ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE

Transcription

1 ACN ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016

2 TABLE OF CONTENTS TABLE OF CONTENTS 1 CORPORATE INFORMATION 2 CHAIRMAN S REPORT 3 CORPORATE GOVERNANCE STATEMENT 6 DIRECTORS REPORT 7 REMUNERATION REPORT 11 AUDITOR S INDEPENDENCE DECLARATION 18 INDEPENDENT AUDITOR S REPORT 19 DIRECTORS DECLARATION 21 CONSOLIDATED STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME 22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 23 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 24 CONSOLIDATED STATEMENT OF CASH FLOWS 25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 26 ADDITIONAL SECURITIES EXCHANGE INFORMATION 51 Page 1

3 CORPORATE INFORMATION ZIPTEL LIMITED Trading on the Australian Securities Exchange with the code ASX:ZIP ABN DIRECTORS Mr Josh Hunt (Independent Non-Executive Chairman) Mr Umberto (Bert) Mondello (Chief Executive Officer and Executive Director) Mr Keaton Wallace (Executive Director) Mr Salvatore Vallelonga (Independent Non-Executive Director) COMPANY SECRETARY Mr Derek Hall PRINCIPAL PLACE OF BUSINESS Suite 8, 281 Hay Street Subiaco, Western Australia 6008 T + 61 (0) REGISTERED OFFICE Suite 8, 281 Hay Street Subiaco, Western Australia 6008 T + 61 (0) SOLICITORS Hunt & Humphry 15 Colin Street West Perth, Western Australia 6005 T +61 (0) SHARE REGISTER Security Transfer Registrars 770 Canning Highway, Nedlands, Western Australia 6153 T +61 (0) AUDITOR BDO Audit (WA) Pty Ltd 38 Station Street Subiaco, Western Australia 6008 T +61 (0) Page 2

4 CHAIRMAN S REPORT DEAR FELLOW SHAREHOLDERS, The 2016 Financial Year was challenging for the Emerging Technology Sector and ZipTel was no exception. Despite this environment, the company continued to make solid progress - with the successful launch of the Zipt low bandwidth mobile communications application ( Zipt ) and the achievement of more than 10 million installs across the globe; the advancement of SpeedTalk, the white label enterprise solution with our partner SpeedCast; and having Zipt selected by Samsung to be ported to the emerging Tizen operating system. We are keenly focused on realising the significant potential of the Company, in both Enterprise and Consumer segments and ultimately building shareholder value. FY 2016 HIGHLIGHTS ENTERPRISE Enterprise Agreement with SpeedCast executed on 3 December The Memorandum of Understanding announced on 15 February 2015 was formalised as a binding commercial agreement (the Agreement ) with SpeedCast to white label the Zipt application as SpeedTalk for an initial period of two years. Per the terms of the Agreement, the white label solution was to be delivered 3 months from the Agreement execution date. This process was completed in line with ZipTel s obligations with the White Label Enterprise Solution SpeedTalk successfully delivered to SpeedCast as announced on 4 March ZipTel continues to work closely with SpeedCast to schedule the pilot program and subsequent public release of SpeedTalk. Further Enterprise Agreements are anticipated following on from the endorsement of the SpeedCast Agreement (and the Samsung Agreement in the Consumer Segment). CONSUMER During the year, over 10 million users across the globe installed Zipt on their mobiles phones. This 10 million install milestone for Zipt was achieved 9 months ahead of targets set out in the original Zipt commercialisation strategy of November Global Brand Ambassador Agreements executed with 8 prominent sports stars including Gareth Bale and Virat Kohli; joining existing Ambassador Brett Lee. Upgraded Zipt 2.0 platform developed and launched in February/March 2016, building on 9 months of user experience gained from Zipt 1.0. World first Zipt Ambassador Portal rolled out as part of the Zipt 2.0 platform launch. Page 3

