Mobile Streams Regulatory News (MOS)

18 Sep 2007 07:02

Mobile Streams plc18 September 2007 Mobile Streams Plc - Interim Results Announcement for the six months ending 30June 2007 18 September 2007 Mobile Streams, the mobile content company, announced today its interim resultsfor the six months ending 30 June 2007. Financial highlights: - Revenue increased in the period by 29% to £4.3m (2006: £3.4m)- Breakeven achieved at trading EBITDA* for the period (2006: loss £0.3m)- Cash at 30 June 2007 was £2.5m (2006: £6.1m) *Calculated as profit before tax, amortisation, depreciation, share compensationexpense and fund raising and floatation costs Operational highlights: During the first half of 2007, Mobile Streams continued to develop new revenuesources from the mobile media market. The highlights included: - Break-even at the EBITDA* level in the first half with net cash at June 30th of £2.5m - Continued investments in our platform and our consumer division. New customer wins included Sony Pictures Digital, Twentieth Century Fox International, Warner Music Group, Private Media Group and Zoombak - a Liberty Media subsidiary. - New channel management agreements hosted and powered by Vuesia signed with major mobile network operators including Vodafone Australia (games channel), Hutchison3G UK (comedy channel) and AIS Thailand (games channel). - Mobile search engine driven revenue growth delivered through Google, Yahoo and Microsoft search engines. - Establishment of new business region IMAP (India, Middle East, Africa, Pakistan). Commenting on today's interim results, Simon Buckingham, CEO, said: 'Mobile Streams has come a long way since its maiden interim announcement thistime last year. The market we operate in is undergoing very rapid change.; wehave modified our business model and organisational structure to reflect this.We have encouraging results coming from our consumer division but ourlongstanding operator business is growing more slowly than expected. The Boardbelieve the second half of the year will continue in much the same way as thefirst half so anticipates breakeven at EBITDA* for the full year.' Enquiries: Mobile Streams 020 7395 2020Simon Buckingham, Chief ExecutiveJames Colquhoun, Finance Director CHIEF EXECUTIVE'S REVIEW Mobile Streams continued to strengthen its business foundations during the firsthalf of 2007. Revenue continued to grow and the Company moved from a sizeableloss to break even compared to the first half of last year. The cash balance at30 June 2007 was £2.5m, the fall in cash primarily being the result of continuedtechnology investment in the proprietary Vuesia platform that powers ourbusiness. Because of its flexibility in handling all mobile media types from text to videoto games to music, Vuesia is the single integrated technology platform that hasenabled Mobile Streams to win business across all of these product types andretail content. This platform is used both internally by Mobile Streams to powerits global business as well as by numerous large media companies. This isevidenced by the many new large operator and media company customers the Companyhas won during the period. The strategic investment in Mobile Streams by Liberty Media highlights theimportance of the mobile content sector for media companies. The LibertyMedia-owned mobile business Zoombak, with whom Mobile Streams has a strategicmanagement partnership, is preparing to launch its mobile location devices andservices in the US and the UK. Mobile Streams' business has three main components: Operators, Platforms andConsumers, all of which are powered by its proprietary technology platform,Vuesia. The Company uses Vuesia to mobilise content through network operators ormobile search engines. During the past six months, downloads from Vuesia havemore than quadrupled (compared with the previous six months)and Mobile Streamshas deployed additional IBM blade hardware servers to support this increasedtraffic load. The continued investments in hardware and software have led to thedevelopment of the recently announced Vuesia AI (Artificial Intelligence)release of the platform, which is expected to power much of Mobile Streams'continued growth in 2008. Mobile Streams' traditional strength in working with mobile network operatorsaround the world has led to many new operator customers being added during theperiod, especially in regions such as Asia and the Middle East. Vuesia is beingdeployed to host and manage more and more sites and channels and to aggregatecontent of all types on behalf of the mobile carriers. Network operatorscontinue to like Mobile Streams' partnership model of having a local presencecombined with global scale and expertise. Content owners including major movie studios and music labels have selectedVuesia to mobilise their content. Vuesia simplifies the process of mobilisingthe myriad of audio and video content onto all the different mobile phonehandsets and networks around the world. Mobile Streams offers a proven singleglobal vendor solution for quickly realizing new global revenue streams frommobile. Mobile Streams buys select search engine traffic from search boxes placed on theoperator portals. It routes this traffic to our owned and operated brandedMobile Internet sites such as Ringtones.com, MobileWallpapers.com,MobileGamer.mobi and MobileAdults.com. The content on these sites is presentedin a personalized way based on the search term that was entered, allowing a veryefficient retailing operation with strong sales conversion rates from clicksinto purchases. Due to its positioning in the market, Mobile Streams believes it is in aposition to monetise all types of mobile content sold through all distributionchannels, working with quality content and distribution partners. Outlook Trading in the second half is following a similar pattern to the first withgrowth in 'direct to consumer' downloads and a decline in revenues fromexisting network operator clients, which is balanced out by new operatorcontracts. Investment in our Vuesia platform will continue but at presentrevenues from platform sales are behind target. The Board believes the second half of the year will continue in much the sameway as the first half, so anticipates breakeven at EBITDA* for the full year. *Calculated as profit before tax, amortisation, depreciation, share compensationexpense and fund raising and flotation costs. FINANCIAL REVIEW Group turnover in the six months to 30 June 2007 was £4.3m, a 29% increase onthe same period in 2006 (£3.4m). Breakeven achieved at trading EBITDA* (2006:£0.3m loss). Loss before tax was £0.5m including share compensation (sameperiod 2006: loss £1.79m including fund raising/flotation costs). 