Final Results

RNS Number : 9321C

Synchronica PLC

15 March 2011

 



Synchronica plc

Preliminary Financial Results for the year ended 31 December 2010

ROYAL TUNBRIDGE WELLS, UNITED KINGDOM---Synchronica plc ("Synchronica" or "the Company") (AIM:SYNC; TSX VENTURE:SYN) the international provider of push email, instant messaging and social networking services, has today issued its consolidated financial results for the year ended 31 December 2010.

All currency is expressed in U.S. dollars.

2010 Highlights:

·     85% increase in revenue from US $5.9 million in 2009 to US $10.9 million in 2010.

·     45% increase in gross profits to US $10.4 million from US $5.7 million in 2009.

·     EBITDA loss decreased by 65% to US $0.8 million from US $2.9 million in 2009.

·     83 mobile operators and eight device manufacturers in customer base, compared to 21 operators and one manufacturer at the end of 2009.

·     1.3 billion users in the Company's addressable market at the end of 2010, a more than fourfold increase over 300 million in 2009.

·     Completed the acquisition of iseemedia Inc. and the Instant Messaging business of Colibria AS.

·     Listed on TSX Venture Exchange.

4th Quarter 2010 Highlights:

·     57% increase in revenue from US $3.3 million in Q4 2009 to US $5.2 million in Q4 2010.

·     EBITDA doubled to US $2.0 million in Q4 2010 from US $1.0 million in Q4 2009.

·     Four operator contracts signed for a total value of US $3.1 million, along with an expansion order worth US $975,000.

·     Initiated device certification program with major Latin American operator group, ensuring compatibility with Synchronica's Instant Messaging service.

"2010 was a very important and successful year for us," said Carsten Brinkschulte, CEO of Synchronica. "We accelerated customer acquisition with both mobile operators and device manufacturers which in turn drove record growth in our addressable market, expanded our global footprint and established our position as the leader in the mobile messaging market for emerging economies. At the same time, we added new technology to our flagship Mobile Gateway platform to increase functionality. As we move forward in 2011, these accomplishments will enable us to further build our customer base, focus on increasing usage across the networks and expand our target to the developed markets."

Financial Highlights

All currency in thousands of U.S. dollars except EPS	Three months ended December 31		Twelve months ended December 31
	2010	2009	2010	2009
Revenue	5,177	3,297	10,924	5,934
Gross margin	97%	98%	96%	96%
EBITDA	2,000	1,000	(830)	(2,900)
Net (loss) income	7	(228)	(6,477)	(4,952)
Basic earnings (loss) per share (U.S. cents):	0.2	(0.6)	(10.2)	(15.5)
Working Capital	1,182	4,252	1,182	4,252

Subsequent Developments

On 2 February, 2011, Synchronica announced an agreement to acquire the Instant Messaging business of Neustar NGM Services Limited ("Neustar NGM") which includes Neustar's technology and patents, 11 contracts with Tier-1 and Tier-2 mobile operators and two contracts with Tier-1 device manufacturers.

At Mobile World Congress 2011 in February, the Company also announced a major upgrade of its flagship product Mobile Gateway. Mobile Gateway 6 features unified messaging, a presence enabled address book and integrates advanced document transcoding and new Instant Messaging capabilities acquired with iseemedia Inc ("iseemedia") and Colibria AS ("Colibria"). These, along with the latest acquisition of RCS (Rich Communication Suite) technology from former competitor Neustar NGM, are helping Synchronica to address the requirements in developed markets.

Synchronica plc	Carsten Brinkschulte, CEO	[phone]
	Angus Dent, CFO	[phone]
www.synchronica.com	Nicole Meissner, COO	[phone]
Northland Capital Partners
(Nominated Adviser)	Shane Gallwey/Rod Venables	[phone]
(Corporate Broker)	Katie Shelton	[phone]
Walbrook PR Limited		[phone]
(media enquiries)	Paul McManus	[e-mail]
(investor enquiries)	Paul Cornelius	[e-mail]

About Synchronica

Synchronica plc is a leading developer of next-generation mobile messaging solutions based on open industry standards. The award-winning product portfolio includes the flagship product Mobile Gateway, providing push email, synchronisation, instant messaging, backup & restore and mobile connectivity to social networks. Synchronica's products are white-labelled and offered by mobile operators in emerging and developed markets to provide mass-market messaging services, increasing data revenues and reducing churn.