5 CHAIRMAN S REPORT Subsequent to year end, Zipt was selected by Samsung to be ported to the emerging Tizen platform. Samsung developers will deliver a Tizen version of Zipt to coincide with Samsung mobile handset launch events planned for August LAUNCH OF THE ZIPT 2.0 PLATFORM Building on the successful launch of Zipt 1.0 in June 2015, the upgraded Zipt 2.0 platform was developed to cater for rapid user uptake in new markets. Zipt 2.0 went live on Android on 19 February 2016 and on ios on 26 February Zipt 2.0 incorporates many new features paired with significantly increased operating capacity. It has demonstrated potential for material loyalty metric improvements over the previous platform. The new features include the World first in-app Zipt Ambassador Portal and monetisation features designed to drive deeper user engagement, in-app referral, increased virality and revenue streams. The Global Brand Ambassador Campaign launched on 3 March This Campaign provides access to the Ambassadors 110+ million social media followers i.e. massive reach with no cash outlay from ZipTel as the Ambassadors have agreed to scrip deals. In addition to consumer product enhancements and scalability, Zipt 2.0 provides the Company with a full service integrated communication solution for enterprises. Zipt 2.0 is the basis for the SpeedTalk application developed for SpeedCast. FINANCIAL RESULTS The Company s focus in FY16 was the development and delivery of Zipt and SpeedTalk applications, based on the proprietary low bandwidth Zipt 2.0 platform. In FY2016, total revenue was up by 53% to $762,388 (FY2015:$498,981) due directly to revenues generated by Zipt. The Company recorded a loss after tax of $14,009,805 (FY2015 loss after tax of $5,687,639) due to investment in the new platform and mass user acquisition campaigns for Zipt in key markets. Notably, a large component of the loss is attributable to non-cash share based payments of $8,479,391. Overall, the Company has demonstrated meaningful use of its funds since listing, with the vast majority of spending directly attributable to research and development activities. As a result, the Company can claim a material portion of its expenditure as eligible under the Australian Government Research and Development Tax Incentive Scheme. The anticipated deployment of the SpeedTalk application will also have an impact on the Group s overall performance going forward. Page 4

6 CHAIRMAN S REPORT OPERATIONAL PERFORMANCE Zipt began FY2016 with less than 500k installs and ended the year with more than 10 million an increase in the order of 1900%. The majority of these installs originated in target regions of the Indian Subcontinent, South East Asia, Latin America and the Middle East where low bandwidth environments are prominent. The direct result of this mass user acquisition campaign is the selection of Zipt by Samsung to be featured on the emerging Tizen platform. Tizen will be in increasing use in Samsung devices going forward. This is a great opportunity for Zipt to grow in a relatively low competition environment there are very few applications currently on Tizen and Zipt is one of only 2 featured communications applications. Now that the mass user acquisition campaigns have resulted in more than 10 million installs and the Samsung opportunity, the Company has moved away from this user acquisition focus to building a sustainable Zipt business model with the key metric of $1 marketing spend to yield $1 of receipts i.e. Net-net Return on Investment. Zipt performance will be augmented by the Samsung opportunity as users acquired on the Tizen platform will be achieved with zero cost per install. OUTLOOK The immediate focus of the Company is the deployment of the SpeedTalk White Label enterprise application. This is a significant monetisation opportunity for the Company which promises repeat, high revenue users with minimal risk due to their corporate profiles. Deployment of SpeedTalk will open up further opportunities within the enterprise segment with companies in key industries which require low bandwidth, calling and messaging solutions i.e. maritime, airlines, agriculture and remote communications providers. The Company will continue to iterate and improve Zipt with a monetisation focus, incorporating the learnings of now more than one year of operational uptime. The Samsung opportunity on Tizen will allow Zipt to grow with and become a key plank for this emerging platform. The Company will leverage this opportunity with its Zipt Ambassadors to build the Zipt brand further, particularly in the Indian Subcontinent. On behalf of my fellow board members, I thank shareholders for their support. We have excellent opportunities with SpeedTalk and Zipt and we are funded to see them to fruition. Yours Faithfully Josh Hunt Chairman 22 August 2016 Page 5

7 CORPORATE GOVERNANCE STATEMENT 1. OUR APPROACH TO CORPORATE GOVERNANCE (A) FRAMEWORK AND APPROACH TO CORPORATE GOVERNANCE AND RESPONSIBILITY The Board of ZipTel Limited ( the Company ) is committed to maintaining the highest standards of corporate governance. Corporate governance is about having a set of values that underpin the company's everyday activities - values that ensure fair dealing, transparency of actions, and protect the interests of stakeholders. The Board considers corporate governance forms part of a broader framework of corporate responsibility and regulatory oversight. In pursuing its commitment to best practice governance standards, the Board will continue to: review and improve its governance practices; and monitor global developments in best practice corporate governance. The Board is guided by the principles and practices that are in our stakeholders' best interests while ensuring full compliance with legal requirements. (B) COMPLIANCE WITH THE ASX CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS The ASX Listing Rules require listed companies to include in their Annual Report a statement disclosing the extent to which they have followed the ASX Corporate Governance Principles and Recommendations in the reporting period. In accordance with ASX Listing Rules and 4.7.4, the Corporate Governance Statement will be available for review on the Company s website ( and will be lodged together with an Appendix 4G with the ASX at the same time that this Annual Report is lodged with ASX. The Appendix 4G will identify each recommendation that needs to be reported against by the Company and will provide shareholders with information as to where relevant disclosures can be found. The Company s corporate governance policies and charters are available at the Company s website Listed companies must identify the recommendations that have not been followed and provide reasons for the company's decision. This Governance Statement describes ZipTel Limited's governance practices and notes where they do not comply with the ASX Corporate Governance Principles and Recommendations. 2. DATE OF THIS STATEMENT This statement reflects our corporate governance policies and procedures as at 22 August Page 6

