Last checked at 26 Mar 2008 07:01
Mobile Streams plc26 March 2008 Mobile Streams Plc ("Mobile Streams" or the "Company") Full Year Results Announcement 26 March 2008 Mobile Streams (AIM: MOS) today announces its full year results for the yearending 31 December 2007. Group revenue in the year was £9.1m, an 11% increase on 2006 (£8.2m). TradingEBITDA* was a loss of £1.2m for the period (2006: breakeven). Loss before taxwas £4.7m (2006: £2.0m). Overall gross margin was 54.8% (2006: 58.6%). Financial highlights: - Revenue increased by 11% to £9.1m (2006: £8.2m) - Loss before tax £4.7m (2006: £2.0m) - Non cash charges for depreciation, amortisation, impairments and share based payments of £3.6m (2006: £0.9m) are included in the loss before tax - Trading EBITDA* loss of £1.2m (2006: breakeven) - Revenue growth driven by Consumer Services and Asia - Cash at 31 December 2007 of £2.3m (2006: £4.1m) - Revenues evenly balanced between Europe, North America, Latin America and Asia Pacific regions *Calculated as loss before tax, interest, amortisation, depreciation,impairments, share compensation expense and fund raising and flotation cost. Strategic highlights: - New channel manager agreements with major carrier groups, including master content partner for SingTel (music, games and download channels), Games channel for Vodafone Live in Australia, AIS in Thailand and comedy service for Hutchison 3 in UK. - Simplification of business structure establishing two business units, Managed Services and Consumer Services, to better take advantage of the recent trends in the mobile content market. - Continued investment in Consumer Services business using the ringtones.com brand. - Exclusive global off-portal mobile partnership with Private Media Group, to distribute Private's premium content through Mobile Streams' platform for off-portal mobile services. - Further development and enhancements made to Vuesia, the company's proprietary media platform, including a major new upgrade, Vuesia AI (for Artificial Intelligence), which simplifies the process of launching and managing mobile content globally through the use of automated functionality. - Content licensing agreements now include Playboy, Private Media Group, Warner Music Group, EMI Music, Sony BMG, Mondo Media's Happy Tree Friends, Electronic Arts, Glu and Paramount Pictures. - Zoombak, a GPS device and service for locating cars and pets, was launched commercially in the US in December 2007, in partnership with our strategic investor Liberty Media Commenting, Mobile Streams Chairman Roger Parry said: 'Mobile Streams' firstfull year as a public company was one in which the company and the mobilecontent industry it operates in underwent significant change. The use of mobiledevices as a means to access content is still relatively undeveloped, but webelieve that the Company's strengths in technology, local content and geographyleaves us well positioned to participate in the Mobile Internet industry goingforward.' Simon Buckingham, CEO, added: '2007 was a transition year for the mobilecontent industry in general and Mobile Streams in particular. Whilst theintroduction of the Mobile Internet onto operator portals disrupted thetraditional carrier portal business models, over time it will enable theindustry and we believe our Company to move to the next level of growth. Thestart of 2008 has been encouraging with trading at breakeven at EBITDA* levelfor the first two months and cash of more than £2m at the end of February.' Outlook and Trading Since the beginning of the 2008 financial year, Mobile Streams has traded ataround the breakeven mark at an EBITDA* level. There is a small ongoing monthlycash outflow from the investment in the Vuesia platform. Revenues from ManagedServices have been solid, with growing revenue coming from the Asia Pacificregion where the Company has carved out a position as the games channel managerfor several network operators such as Optus Australia, Vodafone Australia,SingTel Singapore and AIS Thailand. New launches of Consumer Services powered byour Ringtones.com brand have continued in markets such as Australia andArgentina where the Company already has established operations. The Companyexpects to see a continuation in these market trends during 2008, with overallrevenues from managed operator services remaining broadly flat along withcontinued launches of consumer services, albeit with small initial volumes, inselect markets where Mobile Streams has current operations and the searchengines are establishing partnerships with local mobile operators. *Calculated as loss before tax, interest, amortisation, depreciation,impairments, share compensation expense and fund raising and flotation cost. Enquires: Mobile Streams (020 7395 2000) Simon Buckingham, Chief Executive Officer James Colquhoun, Finance Director CHAIRMANS STATEMENT Group revenue in 2007 was £9.1m, an 11% increase on 2006 (£8.2m). Trading EBITDA* was a loss of £1.2m for the period (2006: breakeven). Loss before tax was£4.7m (2006: £2.0m). During 2007, Mobile Streams invested heavily in building a global mobile contentbusiness covering 13 subsidiaries on 4 continents. Leveraging its expertise andtechnology platform across multiple operating regions both increases MobileStreams' return on technology investment and assists its global customers withthe implementation of their mobile strategies. The Company's global footprintand geographical scale has enabled it to reduce its dependence on any onecustomer or region. 2007 was a year of significant change for the mobile content industry. Thetraditional means of distributing mobile content through portals operated bymobile network operators was challenged by the fact that growth from thisrevenue source by and large stalled during the period. As such, mobile operatorsturned to new business partnerships with internet companies such as Google andYahoo! to take their mobile content business to the next level. However, theseinitiatives were largely experimental and proved demanding to deploytechnically. This transition and instability created an environment which led tolosses being accumulated by the Company as it waited for delayed mobile internetlaunches. In the context of these industry changes 2007 was a transitional year for theCompany, its first full year as a public company. The management was requiredto respond to the changes in market climate, to integrate the three acquisitionsmade during 2006 and to explore new business models such as platforms andcontent creation. As the year progressed, it became clear to management that the Company wouldneed to pare back and focus its activities, which contributed to the end of yearlosses. As such, two company divisions were created - Managed Services formobile content supplied to mobile network operators and media companies - andConsumer Services to focus on the emerging Mobile Internet. Building an on andoff portal presence in its operating markets enables Mobile Streams to leverageits local content, billing relationships and market presence to achieve scaleand maximize future returns. This enables the Company to serve the currentoperator portal business model whilst investing in new deployments of searchengines such as Google and Yahoo! by the network operators. Outlook and Trading Since the beginning of the 2008 financial year, Mobile Streams has traded ataround the breakeven mark at an EBITDA* level. There is a small monthly cashoutflow from the investment in the Vuesia platform. Revenues from ManagedServices have been solid, with growing revenue coming from the Asia Pacificregion where the Company has carved out a position as the games channel managerfor several network operators such as Optus Australia, Vodafone Australia,SingTel Singapore and AIS Thailand. New launches of Consumer Services powered byour Ringtones.com brand have continued in markets such as Australia andArgentina where the Company already has established operations. The Companyexpects to see a continuation in these market trends during 2008, with overallrevenues from managed operator services remaining broadly flat along withcontinued launches of consumer services, albeit with small initial volumes, inselect markets where Mobile Streams has current operations and the searchengines are establishing partnerships with local mobile operators. Roger ParryChairman *Calculated as loss before tax, interest, amortisation, depreciation,impairments, share compensation expense and fund raising and flotation cost. CHIEF EXECUTIVE'S STATEMENT Traditionally, mobile network operators have managed their mobile contentportals, usually appointing master content providers such as Mobile Streams toaggregate and refresh content channels within the portal. This business modellimited the number of suppliers whose content would be presented in the portal.For incumbent suppliers such as Mobile Streams it meant relatively consistentand predictable revenue streams. In order to stimulate new growth in mobile content, the mobile operators formedpartnerships with mobile portals such as Yahoo! and Google. This trend startedmainly in the UK and European regions in 2007. Consumers immediately migratedaway from using the operator portals as a means to discover and purchase contentand turned instead to the Google search box that they were familiar with fromthe PC Internet. Despite this there was little new growth in Mobile Internetusage, rather the usage simply migrated from on-portal to off-portal traffic. Mobile Streams anticipated these developments and hired its first head ofconsumer services in mid 2006 to prepare for their launch. Whilst our positionas an operator portal supplier would be reduced, the overall opportunity for theCompany would be enlarged. To use the case of Vodafone, Mobile Streams suppliedthe comedy channel to Vodafone Live in the UK, but would now have theopportunity to sell not just comedy content but more music, games, graphics andadult content too. What we did not anticipate was the time it would take forthese deployments to be stabilised from a technology standpoint. Additionally,the operators continued to tweak the Mobile Internet model as they sought tochange the balance between on and off portal search traffic, which affectedmanagement and development of the services. The instability and immaturity inconsumer services has led the Company to delay the timescales over which itexpects the Consumer Services business to reach critical mass and scale, locallyand globally. Mobile Streams solidified its key operator relationships in Europe, NorthAmerica, Latin America and Asia during 2007. We have a number of key supplierrelationships with network operators on several continents. Our business coversthe main types of mobile content that consumers are most interested in; music,adult and games. We have the opportunity to distribute this content on and offportal. The Company's strategic partnership with Liberty Media remained strong duringthe year, resulting in the successful launch in the USA in December 2007 ofZoombak, the mobile location services company. Mobile Streams earns an annualmanagement service fee, a capped percentage of Zoombak's revenues and profitsand holds warrants over 10% of the Zoombak equity. 