29th Jun 2007 08:43
Messaging International Plc29 June 2007 Messaging International Plc / Market: AIM / Epic: MES / Sector: Technology 29 June 2007 Messaging International Plc ("Messaging International" or the "Company") Final Results Messaging International Plc, the AIM traded company and provider of innovativemessaging services, announces its results for the year ended 31 December 2006. Overview • Strengthened position as a provider of innovative messaging services • Pre-tax loss of £1,102,272 (2005: loss £392,919) due to ongoing investment in technology • Launched new products/services and expanded geographic reach • Foundations in place for future growth • Expanded contracts with leading international wireless operators • Continue to seek complementary acquisitions • Developed partnership network worldwide Chairman's Statement I am pleased to report the final results for the year ended 31 December 2006.During the year we entered into a number of exciting business relationships,expanded the services on offer to existing clients, signed several new contractsand developed a new direct-marketing website. Our international client baseacross North America, Asia-Pacific, the Middle East and Europe continues to growas our position as a provider of innovative messaging services gains a firmfoothold in the market. I believe that we have now laid the foundations forpotential opportunities and profitable growth and we are confidently lookingforward to the future. Financial results The results for the year ended 31 December 2006 show a pre-tax loss of£1,102,272 (2005: loss of £392,919), on turnover of £674,620 (2005: £219,793).The increased loss was largely due to ongoing investment in cutting edgetechnology and products in order to maintain our position in what is anextremely competitive and rapidly changing market. The results also reflect theadditional costs incurred in running a public company. Being listed on AIM sinceJuly 2005 has given rise to an increase in group administrative costs for thisyear of more than £140,000. Furthermore, in accordance with International Financial Reporting Standards, andwith particular reference to share based transactions, (IFRS 2), we havereviewed the impact of the share option scheme on the group's results for theyear. This review has resulted in a charge against income increasing the group'sloss for the year by £80,951. In March 2007, we raised a further £900,000 through a placing of 120 millionordinary 0.5p shares at 0.75p per share. The board does not recommend the payment of a dividend. Operations We continue to deliver messaging products and services to a growing client basewhich spans North America, Asia-Pacific, the Middle East and Europe and includesprincipally telecom operators and enterprises. We have two main revenue streamsfrom which we receive a customisation and set-up fee, namely: • "Software licensing" - which is usually linked to the number of messages that can be sent though the system. • "Hosted platform" - where we host messaging services for customers, and where we receive a fixed fee or are paid per message. North America: We have recently expanded our contract with Rogers Wireless, thelargest wireless operator in Canada, through the launch of a mail plug-inapplication, allowing Rogers Wireless subscribers to compose and send textmessages directly from within Microsoft Outlook(R) and Outlook(R) Express. We also extended our relationship with Sprint Nextel, the third largest wirelessoperator in the USA and have added a Spanish language feature to the "Text toLandline" application, allowing customers to compose text messages which arethen converted into voice messages before being delivered to landline phones.The Text to Landline product has also met with wide acceptance across VirginUSA's young customer base. Israel: We are proud of our position in this demanding market where we have nowentered into contracts with all four Israeli mobile operators for various "PC toMobile" products. Our latest product launched with "Orange Israel" is our "PC toSMS and MMS" services. Orange Israel is part of Partner Communications CompanyLtd, a leading Israeli mobile operator, which represents an estimated 32% of themobile market in Israel. This is the first telecom operator to launch the MMSversion updated to take account of the changing trends in the market place. Thisversion may be downloaded for no cost from