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 6 of the accounts. £772,000 was invested during the year on tangible and intangible fixed assets.This was predominantly for further development of the Vuesia platform andassociated software. The group continues to invest in the development of theVuesia platform and content assets. The Group incurred a net cash outflow from operations of £713,000 (2006 outflow£1,328,000). The cash balance at 30 June 2007 was £2,530,000. Basic earnings per share amounted to a loss of 1.467p per share (2006: loss of5.832p per share). Adjusted earnings per share (excluding flotation/fundraising costs and sharebased compensation) amounts to a loss of 1.463p per share (2006: 5.783p pershare). James ColquhounFinance Director *Calculated as profit before tax, amortisation, depreciation, share compensationexpense and fund raising and flotation costs. CONSOLIDATED INTERIM INCOME STATEMENT Notes 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 £000's £000's £000's Sales Revenue 4,336 3,353 8,223Cost of sales (1,719) (1,329) (3,402)-----------------------------------------------------------------------------------------------------Gross profit 2,617 2,024 4,821 Selling and marketing costs (177) (115) (251)Administration expenses (3,033) (2,511) (5,360)Other operating expenses (67) (1,337) (1,402)-----------------------------------------------------------------------------------------------------Operating loss (660) (1,939) (2,192) Finance costs - (1) (14)Finance income 114 122 237Loss before income tax (546) (1,818) (1,969) Income tax expense (1) 28 (176)-----------------------------------------------------------------------------------------------------Loss for period (547) (1,790) (2,145)===================================================================================================== Total and continuing earnings per share Price per share Pence per share Pence per share Basic and Diluted 9 (1,467) (5,832) (6,438) CONSOLIDATED INTERIM BALANCE SHEET Notes 6 months to 30 6 months to 30 12 months to 31 June 2007 June 2006 December 2006 £000's £000's £000'sAssetsNon-currentGoodwill 2,292 1,165 2,371Other intangible assets 3,120 1,952 2,861Property, plant and equipment 522 418 468Available for sale assets 466 165 382------------------------------------------------------------------------------------------------------ 6,400 3,700 6,082 CurrentTrade and other receivables 3,126 1,691 2,742Cash and cash equivalents 2,530 6,143 4,073------------------------------------------------------------------------------------------------------ 5,656 7,834 6,815------------------------------------------------------------------------------------------------------Total assets 12,056 11,534 12,897====================================================================================================== EquityEquity attributable to shareholders of Mobile StreamsCalled up share capital 8 71 65 69Share Premium 10,465 9,593 10,290Shares to be used 477 637 637Translation reserve (244) (80) (178)Retained earnings (2,508) (1,883) (2,110)------------------------------------------------------------------------------------------------------Total equity 8,261 8,332 8,708------------------------------------------------------------------------------------------------------LiabilitiesNon-currentDeferred tax liabilities 576 528 735------------------------------------------------------------------------------------------------------CurrentTrade and other payables 3,045 2,649 3,341Current tax liabilities 174 25 113------------------------------------------------------------------------------------------------------ 3,219 2,674 3,454 Total liabilities 3,795 3,202 4,189------------------------------------------------------------------------------------------------------Total equity and liabilities 12,056 11,534 12,897====================================================================================================== CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY Called Share Shares to Translation Retained Total up share premium be issued reserve earnings Equity capital £000's £000's £000's £000's £000's £000's Balance at 1 January 2006 1 165 - - (315) (149)Exchange differences on translation of foreignoperations - - - (80) 25 (55)--------------------------------------------------------------------------------------------Net income recognised directly in equity - - - (80) 25 (55)Profit for the 6 months period to 30 June 2006 - - - - (1,790) (1,790)--------------------------------------------------------------------------------------------Total recognised income and expense for the period - - - (80) (1,765) (1,845)Employee share based compensation - - - - 197 197Shares issued 64 9,428 - - - 9,492Shares to be issued - - 637 - - 637--------------------------------------------------------------------------------------------Balance at 30 June 2006 65 9,593 637 (80) (1,883) 8,332--------------------------------------------------------------------------------------------Balance