My Net Fone Limited Annual Report 2008...A PBX system is essential for office communications and a...

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My Net Fone LimitedAnnual Report 2008

ContentsBoard of Directors 2/ Company Profile, Vision & Values 3/ What is VoIP? 4/ Key Achievements 5/

Chairman’s Review 6/ Managing Director’s Review 7/ Customers‘ Testimonials 10/ Directors’ Report 12/

Corporate Governance Statement 19/ Income Statement 22/ Balance Sheet 23/ Cash Flow Statement 24/

Statement of Changes in Equity 25/ Notes to the Financial Statements 26/ Directors’ Declaration 49/

Auditor’s Independence Declaration 50/ Independent Auditor’s Report 51/ ASX Additional Information 53/

Corporate information 55/

Finalist – Information & Communication TechnologyCITY OF SYDNEY - BUSINESS AWARDS 08

Finalist – SMART 50 COMPANY AWARDS 2008

Board of Directors

Mr Terry Cuthbertson B. Bus., CAChairman

A Chartered Accountant, previously partner with KPMG with extensive corporate finance expertise and knowledge. Also Director of S2Net Limited, Montec International Limited, Mint Wireless Limited, Austpac Resources N.L. and Healthzone Limited.

Director since March 2006

Mr Andy Fung B.E. MComManaging Director

Extensive experience in telecommunications. Formerly Director of Business Development of Lucent Technologies. Director of Symbio Networks Pty Ltd since 2002.


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 2002.


Mr Michael Boorne Electronics Eng. Dip.Non-Executive Director

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. AlsoDirector of Boorne Management Pty Ltd and Earglow Pty Ltd.

Director since December 2006

Ms Catherine Ly B.Bus., CPAChief Financial Officer

Company Secretary since July 2006

2

Mr Sugo

Mr Boorne

Mr Cuthbertson

Mr Fung

Ms Ly

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.

Company Profile

Vision

Values• Superior Customer Service

• Excellent Quality

• Value for money

• Innovation

• Team work

• Integrity

• Passion

To revolutionise how our customers

communicate and enhance their

communication experiences by delivering

innovative solutions with superior value

and quality customer service.

To be recognised by our customers,

employees and shareholders as the most

innovative and customer-centric

communications provider in Australia.

To be an employer of choice and provide

our employees with relevant training, career

development opportunities and a great

environment in which to work.

3

What is VoIP? 4

Voice over Internet Protocol (VoIP) enables users to make and receive phone calls over any broadband

Internet connection. VoIP converts voice into packets of data routing voice conversations over the Internet.

These packets of data are re-assembled into voice at the receiving end anywhere in the world, allowing VoIP

users to use VoIP services just like a conventional phone service.

Benefits of VoIP • Cost Savings: Users enjoy big savings to their telephone bills.

• Enhanced features: VoIP delivers enhanced functionalities at

little or no additional cost.

• Convergence: The integration of voice, data, and internet

offers business-grade connection to end users.

Why MyNetFone VoIP? The Australian VoIP market is rapidly growing as consumers recognise

the benefits of VoIP. MyNetFone is Australia's leading provider of VoIP

services for its quality and reliability. The company is constantly

developing new applications and partnering with equipment

suppliers of the most reputable brands, providing the best possible

VoIP and converged solutions to residential and business users.

The new arrival: Virtual PBX MyNetFone introduces Virtual PBX as part of its business offerings

considering that virtuality is a reality and businesses are turning to this

emerging technology for cost savings and enhanced features.

A PBX system is essential for office communications and a Virtual PBX

provides similar quality and functionalities, without the need to own

and maintain physical equipment with Virtual PBX, business customers

still enjoy crystal clear communications at low rates and make huge

savings on communications equipment. Installation and maintenance

costs are eliminated with simple “Do-It-Yourself” installation and a

user-friendly system management portal. The system is not tied to

physical connection and enables users to expand their

communication network anywhere in the world.

Continuing innovation MyNetFone is a market leader in VoIP and IP applications, and will

continue to develop new and exciting voice and broadband data

innovations to transform the Australian communications landscape.

Wall Socket

DSL/CableModemRouter

VoiceAdaptor

Telephone

Internet

Key Achievements – June 08 5

Paying customers as of June 07

Gross revenue

Gross margin

60,000

$6,808,941

$2,012,024

71%

108%

132%

Financial year07/08

% change fromlast year

Chairman’s Review 6

I am very pleased to report that since its listing in May 2006, My Net Fone Limited has achieved strong growth and this year is no exception. This financial year 2007/08 saw the company once again doubling its gross revenue, gross profit and customer numbers from the previous year.

The gross revenue and gross profit for the year were over $6.8M (2007:$3.3M) and $2M (2007: $0.87M), an increase of 107.8% and 132.3% respectively. The revenue growth is due to the continuing increase in subscriber growth and call usage by customers. The deferred revenue for the year increased to $0.73M as compared with $0.44M in 2007 – an increase of 65.9%. The deferred revenue is the call credits deposited by the customers in their accounts for making future phone calls and is non-refundable. The company reached cash flow positive in the second half of the year and made a net trading loss of $1.9M (2007:$3.3M) for the year, significantly reducing previous year’s loss.

It is important to point out that the significant growth the company experienced in the year includes strong contributions from the SMB (small & medium business) sector as well as from the traditional residential users. These two segments: residential and enterprise will form the platform of growth and expansion for the company in future years. Under the current tight economic climate, business enterprises are very conscious of cost control. My Net Fone’s services are ideal for SMB’s translating cost savings and efficiency gains to their bottom lines. The technology shift to IP (Internet Protocol) also facilitates the transition of moving away from out-dated equipment to MyNetFone’s new generation innovative services.

On the other side of the coin, the company’s exponential growth in a relatively short time frame has placed many challenges and stresses in the daily operations and management of the company. The recruitment, development and retention of well trained and motivated staff as well as the formulation of systems and processes to ensure efficient and effective operations are some of the challenges the company faces in order to deliver quality and cost effective services that our customers expect of us. The growth has also transformed the company from a start-up to a medium sized organisation that comes with a different set of challenges.

The company is very fortunate to have a dedicated, hard working management team led by Andy Fung, Rene Sugo and Catherine Ly in managing the growth and delivering results and benefits to the company. The IP era in the telecom industry has only just begun with broadband roll-outs and usage increasing daily. The potential opportunities are therefore enormous. However, to capitalise these opportunities and to turn it into a profitable business requires vision, risk taking and strategies that are then translated into concrete plans and actions to achieve the desired outcomes. The management team at My Net Fone Limited has demonstrated a track record of success in turning market opportunities into business results.

On behalf of the board, I would like to take this opportunity to thank the management team in achieving a very successful year. The board will continue to provide its full support to the team to ensure the company maintains its momentum of growth and deliver positive results to shareholders.

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 as I look forward to a bright future with My Net Fone in the years ahead.

Terry CuthbertsonChairman

Managing Director’s Review 7

I am pleased to report that the company achieved another year of significant growth with gross revenue of over $6.8M (2007:$3.3M) and $2M (2007: $0.87M) respectively. The loss for the year was reduced by 40.3% to $1.9M. The deferred revenue for the year increased by 65.9% to $0.73M (2007: $0.44M). The deferred revenue is the call credits deposited by the customers in their accounts and will be recognized once the customers have progressively used up the call credits. As of July 2008, the company had over 60,000 paying customers. Since IPO in May 2006, the company has consistently grown exponentially: doubling its gross revenue, gross profit and customer numbers every 12 months while the yearly loss has been reducing significantly.

