Final Results

Synchronica PLC
01 May 2008

 

1 May 2008
                                Synchronica plc
                        ("Synchronica" or "the Company")
                Final Results for the Year Ended 31 December 2007

Synchronica, the international mobile e-mail and synchronisation solutions
provider, is pleased to announce its preliminary results for the year to 31
December 2007.

Financial Highlights

   • Results in line with market expectations

   • Revenues more than doubled to £2.3m (2006: £1.1m)

   • Loss before tax significantly reduced to £3.0m (2006: £6.7m) due to
     tight cost control

   • Diluted loss per share 4.4p reduced from 18.3p

   • Raised £3.5m in March 2007 to support global expansion



Operational Highlights

   • Break-through contract win with Sun Microsystems validated the business
     model

   • Successfully launched Mobile Gateway in high growth and emerging markets

   • Further multiple licensing agreements signed including subsidiary of
     pan-African operator group and SmartTrust

   • Acquired all intellectual property assets and license contracts of
     GoodServer, a provider of e-mail enablement and integration technologies

   • New financial year has started strongly with two more important deals
     signed with Brightstar Corp, a global leader in distribution and supply
     chain solutions for the mobile industry and with one of the world's top 
     five IT services companies
     


Commenting on progress in 2007, Synchronica CEO Carsten Brinkschulte said: "We
are delighted with the Company's strong progress in 2007 and in particular with
our break-through licensing agreement with Sun Microsystems. Synchronica will
now focus on the compelling opportunity to make mobile phones - especially in
booming emerging markets where fixed line usage is either expensive or
unavailable - the primary means of accessing the email. The Company has seen the
first deals in these markets and we are currently working hard towards further
contract wins. 2008 sees us with a healthy and growing sales pipeline and we
look forward to building on our achievements during 2008 with confidence and
optimism."

Enquiries:

Synchronica plc
Carsten Brinkschulte, CEO           [phone]
Angus Dent, CFO                     [phone]
                                    [phone]

Corfin Communications
Neil Thapar, William Cullum, Alexis [phone]
Gore

FinnCap
Charlie Cunningham                  [phone]


Chairman's Statement

2007 was an important year for Synchronica. We doubled our revenue from 2006 to
2007 and, coupled with careful cost control, substantially reduced our losses.
Such a statement, however, hardly does justice to the work that the team here
has done and the success we have achieved. 2007 saw our first - and very
significant - agreement with a major global supplier of computing network
solutions. This is a clear endorsement of the strengths and quality of
Synchronica's technology and demonstrates our ability to do business with
international tier one players. We have worked extremely hard since 2006 on
transforming and focussing the company and our efforts are now being rewarded.
Our business model was validated in 2007 and we anticipate that 2008 will see
further progress towards profitability.

Ground-breaking Contract

Our agreement with Sun Microsystems Inc (Sun) was a defining event for us in
2007. After several months of discussion we signed an agreement in August, which
was broader in scope than we had originally envisaged. During the autumn we
delivered the software in accordance with a detailed and exacting specification
and in December, Sun accepted the first major version of the software generating
US$1.8m of license revenue. We are proud of what we have achieved with Sun and
look forward to a long and fruitful relationship. We are now working closely
with them and are building on our relationship. We have further revenue
contracted with them which will be recognisable in 2008.

Emerging Markets

We have often spoken about our substantial potential in emerging and developing
markets. As a first validation of this strategy, in November 2007 we delivered
Synchronica Mobile Gateway to a subsidiary of a pan-African operator group
generating $400k license revenue. This shows the demand for our technology from
emerging markets and demonstrates that customers are willing to pay significant
license fees. In emerging markets, we believe that the most efficient way to
access the Internet will be via the mobile phone and Synchronica's Mobile
Gateway is a key enabler delivering email, one of the most popular Internet
applications, to mobile phones. Mobile Gateway is better suited for these
markets than the products provided by most of our competitors because it works
on mass-market, low-cost devices. In Africa, Mobile Gateway is now live and the
feedback so far is very positive. We anticipate being able to replicate this
transaction in other emerging markets during 2008 and beyond.


Channels

2008 got off to a flying start, we signed two reseller agreements, one with
Brightstar and one with a major systems integrator, greatly expanding the reach
of our sales, within the first few weeks of the year. Both resellers are already
feeding us leads and we expect business from both this year.

Funding

We strengthened our balance sheet and cash resources in 2007 and early in 2008. 
In March 2007, we successfully raised £3.3m gross by placing 43.5million shares. 
In January 2008 we placed 30 million shares raising an additional £1.9m and 
entered into a swap agreement under which much of the benefit in any uplift in 
the value of our shares would accrue to the company. In February 2008, we placed 
a further 28.6million shares raising some £2 million. The funds raised will be 
used for working capital and in particular to expand Synchronica's sales and 
marketing capabilities in emerging markets in order to take advantage of the 
outstanding opportunity presented by fundamental changes in the capabilities of 
mobile telephony. The latest placing expands the Company's investor base, as two 
institutions new to Synchronica have invested. Additionally, our management team 
further demonstrated its commitment to the Synchronica story by deepening its 
investment in the Company. Carsten Brinkschulte, Synchronica's CEO, subscribed 
for 285,714 shares as part of the Placing, bringing his personal holding to 
762,136 shares, representing 0.52 % of the issued share capital on admission 
of the Placing Shares. Directors also purchased shares in January and February 
2008. As a Board, we believe in the alignment of directors' and shareholders' 
interests.

Changes to the Board

I was very pleased to be asked to join the Board in April 2007 and delighted to
be elected Chairman in August 2007. In January 2008 Robert Mahalski was
appointed to the Board as a Non-Executive Director and I and my fellow directors
look forward to working closely with him. The change of Non-Executive Directors
on the Board during the year gives us the advantage of fresh leadership and
ideas.

John Gunn, David Wickham and Stephen Sadler all left under the pressure of other
business commitments, and the company expresses its thanks for their
contribution.

