Bango Regulatory News (BGO)

12 Jun 2007 07:02

Bango PLC12 June 2007 BANGO PLC ("Bango" or the "Company") Preliminary Results for year ended 31st March 2007 Bango (AIM: BGO), the mobile internet platform provider, today announcesPreliminary Results for the year ended 31st March 2007. Financial Highlights (under IFRS, comparative data for FYE 31 March '06) • Revenues grew 38% to £10.43m (£7.53m). • Gross profit grew 12% to £2.47m (£2.19m). • Operating expenses (excluding share based payments) increased by 48% to £5.53m (£3.75m) due to expansion into new territories, product development and increased marketing spend. • Loss before tax £3.32m, £2.92m before share based payments (£1.53m, £1.36m before share based payments). • Cash balance of £1.93m as at 31 March 07. (£4.86m in 2006). • Monthly cash consumption reduced to around £100k / month at year exit. Operational Highlights • Customer wins include MTV, Capcom, Daily Telegraph, FT.com, Agent Provocateur, Jamba, Betfred, Yamaha Music, EA, Cellcity, Paramount Pictures, Ministry of sound. • Average daily end user spend increased by 48% from March 2006 to March 2007. • New Agreements signed with 3, Swisscom, Orange, O2, Optimus, Telefonica, Proximus Yahoo! and Cingular. • Introduction of new Advantage, Vision and Starter products for large customers, advertisers and individuals. • Ability to add charges on bill for more than 40 mobile operators as at March 07 vs. 21 in March 06. Ray Anderson, Chief Executive Officer of Bango, commented: "The year was one ofsignificant progress in the development of the Company. Bango has established ascalable business with a unique industry position, and as we enter a newfinancial year we are starting to see the benefits of our technology andpartnerships. Our business is growing and the market, although at an earlystage, continues to develop in the way we anticipated although fast growth hastaken longer to start than we expected. Working with mobile operators, contentproviders and brands, other commercial partners and investors, we look forwardto continuing success in the coming years". Contact Details: Bango plc ICIS Limited - Financial PR Panmure Gordon & CoTel. +44 1223 472777 Tel. +44 20 7651 8688 Tel. +44 20 7459 3600Ray Anderson, CEO Tom Moriarty Aubrey PowellPeter Saxton, CFO Caroline Evans-Jones Stuart Gledhill About Bango Bango (AIM: BGO) has developed and operates the technology that enables contentproviders to quickly and easily market, sell and deliver their products andservices directly to mobile phone users on all mobile networks using the mobileweb. This "direct-to-mobile" approach operates alongside the mobile operator'smobile portal. Businesses of all sizes, from individuals to global brands are now using Bango'sservices to engage with their existing and potential mobile customers directly -irrespective of mobile operator. For further information visit www.bango.com. Chairman's Statement The Board is pleased to report good progress in all areas of the business.Although the performance of the business was not consistent throughout the year,the overall picture is one of continued growth in revenue, generated by growingnumbers of Bango customers supplying increasing amounts of content to anexpanding pool of end users as well as expansion into new territories. While Bango's technology and the mobile web have global reach, we have focussedour sales and marketing efforts where we see the most activity by contentproviders: USA, UK and Spain. There have been numerous customer wins in theseterritories as a result, including MTV, Capcom, Daily Telegraph, FT.com, AgentProvocateur, Jamba, Flycell, Betfred, Yamaha Music, EA mobile, Rascal Flatts,Mediaplazza, Cellcity, Handsonmobile, Carmunity, MOMO, Paramount Pictures andMinistry of Sound. We also see significant potential in the gathering momentumamong smaller content providers with hundreds of small and individual customerssigning up since early 2007 when we launched our free sign-up Starter package.Our product range expanded to address high end customers with our Advantageproduct. Compared to the previous financial year, we are pleased to report revenue growthof 38% to £10.43m. Our decision to reduce our charges for collecting paymentsfor larger customers resulted in a slower gross margin increase of 12% to£2.47m. Our established UK business remains the biggest contributor to ourgrowth, measured both by content providers paying for Bango services and endusers connecting through Bango to reach or pay for content. Although we saw aslow down in end user spending in the UK during the first half of the financialyear, which appears to have been due to problems with systems at one mobileoperator and less activity during two summer months, growth resumed in thesecond half of the year and remains solid. Outside the UK, growth has been faster than in the UK but from a smaller base.This has been driven by content providers in the UK using Bango to exportglobally and customers using Bango's global reach to access internationalcontent. Based