Business Highlights

While My Net Fone’s residential customer segment continued its strong growth this year following the release of additional call plans targeting specific overseas markets, this year’s highlight is the significant in-roads that we had made into the SMB (small & medium business) enterprise market. My Net Fone had successfully delivered solutions to enterprises ranging from SOHO (small office & home office) to business customers with multi-location offices in various parts of Australia. The business solutions included a spectrum of IP and VoIP technologies, ranging from multi-port gateways to convergent VoIP and broadband data offerings with VPN (Virtual Private Networks) and remote firewall functionalities.

In the enterprise segment, a whole new generation of PBX’s with IP capabilities (IP PBX) has started to come on the market replacing conventional TDM based equipment. My Net Fone has successfully inter-worked and deployed with our partners a variety of IP PBX’s from different suppliers using the industry standard protocol, SIP. Our partners bundled MyNetFone VoIP service with their IP PBX equipment offering compelling value propositions to their customers. Due to our inter-working capabilities with a wide selection of PBX types, My Net Fone is therefore well positioned to be a VoIP provider of choice to customers who decide to replace their aging PBX equipment with new generation IP PBX.

In response to customers’ needs, My Net Fone also provides broadband Internet data as part of the convergent, bundled offerings of voice and data. Business customers are increasingly looking to source voice and broadband data from a single provider to meet their needs and to minimise multiple handling, i.e. a one-stop shop. A convergent solution in which voice and data are transported over the same IP based infrastructure delivers not just cost savings to business customers but also flexibility and convenience which had not been possible until the advent of IP technology.

My Net Fone reached another significant milestone following the successful launch of its Virtual PBX offerings at this year’s CeBIT show. Virtual PBX is a service that delivers conventional PBX features and functionalities to business customers without them having to purchase and maintain hardware equipment at their premises other than telephony handsets. The service is ideally suited to businesses who do not desire to make substantial up-front capital investments in equipment purchase due to a variety of business reasons. Since its launch, the service has gained traction and mindshare with business customers from a variety of industry backgrounds.

This year, My Net Fone participated as a major sponsor of Australia’s leading IT&T trade exhibition, CeBIT organised by Hanover Fairs. MyNetFone’s brand and message were included in emails that were sent out by the organiser inviting their clients to attend, and were imprinted on 30,000 show bags given out to the attendees at the exhibition. The company’s participation at the exhibition with a professional and functional stand, together with various marketing events and promotions before and during the event, has further deepened MyNetFone’s brand awareness and goodwill in the market and entrenched MyNetFone as a leading provider of VoIP service and IP applications in Australia.

8

The company continued to receive awards from different publications and industry events as well compliments from its customers. Increasingly, the MyNetFone brand and its services have been gaining recognition in the telecom industry and the market. We strive to enhance and maintain the MyNetFone brand synonymous to quality and cost effective VoIP and IP services in Australia.

Company’s Operations

The company’s business philosophy is to strive for continual improvements in all aspects of its internal operations to gain efficiency in productivity and agility in competitiveness. The improvements are incremental and on-going all the time. We believe by this means, our staff and internal processes are aligned closely to match our customers’ needs and to be ahead of our competitors.

We focused on the following key areas during the year:

- MyNetFone Website

In addition to providing information about MyNetFone’s products and services, the website is also an important e-commerce platform for customers’ transactions and interactions with the company’s services. We continued to make the customer interfaces with our website user-friendly, informative and intuitive.

- Service order fulfilment

We had developed further automation processes and systems to provision and fulfil customers’ orders in the most efficient and timely manner. The goal is to enable the customers to use and enjoy the MyNetFone service in the shortest possible time once an order is placed by the customer.

- Service delivery

The delivery of professional, quality customer service by all parts of the company is an on-going exercise of training, development and performance measurements.

Going Forward

While we expect the MyNetFone business to continue to grow and we are very excited by the opportunities unfolding with the continuing up-take of IP PBX’s and our own Virtual PBX by our customers in the enterprise segment. This industry wide shift to IP technology has caused all service providers to compete in a new territory that few has had any previous experience before. My Net Fone will seize this window of opportunity to establish itself as a potent force in the Australian market.

Another area that we look forward to growing is with the launch of naked DSL service in the new financial year. This broadband data service, together with MyNetFone’s VoIP, will be offered as a convergent, bundled offering. One of the key advantages of this offering is that customers will no longer need to subscribe and pay a monthly line rental fee to the incumbent provider, making the value proposition for MyNetFone bundled services even more compelling than ever before.

9

Finally, with revenue and customer number growing and doubling every year, the company has moved away from being a start-up and has evolved into a maturing, albeit still young, organisation with proper corporate structures, systems and processes. The management team at My Net Fone is well aware that the development and retention of well trained, highly motivated and committed staff is absolutely critical to the continuing growth and success of the business if My Net Fone is to be a new generation provider of choice in this highly competitive market. We continue to develop and refine human resource policy within the company that will meet a range of challenges arising from the current economy with near full employment.

On behalf of the management team, I would like to take this opportunity to thank our staff and partners for their dedication and contributions as well as their passion in serving our customers. I am confident that My Net Fone’s business will continue to grow in the new financial year and look forward to your continuing support.

Andy FungManaging Director

10Customers’ Testimonials

Hello,

I thought you might be the best people to pass

on my thanks to the rest of your company. On

Friday, I ordered the Netgear TA612V with a

Panasonic Cordless Phone. It arrived at my

workplace this [Monday] morning. I arrived home

this evening, plugged everything in, and tested it. It

just worked. Just like a regular phone line, but

without having to deal with Telstra. Awesome.

Thank you for your prompt service, your perfectly

pre-configured hardware, your reasonable pricing,

and for including a DID number. I will definitely

be recommending you to my friends and colleagues.

Sorry if this sounds like Marketing copy, but it’s

just so damn nice to have something that actually

really is “plug and play”.

Thanks again,

Bruce.

Dear Mynetfone Team, On behalf on Total Care Transport, I would like to thank you for you excellent commitment and services to our business. Our rollout at the head office went very seamless, we are hoping to work with you all in the near future, as we are rolling out our VoIP solutions for the remaining 10 branches.

A very special thanks to Sampson for his excellent support once again.

Kindest Regards,

William

2008

Directors’ Report 12

FOR THE YEAR ENDED 30 JUNE 2008

Your directors present this report on the company and its controlled entity (the economic entity) for the

financial year ended 30 June 2008.

DirectorsThe 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

Mr Michael BoorneElectronics Eng. Dip.

Non-Executive Director

Mr Andy FungB.E. MCom

Managing Director

Mr René Sugo B.Eng. (Hon)Technical Director

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., Healthzone Limited

and Mint Wireless Limited. Director since March 2006

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. Also Director of Boorn Management Pty Ltd and Earglow Pty

Ltd. Director since December 2006

Extensive experience in telecommunications. Formerly Director of

Business Development of Lucent Technologies. Director of Symbio

Networks Pty Ltd since 2002. Director since March 2006

Extensive experience in telecommunications. Formerly Technical

Director of Lucent Technologies. Director of Symbio Networks Pty Ltd

since 2002. 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 2006.

Board and Committee Meetings

From 1/7/07 to 30/6/08, the Directors held 12 board meetings and 3 audit committee meetings. Each director’s

attendance at those meetings is set out in the following table.