Financial Review

Synchronica's Interim Report and Accounts 2007 was our first based on
International Financial Reporting Standards ("IFRS"). This Preliminary Report is
our first annual report based on IFRS. Previously we reported in accordance with
UK GAAP. The impact of this change, which is small, is explained in the notes to
the financial statements.

I am pleased to report that with revenue of £2.3m for the year, more than double
that for 2006, and a much reduced loss before tax of £3.0m, down from a loss
before tax of £7.0m in 2006, our financial results meet market expectations.

Outlook

2007 was an important year for Synchronica and 2008 will be no less important.
Our principal products, Mobile Gateway and Mobile Backup can now be used on the
vast majority of mobile phones in the world today - currently more than 3.75
billion devices. What we have to do in 2008 is to start to capitalise on the
vast opportunity. Our recent supply agreements on the one hand and fund raisings
on the other mean that we are beginning to get the profile, recognition and
capacity to do this. Your Board believes that investors in Synchronica have an
exceptional opportunity in front of them - and your Board has plans in place to
make the most of this over the next 18 months. We believe we can capture a
significant market share in mobile email and move towards our target of
profitability with the ongoing support of our shareholders.

David Mason
Chairman


Chief Executive's Report

2007 in Review

During 2007, we further refined our product strategy and focused completely on
our award-winning push email and synchronization products Mobile Gateway and
Mobile Backup. We invested into the development of both products and added
unique features in order to better meet customer demand and improve
Synchronica's competitive position. Both products have a ring-fenced development
team associated and a well defined product development roadmap which was created
as a result of thorough analysis of the competitive situation and customer
requirements.

Throughout 2007, we continued to increase the visibility of the company in our
target market with regular briefings of industry analysts, very effective PR
campaigns and participation in relevant trade shows. As a result, we have built
a strong pipeline of prospects for our core products and we are in the process
of converting them into customers.

We have seen our first significant customer wins, demonstrated traction in the
marketplace and validated the acceptance of our core products in the target
market. I am pleased to report a much improved financial result in 2007 compared
to the previous year. We were able to more than double our revenues in 2007
while at the same time reducing our costs and met market expectations.

Break-Through Contract

In August, we announced an OEM license agreement with Sun Microsystems Inc
licensing the SyncML synchronization components of the Synchronica Mobile
Gateway product. It took us longer than expected to close this contract, but the
scope of the agreement is larger than originally anticipated. This deal is a
break-through for Synchronica in several ways:

- It is a bold validation of the quality of our product and recognition
  of Synchronica as a leading technology vendor; Sun Microsystems, one of the
  world's largest IT vendors and inventor of the popular JAVA programming
  language, decided to license Synchronica's synchronization technology and make
  it an integral part of several Sun products.

- With initial license revenues of US$1.8m, the Sun contract has also
  contributed substantially to Synchronica's revenues in 2007.

- Synchronica's technology will become a Sun-branded product and is to be
  offered in combination with the Sun Java Communications Suite, an 
  infrastructure software product competing with Microsoft Exchange, with its 
  main market in the service provider sector. The addressable market is 
  substantial; the installed base exceeds 240 million worldwide and continues to 
  grow. Under the terms of the contract Synchronica will receive annual licence 
  revenues for users of the SyncML technology in addition to support fees and 
  further revenues from enhancement requests.

Outlook

In 2008, Synchronica's focus will be on marketing and further development of our
flagship product Mobile Gateway complimented by its companion product Mobile
Backup. We believe that both products are well positioned in the competitive
marketplace and the demand for both push email and synchronization is strong. In
the last two years, Synchronica has developed compelling products with key
unique features. For 2008 and beyond our goal will be to capitalize and turn
this investment into commercial success.

Marketing and Sales Strategy

We will focus our sales and marketing strategy on service providers (mobile
operators, application service providers, Internet service providers and device
manufacturers) with a regional focus on emerging markets (Middle East, Africa,
Eastern Europe, South-East Asia and Latin America). I believe our products are
ideally suited for the specific needs of these markets, because unlike most
competing products, Mobile Gateway supports mass-market, low-cost handsets; the
vast majority of devices in these regions.

These markets present a barrier to entry for many of our competitors, who focus
mainly on the small segment of relatively expensive Smartphones, the sheer cost
of which means they are often literally non-existent in emerging markets. At the
same time, demand for mobile email and synchronization appears to be very strong
in emerging markets, where the PC and fixed-line penetration is very low while
the mobile phone is phenomenally successful. According to a recent study
published by the United Nations, already more than 58% of the world's 3.5
billion mobile phone users are from emerging markets. Operators in these regions
now have a unique opportunity to turn the mobile phone into the primary device
for accessing the Internet and its most popular application - email.

Our direct sales force is now almost exclusively focussed on emerging markets
and we have hired sales and presales representatives in Dubai covering Middle
East and Africa, Hong Kong covering Asia and Miami addressing Latin America. At
the end of 2007, we announced our first significant deal in the emerging markets
when an operator in Africa purchased a 200,000 user license for Mobile Gateway.
I see this as an encouraging sign and validation of our strategy to focus on
these regions. We see a substantial commercial opportunity validated with this
deal as the operator paid US$400,000 for licenses of our product. We see a
significant opportunity to replicate this success throughout the operator's
group, which has more than 30 million subscribers in 21 subsidiaries in the
Middle-East and Africa.

In Brightstar, which brings broad access to operators in the emerging markets,
we are building a strong channel partner. Brightstar is one of the largest
device distributors world-wide having distributed every 20th handset of the 1.1
billion devices sold in 2007. Our sales force is working closely with Brightstar
and we are planning several road-shows introducing Synchronica's products to
mobile operators turning Brightstar's contacts into prospects for Synchronica.