www.orange.co.il. The programmeinstalls in Outlook(R), Outlook(R) Express and also in the Toolbar for InternetExplorer. We have already received orders from existing clients which includeBank Leumi and Isracard. Other territories: Through our partner, Dominion, our presence in Spain isexpanding and we are now working with two public sector agencies who aremarketing our "Mail Plug-in" and "Multi Alert" products. Our expansion inAsia-Pacific is also proving to be profitable. We have extended our agreementwith a leading telecommunication provider in China enabling us to provideenhanced customised messaging solutions. New initiatives We have recently launched a new direct-marketing website, which allows users tosign-on and acquire "pay as you go" services for our "PC to Mobile" products.Our ultimate aim is to enable end-users to have the option to pay for suchservices through their own operator. This new site is also linked to Google(R)allowing Google(R) users to easily access our system and send SMS messagesglobally. Prospects We remain committed to continued expansion thereby increasing our market shareby both organic growth and corporate acquisition. To this end, we continue toreview new potential business relationships and acquisitions opportunities. Inany event, we are hopeful that the benefits of our enhanced services shouldimpact on this current year's trading. Finally, I would like to thank all those involved in the company for theircontinued hard work and dedication during the year and look forward to reportingon further progress in the near future. H Furman Chairman 28 June 2007 For further information: 1) Irvin Fishman, Finance Director 020 7637 4141 2) Seymour Pierce 020 7017 8000 3) Ellis Stockbrokers Ltd 01293 517744 Consolidated income statement For the year 31 December 2006Continuing operations Notes 2006 2005 £ £Revenue 2 674,620 219,793 Cost of revenue (466,001) (168,594) --------- -------- Gross profit 208,619 51,199 ========= ======== Operating expensesResearch and development (489,429) (182,655)Selling and marketing (440,968) (149,003)General and administrative (362,174) (131,912) --------- -------- Total operating expenses (1,292,571) (463,570) ========= ======== Operating loss 3 (1,083,952) (412,371) Interest receivable and similar income 6 (18,320) 19,452 --------- -------- Loss before taxation (1,102,272) (392,919) Taxation 7 - - --------- --------Loss after taxation 8 (1,102,272) (392,919) ========= ========Earnings per share from continuing operationsBasic loss per ordinary share 9 (0.9)p (0.7)p ========= ======== None of the Group's activities were discontinued in the year. Consolidated statement of changes in equity For the year ended 31 December 2006 2006 2005 £ £Exchange differences on translation of foreignoperations (14,158) (8,887) --------- -------- Net deficit recognised directly in equity (14,158) (8,887) Loss for the period (1,102,272) (392,919) --------- -------- Total recognised income and expense (1,116,430) (401,806) --------- -------- Consolidated balance sheet at 31 December 2006 Notes 2006 2005 £ £Non current assetsGoodwill 10 3,236,617 3,236,617Other intangible assets 11 715 1,631Tangible assets 12 43,592 52,371Other investments 14 53,929 84,338 ---------- -------- 3,334,853 3,374,957 ---------- -------- Current assetsTrade and other receivables 15 191,346 181,501Cash and cash equivalents 16 84,965 954,888 ---------- -------- 276,311 1,136,389 ---------- --------Total assets 3,611,164 4,511,346 -----------Current liabilitiesTrade and other payables 17 (381,181) (220,549) ---------- --------Net current (liabilities)/assets (104,870) 915,840Non current liabilitiesProvisions 18 (90,894) (116,228) ========== ======== Total liabilities (472,075) (336,777) ---------- -------- Net assets 3,139,089 4,174,569 ========== ======== Share capital 20 576,900 576,900Share premium account 21 3,999,475 3,999,475Foreign currency translation reserve 22 (23,045) (8,887)Revenue reserves 22 (1,414,241) (392,919) ---------- -------- Equity 23 3,139,089 4,174,569 ========== ======== The financial statements were approved by the board of directors and authorisedfor issue on 28 June 2007. H Furman I Fishman Non executive chairman Finance director Consolidated cash flow statement For the year ended 31 December 2006 Note 2006 2005 £ £Net cash outflow from operating activities 27 (1,072,620) (344,006) --------- -------- Investing