on the large number of content provider sign-ups over the last two years,we now have a considerable body of operating history from which to observe therelationship between content provider sign-up and subsequent promotion of theircontent. Smaller content providers appear to exploit the mobile web much morerapidly than larger ones. They use the tools and services of the mobile internet- including search, mobile advertising and communities - to a much greaterextent than existing brands, which appear to be slower to move from older style"text message" campaigns. Our management is increasingly focussed on improvingBango's ability to sell quickly and cost effectively to smaller contentproviders, while ensuring that the larger customers are provided with the toolsand information to grow when they are ready. The US market is showing tremendous potential, with increasing numbers ofcustomers, of all sizes, using the Bango service. They see Bango not only as aroute to US based end users, but also as a quick and easy route to consumersworld-wide through the global reach of Bango's technology and services. However,the board believes that initial US growth in end user spend on content may beslower than that experienced in European markets as US mobile operators areslower to open up their billing services to a wide range of content than we sawin Europe. This view is endorsed by the increasing number of US content providers investingin Bango products in preparation for marketing content to mobile end users, andto gain additional revenues outside the USA. During January 2007, the Company restructured its sales and marketing operationsto improve sales productivity, as well as giving our strategic partners moresupport and centralising some previously regional sales activity. This has ledto a significant reduction in monthly operating costs and cash burn, and hasenabled the Company to start the financial year ending March 2008 with a netmonthly cash burn of less than £100,000. The executive team remains focussed onsales and marketing efficiency so that in circumstances of rapid sales growththe business can sustain accelerating customer acquisition rates whilecontaining costs. The Company is well-positioned to exploit its market position. The product lineis strong and there are several innovations coming to market that, the boardbelieves, will enhance the business's competitive stance, seed faster growth andreduce sales cost. During 2007 we will be introducing further low end productsto facilitate the move by content providers from PC web to mobile web. The salesteam continues to raise its productivity, selling more packages per salesperson, and has increased the number of partners reselling the Bango Service. I pleased that Bango is gaining partners among not only mobile internetbusinesses and mobile operators, but increasingly among the leading internetmedia companies who, in our experience, are starting to recognize the mobileinternet opportunity and develop strategies for addressing it. Bango is a well positioned business that enjoys increasing opportunities forgrowth in revenue in this rapidly expanding market. We look forward to providinga further progress update at the half year. Lindsay BuryChairman CEO's Statement During the year ended March 2007, I am pleased to report that we have madesignificant progress towards developing a Company that is positioned to takefull advantage of the growth in the mobile web. It has been a year of honing ourproducts and our organization to become more efficient and more focused on wheremarket demand is growing fastest. Specific activities include investment in our sales and marketing presence inthe USA and Spain; development of our products and technology to make themeasier to use and to expand their capability and efficiency; and theestablishment of relationships with companies such as Yahoo that we believe willbe key to our success as the mobile web becomes mainstream. Bango's product strength together with our sales and marketing activity won usmore than 250 new Pro level customers including big brands such as ParamountPictures, MTV and Gameloft and many smaller content providers. These customerssigned up to one of our mobile web focussed products which generate recurringrevenues for the business. In addition many of these new customers have been successful in gaining businesson the mobile web, resulting in a significant increase in transaction volumesover the year. Comparing March 2007 with March 2006, average daily user spendingwas up 48%. We revised our revenue growth expectations downwards during the year as a resultof three factors: a 2 month pause in growth in the UK in mid 2006, a slowness bylarger companies in deploying their Bango powered solutions and a higherattrition rate among smaller US customers than we had experienced in othercountries. I am pleased to report that revenue growth resumed at the end of 2006and that we are seeing lower attrition among customers as we refine our productsand the market starts to expand. In January 