Product Development

To fuel our marketing and sales goals, we have defined a clear product
development strategy tailored to meet the requirements of service providers
specifically in emerging markets. We will enhance both Mobile Gateway and Mobile
Backup with key features which will help Synchronica to win more customers,
expand the addressable market and help our existing customers to increase the
take-up rate. We plan to add the following key features to Mobile Gateway:

- Mobile Signup: Enabling users to subscribe to the service directly
  from their handset removing the need to access a PC during setup. This feature
  will increase the take-up rate particularly in emerging markets where users
  often do not have access to a PC.

- Email to SMS: Extending the reach of Mobile Gateway to even the most
  basic handsets which do not have a built-in email client. This complimentary
  functionality will substantially enhance the addressable market in particular 
  in emerging markets where the vast majority of phones are low-cost devices.

- Microsoft Exchange 2007: Adding support for the latest version of
  Microsoft's Mail System helps maintain access to the business user market.

Risks

I see a huge opportunity for Synchronica which I believe has the potential to
become the market leading provider of mass-market mobile email. However,
Synchronica may not currently have sufficient resource, in sales, marketing and
engineering to fully exploit this opportunity. We have an award winning product
at the right time and with sufficient resources we can reach our full potential
and emerge as the global market leader.

We have established a scalable sales channel with Sun Microsystems, and more
recently with Brightstar and a major systems integrator all of which extend our
reach far beyond our direct sales efforts. However, experience shows that
activating channels takes time, maintaining them can be quite resource-intensive
and success cannot be guaranteed.

On the product side, I believe we have a compelling product with unique features
enabling us to win against the competition. However, we need to continue to
invest into further product development to maintain this lead and at the same
time deliver customized versions of our products to partners and customers. Our
products are often ahead of competing products, but our competitors are often
better funded than Synchronica enabling them to employ more engineering
resources and we might lose our competitive advantage over time, if this
situation is not addressed.

The board is fully aware of the above challenges and has plans to address them.
I feel confident, that Synchronica will succeed.

Carsten Brinkschulte
Chief Executive Officer




Consolidated Income Statement for the year ended 31 December 2007

                              Note                 2007             2006
                                                  £'000            £'000

Revenue                                           2,285            1,068

Administrative costs
Reorganisation costs             4                 (492)            (529)
Exceptional impairment of          
goodwill                                            -               (661)
Other administrative expenses                    (4,951)          (6,969)
Total administrative costs                       (5,443)          (8,159)
                                                ________         ________
Operating Loss                                   (3,158)          (7,091)

Finance income                                       87              189
Finance costs                                       (12)             (49)
                                                ________         ________
Loss before taxation                             (3,083)          (6,951)

Taxation                         5                  113              296
                                          
Loss for the year after tax                 
attributable to the equity                                    
holders of the parent company                   ________         ________
during the year                                  (2,970)         (6,655) 
                                                ________         ________ 
   
Loss per ordinary                6
share from continuing
operations Basic and Diluted                    ________          ________                   
loss per share                                   (4.4)p          (18.3)p    
                                     



Statement of recognised income and expense
for the year ended 31 December 2007

                                                The Group          The Company
                                           2007      2006      2007      2006
                                           £'000     £'000     £'000     £'000

Exchange difference on translation of      
foreign operations                              7        -         -         -
(Charge)/credit for employee share options    (40)       86      (40)        86
                                           _______   _______   _______   _______

Net (expense)/income recognised directly    
in equity                                     (33)       86      (40)        86

Loss for the year                          (2,970)   (6,655)   (2,849)   (6,857)
                                           _______   _______   _______   _______
Total recognised expenses in the year
attributable to equity holders of the      
parent                                     (3,003)   (6,569)   (2,889)   (6,771)
                                           _______   _______   _______   _______

Balance sheet at 31 December 2007
                                              The Group        The Company
                                          2007     2006     2007      2006
                                    Note  £'000    £'000    £'000     £'000
Assets
Non Current assets
Intangible assets                          579        196      557       193
Property plant and equipment               133         94      105        76
Investments in subsidiaries                -        -           77        89
                                          _______  _______  _______   _______
                                           712        290      739       358
                                          _______  _______  _______   _______
Current assets
Trade and other receivables              1,517        501    1,509       460
Corporation tax                            107        -        121        -
Cash and cash equivalents                  757      2,086      643     2,052
                                         _______  _______  _______   _______
                                         2,381      2,587    2,273     2,512
                                         _______  _______  _______   _______

Total assets                             3,093      2,877    3,012     2,870
                                         _______  _______  _______   _______
Liabilities
Current liabilities
Trade and other payables                 1,006     1,665    1,072     1,677
Corporation tax                           -           16       -         -
Provisions                                 187       155      187       155
                                        _______  _______  _______   _______

Total current liabilities                1,193     1,836    1,259     1,832
                                        _______  _______  _______   _______
Non current liabilities
Provisions                                 349        64      349        64
                                        _______  _______  _______   _______

Total non current liabilities              349        64      349        64
                                        _______  _______  _______   _______

Total Liabilities                         1,542    1,900    1,608     1,896
                                        _______  _______  _______   _______

Equity and reserves
Ordinary shares                    7        840       364       840       364
Share premium                      7     13,167    10,066    13,167    10,066
Retained earnings /    
(accumulated losses)               7    (12,463)  (9,453)   (12,603)  (9,456)
Translation reserve                7          7         -         -         -
                                        _______   _______   _______   _______
Equity attributable to                    1,551      977      1,404      974
shareholders of the parent company
                                        _______   _______   _______   _______

TOTAL EQUITY AND LIABILITIES              3,093    2,877      3,012     2,870
                                        _______   _______   _______   _______



Cash flow statement for the year ended 31 December 2007

                                        The Group        The Company
                                        2007    2006     2007     2006
                                        £'000   £'000    £'000    £'000