Directors

T. Cuthbertson

A. Fung

R. Sugo

M. Boorne

Committe Meetings Attended

Board Audit

Eligible to Attend Attended Eligible to Attend Attended

12

12

12

12

12

12

12

12

3

3

2

1

3

3

2

1


For the year ended 30 June 2008

Operating Result The consolidated loss of the Group for the financial year after providing for income tax amounted to

$1,941,179 ( 2007: $3,250,320); representing a decrease of 40.3% compared with last year.

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 were $6,808,941 (2007:$3,275,942) and $2,012,024 (2007:

$866,012) respectively. The revenue growth was due to the continuing increase in subscriber growth and usage

of the MyNetFone VoIP service. The gross profit was achieved as a result of maintenance of the margins as well

as efficient application of resources. The deferred revenue for the year increased to $725,892 as compared

with $437,539 in 2007 – an increase of 65.9%. The deferred revenue is the call credits deposited by the

customers in their accounts for making future phone calls. This revenue will be recognized once the customers

have progressively used up the call credits.

The subscriber numbers as of July was over 60,000 representing a 71.4% increase over last year. While we

expect the subscriber growth and call usage to continue, it is important to highlight the increase in enterprise

customer sign-ups for a wide range of MNF Business Solutions including Multi-line, Virtual PBX, SIP trunk and

converged broadband and VoIP services. In addition to the residential market, MyNetFone has now made

significant in-roads into the enterprise segment with higher ARPU (average revenue per user). The continuing

sign-up of high value enterprise customers will propel MyNetFone to reach profitability sooner than otherwise

possible. However, the demands and challenges of enterprise customers are vastly different from the

residential users. The company therefore continues to make improvements in all aspects of its service delivery

to customers, streamlining its internal systems and processes as well as setting targets and benchmarks that are

best practice in the industry.

The revenue and customer number growth has only resulted in a moderate increase in operating costs which

were achieved primarily by means of exploiting economies of scale and efficient applications of resources

with automated systems and processes.

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 VoIP phone, broadband

Internet and enhanced services to residential and enterprise customers. In the financial year, the Group

primarily derived its revenue from:

• Monthly fees and call charges from residential and enterprise customers

• Sales of customer premises equipment

• Wholesale of traffic minutes


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.

Future Developments The likely developments in the operations of the economic entity and operations in future financial years are as

follows:

• The sale of VoIP and broadband Internet services

• The development and sale of enhanced services for residential & enterprise customers

• The development and sale of naked DSL and bundled VoIP services.

Environmental Issues

The Group’s operations are not regulated by any significant environmental regulation under a law of the

Commonwealth or of a State or Territory.

DividendsNo dividends were declared or paid since the start of the financial year. No recommendation for payment of

dividends has been made.

Options

No options were granted during or since the end of the financial year by the company to directors.

Remuneration ReportRemuneration 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

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 2008 Year Short term* Post Employment* Share Based Total*Payment Options*

Salary & fees $ Superannuation $ $ $Non-executive

Mr T. Cuthbertson

Mr M. Boorne

Executive

Mr A. Fung (Managing Director)

Mr R. Sugo (Technical Director)

Total

Management Executives

Mr L. Tai (Director)

Ms C. Ly (Chief Financial Officer)

Total

2008

2008

2008

2008

2008

2008

50,000

30,000

168,000

168,000

416,000

53,333

103,000

156,333

4,500

2,700

15,120

15,120

37,440

4,800

9,270

14,070

-

-

-

-

-

-

-

-

54,500

32,700

183,120

183,120

453,440

58,133

112,270

170,403

Only two specified executives are included in the disclosure as there are only four specified executives in total employed in the Company in 2008, two of whom are Executive Directors disclosed above.

Year ended 30 June 2007 Year Short term* Post Employment* ShareBased Total*Payment Options*

Salary & fees $ Superannuation $ $ $Non-executive

Mr T. Cuthbertson

Mr M. Boorne

Executive

Mr A. Fung (Managing Director)

Mr R. Sugo (Technical Director)

Total

Management Executives

Mr L. Tai (Director)

Ms C. Ly (Chief Financial Officer)

Total

2007

2007

2007

2007

2007

2007

50,000

15,000

150,000

150,000

365,000

50,000

100,000

150,000

4,500

1,350

13,500

13,500

32,850

4,500

9,000

13,500

80,000

620,000

-

-

700,000

-

-

-

134,500

636,350

163,500

163,500

1,097,850

54,500

109,000

163,500

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.


Directors

Directors



Compensation of Directors and Key Management Personnel*

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 2009. The key terms of the Agreements

are reviewable on July 1 every year. The Board approved salary increments for Andy Fung and Rene Sugo

in July 2007, bringing their base salary to $168,000 per annum each plus the standard superannuation

guarantee levy. A review has been undertaken in August 2008.

The remuneration and other terms of employment for the Key Executives above are set out in written

agreements. Each of these employment agreements is unlimited in term but may be terminated by written

notice by either party and by the Company making payment in lieu of notice.

Each of these agreements sets out the arrangements for total fixed remuneration, performance-related cash

bonus opportunities, superannuation, termination rights and obligations and eligibility to participate in the

employee equity-based 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 equity-based 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 behavior that may materially damage the reputation of, or otherwise

bring, the Company into 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.

Consolidated Company2008 2007 2008 2007

Short term*

Post employment*

Share-based Payment*

$ $ $ $572,333

51,510

-

623,843

515,000

46,350

700,000

1,261,350

80,000

7,200

-

87,200

65,000

5,850

700,000

770,850




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 corporateAt 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 13,488,954 7,817,223

Mr René Sugo 13,488,955 7,817,222

Mr Terry Cuthbertson 1,125,000 1,000,000

Mr Michael Boorne 2,335,104 -

Total 30,438,013 16,634,445

Directors BenefitsNo 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 AuditorNo 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 CompanyNo 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 DeclarationA copy of the auditor's independence declaration as required under section 307C of the Corporations Act

2001 has been included.



Signed in accordance with a resolution of the Board of Directors:

Terry CuthbertsonChairman

Andy FungManaging Director

Sydney, 27 August, 2008


Corporate Governance Statememt 19

The Board of Directors of My Net Fone Limited is responsible for the corporate governance practices of the

consolidated entity. The Board guides and monitors the business and affairs of My Net Fone Limited on behalf

of the shareholders by whom they are elected and to whom they are accountable.

My Net Fone Limited’s Corporate Governance Statement is structured with reference to the Corporate

Governance Council’s Principles and Recommendations (2nd Edition, August 2007).

Taking into consideration theses principles and recommendations, the Board acknowledges that their key

responsibilities are:

• Overseeing the business and strategic direction of the Company in order to maximise performance

and generate appropriate levels of shareholder return.

• Appointment, evaluation and removal of the Chairman, the Managing Director, the Chief Financial

Officer and the Company Secretary.

• Ensuring that management establishes and follows an appropriate system of internal controls, risk

management and legal compliance.

• Reviewing the performance and implementation of corporate strategies by senior management and

ensuring that senior management have the necessary resources to do so.

• Approving and supervising significant capital expenditure, capital management, acquisitions and

divestments.

• Approving and monitoring annual budgets and strategic plans.

• Approving and monitoring financial and other reporting made to shareholders and the ASX under the

continuous disclosure regime.

The Board has chosen not to follow all of the best practice recommendations set by the ASX Corporate

Governance. The recommendations have not been met in the following areas:

• A Nomination Committee has not been established. The best practice recommendations recognise

that nomination committees may not be required for smaller companies. Due to the size of the

Company and its Board, the Board does not consider it necessary to establish a Nomination

Committee.

• A Remuneration Committee has not been established. Due to the size of the Company and its Board,

the Board does not consider it necessary to establish a Remuneration Committee.