8 DIRECTORS REPORT The Directors of ZipTel Limited (the Company ) submit herewith the annual report of the Company and its controlled entity (the Group ) for the financial year ended 30 June In order to comply with the provisions of the Corporations Act 2001, the Directors Report as follows: DIRECTORS AND SENIOR MANAGEMENT The Company Directors held office during the whole of the financial year and since the end of the financial year. The names and particulars of Directors and senior management of the Company at the end of the 2016 financial year are: JOSH HUNT Non-Executive Chairman Mr Josh Hunt is a lawyer and Principal of project law firm Hunt & Humphry, with experience in providing advice to listed public and private companies and in all aspects of project acquisitions and disposals. Josh has practised corporate and commercial law for over 12 years and has been intimately involved in the formation, acquisition and development of numerous successful companies over this time. Josh s experience extends internationally, where he has acted for a number of companies with operations in Africa, South East Asia, Mongolia, the United States, Canada, the United Kingdom and throughout South America. Special responsibilities: Chairman of the Board Other current directorships in listed entities: None Other directorships in listed entities in the previous 3 years: None UMBERTO (BERT) MONDELLO Executive Director and Chief Executive Officer Mr Bert Mondello first entered the telecommunications industry in 1997, and up until 2002, he managed key retail distribution channels for Optus and Vodafone. During this period, the telecommunications industry evolved significantly, shifting from the basic analogue network to digital and 3G. In 2002, Bert was invited to assist in building the business model and blueprint of Vodafone s outsourced pilot distribution model called Vodafone Alliance. As an equity partner and General Manager of Vodafone Alliance, his responsibility was to build and manage a national business to business sales team. In 2004, his private company icommunications Pty Ltd was appointed by 3 Mobile to manage part of their Australian business channel. Subsequently in 2009, Vodafone and 3 Mobile merged in Australia and icommunications became one of the largest Vodafone business channels in the country. As the Managing Director of the company, Bert was responsible for signing up over 50,000 subscribers to the Vodafone and 3 Network over a ten year period. Today it is still one of Vodafone s most prominent and long-standing business partners. Special responsibilities: Chief Executive Other current directorships in listed entities: None Other directorships in listed entities in the previous 3 years: None Page 7

9 DIRECTORS REPORT KEATON WALLACE Executive Director Mr Keaton Wallace has had an extensive business career that spans both the private and public sectors over the past 15 years specialising in the execution of strategic commercialisation plans across the Telecommunications and technology sectors. As a Co-Founder of ZipTel, Keaton has overseen the acquisition of over 12 Million users onto ZipTel s core platforms. Keaton holds a Non-Executive Director position with ABI Limited, a privately owned insurance technology and platform which has experienced outstanding growth during Keaton s tenure. Keaton is a seed investor in Wangle Technologies Limited and has successfully overseen the Company s listing onto the ASX platform (ASX:WGL). He is in charge of business strategy and commercialisation of Wangle s core consumer and enterprise offerings. Special responsibilities: Executive Other current directorships in listed entities: Wangle Technologies Limited Non-Executive Director Former directorships in listed entities in the previous 3 years: None SALVATORE VALLELONGA Non-Executive Director Company Secretary (resigned 1 July 2016) Mr Salvatore Vallelonga is a Chartered Accountant and a director of Plexus Global Consultants Pty Ltd, a Chartered Accounting and business advisory business specialising in the provision of tailored tax and consultative solutions to its SME clients and emerging growth clients. Salvatore is also a director of Plexus Wealth Pty Ltd, which provides financial planning and wealth solutions to clients. Salvatore is a director of numerous private companies and non-profit organisations. Salvatore has worked closely with his clients in business to business distribution and retail channels in the telecommunication industry, servicing clients working with national and global brands such as Telstra, Vodafone, 3Mobile, Optus, People telecom, M2 Communication and Commander. DEREK HALL Company Secretary (appointed 1 July 2016) Mr Hall is a Chartered Accountant, Fellow of the Financial Services Institute and Member of the Institute of Chartered Secretaries and Administrators. DIRECTORS MEETINGS The following table sets out the number of Directors meetings (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each Director while they were a Director or committee member. DIRECTORS NO OF MEETINGS ELIGIBLE TO ATTEND DIRECTORS MEETINGS ATTENDED Josh Hunt 9 9 Bert Mondello 9 9 Keaton Wallace 9 9 Salvatore Vallelonga 9 9 Page 8