2007 we initiated a drive to increase efficiency and effectivenesswhere we are seeing most growth and on reducing other activities. An example ofthis approach has been to exploit key partner relationships established in 2006to implement operating cost reductions while increasing sales volumes. A reducedmonthly cash burn of under £100,000 at financial year end show progress towardspositive cash flow and profitability. Our year end cash balance of almost £2million is considered sufficient to do this. We have adopted a more conservativeapproach to forecasting and remain focused on achieving the transition toprofitability in the coming year. The market continues to develop broadly in the way we envisaged, to favour theuse of the mobile web as a way to sell and market content to users. UK andSpanish mobile operators announced "flat rate" and low cost mobile internettariffs. Operators also started to open up their portals by including searchengines. Major internet companies such as Google, Yahoo, eBay and MySpace arebeginning to push their PC users to mobiles. Our sales pipeline is expanding andcustomer sign-up rates are increasing. Our unique technology and productoffering, together with the benefits of our expanding network of customers giveus competitive advantage. We therefore enter the new financial year withconfidence and enthusiasm. Sales and marketing We continued to develop our regional sales teams, modelled after our successfulUK operations. The USA team based out of New York is making good progress. Weexpect many successful mobile websites will originate there and that many of theglobal leaders in mobile web will be most active in that market. We have asmaller presence in Spain, where we see many companies developing mobile siteswith global appeal. Our sales operations focussed in Germany did not show the traction we expected.Larger German content providers seem focussed on their local market, so thepower of Bango's global reach is not as valuable. In addition those Germancompanies with a global perspective prefer to engage with the UK based teams. Wetherefore scaled down our German-specific activities and re-allocated resourcesto a "pan European" team. As outlined previously, this is also in line with ouraim to increase operational efficiency. We believe that the US mobile content market is currently about 12 months behindthe UK market but growing fast. Complexities of text messaging may mean that theUS transitions more quickly from the SMS messaging phase that we saw in the UKto an internet model. The advertising led culture in the US is stimulatinggrowth in the mobile web in a way not seen so far outside Japan. The launch ofthe Apple iPhone is raising the awareness of web access through mobiles. Bango Partner Program During 2006 we invested considerable time and resource in building a base of"development partners" who build mobile sites for content providers. With morethan 30 partners active participating in this program vs 14 a year earlier, wehave shifted our focus towards making these partners successful and transferredthe responsibilities of our global partner program into our regional sales,marketing and support teams. Bango salespeople now engage partners faster in the selling cycle, shorteninglead times and accelerating sales. Partners get direct access to Bango'scustomer service teams to enable them to better support opportunities. We have aspecial offering for new development partners, enabling them to learn about andintegrate Bango technology without having to find an initial customer. Theresult of this has been an increased efficiency in dealing with partners,lowering costs and with the expectation of increased sales productivity in thecoming years. In the expectation of a rapid acceleration in demand for small, low cost mobileweb sites, we continue to work closely with a handful of companies we believewill be important providers of such services to "embed" Bango technology intotheir products. Product development Our unique technology and the service it enables is key to our competitivedifferentiation. The development team continued to add significant new featuresand functions to the Bango platform to enable content providers to offer abetter user experience and to reduce the costs of doing business in the mobileinternet. For example, our Billrank technology finds the lowest cost biller forany payment transaction. We also added features to the Bango platform that increased the number ofvisitors to content providers' sites by providing better integration with mobilesearch engines such as Yahoo!, Jumptap and Google. We believe that promotion ofcontent through mobile search engines will become an important driver of enduser activity in the coming years, and it is an area where we see goodopportunities to leverage our independent industry position. System availability exceeded 99.995% during the year. With transaction volumesconstantly increasing, scalability at low cost and without service outage isvital. Our R&D team has steadily increased the capacity