I.T. OnCall Communications, May 2007.

13 12 MyNetFone in CeBIT 2007 Staff in CeBIT 2007 MyNetFone in CeBIT 2007 New website for 2007 Christmas Party 06

14

15 Directors Report 14 FOR THE YEAR ENDED 30 JUNE 2007 Your directors present this report on the company and its controlled entity (the economic entity) for the financial year ended 30 June Directors The directors of the Company at any time during or since the end of the financial year are: Name and qualifications Experience, special responsibilities and other directorship Mr Terry Cuthbertson B.Bus., CA Chairman A Chartered Accountant, previously partner with KPMG with extensive corporate finance expertise and knowledge. Also Director of S2 Net Limited, Montec International Limited, Austpac Resources N.L. and Healthzone Limited. Director since March 2006 Mr Michael Boorne Electronics Eng. Dip. NonExecutive Director A successful entrepreneur with extensive experience in combining technical expertise with commercial and corporate experience. Founder of SpritModems and Mitron Pty Ltd and previously a non Executive Director of Netcomm Ltd. Director since December 2006 Mr Andy Fung B.E. MCom Managing Director Extensive experience in telecommunications. Formerly Director of Business Development of Lucent Technologies. Director of Symbio Networks Pty Ltd since Director since March 2006 Mr René Sugo B.Eng. (Hon) Technical Director Extensive experience in telecommunications. Formerly Technical Director of Lucent Technologies. Director of Symbio Networks Pty Ltd since Director since March 2006 Company Secretary Ms Catherine Ly B.Bus., CPA, is Chief Financial Officer for the Company and has been appointed as Company Secretary since July Board and Committee Meetings From 1/7/06 to 30/6/07, the Directors held 12 board meetings and 4 audit committee meetings. Each director s attendance at those meetings is set out in the following table. Committe Meetings Attended Directors Board Audit Eligible to Attend Attended Eligible to Attend Attended T. Cuthbertson A. Fung R. Sugo M. Boorne

16 Directors Report 15 Operating Result The consolidated loss of the Group for the financial year after providing for income tax amounted to $3,250,320 (2006: $1,406,147). This loss includes a charge of $700,000 due to accounting for sharebased expense in relation to the options granted in February EGM. Review of Operations A review of the operations of the economic entity during the financial year and the results of those operations are as follows: The gross revenue and gross profit for the year are $3,275,942 (2006:$1,603,436) and $747,963 (2006:$142,958) respectively. The revenue growth was due to the increase in subscriber growth and the gross profit was achieved as a result of economies of scale and efficient application of resources. The deferred revenue for the year increased to $437,539 as compared with $217,926 in 2006 an increase of 100.8%. The deferred revenue is the call credits deposited by the customers in their accounts for making future phone calls. This will be recognized once the customers have progressively used up the call credits. The subscriber numbers at the end of June exceeded 35,000 representing a 180% increase over last year. We expect the trend of subscriber growth to continue as a result of sustained marketing efforts and the brand recognition and credibility that have gradually been built up in the market. We continue to work with existing and new equipment suppliers that offer unique value propositions. At the same time, we are developing new enhanced product offerings and solutions suitable for the residential and enterprise sectors. These products and solutions are expected to deliver higher average call spend per user as well as increase in subscriber numbers. We strive to continue lowering our cost base by exploiting the economies of scale, automated processes and systems as well as efficient application of resources. Significant Changes in the State of Affairs No significant changes in the economic entity's state of affairs occurred during the financial year. Principal Activities The principal activity of the Group during the course of the year was to provide broadband VoIP phone service to residential and business customers. In the financial year, the Group derived its revenue from: Monthly fees and call charges from residential and business customers Sales of customer premises devices, i.e. voice adaptors Wholesale charges of traffic minutes Sale of prepaid calling cards After Balance Date Events There were no significant events after the balance date that would materially alter the operations or financial performance of the company.

17 Directors Report 16 Future Developments The likely developments in the operations of the economic entity and operations in future financial years are as follows: The sale of broadband Internet and VoIP bundled services The development of enhanced services for residential and business customers The sale and use of My Net Fone OntheGo VoIP service over WiFi and 3G based mobile handsets The development and joint marketing with strategic partners. Environmental Issues The Group s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or a State or Territory. Dividends No dividends were declared or paid since the start of the financial year. No recommendation for payment of dividends has been made. Options Options that were granted during or since the end of the financial year by the company to directors. Number of options Exercise price Expirydate granted Directors Mr Terry Cuthbertson 1,000, cents 30 September 2008 Mr Michael Boorne 2,000, cents 30 April 2007 Mr Michael Boorne 2,000, cents 31 December 2007 Mr Michael Boorne 2,000, cents 30 September 2008 A total of 7,000,000 options issued to the two nonexecutive Directors was approved by the shareholders in the EGM held on 16 February The first tranche of 2,000,000 options was exercised in the year by Michael Boorne (refer to Note 13 of the Financial Statements for further details of the options). Remuneration Report Remuneration philosophy* The remuneration philosophy of the Board is currently to recognize that in the early stage of growth the company needs to contain operating costs and so the salaries established for the executive directors are negotiated at rates below market levels that would normally be available to persons with such experience and qualifications. At this time the Board has established salary arrangements for the key executives which is commensurate with their level of experience. As the company matures the Board will review its approach to setting remuneration levels by balancing short and long term benefits and linking remuneration to performance. The Board may issue options to employees under the Company Employee Option Plan as set out in note 13 to the financial statements. *designated as audited

18 Directors Report 17 Remuneration of Key Management Personnel For all the key management personnel, only basic salaries and fees and superannuation were granted during the year, no other short term benefit, long term benefit, performance related or share based payment were paid in the year except for the options disclosed above. No bonuses were granted during the year. Details of the nature and amount of each major element of remuneration of each director of the Company and each of the named company executives who receives the highest remuneration are: Year ended 30 June 2007 Year Short term* Post Employment* Share Based Total* Payment Options* Directors Salary & fees $ Superannuation $ $ $ Nonexecutive Mr T. Cuthbertson Mr M. Boorne ,000 15,000 4,500 1,350 80, , , ,350 (Commenced 19 December 2006) Executive Mr A. Fung (Managing Director) ,000 13, ,500 Mr R. Sugo (Technical Director) ,000 13, ,500 Total 365,000 32, ,000 1,097,850 Management Executives Mr L. Tai (Director) ,000 4,500 54,500 Ms C. Ly (Chief Financial Officer) ,000 9, ,000 Total 150,000 13, ,500 Only two specified executives are included in the disclosure as there are only four specified executives in total employed in the Company in 2007, two of whom are Executive Directors disclosed above. Year ended 30 June 2007 Year Short term* Post Employment* ShareBased Total* Payment Options* Directors Nonexecutive Mr T. Cuthbertson Mr M. Boorne (Commenced 19 December 2006) Salary & fees $ Superannuation $ $ $ 8, ,083 Executive Mr A. Fung (Managing Director) ,000 2, , ,433 Mr R. Sugo (Technical Director) ,000 2, , ,433 Total 58,333 5, , ,949 Management Executives Mr L. Tai (Director) ,666 1,500 30,967 49,133 Ms C. Ly (Chief Financial Officer) ,444 2,200 26,644 Total 41,110 3,700 30,967 75,777 Only two specified executives are included in the disclosure as there are only four specified executives in total employed in the Company in 2006, two of whom are Executive Directors disclosed above. *designated as audited

