RNS Number:2882Z
Messaging International Plc
29 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 innovative
messaging 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 contracts
and developed a new direct-marketing website. Our international client base
across North America, Asia-Pacific, the Middle East and Europe continues to grow
as our position as a provider of innovative messaging services gains a firm
foothold in the market. I believe that we have now laid the foundations for
potential opportunities and profitable growth and we are confidently looking
forward 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 edge
technology and products in order to maintain our position in what is an
extremely competitive and rapidly changing market. The results also reflect the
additional costs incurred in running a public company. Being listed on AIM since
July 2005 has given rise to an increase in group administrative costs for this
year of more than #140,000.
Furthermore, in accordance with International Financial Reporting Standards, and
with particular reference to share based transactions, (IFRS 2), we have
reviewed the impact of the share option scheme on the group's results for the
year. This review has resulted in a charge against income increasing the group's
loss for the year by #80,951.
In March 2007, we raised a further #900,000 through a placing of 120 million
ordinary 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 base
which spans North America, Asia-Pacific, the Middle East and Europe and includes
principally telecom operators and enterprises. We have two main revenue streams
from 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, the
largest wireless operator in Canada, through the launch of a mail plug-in
application, allowing Rogers Wireless subscribers to compose and send text
messages directly from within Microsoft Outlook(R) and Outlook(R) Express.
We also extended our relationship with Sprint Nextel, the third largest wireless
operator in the USA and have added a Spanish language feature to the "Text to
Landline" application, allowing customers to compose text messages which are
then converted into voice messages before being delivered to landline phones.
The Text to Landline product has also met with wide acceptance across Virgin
USA's young customer base.
Israel: We are proud of our position in this demanding market where we have now
entered into contracts with all four Israeli mobile operators for various "PC to
Mobile" products. Our latest product launched with "Orange Israel" is our "PC to
SMS and MMS" services. Orange Israel is part of Partner Communications Company
Ltd, a leading Israeli mobile operator, which represents an estimated 32% of the
mobile market in Israel. This is the first telecom operator to launch the MMS
version updated to take account of the changing trends in the market place. This
version may be downloaded for no cost from www.orange.co.il. The programme
installs in Outlook(R), Outlook(R) Express and also in the Toolbar for Internet
Explorer. We have already received orders from existing clients which include
Bank Leumi and Isracard.
Other territories: Through our partner, Dominion, our presence in Spain is
expanding and we are now working with two public sector agencies who are
marketing our "Mail Plug-in" and "Multi Alert" products. Our expansion in
Asia-Pacific is also proving to be profitable. We have extended our agreement
with a leading telecommunication provider in China enabling us to provide
enhanced customised messaging solutions.
New initiatives
We have recently launched a new direct-marketing website, which allows users to
sign-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 such
services 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 messages
globally.
Prospects
We remain committed to continued expansion thereby increasing our market share
by both organic growth and corporate acquisition. To this end, we continue to
review new potential business relationships and acquisitions opportunities. In
any event, we are hopeful that the benefits of our enhanced services should
impact on this current year's trading.
Finally, I would like to thank all those involved in the company for their
continued hard work and dedication during the year and look forward to reporting
on 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 2006
Continuing operations Notes 2006 2005
# #
Revenue 2 674,620 219,793
Cost of revenue (466,001) (168,594)
--------- --------
Gross profit 208,619 51,199
========= ========
Operating expenses
Research 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 operations
Basic 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 foreign
operations (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 assets
Goodwill 10 3,236,617 3,236,617
Other intangible assets 11 715 1,631
Tangible assets 12 43,592 52,371
Other investments 14 53,929 84,338
---------- --------
3,334,853 3,374,957
---------- --------
Current assets
Trade and other receivables 15 191,346 181,501
Cash and cash equivalents 16 84,965 954,888
---------- --------
276,311 1,136,389
---------- --------
Total assets 3,611,164 4,511,346
-----------
Current liabilities
Trade and other payables 17 (381,181) (220,549)
---------- --------
Net current (liabilities)/assets (104,870) 915,840
Non current liabilities
Provisions 18 (90,894) (116,228)
========== ========
Total liabilities (472,075) (336,777)
---------- --------
Net assets 3,139,089 4,174,569
========== ========
Share capital 20 576,900 576,900
Share premium account 21 3,999,475 3,999,475
Foreign 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 authorised
for 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 activities
Interest and similar income 7,072 19,452
Purchase 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 activities
Issue of equity share capital - 1,574,998
Shares issue costs - (292,625)
--------- --------
Net cash from financing activities - 1,282,373
--------- --------
Net (Decrease)/ increase in cash and cash
equivalents (1,041,757) 929,886
Cash and cash equivalents at the beginning of
the year 954,888 25,002
---------- --------
Cash and cash equivalents at the end of the
year (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 International
Financial Reporting Standards "(IFRS)".