Synchronica's Mobile Gateway provides a unique multi-protocol gateway combining Push IMAP, SyncML, ActiveSync, Email-to-MMS and Email-to-SMS, delivering push email and synchronisation to literally any mobile phone currently in the market without requiring an additional client to be downloaded. Expanding Instant Messaging to mobile devices, Mobile Gateway establishes carrier-branded IM communities using the industry-standard XMPP and provides gateways to popular Internet IM communities connecting any IMPS enabled handset.

Headquartered in England, Synchronica also maintains development centres in Germany and the Philippines, in addition to a regional presence in Canada, the USA, Hong Kong, Spain, and Dubai. Synchronica plc is a public company which is traded on the AIM list of the London Stock Exchange (SYNC.L), and the Venture Exchange of the Toronto Stock Exchange (SYN.V). For further information, please visit www.synchronica.com

Preliminary Financial Results for the year ended 31 December 2010

Synchronica is pleased to announce results for the financial year ending 31 December 2010. The Company dramatically expanded its market share and recorded substantial contract-wins, as well as a significant rise in recurring revenue streams.

Synchronica's goals for 2010 were to gain market leadership in next-generation mobile messaging in emerging economies, improve its competitive position by integrating new key features into Mobile Gateway, to diversify its revenue streams by continuing with the transition from upfront licensing agreements with mobile operators to a recurring model based on active users, and to increase revenue from device manufacturers.

By the end of the period, Synchronica had delivered on all of these goals. The Company has emerged as the de facto market leader for next generation mobile messaging in developing countries with group-wide agreements covering Latin America, Africa and Russia as well as contracts with large carriers in India. Through a combination of organic growth and acquisition, Synchronica has grown from a niche player with a limited footprint, into a leading international provider of mobile messaging solutions.

With more than 83 contracts with many of the world's leading mobile operators, and 8 handset manufacturers including two of the world's top 5 brands, Synchronica today provides a host of mobile messaging services, with a global reach and an enviable customer list.

The Company has evolved its flagship product Mobile Gateway from a push Email solution to a complete next-generation mobile messaging platform by adding Instant Messaging, Social Networking and document transcoding services. Mobile Gateway 5 is recognized as a leading mobile messaging platform offering a significant competitive advantage over competing products.

Post period, Synchronica further innovated with the announcement of Mobile Gateway 6, adding further innovative features to the platform including unified messaging and a presence-enabled address book. Mobile Gateway 6 also benefits from the integration of advanced document transcoding technology and new Instant Messaging capabilities, gained from the acquisitions of iseemedia Inc ("iseemedia") and Colibria AS ("Colibria") respectively. With the latest acquisition of RCS (Rich Communication Suite) technology from former competitor Neustar Inc's NGM Services business ("Neustar NGM"), Synchronica is now well positioned to extend its reach into developed markets.

The Company continues to derive most of its revenue from software licensing, but has succeeded in increasing the share of revenues derived from recurring revenue streams from 13% in 2009 to 23% in 2010. The Company's decision to target device manufacturers with Mobile Gateway has also paid dividends, with this segment growing rapidly during 2010 accounting for 35.1% of the full year's revenue.

Synchronica is traded on AIM list of the London Stock Exchange and, since 22 September 2010, has also been traded on the Venture Exchange of the Toronto Stock Exchange (TSX-V).

 

Financial Results

We increased revenue by 85% from US $5.9m in 2009 to US $10.9m for 2010. Synchronica's flagship product Mobile Gateway accounted for 99.7% of our 2010 revenue, up from 77.2% in 2009.