activitiesInterest and similar income 7,072 19,452Purchase of tangible assets (6,610) (13,261)Investments 30,401 (9,193)Net overdrafts acquired with subsidiary - (5,479) --------- --------Net cash used in investing activities 30,863 (8,481) --------- -------- Financing activitiesIssue of equity share capital - 1,574,998Shares issue costs - (292,625) --------- --------Net cash from financing activities - 1,282,373 --------- -------- Net (Decrease)/ increase in cash and cashequivalents (1,041,757) 929,886 Cash and cash equivalents at the beginning ofthe year 954,888 25,002 ---------- -------- Cash and cash equivalents at the end of theyear (86,869) 954,888 ========== ======== Cash and cash equivalents 84,965 954,888)Bank overdrafts (171,834) - --------- -------- (86,869) 954,888 ========= ======== Notes to the financial Statements For the year ended 31 December 2006 1. Significant accounting policies The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards "(IFRS)". The significant accounting policies applied by the company and its subsidiariesin the financial statements on a consistent basis are as follows: a. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe company and entities controlled by the company (its subsidiaries) made up to31 December each year. Control is achieved where the company has the power togovern the financial and operating policies of any subsidiary undertaking so asto obtain benefits from its activities. On acquisition, the assets and liabilities and contingent liabilities of asubsidiary are measured at their fair values at the date of acquisition. Anyexcess of the cost of acquisition over the fair values of the identifiable netassets acquired is recognised as goodwill. Any deficiency of the cost ofacquisition below the fair values of the identifiable net assets acquired (i.e.discount on acquisition) is credited to profit and loss in the period ofacquisition. The results of subsidiaries acquired or disposed of during the year are includedin the consolidated income statement from the effective date of acquisition orup to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used bythe group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. b. Presentational currency These financial statements are presented in pounds sterling because that is thecurrency of the primary economic environment in which the group operates. c. Goodwill Goodwill arising on the acquisition of subsidiaries representing the excess ofthe cost of acquisition over the fair value of the assets and liabilities of itssubsidiaries at the date of acquisition are included in the intangible assets. Goodwill is recognised as an asset and reviewed for impairment at leastannually. Any impairment is recognised immediately in arriving at the profit orloss. d. Other non-current assets: (i) Patents Patents and trademarks are measured initially at purchase cost and are amortisedon a straight-line basis over their estimated useful lives. (ii) Property, plant and equipment Property, plant, and equipment are stated at cost net of accumulateddepreciation. Depreciation is calculated using the straight-line method over theestimated useful lives of the assets at the following annual rates: %Computers 33Electronic Equipment 15-25Furniture and Office Equipment 7-15Leasehold Improvements 10 The carrying values of property plant and equipment are reviewed for impairmentwhen events or changes indicate the carrying value may not be recoverable. Ifany such indication exists and carrying values exceed recoverable amounts suchassets are written down to their recoverable amounts. e. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the company reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Where it is not possible to estimate therecoverable amount of an individual asset, the company estimates the recoverableamount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of the fair value less costs to sell and valuein use. In assessing value in use, the estimated future cash flows arediscounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific tothe asset. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised immediately in profit or loss, unless the relevant asset iscarried at a revalued amount, in which case the impairment loss is treated as arevaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognised immediately in profit or loss, unless the relevant asset iscarried at a relevant amount, in which case the reversal of the impairment lossis treated as a revaluation increase. f. Trade receivables Trade receivables are stated at their nominal value as reduced by appropriateallowances for estimated irrecoverable amounts. g. Trade payables Trade payables are not interest bearing and are stated at their nominal values. h. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. i. Revenue recognition Revenue represents amounts receivable from licensing of messaging services toservice providers and from hosting and maintenance fees net of discounts, valueadded tax and other sales taxes. The group recognise revenue when delivery of the product has occurred, a fee isdeterminable, no further obligations exist and collectibility is probable. Deferred revenue includes amounts received from customers for which revenue hasnot yet been recognised. j. Research and development Research and development costs are treated as an expense and are written off inthe group's consolidated income statement in the year incurred. k. Employee costs: (i) Share options The Group has applied the requirements of IFRS 2 Share-based Payments. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7th November 2002 that where unvested as of1st January 2005. The Group issues equity-settled and cash-settled share-based payments to certainemployees. Equity-settled share-based payments are measured at fair value at thedate of grant. The fair value determined at the grant date of the equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of a Black and Scholesl model. The expected lifeused in the model has been adjusted, based on management's best estimate, forthe effects of non-transferability, exercise restrictions, and behaviouralconsiderations. A liability equal to the portion of the goods or services received is recognisedat the current fair value determined at each balance sheet date for cash-settledshare-based payments. (ii) Severance pay Pursuant to Israeli severance pay law, employees of more than one year areentitled to one month's salary for each year employed or a portion thereof. Thecost of providing severance pay is determined using an independent actuary.Actuarial gains and losses are recognised immediately in the income statement inthe period in which they occur. The value of deposited funds is based on the cash surrender value of theinsurance policies. The deposited funds include profits accumulated up to thebalance sheet date. The deposited funds may be withdrawn only upon fulfilment ofthe severance pay obligation, pursuant to Israeli severance pay law or labouragreements. l. Taxation Income tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from profit as reported in the same income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheCompany's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is recognised on differences between the carrying amounts of assetsand liabilities in the financial statements and the corresponding tax base usedin the computation of taxable profit, and is accounted for using the balancesheet liability method. Deferred tax liabilities are generally recognised forall taxable temporary differences and deferred tax assets are recognised to theextent that it is probable that taxable profits will be available against whichdeductible temporary differences can be utilised. Such assets and liabilitiesare not recognised if the temporary difference arises from goodwill or from theinitial recognition (other than in a business combination) of other assets andliabilities in a transaction that affects neither the taxable profit nor theaccounting profit. The carrying amount of deferred tax is reviewed at each balance sheet date andreduced to the extent that it is no longer probable that sufficient taxableprofits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in theperiod when the liability is settled or the asset realised. Deferred tax ischarged or credited to income statement, except when it relates to items chargedor credited directly to equity, in which case the deferred tax is also dealtwith in equity. Deferred tax assets and liabilities are offset when there is a legallyenforceable right to set off current tax assets against current tax liabilitiesand when they relate to income taxes levied by the same taxation authority andthe Company intends to settle its current tax assets and liabilities on a