The significant accounting policies applied by the company and its subsidiaries
in the financial statements on a consistent basis are as follows:
a. Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the company and entities controlled by the company (its subsidiaries) made up to
31 December each year. Control is achieved where the company has the power to
govern the financial and operating policies of any subsidiary undertaking so as
to obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to profit and loss in the period of
acquisition.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
b. Presentational currency
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the group operates.
c. Goodwill
Goodwill arising on the acquisition of subsidiaries representing the excess of
the cost of acquisition over the fair value of the assets and liabilities of its
subsidiaries at the date of acquisition are included in the intangible assets.
Goodwill is recognised as an asset and reviewed for impairment at least
annually. Any impairment is recognised immediately in arriving at the profit or
loss.
d. Other non-current assets:
(i) Patents
Patents and trademarks are measured initially at purchase cost and are amortised
on a straight-line basis over their estimated useful lives.
(ii) Property, plant and equipment
Property, plant, and equipment are stated at cost net of accumulated
depreciation. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets at the following annual rates:
%
Computers 33
Electronic Equipment 15-25
Furniture and Office Equipment 7-15
Leasehold Improvements 10
The carrying values of property plant and equipment are reviewed for impairment
when events or changes indicate the carrying value may not be recoverable. If
any such indication exists and carrying values exceed recoverable amounts such
assets 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 its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the company estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of the 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.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised immediately in profit or loss, unless the relevant asset is
carried at a relevant amount, in which case the reversal of the impairment loss
is treated as a revaluation increase.
f. Trade receivables
Trade receivables are stated at their nominal value as reduced by appropriate
allowances 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 to
service providers and from hosting and maintenance fees net of discounts, value
added tax and other sales taxes.
The group recognise revenue when delivery of the product has occurred, a fee is
determinable, no further obligations exist and collectibility is probable.
Deferred revenue includes amounts received from customers for which revenue has
not yet been recognised.
j. Research and development
Research and development costs are treated as an expense and are written off in
the 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. In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7th November 2002 that where unvested as of
1st January 2005.
The Group issues equity-settled and cash-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair value at the
date of grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, 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 life
used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions, and behavioural
considerations.
A liability equal to the portion of the goods or services received is recognised
at the current fair value determined at each balance sheet date for cash-settled
share-based payments.
(ii) Severance pay
Pursuant to Israeli severance pay law, employees of more than one year are
entitled to one month's salary for each year employed or a portion thereof. The
cost of providing severance pay is determined using an independent actuary.
Actuarial gains and losses are recognised immediately in the income statement in
the period in which they occur.
The value of deposited funds is based on the cash surrender value of the
insurance policies. The deposited funds include profits accumulated up to the
balance sheet date. The deposited funds may be withdrawn only upon fulfilment of
the severance pay obligation, pursuant to Israeli severance pay law or labour
agreements.
l. Taxation
Income tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the same income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax base used
in the computation of taxable profit, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are generally recognised for
all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities
are not recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable profit nor the
accounting profit.
The carrying amount of deferred tax is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable
profits 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 the
period when the liability is settled or the asset realised. Deferred tax is
charged or credited to income statement, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt
with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and liabilities on a net
basis.
m. Foreign currency
Transactions in foreign currency are recorded at the rate of exchange prevailing
at the date of the transaction. All differences are taken to the income
statement. Assets and liabilities denominated in foreign currency are translated
into sterling at the rate of exchange prevailing at the balance sheet date.
On consolidation, income and expenditure of subsidiary undertakings are
translated into sterling at average rates of exchange in the period. Assets and
liabilities are translated into sterling at the rate of exchange ruling at the
balance sheet date. Exchange differences arising from the use of average rates
for translating the results of foreign subsidiaries or from the translation of
net assets on the acquisition of foreign subsidiary undertakings are taken to
the Group's translation reserves.
n. Credit risk
The Group's principal financial assets are bank balances and cash and other
receivables.