19 Directors Report 18 Compensation of Directors and Key Management Personnel* Short term* Post employment* Sharebased Payment* Consolidated Company $ $ $ $ 515,000 99,443 65,000 8,333 46,350 8,950 5, , , , ,366 1,261, , , ,449 *designated as audited These share based payments are for the options disclosed above. The details and valuation of these options are set out in Note 13 to the financial statements. The fair value of the option was valued at grant date at 13 cents, 10 cents and 8 cents per option for 2 million, 2 million and 3 million options respectively. The options granted were approved by shareholders in the EGM held on 16 February 2007; where the last 2,000,000 options issued to Mr. Michael Boorne were contingent upon the successful exercising of the first and second 2,000,000 options. The Company has entered into Executive Employment Agreements with Andy Fung and Rene Sugo. Each of the agreements is for a period of three years expiring on 30 April The key terms of the agreements are for a base salary of $150,000 per annum (exclusive of Superannuation Guarantee Levy) and are reviewable on July 1 each year. The Board approved a salary increment for Andy Fung and Rene Sugo in July 2007 for 12 percent. Their base salary is $168,000 per annum plus the standard superannuation guarantee levy. The remuneration and other terms of employment for the key executives above are set out in written agreements. Each of these employment agreements are unlimited in term but may be terminated by written notice by either party and by the Company making a payment in lieu of notice. Each of these agreements sets out the arrangements for total fixed remuneration, performancerelated cash bonus opportunities, superannuation, termination rights and obligations and eligibility to participate in the employee equitybased incentive scheme. Executive salaries are reviewed annually. The executive employment agreements do not require the Company to increase base salary, incentive bonuses or to continue the participants participation in equitybased incentive programs. The Company may terminate the employment of the key executive without notice and without payment in lieu of notice in some circumstances. This includes if the executive: 1. commits an act of serious misconduct; 2. commits a material breach of the executive employment agreement; 3. denigrates or engages in any behaviour that may materially damage the reputation of, or otherwise bring, the Company disrepute; or 4. is convicted of any criminal offence which would in the reasonable opinion of the Board of Directors adversely affect the carrying out of the executive s duties.

20 Directors Report 19 The Company may terminate the employment of the key executive at any time by giving the executive notice of termination or payment in lieu of such notice. The amount of notice required from the Company in these circumstances is set out in the following table: Name of key executive Company notice period Employee notice period Termination provision Andy Fung 1 month 1 month 1 month base salary René Sugo 1 month 1 month 1 month base salary Leo Tai 1 month 1 month 1 month base salary Catherine Ly 1 month 1 month 1 month base salary Directors interests in shares and options of the company or related bodies corporate At the date of this Report, the particulars of shares and options held by the directors of the company in the company or in related bodies corporate which are required to be declared in the register of directors' share holdings are as follows: Name of Director Share holding Options Mr Andy Fung 12,100,065 5,039,445 Mr René Sugo 12,100,066 5,039,444 Mr Terry Cuthbertson 1,125,000 1,000,000 Mr Michael Boorne 1,369,000 4,000,000 Total 26,694,131 15,078,889 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 company, controlled entity 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 Auditor No 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 company. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year. Auditors Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 has been included.

21 Directors Report 20 Signed in accordance with a resolution of the Board of Directors: Terry Cuthbertson Chairman Andy Fung Managing Director Sydney, 30 August, 2007

22 Income Statement 21 FOR THE YEAR ENDED 30 JUNE 2007 Note CONSOLIDATED PARENT $ $ $ $ Revenue Rendering of services 3.(a) 3,275,942 1,603,436 Cost of sales (2,527,979) (1,460,478) Gross profit 747, ,958 Finance revenue 3.(a) 55,187 13,216 44,261 10,580 Other income 3.(b) 70,457 6, ,903 51,763 Distribution expenses (112,512) (72,374) Marketing expenses (455,203) (228,773) Occupancy expenses (200,927) (58,943) (172,400) (2,124) Administrative expenses (2,746,296) (1,060,649) (779,396) (357,855) Technology and support expenses (228,799) (1,336) Other expenses 3.(c) (368,990) (141,980) (223,181) (85,607) Finance costs (11,200) (5,138) (45) (266) Loss before income tax (3,250,320) (1,406,147) (840,858) (383,509) Income tax expense Loss after tax (3,250,320) (1,406,147) (840,858) (383,509) Net loss for the year (3,250,320) (1,406,147) (840,858) (383,509) Earnings per share (cents per share) basic for loss for the year (0.07) (0.12) diluted for loss for the year (0.07) (0.12) The above income statement should be read in conjunction with the accompanying notes.

23 Balance Sheet 22 AS AT 30 JUNE 2007 Note CONSOLIDATED PARENT $ $ $ $ ASSETS Current Assets Cash and cash equivalents 5. 1,143,489 1,894, ,653 1,736,233 Trade and other receivables , ,819 2,067 27,178 Other financial assets 7. 62,128 95,728 62,128 62,128 Total Current Asset 1,381,499 2,144, ,848 1,825,539 Noncurrect Assets Other receivables ,450 2,342, ,983 Investment in subsidiaries 18. 5,000,000 5,000,000 Property, plant and equipment , ,694 Total Noncurrent Asset 243, ,144 7,342,783 5,718,983 TOTAL ASSETS 1,625,003 2,365,777 8,254,631 7,544,522 LIABILITIES Current Liabilities Trade and other payables 9. 1,374, , , ,451 Deferred revenue , ,926 Provisions ,915 21,876 Total Current Liabilities 1,895, , , ,451 Noncurrent Liabilities Other payables 9. 6,308 13,888 13,888 Provisions ,710 7,555 Total Noncurrent Liabilities 18,018 21,443 13,888 TOTAL LIABILITIES 1,913, , , ,339 NET ASSETS (288,662) 1,373,130 8,135,853 7,388,183 EQUITY Contributed capital 12. 3,496,887 2,608,359 8,311,887 7,423,359 Share based payment reserve 1,048, ,333 1,048, ,333 Accumulated losses (4,833,882) (1,583,562) (1,224,367) (383,509) TOTAL EQUITY 2(d). (288,662) 1,373,130 8,135,853 7,388,183 The above balance sheet should be read in conjunction with the accompanying notes.