of the Bango system tostay ahead of demand at low cost. We established a third hosting facility andacquired new hardware and software for our data-centres from Zeus (cacheing andcross-server load balancing) and NetApp (reliable highly scalable storage). Wealso succeeded in achieving Level 2 PCI Data Security Standard certification. We reinforced our IPR position by applying for further patents relating to ourBillrank technology. We were also first to demonstrate the new UK "payforit"user experience which is now automatically available to all our contentproviders. Payforit, a cross network mobile internet billing scheme, will becomea mandatory requirement for mobile commerce in the UK later in calendar year2007, and will accelerate the move away from SMS based payment systems. Work to streamline and simplify our "self-service" proposition continued and weintroduced a zero cost of entry "starter package" in preparation for marketingactivity with key partners later in 2007. If the market develops as weanticipate we need to be able to service hundreds of thousands of contentprovider customers rather than the thousands we handle today. This work isongoing. Financial performance Revenues grew 38% to £10.43m (£7.53m) and gross profit grew 12% to £2.47m(£2.19m FY06). After slower growth in content access fees in the first half of the year, moresubstantial growth returned in the second half of the year, with revenue for theyear up by 37% on the previous year. In line with Bango's decision to increasepayouts to larger content provider customers, the gross margin percentage oncontent access fees reduced to 13% (2006 : 20%). In absolute terms the grossmargin earned on content access fees held broadly level at £1.17m (2006 :£1.31m). Content provider revenues grew to £1.54m (2006 : £1.00m), up by 53% comparedwith the previous year, with margin also increasing by a similar percentage to£1.26m (2006 : £0.82m). Revenue and margin from services to Mobile Network Operators decreased to £0.03m(2006 : £0.06m) as the Company continues to move away from one-off sources ofincome. Operating expenses (excluding share based payments) increased by 48% to £5.53m(£3.75m) due to our expansion into new territories, product development andincreased marketing spend. They reduced from around £550,000 per month inOctober 2006 to below £400,000 per month in March 2007. The period to December 2006 was marked by investment in marketing, sales andpartner recruitment to gain presence in Germany, USA and Spain. In January 2007the changes in our partner program and sales focus enabled us to reduce our costbase by around 30% over a 3- month period while still increasing monthlyrevenues and gross margin. Our expectation is that we can continue to grow revenues and marginsconsiderably with current operating cost levels, as a result of the highleverage we gain from our systems and partners. A key focus on entering the current financial year is reducing customeracquisition cost to ensure we are in a good position to capitalize on ourposition when the market accelerates. The loss before tax was £3.32m, £2.92m before share based payments. (£1.53m,£1.36m before share based payments). The loss was mostly due to investments ininternational roll-out, primarily in sales and marketing activity. The cash outflow from operations was broadly in line with the trading resultsfor the period, reflecting the small change in working capital requirementsdespite the substantial increase in revenue and the purchase of new hardware tosupport future increases in demand as expected as existing and new customersincrease their transaction volumes. We experienced an increase in attrition rates during the year. Some earlycustomers in the USA proved over-optimistic in their revenue forecasts andpostponed their entry into the mobile web. Some of these have since returned nowthat there are ways to market more efficiently. Bango wishes to supply allpotential customers without necessarily being able to predict which of thosecustomers will succeed in monetising their content. Therefore our businessmodel and technologies concentrate on reducing costs and barriers to becoming aBango customer and ensuring the running costs in the early stages of developinga mobile business are low. Entering FY2007/8 the net monthly cash burn was around £100,000. Furthersign-ups of customers and increasing transaction volumes are generatingincreasing gross margin. With costs stable we believe our existing resources andfurther business growth will take us to positive cash flow and profitability. Outlook and Strategy for FY2007/8 We have established an effective and scalable business in an early stage market.Growth is continuing and current performance indicators are favourable. With largely predictable and stable operational costs, our focus for the year toMarch 2008 is to continue to drive down customer acquisition costs and tostrengthen the product proposition. This will enable us to increase our growthrates while maintaining stable operating expenditure. Our goal