Final Results

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

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Sigmaroc (SRC)
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