Our gross profits remain comfortably above 90%. Administrative costs, net of exceptional charges, have increased from US $8.5m in 2009 to US $11.3m in 2010. Approximately half of this increase is the cost of operating the IMPS business acquired from Colibria. The remainder is due to growth in operating activities of the business. Excluding exceptional items, we recorded a reduced EBITDA loss of US $0.83m against an EBITDA loss of US $2.86m the previous year.

 

Listing On Toronto Venture Exchange

On 22 September 2010 Synchronica began trading on the TSX Venture Exchange of the Toronto Stock Exchange (TSX). The TSX is the third largest exchange in North America by market capitalisation, and the second largest for technology companies. The North American listing provides Synchronica with a strategic route into an investment community that is very tech-savvy, and ready to back growing companies like Synchronica.

 

Contract Wins

Analogous of the performance recorded in previous years, Synchronica's final quarter for 2010 has been extremely active.

In October, Synchronica announced that it had received counter-signatures and purchase orders from a pan-African operator group in a deal worth an initial US $752,000. In December, the same operator group issued a volume expansion order worth a further US $975,000, for additional licenses. With these orders, all of the operator's African subsidiaries will be enabled to provide advanced mobile messaging, powered by Mobile Gateway 5, to its more than 45 million subscribers. The customer expects to launch the service in March 2011.

In November, Synchronica closed a deal worth an initial US $246,000, for the Russian subsidiary of a large pan-European mobile operator group. The operator owns GSM licenses across 37 Russian regions, and covers an addressable population size of approximately 61 million. This order will see the operator using Synchronica's Instant Messaging infrastructure to provide its own carrier-branded IM community to its 18 million subscribers, in addition to offering regular access to mainstream communities.

A US $560,000 purchase order was received in December from the Nigerian subsidiary of a large tier-1 pan-African mobile operator group. This is the second of Nigeria's 'top-3' operators to place an order with Synchronica, and when both services are launched, seven out of every ten GSM subscribers in Nigeria will have access to the award-winning Mobile Gateway messaging infrastructure.

Also in December, Synchronica closed a deal valued at approximately US $1.5 million with a large operator in the Middle East. While the order covers an initial volume of user licenses for Mobile Gateway, the agreement also includes recurring support and maintenance fees of US $215,640 for each 12-month period of the life of the licenses.

During the final quarter, a major Latin American operator group issued a requirement for device manufacturers to certify their handsets with Synchronica's IM infrastructure. Synchronica has since received certification orders from three 'top-10' device manufacturers as a consequence of these requirements. While this process ensures that the operator's customers increasingly make use of Synchronica's Instant Messaging service, it also provides Synchronica with indirect revenues and important business development prospects with tier-1 manufacturers.

 

Consolidating the Mobile Messaging Market

Earlier in 2010, Synchronica completed its acquisition of the Instant Messaging business of Colibria. The deal included Colibria's OMA IMPS technology in addition to 13 contracts with mobile operators. The acquisition was a springboard for Synchronica to accelerate its entry into the Instant Messaging market and included group-wide agreements with the two largest operator groups in Latin America. Integrated into Mobile Gateway, Colibria's Instant Messaging platform substantially improved the IM capabilities of the platform.

This was followed closely by the acquisition of Synchronica's competitor, iseemedia. Completed in October, this acquisition added contracts with large mobile operators in India, extending the contracted addressable market to 853 million subscribers. Additionally, Synchronica gained iseemedia's patented document transcoding technology, which has recently been integrated into Mobile Gateway 6. In tandem with the acquisition of iseemedia, Synchronica began trading on the TSX Venture Exchange on 22 September 2010, complementing the trading in the UK on the London Stock Exchange's AIM market.

Both transactions were well supported by new and existing institutional investors, and the customer contracts acquired via both transactions contributed to the progress made in the transition towards recurring revenue streams.

Post the reporting period, on 2 February 2011, Synchronica announced an agreement to acquire the Instant Messaging business of Neustar NGM. This acquisition includes Neustar NGM's technology and patents, 11 contracts with high-profile Tier-1 and Tier-2 mobile operators, and two contracts with Tier-1 device manufacturers.