is to reach profitability and to be cashflow positive with asignificantly reduced cost of customer acquisition this year - and before themarket enters a fast growth phase. This will enable us to capitalize on marketgrowth from a position of strength. On behalf of the Board, I would like to express my gratitude to Bango's partnersand employees for their continued support. Working with mobile operators,content providers, billing companies and other commercial partners andinvestors, we look forward to increasing success in the year ahead. Ray AndersonChief Executive Officer BANGO PLC Unaudited results for the 12 months ending 31 March 2007 Consolidated income statement 2007 2006 Note £ £Revenue 2 10,428,312 7,532,877 Cost of sales 7,962,403 5,341,577 --------------- ---------------Gross profit 2,465,909 2,191,300 Administrativeexpenses 5,528,659 3,746,209Share basedpayments 401,640 166,362 --------------- ---------------Operating loss (3,464,390) (1,721,271) Investment income 147,284 195,069 --------------- ---------------Loss beforetaxation (3,317,106) (1,526,202) Income tax expense - - --------------- ---------------Loss for thefinancial year (3,317,106) (1,526,202) =============== ===============Basic and dilutedloss per share(pence) 3 (12.40) (6.09) =============== =============== All of the activities of the group are classified as continuing. Consolidated summarised Balance SheetAs at 31 March 2007 2007 2006 £ £ASSETSNon-current assetsProperty, plant andequipment 506,450 319,013Intangible assets 15,311 24,083 --------------- ---------------Non-current assets 521,761 343,096 Current assetsTrade and otherreceivables 2,423,266 2,267,458Cash and cashequivalents 1,931,094 4,863,004 --------------- --------------- 4,354,360 7,130,462 --------------- ---------------Total assets 4,876,121 7,473,558 =============== =============== EQUITY Capital and reservesShare capital 5,369,548 5,306,864Share premiumaccount 5,310,885 5,255,136Merger reserve 1,236,225 1,236,225Other reserve 595,835 194,195Accumulated losses (10,072,270) (6,755,164) --------------- ---------------Total equity 2,440,223 5,237,256 =============== =============== LIABILITIESCurrent liabilitiesBank overdraft - 10,772Trade and otherpayables 2,435,898 2,225,530 --------------- ---------------Total liabilities 2,435,898 2,236,302 --------------- ---------------Total equity andliabilities 4,876,121 7,473,558 =============== =============== Consolidated summarised cash flow statement 2007 2006 £ £Net cash used by operating activities 4 (2,821,343) (1,665,667) Cash flows from investing activitiesPurchase of property, plant andequipment (352,525) (333,679)Purchase of intangible assets (15,971) -Disposal of property, plant andequipment 2,984 2,689Interest received 147,284 195,069 ------------- -------------Net cash used by investingactivities (218,228) (135,921) Cash flow from financingactivitiesProceeds from initial publicoffering net of share issueexpenses - 6,172,379Proceeds from other issuance ofOrdinary Shares 118,433 161,221 ----------- ------------Net cash generated fromfinancing activities 118,433 6,333,600 ----------- ------------Net (decrease)/increase in cash, cash equivalents and overdrafts (2,921,138) 4,532,012 Cash, cash equivalents andoverdrafts at beginning of year 4,852,232 320,220 ---------- ----------Cash and cash equivalents atend of year 1,931,094 4,852,232 ========= ========= Consolidated statement of changes in equity Share Share capital premium Merger Other AccumulatedGroup account reserve reserve losses Total £ £ £ £ £ £ At 1 April 4,186,900 - 1,236,225 27,833 (5,228,962) 221,9962005 Loss for the financial year - - - - (1,526,202) (1,526,202) -------- --------- --------- --------- --------- ---------Total income/(expense) recognizedfor 2006 - - - - (1,526,202) (1,526,202)Shares issuedon IPO 1,044,776 5,955,224 - - - 7,000,000 Share issuecosts deductedfrom equity - (786,121) - - - (786,121) Exercise ofshare options 75,188 86,033 - - - 161,221optionsShare basedpayment charge - - - 166,362 - 166,362 ------- --------- ------ --------- ------------- --------- 1,119,964 5,255,136 - 166,362 (1,526,202) 5,015,260 -------- --------- ------ --------- ------------- ---------At 31 March2006 5,306,864 5,255,136 1,236,225 194,195 (6,755,164) 5,237,256 Loss for the financial year - - - - (3,317,106)(3,317,106) -------- --------- ------ --------- ------------- ---------Total income/(expense) recognizedfor 2007 - - - - (3,317,106)(3,317,106) Exercise ofshare options 62,684 55,749 - - - 118,433Share-basedpayment charge - - - 401,640 - 401,640 ------ ------ --------- ------- --------- -------- 62,684 55,749 - 401,640 (3,317,106)(2,797,033) ------ ------ -------- ------- --------- ---------At 31 March2007 5,369,548 5,310,885 1,236,225 595,835 (10,072,270) 2,440,223 ========= ========= ========= ======= ========== ========= Notes 1. Accounting policies and basis of preparation Whilst not yet a requirement for AIM companies, the Group has chosen to prepareits Annual Report in accordance with International Financial