24 Cash Flow Statement 23 FOR THE YEAR ENDED 30 JUNE 2007 Note CONSOLIDATED PARENT $ $ $ $ Cash flows from operating activities Receipts from customers 3,873,543 1,783, ,004 24,585 Payments to suppliers and employees (5,517,648) (2,099,448) (541,528) 59,086 Interest received 55,187 13,216 44,261 10,580 Borrowing costs (11,200) (5,138) (45) (266) Net cash flows (used in)/from operating 5. (1,600,119) (307,535) (153,308) 93,985 activities Cash flows from investing activities Purchase of property, plant and equipment 8. (72,607) (209,740) Decrease/ (Increase) in security deposit 7. 33,600 (90,649) (62,128) Advances to subsidiary (1,623,800) (718,983) Net cash flows used in investing activities (39,007) (300,389) (1,623,800) (781,111) Cash flows from financing activities Proceeds from issue of shares ,000 3,000, ,000 3,000,003 Transaction costs of issue of shares 12. (11,472) (576,644) (11,472) (576,644) Net Cash flows from financing activities 888,528 2,423, ,528 2,423,359 Net increase in cash and cash equivalents (750,598) 1,815,435 (888,580) 1,736,233 Cash and cash equivalents at beginning of year 1,894,086 78,651 1,736,233 Cash and cash equivalents at end of the year 5. 1,143,489 1,894, ,653 1,736,233 The above cash flow statement should be read in conjunction with the accompanying notes.

25 Statment of Changes in Equity 24 FOR THE YEAR ENDED 30 JUNE 2007 CONSOLIDATED As at 1 July 2005 IPO costs recognised directly in equity Loss for the year Total recognised income and expense for the year Other equity movements Issue of share capital Share based payments As at 30 June 2006 Issued Capital $ $ $ $ 185,000 (576,644) (576,644) 3,000,003 2,608,359 Share based payment & other 348, ,333 Accumulated Losses (177,415) (1,406,147) (1,406,147) (1,583,562) Total 7,585 (576,644) (1,406,147) (1,982,791) 3,000, ,333 (1,373,130) Movements Share issue costs (11,472) (11,472) Net income/ (expense) recognised directly in equity (11,472) (11.472) Loss for the year (3,250,320) (3,250,320) Total recognised income and expense for the year (11,472) (3,250,320) (3,261,792) Other equity movements Issue of share capital 900, ,000 Share based payments 700, ,000 As at 30 June ,496,887 1,048,333 (4,833,882) (288,662) PARENT As at 1 July 2005 IPO costs recognised directly in equity (576,644) (576,644) Loss for the year (383,509) (383,509) Total recognised income and expense for the year (576,644) (383,509) (960,153) Other equity movements Issue of share capital 3,000,003 3,000,003 Prior period adjustment Contributed equity (Note 22) 5,000,000 5,000,000 Share based payments 348, ,333 As at 30 June ,423,359 5,348,333 (383,509) 7,388,183 Movements Share issue costs (11,472) (11,742) Net income/ (expense) recognised directly in equity (11,472) (11,742) Loss for the year (840,858) (840,858) Total recognised income and expense for the year (11,472) (840,858) (852,330) Other equity movements Issue of share capital 900, ,000 Share based payments 700, ,000 As at 30 June ,311,887 6,048,333 (1,224,367) 8,135,853 The above statement of changes in equity should be read in conjunction with the accompanying notes.

26 Notes to the Financial Statements 25 FOR THE YEAR ENDED 30 JUNE CORPORATE INFORMATION The financial report of My Net Fone Limited and its controlled entity (the Group) for the year ended 30 June 2007 was authorised for issue in accordance with a resolution of the directors on 30 August My Net Fone Limited (the Parent) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors' Report. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporation Act 2001 and Australian Accounting Standards. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars. (b) (c) Statement of compliance Certain Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the Group for the annual reporting period ended 30 June The directors have not early adopted any of these new or amended standards or interpretations. The directors have not yet fully assessed the impact of these new or amended standards (to the extent relevant to the Group) and interpretations. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). Basis of consolidation The consolidated financial statements comprise the financial statement of My Net Fone Limited and its subsidiary (My Net Fone Australia Pty Ltd) as at 30 June 2007 ('the Group'). Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity. The financial statements of the subsidiary are prepared for the same reporting period as the parent company, using consistent accounting policies. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. In preparing the consolidated financial statements all intercompany balances and transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

27 Notes to the Financial Statements 26 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Going Concern The Directors believe that the Group will be able to continue as a going concern and, as a consequence, the financial report has been prepared on a going concern basis. This basis presumes that funds will be available to finance future operations and the realisation of assets and settlement of liabilities will occur in the normal course of business. The Group incurred an operating loss of $3,250,320 (2006: loss of $1,406,147) during the year ended 30 June 2007, and as at that date the Group's total liabilities exceeded total assets by $288,662. (2006: total assets excedeed total liabilities by $1,373,130) However, this negative liability position is viewed as controllable by the directors because: 1/ The excess liabilities over assets will be amended once shareholders approve at the next AGM to the conversion of $500,000 debt from Symbio Networks into My Net Fone equity on the same terms and conditions as the placement in June / Included in the current liabilities is $437,539 of deferred revenue which will be recognised as 2008 revenue when customers' credits are progressively used up. This deferred revenue does not represent a gross cash outflow. 3/ Of the total amount of $1,239,107 of trade payables, $1,060,538 is owed to Symbio Networks Pty Ltd which is a related party to My Net Fone. Symbio Networks has agreed to an extended payment term of the payable at a commercial interest rate similar to bank overdraft to My Net Fone. The Directors believe that the going concern basis of accounting is appropriate due to the capital raised in June 2007 and the expected cash flows to be generated by the Group over the next twelve months. The Directors will closely monitor cash flows as the Group grows and if revenues do not increase as expected, the directors will look to contain costs and negotiate with the related party supplier Symbio Networks to change and extend payment terms. The Directors believe that these actions, if required, will be sufficient to ensure that the company will be able to pay its debts as and when they fall due for the next twelve months at least. Notwithstanding the above, the directors acknowledge that there are a number of risk factors that could materially affect the Group's future profit ability and cash flows, which include, but are not limited to: (i) (ii) Competition There can be no assurance given in respect of the Group's ability to continue to compete profitably in the competitive markets in which the Group operates. The potential exists for change in the competitive environment in which the Group operates. Management of Growth Consistent with early stage growth companies, the Group is not currently operating profitably. There is a risk the Group will have insufficient working capital to meet its business requirements and the expansion of the Group will depend upon the ability of management to implement and successfully manage the Group's growth strategy.