at 1 July 2006 65 9,593 637 (80) (1,883) 8,332Exchange differences on translation of foreignoperations - - - (98) - (98)--------------------------------------------------------------------------------------------Net income recognised directly in equity - - - (98) - (98)Profit for the 6 months period to 31 December 2006 - - - - (355) (355)--------------------------------------------------------------------------------------------Total recognised income and expense for the period - - - (98) (355) (453)Employee share based compensation - - - - 128 128Shares issued 4 697 - - - 701--------------------------------------------------------------------------------------------Balance at 31 December 2006 69 10,290 637 (178) (2,110) 8,708--------------------------------------------------------------------------------------------Balance at 1 January 2007 69 10,290 637 (178) (2,110) 8,708Exchange differences on translation of foreignoperations - - - (66) - (66)--------------------------------------------------------------------------------------------Net income recognised directly in equity - - - (66) - (66)Profit for the 6 months period to 30 June 2007 - - - - (547) (547)--------------------------------------------------------------------------------------------Total recognised income and expense for the period - - - (66) (547) (613)Employee share based compensation - - - - 144 144Shares issued 2 175 - - - 177Shares to be issued - - (160) - - (160)Other recognised gains and losses - - - - 5 5--------------------------------------------------------------------------------------------Balance at 30 June 2007 71 10,465 477 (244) (2,508) 8,261-------------------------------------------------------------------------------------------- CONSOLIDATED INTERIM CASH FLOW STATEMENT Notes 6 months to 6 months to 12 months to 30 June 2007 30 June 2006 31 December 2006 £000's £000's £000's Cash flows from operating activitiesResult for the period before tax (546) (1,818) (1,969)Adjustments 10 552 231 641Changes in trade and other receivables (341) (167) (571)Changes in trade and other payables (296) 550 370Income tax paid (82) (124) (192)---------------------------------------------------------------------------------------------------------Total cash flows from operating activities (713) (1,328) (1,721) Cash flows from investing activitiesAdditions to property, plant and equipment (115) (458) (454)Additions to other intangible assets (657) (355) (802)Acquisitions of subsidiaries (net of cash acquired) - (1,375) (2,379)Trade investments (124) (165) (382)Interest received 114 122 216Interest paid - (1) (14)---------------------------------------------------------------------------------------------------------Total cash flows from investing activates (782) (2,232) (3,815) Cash flows from financing activitiesIssue of share capital (net of expenses paid) 18 9,492 9,494---------------------------------------------------------------------------------------------------------Total cash flow from financing activities 18 9,492 9,494 Net change in cash and cash equivalents (1,477) 5,932 3,958Cash and cash equivalents at beginning of period 4,073 268 268Exchange (losses) on case and cash equivalents (66) (57) (153)---------------------------------------------------------------------------------------------------------Cash and cash equivalents at end of period 2,530 6,143 4,073========================================================================================================= 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. The financial information set out in this interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. TheGroup's statutory financial statements for the year ended 31 December 2006,prepared under UK GAAP, have been filed with the Registrar of Companies. Theauditor's report on those financial statements was unqualified and did notcontain statements under Section 237(2) of the Companies Act 1985. These consolidated interim financial statements have been approved for issue bythe Board of Directors on 17 September 2007. 2. Summary of significant accounting policies 2.1 Basis of preparation These June 2007 interim consolidated financial statements of Mobile Streams arefor the six months ended 30 June 2007. They have been prepared in accordancewith IAS 34, Interim Financial Reporting, and are covered by EU adopted IFRS 1,First-time Adoption of IFRS, because they represent part of the period coveredby the Group's first IFRS financial statements for the year ended 31 December2007. All references to IFRS in these statements refers to IFRS as adopted bythe EU. These interim statements have been prepared using the recognition andmeasurement principles of IFRS standards and IFRIC interpretations issued andeffective as at the time of preparing these statements. The IFRS standards andIFRIC interpretations that will be applicable at 31 December 2007, includingthose that will be applicable on an optional basis, are not known with certaintyat the time of preparing these interim financial statements. The policies setout below have been consistently applied to all years presented and comparativeinformation 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. The UK GAAP differs in some areas to IFRS. In preparing the 2007consolidated interim 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. 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 6. Preparation of interim financial statements in accordance with IAS 34 requiresthe use of some critical accounting estimates. It requires management of MobileStreams to exercise judgement when applying the Company's accounting policies.The specific areas involving a higher degree of judgement and/or complexity andareas where assumptions/estimates are significant to the financial statementsare disclosed in Note 3. The historical cost measurement basis has been used inpreparation of these interim statements, with the exception of certain financialinstruments which are measured at fair value. 