Customer Growth and Market Penetration

A key goal of Synchronica for 2010 was to increase its customer base. Outside the obvious commercial benefits associated with covering a diverse list of customers, it also provides Synchronica with substantial business development opportunities.

In June 2010, Synchronica announced that it had signed its 40th mobile operator customer, and increased its addressable market to 660 million potential end users. By November 2010, Synchronica's customer list had increased to 60 mobile operators, representing a combined addressable market of just under 1 billion potential end users.

Today, Synchronica's mobile operator base stands at 83 customers from 62 countries, representing a growth in customers of 108% since last June. The combined addressable user base has also grown significantly and now exceeds 1.3 billion.

Synchronica has also seen a significant increase in business from device manufacturers who wish to offer advanced push email, synchronisation, social networking and instant messaging on their mass-market devices. Synchronica's messaging solutions have been licensed by six Tier-2, and two Tier-1 manufacturers.

Device manufacturers are attracted by Synchronica's operator customer base and its technical approach of using native messaging clients on low-end chipsets, in addition to the complete set of technical and commercial resources which Synchronica provides. Device manufacturers have become an important part of Synchronica's success, and Synchronica will continue to provide support to this growing channel.

 

Product Innovation and Relevance

During 2010, Synchronica launched a major upgrade to its flagship product, Mobile Gateway 5. This award-winning messaging platform provided 'clientless' push email and synchronisation, instant messaging, access to social networking services, and web feeds to literally any mobile phone.

Mobile Gateway 5 has been very well received by the market, and has been an integral contributor to Synchronica's commercial success in 2010.

Post the reporting period, at Mobile World Congress 2011, Synchronica announced Mobile Gateway 6. This further major upgrade of the product introduces unified messaging with a pre-RCS suite that supports a wide range of entry-level and mid-range mobile phones. Mobile Gateway 6 features a presence-enabled address book, an ultra-lightweight J2ME client and support for xHTML browsers. The new client introduces an advanced user experience for feature phones and Smartphones and also features advanced document streaming and transcoding capabilities, dramatically reducing bandwidth consumption by as much as 90 per cent - a major benefit for cost-conscious operators who wish to reduce their wholesale bandwidth costs.

Initial feedback for Mobile Gateway 6 has been very encouraging, and customers are excited about branding capabilities and advanced functionality provided by Mobile Gateway 6.

 

Strategic Focus

While Synchronica is considered the de facto market leader for next-generation mobile messaging in emerging markets, the Company has now expanded its focus to include prospects in developed markets. With the acquisition of Neustar NGM, Synchronica has already expanded its customer base in Europe and the Company is now looking to add further operator customers in European - and potentially also North American - markets. Synchronica will continue to innovate with plans to integrate the acquired RCS (Rich Communication Suite) technology and is targeting the introduction of further innovations to its messaging platform, Mobile Gateway, throughout the year.

 

Outlook

The extremely strong end to the year has continued into the first quarter of the year as we continue to grow our operating customers and increase our addressable market. We remain confident that we have the right distribution channels, product, and skills in place to grow further and expand the customer base further in 2011. We have also worked hard to diversify our business model combining both perpetual and recurring revenue license agreements and we expect 2011 to show further positive results and we expect recurring revenue to make an even greater contribution in 2011 ensuring a more predictable revenue and cash flow.

The acquisition of the instant messaging business of Neustar NGM Services Ltd and the organic growth that

we expect to come from the many opportunities that our high growth emerging markets present gives the Board confidence in the new financial year and our ability to meet market expectations.