28 Notes to the Financial Statements 27 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Going Concern (Continued) (iii) Reliance on Key Management The responsibility of overseeing the daytoday operations and strategic management of the Group is substantially dependent upon its senior management and its key personnel. There can be no assurance given that there will be no detrimental impact on the Group if one, or a number of, these employees cease their employment. (iv) New Products and Technological Developments The Group's current core business of broadband telecommunications is highly competitive and is subject to the introduction of new and improved products and services in to the market on a regular basis. (v) Broadband Access Arrangements The Group currently has certain access to the Internet backbone network. Terms of the supply of broadband are negotiated regularly. There is no guarantee that future access arrangements will be able to be negotiated on acceptable terms. (vi) Distribution Channels and Device Suppliers Currently the Group benefits from its good working relationship with its distribution channels to promote its products and services and with its device suppliers to provide its VoIP adaptors. There is no guarantee that these relationships will continue in the future. (vii) Agreement with Symbio The Group is dependent upon the supply of services by Symbio pursuant to its contract with Symbio, details of which are set out at Note 19. If, notwithstanding its contractual obligations, Symbio were to fail to supply the Group, there is no guarantee that the Group could either obtain these services from another party or provide them itself in the short term. (viii) Legislation, Regulation and Policies Any material adverse changes in government or other regulatory organisation policies or legislation which impacts on the telecommunications industry, may affect the viability and profitability of the Group. (ix) Internet Access The use of VoIP technology is dependent on quality and speed of access to the Internet. The market growth of VoIP may be limited by the take up rate of broadband and other fast Internet access or by the quality of such access. (e) Reverse acquisition In accordance with AASB3 Business Combinations, when My Net Fone Limited (the legal parent) acquired My Net Fone Australia Pty Limited (the legal subsidiary), the acquisition was deemed to be a reverse acquisition since the substance of the transaction was that the existing shareholders of My Net Fone Australia Pty Limited have, through My Net Fone Australia Pty Limited, effectively acquired My Net Fone Limited. Under reverse acquisition accounting, the consolidated financial statements are prepared as if My Net Fone Australia Pty Limited had acquired My Net Fone Limited, not vice versa as represented by the legal position.

29 Notes to the Financial Statements 28 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (f) Significant accounting judgements, estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: Sharebased payment transactions The Group measures the cost of equitysettled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an independent valuer using a binomial model. The assumptions are detailed in note 13. (g) (h) (i) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Rendering of services Revenue from telecommunication services are recognised when the services are provided to the customer. Deferred revenue represents the unused proportion of cash received in advance for call credits determined on a specific account basis at balance date. (ii) Interest income / Finance revenue Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Operating lease payments are recognised as an expense in the income statement on a straightline basis over the lease term. Lease incentives are recognised on a straightline basis over the lease term. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and shortterm deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (j) Trade and other receivables Trade receivables and other receivables, which generally have 3090 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.

30 Notes to the Financial Statements 29 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (k) Foreign Currency Translation (i) Functional and presentation currency Both the functional and presentation currency of My Net Fone Limited and its subsidiary is Australian dollars ($). Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. (ii) Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All exchange differences in the consolidated financial report are taken to profit or loss. Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. (l) Income tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carryforward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax credits and unused tax losses can be utilised, except: when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

31 Notes to the Financial Statements 30 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (l) (m) Income tax (Continued) The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Other taxes Revenues, expenses and assets are recognised net of the amount of GST except: when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (n) Property, plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straightline basis over the estimated useful life of the assets as follows: Furniture & Fittings over 6 to 10 years Office Equipment over 3 to 5 years IT Systems over 2 to 4 years The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. (i) Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

32 Notes to the Financial Statements 31 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (n) Property, plant and equipment (Continued) The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cashgenerating unit to which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value. An impairment exists when the carrying value of an asset or cashgenerating units exceeds its estimated recoverable amount. The asset or cashgenerating unit is then written down to its recoverable amount. For plant and equipment, impairment losses are recognised in the income statement in the other expenses line item. (ii) Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. (o) Other financial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, heldtomaturity investments, or availableforsale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The group determines the classifications of its financial assets after initial recognition and, when allowed and appropriate, reevaluates this designation at each financial yearend. (i) Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains or losses are recognised in the profit or loss when the loans or receivables are derecognised or impaired, as well as through the amortisation process. (ii) Investments in subsidiaries held by the parent Investments in subsidiaries held by the parent entity are recognised and subsequently measured at cost in the separate financial statements of the Company, less any impairment. (p) Impairment of assets The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value.

33 Notes to the Financial Statements 32 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (p) Impairment of assets (Continued) In such cases the asset is tested for impairment as part of the cashgenerating unit to which it belongs. When the carrying amount of an asset or cashgenerating unit exceeds its recoverable amount, the asset or cashgenerating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset. (q) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (r) Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the balance sheet date. If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. (s) Employee leave benefits (i) (ii) Wages, salaries and annual leave Liabilities for wages and salaries, including nonmonetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in current provisions in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

34 Notes to the Financial Statements 33 FOR THE YEAR ENDED 30 JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (t) Contributed capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (u) Earnings per share Basic earnings per share is calculated as net loss attributable to members of the group, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares. Diluted earnings per share is calculated as net loss attributable to members of the parent divided by the weighted average number of ordinary shares and dilutive potential ordinary shares. (v) Derecognition of financial assets and financial liabilities (i) (ii) Financial Assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: the rights to receive cash flows from the asset have expired; the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a 'passthrough' arrangement; or the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Financial Liabilities A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. (w) Sharebased payment transactions The Group provides benefits to its employees and Directors (including key management personnel) in the form of sharebased payments, where by employees render services in exchange for shares or rights over shares (equitysettled transactions). The cost of these equitysettled transactions with employees and Directors is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, further details of which are given in note 13. The cost of equitysettled transactions is recognised, together with a corresponding increase in equity,over the period in which the performance and / or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees and Directors become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the income statement is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of nonmarket performance conditions being met; and (iii) the expired portion of the vesting period. The charge to the income statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity.