2008 will see the fulldeployment and rollout of Zoombak in the US and other markets such as the UK. As such, I am convinced that there is significant incremental opportunity forMobile Streams to strengthen its results by leveraging all the investments ithas made and knowledge it has gained in 2007 and for the nine years that theCompany has been operating. As the Mobile Internet opens up around the worldover time, I am confident that the Company is well placed to benefit. Simon BuckinghamChief Executive Officer FINANCIAL REVIEW Group revenue in the year was £9.1m, an 11% increase on 2006 (£8.2m). TradingEBITDA* was a loss of £1.2m for the period (2006: breakeven). Loss before taxwas £4.7m (£2.0m). Overall gross margin was 54.9% (2006: 58.6%). We now have a genuine global distribution footprint with 13 subsidiaries on 4continents. Leveraging our expertise and technology platform across multipleoperating regions both increases our return on technology investment and assistsour global customers with the implementation of their mobile strategies. Ourglobal footprint and geographical scale has enabled us to reduce our dependenceon any one customer or region, and facilitate our growth. The Group has adopted International Financial Reporting Standards for the firsttime. The principal impact of this change is the requirement to separatelyidentify intangible assets acquired in business combinations. The impact ofthese changes are detailed in note 26 of the accounts. £1,467,000 was invested during the year on property, plant and equipment, andintangibles assets. This was predominantly for the further development of theVuesia platform. The Group continue to invest in the development of the Vuesiaplatform, albeit at a much reduced rate as it focuses on earning returns frominvestments in prior years. The Group incurred an impairment charge of £2,206,000 relating to goodwill andintangible assets. The impairment charge under IFRS differs to the impairmentcharge under UK GAAP as follows:Impairment under UK GAAP 1,583,000Additional impairment under IFRS 623,000Total 2,206,000 The additional impairment under IFRS relates to deferred tax on intangiblesassets acquired via business acquisitions. IAS 12 requires the group to adddeferred tax on intangibles assets acquired via business combinations togoodwill and test for impairment annually. Further detail of the impairment canbe seen at note 12. The Group incurred a net cash outflow from operations of £0.4m (2006: outflow£1.7m); net cash outflows from investing activities were £1.4m (2006: outflow£3.8m). The cash balance at 31 December 2007 was £2.3m (2006: £4.1m). Basic earnings per share amounted to a loss of 12.024 per share (2006: loss of6.753p). Adjusted earnings per share (excluding depreciation, amortisation, impairments,flotation/fund raising costs and share compensation expense) amounted to a lossof 1.785p (2006: profit of 0.325p). J ColquhounFinance Director *Calculated as loss before tax, interest, amortisation, depreciation,impairments, share compensation expense and fund raising and flotation cost. Accounting policies Summary of significant accounting policies Basis of preparation The consolidated financial statements of Mobile Streams are for the 12 monthsended 31 December 2007. They have been prepared in accordance with applicableInternational Financial Reporting Standards as adopted by the EU. Allreferences to IFRS in these statements refer to IFRS as adopted by the EU. The policies set out below have been consistently applied to all years presentedand comparative information has been restated and represented under IFRS. Mobile Streams' consolidated financial statements have been previously preparedin accordance with UK's Generally Accepted Accounting Principles (GAAP) until 31December 2006. UK GAAP differs in some areas to IFRS. In preparing the 2007consolidated financial statements certain accounting, valuation andconsolidation methods have been adjusted to comply with IFRS. The comparativefigures for 2006 have been restated to reflect these adjustments, unlessotherwise described in the accounting policies. The date of transition to IFRSwas 1 January 2006. A conversion statement explaining reconciliations and descriptions of the effectof the transition from UK GAAP to IFRS on equity, net income and cash flows hasbeen provided in note 26. Preparation of financial statements in accordance with IAS 1 requires the use ofsome key assumptions and other sources of estimation uncertainty. It requiresmanagement of Mobile Streams to exercise judgement when applying accountingpolicies. The specific areas involving a higher degree of judgement and/orcomplexity and areas where assumptions/estimates are significant to thefinancial statements are disclosed in note 2. The historical cost conventionhas been applied, except as modified to account of the revaluation of certainfinancial instruments, as set out in the accounting polices. Consolidation - subsidiaries Subsidiaries are all entities over which the group has the power to govern theoperating and financial policies generally accompanying a shareholding of morethan half of the voting rights. Subsidiaries are fully consolidated from thedate on which control is transferred to the Group. They are de-consolidated fromthe date on which control is lost. The purchase method of accounting is used to account for the acquisition ofsubsidiaries by the Group. The cost of a business combination is measured as thefair value of assets given, equity instruments issued and liabilities incurredor assumed at the date of exchange, plus costs directly attributable to theacquisition, in line with IFRS 3, Business Combinations. Any assets acquired andliabilities and contingent liabilities assumed that are identifiable aremeasured initially at their fair values at the acquisition date. Goodwill isstated after separating out identifiable intangible assets. The excess of thecost of a business combination over the fair value of the identifiable netassets acquired is recorded as goodwill. If the cost of a business combinationis less than the fair value, the difference is recognised directly in the incomestatement. Inter-company transactions, balances and unrealised gains on transactionsbetween group companies are eliminated in full. Unrealised losses are alsoeliminated unless the transaction provides evidence of an impairment of theasset transferred. Subsidiaries' accounting policies have been changed wherenecessary to ensure consistency with the policies adopted by the Group. Foreign currency translation (a) Presentational currency The consolidated and parent company financial statements are presented inBritish pounds. (b) Transactions and balances Foreign currency transactions are translated into the presentational currencyusing the exchange rates prevailing at the date the transaction occurs. Anyexchange gains or losses resulting from these transactions and from thetranslation of monetary assets and liabilities at balance date are recognised inthe income statement. Any translation gains or losses on non-monetary items arerecognised in equity to the extent that they relate to gains and losses onnon-monetary items which are recorded in equity. Otherwise, these translationgains or losses are recognised in the income statement. (c) Group companies The financial results and position of all group entities that have apresentation currency different from the presentation currency of the Group aretranslated into the presentation currency as follows: i assets and liabilities for each balance sheet are translated at the closing exchange rate at the date of balance sheet ii income and expenses for each income statement are translated at average exchange rates (unless it is not a reasonable approximation, in which case translated at dates of transactions) iii all resulting exchange differences are recognised as a separate component of equity (cumulative translation reserve) Property, plant and equipment All property, plant and equipment (PPE) are stated at cost, less accumulateddepreciation and impairment losses. Cost includes expenditure that is directlyattributable to the purchase of the items. Depreciation is calculated to write off the cost of property, plant andequipment less estimated residual value on a straight line basis over theirestimated useful lives. The following rates and methods have been applied: Leasehold improvements Over the life of the lease Plant and equipment 33% straight line Office furniture Between 10% and 33% straight line The asset's residual value and useful live is reviewed, and adjusted ifrequired, at each balance sheet date. The carrying amount of an asset is writtendown immediately to its recoverable amount if the carrying amount is greaterthan its estimated recoverable amount. Gains/losses on disposal of assets are determined by comparing proceeds receivedto the carrying amount. Any gain/loss is included in the income statement. Intangible assets (a) Goodwill Goodwill represents the excess of the cost of a business combination over thefair value of net identifiable assets of the acquired entity at the date ofacquisition. This goodwill for subsidiaries is included in intangible assets(the purchase method). Intangibles acquired in a business combination areacquired at fair value. Goodwill is tested annually for impairment and carriedat cost less accumulated impairment losses. Goodwill is allocated tocash-generating units for impairment testing. Excess of the fair value of netassets over the cost of the combination is recognised immediately afteracquisition in the income statement. (b) Customer relationships Customer relationships represent relationships that have been acquired throughbusiness combinations. To meet this definition, the intangibles must beidentifiable either by being separable, or by arising from contractual or otherlegal rights. Intangibles acquired through business combinations are recognisedat fair value. Where a reliable estimate of useful life of the intangible canbe obtained, the intangible asset is to be amortised using the straight linebasis, over the useful life. Where there is an indication of impairment ofintangibles, the intangible will be tested for impairment. The estimated usefullive of customer relationships is 5 years. (c) Technology based assets Technology based assets represent assets that have been acquired throughbusiness combinations. To meet this definition, the intangibles must beidentifiable either by being separable, or by arising from contractual or otherlegal rights. Intangibles acquired through business combinations are recognisedat fair value. Where a reliable estimate of useful life of the intangible canbe obtained, the intangible asset is to be amortised using the straight linebasis, over the useful life. Where there is an indication of impairment ofintangibles, the intangible will be tested for impairment. The estimated usefullive of technology based assets is 5 years. (d) Non-compete agreement The non-compete agreement was acquired through the business combination ofMobile Streams (Hong Kong) Limited. To meet this definition, the intangible mustbe identifiable either by being separable, or by arising from contractual orother legal rights. Intangibles acquired through business combinations arerecognised at fair value. The estimated useful live of the non-competeagreement is 3.5 years. The intangible asset is to be amortised using thestraight line basis, over the useful life. Where there is an indication ofimpairment of intangibles, the intangible will be tested for impairment. (e) Media content Media content represents intangible assets that have acquired from third partiesand also these that are internally generated. Content expenditure is charged toincome in the year in which it is incurred unless it meets the recognitioncriteria of IAS 38 Intangible Assets. For internally generated media content tomeet the criteria of an intangible the Group must demonstrate the followingcriteria. Firstly the technical feasibility of completing the asset so that itwill be available for use, its intention to complete the intangible (or sellit), its ability to use or sell the intangible, that the intangible willgenerate future economic benefit, adequate resources to complete the intangibleand the expenditure can be reliably measured. Intangible assets, ifcapitalised, are amortised on a straight-line basis over the period of theexpected benefit. Intangibles acquired from third parties are recognised at cost. Where areliable estimate of useful life of the intangible can be obtained, theintangible asset is to be amortised using the straight line basis, over theuseful life. Where there is an indication of impairment of intangibles with adefinite life, the