SPACETALK LTD — Annual Report 2004

Sep 29, 2004

(Formerly Ezylmage Limited)ABN 93 091 351 530 Financial Report as at 30 June 2004

CONTENTS

Directors' Report Independent Audit Report Directors' Declaration Statement of Financial Performance Statement of Financial Position Statement of Cash Flows Notes to the Financial Statements

DIRECTORS' REPORT

Your Directors present their report together with the financial report of the Company for the year ending 30 June 2004.

Directors

The names and qualifications of persons holding the position of Director of the Company, during the financial period and up to the date of this report are:-

Mark Fortunatow BSc BEc-Executive Chairman

Executive Chairman Mark Fortunatow, founder and chief executive of the Company's subsidiary MGM Wireless Holdings Pty Ltd. brings more than 13 years of senior executive management experience in marketing, engineering, information systems. finance and customer support.

Mr Fortunatow previously founded three successful technology-based enterprises. Linx Computer Systems (s developer and marketer of financial software). Timekeeping Australia (a leader in the Australian workforce management market) and Netline Technologies (a company designing engineering selling and distributing voice based mobile wireless solutions). accumulating substantial practical experience in the many disciplines required to successfully launch and sustainably grow a successful technology enterprise.

Mr Fortunatow's international experience includes establishing distribution networks in more than 15 countries, as well as successfully executing several strategic relationships and alliances, joint ventures and acquisitions.

He holds a degree of Bachelor of Science and Bachelor of Economics from Adelaide University.

Mr Fortunatow joined the board on 3 October 2003.

Mark Edwin Hurd BSc(Hons) - Executive Director

Mr Hurd is co-founder and Chief Technical Officer of MGM Wireless Holdings Pty Ltd.

He holds an honours degree in Mathematical and Computer Sciences and has received numerous awards for outstanding academic and software engineering achievements. He is the chief architect of MGM's technology.

A regular active contributor to Microsoft technical forums, Mr Hurd is sought after internationally by leading software engineers and corporations for his advice and software architecture expertise.

Prior to MGM, Mr Hurd was Chief Technical Officer at Netline Technologies, and before that held positions with Logica and Coopers and Lybrand and carried out numerous academic research projects.

In 1998, Mr Hurd co-founded Netline Technologies to design. Engineer, sell and distribute voice based mobile wireless solutions. The company achievements included Winner - Most outstanding Wireless Mobile Product.

Mr Hurd joined the board on 3 October 2003.

Richard Salvatore Sciano - Non-executive Director

Mr Sciano, 35, was born and educated in Western Australia. He has been involved in the Australian property investment and development industry for over 15 years. Mr Sciano is also the Executive Director of ASX-listed minerals explorer Golden State Resources Ltd, and a director of a number of private companies whose businesses are focused on property investment and development.

Phillip Sidney Redmond Jackson BJuris LLB MBA, FAICD - Chairman and Non-Executive Director

Mr Jackson is a barrister and solicitor with over 20 years experience in international business, including financing, project development and marketing, gained as both an external legal counsel and as an in-house counsel and manager with major international resources and technology companies, including Western Mining Corporation. He is a director of the Asia Pacific subsidiary of an international resource services company with revenues in excess of $10 billion pa. He has lived and worked in North America, Asia and the Middle East. He is a graduate of the University of Western Australia with degrees in Law and Business Administration, and is a fellow of the Australian Institute of Company Directors.

Mr Jackson resigned as a director on 3 October 2003.

DIRECTORS' REPORT

Peter Campbell Ruttledge BSc CA ASIA - Non-executive Director and Company Secretary

Mr Ruttledge is a chartered accountant with over 16 years experience in the administration of public companies. His international experience includes senior executive roles with Rank Xerox in London and Deloitte in Dublin. He is also Chief Financial Officer and Company Secretary of Dalrymple Resources NL, 40% owner of the Thunderbox Gold Mine in WA.

Mr Ruttledge resigned as a director and company secretary on 3 October 2003.

Principal Activity

The principal activity and focus of the Company's operations during the period was a single source provider of mobile messaging solutions for business enterprises.

Operating Results

The amount of the operating loss of the Company after income tax was $579,988 (2003: $751,351 - loss).

Dividends

Since the incorporation of the Company, no dividends have been paid by the Company or are recommended to be paid by the directors.

Review of Operations and Likely Developments in the Future

2004 was a turning point and an exceptional year for the Company. With the Ezyimage / MGM Wireless merger, change in the company's operations, a highly successful new product launch into the Education Markets, national expansion, and completion of many corporate initiatives, the year has been truly significant.