10 DIRECTORS REPORT DIRECTORS SHAREHOLDINGS The following table sets out each Director s relevant interest in shares and options in shares of the Company as at the date of this report. DIRECTORS FULLY PAID ORDINARY SHARES OPTIONS Josh Hunt 589, ,912 Bert Mondello 11,477,500 4,153,750 Keaton Wallace 10,376,000 3,621,250 Salvatore Vallelonga 635, ,000 REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT Information about the remuneration of Directors and senior management is set out in the Remuneration Report of this Directors Report on pages 11 to 18. SHARE OPTIONS GRANTED TO DIRECTORS AND SENIOR MANAGEMENT The Company maintains an option plan for senior management and executives, including Executive Directors, as approved by shareholders at an Annual General Meeting. There are currently 3,300,000 unissued ordinary shares under option under the Company s option plan as at the date of this report. REVIEW OF OPERATIONS AND PRINCIPAL ACTIVITIES The consolidated entity s principal activities at the commencement of the financial year are outlined in the Chairman s report and listed below in Events Subsequent to Balance Date. OPERATING RESULTS The loss after tax of the consolidated entity for the financial year attributable to the members of ZipTel Limited was $14,009,805 (30 June 2015: loss $5,687,639). DIVIDENDS No dividend has been declared by the Directors for this financial year. STATE OF AFFAIRS In the opinion of the Directors there were no significant changes in the state of affairs of the Company and its controlled entities that occurred during the financial year under review not otherwise disclosed in this report or the accompanying financial report. Reference should be made to the subsequent events note for changes in the state of affairs after balance date. INDEMNIFICATION OF OFFICERS AND AUDITORS During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary and all executive officers of the Company and of any related body corporate against a liability incurred as a Director, Secretary or executive officer to the extent permitted by the Corporations Act The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as an officer or auditor. Page 9

11 DIRECTORS REPORT LIKELY DEVELOPMENTS Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years has been made in part in the Chairman s Report at the beginning of this Annual Report. Any further such disclosure and the expected results of those operations are likely to result in unreasonable prejudice to the consolidated entity and have accordingly not been disclosed in this report. ENVIRONMENTAL REGULATION AND PERFORMANCE The economic entity s operations are not subject to any significant environmental regulations under the Commonwealth or State legislation. However, the Directors believe that the economic entity has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the economic entity. EVENTS SUBSEQUENT TO BALANCE DATE There were no matters or circumstances arising since the end of the reporting period that have significantly affected, or may significantly affect the operations of the Company and the results of those operations or the state of the affairs of the Company in the financial period subsequent to 30 June PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of a 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. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor (BDO Audit (WA) Pty Ltd) for audit and nonaudit services provided during the year are set out below. The Board of the Company has considered the position and is satisfied that the provision of the nonaudit services is compatible with the general standard of independence for auditors imposed by the Corporations Act The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms: $ $ TAXATION SERVICES: - Tax compliance services 28,677 30,502 Total remuneration for non-audit services 28,677 30,502 Page 10

12 DIRECTORS REPORT REMUNERATION REPORT (AUDITED) This Remuneration Report, which forms part of the Directors Report, sets out information about the remuneration of ZipTel Limited s Directors and its senior management for the financial year ended 30 June The prescribed details for each person covered by this report are detailed below under the following headings: Director and senior management details Remuneration policy Remuneration of Non-Executive Directors Retirement Benefits Remuneration of Directors and senior management Relationship between company performance and shareholder wealth Remuneration of key management personnel Key terms of employment contracts Other statutory information. DIRECTOR AND SENIOR MANAGEMENT DETAILS The following persons acted as Directors of the company during or since the end of the financial year: NON-EXECUTIVE CHAIRMAN CHIEF EXECUTIVE OFFICER EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR Josh Hunt Bert Mondello Keaton Wallace Salvatore Vallelonga REMUNERATION POLICY The Company s remuneration policy is based on the following principles: Provide competitive rewards to attract high quality executives; Provide an equity incentive for senior executives that will provide an incentive to executives to align their interests with those of the Company and its shareholders; and Ensure that rewards are referenced to relevant employment market conditions. Remuneration packages contain the following key elements: Primary benefits salary/fees; and Benefits, including the provision of motor vehicles and superannuation. In accordance with best practice corporate governance, the structure of Non-Executive Directors and key management personnel remuneration is separate and distinct. The Board seeks to set remuneration at a level which provides the Company with the ability to attract and retain directors of relevant experience and skill, whilst incurring costs which are acceptable to shareholders. REMUNERATION OF NON-EXECUTIVE DIRECTORS The Company s Constitution provides that non-executive Directors may collectively be paid from an aggregate maximum fixed sum out of the funds of ZipTel Limited as remuneration for their services as Directors. The aggregate maximum fixed sum has been set at $250,000 per annum. Page 11