intangible will be tested for impairment. The estimateduseful life of content is 2 years. (f) Media platform development Media platform developments represent intangible assets that have internallygenerated including capitalised direct staff costs. Platform expenditure ischarged to income in the year in which it is incurred unless it meets therecognition criteria of IAS 38 Intangible Assets. To meet this criteria theGroup must demonstrate the technical feasibility of completing the asset so thatit will be available for use, its intention to complete the intangible (or sellit), its ability to use or sell the intangible, that the intangible willgenerate future economic benefit, adequate resources to complete the intangibleand the expenditure can be reliably measured. Intangible assets, ifcapitalised, are amortised on a straight-line basis over the expected usefullife. Where there is an indication of impairment of intangibles with a definitelife, the intangible will be tested for impairment. The estimated useful life ofmedia platform development is 3 years. (g) Software Software represents assets that have been acquired from third parties. To meetthis definition, the intangibles must be both identifiable and either separable,or arise from contractual or other legal rights. Intangibles acquired fromthird parties are stated at cost less accumulated amortisation and impairmentlosses. Where a reliable estimate of useful life of the intangible can beobtained, the intangible asset is to be amortised using the straight line basis,over the useful life. Where there is an indication of impairment of intangibleswith a definite life, the intangible will be tested for impairment. Amortisation is shown in "depreciation, amortisation and impairment" in theincome statement. Impairment of assets Assets that have an indefinite useful life, such as goodwill, are not subject toamortisation, but are instead tested annually for impairment and also testedwhenever an event or change in situation indicate that the carrying amount maynot be recoverable. Assets that are subject to amortisation are also tested forimpairment whenever an event or change in situation indicate that the carryingamount may not be recoverable. An impairment loss is recognised in the incomestatement as the amount by which the carrying amount of an asset exceeds itsrecoverable amount. The recoverable amount is determined by the higher of thefair value of an asset less costs to sell and the value in use. In order toassess impairment, assets are grouped at the lowest levels for which separatecash flows can be identified (cash-generating units). Impairment is shown in "depreciation, amortisation and impairment" in the incomestatement. Research and development Research expenditure is expensed in the year in which it is incurred. Development expenditure is charged to income in the year in which it is incurredunless it meets the recognition criteria of IAS 38 Intangible Assets. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held with financialinstitutions, and other short-term highly liquid investments with originalmaturities of three months or less. Taxation Current tax is the tax currently payable based on taxable profit for the year. Deferred income tax is provided, using the liability method, on temporarydifferences arising between the tax base of assets and liabilities and theircarrying amounts in the consolidated financial statements. However, deferred taxis not provided on initial recognition of goodwill, nor on the initialrecognition of an asset or liability unless the related transaction is abusiness combination or affects tax or accounting profit. Deferred tax ontemporary differences associated with shares in subsidiaries is not provided ifreversal of these temporary differences can be controlled by the Group and it isprobable that reversal will not occur in the foreseeable future. Deferred incometax is determined using tax rates known by the balance sheet date and areexpected to apply when the deferred income tax asset is realised or the deferredincome tax liability is settled. Deferred income tax assets are recognised onlyto the extent that it is probable that future taxable profit will be availableagainst which the temporary differences can be utilised. Deferred taxliabilities are provided in full, with no discounting. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statements, except where they relate to items that arecharged or credited directly to equity, in which case the related deferred taxis also charged or credited directly to equity. Provisions Provisions, including those for legal claims, are recognised when the Group hasa present legal or constructive obligation as a result of past events, it isprobable that an outflow of economic benefits will be required to settle theobligation and the amount has been reliably estimated. Provisions are measured at the present value of best estimate of the expenditurerequired to settle the present obligation at the balance sheet date. Thediscount rate used to determine the present value reflects current marketassessments of the time value of money and the increases specific to theliability, including risks specific to the liability. Financial Assets The Group can classify its financial assets and liabilities into the belowcategories depending on the purpose for which they were acquired. Theclassification is determined at initial recognition and is re-evaluated at everyreporting date. a) Loans and receivables Trade receivables are classified as loans and receivables. Trade receivablesare non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market and where there is no intention of trading. Theyare included as current assets, unless maturity is greater than 12 months afterbalance sheet date. Trade receivables are included in trade and otherreceivables in the balance sheet. Trade receivables are recognised initially atfair value and later measured at amortised cost using the effective interestmethod, less provision for impairment. An impairment provision for tradereceivables is established when there is evidence the Group will not be able tocollect all amounts due according to the terms of the receivables. The provisionis calculated as the difference between the receivable's carrying amount and thepresent value of estimated future cash flows, discounted at the effectiveinterest rate. b) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are eitherdesignated in this category or not classified in any of the other categories.They form part of non-current assets unless management intends to dispose of theinvestment within 12 months of balance sheet date. The Groups available forsale investments consist of unlisted securities. All available-for-sale financial assets are measured at fair value at balancesheet date, with subsequent changes in value recognised in equity. Gains andlosses arising from financial instruments classified as available-for-sale areonly recognised in profit or loss when they are sold or when the investment isimpaired. In the case of impairment, any loss previously recognised in equity istransferred to the income statement. Losses recognised in the income statementon equity instruments are not reversed through the income statement but chargedto equity. Losses recognised in prior period consolidated income statementsresulting from the impairment of debt securities are reversed through the incomestatement, if the subsequent increase can be objectively related to an eventoccurring after the impairment loss was recognised in profit or loss. The Group assesses at each balance sheet date whether there is evidence thatfinancial assets are impaired. Financial Liabilities Financial liabilities are obligations to pay cash or other financial assets andare recognised when the Group becomes a party to the contractual provisions ofthe instrument. All financial liabilities are recorded initially at fair value,net of direct issue costs. A financial liability is derecognised only when the obligation is extinguished,that is, when the obligation is discharged or cancelled or expires. Trade payables The Group's financial liabilities consist of trade and other payables, which aremeasured at amortised cost using the effective interest rate method. Financial liabilities are recognised when the Group becomes a party to thecontractual agreements of the instrument. All interest-related charges arereported in the income statement are included in the income statement line items"finance costs" or "finance income". Revenue recognition Revenue includes the fair value of sale of goods and services, net ofvalue-added tax, rebates and discounts and after eliminating intercompany saleswithin the Group. Revenue is recognised as follows: a) Sales of goods Sales of goods are recognised when a Group entity has delivered media content tothe end consumer, who has accepted the product and collectability of the relatedreceivable is reasonably assured from the customer. b) Rendering of services Rendering of services are recognised in the accounting period in which theservices are rendered, by reference to completion of the specific transaction,on the basis of the actual service provided as a proportion of the totalservices to be provided. c) Interest income Interest receivable is recognised in the income statement using the effectiveinterest method. If the collection of interest is considered doubtful, it issuspended and excluded from interest income in the income statement. d) Deferred income Revenue that has been collected from customers but where the above conditionsare not met is recorded in the balance sheet under other debtors and deferredincome and released to the income statement when the conditions are met. Share based payments Employees (including Directors) of the Group receive remuneration in the form ofshare-based payment transactions, whereby employees render services in exchangefor shares or rights over shares ('equity-settled transactions'). Equity settled transactions The Group has applied the requirements of IFRS 2 Share-based Payments to allgrants of equity instruments. The cost of equity settled transactions with employees is measured by referenceto the fair value at the grant date of the equity instruments granted. The fairvalue is determined by using the Black-Scholes method. The cost of equity-settled transactions is recognised, together with acorresponding increase in retained earnings, over the periods in which theperformance conditions are fulfilled, ending on the date on which the relevantemployees become fully entitled to the award ('vesting date'). At each balancesheet date before vesting, the cumulative expense is calculated, representingthe extent to which the vesting period has expired and management's bestestimate of the achievement or otherwise of non-market conditions and of thenumber of equity instruments that will ultimately vest. Market conditions aretaken into account in determining the fair value of the options granted, atgrant date, and are subsequently not adjusted for. The movement in cumulativeexpense since the previous balance sheet date is recognised in the incomestatement, with a corresponding entry in equity. No expense or increase in equity is recognised for awards that do not ultimatelyvest. Awards where vesting is conditional upon a market condition are treated asvesting irrespective of whether or not the market condition is satisfied,provided that all other performance conditions are satisfied. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or optionsare charged to the share premium account. Shares to be issued Shares to be issued are recorded in Balance Sheet when the Group has anobligation to issue shares. Shares to be issued relate to deferredconsideration on the acquisition of Mobile Streams Europe GmbH (formerly CyoshiMobile GmbH). The shares are valued at the market value as of date ofacquisition. Leased assets In accordance with IAS 17, all the Groups leases are determined to be operatingleases and the payments made under them are charged to the income statement on astraight line basis over the lease term. Lease incentives are spread over theterm of the lease. Operating leases are leases in which the risks and rewards of ownership are nottransferred to the lessee. Standards and interpretations not yet applied The following new Standards and Interpretations, which are yet to becomemandatory, have not been applied in the 2007 group financial statements. Standard or Interpretation Effective for in reporting periods starting on or after IAS 1 Presentation of Financial Statements (revised 2007) 1 January 2009IFRS 2 Amendment to IFRS 2 Share-based Payment - Vesting 1 January 2009 Conditions and CancellationsIAS 23 Borrowing Costs (revised 2007) 1 January 2009IAS 32 Presentation and IAS 1 Presentation of Financial 1 January 2009 Statements - Puttable Financial Instruments and Obligations Arising on LiquidationIAS 27 Consolidated and Separate Financial Statements 1 July 2009 (Revised 2008)IFRS 3 Business Combinations (Revised 2008) 1 July 2009IFRS 8 Operating Segments 1 January 2009IFRIC 11 IFRS 2- Group and Treasury Share Transactions 1 March 2007IFRIC 12 Service Concession Arrangements 1 January 2008IFRIC 13 Customer Loyalty Programmes 1 July 2008IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, 1 January 2008 Minimum Funding Requirements and their Interaction Standards management expect to effect the Group Amendment to IAS 1 Presentation of Financial Statements (effective from 1January 2009) This amendment affects the presentation of owner changes in equity andintroduces a statement of comprehensive income. Preparers will have the optionof presenting items of income and expense and components of other comprehensiveincome either in a single statement of comprehensive income with subtotals, orin two separate statements (a separate income statement followed by a statementof other comprehensive income). This amendment does not affect the financialposition or results of the Group but will give rise to additional disclosures.Management is currently assessing the detailed impact of this amendment on theGroup's financial statements. Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations(effective from 1 January 2009)This amendment affects share based payments. All cancellations, whether by theentity or by other parties, should receive the same accounting treatment. UnderIFRS 2, a cancellation of equity instruments is accounted for as an accelerationof the vesting period. Therefore any amount unrecognised that would otherwisehave been charged is recognised immediately. Any payments made with thecancellation (up to the fair value of the equity instruments) is accounted foras the repurchase of an equity interest. Any payment in excess of the fair valueof the equity instruments granted is recognised as an expense. Vesting conditions are service conditions and performance conditions only. Otherfeatures of a share-based payment are not vesting conditions. Under IFRS 2,features of a share-based payment that are not vesting conditions should beincluded in the grant date fair value of the share-based payment. The fair valuealso includes market-related vesting conditions. This will not affect the Groupas the only current condition on share based payments relates to service. No other standard is expected to effect the financial statements. The Group does not intend to apply any of these pronouncements early. CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2007 Notes 2007 2006 £000's £000's Revenue 27 9,098 8,223Cost of sales 27 (4,108) (3,402) Gross profit 4,990 4,821 Selling and marketing costs (623) (251)Administration expenses (5,127) (4,505)Other operating expenses (116) (106)Depreciation, amortisation and impairment 5 (3,357) (530)Flotation/fundraising costs - (1,296)Share based compensation (240) (325)Restructuring costs (363) - Operating loss (4,836) (2,192) Finance costs 6 - (14)Finance income 6 180 237Loss before income tax (4,656) (1,969) Income tax expense 9 432 (83) Loss for period (4,224) (2,052) Attributable to:Attributable to equity shareholders of Mobile Streams Plc (4,224) (2,052) Total and continuing earnings per share Pence per Pence per share share Basic and basic 7 (12.024) (6.753) CONSOLIDATED BALANCE SHEETAs at 31 December 2007 Notes 2007 2006 £000's £000'sAssetsNon-currentGoodwill 12 977 2,464Intangible assets 12 2,516 2,923Property, plant and equipment 11 409 405Available for sale financial assets 13 467 382 4,369 6,174 CurrentTrade and other receivables 14 3,248 2,743Cash and cash equivalents 15 2,301 4,073 5,549 6,816 Total assets 9,918 12,990 EquityEquity attributable to the equityholders of Mobile Streams PlcCalled up share capital 19 71 69Share Premium 10,468 10,290Shares to be issued 19 479 637Translation reserve (182) (178)Retained earnings (6,001) (2,017) Total equity 4,835 8,801 LiabilitiesNon-currentDeferred tax liabilities 17 306 735 CurrentTrade and other payables 16 4,283 3,341Provisions 18 442 -Current tax liabilities 52 113 4,777 3,454 Total liabilities 5,083 4,189 Total equity and liabilities 9,918 12,990 The financial statements were authorised for issue by the Board of Directors andwere signed on its behalf by: 25 March 2008 J A ColquhounFinance Director CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2007 Equity attributable to the equity holders of Mobile Streams Plc Called Share Shares to be Translation Retained Total up share premium issued reserve earnings Equity capital £000's £000's £000's £000's £000's £000's Balance at 1 January 2006 1 165 - - (290) (124)Exchange differences on translation of foreignoperations - - - (178) - (178)Net income recognised directly in equity - - - (178) - (178)Loss for the year to 31 December 2006 - - - - (2,052) (2,052)Total recognised income and expense for the period - - - (178) (2,052) (2,230)Employee share based compensation - - - - 325 325Shares issued 68 10,125 - - - 10,193Shares to be issued - - 637 - - 637 Balance at 31 December 2006 69 10,290 637 (178) (2,017) 8,801 Balance at 1 January 2007 69 10,290 637 (178) (2,017) 8,801Exchange differences on translation of foreignoperations - - - (4) - (4)Net income recognised directly in equity - - - (4) - (4)Loss for the year to 31 December 2007 - - - - (4,224) (4,224)Total recognised income and expense for the period - - - (4) (4,224) (4,228)Employee share based compensation - - - - 240 240Shares issued 2 178 - - - 180Shares to be issued - - (158) - - (158) Balance at 31 December 2007 71 10,468 479 (182) (6,001) 4,835 CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2007 Notes 2007 2006 £000's £000's Cash flows from operating activitiesResult for the period before tax (4,656) (1,969)AdjustmentsShare based payments 240 325Depreciation 123 48Amortisation 1,028 482Interest received (180) (237)Impairment of intangibles and goodwill 2,206 -Interest expense - 14Changes in trade and other receivables (505) (571)Changes in trade and other payables 1,384 370Income tax paid (64) (192) Total cash flows from operating activities (424) (1,730) Cash flows from investing activitiesAdditions to property, plant and equipment (180) (454)Additions to other intangible assets (1,282) (802)Acquisitions of subsidiaries (net of cash acquired) - (2,379)Available for sale financial assets (87) (382)Interest received 180 216 Total cash flows from investing activities (1,369) (3,801) Cash flows from financing activitiesInterest paid - (14)Issue of share capital (net of expenses paid) 23 9,494 Total cash flow from financing activities 23 9,480 Net change in cash and cash equivalents (1,770) 3,949Cash and cash equivalents at beginning of period 4,073 268Exchange (losses) on cash and cash equivalents (2) (144) Cash and cash equivalents at end of period 15 2,301 4,073 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. General information Mobile Streams Plc (the Company) and its subsidiaries (together 'the Group')deliver mobile media solutions via distribution, content and an integratedtechnology platform, Vuesia. The Group has subsidiaries based around the worldin Europe, Asia, North America and Latin America. The Group has made variousstrategic acquisitions to build its market share in these regions. The Company is a public limited company incorporated in the United Kingdom. Theaddress of its registered office is Medius House, 63-69 New Oxford Street,London, WC1A 1DG. The Company is listed on the London Stock Exchange's Alternative InvestmentMarket. These consolidated financial statements have been approved for issue by theBoard of Directors on 25 March 2008. 2. Critical accounting estimates and judgements Estimates and judgements are evaluated on a regular basis and are based onhistorical experience and other factors, such as expectations of future eventsthat are believed to be reasonable under the circumstances. 2.1 Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. Theseestimates, by definition, will rarely equal the related actual results. Theestimates and assumptions that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities within the nextfinancial year are discussed below. (a) Goodwill The Group tests annually whether goodwill has suffered any impairment, inaccordance with the accounting policy. The recoverable amount ofcash-generating units has been determined based on value-in-use calculations.These calculations require estimates to be made. Refer to note 12. (b) Income taxes The Group is subject to income taxes in various jurisdictions. Judgement isrequired in determining the worldwide provision for income taxes. There are manytransactions/calculations for which the ultimate tax determination is uncertainduring the ordinary course of business. Where the final tax outcome is differentto what is initially recorded, such differences will impact the income tax anddeferred tax provisions. (c) Intangible assets The Group is required to identify and assess the useful life of intangibleassets and determine if there is a finite or indefinite life. Judgement isrequired in determining if an intangible asset has a finite life and the extentof this finite life in order to calculate the amortisation charge on the asset.The Group tests annually whether intangible assets have suffered any impairment,in accordance with the accounting policy. The recoverable amount ofcash-generating units have been determined based on value-in-use calculations.These calculations require estimates to be made. Where there is no method ofvaluation for an intangible asset, management will make use of a valuationtechnique to determine the value of an intangible if there is no evidence of amarket value. In doing so certain assumptions and estimates will be made.Refer to note 12. d) Share based payments The Group is required to measure the fair value of equity settled transactionswith employees at the grant date of the equity instruments. The fair value isdetermined by using the Black-Scholes method. This requires assumptionsregarding interest free rates, share price volatility and expected life of anemployee share option. The volatility of the Company's share price on each dateof grant was calculated as the average of volatilities of share prices ofcompanies in the Peer Group on the corresponding dates. The volatility of shareprice of each company in the Peer Group was calculated as the average ofannualized standard deviations of daily continuously compounded returns on theCompany's stock, calculated over 1, 2, 3, 4 and 5 years back from the date ofgrant, where applicable. The risk-free rate is the yield to maturity on thedate of grant of a UK Gilt Strip, with term to maturity equal to the life of theoption. In our experience the expected life of an employee share option is 5years. e) Deferred taxation Judgement is required by management in determining whether the Group shouldrecognise a deferred tax asset. Management considered whether there issufficient certainty its tax losses available to carry forward would ultimatelybe offset against future earnings, this judgement impacts on the degrees towhich deferred tax assets are recognised (see note 9). 