35 Notes to the Financial Statements (continued) 34 FOR THE YEAR ENDED 30 JUNE REVENUES AND EXPENSES Revenue and Expenses from Continuing Operations (a) Revenue Rendering of services Finance revenue CONSOLIDATED PARENT $ $ $ $ 3,275,942 1,603,436 55,187 13,216 44,261 10,580 3,331,129 1,616,652 44,261 10,580 Breakdown of finance revenue: Bank interest receivable 55,187 13,216 44,261 10,580 55,187 13,216 44,261 10,580 (b) Other income Contribution from landlord 7,578 1,263 1,263 Rent received 51,720 5, ,400 Management fees 105,000 50,500 Other 11,159 12,503 70,457 6, ,903 51,763 (c) Other expenses Depreciation on property, plant and equipment 49,247 8,502 Net loss on disposal of plant & equipment 1,374 Accounting and audit fees 107,570 75, ,720 69,000 General expenses 42,816 11,132 14,944 1,161 Stamp duty 27,389 27,389 Legal fees 21,042 15,446 21,042 15,446 Listing fees 18,309 18,309 Registry fees 28,776 28,776 Merchant processing fees 62,939 29,264 Subscriptions and memberships 10, , , , ,181 85,607 (d) Minimum lease payments Operating lease premises 180,342 46, ,400 (e) Employee benefits expense Wages and salaries 1,654, ,147 65,000 8,333 Superannuation 288,456 68,024 5, Share based payments expense 700, , , ,333 Payroll tax 91,146 12,931 3, Workers compensation costs 7,791 1, ,742,029 1,059, , ,855

36 Notes to the Financial Statements (continued) 35 FOR THE YEAR ENDED 30 JUNE INCOME TAX The major components of income tax expense are: Income Statement Current income tax Current imcome tax charge Adjustments in respect of current income tax of previous years CONSOLIDATED PARENT $ $ $ $ Deferred income tax Relating to origination and reversal of temporary differences Income tax expense reported in the income statement A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the company s applicable income tax rate is as follows: Accounting profit before tax from continuing operations (3,250,320) (1,406,147) (840,858) (383,509) At the statutory income tax rate of 30% (975,096) (421,844) (252,257) (115,053) Share based payment expenses not allowable for income tax purposes 210, , , ,500 Unrecognised temporary differences 61,597 44,294 (33,307) (7,460) Unrecognised tax losses 703, ,050 75,564 18,013 Income tax expense reported in the income statement Entities in the Group have tax losses arising in Australia of $3,431,938 (2006: 1,086,941) that are available to be offset against future taxable profits. A deferred tax asset relating to these losses has not been recognised as utilisation of the tax losses is not considered to be probable. The total deductible temporary differences in relation to the nonrecognition of the deferred tax asset is $194,227 (2006: $112,172) The Group has yet to decide whether it will form a tax consolidated group for tax purposes.

37 Notes to the Financial Statements (continued) 36 FOR THE YEAR ENDED 30 JUNE CASH AND CASH EQUIVALENTS Cash at bank and on hand CONSOLIDATED PARENT $ $ $ $ 1,143,489 1,894, ,653 1,736,233 Reconciliation to Cash Flow Statement For the purposes of the Cash Flow Statement, cash and cash equivalents comprise the following at 30 June 2007: Cash at the bank and on hand 1,143,489 1,894, ,653 1,736,233 Reconciliation of net profit after tax to net cash flow from operations: Net loss (3,250,320) (1,406,147) (840,858) (383,509) Adjustments for: Depreciation of plant and equipment 49,247 8,502 Net loss on disposal of plant and equipment 1,374 Share based payments expense 700, , , ,333 Changes in assets and liabilities (Increase)/decrease in trade and other receivables (20,063) (143,246) 25,111 (27,178) (Increase)/decrease in inventories 2,025 (Decrease)/increase in trade and other creditors 635, ,764 (37,561) 156,339 (Decrease)/increase in deferred revenue 219, ,429 (Decrease)/increase in provisions 66,194 29,431 Net cash flow from/(used in) operating activities (1,600,119) (307,535) (153,308) 93, TRADE AND OTHER RECEIVABLES Current Trade receivables Other receivables 86,963 88, ,882 60,245 94, ,819 2,067 2,067 27,178 27,178 Noncurrent Other receivables Intercompany receivable* 450 1,450 2,342, , ,450 2,342, ,983 * The intercompany receivable corresponds to the cash advances made by My Net Fone Limited to its subsidiary My Net Fone Australia Pty Ltd at cost value. These cash advances are noninterest bearing. 7. OTHER FINANCIAL ASSETS Current Term deposits 62,128 95,728 62,128 62,128 Short term deposits are made for period of 6 months and earn interest at the respective short term deposit rates. The deposit was made for the purpose of bank guarantee for office premises.

38 Notes to the Financial Statements (continued) 37 FOR THE YEAR ENDED 30 JUNE PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED Year ended 30 June 2007 At 1 July 2006, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year At 30 June 2007, net of accumulated depreciation Furniture & Fittings $ $ $ $ 190,877 15,905 (31,357) 175,425 Office Equipment 26,290 29,630 (13,511) 42,409 IT Systems 2,527 27,072 (4,379) 25,220 Total 219,694 72,607 (49,247) 243,054 At 30 June 2007 Cost 212,073 61,580 31, ,570 Accumulated depreciation (36,648) (19,171) (6,697) (62,516) Net carrying amount 175,425 42,409 25, ,054 CONSOLIDATED Year ended 30 June 2006 At 1 July 2005, net of accumulated depreciation 10,286 6,279 3,265 19,830 Additions 186,019 22, ,740 Disposals (1,374) (1,374) Depreciation charge for the year (4,054) (2,810) (1,638) (8,502) At 30 June 2006, net of accumulated depreciation 190,877 26,290 2, ,694 At 30 June 2006 Cost 196,168 31,950 4, ,963 Accumulated depreciation and impairment (5,291) (5,660) (2,318) (13,269) Net carrying amount 190,877 26,290 2, ,694 These assets are not impaired as at year end. 9. TRADE AND OTHER PAYABLES Current Trade payables Other creditors Security deposit Lease incentive CONSOLIDATED PARENT $ $ $ $ 1,239, ,508 2,000 7,578 1,374, , ,317 7, , ,210 3, ,778 36,256 98,619 7, ,451 (i) Trade payable are noninterest bearing and are normally settled on 30day terms with nonrelated suppliers. Included in trade payable is $1,060,538 payable to Symbio Networks. Refer to Note 2(d) and Note 19.

39 Notes to the Financial Statements (continued) 38 FOR THE YEAR ENDED 30 JUNE TRADE AND OTHER PAYABLES (Continued) Noncurrent Lease incentive CONSOLIDATED PARENT $ $ $ $ 6,308 13,888 13, DEFERRED REVENUE Prepaid calling credits 437, ,926 Deferred revenue relates to cash received from customers up front with respect to prepaid calling credits. The balance represents the unused call credits as at balance date. 11. PROVISIONS CONSOLIDATED As at 1 July 2006 Arising during the year Utilised during the year As at 30 June 2007 Annual leave Long service leave Total $ $ $ 21,876 7,555 29,431 77,123 4,155 81,278 (15,084) (15,084) 83,915 11,710 95,625 Current 83,915 83,915 Noncurrent 11,710 11,710 83,915 11,710 95,625 PARENT As at 1 July 2006 Arising during the year Utilised during the year As at 30 June 2007 Current Noncurrent