13 DIRECTORS REPORT The Constitution and the Australian Securities Exchange Listing Rules specify that the aggregate remuneration amount can only be increased by the passing of an ordinary resolution of shareholders. Since the Company s establishment in March 2004, this fixed amount has not been increased. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external shareholders as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director is entitled to receive a fee for being a director of the Company. The remuneration of non-executive directors for the year ended 30 June 2016 is detailed in the remuneration of key management personnel in Table 1 of this report. RETIREMENT BENEFITS Consistent with the ASX Corporate Governance Rules which states that non-executive directors should not be provided with retirement benefits other than statutory superannuation, the Company does not provide retirement benefits to its Non-Executive Directors. REMUNERATION OF SENIOR MANAGEMENT AND EXECUTIVE DIRECTORS The Company aims to reward senior management and executive directors with a level and mix of remuneration commensurate with their position and responsibilities within the Company. The objective of the remuneration policy is to: Reward senior management personnel and executive directors for Company and individual performance; Align the interests of the senior management personnel and executive directors with those of the shareholders; and Ensure that total remuneration is competitive by market standards. In determining the level and make-up of senior management and executive directors remuneration, the Board reviews reports detailing market levels of remuneration for comparable roles. Remuneration currently consists of fixed and variable elements which are dependent on the satisfaction of such performance conditions as may be imposed by the Board. Senior Management and Executive Directors are compensated through a variety of components which include: Short term employee benefits; Post-employment benefits; Other long term benefits; Termination benefits; and Share-based payments. The relative weighting of fixed and variable components for target performance is set according to the scope of the individual s role. The at-risk component is linked to those roles in which market value provides reasons to provide some individuals with higher levels of remuneration, while also recognising the importance for providing shareholders with value. To ensure that fixed remuneration for the Company s most senior executives remains competitive, it is reviewed annually based on performance and market data. The Board may, from time to time, in its absolute discretion, make a written offer executives to apply for up to a specified number of Performance Rights. Page 12

14 DIRECTORS REPORT Cash bonuses granted to executives are based on the respective performance of their regional business unit. Bonuses are paid out at various times during the year as determined by the Board. REMUNERATION CONSULTANTS There have been no remuneration consultants used in the period. RELATIONSHIP BETWEEN COMPANY PERFORMANCE AND SHAREHOLDER WEALTH The remuneration policy has been tailored to increase goal congruence between shareholders and Directors and key management personnel. Currently, this is facilitated through bonus schemes and the issue of options and performance rights to key management personnel to encourage the alignment of personal and shareholder interests. The Group believes this policy will be effective in increasing shareholder wealth. As the Group is currently in the start-up phase, the Directors assess the performance of the Group with regard to the price of the Company s ordinary shares listed on the ASX and the market capitalisation of the Company rather than Group financial performance. Directors and executives are issued Long Term Incentives ( LTIs ) in the form of options and, in some cases, performance rights, to encourage the alignment of personal and shareholder interests. Rights issued to Directors may be subject to market based price hurdles and vesting conditions and the exercise price of rights is set at a level that encourages the Directors to focus on share price appreciation. The Group believes this policy will be effective in increasing shareholder wealth. Key management personnel are also entitled to participate in the employee share and option arrangements. Performance rights vest on the achievement of operational milestones, providing those directors holding performance shares an incentive to meet the operational milestones prior to the expiry date of the performance shares. On the resignation of Directors any vested rights issued as remuneration are retained by the relevant party. The Board may exercise discretion in relation to approving incentives such as rights. The policy is designed to reward key management personnel for performance that results in long-term growth in shareholder value. In considering the entity s performance and benefits for shareholders wealth, the Chairman has regard to the following indices in respect of the current financial year and the previous five financial years to June 2016: FINANCIAL YEAR ENDING 30 JUNE Revenue ($ 000) ,983 14,872 NPAT ($ 000) (14,010) (5,688) (2,445) (2,225) (4,064) Share price at start of year $0.77 $0.20 $0.001 $0.001 $0.001 Share price at end of year $0.155 $0.77 $0.20 $0.001 $0.001 Dividend Basic EPS (cents per share) (17.21) (8.21) (8.81) (0.07) (0.13) Page 13