2.2 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. The excess ofthe cost 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. 2.3 Foreign currency translation (a) Functional and presentation currency The financial statements of each of the Group's entities are measured using thecurrency of the primary economic environment in which the entity operates('functional currency'). The consolidated financial statements are presented inBritish pounds, which is the Company's functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the date the transaction occurs. Any exchangegains or losses resulting from these transactions and from the translation ofmonetary assets and liabilities at balance date are recognised in the incomestatement. Any translation gains or losses on non-monetary items are recognisedin equity to the extent that they relate to gains and losses on non-monetaryitems which are recorded in equity. Otherwise, these translation gains or lossesare recognised in the income statement. (c) Group companies The financial results and position of all group entities that have a functionalcurrency different from the presentation currency are translated into thepresentation 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) 2.4 Property, plant and equipment (tangible assets) 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 leasePlant and equipment 33% straight lineOffice furniture Between 10% and 33% straight line The asset's residual values and useful lives are 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. 2.5 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. (b) Other intangible assets Other intangible assets represent intangible items that have been acquiredthrough business combinations and through separate acquisition. To meet thisdefinition, the intangibles must be both identifiable and separable, or arisefrom contractual or other legal rights. Intangibles acquired through businesscombinations are recognised at fair value and separately acquired intangiblesare recognised at cost. Where a reliable estimate of useful life of theintangible can be obtained, the intangible asset is to be amortised over theuseful life. When an indefinite life exists for an intangible asset, theintangible will not be amortised, but must be tested annually for impairment.The useful lives of finite life intangible assets is as follows: Media content 2 yearsMedia platform developments 3 yearsCustomer relationships 5 yearsTechnology based assets 5 yearsNon compete agreement 3.5 years 2.6 Impairment of assets Assets that have an indefinite useful life, such as goodwill and indefinite lifeintangibles, are not subject to amortisation, but are instead tested annuallyfor impairment and also tested whenever an event or change in situation indicatethat the carrying amount may not be recoverable. Assets that are subject toamortisation are also tested for impairment whenever an event or change insituation indicate that the carrying amount may not be recoverable. Animpairment loss is recognised in the income statement as the amount by which thecarrying amount of an asset exceeds its recoverable amount. The recoverableamount is determined by the higher of the fair value of an asset less costs tosell and the value in use. In order to assess impairment, assets are grouped atthe lowest levels for which separate cash flows can be identified(cash-generating units). 2.7 Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held with financialinstitutions, other short-term highly liquid investments with originalmaturities of three months or less and bank overdrafts. Bank overdrafts areclassified within borrowings in current liabilities on the balance sheet. 2.8 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 income tax isdetermined using tax rates known by the balance sheet date and are expected toapply when the deferred income tax asset is realised or the deferred income taxliability is settled. Deferred income tax assets are recognised only to theextent that it is probable that future taxable profit will be available againstwhich the temporary differences can be utilised. Deferred tax liabilities areprovided 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. 2.9 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. 2.10 Financial Assets & Financial Liabilities The group can classify its investments into the below categories depending onthe purpose for which the investments were acquired. The classification isdetermined at initial recognition and is re-evaluated at every reporting date. a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market and where there isno intention of trading. They are included as current assets, unless maturity isgreater than 12 months after balance sheet date. Loans and receivables areincluded in trade and other receivables in the balance sheet. b) Trade receivables Trade receivables are recognised initially at fair value and later measured atamortised cost using the effective interest method, less provision forimpairment. An impairment provision for trade receivables is established whenthere is evidence the Group will not be able to collect all amounts dueaccording to the terms of the receivables. The provision is calculated as thedifference between the receivable's carrying amount and the present value ofestimated future cash flows, discounted at the effective interest rate. Theprovision is recognised in the income statement. c) Interest paid Interest payable is recognised in the income statement on an accruals basis. d) 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. Purchases and sales of investments are recognised on trade date, being the dateon which the Group commits to purchase or sell the