40 Notes to the Financial Statements (continued) 39 FOR THE YEAR ENDED 30 JUNE CONTRIBUTED CAPITAL AND RESERVES A ORDINARY SHARES Shares issued and fully paid Movements in ordinary shares on issue At 1 July Issued during the year: 2,000,000 shares at 20 cents per share 3 ordinary shares at 1 dollar per share 28,928,469 shares at Nil cents per share Seed capital investment 3,571,427 shares at 14 cents per share IPO 12,500,000 shares at 20 cents per share Transaction costs Share Placement 2,777,778 shares at 18 cents per share transaction costs At 30 June Movements in ordinary shares on issue At 1 July Issued during the year: 2,000,000 shares at 20 cents per share 3 ordinary shares at 1 dollar per share 28,928,569 shares at fair value of $5,000,000 Seed capital investment 3,571,427 shares at 14 cents per share IPO 12,500,000 shares at 20 cents per share Transaction costs Share Placement 2,777,778 shares at 18 cents per share transaction costs At 30 June CONSOLIDATED PARENT ,496,887 44,999,999 $ $ $ $ 2,000,000 2,777,778 49,777,777 2,608,359 8,311,887 7,423,359 Consolidated Number of Shares $ Number of Shares $ 2,608, , ,000 (11,472) 3,496, ,928,469 3,571,427 12,500,000 44,999, , ,000 2,500,000 (576,644) 2,608,359 Parent Number of Shares $ Number of Shares $ 44,999,999 2,000,000 2,777,778 49,777,777 7,423, , ,000 (11,472) 8,311, ,928,569 3,571,427 12,500,000 44,999, ,000, ,000 2,500,000 (576,644) 7,423,359 Ordinary shares have the right to receive dividends as declard and in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

41 Notes to the Financial Statements (continued) 40 FOR THE YEAR ENDED 30 JUNE CONTRIBUTED CAPITAL AND RESERVES (Continued) Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. Under AIFRS reverse acquisition rules, the number of shares disclosed by the consolidated group are those of My Net Fone Limited whilst the value of shares disclosed by the consolidated group is an aggregation of My Net Fone Australia Pty Limited (Legal Subsidiary) and My Net Fone Limited (Legal Parent). Movements during the year 2,000,000 shares were converted from options, which were granted to the Nonexecutive Director in the EGM held on 16 February On 28 June 2007, the Company successfully completed a private placement raising $500,000 before capital raising costs. That placement was made to professional investors through the issue of 2,777,778 fully paid ordinary shares at a price of 18 cents per share and 5,555,556 attaching options at an exercise price of 25 cents and expiring 30 April The Company obtained official quotation of these shares and options on 06 July Subsequent events Another placement to raise $500,000 was agreed with Symbio Networks Pty Ltd, a related party to My Net Fone Limited. This placement will convert a part of the existing debts to Symbio Networks into My Net Fone equity and is subject to shareholders' approval at the next AGM. The placement, if approved, will have 2,777,778 shares issued at a price of $0.18 per share and 5,555,556 attaching options at an exercise price of $0.25 and expiring 30 April The Company will issue the shares and options once it gains shareholders' approval. B SHARE OPTIONS Movements in ordinary shares on issue Outstanding at the beginning of the year Granted during the year Granted during the year per placement Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year Exercisable at the end of the year No. WAEP $ No. WAEP $ 23,932, ,000, ,932, ,555, (2,000,000) ,488, ,932, ,876, ,250, Outstanding options as at year end The outstanding balance as at 30 June 2007 is represented by: 11,611,111 options issued under a share based payment option scheme under which options to subscribe for the compamy s shares have been granted to certain executives and other employees (Refer Note 13). 6,250,000 options issued to IPO investers over ordinary shares with an exercise price of 25 cents each. exercisable immediately and until 30 April ,071,429 options issued to seed capital investors over ordinary shares with an exercise price of 25 cents each, excercisable from 13 March 2007 and until 30 April ,000,000 options issued to nonexecutive director approved by shareholders in the EGM held on 16 February 2007 with an exercise price of 25 cents each, exercisable from 26 February 2007 and until 31 December (Refer Note 13)

42 Notes to the Financial Statements (continued) 41 FOR THE YEAR ENDED 30 JUNE CONTRIBUTED CAPITAL AND RESERVES (Continued) 3,000,000 options issued to nonexecutive director approved by shareholders in the EGM held on 16 February 2007 with an exercise price of 30 cents each, exercisable from 26 February 2007 and until 30 September The issue of 2,000,000 options is contingent upon the successful exercising of the 2,000,000 options in December (Refer Note13) 5,555,556 options issued to share placement investors over ordinary shares with an exercise price of 25 cents each, exercisable from 04 July 2007 and until 30 April SHARE BASED PAYMENT PLANS Outstanding options as at year end Jun07 Jun06 EOP Refer Note a Options granted to Directors Refer Note b Total 500,000 16,111,111 16,611, ,000 11,111,111 11,611,111 a. Employee Option Plan (EOP) The Board may issue options under the EOP to any employee of the Company and its subsidiaries, including executive directors and nonexecutive directors. Options will be issued free of charge, unless the Board determines otherwise. Each option is to subscribe for one share and when, issued, the shares will rank equally with other shares. Unless the terms on which an option was offered specify otherwise, an option may be exercised at any time after one year from the date it is granted, provided the employee is still employed by the Company. An option may also be exercised in special circumstances, that is, at any time within 6 months after the employee's death, total and permanent disablement, or retrenchment. An option lapses upon the termination of the employee's employment by the Company and, unless the terms of the offer of the option specify otherwise, lapses three years after the date upon which it was granted. The exercise price per share for an option will be 25 cents per share in respect of options granted before the Company was admitted to the official listing of the ASX and there after be the average closing market price of the Company's share over the five trading days before their issue. The maximum number of options on issue under the EOP must not at any time exceed 5% of the total number of shares on issue at that time. b. SHARE OPTIONS Movements during the year The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in share options issued during the year: No. WAEP $ No. WAEP $ Outstanding at the beginning of the year 11,611, Granted during the year 7,000, ,611, Forfeited during the year Exercised during the year (2,000,000) 0.20 Expired during the year Outstanding at the end of the year 16,611, ,611, Exercisable at the end of the year 5,000,