15 DIRECTORS REPORT REMUNERATION OF KEY MANAGEMENT PERSONNEL Table 1: Remuneration of the Non-Executive and Executive Directors of the Company for the year ended 30 June SHORT TERM BENEFITS POST-EMPLOYMENT SHARE BASED PAYMENTS TOTAL PERFORMANCE RELATED 2016 DIRECTORS SALARY & FEES ($) NON- MONETARY ($) SUPER- ANNUATION ($) TERMINAT- ION BENEFIT ($) RIGHTS ($) TOTAL ($) FIXED REM- UNERATION % LTI % EXECUTIVE DIRECTORS B.Mondello 240, , ,935,000 2,197, K.Wallace 240, , ,935,000 2,197, NON-EXECUTIVE DIRECTORS J.Hunt 38, , , S.Vallelonga 38, , , TOTAL 556, , ,257,000 4,859, Table 2: Remuneration of the Non-Executive and Executive Directors of the Company for the year ended 30 June SHORT TERM BENEFITS POST-EMPLOYMENT SHARE BASED PAYMENTS TOTAL PERFORMANCE RELATED 2015 SALARY & FEES NON- MONETARY SUPER- ANNUATION TERMINAT- ION BENEFIT RIGHTS TOTAL FIXED REM- UNERATION LTI DIRECTORS ($) ($) ($) ($) ($) ($) % % EXECUTIVE DIRECTORS B.Mondello 215, , ,254,540 1,489, K.Wallace 215, , ,254,540 1,489, NON-EXECUTIVE DIRECTORS J.Hunt 30, , S.Vallelonga 30, , TOTAL 490, , ,509,080 3,039, According to the Australian Accounting Standards, the Company s acquisition of AussieSim Pty Ltd during the prior financial year was regarded as a capital transaction of the legal subsidiary instead of a business combination. The new combined group is in substance a continuation of the business of AussieSim Pty Limited. The Table above is remuneration of the Directors of AussieSim Pty Ltd (also the current Directors of ZipTel Limited) during the year ended 30 June No options held by Directors and senior management were exercised during the current or previous financial year. Page 14

16 DIRECTORS REPORT KEY TERMS OF EMPLOYMENT CONTRACTS It is Group policy that service contracts for Senior Management and Executive Directors be entered into. A service contract with an executive Director or senior executive would provide for the payment of benefits where the contract is terminated by the entity or the individual. The Executive Directors and senior executives would also be entitled to receive on termination of employment their statutory entitlements of accrued annual and long service leave, together with any superannuation benefits. At any time the service contract can be terminated either by the entity or the Executive Director or senior management member providing notice for a period of time in line with market practice at the time the terms are agreed. The Company may make a payment in lieu of notice for the same period of time, equal to 100% of base salary. An Executive Director or senior executive would have no entitlement to termination payment in the event of removal for misconduct. Major provisions of the agreements existing at balance date relating to executive remuneration are set out below. Mr Bert Mondello Term of agreement: in effect until terminated in accordance with the agreement. Termination notice period: 3 months by either party. The Company may elect to pay 3 months base salary and superannuation in lieu of notice. Additional termination benefits: statutory entitlements of accrued annual and long service leave, together with any superannuation benefits. Mr Keaton Wallace Term of agreement: in effect until terminated in accordance with the agreement. Termination notice period: 3 months by either party. The Company may elect to pay 3 months base salary and superannuation in lieu of notice. Additional termination benefits: statutory entitlements of accrued annual and long service leave, together with any superannuation benefits. Non-Executive Directors Term of agreement: in effect until terminated in accordance with the agreement. Contracted on annual fixed remuneration plus statutory superannuation. Non-Executive Directors are not entitled to a retirement allowance. Total compensation for all Non-Executive Directors is not to exceed AUD$250,000 per year. OTHER STATUTORY INFORMATION TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL The Group acquired the following goods and services as follows. $ $ Purchase from icommunications Pty Ltd (a company related to Umberto Mondello) for rent and administration services - 59,504 Purchase from Hunt & Humphry (an entity related to Josh Hunt) for legal services 21,395 42,119 Purchase from Plexus Global Consultants (an entity related to Salvatore Vallelonga) for accounting services ,635 22, ,258 All transactions were made on normal commercial terms and conditions and at market rates. Page 15