The credit risk on liquid funds and derivative financial instruments is limited
because the counterparties are banks with high credit ratings assigned by
international credit-rating agencies. There is no risk attributable to currency
movements 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 of
end-user media messaging systems.
b. Revenues by geographical market and customer location
The Group's operations are located primarily in Israel and the business is
managed on the basis of one reportable segment.
Analysis of revenues by geographical market and customer location are as
follows:
2006 2005
# #
Israel 152,690 85,172
United States of America 424,752 78,611
Rest 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) 940,025 305,342
Auditors' remuneration 26,087 21,363
(Company - #12,500 (2005: #10,000))
Research and development expenditure 489,429 182,655
Depreciation of property, plant and equipment 22,376 8,281
Amortisation of patents 916 307
========= ========
4. Staff numbers and costs
Payroll costs include: 2006 2005
# #
Staff payroll and related costs 850,482 267,504
Directors' 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 3
Sales & Marketing 5 6
Research & Development 13 13
Production 3 3
Directors' remuneration 5 5
--------- ---------
28 30
========= =========
5. Directors' remuneration
The analysis of directors' remuneration is:
2006 2005
# #
Executive directors 79,543 33,672
Non-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 option
scheme are as shown in the directors' report.
6. Investment and similar income
2006 2005
# #
Interest on bank deposits 7,072 14,037
Net (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 multiplied
by the standard rate of tax applicable in the UK. (330,682) (117,875)
Effects of:
Depreciation and amortisation - 2,576
Non-recognition of losses 330,682 115,299
--------- ---------
Current tax charge - -
========= =========
In accordance with IAS 12 the Company and the Group have not recognised deferred
tax assets as they do not anticipate that profits generated in the short term
will exceed accumulated losses generated by the subsidiaries prior to
acquisition.
In addition, TeleMessage Ltd in Israel was granted approved enterprise status
for its investment programme. The main benefit arising from such status is the
reduction in tax rates on income. The Company's income from the "Approved
Enterprises" scheme is tax exempt for four years commencing with the year it
first earns taxable income and then would be subject to a reduced tax rate of
between 10% and 25% for a period of up to six years. Since the Company has
incurred losses to date it has not utilised any of the aforementioned tax
benefits.
8. Loss/profit attributable to ordinary shareholders
The Company has taken advantage of the exemption under Section 230(1)(b) of the
Companies Act 1985 from presenting its own income statement however the loss
dealt 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 after
taxation 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 issue
in 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: 1,938
At 1 January 2006 and 31 December 2006
=========
Amortisation: 307
At 1 January 2006
Charge 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 18,639
Foreign 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 Telemessage
Limited. 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 employee
severance obligations pursuant to Israeli severance pay law and staff contracts
of employment, which are relevant to the company's principal subsidiary
undertaking 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 - 458,875
Due from government authorities 6,024 6,024 35,167 25,482
Other receivables and prepaid
expenses 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 bank
deposits with an original maturity of three months or less. The carrying amount
of 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 19,321
Deferred revenue 5,372 - 9,089 -
--------- -------- --------- --------
381,181 33,793 220,549 19,321
========= ======== ========= ========
Trade creditors and accruals principally comprise amounts outstanding for trade
purchase and ongoing costs.
The directors consider that the carrying amount of trade payables approximates
their fair value.
18. Non-current liabilities
Group Company Group Company 2005
======= ========= ======= ==============
2006 2006 2005 #
====== ====== ====== ===
# # #
=== === === ===
Severance pay obligations of
subsidiary 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 34,309
Interest cost 4,638 5,064
Expected 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 94,923
Current service cost 27,217 34,309
Interest cost 4,638 5,064
Benefits 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 60,248
Expected return 854 1,266
Contributions by employer 25,264 25,320
Benefits 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 2005
Discount 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 liability
was #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 4,000,000
31 December 2005 and 31 December 2006
========= =========
Issued and fully paid ordinary shares: Number Group & company
#
========= ========
Number of ordinary shares of 0.5p each at 115,380,000 576,900
31 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 acquire
ordinary shares in the Company of which 1,487,675 options were exercisable at 31
December 2006. During the year 828,087 share options lapsed due to holders of
those options leaving employment with the Group.