netbasis. m. Foreign currency Transactions in foreign currency are recorded at the rate of exchange prevailingat the date of the transaction. All differences are taken to the incomestatement. Assets and liabilities denominated in foreign currency are translatedinto sterling at the rate of exchange prevailing at the balance sheet date. On consolidation, income and expenditure of subsidiary undertakings aretranslated into sterling at average rates of exchange in the period. Assets andliabilities are translated into sterling at the rate of exchange ruling at thebalance sheet date. Exchange differences arising from the use of average ratesfor translating the results of foreign subsidiaries or from the translation ofnet assets on the acquisition of foreign subsidiary undertakings are taken tothe Group's translation reserves. n. Credit risk The Group's principal financial assets are bank balances and cash and otherreceivables. The credit risk on liquid funds and derivative financial instruments is limitedbecause the counterparties are banks with high credit ratings assigned byinternational credit-rating agencies. There is no risk attributable to currencymovements as the Group holds all funds in UK sterling bank accounts 2. Revenue a. Group activities The Group activities are in a single business segment, being the development ofend-user media messaging systems. b. Revenues by geographical market and customer location The Group's operations are located primarily in Israel and the business ismanaged on the basis of one reportable segment. Analysis of revenues by geographical market and customer location are asfollows: 2006 2005 £ £Israel 152,690 85,172United States of America 424,752 78,611Rest of the world 97,178 56,010 --------- -------- 674,620 219,793 ========= ======== 3. Operating loss The following costs have been included in arriving at the operating loss: 2006 2005 £ £Staff costs (see note 4 below) 940,025 305,342Auditors' remuneration 26,087 21,363(Company - £12,500 (2005: £10,000))Research and development expenditure 489,429 182,655Depreciation of property, plant and equipment 22,376 8,281Amortisation of patents 916 307 ========= ======== 4. Staff numbers and costs Payroll costs include: 2006 2005 £ £Staff payroll and related costs 850,482 267,504Directors' remuneration 89,543 37,838 --------- -------- 940,025 305,342 ========= ======== Details of directors' remuneration are set out in note 5 below. The average number of employees (including directors) employed by the Group: 2006 2005 No. No.Administration 2 3Sales & Marketing 5 6Research & Development 13 13Production 3 3Directors' remuneration 5 5 --------- --------- 28 30 ========= ========= 5. Directors' remuneration The analysis of directors' remuneration is: 2006 2005 £ £Executive directors 79,543 33,672Non-executive directors 10,000 4,166 --------- --------- 89,543 37,838 ========= ========= Horacio Furman has waived his right to director's fees of £5,000 per annum. Details of share options granted to directors under the unapproved share optionscheme are as shown in the directors' report. 6. Investment and similar income 2006 2005 £ £Interest on bank deposits 7,072 14,037Net (losses)/gains on foreign currency transactions (25,392) 5,415 --------- --------- (18,320) 19,452 ========= ========= 7. Taxation 2006 2005 ====== ====== £ £ === ===Current tax charge - - ========= =========Factors affecting the tax charge:Loss on ordinary activities before taxation (1,102,272) (392,919) ========= ========= Loss on ordinary activities before taxation multipliedby the standard rate of tax applicable in the UK. (330,682) (117,875) Effects of:Depreciation and amortisation - 2,576Non-recognition of losses 330,682 115,299 --------- ---------Current tax charge - - ========= ========= In accordance with IAS 12 the Company and the Group have not recognised deferredtax assets as they do not anticipate that profits generated in the short termwill exceed accumulated losses generated by the subsidiaries prior toacquisition. In addition, TeleMessage Ltd in Israel was granted approved enterprise statusfor its investment programme. The main benefit arising from such status is thereduction in tax rates on income. The Company's income from the "ApprovedEnterprises" scheme is tax exempt for four years commencing with the year itfirst earns taxable income and then would be subject to a reduced tax rate ofbetween 10% and 25% for a period of up to six years. Since the Company hasincurred losses to date it has not utilised any of the aforementioned taxbenefits. 