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2010

	Note	3 months to 31 December 2010 (unaudited US $'000	3 months to 31 December 2009 (unaudited) US $'000	12 months to 31 December  2010 (unaudited) US S'000	12 months to 31 December 2009 (unaudited) US $'000
Revenue		5,177	3,297	10,924	5,934
Cost of sales		(175)	(59)	(480)	(263)
Gross profit		5,002	3,238	10,444	5,671
Administrative costs
Amortisation and depreciation		(1,778)	(167)	(3,653)	(906)
Exceptional items		(1,364)	(859)	(1,887)	(1,419)
Other administrative expenses		(2,974)	(2,257)	(11,277)	(8,530)
Foreign exchange  gains/(losses) on operating activities		204	129	(139)	113
Total administrative costs		(5,912)	(3,154)	(16,956)	(10,742)
Operating (loss)/profit		(910)	84	(6,512)	(5,071)
Finance income		693	-	79	320
Finance costs		(19)	(137)	(852)	(432)
Loss before taxation		(236)	(53)	(7,285)	(5,183)
Taxation	2	243	(175)	808	231
Profit/(loss) after tax and total comprehensive income for the period		7	(228)	(6,477)	(4,952)
Attributable to:
-     Equity holders of the parent company		207	(228)	(6,254)	(4,952)
-     Non-controlling interest		(200)	-	(223)	-
		7	(228)	(6,477)	(4,952)
Earnings per ordinary share from continuing operations
Basic earnings/(loss) per ordinary share (US cents)	3	0.2c	(0.6c)	(10.2c)	(15.5c)
Diluted earnings/ (loss) per ordinary share (US cents)	3	0.2c	-	-	-

Consolidated Statement of Financial Position

as at 31 December 2010

		As at	As at
		31 December	31 December
		2010	2009
		(unaudited)	(unaudited)
		US $'000	US $'000
Assets
Non-current assets
Intangible assets		21,796	7,464
Property, plant and equipment		372	267
Derivative financial instruments		442	313
Total non-current assets		22,610	8,044
Current assets
Trade and other receivables		9,974	2,089
Derivative financial instruments		1,228	567
Corporation tax		-	22
Cash and cash equivalents		1,182	4,252
Total current assets		12,384	6,930
TOTAL ASSETS		34,994	14,974
Current liabilities
Trade and other payables		3,861	3,033
Corporation tax		25	143
Provisions		139	1,659
Total current liabilities		4,025	4,835
Non-current liabilities
Provisions		1,921	543
Other payables		34	-
Retirement benefit obligation		138	-
Deferred tax liability		3,396	109
Total non-current liabilities		5,489	652
Total liabilities		9,514	5,487
Equity and reserves
Ordinary shares		21,309	8,644
Share premium account		34,247	30,033
Merger reserve		4,919	2,269
Warrant reserve		1,358	-
Accumulated losses		(37,383)	(31,459)
Equity attributable to shareholders of the parent company		24,450	9,487
Non-controlling interest		1,030	-
Total Equity		25,480	9,487
TOTAL EQUITY AND LIABILITIES		34,994	14,974

Consolidated Statement of Cash Flow

for the year ended 31 December 2010

	3 months to	3 months to	12 months to	12 months to
	31 December	31 December	31 December	31 December
	2010	2009	2010	2009
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
	US $'000	US $'000	US $'000	US $'000
Cash flow from operating activities
Loss before taxation	(236)	(53)	(7,285)	(5,183)
Adjusted for:
Depreciation	133	45	277	210
Amortisation of intangibles	1,645	115	3,376	623
Impairment of intangibles	-	7	-	50
Loss on disposal of property, plant and equipment	-	-	-	23
Finance losses/(gains) on operating activities	(204)	(129)	139	(113)
Finance income	(693)	-	(79)	(320)
Finance costs	19	137	852	432
Equity-settled share-based payment	162	32	318	123
Cash flows from operating activities before changes in working capital and provisions	826	154	(2,402)	(4,155)
(Increase)/decrease in receivables	(4,981)	(842)	(7,253)	(676)
(Decrease)/increase in provisions	(22)	(78)	(192)	(21)
Increase/(decrease) in payables	617	(337)	748	(2,498)
Cash utilised in operating activities	(3,560)	(1,103)	(9,099)	(7,350)
Tax received	(108)	(98)	157	416
Net cash used in operating activities	(3,668)	(1,201)	(8,942)	(6,934)
Cash flow from investing activities
Acquisition of subsidiaries net of cash acquired	216	-	2,669	-
Purchase of intangible assets	(498)	(545)	(3,077)	(2,049)
Purchase of property, plant and equipment	(114)	(20)	(260)	(224)
Net cash used in investing activities	(396)	(565)	(668)	(2,273)
Cash flow from financing activities
Net proceeds from issue of ordinary share capital	39	-	6,220	7,669
Proceeds from derivative financial instruments	89	59	476	713
Payments to finance lease creditors	(10)	-	(10)	-
Finance costs paid	(5)	-	(10)	(10)
Interest received	1	-	4	27
Net cash generated from financing activities	114	59	6,680	8,399
Net decrease in cash and cash equivalents	(3,950)	(1,707)	(2,930)	(808)
Cash and cash equivalents at 1 October/ 1 January	4,924	5,835	4,252	5,023
Effects of exchange rate changes on cash equivalents	208	124	(140)	37
Cash and cash equivalents at period end	1,182	4,252	1,182	4,252