Number of Date Exercise Exercisable
options price
granted between
Directors:
Guy Levit 20,266 27.7.2005 5p 20.7.2006 - 7.6.2010
Guy Levit 1,555 27,7.2005 2.17p 27.7.2005 -
15.11.2011
David 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 - 1.8.2012
employees
Other 882,669 27.7.2005 3.06p 27.7.2005 -
employees 31.12.2014
Other 18,443 27.7.2005 3.67p 27.7.2005 - 1.11.2012
employees
Other 113,329 27.7.2005 5p 27.7.2005 - 3.8.2015
employees
Other 2,753,162 1.3.2006 5p 1.3.2006 - 1.3.2016
employees
Other 431,624 6.10.2006 5p 6.10.2006 - 6.10.2016
employees
Other 288,860 6.10.2006 3.2p 6.10.2006 - 6.10.2016
employees ---------
5,018,886
---------
Warrants
On 24 May 2005, the Company authorised 100,000,000 warrants entitling holders to
subscribe 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 22,278,061
Holders 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 reserve
Reserves at 1
January 2006 (8,887) (392,919) 14,185
Loss from continuing
operations - (1,102,272) (33,517)
Foreign currency
translation
differences (14,158) - -
Adjustment for share
based payments - 80,950 -
--------- --------- ---------
Reserves at 31
December 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 office
facilities and motor vehicles for periods of up to three years, all terminating
by 2008.
At 31 December 2006 the future minimum commitments outstanding under
non-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 5,8,46,973
unissued ordinary shares in the period ended 31 December 2006 (1,864,943 in the
year ended 31 December 2005) to directors and employees of the Group that had
fixed exercise prices, in a number of tranches. The vesting period of each
tranche varies from 0 to 4 years. The options lapse if they remain unexercised
for a period of ten years from the date of the grant. Exercise of an option is
subject to continued employment. Options were valued using the Black and Scholes
pricing model. The fair value per option granted and the assumptions used in the
calculation were as follows:
Grant Date 27/07/2005 27/07/2005 27/07/2005 27/07/2005
Share Price at
Grant Date 5p 5p 5p 5p
Exercise Price 2.17p 3.06p 3.67p 2.17p
Shares under
Options 10,533 1,195,785 18,443 645,452
Vesting Period < 1 year < 2.5 years < 1.5 years 0 - 4 years
Expected
Volatility 39.80% 39.80% 39.80% 39.80%
Option Life 10 10 10 10
Expected Life 5-5.25 5-6 5-5.5 5-6
Risk Free Rate 3.86% 3.86% 3.86% 3.86%
Expected
dividends
expressed as
dividend yield 0% 0% 0% 0%
Retention
factor 100% 100% 100% 100%
Fair value of
option 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 2.25p
Exercise Price 5p 5p 3.2p
Shares under Options 3,256,276 431,624 288,860
Vesting Period < 4 years < 3 years < 4 years
Expected Volatility 158.30% 151.40% 151.40%
Option Life 10 10 10
Expected Life 5.25-6 5.25-6 5.25-6
Risk Free Rate 4.40% 5.01% 5.01%
Expected dividends expressed as
dividend 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 of
similar AIM listed companies, while the volatility of options issued on 1 March
2006 and 6 October 2006 reflects the increased of the Messaging International
PLC share price arising from the relevant period to date, The expected life of
the options takes into account the seniority of the employees to whom share
options are issued. The risk free rate is based on the redemption yield on US
federal bonds with a life in line with the expected option life.
Other than the options granted above, there were no movements in options granted
or outstanding to employees of the Group and Company in the period.
27. Reconciliation of operating loss to net cash outflow from operating
activities
Group Group
2006 2005
# #
Operating Loss (1,083,952) (412,371)
--------- --------
Adjustments for:
Depreciation of tangible assets 22,376 8,281
Amortisation of intangible assets 916 307
Share based payment adjustment 80,950 -
Foreign currency translation differences (46,529) (8,887)
--------- --------
57,713 (299)
--------- --------
--------- --------
Operating cash outflow before movement in working
capital (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, the
finance director, is a partner.
29. Control
The Company is listed on the AIM market and in the Directors' opinion there is
no ultimate controlling party.
The announcement set out above does not constitute a full financial statement of
the company's affairs for the year ended 31 December 2006. The company's
auditors have reported on the full accounts for the said year and have
accompanied them with an unqualified report. The accounts have yet to be
delivered to the Registrar of Companies. The annual report and accounts will be
available from the Company Secretary, 58-60 Berners Street, London, W1T 3JS
The information relating to the year ended 31 December 2005 is extracted from
the audited accounts that have been filed at Companies House and on which the
auditors issued an unqualified opinion.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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