Composition of the Board

The skills, experience and expertise relevant to the position of director held by each director in office at the

date of the annual report is included in the Directors’ Report. There are two Non-executive Directors sitting on

the Board and both of them are independent of management and free from any business or other relationship

that could materially interfere with – or could reasonably be perceived to materially interfere with – the

exercise of their unfettered and independent judgement.

In the context of director independence, “materiality” is considered from both the company and individual

director perspective. The determination of materiality requires consideration of both quantitative and

qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the

appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if


it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include

whether a relationship is strategically important, the competitive landscape, the nature of the relationship and

the contractual or other arrangements governing it and other factors that point to the actual ability of the

director in question to shape the direction of the company’s loyalty.

In accordance with the definition of independence above, and the materiality thresholds set, the following

directors of My Net Fone Limited are considered to be independent:

Name Position

Mr. Terry Cuthbertson Chairman, Non-executive Director

Mr. Michael Boorne Non-executive Director

There are procedures in place, agreed by the Board, to enable directors in furtherance of their duties to seek

independent professional advice at the company’s expense.

Nomination Committee

During the year of 2008 My Net Fone Limited had not set up a Nomination Committee due to the scale of the

company.

Audit Committee

Given the small size of the Board, the Board has conducted all the functions of an Audit Committee. It is the

Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes

internal controls to deal with both the effectiveness and efficiency of significant business processes, the

safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial

information as well as non-financial considerations such as the benchmarking of operational key performance

indicators.

The Board members have met every month and held conference calls where necessary to ensure it continues

to operate within the established guidelines.

The details of meeting and attendances are disclosed in the Directors’ Report.

Performance Evaluation The performance of the Board and key executives is reviewed regularly against both measurable and

qualitative indicators.The performance criteria against which directors and executives are assessed are

aligned with the financial and non-financial objectives of My Net Fone Limited in the coming year. Directors

whose performance is consistently unsatisfactory may be asked to retire.

During the reporting period, My Net Fone Limited did not comply with ASX Corporate Governance Council

best practice recommendation 2.5 since the Board considered that the company size was not big enough to

form a performance committee.


Remuneration Policies It is the company’s objective to provide maximum stakeholder benefit from the retention of a high quality

Board and executive team by remunerating directors and key executives fairly and appropriately with

reference to relevant employment market conditions. To assist in achieving this objective, the Board links the

nature and amount of executive directors’ and officers’ emoluments to the company’s financial and

operational performance. The expected outcomes of the remuneration structure are;

• Retention and motivation of key executives;

• Attraction of high quality management to the company; and

• Performance incentives that allow executives to share the success of My Net Fone Limited.

There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive

directors.

The Board is responsible for determining and reviewing compensation arrangements for the directors

themselves and the executive team.

There was no Remuneration Committee set up throughout the year due to the small scale of the Company.

The amount of remuneration for all key management personnel for the company are detailed in the directors’

report under the heading Remuneration of Key Management Personnel.

Income Statement 22

Note CONSOLIDATED PARENT

$ $ $ $

Revenue

Rendering of services

Cost of sales

Gross profit

Finance revenue

Other income

Distribution expenses

Marketing expenses

Occupancy expenses

Administrative expenses

Technology and support expenses

Other expenses

Finance costs

Loss before income tax

Income tax expense

Loss after income tax

Net loss for the year

Earnings per share (cents per share)

- basic for loss for the year

- diluted for loss for the year

6,808,941

(4,796,917)

2,012,024

44,167

75,446

(237,989)

(842,448)

(202,685)

(2,313,485)

(121,890)

(343,178)

(11,141)

(1,941,179)

-

(1,941,179)

(1,941,179)

(3.76)

(3.76)

3.(a)

3.(a)

3.(b)

3.(c)

2008 2007 2008 2007

3,275,942

(2,409,930)

866,012

55,187

70,457

(112,512)

(573,252)

(200,927)

(2,746,296)

(228,799)

(368,990)

(11,200)

(3,250,320)

-

(3,250,320)

(3,250,320)

(7.16)

(7.16)

-

-

-

29,640

269,778

-

-

(187,443)

(97,543)

-

(100,084)

(205)

(85,857)

-

(85,857)

(85,857)

The above income statement should be read in conjunction with the accompanying notes.


-

-

-

44,261

289,903

-

-

(172,400)

(779,396)

-

(223,181)

(45)

(840,858)

-

(840,858)

(840,858)

Balance Sheet 23

AS AT 30 JUNE 2008

Note CONSOLIDATED PARENT

$ $ $ $

ASSETS

Current Assets

Cash and cash equivalents

Trade and other receivables

Other financial assets

Total Current Asset

Non-currect Assets

Other receivables

Investment in subsidiaries

Property, plant and equipment

Total Non-current Asset

TOTAL ASSETS

LIABILITIES

Current Liabilities

Trade and other payables

Deferred revenue

Provisions

Total Current Liabilities

Non-current Liabilities

Other payables

Provisions

Total Non-current Liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Contributed capital

Share based payment reserve

Accumulated losses

TOTAL EQUITY

794,341

428,596

62,128

1,285,065

450

-

199,529

199,979

1,485,044

2,340,149

725,892

135,636

3,201,677

-

19,580

19,580

3,221,257

(1,736,213)

3,990,515

1,048,333

(6,775,061)

(1,736,213)

5.

6.

7.

6.

18.

8.

9.

10.

11.

9.

11.

12.

2(d).

2008 2007 2008 2007

The above balance sheet should be read in conjunction with the accompanying notes.

387,537

9,377

62,128

459,042

3,155,313

5,000,000

-

8,155,313

8,614,355

70,731

-

-

70,731

-

-

-

70,731

8,543,624

8,805,515

1,048,333

(1,310,224)

8,543,624

1,143,489

175,882

62,128

1,381,499

450

-

243,054

243,504

1,625,003

1,374,193

437,539

83,915

1,895,647

6,308

11,710

18,018

1,913,665

(288,662)

3,496,887

1,048,333

(4,833,882)

(288,662)

847,653

2,067

62,128

911,848

2,342,783

5,000,000

-

7,342,783

8,254,631

118,778

-

-

118,778

-

-

-

118,778

8,135,853

8,311,887

1,048,333

(1,224,367)

8,135,853

Cash Flow Statement 24

CONSOLIDATED PARENT

$ $ $ $

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest received

Borrowing costs

Net cash provided by (used in) operating

activities

Cash flows from investing activities

Purchase of property, plant and equipment

Decrease/ (Increase) in security deposit

Advances to subsidiary

Net cash provided by (used in) investing

activities

Cash flows from financing activities

Proceeds from issue of shares

Transaction costs of issue of shares

Net Cash provided by (used in) financing

activities

Net increase (decrease) in cash and cash

equivalents

Cash and cash equivalents at beginning of

Financial year

Cash and cash equivalents at end of finacial

year

7,600,920

(8,457,811)

44,167

(11,141)

(823,865)

(18,911)

-

-

(18,911)

500,000

(6,372)

493,628

(349,148)

1,143,489

794,341

5.

8.

7.

12.

12.

5.

2008 2007 2008 2007

The above cash flow statement should be read in conjunction with the accompanying notes.