Cash flows from operating activities
Loss before taxation                    (3,083) (6,951)  (3,228)  (7,157)
Adjusted for:
Depreciation                                62      76       51       70
Amortisation of intangibles                160     774      151      315
Amounts written off investments            -       -        -        913
(Profit)/Loss on disposal of property,      
plant and equipment                         (5)      1       (4)      3
Finance Income                             (87)   (189)     (87)     (189)
Foreign exchange losses/(gains) on      
operating activities                        12       49      12        49
Equity settled share based payment     
(credit)/expense                           (40)      86     (40)       84
                                          ______  ______   ______   ______

Cash flows from operating activities    
before changes in working capital and
provisions                              (2,981) (6,154)  (3,145)  (5,912)

- (decrease)/increase in provisions        317     219      317      219
- (increase)/decrease in trade and      
   other receivables                    (1,016)    406   (1,049)     447
- (decrease)/increase in payables         (659)    750     (605)     921
                                        _______ _______  _______  _______
Cash utilised from operations           (1,358)  1,375   (1,337)   1,587
Income tax (paid) / received               -       300      -        300
                                        _______ _______  _______  _______

Net cash used in operating activities   (4,339) (4,479)  (4,482)  (4,025)
                                        ______  ______   ______   ______
Cash flows from investing activities
Acquisition of subsidiary net of cash   
acquired                                 -        (25)      -        (25)
Investment in subsidiary                 -       -          -       (336)
Purchase of intangible assets            (243)    (70)     (215)    (119)
Purchase of property, plant and          
equipment                                (103)    (91)      (80)     (81)
Proceeds from sale of property, plant   
and equipment                               4       7         4        -
Proceeds on disposal of investment          -       -        12        -
Interest received                          87     195        87      195
                                        ______  ______   ______   ______

Net cash used in investing activities    (255)     16      (192)    (366)
                                        ______  ______   ______   ______
Cash flows from financing activities
Net proceeds from issue of ordinary    
shares                                  3,277      -      3,277      -
Finance lease repayments                   -      (17)      -        (17)
                                        _______ _______  _______   _______

Net cash generated from financing       
activities                              3,277     (17)     3,277     (17)
                                        ______   ______   ______    ______

Net decrease in cash and cash          
equivalents                            (1,317)  (4,480)   (1,397)  (4,408)
Cash and cash equivalents at 1 January  
2007                                    2,086    6,615     2,052     6,509
Effects of exchange rate changes on       (12)     (49)      (12)     (49)
cash and cash equivalents
                                         ______  ______   ______     ______

Cash and cash equivalents at 31        
December 2007                             757     2,086      643    2,052
                                         ______  ______   ______     ______
  


Notes forming part of the preliminary results for the year ended 31 December
2007

1. General information

Synchronica plc is incorporated in the United Kingdom under the Companies Act
1985. The address of its registered office is Mount Pleasant House, Lonsdale
Gardens, Royal Tunbridge Wells, Kent, TN1 1NY.

These consolidated preliminary results are presented in pounds sterling, which
represents the functional currency of the Group. Foreign operations are
consolidated in accordance with the policies set out in note 2 below.


2.  Significant accounting policies

Basis of preparation

The Group and parent company financial statements have been prepared in
accordance with EU endorsed International Financial Reporting Standards (IFRS),
International Financial Reporting Interpretations Committee (IFRIC)
interpretations and with those parts of the Companies Act 1985 applicable to
companies reporting under IFRS. All accounting standards and interpretations
issued by the International Accounting Standards Board and the International
Financial Reporting Interpretations Committee effective at the time of preparing
these financial statements have been applied.

The Group and parent company financial statements have been prepared under the
historical cost convention. A summary of the significant Group accounting
policies adopted in the preparation of the financial statements is set out
below. These policies have been consistently applied to all the years presented,
unless otherwise stated.

The preparation of financial statements which comply with IFRS requires the use
of estimates and assumptions, and for management to exercise its judgement in
the process of applying the Group's accounting policies.

Going concern

These financial statements have been prepared on the going concern basis which
is supported by forecasts and projections covering the period to 31st December
2009.

The company made a loss of £2.97 million for the year to 31st December 2007 and
had cash of £0.76 million at that time. Since 31st December the company has
twice raised additional funds from shareholders of £3.875m (See note 30). The
projections and forecasts, which include cash flows, suggest that provided the
company trades in line with expectations that it has sufficient funds to meet
its liabilities as they fall due. There is however an obvious risk that the
company 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 company's cash flow. The forecasts are
reliant on signing new deals with new customers which are expected but not
guaranteed, negotiations are ongoing.

In addition the company operates in a highly specialised and fast moving
environment in which in order to generate revenue it is necessary that the
products are and remain up to date, to ensure this it may be necessary to
increase costs.

Given the above the directors acknowledge that there is a material uncertainty
related to the these events, that may cast significant doubt on the entity's
ability to continue as a going concern and, therefore, that it may be unable to
realise its assets and discharge its liability in the normal course of business.

Management have however taken the relevant steps to ensure that further funding
has been raised from existing and new investors. Based on forecasts and
projections and additional funding raised since the balance sheet date,
management expect the company to continue as a going concern.

Standards, amendments and interpretations to published standards not yet
effective

Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the group's accounting periods beginning
on or after 1 January 2008 or later periods and which the group has decided not
to adopt early. These are:

• IFRS 8, Operating Segments' (effective for accounting periods
beginning on or after 1 January 2009). This standard sets out requirements for
the disclosure of information about an entity's operating segments and also
about the entity's products and services, the geographical areas in which it
operates, and its major customers. It replaces IAS 14, Segmental Reporting. The
group expects to apply this standard in the accounting period beginning on 1
January 2009. As this is a disclosure standard it will not have any impact on
the results or net assets of the group.

   • Amendment to IAS 1, Presentation of financial statements: a revised
     presentation

(effective for accounting periods beginning on or after 1 January 2009). The
revised IAS 1 introduces a single "statement of comprehensive income"
incorporating both the profits and losses that have traditionally been reported
in the income statement and other gains and losses that are currently reported
in the Statement of Recognised Income and Expense or the Statement of Changes in
Equity. - Amendment to IAS 1, "Presentation of financial statements: Amendment
to capital disclosures" (effective for accounting periods beginning on or after
1 January 2009). The group expects to apply these amendments in the accounting
period beginning on 1 January 2009. As this is a disclosure standard it will not
have any impact on the results or net assets of the group.