Reporting Standards("IFRSs") as adopted in the European Union and as applied in accordance with theprovisions of the Companies Act 1985. The first time adoption of International Financial Reporting Standards inpreparing the financial statements for the year-ended 31 March 2007 has had nomaterial effect upon the results and financial position of the Group. Interim results for the period to 30 September 2006, released on 18 October2006, were prepared under UK GAAP. Had those results been prepared underInternational Financial Reporting Standards there would have been no materialdifference in results and financial position presented for that period. The consolidated financial statements have been prepared under the historicalcost convention. Significant accounting policies The principal accounting policies applied in the preparation of theseconsolidated financial statements are set out below. These policies have beenconsistently applied to all the years presented, unless otherwise stated. 1.1 Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulateddepreciation. Depreciation is provided to write off the cost of all property,plant and equipment to its residual value on a straight-line basis over itsexpected useful economic lives, which are as follows: Leasehold improvements 20% straight lineOffice equipment 20% straight lineComputer equipment 33.3% straight line 1.2 Intangible assets Acquired intangible assets are measured initially at historical cost and areamortized on a straight-line basis over the expected useful economic lives: Domain names 33.3% straight line 1.3 Impairment of property, plant and equipment and intangible assets At each balance sheet date, the Group reviews the carrying amounts of itsproperty, plant and equipment and intangible assets for any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss, if any. The recoverable amount is the higher ofthe fair value less costs to sell and value in use. 1.4 Trade receivables Trade receivables are recognized initially at fair value and are measuredsubsequent to initial recognition at amortized cost using the effective interestmethod, less provision for impairment. Any change in their value throughimpairment or reversal of impairment is recognized in the income statement. Provision against trade receivables is made when there is objective evidencethat the group will not be able to collect all amounts due to it in accordancewith the original terms of those receivables. The amount of the write-down isdetermined as the difference between the asset's carrying amount and the presentvalue of estimated future cash flows. 1.5 Trade payables Trade payables are initially measured at fair value, and are subsequentlymeasured at amortized cost, using the effective interest rate method. 1.6 Revenue recognition End users make a prepayment to the Group prior to accessing chargeable mobileinternet content. Content access fees are received from end users and are recognized as revenue atthe time at which end users access chargeable mobile internet content. Where there has been no activity on an end user account for a period of 90 days,the balance remaining is released to revenue in accordance with the end userterms and conditions, because of operating policies of mobile network operatorsrelating to number reissue. Revenue from the sale of licences to content providers and service contracts isrecognized in the financial statements over the period of the contract. Revenue from services provided to mobile phone operators and content providersare recognized in the financial statements over the period of the contract. 1.7 Employee benefits All accumulating employee-compensated absences that are unused at the balancesheet date are recognized as a liability. Payments to defined contribution retirement benefit schemes are charged as anexpense as they fall due. 1.8 Share-based payment transactions The Group issues equity settled share-based compensation to certain employees(including directors). Equity settled share-based payments are measured at fairvalue at the date of grant. The fair value determined at the grant date of theequity-settled share-based payment is expensed on a straight-line basis over thevesting period, together with a corresponding increase in equity, based upon theGroup's estimate of the shares that will eventually vest. These estimates aresubsequently revised if there is any indication that the number of optionsexpected to vest differs from previous estimates. Any cumulative adjustmentprior to vesting is recognized in the current period. No adjustment is made toany expense recognized in prior periods. Fair value is measured by an external valuer using the Black-Scholes optionpricing model. The expected life used in the model has been adjusted, based onmanagement's best estimate, for the effects of non-transferability, exerciserestrictions and behavioural considerations. Where the terms of an equity-settled transaction are modified, as a minimum anexpense is recognized as if the terms had not been modified. In addition, anexpense is recognized for any increase in the value of the transaction as aresult of the modification, as measured by the date of modification. Where an equity-settled transaction is cancelled, it is treated as if it hadvested on the due date of the cancellation, and any expense not yet recognizedfor the transaction is recognized immediately. However, if a new transaction issubstituted for the cancelled transaction, and designated as a replacementtransaction on the date that it is granted, the cancelled and new transactionsare treated as if they were a modification of the original transaction, asdescribed in the previous paragraph. Share-based payment transactions are shown separately in the Consolidated IncomeStatement. 