289,445

(460,094)

29,640

(205)

(141,214)

-

-

(812,530)

(812,530)

500,000

(6,372)

493,628

(460,116)

847,653

387,537

Note


3,873,543

(5,517,648)

55,187

(11,200)

(1,600,119)

(72,607)

33,600

-

(39,007)

900,000

(11,472)

888,528

(750,598)

1,894,086

1,143,489

344,004

(541,528)

44,261

(45)

(153,308)

-

-

(1,623,800)

(1,623,800)

900,000

(11,472)

888,528

(888,580)

1,736,233

847,653

Statment of Changes in Equity 25

Issued Capital

$ $ $ $CONSOLIDATED

As at 1 July 2006

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 2007

Movements

Share issue costs

Net income/ (expense) recognised directly in equity

Loss for the year





As at 30 June 2008

PARENT

As at 1 July 2006

IPO costs recognised directly in equity

Loss for the year





As at 30 June 2007

Movements

Share issue costs

Net income/ (expense) recognised directly in equity

Loss for the year





As at 30 June 2008

2,608,359

(11,472)

-

(11,472)

900,000

-

3,496,887

(6,372)

(6,372)

-

(6,372)

500,000

3,990,515

7,423,359

(11,472)

-

(11,472)

900,000

-

8,311,887

(6,372)

(6,372)

-

(6,372)

500,000

-

8,805,515

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Share basedpayment &

other

AccumulatedLosses Total

348,333

-

-

-

-

700,000

1,048,333

-

-

-

-

-

-

1,048,333

348,333

-

-

-

-

700,000

1,048,333

-

-

-

-

-

-

1,048,333

(1,583,562)

-

(3,250,320)

(3,250,320)

-

-

(4,833,882)

-

-

(1,941,179)

(1,941,179)

-

-

(6,775,061)

(383,509)

-

(840,858)

(840,858)

-

-

(1,224,367)

-

-

(85,857)

(85,857)

-

-

(1,310,224)

1,373,130

(11,472)

(3,250,320)

(3,261,792)

900,000

700,000

(288,662)

(6,372)

(6,372)

(1,941,179)

(1,947,551)

-

500,000

-

(1,736,213)

7,388,183

(11,472)

(840,858)

(852,330)

900,000

700,000

8,135,853

(6,372)

(6,372)

(85,857)

(92,229)

-

500,000

-

8,543,624


Notes to the Financial Statements 26


1 CORPORATE INFORMATION The financial report of My Net Fone Limited and its controlled entity (the Group) for the year ended 30 June 2008

was authorized for issue in accordance with a resolution of the directors on 27 August 2008.

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 that has been prepared in accordance with

Australian Accounting Standards, Australian Accounting Interpretations, other authoritative

pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result

in a financial report containing relevant and reliable information about transactions, events and

conditions to which they apply. Compliance with Australian Accounting Standards ensures that the

financial statements and notes also comply with International Financial Reporting Standards. Material

accounting policies adopted in the preparation of this financial report are presented below. They have

been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs, modified,

where applicable, by the measurement at fair value of selected non-current assets, financial assets and

financial liabilities.

The financial report is presented in Australian dollars.

(b) 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 2008. 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).

(c) 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 2008 ('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.


2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (c) Basis of consolidation

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 infull.

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.

(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 $1,941,179 (2007: loss of $3,250,320) during the year ended 30

June 2008, and as at that date the Group's total liabilities exceeded total assets by $1,736,213. (2007:

$288,662).

However, this negative liability position is viewed as controllable by the directors because:

1/ Included in the current liabilities is $725,892 of deferred revenue which will be recognised as 2009

revenue when customers' credits are progressively used up. This deferred revenue does not represent a

gross cash outflow.

2/ Of the total amount of $2,200,634 of trade payables, $2,037,678 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 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 profitability and cash flows, which include, but are not limited to:

(i) 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.

(ii) 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.



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Going Concern (Continued) (iii) Reliance on Key Management

The responsibility of overseeing the day-to-day 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 into 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 dependant 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 AASB 3 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.

(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:



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (f) Significant accounting judgements, estimates and assumptions (Continued) Share-based payment transactions

The Group measures the cost of equity-settled 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) 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 un-used 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.

(h) 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 straight-line

basis over the lease term. Lease incentives are recognised on a straight-line basis over the lease term.

(i) Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term

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 30-90 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.

(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



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (k) Foreign Currency Translation (Continued) ($). 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.

Non-monetary 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. Non-monetary 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, carry-forward 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 carry-forward 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.

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



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (l) Income tax (Continued) 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.

(m) 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 carried at cost or fair value as indicated less, where applicable, any accumulated

depreciation and impairment losses.

Depreciation is calculated on a straight-line 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.



2 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

pre-tax 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 cash-generating 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 cash-generating units exceeds its

estimated recoverable amount. The asset or cash-generating 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) De-recognition 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 de-recognition 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, held-to-

maturity investments, or available-for-sale 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, re-evaluates this

designation at each financial year-end.

(i) Loans and receivables

Loans and receivables are non-derivative 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



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (p) Impairment of assets (Continued) 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. In such cases the asset

is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount

of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating

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

pre-tax 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 pre-tax 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) Wages, salaries and annual leave

Liabilities for wages and salaries, including non-monetary 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.

(ii) 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.



2 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) De-recognition of financial assets and financial liabilities (i) 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 'pass-through' 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.

(ii) Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or

expires.

(w) Share-based payment transactions The Group provides benefits to its employees and Directors (including key management personnel) in the

form of share-based payments, whereby employees render services in exchange for shares or rights over

shares (equity-settled transactions).

The cost of these equity-settled 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 equity-settled 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 non-market 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.

(x) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to

changes in presentation for the current financial year.



CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

(continued)

3. REVENUES AND EXPENSES

Revenue and Expenses from Continuing Operations

(a) Revenue

Rendering of services

Finance revenue

Breakdown of finance revenue:

Bank interest receivable

(b) Other income

Contribution from landlord

Rent received

Management fees

Other

(c) Other expenses

Depreciation on property, plant and equipment

Accounting and audit fees

General expenses

Stamp duty

Settlement fees

Valuation report

Legal fees

Listing fees

Registry fees

Merchant processing fees

Subscriptions and memberships

(d) Minimum lease payments

Operating lease – premises

(e) Employee benefits expense

Wages and salaries

Superannuation

Share based payments expense

Payroll tax

Workers’ compensation costs

6,808,941

44,167

6,853,108

44,167

44,167

7,578

56,149

-

11,719

75,446

62,436

30,925

51,195

-

12,000

3,000

4,541

24,381

18,808

129,349

6,543

343,178

187,443

1,815,844

307,084

-

89,981

9,401

2,222,310

-

29,640

29,640

29,640

29,640

-

187,443

60,000

22,335

269,778

-

30,225

23,670

-

-

3,000

-

24,381

18,808

-

-

100,084

187,443

80,000

7,200

-

5,232

419

92,851


3,275,942

55,187

3,331,129

55,187

55,187

7,578

51,720

-

11,159

70,457

49,247

107,570

42,816

27,389

-

-

21,042

18,309

28,776

62,939

10,901

368,990

180,342

1,654,635

288,456

700,000

91,146

7,791

2,742,028

-

44,261

44,261

44,261

44,261

-

172,400

105,000

12,503

289,903

-

104,720

14,944

27,389

-

-

21,042

18,309

28,776

-

8,000

223,180

172,400

65,000

5,850

700,000

3,259

226

774,335


CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

(continued)

4. INCOME TAX

The major components of income tax expense are:

Income Statement

Current income tax

Current income tax charge

Adjustments in respect of current income tax of

previous years

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

At the statutory income tax rate of 30%

Share based payment expenses not

allowable for income tax purposes

Unrecognised temporary differences

Unrecognised tax losses

Income tax expense reported in the income

statement

Entities in the Group have tax losses arising in Australia of $5,119,223 (2007:$3,431,938) 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 non-recognition of the deferred tax asset is $305,730 (2007: $194,227)

The Group has yet to decide whether it will form a tax consolidated group for tax purposes.