43 Notes to the Financial Statements (continued) 42 FOR THE YEAR ENDED 30 JUNE SHARE BASED PAYMENT PLANS (Continued) The outstanding balance as at 30 June 2007 is represented by: 11,111,111 options over ordinary shares with an exercise price of 25 cents each, exercisable from 18 May 2008 and until 30 April ,000 EOP options over ordinary shares with an exercise price of 25 cents each, exercisable upon meeting the above conditions and until 30 April ,000,000 options issued to nonexecutive director approved by shareholders in the EGM held on 16 February 2007 with an exercise price of 25 cents each, exercisable from 26 February 2007 and until 31 December ,000,000 options issued to nonexecutive director approved by shareholders in the EGM held on 16 February 2007 with an exercise price of 30 cents each, exercisable from 26 February 2007 and until 30 September The issue of 2,000,000 options is contingent upon the successful exercising of the options in December The weighted average remaining contractual life for the share options outstanding as at 30 June 2007 is 1.32 years (2006: 3 years). The weighted average exercise price for options outstanding at the end of the year was 26 cents (2006: 25 cents). Shares options issued to the Directors during the year During the year options were issued to interests associated with the following directors: Mr Michael Boorne (Nonexecutive Director) Mr Terry Cuthbertson (Chairman) Number 6,000,000 1,000,000 7,000,000 Each option was issued free of charge and entitles the holder to subscribe for, and be allotted, one ordinary share in the capital of My Net Fone Limited. Shares issued on the exercise of options will rank equally with all existing shares on issue, as at the exercise date. The exercise price of option to Mr. Michael Boorne varies from 20 cents to 30 cents each, exercisable from 26 February The expiry dates for exercising these options are 30 April 2007 (2,000,000 options); 31 December 2007 (2,000,000 options) and 30 September 2008 (2,000,000 options). The issue of the last 2,000,000 options is contingent upon the successful exercising of the options in April and December All options not exercised on or before the expiry date will lapse. The exercise price of each option to Mr. Terry Cuthberson is 30 cents, exercisable from 26 February The expiry date for exercising these options is 30 September All options not exercised on or before the expiry date will lapse. The expense recognised in the income statement in relation to share based payments is disclosed in note 3.(e) The weighted average fair value of options granted during the year was 10 cents (2006: 3 cents). The fair value of equity settled share options granted is estimated as at the date of grant using a binomial model taking into account the terms and conditions upon which the options were granted.

44 Notes to the Financial Statements (continued) 43 FOR THE YEAR ENDED 30 JUNE SHARE BASED PAYMENT PLANS (Continued) The following table lists the inputs to the model used for the year ended 30 June 2007: 2007 Number of options granted 2,000,000 2,000,000 3,000,000 Dividend yield (%) Nil Nil Nil Expected volatility (%) Risk free interest rate (%) Expected life of option (years) Option exercise price ($) Share price at grant date ($) Sensitivity analysis If the volatility rate used has been 40%, the share based payment expense for the year would have increased by $50K. If the volatility rate used has been 50%, the share based payment expense for the year would have increased by $100K. The following table lists the inputs to the model used for the year ended 30 June 2006: Dividend yield (%) Expected volatility (%) Risk free interest rate (%) Expected life of option (years) Option exercise price ($) Share price at grant date ($) 2006 Nil COMMITMENTS AND CONTINGENCIES Operating lease commitments Group as lessee The Group has entered into a commercial lease for building rental from Brenmoss Properties Pty Ltd and Appreciate Group Pty Ltd. The term of the lease is for 3 years commencing on 1st May 2006 and ending on the 30th April An additional rent for car parking is also attached with the lease. The Group is entitled to sublet part of the premises to Symbio Networks Pty Ltd during the term of the lease. The ratio between My Net Fone Limited and Symbio Networks Pty Limited is 70 to 30. Future minimum rentals payable under noncancellable operating leases as at 30 June are as follows: CONSOLIDATED PARENT $ $ $ $ Within one year 186, , , ,240 After one year but not more than five years 155, , , ,440 More than five years 342, , , ,680

45 Notes to the Financial Statements (continued) 44 FOR THE YEAR ENDED 30 JUNE EVENTS AFTER THE BALANCE SHEET DATE A placement to raise $500,000 was discussed with Symbio Networks Pty Ltd, a related party to My Net Fone Limited. (Refer Note 12) There have been no other material transactions or events outside the ordinary business of My Net Fone Limited subsequent to 30 June AUDITORS REMUNERATION Amounts received or due and receivable by Ernst & Young Australia for: audit and review of the financial report other assurance services initial public offer CONSOLIDATED PARENT $ $ $ $ 100, ,000 69, , , , ,000 69, , , DIRECTOR AND EXECUTIVE DISCLOSURES (a) Details of Key Management Personnel Mr Andy Fung (Managing Director) Mr René Sugo (Technical Director) Mr Leo Tai (Director) Mr Terry Cuthbertson (Nonexecutive Chairman) Mr Michael Boorne (Nonexecutive Director) (b) Compensation of Key Management Personnel The Group has applied the exemption under Corporations Amendments Regulation 2006 No 4 which exempts listed companies from providing remuneration disclosures in relation to their key management personnel in their annual financial reports by Accounting Standard AASB 124 Related Party Disclosures. These disclosures are provided on pages 16 to 18 of the Directors Report designated as audited. (c) Shareholdings of Key Management Personnel Balance at beginning of period Trade during the year Options exercised Balance at end of period 30 June July June 2007 Directors Mr Andy Fung 12,100,065 12,100,065 Mr René Sugo 12,100,066 12,100,066 Mr Leo Tai 2,478,440 2,478,440 Mr Terry Cuthbertson 1,125,000 1,125,000 Mr Michael Boorne 1,164,000 1,164,000 Total 27,803,571 1,164,000 28,967,571 The above shareholdings are held indirectly through controlled entities. No shares were granted during the year.

46 Notes to the Financial Statements (continued) 45 FOR THE YEAR ENDED 30 JUNE DIRECTOR AND EXECUTIVE DISCLOSURES (Cont d) Balance at beginning of period Granted Options exercised Balance at end of period 30 June July June 2006 Directors Mr Andy Fung 55 12,100,010 12,100,065 Mr René Sugo 35 12,100,031 12,100,066 Mr Leo Tai 10 2,478,430 2,478,440 Mr Terry Cuthbertson 1,125,000 1,125,000 Mr Michael Boorne Total ,803,471 27,803,571 The above shareholdings are held indirectly through controlled entities. (d) Share options of Key Management Personnel Balance at beginning of period Granted Options exercised/ transfered Balance at end of period 30 June July June 2007 Directors Mr Andy Fung Mr René Sugo Mr Leo Tai Mr Terry Cuthbertson Mr Michael Boorne Total 5,039,445 5,039,444 1,032,222 11,111,111 1,000,000 6,000,000 7,000,000 2,000,000 2,000,000 5,039,445 5,039,444 1,032,222 1,000,000 4,000,000 16,111,111 11,111,111 options are restricted and exerciasble from 18 May 2008 to 30 April ,000,000 options are exercisable from 26 Februany 2007 to 31 December ,000,000 options are exercisable from 26 Februany 2007 to 30 September During the year, Michael Boorne transferred 2 million options to a third party, and options were exercised accordingly by the third party. Balance at beginning of period Granted Options exercised Balance at end of period 30 June July June 2006 Directors Mr Andy Fung 5,039,445 5,039,445 Mr René Sugo 5,039,444 5,039,444 Mr Leo Tai 1,032,222 1,032,222 Mr Terry Cuthbertson Mr Michael Boorne Total 11,111,111 11,111,111