17 DIRECTORS REPORT OUTSTANDING BALANCES WITH RELATED PARTIES $ $ Hunt & Humphry Plexus Global Consultants ,420 Outstanding balances are unsecured, interest free and settlement occurs in cash. EQUITY HOLDINGS 1,643 13,420 The number of ordinary shares of the Company held, directly, indirectly or beneficially, by each Director and key management personnel, including their personally-related entities for the year ended 30 June 2016 is as follows: KEY MANAGEMENT PERSONNEL HELD AT 30 JUNE 2015 ON MARKET PURCHASES DURING THE YEAR OTHER CHANGES BALANCE AT APPOINTMENT/ (RESIGNATION) DATE HELD AT 30 JUNE 2016 J.Hunt 550,695 38,461 0 n/a 589,156 B.Mondello 9,807, ,000 1,500,000 n/a 11,477,500 K.Wallace 8,787,500 88,500 1,500,000 n/a 10,376,000 S.Vallelonga 570,000 65,000 0 n/a 635,000 TOTAL 19,715, ,961 3,000,000 23,077,656 OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS No options were granted as remuneration during the period. The number of options of the Company held, directly, indirectly or beneficially, by each Director and key management personnel, including their personally-related entities for the year ended 30 June 2016 is as follows: KEY MANAGEMENT PERSONNEL HELD AT 30 JUNE 2015 ON MARKET PURCHASES DURING THE YEAR EXPIRED DURING THE YEAR BALANCE AT APPOINTMENT/ (RESIGNATION) DATE HELD AT 30 JUNE 2016 J.Hunt 290, n/a 290,912 B.Mondello 4,153, n/a 4,153,750 K.Wallace 3,621, n/a 3,621,250 S.Vallelonga 225, n/a 225,000 TOTAL 8,290, ,290,912 The number of performance rights of the Company held, directly, indirectly or beneficially, by each Director and key management personnel, including their personally-related entities for the year ended 30 June 2016 is as follows: Page 16

18 DIRECTORS REPORT KEY MANAGEMENT PERSONNEL HELD AT 30 JUNE 2015 GRANTED DURING THE YEAR AS REMUNERATION CONVERTED TO SHARES DURING THE YEAR BALANCE AT APPOINTMENT/ (RESIGNATION) DATE HELD AT 30 JUNE 2016 J.Hunt 0 150,000 0 n/a 150,000 B.Mondello 1,500,000 1,500,000 (1,500,000) n/a 1,500,000 K.Wallace 1,500,000 1,500,000 (1,500,000) n/a 1,500,000 S.Vallelonga 0 150,000 0 n/a 150,000 TOTAL 3,000,000 3,300,000 (3,000,000) 3,300,000 At a General Meeting of shareholders held on 20 October 2015, shareholders voted to grant a total of 3,300,000 Performance Rights to the Directors as remuneration as detailed above. The Performance Rights vest and convert to Ordinary Fully Paid Shares on a one for one basis following the achievement of 10 million installs for Zipt. This milestone was achieved on 4 April Key valuation assumptions made at grant date are summarised below: The share price at grant date of the Performance Rights was $1.29. On the basis of the above assumptions, the vesting of the entire 3,300,000 Performance Rights was recognised with a corresponding expense of $4,257,000 in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Performance Rights that converted to shares during the year relate to a grant of 1,500,000 performance rights to each of Mr Mondello and Mr Wallace on 28 November These rights vested following the achievement of the following performance milestone: Performance Rights will vest on the date that the Company s market capitalisation is equal to or exceeds $70,000,000 for 21 consecutive trading days. This milestone was met and the Performance Rights were converted to Ordinary Fully Paid Shares on 4 September These Performance Rights were fully expensed in the prior year. THIS IS THE END OF THE AUDITED REMUNERATION REPORT This Directors Report is signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act On behalf of the Directors, Umberto Mondello Chief Executive Officer 22 August 2016 Page 17

19 Tel: Fax: Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF ZIPTEL LIMITED As lead auditor of ZipTel Limited for the year ended 30 June 2016, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of ZipTel Limited and the entities it controlled during the period. Dean Just Director BDO Audit (WA) Pty Ltd Perth, 22 August 2016 BDO Audit (WA) Pty Ltd ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

20 Tel: Fax: Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR S REPORT To the members of ZipTel Limited Report on the Financial Report We have audited the accompanying financial report of ZipTel Limited, which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the year s end or from time to time during the financial year. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. 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. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company s preparation of the financial report that gives a true and fair view 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 company s internal control. 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. 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 complied with the independence requirements of the Corporations Act We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of ZipTel Limited, would be in the same terms if given to the directors as at the time of this auditor s report. BDO Audit (WA) Pty Ltd ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