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(1,941,179)

(582,354)

-

76,216

506,138

-

-

(85,857)

(25,757)

-

(54,474)

80,231

-

-


(3,250,320)

(975,096)

210,000

61,597

703,499

-

-

(840,858)

(252,257)

210,000

(33,307)

75,564

-

-


CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

(continued)

5. CASH AND CASH EQUIVALENTS

Cash at bank and on hand

Reconciliation to Cash Flow Statement

For the purposes of the Cash Flow Statement, cash and

cash equivalents comprise the following at 30 June 2008:

Cash at the bank and on hand

Reconciliation of net profit after tax to net cash flow from operations:

Net loss

Adjustments for:

Depreciation of plant and equipment

Net loss on disposal of plant and equipment

Share based payments expense

Changes in assets and liabilities

(Increase)/decrease in trade and other receivables

(Increase)/decrease in inventories

(Decrease)/increase in trade and other creditors

(Decrease)/increase in deferred revenue

(Decrease)/increase in provisions

Net cash flow from/(used in) operating activities

6. TRADE AND OTHER RECEIVABLES

Current

Trade receivables

Less: Provision for impairment of receivables

Other receivables

Non-current

Other receivables

Intercompany receivable*

* 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 non-interest bearing.

7. OTHER FINANCIAL ASSETS

Current

Term deposits

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.

794,341

794,341

(1,941,179)

62,436

-

-

(252,714)

-

959,648

288,353

59,591

(823,865)

405,804

(80,000)

102,792

428,596

450

-

450

62,128

387,537

387,537

(85,857)

-

-

-

(7,311)

-

(48,046)

-

-

(141,214)

-

-

9,377

9,377

-

3,155,313

3,155,313

62,128


1,143,489

1,143,489

(3,250,320)

49,247

-

700,000

(20,063)

-

635,211

219,613

66,194

(1,600,119)

86,963

-

88,919

175,882

450

-

450

62,128

847,653

847,653

(840,858)

-

-

700,000

25,111

-

(37,561)

-

-

(153,308)

-

-

2,067

2,067

-

2,342,783

2,342,783

62,128


$ $ $ $

Furniture &Fittings

(continued)

8. PROPERTY, PLANT AND EQUIPMENT

CONSOLIDATED

Year ended 30 June 2008

At 1 July 2007, net of accumulated depreciation and

impairment

Additions

Disposals

Depreciation charge for the year

At 30 June 2008, net of accumulated depreciation

At 30 June 2008

Cost

Accumulated depreciation

Net carrying amount

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

At 30 June 2007

Cost

Accumulated depreciation and impairment

Net carrying amount

These assets are not impaired as at year end.

9. TRADE AND OTHER PAYABLES

Current

Trade payables

Other creditors

Security deposit

Lease incentive

(i) Trade payable are non-interest bearing and are normally settled on 30-day terms with non-related suppliers.

Included in trade payable is $2,037,678 payable to Symbio Networks. Refer to Note 2(d) and Note 19.

175,425

-

-

(31,752)

143,673

211,697

(68,024)

143,673

190,877

15,905

-

(31,357)

175,425

212,073

(36,648)

175,425

2,200,634

119,207

14,000

6,308

2,340,149

OfficeEquipment IT Systems Total

CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

42,409

7,016

-

(15,469)

33,956

68,596

(34,640)

33,956

26,290

29,630

-

(13,511)

42,409

61,580

(19,171)

42,409

1,239,107

125,508

2,000

7,578

1,374,193

25,220

11,895

-

(15,215)

21,900

43,812

(21,912)

21,900

2,527

27,072

-

(4,379)

25,220

31,917

(6,697)

25,220

63,202

7,529

-

-

70,731

243,054

18,911

-

(62,436)

199,529

324,105

(124,576)

199,529

219,694

72,607

-

(49,247)

243,054

305,570

(62,516)

243,054

115,210

3,568

-

-

118,778


$ $ $


CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

(continued)

9. TRADE AND OTHER PAYABLES (Continued)

Non-current

Lease incentive

10. DEFERRED REVENUE

Pre-paid calling credits

Deferred revenue relates to cash received from customers up front with respect to pre-paid calling credits. The balance represents the

unused call credits as at balance date.

11. PROVISIONS

CONSOLIDATED

As at 1 July 2007

Arising during the year

Utilised during the year

As at 30 June 2008

Current

Non-current

PARENT

As at 1 July 2007

Arising during the year

Utilised during the year

As at 30 June 2008

Current

Non-current

-

725,892

6,308

437,539

-

-

-

-

Annual leave Long service leave Total

83,915

85,245

(33,524)

135,636

135,636

-

135,636

-

-

-

-

-

-

-

11,710

7,870

-

19,580

-

19,580

19,580

-

-

-

-

-

-

-

95,625

93,115

(33,524)

155,216

135,636

19,580

155,216

-

-

-

-

-

-

-



CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

12. 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

Share Placement


- transaction costs

At 30 June


At 1 July

Issued during the year:


Share Placement


- transaction costs

At 30 June

3,990,515

(continued)

3,496,887 8,805,515 8,311,887

49,777,777

-

2,777,778

-

52,555,555

3,496,887

-

500,000

(6,372)

3,990,515

44,999,999

2,000,000

2,777,778

-

49,777,777

2,608,359

400,000

500,000

(11,472)

3,496,887

$

Parent

49,777,777

2,777,778

-

52,555,555

2008 2007Number of Shares $Number of Shares

8,311,887

500,000

(6,372)

8,805,515

$

Consolidated2008 2007

Number of Shares $Number of Shares

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.


44,999,999

2,000,000

2,777,778

-

49,777,777

7,423,359

400,000

500,000

(11,472)

8,311,887

Notes to the Financial Statements 41(continued)

12. ISSUED 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

- On 26 October 2007, after approval by shareholders in the 2007 AGM, the Company successfully completed a

placement raising $500,000 before capital raising costs. That placement was to convert a part of the existing debt

to Symbio Networks, a related party to My Net Fone, into My Net Fone equity 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 2009. The Company obtained official quotation of these shares and options on 29

October 2007.

No. WAEP $ No. WAEP $2008 2008 2007 2007

B SHARE OPTIONS

34,488,096

-

5,555,556

(2,000,000)

-

(2,000,000)

36,043,652

35,543,652


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

Outstanding options as at year end

The outstanding balance as at 30 June 2008 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 2009.

- 6,071,429 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 2009.

- 1,000,000 options issued to non-executive 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 2008. (Refer Note 13)

- 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 2009.

- 5,555,556 options issued to Symbio Networks Pty Ltd over ordinary shares with an exercise price of 25 cents each, exercisable from 26

October 2007 and until 30 April 2009.

0.25

-

0.25

-

-

-

0.25

0.25


23,932,540

7,000,000

5,555,556

-

(2,000,000)

-

34,488,096

22,876,985

0.25

0.26

0.25

-

0.20

-

0.25

0.26


13. SHARE BASED PAYMENT PLANS

No. WAEP $ No. WAEP $2008 2008 2007 2007

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:

16,611,111

-

(2,000,000)

(2,000,000)

12,611,111

12,111,111

Outstanding at the beginning of the year

Granted during the year

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

0.26

0.25

0.30

0.25

0.25

11,611,111

7,000,000

-

(2,000,000)

-

16,611,111

5,000,000

0.25

0.26

-

0.20

-

0.26

0.28

Outstanding options as at year end Jun-08 Jun-07

EOP - Refer Note a

Options granted to Directors - Refer Note b

Total

500,000

12,111,111

12,611,111

500,000

16,111,111

16,611,111

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

non-executive 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.