   • Amendment to IFRS 2, "Share-based payments": vesting conditions and
    cancellations (effective for accounting periods beginning on or after 1
    January 2009). This amendment is still to be endorsed by the EU. Management
    is currently assessing the impact of the Amendment on the accounts.


   • Revised IFRS 3, "Business Combinations" and complementary amendments to
    IAS 27,'Consolidated and separate financial statements (both effective for
    accounting periods beginning on or after 1 July 2009). This revised standard
    and amendments to IAS 27 is still to be endorsed by the EU. The revised IFRS
    3 and amendments to IAS 27 arise from a joint project with the Financial
    Accounting Standards Board (FASB), the US standards setter, and result in
    IFRS being largely converged with the related, recently issued, US
    requirements. There are certain very significant changes to the requirements
    of IFRS, and options available, if accounting for business combinations.
    Management is currently assessing the impact of revised IFRS 3 and
    amendments to IAS 27 on the accounts.


   • IFRIC 12 'Service concession arrangements', IFRIC 13 'Customer loyalty
    programmes' and IFRC 14 'IAS 19 - The limit on a defined benefit asset,
    minimum funding, requirements and their interaction', Amendment to IAS 23
    'Borrowing costs' and amendments to IAS 32 'Puttable Financial Instruments
    and Obligations Arising on Liquidation will not have a material impact on
    the financial statements of the group.

First time adoption of IFRS

These are the Group's first financial statements prepared in accordance with
IFRS. Accordingly, IFRS 1 'First Time Adoption of International Financial
Reporting Standards' has been applied. The Group's transition date to IFRS is 1
January 2006, and the Group prepared its opening balance sheet at that date in
accordance with IFRS effective at 31 December 2007 except as specified below. In
preparing these financial statements, the Group applied mandatory exceptions and
certain of the optional exemptions available in IFRS 1 from the full
retrospective application of IFRS:

Optional exemptions to full retrospective restatement elected by the Group

(i)  Business combinations exemption
The Group has taken the business combination exemption, which allows that IFRS 3
not be applied to business combinations that took place prior to 1 January 2006,
the date of transition to IFRS.

(ii) Cumulative translation differences
The Group has elected to set the previous cumulative translation differences
arising from the translation of all foreign operations to zero at the date of
transition to IFRS.

Reconciliations and explanations of the effect of the transition from UK GAAP to
IFRS on the Group's equity and its profit or loss are provided in note 9.

Basis of consolidation

The consolidated financial statements incorporate the results, assets,
liabilities and cash flows of the company and each of its subsidiaries for the
financial year ended 31 December 2007.

Subsidiaries are entities controlled by the Group. Control is deemed to exist
when the Group has the power, directly or indirectly to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The results, assets, liabilities and cash flows of subsidiaries are included in
the consolidated financial statements from the date control commences until the
date that control ceases.

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.

Intra-group balances and transactions are eliminated on consolidation.

Foreign currencies

Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the 'functional currency'). The consolidated financial
statements are presented in sterling, which is the Company's functional and
presentation currency.

Transactions entered into by Group entities in a currency other than the
currency of the primary economic environment in which it operates (the
"functional currency") are recorded at the rates ruling when the transactions
occur. Foreign currency monetary assets and liabilities are translated at rates
ruling at the Balance Sheet date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised
immediately in the Income Statement.

On consolidation the balance sheet of the overseas subsidiary undertaking is
translated at the rate of exchange ruling at the balance sheet date. The
exchange differences arising on the retranslation of opening net assets,
together with the year-end adjustment to closing rates of income statements
translated at average rates, are taken directly to reserves. The income
statement of the overseas subsidiary undertaking is translated at average
exchange rates (unless this average is not a reasonable approximation of the
effect of the rates prevailing on the transaction dates, in which case the
income and expenses are translated at the rate on the dates of the
transactions). All other translation differences are taken to the income
statement. Tax charges and credits attributable to exchange differences on those
borrowings are also dealt with in reserves.

Leases

Where substantially all of the risks and rewards incidental to ownership are not
transferred to the group (an "operating lease"), the total rentals payable under
the lease are charged to the consolidated income statement on a straight-line
basis over the lease term. The aggregate benefit of lease incentives is
recognised as a reduction of the rental expense over the lease term on a
straight-line basis.

Revenue

Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for licences granted and services
provided in the normal course of business, net of discounts, any refunds due,
and VAT.

The Group derives revenue from one trade in software licences and providing
customer support and other services in relation to those licences. Customer
support includes telephone support and maintenance updates. Other services
include the sale of professional services to install and maintain software and
to train licensees in the maintenance and use of the software.

Revenue allocable to software licences is recognised when all of the following
conditions are met:

• The Group has transferred to the buyer the significant risks and rewards of
  ownership;

• The Group retains neither continuing managerial involvement to the degree
  usually associated with ownership nor effective control over the goods sold;

• The amount of revenue can be measured reliably;

• It is probable that the economic benefit associated with the transaction will
  flow; and

• The costs incurred or to be incurred in respect of the transaction can be
  measured reliably.

Revenue allocable to customer support and maintenance is recognised on a
straight line basis over the term of the contract, usually one year. Revenue not
recognised in the income statement under this policy is classified as deferred
income in the balance sheet.

Revenue allocable to other services is recognised when the service has been
rendered to the customer and the value can be measured reliably with reference
to the stage of completion of the project.