asset. Investments areinitially recognised at fair value plus transaction costs for financial assetsnot carried at fair value through the profit and loss. They are derecognisedwhen the rights to receive cash flows from the investments have expired or havebeen transferred and risks and rewards of ownership have been transferred.Financial assets at fair value through profit or loss and available for saleassets are subsequently carried at fair value. Loans and receivables and held tomaturity investments are carried at amortised cost using the effective interestmethod. Any realised and unrealised gains and losses arising from changes infair value of the financial assets at fair value through profit or loss areincluded in the income statement in the period they arise. Unrealised gains/losses arising from changes in fair value of non-monetary securities (availablefor sale) are recognised in equity. When available for sale assets are sold orimpaired the accumulated fair value adjustments are included in the incomestatement. Fair value of investments are based on current bid prices. If the market is notactive or securities are unlisted, fair value can be determined via valuationtechniques such as use of recent arm's length transactions, reference to similarinstruments and discounted cashflow analysis. The Group assesses at each balance sheet date whether there is evidence thatfinancial assets are impaired. The Group does not have any financial liabilities as at the balance sheet date. 2.11 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 products to thecustomer, who has accepted the product and collectibility of the relatedreceivable is reasonably assured. 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 on an accruals basis.If the collection of interest is considered doubtful, it is suspended andexcluded from interest income in the income statement. 2.12 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'). a) 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 equity, over the periods in which the performanceconditions are fulfilled, ending on the date on which the relevant employeesbecome fully entitled to the award ('vesting date'). At each balance sheet datebefore vesting, the cumulative expense is calculated, representing the extent towhich the vesting period has expired and management's best estimate of theachievement or otherwise of non-market conditions and of the number of equityinstruments that will ultimately vest or, in the case of an instrument subjectto a market condition, be treated as vesting as described above. The movement incumulative expense since the previous balance sheet date is recognised in theincome statement, 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. The dilutive effect of outstanding options is reflected as additional sharedilution in the computation of diluted earnings per share. 2.13 Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or optionsare booked to the share premium account. 3. 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. 3.1 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 will test annually whether goodwill has suffered any impairment, inaccordance with the accounting policy stated in Note 2.6. The recoverable amountof cash-generating units have been determined based on value-in-usecalculations. These calculations require estimates to be made. (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.Intangible assets that are identified to have an indefinite useful life will betested annually for any impairment in accordance with the accounting policystated in Note 2.6. The recoverable amount of cash-generating units have beendetermined based on value-in-use calculations. These calculations requireestimates to be made. 4. Seasonal/cyclical trends The scale of mobile media content is subject to seasonal fluctuations with peakdemand falling in the second half of each year, particularly around theChristmas period. Revenues are also subject to cyclical fluctuation due toMobile Network Operator upgrades/development of their infrastructure; thistypically follows their peak season 'technical freezes'. For the six months ended 30 June 2006, sales revenue represented 41% of theannual sales revenue for the year ended 31 December 2006. This is representativeof a general trend that second half revenues were 40% - 50% higher than firsthalf. 5. Related party transactions During period the Group entered in to a trading relationship Zoombak LLC, with arelated party by virtue of shared directors. During the period revenue of£200,000 was earned, all of which remained outstanding at the balance sheetdate. 6. Transition to IFRS 6.1 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 interim financialstatements have been prepared as described in Note 2.1. The Group has appliedIFRS 1 in preparing these consolidated interim financial statements. Mobile Streams' transition date is 1 January 2006. The Group prepared itsopening IFRS balance sheet at that date. The reporting date of these interimconsolidated financial statements is 30 June 2007. In preparing these interim consolidated financial statements in accordance withIFRS 1, the Group has applied mandatory exceptions and certain optionalexemptions from full retrospective application of IFRS. 6.1.1 Exemptions from full retrospective application elected by the Group a) Cumulative translation differences exemption The Group has elected to set the previously accumulated cumulative translationto zero at 1 January 2006. As this had previously been included with retainedearnings in the UK GAAP financial statements, no adjustment is shown on thetransition to IFRS reconciliations. 6.1.2 Exceptions from full retrospective application followed by the Group a) Estimates exception Estimates under IFRS at 1 January 2006 should be consistent with estimates madefor the same date under previous UK GAAP, unless there is evidence that thoseestimates were in error. 