Consolidated Statement of Changes in Equity

for the year ended 31 December 2010

						Total
						attributable
						to equity	Non-
	Share	Share	Merger	Warrant	Accumulated	shareholders	controlling	Total
	capital	premium	reserve	reserve	losses	of the parent	interest	equity
	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited)
	US $'000	US $'000	US $'000	US $'000	US $'000	US $'000	US $'000	US $'000
At 1 January 2009	5,442	25,566	2,269	-	(26,630)	6,647	-	6,647
Adjustment for share based payments	-	-	-	-	123	123	-	123
Proceeds from placing	3,202	4,467	-	-	-	7,669	-	7,669
Total comprehensive income	-	-	-	-	(4,952)	(4,952)	-	(4,952)
At 1 January 2010	8,644	30,033	2,269	-	(31,459)	9,487	-	9,487
Adjustment for share-based payments	-	-	-	-	318	318	-	318
Proceeds from placing	3,534	2,187	-	499	-	6,220	-	6,220
Shares issued in exchange for derivative financial assets	1,337	507	-	-	-	1,844	-	1,844
Shares issued as consideration for acquisitions	7,794	1,520	2,650	859	-	12,823	-	12,823
Non-controlling interest arising on business combination [Note 4]	-	-	-	-	-	-	1,558	1,558
Acquisition of non-controlling interest	-		-	-	12	12	(305)	(293)
Total comprehensive income	-	-	-	-	(6,254)	(6,254)	(223)	(6,477)
At 31 December 2010	21,309	34,247	4,919	1,358	(37,383)	24,450	1,030	25,480

1. Basis of preparation

These preliminary unaudited consolidated financial statements ('preliminary financial statements') have been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations issued by the International Accounting Standards Board ('IASB') as adopted for use in the European Union. However, it should be noted that these interim financial statements are neither required, nor themselves contain sufficient information, to comply fully with IFRS as adopted by the European Union and IFRS as issued by the IASB.

The principal accounting policies are unchanged from those disclosed in the Group's financial statements for the year ended 31 December 2009, except for:

With effect from 1 July 2010, the presentational currency has been changed to US dollars. The Group presentational currency had remained in sterling, following the change in functional currency to US dollars from 1 January 2009, to provide consistency for the shareholders. Following the acquisition of iseemedia Inc. and listing on the TSX Venture Exchange, the shareholder base is split between the London and Toronto markets. The board decided to provide a presentation currency that shareholders in both jurisdictions are familiar with, the US dollar. The change of the Group's presentational currency and that of the Company's functional currency were accounted for in accordance with IAS 21 "The Effects of Changes in Foreign Exchange Rates". On the change of the Group's presentational currency, comparative figures previously reported in sterling are translated into US dollars using the underlying functional currency amounts.