Share-based payments

The group operates an employee share option scheme. The fair value of options or
shares granted under the scheme is recognised in the income statement as an
expense over the period in which any performance conditions are fulfilled ending
on the date on which the relevant employees become fully entitled to the award,
based on management's best estimate of the number of awards that will ultimately
vest. A corresponding amount is credited to equity. No expense is recognised for
awards that do not ultimately vest, except for those where the vesting depends
on a market condition. Whether or not the market condition is satisfied, these
are treated as vesting as long as all other performance conditions are
satisfied.

The fair value of the awards are measured at the date at which they are granted
using a Black Scholes Merton option-pricing model.

Investments

Investments in subsidiaries and participating interests are stated at cost less
provision for impairment where necessary to reduce book value to recoverable
amount. Cost is purchase price including acquisition expenses, but excluding any
payment for accrued interest or fixed dividend entitlement.

Intangible assets - goodwill

Goodwill arising on the acquisition of subsidiary undertakings and businesses,
representing any excess of the fair value of the consideration given over the
fair value of the identifiable assets and liabilities acquired is capitalised
and provision is made for any impairment.

Goodwill and intellectual property rights are allocated to cash generating units
for the purpose of impairment testing. The recoverable amount of the
cash-generating unit to which the goodwill or intellectual property rights
relates is tested annually for impairment or when events or changes in
circumstances indicate that it might be impaired.

In an impairment test, the recoverable amount of the cash-generating unit or
asset is estimated to determine the extent of any impairment loss. The
recoverable amount is the higher of the fair value less costs to sell and the
value in use in the Group. An impairment loss is recognised to the extent that
the carrying value exceeds the recoverable amount.

In determining a cash-generating unit's value in use, 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 risks
specific to the cash-generating unit or asset that have not already been
included in the estimate of future cash flows.

Intangible assets - intellectual property rights

Intellectual property rights acquired as part of a business acquisition are
capitalised separately from goodwill if their value can be measured reliably on
initial recognition and they are controlled through custody or legal rights.
These rights are initially recorded at fair value which is based on replacement
cost and are amortised over four years which is their estimated useful economic
life. Provision is made for any impairment.

Intellectual property rights purchased separately from a business are
capitalised at cost and are amortised over four years which is their estimated
useful economic life. Provision is made for any impairment.

Amortisation

Intangible assets, other than goodwill, are amortised on a straight line basis,
to reduce their carrying value to their residual value, over their estimated
useful lives. The following useful lives were applied during the year:

Computer software           up to 2 years
Intellectual property       up to 4 years

Methods of amortisation, residual values and useful lives are reviewed, and if
necessary adjusted, at each balance sheet date

Research and development

An intangible asset arising from development (or from the development phase of
an internal project) shall be recognised if, and only if, an entity can
demonstrate that all of the following conditions are met:

• it is probable that the asset will create future economic benefits.
• the development costs can be measured reliably.
• technical feasibility of completing the intangible asset can be demonstrated.
• there is the intention to complete the asset and use or sell it.
• there is the ability to use or sell the asset, and
• adequate technical, financial and other resources to complete the development
  and to use the asset are available.

Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and accumulated impairment losses
on the same basis as intangible assets acquired separately.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses if applicable. Depreciation on property, plant and
equipment is charged on an asset's residual value over its useful economic life
as follows:

Office equipment         up to 2 years
Fixtures and fittings    up to 4 years
Motor vehicles           up to 4 years

Residual values and useful lives are reviewed and adjusted, if appropriate, at
each balance sheet date.

Share Capital

Financial instruments issued by the Group are treated as equity only to the
extent that they do not meet the definition of a financial liability. The
Group's ordinary shares are classified as equity instruments. The Group
considers its capital to comprise its ordinary share capital, share premium and
accumulated retained earnings. There have been no changes in what the Group
considers to be capital since the previous period.

The Group is not subject to any externally imposed capital requirements.

Cash and cash equivalents

For the purpose of preparation of the cash flow statement, cash and cash
equivalents include cash at bank and in hand and short-term deposits with an
original maturity period of three months or less. Bank overdrafts that are an
integral part of a subsidiary's cash management are included in cash and cash
equivalents where they have a legal right of set-off and there is an intention
to settle net, against positive cash balances, otherwise bank overdrafts are
classified as borrowings.

Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation and default or delinquency in payments
are considered indicators that the trade receivable is impaired. The amount of
the provision is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the original
effective interest rate. The carrying amount of the asset is reduced through the
use of an allowance account and the amount of the loss is recognised in the
income statement within administrative expenses. When a trade receivable is
uncollectible, it is written-off against the allowance account for trade
receivables. Subsequent recoveries of amounts previously written-off are
credited against administrative costs in the income statement.

Taxation

The charge for current income tax is based on the results for the year as
adjusted for items which are not taxed or disallowed. It is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is accounted for using the liability method in respect of
temporary differences arising from differences between the tax bases of assets
and liabilities and their carrying amounts in the financial statements.

Deferred tax liabilities are 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 is due to goodwill arising on a business combination or from an asset
or liability, the initial recognition of which does not affect either taxable or
accounting income.

Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries except where the Group is able to control
the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.

Deferred tax is measured at the tax rates that are expected to apply in the
periods when the timing differences are expected to reverse, based on tax rates
and law enacted or substantively enacted at the balance sheet date. Deferred tax
is charged or credited in the income statement, except when it relates to items
credited or charged directly to shareholders' equity, in which case the deferred
tax is also dealt with in shareholders' equity.

Provisions

Provisions are recognised when the Group has a present obligation in respect of
a past event, where it is more likely than not that an outflow of resources will
be required to settle the obligation, and where the amount can be reliably
estimated.

Financial instruments

The Group classifies financial instruments, or their component parts, on initial
recognition as a financial asset, a financial liability or an equity instrument
in accordance with the substance of the contractual arrangement.

Financial assets and financial liabilities are recognised on the Group's balance
sheet when the Group becomes party to the contractual provisions of the
instrument.

The particular recognition and measurement methods adopted for the Group's
financial instruments are disclosed below:

Derivatives

In the normal course of its business, the Group is exposed to currency risk.
Forward foreign exchange contracts are derivative instruments and are used by
the Group to manage its currency risks.

Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are also subsequently carried at fair value. The
method of recognising the resulting gain or loss depends on whether the
derivative is designated as an effective hedging instrument and the nature of
the item being hedged.

Fair value determination

Whenever available, the fair value of a financial instrument is derived from
quoted prices in an active market. For assets held, fair value is the bid price
and for liabilities held it is the asking price. If there is no active market,
fair value is established by using a valuation technique. Valuation techniques
include the use of information from recent arm's length market transactions
between knowledgeable, willing parties, if available, reference to the current
fair value of similar instruments and discounted cash flow analysis. The
valuation technique used incorporates all factors that market participants would
consider in setting a price and is consistent with accepted economic
methodologies for pricing financial instruments.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all its liabilities. Equity instruments
issued by the company are recorded at the proceeds received, net of directly
attributable issue costs.

Dividends

Final dividends are recognised as a liability in the period in which they are
approved by the company's shareholders. Interim dividends are recognised when
they are paid.

3. Segmental Reporting

The returns earned by the group are predominantly affected by the territory in
which it operates, and accordingly management considers the primary reporting
segment is based on geographic territory of revenue generation. The management
considers that the Group only operates in one business segment, that of
development and provision of mobile device management and synchronisation
solutions.

             North America          Europe       Rest of World       Total
            2007     2006        2007   2006     2007    2006    2007    2006
            £'000   £'000       £'000  £'000    £'000    £'000   £'000  £'000

Revenue     1,132     354        849     549      304     165    2,285   1,068

Unallocated                                                     (5,443) (8,159)
corporate
expenses
Operating loss                                                  (3,158) (7,091)
Finance income                                                      87     189
Finance costs                                                      (12)    (49)
Taxation                                                           113     296
(Loss) in year                                                  (2,970) (6,655)



The geographical split of net assets of the Group stated net of intercompany
balances, is as follows:

         North America   Europe        Rest of World  Unallocated   Total
         2007    2006    2007   2006   2007   2006    2007  2006    2007    2006
         £'000   £'000   £'000  £'000  £'000  £'000   £'000 £'000   £'000  £'000
Segment 
Asset    1,038     57      51    179    141     40   1,863  2,601   3,093  2,877
Segment    
Liabilities -       -       -     -      -       - (1,542) (1,900)(1,542)(1,900)
Net 
assets   1,038     57      51    179    141     40     321   701    1,551    977                

        North America   Europe       Rest of World    Unallocated    Total
        2007   2006     2007  2006   2007   2006      2007   2006    2007  2006
        £'000  £'000    £'000  £'000 £'000  £'000     £'000  £'000   £'000 £'000
         
Capital
expenditure -    -       -      -      -      -        103      91     103    91

Depreciation -   -       -       -     -       -        62      76      62    76


4.       Reorganisation costs

                                                       2007          2006
                                                      £'000          £'000
Costs on closure of site                                 -             300
Impairment losses deducted from intangible assets        -             661
Provision for onerous contracts                         492            229
                                                      _______       _______
                                                        492           1,190
                                                      _______       _______
 

5.      Taxation

Income tax (credit) / expense
                                                2007          2006
                                                £'000         £'000

UK research & development tax credit            (121)         (300)
Overseas corporation tax charge/(credit)           8             4
                                                _______       _______
                                                (113)         (296)
                                                _______       _______

The UK research and development tax credit received represents the refund of tax
due from research carried out in the year ended 31 December 2005 (2006: 31
December 2003 and 31 December 2004).

The group's loss before tax differs from the theoretical amount that would arise
using the weighted average tax rate applicable to results of the consolidated
entities as follows:

                                                2007          2006
                                                £'000         £'000

Loss on ordinary activities before taxation   (3,083)        (6,951)
                                                _______       _______

Theoretical tax at UK corporation tax rate 30% (925)         (2,086)
(2006: 30%)
Effects of:
- unrelieved tax losses                         943           1,827
- other timing differences                      -                (5)
- amortisation of goodwill                      -                19
- impairment of goodwill                        -               162
- expenditure that is not tax deductible         12              21
- capital allowances in excess of depreciation  (18)             39
- adjustments in respect of prior periods       -                -
- higher tax rates on overseas earnings           8               1
- research and development tax credit           (121)          (300)
- share based payments                           (12)            26
                                                _______       _______
Actual current taxation credit                  (113)          (296)
                                                _______       _______

A potential deferred tax asset of £4,374,000 (2006: £3,706,000) in relation to
unrelieved losses of £15,620,000 (2006: £12,352,000) has not been recognised due
to the uncertainty of recoverability of this amount.

6.      Loss per ordinary share

Basic loss per ordinary share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period.

                                                   2007       2006
                                                   £'000      £'000

Numerator
                                                   _________  _________
Losses used for calculation of basic and diluted   
EPS                                                2,970      6,655
                                                   _________  _________

                                                   Number     Number

Denominator
Weighted average number of ordinary shares used in 68,197,584 36,383,766
basic EPS
                                                   _________  _________

Basic and diluted loss per share (pence)           (4.4)p     (18.3)p
                                                   _________  _________

4,959,075 (2006: 289,942) shares have been excluded from the calculation of
diluted loss per share because they would reduce loss per share.

7.       Statement of changes in shareholders' equity

The Group           Ordinary  Share  Capital (Accumu-  Trans-lation  Total
                     shares  premium  to be    lated     Reserve
                                     issued    loss)
                    £'000    £'000   £'000   £'000                  £'000

At 1 January 2006     364    9,893     173    (2,884)      -         7,546

Accumulated loss    
for the year           -        -       -     (6,655)      -        (6,655)
Capital issued         -       173    (173)      -         -            -
Adjustment for      
share based payment    -        -       -         86       -            86
                    _______  _______ _______  _______   _______      _______

At 31 December 2006   364    10,066     -     (9,453)      -           977

Accumulated loss   
for the year           -        -       -     (2,970)      -        (2,970)
Adjustment for     
share based payment    -        -       -        (40)      -           (40)
Proceeds from       
placing               437     2,840     -        -         -         3,277
Acquisition of      
assets                 39       261     -        -         -           300
Currency               -        -       -        -         7             7
translation
difference
                    _______  _______ _______  _______   _______      _______

At 31 December 2007   840     13,167    -     (12,463)     7          1,551
                    _______  _______ _______  _______   _______      _______

The nature and purpose of each category of reserve within owners' equity is as
follows:

Share premium Amount subscribed for share capital in excess of nominal value
less costs of issuing new share capital.