6.2 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 30 June 2006- equity at 31 December 2006- net income 30 June 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. 6.2.1 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 - 165Translation reserve c 25 (25) -Retained earnings d (340) 25 (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 176Reverse accumulated depreciation on media platform development from prior periods 79Take up accumulated amortisation charge on media platform development for prior periods (79) --------Total impact - increase intangibles 176 --------(b) Property, Plant & EquipmentReallocation of media platform development to Intangibles (176) --------Total impact - decrease Property, Plant & Equipment (176) --------(c) Translation reserveReset translation reserve to nil per IFRS exemption adopted (25) --------Total impact - decrease translation reserve (25) --------(d) Retained earningsReverse accumulated depreciation on media platform development from prior periods (79)Take up accumulated amortisation charge on media platform development for prior periods 79Reset translation reserve to nil per IFRS exemption adopted 25 --------Total impact - increase retained earnings 25 -------- 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'spolicies as shown in note 2.5. As the same useful life applies the net effect ofreversing depreciation 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. 6.2.2 Reconciliation of equity at 30 June 2006 Notes UK GAAP Effect of IFRS transition to IFRS £000's £000's £000'sAssetsNon-CurrentGoodwill a 1,931 (766) 1,165Other intangible assets b 55 1,897 1,952Property, plant and equipment c 907 (489) 418Available-for-sale asset 165 - 165 -------- -------- -------- 3,058 642 3,700 CurrentTrade and other receivables 1,691 - 1,691Cash and cash equivalents 6,143 - 6,143 -------- -------- -------- 7,834 - 7,834 -------- -------- --------Total assets 10,892 642 11,534 -------- -------- --------EquityEquity attributable to shareholders ofMobile StreamsCalled up share capital 65 - 65Share premium 9,593 - 9,593Shares to be issued d 496 141 637Translation reserve e (55) (25) (80)Retained earnings f (1,868) (15) (1,883) -------- -------- -------- 8,231 101 8,332 -------- -------- --------Total equity 8,231 101 8,332 -------- -------- --------LiabilitiesNon-CurrentDeferred tax liabilities g - 528 528 -------- -------- -------- - 528 528 CurrentTrade and other payables h 2,636 13 2,649 Current tax liabilities 25 - 25 -------- -------- -------- 2,661 13 2,674 -------- -------- --------Total Liabilities 2,661 541 3,202 -------- -------- --------Total equity and liabilities 10,892 642 11,534 -------- -------- -------- Explanation of the effect of the transition to IFRS as at 30 June 2006 £000's(a) GoodwillReverse accumulated amortisation of goodwill for period to 30/06/06 17Re-calculation of goodwill on business combinations (1,324)Account for deferred tax liability on intangibles under business combinations 549Offset deferred tax asset on amortisation of intangibles under business combinations (21)Accrue expenses relating to business combinations - invoices received after reporting date 13 --------Total impact - decrease goodwill (766) --------(b) Other intangible assetsRecognise intangible assets on business combinations 1,465Take up amortisation of intangibles on business combinations for period to 30/06/06 (57)Reallocation of media platform development from Property, Plant & Equipment 489Reverse accumulated depreciation on media platform development from prior periods 141Take up accumulated amortisation charge on media platform development for prior periods (141) --------Total impact - increase other intangible assets 1,897 --------(c) Property, Plant & EquipmentReallocation of media platform development to Intangibles (489) --------Total impact - decrease Property, Plant & Equipment (489) --------(d) Shares to be issuedRe-calculate cost of shares to be issued on business combinations 141 --------Total impact - increase shares to be issued 141 --------(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 30/06/06 17Take up amortisation of intangibles on business combinations for period to 30/06/06 (57)Reverse depreciation on media platform development from prior periods (141)Take up amortisation charge on media platform development for prior periods 141Reset translation reserve to nil per IFRS exemption adopted 25 --------Total impact - decrease retained earnings (15) --------(g) Deferred tax liabilitiesAccount for deferred tax liability on intangibles under business combinations 549Offset deferred tax asset on amortisation of intangibles under business combinations (21) --------Total impact - increase deferred tax liability 528 --------(h) Trade and other payablesAccrue expenses relating to business combinations - invoices received after reporting date 13 --------Total impact - increase trade and other payables 13 Detailed explanatory notes: (i) Business combinations - Goodwill & Intangibles In accordance with the Group's accounting policies regarding the recognition ofintangible assets and goodwill (note 2.5) and in accordance with IFRS 3 BusinessCombinations, certain amounts previously classified as goodwill under UK GAAPhave been re-classified as intangibles under IFRS. Identifiable intangibleassets on business combinations (acquisitions) have been recorded at fair valueand have therefore increased intangible assets. This has in turn reduced theamount of goodwill recorded on business combinations. Under IFRS goodwill cannot be amortised, but instead must be tested annually forimpairment. Previously accumulated amortisation on goodwill has been reversedagainst retained profits. Intangible assets with a finite useful life areamortised over their 