1.9 Segment reporting A segment is a distinguishable component of the group services or operatinggeography. The primary segmentation is by type of service, with a secondarysegmentation by geography. 1.10 Financial instruments/ liabilities Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the entityafter deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including sharecapital) are equivalent to a similar debt instrument, those financialinstruments are classed as financial liabilities. Financial liabilities arepresented as such in the balance sheet. Finance costs and gains or lossesrelating to financial liabilities are included in the income statement. Financecosts are calculated so as to produce a constant rate of return on theoutstanding liability. Where the contractual terms of share capital do not have any terms meeting thedefinition of a financial liability then this is classed as an equityinstrument. Dividends and distributions relating to equity instruments aredebited direct to equity. 1.11 Share capital and reserves Share Capital Ordinary shares are classified as equity. Equity instruments issued by theCompany are recorded at the proceeds received, net of direct issue costs. Share premium Share premium represents the excess over nominal value of the fair value ofconsideration received for equity shares, net of expenses of the share issue. Merger reserve The merger reserve represents the difference between the parent company's costof investment and a subsidiary's share capital and share premium where a groupreorganisation qualifies as a common control transaction. Other reserve The other reserve represents equity-settled share-based employee remunerationuntil such share options are exercised. 1.12 Internally-generated intangible assets - research and developmentexpenditure Expenditure on research activities is recognized as an expense in the period inwhich it is incurred. An internally-generated intangible asset arising from the Group's developmentactivities is recognized only if all of the following conditions are met: • an asset is created that can be identified (such as software and new processes) • it is probable that the asset created will generate future economic benefits; and • the development cost of the asset can be measured reliably. Internally-generated intangible assets are amortized on a straight-line basisover their useful economic lives. Where no internally-generated intangible assetcan be recognized, development expenditure is recognized as an expense in theperiod in which it is incurred. 2. Revenues Turnover is split between the following activities: 2007 2006 £ £Content access fees 8,859,633 6,470,383Content provider fees 1,536,564 1,002,619Services to Mobile NetworkOperators 32,115 59,875 --------------- --------------- 10,428,312 7,532,877 ============= ============= A geographical split of the turnover is given below: 2007 2006 £ £ United Kingdom 8,472,721 6,755,158EU 741,241 324,270US and Canada 934,623 311,454Rest of the World 279,727 141,995 --------------- --------------- 10,428,312 7,532,877 ============== ============= 3. Loss per share 2007 2006Loss for the period £3,317,106 £1,526,202Weighted average number of shares in issue 26,746,721 25,041,299Basic and diluted loss per share 12.40p 6.09p Share options outstanding at 31 March 2007 and 31 March 2006 are considered tobe non-dilutive. 4. Notes to the statement of cash flows Cash used by operations 2007 2006 £ £ Operating loss (3,317,106) (1,526,202)Depreciation and amortisation 186,847 76,427Investment income (147,284) (195,069)Share-based payment expense 401,640 166,362Shares issued in payment forservices - 41,500Increase in receivables (155,808) (1,219,408)Increase in payables 210,368 990,723 --------------- ---------------Net cash used by operations (2,821,343) (1,665,667) ========= ========= 5. Publication of non-statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The consolidated income statement, consolidated balance sheet, consolidated cashflow statement, consolidated statement of changes in equity and associated notesfor the year-ended 31 March 2007 have been extracted from the group's unauditedfinancial statements. These financial statements have not yet been delivered tothe Registrar. 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