8. Loss/profit attributable to ordinary shareholders The Company has taken advantage of the exemption under Section 230(1)(b) of theCompanies Act 1985 from presenting its own income statement however the lossdealt with in the financial statements of the Company was £33,517 (2005: profit- £14,185). 9. Loss per ordinary share The calculation of the loss per ordinary share is based on the loss aftertaxation of £1,102,272 (2005: £392,919) and 115,380,000 ordinary shares (2005:56,171,781 ordinary shares) being the weighted average number of shares in issuein the year. 10. Goodwill 2006 £Cost at 1 January 2006 and 31 December 2006 3,236,617 -----------Impairment at 1 January 2006 and 31 December 2006 - ---------Carrying value at 31 December 2005 and 31 December 2006 3,236,617 ========= 11. Other intangible assets 2006 £ =========Cost: 1,938At 1 January 2006 and 31 December 2006 =========Amortisation: 307At 1 January 2006Charge for the year 916 ---------As at 31 December 2006 1,223 ========= Carrying value at 31 December 2006 715 =========Carrying value at 31 December 2005 1,631 ========= 12. Tangible assets Group £Cost at 1 January 2006 60,652 --------Additions 18,639Foreign Exchange movement (7,427) ---------Cost at 31 December 2006 71,864 ========= Depreciation at 1 January 2006 (8,281) ---------Depreciation in the year (22,376)Foreign Exchange movement 2,385 --------- (28,272) ========= Carrying value at 31 December 2006 43,592 =========Carrying value at 31 December 2005 52,371 ========= All the above assets are included in the accounts of subsidiary undertakings. 13. Investment in subsidiary undertakings Company £At 31 December 2005 and 31 December 2006 3,269,000 ========= The investment in subsidiary represents 100% of the share capital of TelemessageLimited. A company incorporated in Israel. 14. Other Investments Other investments of £53,929 represents the value of funds at 31 December 2006(2005: £84,338) invested in insurance policies, in order to provide for employeeseverance obligations pursuant to Israeli severance pay law and staff contractsof employment, which are relevant to the company's principal subsidiaryundertaking in Israel. 15. Trade and other receivables Group Company Group Company 2006 2006 2005 2005 £ £ £ £Trade receivables 149,131 - 113,059 -Due from subsidiary undertaking - 1,262,542 - 458,875Due from government authorities 6,024 6,024 35,167 25,482Other receivables and prepaidexpenses 36,191 8,027 33,275 15,688 --------- --------- --------- --------- 191,346 1,276,593 181,501 500,045 ========= ========= ========= ========= The amount due from subsidiary undertaking is due after more than one year. 16. Cash and cash equivalents Bank balances and cash comprise monies held by the company and short-term bankdeposits with an original maturity of three months or less. The carrying amountof these assets approximates their fair value. 17. Trade and other payables Group Company Group 2005 Company 2006 2006 £ 2005 £ £ £Bank overdrafts 171,834 - - -Trade payables 46,956 - 80,556 -Employee and payroll accruals 108,589 3,963 77,930 -Other accruals 48,430 29,830 52,974 19,321Deferred revenue 5,372 - 9,089 - --------- -------- --------- -------- 381,181 33,793 220,549 19,321 ========= ======== ========= ======== Trade creditors and accruals principally comprise amounts outstanding for tradepurchase and ongoing costs. The directors consider that the carrying amount of trade payables approximatestheir fair value. 18. Non-current liabilities Group Company Group Company 2005 ======= ========= ======= ============== 2006 2006 2005 £ ====== ====== ====== === £ £ £ === === === ===Severance pay obligations ofsubsidiary undertakings 90,894 - 116,228 - ========= ======== ========= ========= 19. Severance pay liability (a) The amounts recognised in the balance sheet are as follows: Group Group 2006 2005 £ £Defined benefit obligation (90,894) (116,228)Fair value of plan assets 53,929 84,338 --------- ---------Benefit liability (36,965) (31,890) ========= ========= (b) Amounts recognised in the statement of operations are as follows: Group Group 2006 2005 £ £Current service cost 27,217 34,309Interest cost 4,638 5,064Expected return on assets (854) (1,266)Net actuarial gain recognised in the year 1,465 - --------- ---------Total expense included in statement of operations 32,466 38,107 ========= ========= (c) Changes in present value of defined benefit obligation are as follows: Group Group 2006 2005 £ £Liability at the beginning of the year 116,228 94,923Current service cost 27,217 34,309Interest cost 4,638 5,064Benefits paid (21,968) -Actuarial losses on obligation 3,784 -Foreign exchange differences (39,005) (18,068) --------- ---------Liability at the end of the year 90,894 116,228 ========= ========= (d) Changes in fair value of plan assets are as follows: Group Group 2006 2005 £ £Plan assets at the beginning of the year 84,338 60,248Expected return 854 1,266Contributions by employer 25,264 25,320Benefits paid (20,138) -Actuarial losses 2,319 -Foreign exchange difference (38,708) (2,496) --------- ---------Plan asset at the end of the year 53,929 84,338 ========= ========= (e) The actuarial assumptions used are as follows: Group Group 2006 2005Discount rate 5.83% 6.2%Future salary increase 3.5% - 5% 3.5% - 5%Average expected remaining working years 15.6 15.6 The comparative figure for the severance pay liability relates to a full year,although the Company acquired its subsidiary on 20 July 2005. When the liabilitywas £102,390 and the plan asset was £75,145. 20. Share capital Authorised: Number Group & company £ ========= =========Number of ordinary shares of 0.5p each at 800,000,000 4,000,00031 December 2005 and 31 December 2006 ========= ========= Issued and fully paid ordinary shares: Number Group & company £ ========= ========Number of ordinary shares of 0.5p each at 115,380,000 576,90031 December 2005 and 31 December 2006 ========== ======== Share options The unapproved share option scheme was adopted by the board on 27 July 2005. At 31 December 2006 there were in existence 5,018,886 options to acquireordinary shares in the Company of which 1,487,675 options were exercisable at 31December 2006. During the year 828,087 share options lapsed due to holders ofthose options leaving employment with the Group. Number of Date Exercise Exercisable options price granted betweenDirectors:Guy Levit 20,266 27.7.2005 5p 20.7.2006 - 7.6.2010Guy Levit 1,555 27,7.2005 2.17p 27.7.2005 - 15.11.2011David Rubner 500,000 27.7.2005 5p 20.7.2006 - 20.7.2015 --------- 521,821 Other 8,978 27.7.2005 2.17p 27.7.2005 - 1.8.2012employeesOther 882,669 27.7.2005 3.06p 27.7.2005 -employees 31.12.2014Other 18,443 27.7.2005 3.67p 27.7.2005 - 1.11.2012employeesOther 113,329 27.7.2005 5p 27.7.2005 - 3.8.2015employeesOther 2,753,162 1.3.2006 5p 1.3.2006 - 1.3.2016employeesOther 431,624 6.10.2006 5p 6.10.2006 - 6.10.2016employeesOther 288,860 6.10.2006 3.2p 6.10.2006 - 6.10.2016employees --------- 5,018,886 --------- Warrants On 24 May 2005, the Company authorised 100,000,000 warrants entitling holders tosubscribe for ordinary shares at 5p per ordinary share. At 31 December 2006, there were 50,000,000 of these warrants in issue. Number of warrants issued to: Directors 22,278,061Holders of more than 3% of warrants in issue: • Reverse Takeover Investments Plc 10,000,000 • Seymour Pierce Limited 5,000,000 Others 12,721,939 --------- 50,000,000 ========= 21. Share premium account Group & Company £ ---At 1 January 2006 and 31 December 2006 3,999,475 ========= 22. Reserves Group Group Company 2006 2006 2006 £ £ £ Translation reserve Revenue reserve Revenue reserveReserves at 1January 2006 (8,887) (392,919) 14,185Loss from continuingoperations - (1,102,272) (33,517)Foreign currencytranslationdifferences (14,158) - -Adjustment for sharebased payments - 80,950 - --------- --------- ---------Reserves at 31December 2006 (23,045) (1,414,241) (19,332) ========= ========= ========= 23. Statement of movements in equity Group Company 2006 2006 £ £Loss from continuing operations (1,102,272) (33,517)Adjustment for share based payments 80,950 -Foreign currency translation differences (14,158) -Equity at 1 January 2006 4,174,569 4,590,560 --------- ---------Equity at 31 December 2006 3,139,089 4,557,043 ========= ========= 24. Capital commitments The Group had no significant capital commitments at 31 December 2006. 