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 deferred taxliability and corresponding goodwill is reduced. In determining cost of business combinations, shares to be issued are to bevalued at the date of acquisition. Previously reported figures included the costof shares to be issued based on the share price at reporting date. This has beenamended to show the cost of shares at date of acquisition. An amendment has alsobeen posted for costs relating to acquisition that were incurred after thebalance sheet date, but are known with certainty. These costs have been shown asaccrued liabilities. (ii) Media platform development As per explanatory notes in 6.2.1 above. (iii) Translation reserve As per explanatory notes in 6.2.1 above 6.2.3 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 (1,194) 2,371Other intangible assets b 136 2,725 2,861Property, plant and equipment c 1,112 (644) 468Available-for-sale asset 382 - 382 -------- -------- -------- 5,195 887 6,082 CurrentTrade and other receivables 2,742 - 2,742Cash and cash equivalents 4,073 - 4,073 -------- -------- -------- 6,815 - 6,815 -------- -------- --------Total assets 12,010 887 12,897 -------- -------- --------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) (136) (2,110) -------- -------- --------Total equity 8,526 182 8,708 -------- -------- --------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 12,010 887 12,897 -------- -------- -------- 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 743Offset deferred tax asset on amortisation of intangibles under business combinations (93)Accrue 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 (1,194) -------(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 644Reverse accumulated depreciation on media platform development from prior periods 262Take up accumulated amortisation charge on media platform development for prior periods (262) -------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)Reverse depreciation on media platform development from prior periods (262)Take up amortisation charge on media platform development for prior periods 262Reset translation reserve to nil per IFRS exemption adopted 25 -------Total impact - decrease retained earnings (136) -------(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 (note 2.5) 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. Previously accumulated amortisation on goodwill has been reversedagainst retained profits. Intangible assets with a finite useful life areamortised over their 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 deferred taxliability and corresponding goodwill is reduced. In determining cost of business combinations, shares to be issued are to bevalued at the date of acquisition. Previously reported figures included the costof shares to be issued based on the share price at reporting date. This has beenamended to show the cost of shares at date of acquisition. An amendment has alsobeen posted for costs relating to acquisition that were incurred after thebalance sheet date, but are known with certainty. These costs have been shown asaccrued liabilities. (ii) Media platform development As per explanatory notes in 6.2.1 above. (iii) Translation reserve As per explanatory notes in 6.2.1 above. 6.2.4 Reconciliation of net income for six months ended June 2006 Notes UK GAAP Re-classification Effect of IFRS transition to IFRS £000's £000's £000's £000's Sales Revenue 3,353 - - 3,353Cost of Sales (1,329) - - (1,329) -------- -------- -------- --------Gross Profit 2,024 - - 2,024 Selling and marketing costs - (115) - (115)Administration expenses a (2,631) 160 (40) (2,511)Other operating expenses (1,292) (45) - (1,337) -------- -------- -------- --------Operating loss (1,899) - (40) (1,939) Finance costs (1) - - (1)Finance income 122 - - 122 -------- -------- -------- --------Loss before income tax (1,778) - (40) (1.818)Income tax expense 28 28 -------- -------- -------- --------Loss for period (1750) - (40) (1790) -------- -------- -------- -------- Explanation of the effect of the transition to IFRS as at 30 June 2006 £000's(a) Administration costsReverse amortisation of goodwill for period to 30/06/06 17Take up amortisation on business combinations for period to 30/06/06 (57)Reverse depreciation of media platform development for period to 30/06/06 62Take up amortisation of media platform development for period to 30/06/06 (62) --------Total impact - increase administration costs (40) -------- Detailed explanatory notes: (i) Business combinations - Goodwill & Intangibles As per explanatory notes in 6.2.2 above. (ii) Media platform development As per explanatory notes in 6.2.1 above. 6.2.5 Reconciliation of act 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 Sales 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 Profit (2,031) - (161) (2,192) Finance costs (14) - - (14)Finance income 237 - - 237 -------- ------- -------- -------Loss before income tax (1,808) - (161) (1.969) Income tax expense (176) (176) -------- ------- -------- -------Loss for period (1,894) - (161) (2,145) -------- ------- -------- ------- 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)Reverse depreciation of media platform development for period to 31/12/06 121Take up amortisation of media platform development for period to 31/12/06 (121) --------Total impact - increase administration costs (161) -------- Detailed explanatory notes: (i) Business combinations - Goodwill & Intangibles As per explanatory notes in 6.2.2 above. (ii) Media platform development As per explanatory notes in 6.2.1 above. 