47 Notes to the Financial Statements (continued) 46 FOR THE YEAR ENDED 30 JUNE INVESTMENT IN SUBSIDIARIES The consolidated financial statemants include the financial statements of My Net Fone Limited and the subsidiaries listed in the following table: Name Country of Incorporation % Equity Interest Investment My Net Fone Australia Pty Limited Australia 100 5,000,000 The investment in the abovementioned subsidiary was not impaired during the year (2006: $nil). 19. RELATED PARTY DESCLOSURE The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year: Sales to related parties Purchases from related parties Amounts owed to related parties Amounts owed to related parties Related Party $ $ $ $ Consolidated Symbio Networks Pty Limited (i) 73,735 2,793,357 4,660 1,060,538 Parent Subsidiary: My Net Fone Australia Pty Limited (ii) 105,000 2,342,783 (i) The Group entered into a VoIP technology services agreement which includes the provision of technology, software, support and related services with Symbio Networks Pty Ltd (a director related entity) for a term of 5 years commencing on 1 April The agreement is at both normal market prices and on normal commercial terms. Additionally the agreement stipulates an agreed pricing structure which is volume based and gives the Group the ability to benefit from higher volume commitments in order to reduce its cost base. The agreement is currently being reviewed in light of experience gained so far and future plans. (ii) Transactions within the Group have been eliminated in full on consolidation. 20. EARNINGS PER SHARE The following reflects the income and share data used in the basic earnings per share computations: Consolidated Net loss attributable to ordinary equity holders of the parent (used in calculating basic EPS) Net loss attributable to ordinary equity holders of the parent (used in calculating diluted EPS) Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share options Weighted average number of ordinary shares adjusted for the effect of dilution (3,250,320) (3,250,320) 45,365,905 Nil 45,365,905 (1,406,147) (1,406,147) 11,814,158 Nil 11,814,158 There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

48 Notes to the Financial Statements 47 (continued) FOR THE YEAR ENDED 30 JUNE SEGMENT NOTE The group operates in one business segment and one geographical segment being the telecommunications segment in Australia. 22. PRIOR PERIOD ADJUSTMENT (PARENT ENTITY ONLY) These financial statements contain a correction to the prior period and restatement of comparatives. On 8 March 2006, My Net Fone Australia Pty Ltd was acquired by My Net Fone Limited. My Net Fone Limited issued 28,928,571 new shares in exchange for all of the shares in My Net Fone Australia Pty Ltd. In My Net Fone s separate financial report the investment in the subsidiary (My Net Fone Australia Pty Ltd) was accounted at cost whereas it should have corresponded to the fair value, at the date of exchange, of the equity instruments issued by My Net Fone Limited. The amount of correction and the financial statement line items affected for the prior period are as follows: My Net Fone Ltd s separate financial report ($ 000) Jun06 Before adjustment Jun06 After adjustment Investment in Subsidiary Contributed Equity Total Equity 0 2,423,359 2,388,183 5,000,000 7,423,359 7,388,183 The adjustment has no impact on June 2006 consolidated accounts and the earnings per share.

49 Notes to the Financial Statements (continued) 48 FOR THE YEAR ENDED 30 JUNE FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group s principal financial instruments commprise cash at bank and short term deposits. The main risks arising from the Group s financial instruments are cash flow interest rate risk, liquidity risk and credit risk. The Board reviews and agrees the policies for managing each of these risks and they are summarised below: Interest rate risk The company has no interest bearing liabilities. Funds on deposit are disclosed and the respective weighted average interest rate are disclosed below. Liquidity Risk The Group s objective is to maintain a balance between continuity of funding and interest revenue through the use of current accounts and short term deposits. Credit risk The company has no significant exposure to credit risk as the majority of its sales are prepaid as at year end. However, for credit sales the company only trades with recognised creditworthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Fair values Set out below is a comparison by category of carrying amounts and fair values of all of the Group s financial instruments recongnised in the financial statements. Consolidated Carrying amount Financial assets Cash (weighted average effective interest rate 4.8%) 1,109,046 Cash at call 34,443 (weighted average effective interest rate 4.8%) Trade and other receivables 175,882 Other financial assets 62,128 (weighted average effective interest rate 4.75%) Fair value Carrying amount Fair value ,109,046 34, ,882 62,128 1,894, ,819 95,728 1,894, ,819 95,728 Financial liabilities On balance sheet Trade payables 1,374,195 1,374, , ,402 Parent Carrying amount Financial assets Cash (weighted average effective interest rate 4.8%) 847,653 Trade and other receivables 2,067 Other financial assets 62,128 (weighted average effective interest rate 4.75%) Fair value Carrying amount Fair value ,653 1,736,233 1,736,233 2,067 27,178 27,178 62,128 62,128 62,128 Financial liabilities On balance sheet Trade payables 118, , , ,451

50 Directors Declaration 49 In accordance with a resolution of the directors of My Net Fone Limited, we state that: 1. In the opinion of the directors: (a) the financial report and the additional disclosures included in the Directors' report of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2007 and of their performance for the year ended on that date; and (ii) complying with Accounting Standards and Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. 2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with sections 295 A of the Corporations Act 2001 for the financial year ending 30 June On behalf of the Board Terry Cuthbertson Chairman Andy Fung Managing Director Sydney, 30 August 2007

51

52 Independent auditor s report 51 to the member of My Net Fone Limited We have audited the accompanying financial report of My Net Fone Limited (the company) and the entity it controlled during the year, which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors declaration. The company has disclosed information as required by paragraphs Aus 25.4 to Aus of Accounting Standard 124 Related Party Disclosures ( remuneration disclosures ), under the heading Remuneration Report on pages 3 to 6 of the directors report, as permitted by Corporations Regulation 2M Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2b, the directors also state that the consolidated/parent financial statements and notes comply with International Financial Reporting Standards. The directors are also responsible for the remuneration disclosures contained in the directors report. Auditor s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement and that the remuneration disclosures comply with Accounting Standard AASB 124 Related Party Disclosures. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Liability limited by a scheme approved under Professional Standards Legislation.

53 Independent auditor s report 52 to the member of My Net Fone Limited We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit we have met the independence requirements of the Corporations Act We have given to the directors of the company a written Auditor s Independence Declaration, a copy of which is included in the directors report. Auditor s Opinion In our opinion: 1. the financial report of My Net Fone Limited is in accordance with: (a) the Corporations Act 2001, including: (i) giving a true and fair view of the financial position of My Net Fone Limited and the consolidated entity at 30 June 2007 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations); and (b) other mandatory financial reporting requirements in Australia. 2. the consolidated/parent financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2b. 3. the remuneration disclosures that are contained on pages 16 to 18 of the directors report comply with Accounting Standard AASB 124 Related Party Disclosures. Ernst & Young Garry Wayling Partner Sydney Date: 30 August 2007 Liability limited by a scheme approved under Professional Standards Legislation.