FOR THE YEAR ENDED 30 JUNE 2007

(continued)

13. SHARE BASED PAYMENT PLANS (Continued)

The outstanding balance as at 30 June 2008 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 2009.

- 500,000 EOP options over ordinary shares with an exercise price of 25 cents each, exercisable upon meeting the

above conditions and until 30 April 2009.

- 1,000,000 options issued to non-executive 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 2008.

The weighted average remaining contractual life for the share options outstanding as at 30 June 2008 is 0.32 years

(2007: 1.32 years).

The weighted average exercise price for options outstanding at the end of the year was 25 cents (2007: 26 cents).

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 each option to Mr. Terry Cuthbertson is 30 cents, exercisable from 26 February 2007. The expiry

date for exercising these options is 30 September 2008. 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 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.

The following table lists the inputs to the model used for the year ended 30 June 2007:

Sensitivity analysis

- If the volatility rate used had been 40%, the share based payment expense for the year would have been around

$750k.

- If the volatility rate used had been 50%, the share based payment expense for the year would have been around

$800k.

2,000,000

Nil

30

6.35

0.2

0.20

0.33

2007

Number of options granted

Dividend yield (%)

Expected volatility (%)

Risk free interest rate (%)

Expected life of option (year)

Option exercise price ($)

Share price at grant date ($)

2,000,000

Nil

30

6.45

0.9

0.25

0.33

2,000,000

Nil

30

6.06

1.6

0.30

0.33


14. 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 2009.

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 non-cancellable operating leases as at 30 June are as follows:

CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

193,354

-

-

193,354

Within one year

After one year but not more than five years

More than five years

186,600

155,500

-

342,100

193,354

-

-

193,354

186,600

155,500

-

342,100



15. EVENTS AFTER THE BALANCE SHEET DATE

There have been no other material transactions or events outside the ordinary business of My Net Fone Limited

subsequent to 30 June 2008. The financial report was authorised for issue on 27 August 2008 by the Board of

Directors.

16. AUDITORS’ REMUNERATION

Amounts due and receivable by Grosvenor Schiliro for 2008 and received by Ernst & Young Australia for 2007:

17. 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 (Non-executive Chairman)

Mr Michael Boorne (Non-executive 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 14 to 16 of the Directors’ Report designated

as audited.

(c) Shareholdings of Key Management Personnel

1 July 2007

Balance atbeginning of

period

12,100,065

12,100,066

2,478,440

1,125,000

1,164,000

28,967,571

– audit and review of the financial report

1,388,889

1,388,889

-

-

1,171,104

3,948,882

-

-

-

-

-

-

100,000

100,000

CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007

100,000

100,000

35,000

35,000

35,000

35,000

Trade duringthe year

Optionsexercised

Balance atend ofperiod

30 June 200830 June 2008

Directors

Mr Andy Fung

Mr René Sugo

Mr Leo Tai


Mr Michael Boorne

Total

The above shareholdings are held indirectly through controlled entities. No shares were granted during the year.

13,488,954

13,488,955

2,478,440

1,125,000

2,335,104

32,916,453


CONSOLIDATED PARENT

$ $ $ $2008 2007 2008 2007


17. DIRECTOR AND EXECUTIVE DISCLOSURES (Cont’d)

1 July 2006


period

12,100,065

12,100,066

2,478,440

1,125,000

-

27,803,571

-

-

-

-

-

-


Optionsexercised


30 June 200730 June 2007

Directors

Mr Andy Fung

Mr René Sugo

Mr Leo Tai


Mr Michael Boorne

Total

The above shareholdings are held indirectly through controlled entities.

12,100,065

12,100,066

2,478,440

1,125,000

1,164,000

28,967,571

1 July 2007


period

5,039,445

5,039,444

1,032,222

1,000,000

4,000,000

16,111,111

2,777,778

2,777,778

-

-

-

5,555,556

-

-

-

-

4,000,000

4,000,000

Optionsexercised/

lapsed


30 June 200830 June 2008

Directors

Mr Andy Fung

Mr René Sugo

Mr Leo Tai


Mr Michael Boorne

Total

- No options were granted during the year

- 11,111,111 options are restricted and exerciasble from 18 May 2008 to 30 April 2009.

- 1,000,000 options are exercisable from 26 Februany 2007 to 30 September 2008.

- 5,555,556 options are exercisable from 26 October 2007 to 30 April 2009.

- During the year, Michael Boorne did not exercise 2,000,000 options that expired on 31 December 2007, which in turn caused the lapse of

the other 2,000,000 options that is contingent upon the successful exercising of the options in December 2007.

7,817,223

7,817,222

1,032,222

1,000,000

-

17,666,667

1 July 2006


period

-

-

-

1,000,000

6,000,000

7,000,000

-

-

-

-

2,000,000

2,000,000

Granted Optionsexercised


30 June 200730 June 2007

Directors

Mr Andy Fung

Mr René Sugo

Mr Leo Tai


Mr Michael Boorne

Total

5,039,445

5,039,444

1,032,222

1,000,000

4,000,000

16,111,111


1,164,000

1,164,000

(d) Share options of Key Management Personnel

5,039,445

5,039,444

1,032,222

-

-

11,111,111



18. INVESTMENT IN SUBSIDIARIES

The consolidated financial statemants include the financial statements of My Net Fone Limited and the subsidiaries

listed in the following table:

The investment in the abovementioned subsidiary was not impaired during the year (2007: $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:

20. EARNINGS PER SHARE

The following reflects the income and share data used in the basic earnings per share computations:

21. SEGMENT NOTE

The group operates in one business segment and one geographical segment being the telecommunications

segment in Australia.

Country ofIncorporation

% EquityInterest InvestmentName

My Net Fone Australia Pty Limited Australia 100 5,000,000

Related Party $ $ $ $

Sales torelated parties

78,925

60,000

5,390,305

-

Purchasesfrom related

parties

Amounts owedto related

parties

2,037,678

-

Amounts owedto related

parties

Consolidated

Symbio Networks Pty Limited (i)

Parent

Subsidiary:

My Net Fone Australia Pty Limited (ii)

(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 2006. 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.

9,547

3,155,313

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

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.

2008 2007

Consolidated

(1,941,179)

(1,941,179)

51,629,629

Nil

51,629,629


(3,250,320)

(3,250,320)

45,365,905

Nil

45,365,905


22. 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 pre-paid 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. Moreover, the

company considers it is appropriate to provide a provision for impairment of receivables for the year ended 30 June

2008.

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.