The financial information for the year ended 31 December 2010 is unaudited and does not constitute the Group's statutory financial statements for the year. However, the comparative financial information for the full year ended 31 December 2009 has been derived from the statutory financial statements for that period. The auditors' report on those accounts was unqualified, and included by way of reference matters to which the auditors drew attention by way of emphasis without qualifying their report.

These preliminary financial statements have been prepared on the going concern basis which is supported by forecasts and projections covering the period to 31 December 2012.

The forecasts and projections, which include monthly cash flows, suggest that provided the Group trades in line with expectations it has sufficient funds to meet its liabilities as they fall due. There is however a risk that the Group may not meet its revenue expectations and / or that while it may meet these revenue expectations it might meet them more slowly than anticipated; either or both of these could test the Group's cash flow. The forecasts are reliant on signing new deals with new customers which is expected but not guaranteed, negotiations are ongoing.

Given the above, the directors acknowledge that there is a material uncertainty related to these events, that may cast significant doubt on the Group's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The directors have been advised by the auditors that they intend to include an emphasis of matter paragraph in their audit opinion drawing attention to the material uncertainty in this basis of presentation assertion on going concern.

The Group has faced the uncertainties noted above throughout its life. To date, when required, management has been successful in raising additional funding from existing and new investors. Based on forecasts and projections, management expect the company to continue as a going concern.

The Board of Directors approved this Interim Report on 14 March 2011.

2. Taxation

The taxation charges for the three month period and year to 31 December 2010 are based on the effective taxation rate, which is estimated will apply to earnings for the year ending 31 December 2010.

3. Earnings per share

	3 months to	3 months to	12 months to	12 months to
	31 December	31 December	31 December	31 December
	2010	2009	2010	2009
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Numerator
Profit/(losses) attributable to equity holders of the parent (US$'000)	207	(228)	(6,254)	(4,952)
Denominator
Weighted average number of ordinary shares used in calculating basic EPS	93,076,071	38,496,933	61,154,290	31,949,934
Basic earnings per ordinary share (US cents)	0.2c	(0.6c)	(10.2c)	(15.5c)
Weighted average dilutive securities	18,277,363	6,666,030	10,021,858	1,273,618
Weighted average number of ordinary shares used in calculating diluted EPS	111,353,434	45,162,963	71,176,148	33,223,552
Diluted earnings per share	0.2c	-	-	-

4. Acquisition of iseemedia Inc.

On 21 September 2010, the Group acquired 82.34% of the share capital of iseemedia Inc.. The following provisional fair value table is at that date. The Group acquired further holdings of share capital of iseemedia Inc. during the year, 2.13% on 28 September 2010 and 1.38% on 6 October 2010. The final 14.15% was acquired on 6 January 2011 making iseemedia Inc. a wholly owned subsidiary.

	Carrying values	Provisional
	pre-acquisition	fair values
	US$'000	US$'000
Customer relationships	-	2,999
Intellectual property rights	-	2,471
Patent rights	-	1,172
Property, plant and equipment	138	-
Receivables	498	498
Cash and cash equivalents	3,532	3,532
Payables	(62)	(62)
Deferred tax	-	(1,793)
Fair value of net assets	4,106	8,817
Minority interest (17.66%)		(1,558)
Goodwill		554
Consideration paid		7,813
Satisfied by:
Ordinary shares		6,954
Warrants		859
Consideration paid and payable		7,813

The fair value of the shares issued was determined by reference to their quoted market bid price of 19p (29.5 cents) at the date of acquisition.

The fair value of the warrants issued was determined using the Black-Scholes-Merton pricing model.

5. Acquisition of Neustar Business

On 2 February 2011, the Group acquired the instant messaging business of Neustar NGM Services Limited and certain affiliates.

	Carrying values	Provisional
	pre-acquisition	fair values
	US$'000	US$'000
Customer relationships	-	4,745
Intellectual property rights	-	400
Deferred tax	-	(1,389)
Fair value of net assets	-	3,756
Discount on acquisition		(3,505)
Consideration payable		251
Satisfied by:
Cash		251
Consideration payable		251

 

END

 

 

FR GGUBPWUPGPPC