25. Financial commitments Lease agreements: The Company's subsidiary in Israel has entered into operating leases for officefacilities and motor vehicles for periods of up to three years, all terminatingby 2008. At 31 December 2006 the future minimum commitments outstanding undernon-cancellable operating leases are: 2006 2005 Group Group £ £ 2006 47,580 57,834 2007 21,030 33,961 2008 4,313 19,304 --------- --------- 72,923 111,099 ========= ========= 26. Equity settled share option scheme Since incorporation the Company has awarded share options over 5,8,46,973unissued ordinary shares in the period ended 31 December 2006 (1,864,943 in theyear ended 31 December 2005) to directors and employees of the Group that hadfixed exercise prices, in a number of tranches. The vesting period of eachtranche varies from 0 to 4 years. The options lapse if they remain unexercisedfor a period of ten years from the date of the grant. Exercise of an option issubject to continued employment. Options were valued using the Black and Scholespricing model. The fair value per option granted and the assumptions used in thecalculation were as follows: Grant Date 27/07/2005 27/07/2005 27/07/2005 27/07/2005 Share Price atGrant Date 5p 5p 5p 5pExercise Price 2.17p 3.06p 3.67p 2.17pShares underOptions 10,533 1,195,785 18,443 645,452Vesting Period < 1 year < 2.5 years < 1.5 years 0 - 4 yearsExpectedVolatility 39.80% 39.80% 39.80% 39.80%Option Life 10 10 10 10Expected Life 5-5.25 5-6 5-5.5 5-6Risk Free Rate 3.86% 3.86% 3.86% 3.86%Expecteddividendsexpressed asdividend yield 0% 0% 0% 0%Retentionfactor 100% 100% 100% 100%Fair value ofoption 3.36p - 3.39p 2.86p - 3.00p 2.56p - 2.64p 2.04p - 2.24p Grant Date 01/03/2006 06/10/2006 06/10/2006 Share Price at Grant Date 4.6p 2.25p 2.25pExercise Price 5p 5p 3.2pShares under Options 3,256,276 431,624 288,860Vesting Period < 4 years < 3 years < 4 yearsExpected Volatility 158.30% 151.40% 151.40%Option Life 10 10 10Expected Life 5.25-6 5.25-6 5.25-6Risk Free Rate 4.40% 5.01% 5.01%Expected dividends expressed asdividend yield 0% 0% 0%Retention factor 85% 85% 85%Fair value of option 3.66p -3.72p 1.71p - 1.76p 1.75p - 1.79p The volatility of options issued on 27 July 2005 is based on the volatility ofsimilar AIM listed companies, while the volatility of options issued on 1 March2006 and 6 October 2006 reflects the increased of the Messaging InternationalPLC share price arising from the relevant period to date, The expected life ofthe options takes into account the seniority of the employees to whom shareoptions are issued. The risk free rate is based on the redemption yield on USfederal bonds with a life in line with the expected option life. Other than the options granted above, there were no movements in options grantedor outstanding to employees of the Group and Company in the period. 27. Reconciliation of operating loss to net cash outflow from operatingactivities Group Group 2006 2005 £ £ Operating Loss (1,083,952) (412,371) --------- -------- Adjustments for:Depreciation of tangible assets 22,376 8,281Amortisation of intangible assets 916 307Share based payment adjustment 80,950 -Foreign currency translation differences (46,529) (8,887) --------- -------- 57,713 (299) --------- -------- --------- --------Operating cash outflow before movement in workingcapital (1,026,239) (412,670) --------- -------- (Increase)/Reduction in receivables (9,845) 47,308(Reduction)/Increase in payables (11,202) 7,518(Reduction)/Increase in provisions (25,334) 13,838 --------- -------- (46,381) 68,664 --------- -------- --------- --------Net cash outflow from operating activities (1,072,620) (344,006) ========= ======== 28. Related Party Disclosures During the year the Company was charged professional fees amounting to £12,000(2005: £nil) by Auerbach Hope, an accountancy practice in which I Fishman, thefinance director, is a partner. 29. Control The Company is listed on the AIM market and in the Directors' opinion there isno ultimate controlling party. The announcement set out above does not constitute a full financial statement ofthe company's affairs for the year ended 31 December 2006. The company'sauditors have reported on the full accounts for the said year and haveaccompanied them with an unqualified report. The accounts have yet to bedelivered to the Registrar of Companies. The annual report and accounts will beavailable from the Company Secretary, 58-60 Berners Street, London, W1T 3JS The information relating to the year ended 31 December 2005 is extracted fromthe audited accounts that have been filed at Companies House and on which theauditors issued an unqualified opinion. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sigmaroc.