Carrying amountConsolidated

758,874

35,467

428,596

62,128

2,340,149

Financial assets

Cash (weighted average effective interest rate 4.8%)

Cash at call

(weighted average effective interest rate 5.25%)




Financial liabilities

On balance sheet

Trade payables

758,874

35,467

428,596

62,128

2,340,149

Fair value Carrying amount Fair value

2008 2007

1,109,046

34,443

175,882

62,128

1,374,193

1,109,046

34,443

175,882

62,128

1,374,193

Carrying amountParent

387,537

9,377

62,128

70,731

Financial assets

Cash (weighted average effective interest rate 4.8%)




Financial liabilities

On balance sheet

Trade payables

387,537

9,377

62,128

70,731

Fair value Carrying amount Fair value

2008 2007

847,653

2,067

62,128

118,778

847,653

2,067

62,128

118,778


23. COMPANY DETALS The registered office of the company is: My Net Fone Limited Level 2, 10-14 Waterloo Street

Surry Hills NSW 2010

The principal place of business is: My Net Fone Limited Level 2, 10-14 Waterloo Street


Directors’ Declaration 49

The directors of the company declare that:

1. the financial statements and notes, as set out on pages 22 to 48, are in accordance with the Corporations Act 2001

and:

a. comply with Accounting Standards and the Corporations Regulations 2001; and

b. give a true and fair view of the financial position as at 30 June 2008 and of the performance for the year

ended on that date of the company and consolidated group;

2. the Chief Executive Officer and Chief Financial Officer have each declared that

a. the financial records of the company for the financial year have been properly maintained in accordance

with section 286 of the Corporations Act 2001;

b. the financial statements and notes for the financial year comply with the Accounting Standards; and

c. the financial statements and notes for the financial year give a true and fair view;

3. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as

and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

Terry Cuthbertson

Chairman

Andy Fung

Managing Director

Sydney, 27 August 2008

50

Grosvenor SchiliroChartered Accountants & Business Advisers

MY NET FONE LIMITED AND CONTROLLED ENTITYAUDITOR’S INDEPENDENCE DECLARATION

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2008 there have been:

a) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001

in relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of My Net Fone Limited and Controlled entity.

Grosvenor Schiliro

Mark SchiliroPartner

Dated in Sydney, this twenty seventh day of August 2008

Independent Auditor’s Report 51

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MY NET FONE LIMITED

Report on the Financial Report

We have audited the accompanying financial report of My Net Fone Limited (the Company) and My Net Fone Limited and

Controlled Entity (the consolidated entity), which comprises the balance sheet as at 30 June 2008, 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 and other explanatory notes and the directors’ declaration of the consolidated entity

comprising the company and entity it controlled at the year’s end or from time to time during the financial year.

As permitted by the Corporations Regulations 2001, the company has disclosed information about the remuneration of

directors and executives (remuneration disclosures), required by Accounting Standard AASB 124: Related Party Disclosures,

under the heading ‘Remuneration Report’ in pages 14 to 16 of the directors’ report and not in the financial report.

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 Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.

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 2 the directors also

state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with the

Australian equivalents to International Financial Reporting Standards (AIFRS) ensures that the financial report, comprising the

financial statements and notes, complies with AIFRS.

The directors of the company also are responsible for preparation and presentation of the remuneration disclosures

contained in the directors’ report in accordance with the Corporations Regulations 2001.

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 in the directors’ report comply with Accounting

Standard AASB 124.

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 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, the auditor considers internal controls

Grosvenor SchiliroChartered Accountants & Business Advisers

Independent Auditor’s Report 52

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 and the

remuneration disclosures in the directors’ report.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material

inconsistencies with the financial report.

Our audit did not involve an analysis of the prudence of business decisions made by the directors or management.

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 2001.

Auditor’s Opinion

In our opinion

a. the financial report of My Net Fone Limited and My Net Fone Limited and Controlled Entity is 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 2008 and of their performance for the year ended on that date; and

ii. complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001;

b. the financial report also complies with International financial Reporting Standards as disclosed in Note 2, and

c. the remuneration disclosures that are contained in pages 14 to 16 of the directors’ report comply with Accounting

Standard AASB 124.

Grosvenor Schiliro

Mark SchiliroPartner

Sydney Dated this twenty seventh day of August 2008

ASX Additional Information 53

Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows. The

information is current as at 01 September 2008.

(a) Distribution of equity securities

(i) Ordinary share capital

52,555,555 fully paid ordinary shares are held by 314 individual shareholders.

All issued ordinary shares carry one vote per share and carry the rights to dividends.

(ii) Options

34,543,656 options are held by 242 individual option holders.

Options do not carry a right to vote.

The number of shareholders, by size of holding, in each class are:

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

The number of security investors holding less than a marketable parcel of ordinary shares is 25

(b) Substantial shareholders

Ordinary shareholders

Avondale Innovations Pty Ltd

Amber (Asia) Pty Ltd

Mr W. G. Martin + Mrs B. M. Martin

Boorne Gregg Investments Pty Limited

Symbio Networks Pty Ltd

Fully Paid Ordinary Shares Options

6

40

66

173

29

314

2

55

103

45

37

242

Fully Paid

Number Percentage

12,100,066

12,100,066

3,277,314

2,835,000

2,777,778

23.02

23.02

6.24

5.40

5.29

54

(c) Twenty largest holders of quoted equity securities

Avondale Innovations Pty Ltd

Amber (Asia) Pty Ltd

Mr W.G. Martin + Mrs B.M. Martin

Boorne Gregg Investments Pty Limited

Symbio Networks Pty Ltd

L&C Pty Ltd

Earglow Pty Ltd

ANZ Nominees Limited

Mr Peter James Connolly

Kore Management Services Pty Limited

Lee Superfund Management Pty Limited

Mr A. McMillan + Mrs S. McMillan

Mr Christopher John Ayres

Mr N W Durnford & Mrs C D Durnford

Mr J.E. Bradley + Mrs N.M. Vandepeer

Mr Geoffrey David Wyatt

Mr Boon Leng Low

Chemco Pty Ltd

Mr Raymond Alfred Jackson

HSBC Custody Nominees (Australia) Limited

(d) On-Market Buy Back

There is currently no on-market buy back.

(e) Use of Cash

My Net Fone Limited has used the cash and assets in a form readily convertible to cash that it held at 18

May 2006 (the date MNF listed on the Australian Securities Exchange) in a way consistent with its business

objectives.

Fully Paid

Number Percentage

12,100,066

12,100,066

3,277,314

2,835,000

2,777,778

2,478,430

2,109,784

1,500,000

1,420,000

1,125,000

1,125,000

469,033

400,000

370,000

370,000

300,000

296,000

267,857

258,603

200,000

45,779,931

23.02

23.02

6.24

5.40

5.29

4.72

4.01

2.85

2.70

2.14

2.14

0.89

0.76

0.70

0.70

0.57

0.56

0.51

0.49

0.38

87.09

55CORPORATE INFORMATION

DirectorsTerry Cuthbertson (Chairman)

Michael Boorne

Andy Fung

René Sugo

Company Secretary

Catherine Ly

Registered Office

Level 2,

10-14 Waterloo Street


Australia

Principal place of business

Level 2,

10-14 Waterloo Street


Austraila

Phone 61 2 8008 8000

Share Register

Link Market Services Limited

Level 12

680 George Street

Sydney NSW 2000

Australia

Phone 61 2 8280 7100

Solicitors

Colin Biggers & Paisley

Level 42

2 Park Street

Sydney NSW 2000

This annual report covers both My Net Fone Limited

as an individual entity and the consolidated entity

comprising My Net Fone Limited and its subsidiary.

The Group’s functional and presentation currency is AUD ($)

The company is listed on the Australian Securities

Exchange under the code MNF

The Annual General Meeting of My Net Fone Limited

will be held at Level 2, 10-14 Waterloo Street, Surry Hills

NSW 2010 at 10:30 am on 31 October 2008.

Bankers

Commonwealth Bank of Australia

Elizabeth & Foveaux Streets

Sydney NSW 2010

Australia

Auditors

Grosvenor Schiliro

Level 2, 333 George Street

Sydney NSW 2000

Australia

Annual Report

Copies of the 2008 Annual Report with

the Financial Statements can be downloaded from:

www.mynetfone.com.au/investor/annual-reports

MyNetFone Limited Annual Report 2008

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