7. Segmental reporting Primary reporting format - geographical segments As at 30 June 2007, the Group is organised into 4 geographical segments: Europe,North America, Latin American, and Asia. All operations are continuing. The segment results for the 6 months ended 30 June 2007 are as follows: £000's Europe North Latin Asia Group America AmericaTotal gross segment sales 1,402 1,228 1,092 614 4,336 ----------------------------------------------------------------Operating loss (40) (84) (413) (123) (660)Finance costs - net 114Flotation/fundraising costs - --------Loss before income tax (546)Income tax expense (1) --------Profit for the period (547) -------- The segment results for the 6 months ended 30 June 2006 are as follows: £000's Europe North Latin Asia Group America America Total gross segment sales 1,475 1,004 855 19 3,353 ----------------------------------------------------------------Operating profit/(loss) (648) 118 6 (123) (647)Finance costs - net 121Flotation/fundraising costs (1,292) --------Loss before income tax (1,818)Income tax expense 28 --------Loss for the period (1,790) -------- The segment results for the 6 months ended 31 December 2006 are as follows: £000's Europe North Latin Asia Group America America Total gross segment sales 2,064 878 1,469 459 4,870 ----------------------------------------------------------------Operating loss 652 (323) (431) (147) (249)Finance costs - net 102Flotation/fundraising costs (4) --------Loss before income tax (151)Income tax expense (204) --------Loss for the period (355) -------- 8. Share capital Number of shares Ordinary shares Treasury Shares Total (000's) (000's) (000's) (000's) At 1 January 2006 502 502 - 502New share issues 78 78 - 78Forfeiture (63) (63) - (63) ---------------------------------------------------------------------- 517 517 - 517Bonus issue 24,840 24,840 - 24,840New share issues 7,562 7,562 - 7,562 ---------------------------------------------------------------------- Balance at 30 June 2006 32,919 32,919 - 32,919 ---------------------------------------------------------------------- New share issues 1,721 1,721 - 1,721 ---------------------------------------------------------------------- Balance at 31 December 2006 34,640 34,640 - 34,640 ---------------------------------------------------------------------- New share issues 915 915 - 915 ---------------------------------------------------------------------- Balance at 30 June 2007 35,555 35,555 - 35,555 ---------------------------------------------------------------------- The total number of shares issued is 35,555,224 (December 2006: 34,640,000) witha par value of £0.002 per share. All issued shares are fully paid. 9. Earnings per share Basic Basic earnings per share is calculated by dividing the profit attributable toequity holders of the Company by the weighted average number of ordinary sharesin issue during the period, excluding ordinary shares purchased by the Companyand held as treasury shares. 30 June 2007 30 June 2006 31 December 2006 Profit attributable to equity holders of the Company (£000's) (547) (1,790) (2,145) -----------------------------------------------Weighted average number of ordinary shares in issue (000's) 34,416 30,452 32,465 -----------------------------------------------Basic earnings per share (£ per thousand share) (15.89) (58.78) (66.07) ----------------------------------------------- Diluted Diluted earnings per share is calculated adjusting the weighted average numberof ordinary shares outstanding to assume conversion of all dilutive potentialordinary shares. The Company has only one category of dilutive ordinary shares:share options. The calculation is performed for the share options to determine the number ofshares that could have been acquired at fair value (determined as the averageannual market share price of the Company's shares) based on the monetary valueof the subscription rights attached to outstanding share options and the yet tobe recognised expenses in terms of the option. The number of shares calculatedas above is compared with the number of shares that would have been issuedassuming the exercise of the share options. Where there is a loss for the periodin question, there is no dilution applied. As the Group is showing a loss for all periods being reported, no dilution isapplicable, hence diluted earnings per share is the same as basic earnings pershare. 10. Cash flow statement The following non-cash flow adjustments have been made to the pre-tax result forthe year to arrive at operating cash flow: 30 June 2007 30 June 2006 31 December 2006 £000's £000's £000's Adjustments for:- depreciation, amortisation and impairment losses 522 155 539- share option issued 144 197 325- interest income (114) (122) (237)- interest expense - 1 14 ---------------------------------------------------Total 552 231 641 --------------------------------------------------- 11. 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 637 ======== 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 carrying £000's amount £000's Cash and cash equivalents 11 11Receivables 113 113Payables (105) (105) -------- --------No assets required 19 19 -------- -------- Purchase consideration settled in cash 1,389Cash and cash equivalents in subsidiary acquired (11) --------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 £3,000.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 477Identifiable intangible assets:- customer relationships (210) --------Goodwill 237 ======== 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 carrying £000's amount £000'sPayables (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 profit of £15,000. Hadthe acquisition taken place on 1 January 2006 it would have contributed £497,000of revenue 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: (690) --------- customer relationships 35- technology based assets 638- Non compete agreements 17 -------- Goodwill 849 ======== 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 685 Cash 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 £138,000. 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. 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