3. Directors' and Officers' remuneration and interests The Directors are regarded as the key management personnel of the Mobile StreamsPlc. Charges in relation to remuneration received by key management personnel forservices in all capacities during the years ended 31 December 2007 are asfollows: 2007 2006 £000's £000'sShort- term employee benefits- salaries/remuneration 240 369- social security costs 24 35Share-based payments - 169 264 573 4. Services provided by the group's auditor and network firms During the year the Group (including its overseas subsidiaries) obtained the followingservices from the Group's auditor at costs detailed below: 2007 2006 £000's £000's Fees payable to company auditor for the audit of parent company and consolidated accounts 64 44 Non-Audit services:Fees payable to the Company's auditor and its associates forother services:The audit of company's subsidiaries pursuant to legislation 5 4Interim procedures 15 -Tax compliance and advisory services 7 41Advisory work on acquisitions - 92Advice relating to fund raising and initial public offering, including acting as reporting accountant - 116 91 297 5. Depreciation, amortisation and impairment 2007 2006 £000's £000'sDepreciation 123 48Amortisation 1,028 482Impairment of goodwill 1,496 -Impairment of other intangible assets 529 -Impairment of content 181 - 3,357 530 The Group incurred a total impairment charge of £2,206,000 relating to goodwilland intangible assets. The impairment charge under IFRS differs to theimpairment charge under UK GAAP as follows: Impairment under UK GAAP 1,583,000Additional impairment under IFRS 623,000 Total 2,206,000 The additional impairment under IFRS relates to deferred tax on intangibles assets acquired on businessacquisition. IAS 12 requires the Group to add deferred tax on intangibles assets acquired via businesscombinations to goodwill and impair test annually. Further detail of the impairment can be seen in note12. 6. Finance receivable/(PAYABLE) 2007 2006 £000's £000's Interest receivable 121 216Other interest receivable 59 21 180 237 Bank interest payable - (14) Net interest receivable 180 223 7. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the loss attributable toequity holders of the Company by the weighted average number of ordinary sharesin issue during the period. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below. 31 December 31 December 2007 2006 Pence per Pence per share share Basic and diluted earnings per share (12.024) (6.753) £000's £000'sLoss for the financial period (4,224) (2,052) For adjusted earnings per share £000's £000's Loss for the financial period (4,224) (2,052) Add back: flotation/fund raising costs - 1,296Add back: share compensation expense 240 325Add back: impairment of intangibles and goodwill 2,206 -Add back: depreciation and amortisation 1,151 530 Adjusted loss for the period (627) 99 Weighted average number of shares Number of Number of shares shares For basic earnings per share 35,128,404 30,384,461For diluted earnings per share 35,128,404 31,872,658 Pence per Pence per share shareAdjusted basic earnings per share (1.785) 0.325Adjusted diluted earnings per share - 0.311 The adjusted EPS has been calculated to reflect the underlying profitability of the business byexcluding the flotation and fund raising costs, and share compensation expense. The Company is required to issue a further 620,268 shares to satisfy the deferred considerationrelating to the acquisition Mobile Streams Europe GmbH (formerly Cyoshi Mobile GmbH) and 629,020shares under share options schemes. These have been excluded in calculating the dilated earningsper share as losses were incurred during the period. 8. Directors and employees Staff costs during the year were as follows: 2007 2006 £000's £000's Wages and salaries 3,360 2,569Social security costs 449 281Pension costs - - 3,809 2,850Less: staff costs capitalised within (732) (380)media platform costs 3,077 2,470 The average number of employees during the year was: 2007 2006 Number Number Management 7 7Administration 94 71 101 78 Remuneration in respect of Directors was asfollows: 2007 2006 £000's £000's Emoluments 278 404 278 404 The amounts set out above include remuneration in respect of the highest paid director asfollows: 2007 2006 £000's £000's Emoluments 104 175 104 175 9. income tax expense The tax charge is based on the loss for the year and represents: 2007 2006 £000's £000's Loss for the year before taxation (4,656) (1,969)Loss multiplied by standard rateof corporation tax in the United Kingdom of 30% (1,397) (591) Expected tax expense (1,397) (591) Adjustment for tax-rate differences 7 -Adjustment for non-deductible expensesExpenses not deductible for tax purposes 837 450Deductions following exercise of EMI options (66) (25)Relating to goodwill impairment/amortisation (344) (26)Excess of depreciation over capital allowances 348 (37)Prior year tax adjustments 37 -Overseas taxation and losses 138 312 Actual tax expense, net (432) 83 ComprisingCurrent tax expense (3) 109Deferred tax (expense), income, resulting from the (429) (26)- origination and reversal of temporary differences (429) (26) Please refer to note 17 for information on the entity's deferred tax assets and liabilities. The Group has approximately £2.6m trading losses to offset against futuretrading profits. At this stage no deferred tax asset has been recognised andwill not be recognised until such time as the expansion of the relevantcompanies within the Group beyond their initial set up phase deems itappropriate. The Company has a deferred tax asset estimated at £12,000 relating to apotential UK corporation tax deduction in respect to employee share options.Due to the uncertainty of the timing of exercise and the current expansion phaseno deferred tax asset has been recognised at this stage. 10. DIVIDENDS No dividend was paid or proposed during the year (2006: £nil). 11. Property, plant and equipment Leasehold Office Total improvements furniture, plant and equipment £000's £000's £000's CostAt 1 January 2007 44 461 505Additions - 127 127Disposals - - -At 31 December 2007 44 588 632 DepreciationAt 1 January 2007 4 96 100Provided in the year 8 115 123Disposals - - -At 31 December 2007 12 211 223 Net book amount at31 December 2007 32 377 409 Leasehold Office Total improvements furniture, plant and equipment £000's £000's £000's CostAt 1 January 2006 - 152 152Additions 44 340 384Disposals - (31) (31) At 31 December 2006 44 461 505 DepreciationAt 1 January 2006 - 81 81Provided in the year 4 44 48Foreign exchange movement - 2 2Disposals - (31) (31) At 31 December 2006 4 96 100 Net book amount at31 December 2006 40 365 405 12. intangible assets Mobile Streams' intangible assets comprise its Vuesia Media Platform, acquiredcustomer relationships, technology-based assets, non-compete agreements, andmedia content. Other intangibles consists of customer relationships, technologybased assets, and non-compete agreements. Intangible assets are amortised inline with the Groups accounting policies. Media platform development Media Other and software content Goodwill intangibles Total £000's £000's £000's £000,s £000's CostAt 1 January 2007 978 151 2,464 2,364 5,957Additions- internally generated 1,040 - - - 1,040- externally acquired 110 181 9 - 300 At 31 December 2007 2,128 332 2,473 2,364 7,297 Accumulated amortisationand impairmentAt 1 January 2007 271 15 - 284 570Amortisation 497 57 - 474 1,028Impairment - 181 1,496 529 2,206 At 31 December 2007 768 253 1,496 1,287 3,804 Net book value at 31 December 2007 1,360 79 977 1,077 3,493 Media platform development Media Other and software content Goodwill intangibles Total £000's £000's £000's £000's £000'sCostAt 1 January 2006 255 - - - 255Additions- internally generated 633 - - - 633- externally acquired 90 151 2,464 2,364 5,069 At 31 December 2006 978 151 2,464 2,364 5,957 Accumulated amortisationAt 1 January 2006 88 - - - 88Amortisation 183 15 - 284 482 At 31 December 2006 271 15 - 284 570 Net book value at 31 December 2006 707 136 2,464 2,080 5,387 Impairment The main changes in the carrying amounts of goodwill result from the impairmentof previously recognised goodwill. Impairment is included in "Depreciation,amortisation and impairment" expenses in the income statement. The net carrying amount of goodwill can be analysed as follows: Subsequent to the annual impairment test for 2007, the carrying amount of goodwill is allocated to thefollowing cash generating units: 2007 2006 £000's £000's The Nickels Group - 310Mobile Streams Europe GmbH - 1,186Mobile Streams (Hong Kong) Limited 977 968 977 2,464 The recoverable amounts for the cash-generating units given above were determined based on value-in-usecalculations, covering a three year forecast assuming growth from further developing the existingcustomer relationships and broadening the content repertoire offering. Growth and discount rates usedin the valuation of cash-generating units were as follows: The Nickels Group Mobile Streams Europe Mobile Streams (Hong GmbH Kong) Limited Growth rates 3% 3% 3%Discount rates 30% 16% 17% Key assumptions relating to the valuation of intangibles and goodwill were basedon past experience. This includes assumptions for discount rate, growth ratesand projected cashflows for cash generating units. The forecast for Mobile Steams' European was adjusted in 2007 for a decline inon portal revenues and slower than expected increase in off-portal revenues.Impairment testing, taking into account these developments, resulted in the fullimpairment of goodwill. The forecast for The Nickels Group Inc was adjusted in 2007 for a decline inrevenues. Impairment testing, taking into account these developments, resultedin the full impairment of goodwill. The impairment review of Mobile Streams' (Hong Kong) Limited showed noindication of impairment. The related impairment loss of £2,025,000 (2006: nil) was included in "depreciation, amortisation and impairment" in the income statement andattributed as follows: Customer Goodwill Total relationships £000's £000's £000's The Nickels Group 144 310 454Mobile Streams' GmbH 385 1,186 1,571 529 1,496 2,025 As a result of the developments in the European business during 2007, MobileStreams' management expects lower revenue growth and profits from Mobile StreamsEurope GmbH and the Nickels Group. Expectations were revised due to increasedcompetition and a slower than expected opening up of the mobile internet, and inThe Nickels Group due to slower revenue growth and lower operating profits fromthe Nickels Group are due to fewer hit title ringtones from its contentrepertoire and increased competition. Apart from the consideration described in determining the value in use of thecash generating units described above, the management of Mobile Streams in notcurrently aware of any other probable changes that would necessitate changes inits key estimates. Other intangible assets Mobile Streams' other intangible assets comprise acquired customerrelationships, technology based assets, own software development and mediacontent. The carrying amounts for the reporting periods under review can beanalyzed as follows: 2007 The Nickels Group Mobile Streams GmbH Mobile Streams (Hong Kong) Limited £000's £000's £000'sCustomer relationships 7 443 25Technology-based assets - 140 450Non-compete agreement - - 12 7 583 487 2006 The Nickels Group Mobile Streams GmbH Mobile Streams (Hong Kong) Limited £000's £000's £000's Customer relationships 193 1,078 32Technology-based assets - 183 578Non-compete agreement - - 16 193 1,261 626 Customer relationships recognized on the acquisition of Mobile Streams EuropeGmbH and The Nickels Group were subject to impairment testing and wereconsequently partially impaired. All amortisation and impairment charges are included in "depreciation,amortisation and impairment of non-financial assets" in the income statement.Total impairment relating to The Nickels Group (£454,000) and Mobile Streams'GmbH (£1,571,000) are shown in the American and European operating segmentsrespectively. Media content An impairment of £181,000 relating to media content was recorded in MobileStreams Plc. During the year the Group invested in media content, revenues generated fromthis content have been below expectation, consequently management has conductedan impairment review and subsequently recorded an impairment. Impairmentcharges are included in "depreciation, amortisation and impairment" in theincome statement. 