Capital to be issued Share options granted and now exercised in connection with
the acquisition of Synchronica Software GmbH.

Accumulated Loss Cumulative net losses recognised in the consolidated income
statement.

8.       Publication of non-statutory accounts

The financial information in this preliminary announcement does not constitute
the company's statutory accounts for the year ended 31 December 2007, prepared
in accordance with IFRSs as adopted by the EU, or the year ended 31 December
2006, which were prepared under UK GAAP, but it is derived from those accounts.

The statutory accounts for 2006 have been delivered to the Registrar of
Companies and those for 2007 will be delivered following the Company's annual
general meeting. The auditors will report on those accounts; their reports is
expected to be unqualified, however it is expected to include an emphasis of
matter - Going Concern, in relation to the presentation of the financial
statements on a going concern basis, which will indicate the existence of
material uncertainties which may cast doubt about the Group's ability to
continue as a going concern. The financial statements do not include any
adjustments that would result if the Group was unable to continue as a going
concern. The financial statements do not contain statements under the Companies
Act 1985, s237 (2) or (3).

9.       Reconciliation of equity and profit under UK GAAP to IFRS

Synchronica plc reported under UK GAAP in its previously published financial
statements for the year ended 31 December 2006. The analysis below shows a
reconciliation of equity and profit as reported under UK GAAP as at 31 December
2006 to the revised equity and profit under IFRS as reported in these financial
statements. In addition, there is a reconciliation of equity under UK GAAP to
IFRS at the transition date for the Group and company, being 1 January 2006.

Date of transition to IFRS        As at 1     Effect of     As at 1
1 January 2006                 January 2006  translation January 2006
                                                 to
                                 UK GAAP       IFRS         IFRS
                                 £'000         £'000       £'000

Goodwill                         578           -             578
Intangible assets                284           13            297
Property, plant and equipment    100          (13)            87
                               _______       _______     _______

Non current assets               962           -             962
                               _______       _______     _______

Trade and other receivables      907           -             907
Cash and cash equivalents      6,615           -           6,615
                               _______       _______     _______

Current assets                 7,522           -           7,522
                               _______       _______     _______

Total assets                   8,484           -           8,484
                               _______       _______     _______

Trade payables                   254           -             254
Accruals and deferred income     509           36            545
Other current liabilities        139           -             139
                               _______       _______     _______

Current liabilities              902           36            938
Provisions                        -             -           -
                               _______       _______     _______

Total liabilities                902           36            938
                               _______       _______     _______

Equity attributable to the     7,582          (36)         7,546
shareholders of the parent
entity
                               _______       _______     _______

Total equity and liabilities   8,484           -           8,484
                               _______       _______     _______

9.       Reconciliation of equity and profit under UK GAAP to IFRS (continued)

31 December 2006                  As at 31     Effect of     As at 31
                                December 2006 translation  December 2006
                                                   to
                                  UK GAAP        IFRS         IFRS
                                 £'000         £'000        £'000

Goodwill                          -             -            -
Intangible assets                 143           53           196
Property plant and equipment      147          (53)           94
                                _______       _______      _______

Non current assets                290           -            290
                                _______       _______      _______

Trade and other receivables       501           -            501
Cash and cash equivalents       2,086           -          2,086
                                _______       _______      _______

Current assets                  2,587           -          2,587
                                _______       _______      _______

Total assets                    2,877           -          2,877
                                _______       _______      _______

Trade payables                    571           -            571
Accruals and deferred income      862           36           898
Other current liabilities         212           -            212
                                _______       _______      _______

Current liabilities             1,645           36         1,681
Provisions                        219           -            219
                                _______       _______      _______

Total liabilities               1,864           36         1,900
                                _______       _______      _______

Equity attributable to the      1,013          (36)          977
shareholders of the parent
entity
                                _______       _______      _______

Total equity and liabilities    2,877         -            2,877
                                _______       _______      _______

9. Reconciliation of equity and profit under UK GAAP to IFRS (continued)

Reconciliation of profit for the year ended 31 December
2006:
                                                             £'000

Loss reported under UK GAAP                                  (6,619)
Employee costs                                                  (36)
                                                             _______
Loss reported under IFRS                                     (6,655)
                                                             _______

Reconciliation of cash flow statement for the year ended 31 December 2006:

The only changes to the cash flow statement are presentational

The key difference is:

31 December 2006               As at 31      Effect of      As at 31
                            December 2006  translation to December 2006
                               UK GAAP          IFRS          IFRS
                              £'000          £'000           £'000

Operating loss                (7,128)         (36)           (7,090)
                              _______        _______        _______
Changes in working capital
Increase/ (decrease) in        1,645           36             1,681
current liabilities
                              _______        _______        _______

Explanation of reconciling items between UK GAAP and IFRS

The standards and interpretations giving rise to the most significant changes to
the previously reported profit of the Group and equity of the Group and company
are:

(a) IAS 19 Employee Benefits
Under UKGAAP accumulated holiday absences are not recognised where under IAS19
employee benefits compensation that can be carried forward into future period
must be accrued for.

(b) IAS 38 Intangible Assets
Under UK GAAP, all capitalised computer software was included within tangible
fixed assets. IAS 38 "Intangible Assets" requires software that is not an
integral part of an item of computer hardware to be classified within intangible
assets.






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