21 Opinion In our opinion: (a) the financial report of ZipTel Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Emphasis of matter Without modifying our opinion, we draw attention to Note 1 in the financial report, which indicates that the ability of the consolidated entity to continue as a going concern is dependent upon the receipt of funds via the Australian Governments Research and Development Tax Incentive Scheme and the future successful raising of necessary funding through debt or equity. These conditions, along with other matters as set out in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business. Report on the Remuneration Report We have audited the Remuneration Report included in pages 11 to 17 of the directors report for the year ended 30 June The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of ZipTel Limited for the year ended 30 June 2016 complies with section 300A of the Corporations Act BDO Audit (WA) Pty Ltd Dean Just Director Perth, 22 August

22 DIRECTORS DECLARATION The Directors declare that: The financial statements and notes, as set out on pages 26 to 50 are in accordance with the Corporations Act 2001 including: In the Directors opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable: In the Directors opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001 and other mandatory professional reporting requirements, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Group and the Company; In the Directors opinion, the financial statements and notes thereto are in accordance with the International Financial Reporting Standards issued by the International Accounting Standards Board as stated in note (1) to the financial statements; and The Directors have been given the declarations required by section 295A of the Corporations Act 2001 by the Chief Executive Officer and the Chief Financial Officer. Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001 Umberto Mondello Chief Executive Officer 22 August 2016 Page 21

23 CONSOLIDATED STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016 Notes $ $ Revenue Sale of goods and services 2 762, ,981 Other income 3 1,180, ,426 Expenses Cost of sales 4 (1,176,045) (623,026) Other expenses from ordinary activities Administration (899,938) (668,057) Research and development (1,488,777) - Employee benefits 4 (898,871) (811,392) Marketing and distribution 4 (2,380,505) (930,556) Consulting 4 (519,972) (322,369) Depreciation and amortisation 4 (55,924) (55,853) Occupancy (50,979) (77,415) Write off of inventories 9 - (40,473) Share-based payments 19 (8,479,391) (2,809,080) Finance costs (5,194) (2,729) Exchange gain 2,580 1,904 Total Expenses (15,953,015) (6,339,046) Loss before income tax (14,009,805) (5,687,639) Income tax expense Loss after income tax for the year (14,009,805) (5,687,639) Other comprehensive income - - Total comprehensive loss for the year (14,009,805) (5,687,639) Loss attributable to owners of the Company (14,009,805) (5,687,639) Total comprehensive loss attributable to owners of the Company (14,009,805) (5,687,639) Loss per share for the year attributable to the members of ZipTel Limited (cents per share) 16 (17.21) (8.21) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. Page 22

24 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016 Notes $ $ Current Assets Cash and bank balances 7 1,353,070 6,278,031 Trade and other receivables 8 104,872 97,374 Prepayments 6,868 - Inventories 9 20,988 24,005 Total Current Assets 1,485,798 6,399,410 Non-current Assets Receivables 8 24,001 - Plant and equipment 10 6,566 24,731 Intangible assets , ,614 Total Non-current Assets 155, ,345 Total Assets 1,641,221 6,586,755 Current Liabilities Trade and other payables , ,815 Provision for advance billings 13,882 11,940 Total Current Liabilities 732, ,755 Non-current Liabilities Provisions ,437 84,400 Total Non-current Liabilities 103,437 84,400 Total Liabilities 835, ,155 Net Assets 805,320 6,063,600 Equity Issued capital 14 12,402,899 12,130,765 Reserves 15 11,468,657 2,989,266 Accumulated losses (23,066,236) (9,056,431) Capital and reserves attributable to owners of the Company 805,320 6,063,600 Total equity 805,320 6,063,600 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. Page 23

25 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016 Attributable to Owners of the Company Notes Issued Capital Share-based Payments Reserve Accumulated Losses Total $ $ $ $ Balance at 30 June ,224, ,186 (3,368,792) 4,035,910 Loss for the year - - (5,687,639) (5,687,639) Total comprehensive loss for the year - - (5,687,639) (5,687,639) Transactions with owners in their capacity as owners Contribution of equity, net of transaction costs 14 4,906, ,906,249 Recognition of share-based payments 15-2,809,080-2,809,080 Balance at 30 June ,130,765 2,989,266 (9,056,431) 6,063,600 Loss for the year (14,009,805) (14,009,805) Total comprehensive loss for the year (14,009,805) (14,009,805) Transactions with owners in their capacity as owners Contribution of equity, net of transaction costs , ,134 Recognition of share-based payments 15-8,479,391-8,479,391 Balance at 30 June ,402,899 11,468,657 (23,066,236) 805,320 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. Page 24