13. Available for sale assets The Group, through its wholly owned subsidiary Mobile Streams Inc, has invested £382,000 in MobileGreetings Inc. The investment was in the form of interest bearing convertible loan stock, but was converted toshare capital during the period. Mobile Greetings' principal activities are the creation andpublication of mobile phone content. The Group, through the parent company invested £85,000 in FunkySexyCool Inc in the form of sharecapital. 2007 2006 £000's £000's At 1 January 382 -Additions 85 382Disposals - - At 31 December 467 382 Available for sale assets have been fair valued at the carrying amount at thebalance sheet date. Management deem there to be no change in the fair valueduring the period. In valuing 'available for sale assets', management were required to make keyassumptions and estimates relating to expected cashflows, growth rates anddiscount rates. Assumptions and estimates were based on past experience. 14. Trade and other receivables 2007 2006 £000's £000's Trade receivables 1,480 2,221Accrued receivables 1,068 522Other taxes 85 -Prepayments 615 - 3,248 2,743 The carrying value of trade receivables is considered a reasonable approximationof fair value. All of Mobile Streams trade and other receivables have been reviewed forindicators of impairment. Certain trade receivables, on the basis of age andcollectability were found to be impaired and a provision of £37,000 (2006: £Nil)has been recorded accordingly. In addition, some of the unimpaired trade receivables are past due as at thereporting date. The age of financial assets past due but not impaired is asfollows: 2007 2006 £000's £000's Not more than 3 months 48 114More than 3 months but not more than 6 months 15 5More than 6 months but not more than 1 year 1 -More than 1 year - 2 15. Cash and cash equivilents Cash and cash equivalents include the following components: 2007 2006 £000's £000's Cash at bank and in hand 2,301 4,073 16. Trade and other payables 2007 2006 £000's £000's Trade payables 1,051 1,244Other taxation and social security 152 91Other payables 237 208Accruals and deferred income 2,843 1,798 4,283 3,341 All amounts are short term. The carrying values are considered to be areasonable approximation of fair value. 17. Deferred Taxation assets and liabilities Recognised Balance 1 Recognised in Recognised in Balance 1 in Tax rate Balance 31 Jan 2006 income equity Jan 2007 income adjustment Dec 2007 £000's £000's £000's £000's £000's £000's £000'sDeferred taxliability: Intangibles - 650 - 650 (344) - 306Property, plant and equipment - 85 - 85 16 (7) 94Losses available - - - - (94) - (94) - 735 - 735 (422) (7) 306 Deferred tax on intangibles has decreased as a result of impairment andamortisation. Deferred tax on property, plant and equipment increased a result of excessdepreciation over capital allowances. The tax rate adjustment relates to a movement in the UK corporate tax rate from30% to 28% effective 1 April 2008. This requires the Group to adjust deferredtax on property, plant and equipment to the new rate. 18. Provisions Onerous Other Trade Total contracts receivables £000's £000's £000's £000's Balance 1 January 2007 - - - -Movement 130 275 442 Balance 31 December 2007 130 275 37 442 During the year the Company entered into a number of contracts with ongoingservice and financial obligations, in some instances the cost of the ongoingobligations are in excess of the anticipate future associated revenues, wherethis is the case the anticipated future losses have been provided for. Futurelosses have been estimated based on current and forecasted analysis of therelevant contacts, all of which be concluded during 2008. Provisions have also been made for legal costs and compensation paymentsrequired to settle litigation relating to intellectual property rightsinfringement and claims from former employees. Due to the inherentuncertainties of the outcome of such claims management has estimated the totalcost of settlement based on advice received from legal advisers. Managementanticipates that all outstanding claims will be resolved during 2008. 19. SHARE CAPITAL Number of shares (000's) Balance at 1 January 2007 34,640New share issues 1,008Balance at 31 December 2007 35,648 The Company only has one class of shares. The total number of shares issued is 35,647,924 (December 2006: 34,639,691) witha par value of £0.002 per share. All issued shares are fully paid. 2007 2006 £000's £000'sAuthorised69,150,000 ordinary shares of £0.002 each 138 138(2006: 69,150,000) Allotted, called up and fully paid: 35,647,924 ordinary shares of £0.002 each (2006: 34,639,691 ordinary shares of £0.002 each) 71 69 On 23 January 2006 a bonus issue on a 48 for 1 basis was made to existing shareholders of fully paid up ordinaryshares. On 9 May 2007 the Company issued 206,756 fully paid ordinary shares of £0.002 per share at a value of £0.77 per shareas part of the consideration for the purchase of the share capital of Mobile Streams Europe GmbH (formerly CyoshiMobile GmbH).During the year the Company issued a total of 801,477 fully paid ordinary shares of £0.002 each as a consequence ofthe exercise by employees of options over shares in the Company. The average exercise price paid on these shares was£0.026 per share. (2006: 848,000 at £0.127) Shares to be issued 2007 2006 £000's £000's Balance 1 January 637 -Movement (158) 637 Balance 31 December 479 637 The Company is required to issue a further 620,268 shares to satisfy the deferred consideration relatingto the acquisition Mobile Streams Europe GmbH (formerly Cyoshi Mobile GmbH) OptionsThe table below summarises the exercise terms of the various options over ordinary shares of £0.002 each which have beengranted, and were still outstanding at 31 December 2007 and 31 December 2006. At 31 December At 31 December 2006 2007 Period of option Ordinary shares Ordinary shares of of £0.002 each £0.002 eachDate of issue Exercise Earliest date Latest date Number price Enterprise Management Incentive Scheme 19 Nov 2004 £0.03183* 19 Nov 2005** 18 Nov 2014 275,625 436,92501 Mar 2005 £0.03183* 1 Mar 2006** 28 Feb 2015 - 490,00001 Feb 2006 £0.8163 1 Feb 2007*** 31 Jan 2016 117,600 120,05017 Aug 2006 £0.46 17 Aug 2007**** 16 Aug 2016 33,500 61,50007 Dec 2006 £0.40 7 Dec 2007**** 06 Dec 2016 287,550 454,05025 Jul 2007 £0.28 25 Jul 2008**** 24 Jul 2017 227,000 -20 Sep 2007 £0.225 20 Sep 2008**** 19 Sep 2017 320,000 - ISO Sub-Plan19 Nov 2004 £0.03183* 19 Nov 2005*** 18 Nov 2014 12,250 12,250 Global ShareOption Plan19 Nov 2004 £0.03183* 19 Nov 2005** 18 Nov 2014 - 9,80001 Feb 2006 £0.03183* 19 Nov 2005** 31 Jan 2016 116,375 116,37501 Feb 2006 £0.8163 1 Mar 2006** 31 Jan 2016 52,675 52,67519 Apr 2006 £0.76 19 Apr 2007**** 18 Apr 2016 207,468 207,46802 Aug 2006 £0.465 2 Aug 2007**** 01 Aug 2016 116,426 116,42608 Aug 2006 £0.465 8 Aug 2007**** 07 Aug 2016 210,000 210,00017 Aug 2006 £0.46 17 Aug 2007**** 16 Aug 2016 44,225 92,67507 Dec 2006 £0.40 7 Dec 2007**** 06 Dec 2016 208,450 210,45027 Jun 2007 £0.39 27 Jun 2008**** 26 Jun 2017 66,250 -20 Sep 2007 £0.225 20 Sep 2007**** 19 Sep 2017 360,000 - Stand AloneOption Plans01 Feb 2006 £0.03183* 1/2/2006***** 31 Jan 2016 24,500 24,50015 Feb 2006 £0.87 15 Feb 2007**** 14 Feb 2016 689,655 689,65515 Feb 2006 £0.002 1 Mar 2006****** 28 Feb 2015 - 155,077 * Original issue price was £0.078. Due to recapitalisation the adjusted issue price is £0.03183. ** 50% of the issued options can be exercised on the later of the first anniversary of the grant date (date shownabove) or the date the shares are traded on a stock exchange. 100% of the issued options can be exercised on the laterof the second anniversary of the grant date or the date the shares were traded on a stock exchange. *** 100% of the issued options can be exercised on the later of the first anniversary of the grant date (date shownabove) or the date the shares are traded on a stock exchange. **** 33.33 % of issued options can be exercised on or after the first anniversary of the grant date, 66.67% of theissued options can be exercised on or after the second anniversary of the grant date, 100% of the issued options canbe exercised on or after the third anniversary of the grant date. ***** Options exercisable immediately issued to employee who left the company after a number of years of service. ****** Options issued pursuant to a non-dilute agreement upon IPO. 20. Share based payments The Group operates a number of share option schemes in order to attract andmaintain key staff. The remuneration committee can grant options over shares inthe Company to employees of the Group. Options are granted with a fixedexercise price equal to the market price of the shares under option at the dateof grant. The contractual life of an option is 10 years. The Company has madegrants throughout 2007. Details of the option plans in place and exerciseperiods are shown above in note 19. Exercise of an option is subject tocontinued employment. Options were valued using the Black-Scholesoption-pricing model. The fair value per option granted during the year and theassumptions used in the calculation are shown below: Date of grant 2 Jan 2007 2 Jan 2007 2 Jan 2007 27 Jun 2007 27 Jun 2007 27 Jun 2007 25 Jul 2007Share price at grant (£) 0.3550 0.3550 0.3550 0.3900 0.3900 0.3900 0.2800Exercise price (£) 0.3550 0.3550 0.3550 0.3900 0.3900 0.3900 0.2800Shares under option 5,000 5,000 5,000 22,083 22,083 22,083 226,667Vesting period (years) 1 2 3 1 2 3 1Volatility 86.34% 86.34% 86.34% 82.12% 82.12% 82.12% 70.20%Option Life (years) 10 10 10 10 10 10 10Expected life (years) 5 5 5 5 5 5 5Risk-free rate 5.00% 5.00% 5.00% 5.6615% 5.6615% 5.6615% 5.5142%Dividend yield 0.00% 0.00% 0.00% 0% 0% 0% 0%Fair value (£) 0.1245 0.1724 0.2056 0.1320 0.1830 0.2190 0.0825 Date of grant 25 Jul 2007 25 Jul 2007 20 Sep 2007 20 Sep 2007 20 Sep 2007Share price at grant (£) 0.2800 0.2800 0.2250 0.2250 0.2250Exercise price (£) 0.2800 0.2800 0.2250 0.2250 0.2250Shares under option 226,667 226,667 75,667 75,667 75,667Vesting period (years) 2 3 1 2 3Volatility 70.20% 70.20% 70.10% 70.10% 70.10%Option Life (years) 10 10 10 10 10Expected life (years) 5 5 5 5 5Risk-free rate 5.5142% 5.5142% 5.0873% 5.0873% 5.0873%Dividend yield 0% 0% 0% 0% 0%Fair value (£) 0.1162 0.1404 0.0659 0.0926 0.1120 The volatility of the Company's share price on each date of grant was calculatedas the average of volatilities of share prices of companies in the Peer Group onthe corresponding dates. The volatility of share price of each company in thePeer Group was calculated as the average of annualized standard deviations ofdaily continuously compounded returns on the Company's stock, calculated over 1,2, 3, 4 and 5 years back from the date of grant, where applicable. Therisk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip,with term to maturity equal to the life of the option. In our experience theexpected life of an employee share option is 5 years. 2007 2006 Number Weighted Number Weighted (000's) average (000's) average exercise exercise price price Outstanding at 1 January 3,524 £0.391 1,882 £0.032Granted 988 £0.251 2,704 £0.549Forfeited (341) £0.403 (214) £0.286Exercised (801) £0.026 (848) £0.127 Outstanding at 31 December 3,370 £0.435 3,524 £0.391 Exercisable at 31 December 1,050 £0.439 786 £0.029 2007 2006 Range of Weighted Number of Weighted average Weighted Number of Weighted average exercise average Shares remaining life (years): average Shares remaining life (years): prices exercise (000's) exercise (000's) price Expected Contractual price Expected Contractual £0 - £0.50 £0.325 2,302 3.0 8.9 £0.191 2,430 3.2 8.9 £0.51 - £1.50 £0.834 1,068 3.1 8.2 £0.832 1,094 3.1 9.1 The weighted average share price during the period for options exercised overthe year was £0.584 (2006: £0.757). The total charge for the year relating to employee share based payment plans was£240,000 (2006:£325,000), all of which related to equity-settled share basedpayment transactions. 21. Capital commitments The Group has no capital commitments as at 31 December 2007. (2006: £45,000(US$90,000)). 22. Contingent liabilities Various intellectual property right infringements and legal claims have beenmade against the Group. Unless recognised as a provision (see note 18),management considers these claims to be unjustified and the probability thatthey will require settlement at the Group's expense is remote. This evaluationhas been backed up by external independent legal advice. (2006: £Nil) 23. OPERATING LEASES The Group has commitments under operating leases for land and buildings andother leases to pay the following amounts in the next twelve months. Land and Buildings Other 2007 2006 2007 2006 £000's £000's £000's £000's Annual commitments under non-cancellableoperating lease expiring:Within one year 139 118 4 13 Within two to five years 157 246 - 2 After five years - 13 - - 377 296 377 4 15 Lease payments recognised as an expense during the period amount to £252,000(2006: £174,000). 24. Major Non-Cash transactions The Group entered into a barter transaction with MTV to exchange media rightsand wholly owned content for onscreen advertising totalling £178,000. 25. Related party transactions During the period the Group entered in to a trading relationship Zoombak LLC, arelated party by virtue of shared director and chief executive officer. Duringthe period revenue of £193,000 (2006: £Nil) was earned, of which £118,000remained outstanding at the balance sheet date. 26. Transition to IFRS 26.1 Basis of transition to IFRS The Group's financial statements for the year ended 31 December 2007 will be thefirst annual financial statements that comply with IFRS. These financialstatements have been prepared as described in the Groups accounting policies.The Group has applied IFRS 1 in preparing these consolidated financialstatements. Mobile Streams' transition date is 1 January 2006. The Group prepared itsopening IFRS balance sheet at that date. In preparing these consolidated financial statements in accordance with IFRS 1,the Group has applied mandatory exceptions and certain optional exemptions fromfull retrospective application of IFRS. 26.1.1 Exemptions from full retrospective application elected by the Group a) Cumulative translation differences exemption The Group has elected to set the previously accumulated cumulative translationadjustments relating to retranslation of the net investment in foreignoperations to zero at 1 January 2006. As this had previously been included withretained earnings in the UK GAAP financial statements, no adjustment is shown onthe transition to IFRS reconciliations. 26.2 Reconciliations between IFRS and UK GAAP The following reconciliations provide a quantification of the effect oftransition to IFRS from UK GAAP. The following reconciliations provide detailsof the impact of transition on - equity at 1 January 2006 - equity at 31 December 2006 -net income 31 December 2006 There has been no cash flow effect as a result of the transition to IFRS,therefore no reconciliation is required. The changes to the cash flow are presentational only. The changes are thedifferent presentation of interest, where interest paid is now included infinancing activities and interest received in investing activities, and alsotaxation is included in operating, whereas previously it was disclosedseparately. 26.2.1 Reconciliation of equity at 1 January 2006 Notes UK GAAP Effect of IFRS transition to IFRS £000's £000's £000'sAssetsNon-CurrentOther intangible assets a - 176 176Property, plant and equipment b 247 (176) 71 247 - 247 CurrentTrade and other receivables 1,524 - 1,524Cash and cash equivalents 268 - 268 1,792 - 1,792 Total assets 2,039 - 2,039 EquityEquity attributable to shareholders ofMobile StreamsCalled up share capital 1 - 1Share premium 165 - 165Retained earnings (315) - (315) (149) - (149) Total equity (149) - (149) LiabilitiesCurrentProvisions 18 - 18Trade and other payable 2,170 - 2,170 2,188 - 2,188 Total Liabilities 2,188 - 2,188 Total equity and liabilities 2,039 - 2,039 Explanation of the effect of the transition to IFRS as at 1 January 2006 (a) Other intangible assetsReallocation of media platform development from Property, Plant & Equipment 176 Total impact - increase intangible assets 176 (b) Property, Plant & EquipmentReallocation of media platform development to Intangible assets (176) Total impact - decrease Property, Plant & Equipment (176) Detailed explanatory notes: (i) Media platform development Media platform development costs were previously capitalised as tangible assetsas allowed under UK GAAP. Under IFRS, software components are recognised asintangibles assets unless they form an integral part of computer hardware. Themedia platform development costs do not form an integral part of computerhardware and have therefore been re-classified as intangible assets. Accumulated depreciation in relation to the media platform development costs hasbeen reversed and replaced by amortisation in accordance with the Group'saccounting policies. As the same useful life applies the net effect of reversingdepreciation and accounting for amortisation is nil. (ii) Translation reserve The Group has decided to apply the IFRS exemption allowed under IAS 21 to resetthe translation reserve to nil at opening balance sheet date. The previouslyaccumulated translation reserve is set to nil and applied against retainedearnings at that date. The gain or loss on future disposals of the relevantforeign entities will be adjusted only by the accumulated translationadjustments arising after the opening IFRS balance sheet date. 26.2.3 Reconciliation of equity at 31 December 2006 Notes UK GAAP Effect of IFRS transition to IFRS £000's £000's £000'sAssetsNon-CurrentGoodwill a 3,565 (1,101) 2,464Other intangible assets b 136 2,725 2,861Property, plant and equipment c 1,112 (644) 468Available-for-sale asset 382 - 382 5,195 980 6,175 CurrentTrade and other receivables 2,742 - 2,742Cash and cash equivalents 4,073 - 4,073 6,815 - 6,815 Total assets 12,010 980 12,990 EquityEquity attributable to shareholders ofMobile StreamsCalled up share capital 69 - 69Share premium 10,290 - 10,290Shares to be issued d 294 343 637Translation reserve e (153) (25) (178)Retained earnings f (1,974) (43) (2,017) Total equity 8,526 275 8,801 LiabilitiesNon-CurrentDeferred tax liabilities g 85 650 735 85 650 735 CurrentTrade and other payables h 3,286 55 3,341Current tax liabilities 113 - 113 3,399 55 3,454 Total Liabilities 3,484 705 4,189 Total equity and liabilities 12,010 980 12,990 Explanation of the effect of the transition to IFRS as at 31 December 2006 £000's(a) GoodwillReverse accumulated amortisation of goodwill for period to 31/12/06 123Re-calculation of goodwill on business combinations (2,022)Account for deferred tax liability on intangibles under business combinations per IAS 12 743Accrue expenses relating to business combinations - invoices received after reporting date 23Account for changes to opening balance sheet of acquired entities on business combinations 32 Total impact - decrease goodwill (1,101) (b) Other intangible assetsRecognise intangible assets on business combinations 2,365Take up amortisation of intangibles on business combinations for period to 30/12/06 (284)Reallocation of media platform development from Property, Plant & Equipment 644 Total impact - increase other intangible assets 2,725 (c) Property, Plant & EquipmentReallocation of media platform development to Intangibles (644) Total impact - decrease Property, Plant & Equipment (644) (d) Shares to be issuedRe-calculate cost of shares to be issued on business combinations 343 Total impact - increase shares to be issued 343 (e) Translation reserveReset translation reserve to nil per IFRS exemption adopted (25) Total impact - decrease translation reserve (25) (f) Retained earningsReverse amortisation of goodwill for period to 31/12/06 123Take up amortisation of intangibles on business combinations for period to 31/12/06 (284)Deferred tax on amortisation of intangibles under business combinations 93Reset translation reserve to nil per IFRS exemption adopted 25 Total impact - decrease retained earnings (43) (g) Deferred tax liabilitiesAccount for deferred tax liability on intangibles under business combinations 743Offset deferred tax asset on amortisation of intangibles under business combinations (93) Total impact - increase deferred tax liability 650 (h) Trade and other payablesAccrue expenses relating to business combinations - invoices received after reporting date 23Account for changes to opening balance sheet of acquired entities on business combinations 32 Total impact - increase trade and other payables 55 Detailed explanatory notes: (i) Business combinations - Goodwill & Intangibles In accordance with the Group's accounting policies regarding the recognition ofintangible assets and goodwill and in accordance with IFRS 3 BusinessCombinations, certain amounts previously classified as goodwill under UK GAAPfollowing acquisitions made in the period have been re-classified as intangiblesunder IFRS. Identifiable intangible assets on business combinations(acquisitions) have been recorded at fair value and have therefore increasedintangible assets. This has in turn reduced the amount of goodwill recorded onbusiness combinations. Under IFRS goodwill cannot be amortised, but instead must be tested annually forimpairment. Intangible assets with a finite useful life are amortised overtheir useful life. The recognition of intangible assets on business combinations results in adeferred tax liability based on the company tax rate in the region theintangible assets belong, hence increasing goodwill on business combinations. Asthe intangible assets are amortised over the useful life, the correspondingdeferred tax liability is reduced and a tax credit recorded in the incomestatement. In determining cost of business combinations, the deferred consideration ofshares to be issued is to be valued at the date of acquisition. Previouslyreported figures included the cost of the deferred consideration of shares to beissued based on the share price at reporting date. This has been amended to showthe cost of shares at date of acquisition. An amendment has also been posted forcosts relating to acquisition that were incurred after the balance sheet date,but are known with certainty. These costs have been shown as accruedliabilities. (ii) Media platform development As per explanatory notes in 26.2.1 above. (iii) Translation reserve As per explanatory notes in 26.2.1 above. 26.2.5 Reconciliation of net income for the year ended 31 December 2006 Notes UK GAAP Re-classifications Effect of IFRS transition to IFRS £000's £000's £000's £000's Revenue 8,223 - - 8,223Cost of Sales (3,402) - - (3,402)Gross profit 4,821 - - 4,821 Selling and marketing costs - (251) - (251)Administration expenses a (5,556) 357 (161) (5,360)Other operating expenses (1,296) (106) - (1,402)Operating loss (2,031) - (161) (2,192) Finance costs (14) - - (14)Finance income 237 - - 237Loss before income tax (1,808) - (161) (1,969)Income tax expense b (176) 93 (83)Loss for period (1,984) - (68) (2,052) Explanation of the effect of the transition to IFRS as at 31 December 2006 £000's (a) Administration costsReverse amortisation of goodwill for period to 31/12/06 123Take up amortisation on intangibles on business combinations for period to 31/12/06 (284)Total impact - increase administration costs (161) (b) Income tax expenseDeferred tax asset on amortisation of intangibles under business combinations 93 Total impact - decrease income tax expense 93 Detailed explanatory notes: (i) Business combinations - Goodwill & Intangibles As per explanatory notes in 26.2.2 above. (ii) Media platform development As per explanatory notes in 26.2.1 above. 27. Segment reporting Strategy The Directors consider there to be one class of business, being the distributionof licensed mobile phone content. As at 31 December 2007, the Group is organised into 4 geographical segments:Europe, North America, Latin American, and Asia. All operations are continuing. All inter-segment transfers are priced and carried out at arm's length. The segment results for the year ended 31 December 2007 are as follows: Europe North America Latin America Asia Totals £000's £000's £000's £000's £000'sTotal gross segment sales- from external customers 3,276 1,917 2,177 1,728 9,098 Operating result 3,276 1,917 2,177 1,727 9,098 Cost of goods sold (1,267) (712) (919) (1,210) (4,108)Employee expense (1,748) (657) (303) (400) (3,108) Depreciation and amortisation (530) (79) (27) (34) (670)Other operating expenses (985) (707) (1,015) (422) (3,129) Segment operating results (1,254) (238) (87) (338) (1,917) Interest revenue 87 31 56 6 180Income tax expense (100) - 92 5 (3) Segment assets 11,932 3,012 1,775 990Segment liabilities (2,143) (4,054) (2,511) (1,431) 17,709 (10,139)Capital expenditure 1,231 77 59 100 1,467 Segment impaired losses (1,752) (454) - - (2,206) The segment results for the year ended 31 December 2006 are as follows: Europe North America Latin America Asia Totals £000's £000's £000's £000's £000'sRevenue- from external customers 3,539 1,882 2,324 478 8,223Segment revenues 3,539 1,882 2,324 478 8,223 Cost of goods sold (1,359) (889) (1,014) (318) (3,580)Employee expense (1,036) (796) (365) (273) (2,470)Depreciation, amortisation and impairment of non financial assets (275) (8) (31) (375) (61)Other operating expenses (1,544) (176) (466) (103) (2,289)Segment operating results (675) (40) 471 (247) (491) Interest revenue 288 - - 2 290Interest expense (12) (54) (2) - (68)Income tax expense 100 - 9 - 109 Segment assets 12,303 2,524 1,389 423 16,639Segment liabilities (1,795) (3,216) (1,967) (493) (7,471) Capital expenditure 970 258 15 14 1,257 The totals presented in the Groups operating region segments reconcile to theentity's key financial figures as presented in its financial statements asfollows: 2007 2006 2007 2006 £000's £000'sSegment revenuesTotal segment revenues 9,098 8,223 Entity's revenues 9,098 8,223 Segment resultsTotal segment operating results reported (1,917) (491)Interest revenue 180 237Unallocated operating income and expenses (713) (405) Entity's operating result (2,450) (659) Result from equity accounted investmentsFinance costs - (14)Other financial result (2,206) (1,296)Entity's result for the period before tax (4,656) (1,969) Segment assetsTotal segment assets 17,709 16,639Consolidation (7,791) (3,649) Entity's assets 9,918 12,990 Segment liabilitiesTotal segment liabilities 10,139 7,471Consolidation (5,056) (3,282) Entity's liabilities 5,083 4,189 28. Business combinations On 19 April 2006, the Group acquired 100% of the share capital of Mobile StreamsEurope GmbH (formerly Cyoshi Mobile GmbH). Details of net assets acquired and goodwill are as follows:Purchase consideration £000's- cash paid 1,388- shares issued 159- shares to be issued 478- direct costs relating to the acquisition 96Net assets acquired (19)Cost of business combination 2,102Identifiable intangible assets:- customer relationships (1,252)- technology based assets (213)Goodwill before deferred tax 637 Deferred tax recognised on intangible assets 549 Total goodwill recognised 1,186 The goodwill is attributable to the significant future benefits expected toarise from Cyoshi's position of leading independent producer and distributor ofmobile media across Europe. This acquisition strengthens the Group's reach inEurope. The assets and liabilities arising from the acquisition are as follows: Fair value Acquiree's £000's carrying amount £000'sCash and cash equivalents 11 11Receivables 113 113Payables (105) (105)Net assets required 19 19 Purchase consideration settled in cash 1,388Cash and cash equivalents in subsidiary acquired (10) Cash outflow on acquisitions 1,378 Part of the purchase consideration for the acquisition is in the form of sharesissued and shares to be issued. The fair value of shares issued was determinedbased on 206,756 shares issued at the share price at the date of acquisition,being £0.77 per share, giving a total fair value of £159,202. Fair value ofshares to be issued was determined based on 620,268 shares to be issued at theshare price at the date of acquisition, being £0.77 per share, giving a totalfair value of £477,606. Since acquisition Mobile Streams Europe GmbH has generated a profit of £41,000.Had the acquisition taken place on 1 January 2006 it would have contributed£441,000 revenue and a loss of £6,000 to the Group in the year to 31 December2006. On 4 August 2006, the Group acquired 100% of the share capital of The NickelsGroup. Details of net assets acquired and goodwill are as follows:Purchase consideration £'000 - cash paid 230- deferred cash 123- direct costs relating to the acquisition 15Net assets acquired 79 Total purchase consideration 447 Identifiable intangible assets:- customer relationships (210)Goodwill before deferred tax 237 Deferred tax recognised on intangible assets 73 Total goodwill recognised 310 The goodwill is attributable to the strengthening of the Groups' contentgeneration and distribution business as well as providing a strategic footholdinto the west coast of the US and access to unique music content in highperforming and unique genres, including mobile rights to one of the world's bestselling artists. The assets and liabilities arising from the acquisition are as follows: Fair value Acquiree's £000's carrying amount £000's Payables (79) (79) Net liabilities acquired (79) (79) Purchase consideration settled in cash 230Cash and cash equivalents in subsidiary acquired -Cash outflow on acquisitions 230 Since acquisition The Nickels Group Inc has generated a loss of £5,000. Had theacquisition taken place on 1 January 2006 it would have contributed £497,000 ofrevenue and £98,000 of profit for the Group in the year to 31 December 2006. On 8 August 2006, the Group acquired 100% of the share capital of Mobile Streams(Hong Kong) Limited (formerly Mobilemode Limited). Details of net assets acquired and goodwill are as follows:Purchase consideration £000's- cash paid 685- shares issued 700- direct costs relating to the acquisition 162Net liabilities acquired (8)Total purchase consideration 1,539Identifiable intangible assets:- customer relationships (35)- technology based assets (638)- Non compete agreements (17)Goodwill before deferred tax 849 Deferred tax recognised on intangible assets 121 Total goodwill recognised 970 The goodwill is attributable to the increased distribution and relationships inthe Asia Pacific region, with a number of network operators. The acquisitionprovides the Group with a comprehensive position in Asia Pacific and theimmediate benefit of a strong management team with strong relationships withnetwork operators. The assets and liabilities arising from the acquisition are as follows: Fair value Acquiree's carrying £000's amount £000's Cash and cash equivalents 163 163Receivables 221 221Fixed assets 2 2Payables (363) (363)Income tax (15) (15) Net assets acquired 8 8 Purchase consideration settled in cash 685Cash and cash equivalents in subsidiary acquired (163) Cash outflow on acquisition 522 Part of the purchase consideration for the acquisition is in the form of sharesissued. The fair value of shares issued was determined based on 1,537,736 sharesissued at the share price at the date of acquisition, being £0.455 per share,giving a total fair value of £699,670. Since acquisition Mobile Streams (Hong Kong) Limited and its subsidiaries hasgenerated a loss £99,000. Had the acquisition taken place on 1 January 2006 itwould have contributed £1,184,000 revenue and a loss of £188,000 for the Groupin the year to 31 December 2006. 29. Risk management objectives and policies The Group is exposed to currency and liquidity risk, which result from both itsoperating and investing activities. The Group's risk management is coordinatedin close co-operation with the board of Directors, and focuses on activelysecuring the Group's short to medium term cash flows by minimising the exposureto financial markets. . The most significant financial risks to which the Groupis exposed to are described below. Also refer to the accounting policies. Foreign currency risk The Group is exposed to translation and transaction foreign exchange risk. Thecurrencies where the Group is most exposed to volatility are US Dollars, Euro,and Argentine Peso. Currently, there is generally an alignment of assets and liabilities in aparticular market, and no hedging instruments are used. In Latin Americanmarkets, cash in excess of working capital is converted into a hard currencysuch as US Dollars. The Company will continue to review its currency riskposition as the overall business profile changes. Foreign currency denominated financial assets and liabilities, translated intoEuros at the closing rate, are as follows. 2007 2006 £000's £000's US EURO • ARS Other US EURO • ARS Other Nominal amounts $ $ $ $ Financial assets 969 308 773 1,772 784 247 604 620Financial liabilities 907 22 368 1,331 746 105 419 760Short-term exposure 62 286 405 441 38 142 185 (140) Financial assets - - - - - - - -Financial liabilities - - - - - - - -Long-term exposure - - - - - - - - The following table illustrates the sensitivity of the net result for the yearand equity in regards to the Group's financial assets and financial liabilitiesand the British Pound to US Dollar, Euro and Argentine Peso exchange rates. Percentage movements used for sensitivity analysis are as follows. Both ofthese percentages have been determined based on the average market volatility inexchange rates in the previous 12 months. 2007 2006 US Dollar 3% 7%EURO 6% 2%Argentine Peso 4% 7% If the British Pound had strengthened against the US Dollar, Euro and ArgentinePeso by the percentages above retrospectively, then this would have had thefollowing impact: 2007 2006 £000's £000's US EURO ARS Total US EURO ARS Total $ • $ $ • $Net result for the year 2 2 8 12 1 4 20 25Equity 31 20 3 54 48 - 12 60 If the British Pound had weakened against the US Dollar, Euro and Argentine Pesoby the percentages above retrospectively, then this would have had the followingimpact: 2007 2006 £000's £000's US EURO ARS Total US EURO ARS Total $ • $ $ • $Net result for the year (2) (2) (8) (12) (1) (4) (20) (25)Equity (31) (20) (3) (54) (48) - (12) (60) Liquidity risk The Group/Company seeks to manage financial risk by ensuring sufficientliquidity is available to meet foreseeable needs and to invest cash assetssafely and profitably. The Group currently has no borrowing arrangement in place and prepares cashflowforecasts which are reviewed at Board meetings to ensure liquidity. As at 31 December 2007, the Groups liabilities have contractual maturities whichare summarised below: 31 December 2007 Current Non-current Within 6 months 6 to 12 months 1 to 5 years Later than 5 years £000's £000's £000's £000's Trade payables 4,253 30 - - This compares to the maturity of the Groups financial liabilities in theprevious reporting period as follows: 31 December 2006 Current Non-current Within 6 months 6 to 12 months 1 to 5 years Later than 5 years £000's £000's £000's £000's Trade payables 3,280 61 - - This information is provided by RNS The company news service from the London Stock Exchange
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