After successfully completing the Ezvimage / MGM Wireless merger, on October 1st, 2003, the company launched the first of its industry specific SMS messaging solutions.

MsgU™, an SMS communication solution designed specifically for schools to improve student attendance, was launched in South Australia after 14 months of comprehensive research & development, investment and planning.

The first South Australian schools to license the MsgU solution immediately and enthusiastically reported dramatic improvements in student attendance and, in the space of a few weeks, front-page newspaper stories across the country were hailing the system's success and commending the company for its innovation.

Within days of this media, the South Australian Premier, the Hon. Mike Rann, announced the Government would make available $1 million in additional funding for schools to address truancy and student retention, with the highest priority project being implementation of the MGM Wireless MsgU system.

The company is pleased to report that since then, more than half of all South Australian government high schools have now purchased licenses for MsgU, and the numbers continue to grow.

Having expanded sales channels nationwide during the year, we are pleased to report over 80 schools, geographically covering every mainland (excluding NT) state of Australia have now purchased MsgU. However, whilst impressive, this number still only represents 4% of the total Australian market size.

Extensive media coverage on MsqU and MGM Wireless in the Sydney Morning Herald, The Age, The Brisbane Courier Mail, Adelaide Advertiser, The West Australian, Channel 7 News, A Current Affair, numerous Radio Talkback shows, BBC Radio channel 5 (UK), and numerous educational publications further acknowledged the success of the product and the positive impact it is making on the next generation of Australians.

During the course of the year, MsqU was also independently proven by Governments, Education Departments and Schools nationally to deliver, within weeks of implementation, sustained improvements in student attendance and reductions in truancy by between 30-80%.

We are pleased to report the company has already achieved clear market leadership and dominates the Australian marketplace. MGM Wireless invented this technology, is pioneering a new market and industry, and achieving commercial success.

DIRECTORS' REPORT

From a social point of view, unfortunately, the truth remains that in our affluent Australian society, some 120,000 to 150,000 teenage kids are missing from school every day - that's the equivalent of 150 large schools being empty. Truancy is a first step in a downward spiral that often results in poor engagement in school activities and in students leaving school before completing their studies.

With every Australian high school costing an average of $11 million a year to run, the public is asking, "What is the point in our governments throwing money into an education system if the children aren't there?" On a political level, governments are beginning to acknowledge the Truancy epidemic.

Truancy - and its concomitant problems such as low retention rates, vandalism, shoplifting, unwanted teen pregnancy and crime - is a growing and somewhat hidden problem in Australia. Prime Minister John Howard recently announced that if reelected, the Liberal Party would move to base future $7 billion school funding conditional on schools publicly reporting on daily student attendance rates.

On September 3rd, 2004, Labor leader Mark Latham promised to invest $65 million over four years to help schools and teachers tackle student discipline and truancy.

The company is pleased to report that an independent estimate holds MsqU directly responsible for an additional 1 million days spent at school by Australian children since October 1st, 2003.

Financial Overview

The successful launch and market acceptance of new technology is always impressive, however the simultaneous achievement of commercial success is even more rewarding.

The return on investment for Schools purchasing MsgU is significant. Schools are generally funded by the number of enrolled students and attendance, in Australia, each student represents approximately $8000 in annual funding. Funding is generally continuously adjusted according to student numbers, with funding cuts as student numbers and attendance decrease. However the cost of absenteeism impacts not only on individual schools and families but also on Australia's future social and economic health. Students who are absent for two or more days each school month achieve 25% less in academic terms than their fellow students. Truancy is an indicator for petty and more serious crime, including theft, graffiti and vandalism.

By rapidly achieving a sustained improvement of 30-80% in daily attendance, the financial iustification for schools to invest in MsgU is solid. In fact, we often see Governments assisting schools through grants and other means to purchase our solution.

Providing schools with a solution that specifically address their needs, rather than just a product offering, means the company achieves strong margins.

In May 2004. MGM Wireless changed its pricing model to feature schools making payment not only for initial consulting and license fees, but also for ongoing annual license fees and communication charges.

This has had the effect of the company growing a significant ongoing income stream. By September 30th, 2004, this deferred income already grew to $120,000 and is expected to grow each quarter by $70,000 or more.

The company continues to grow from financial strength to strength, and highlights include:

• Achievement in first year sales (9 months) of $325,055.
• Quarter on quarter sales growth of 20-30%.
• Expected to move into trading profitability over the next 6-9 months.
• The company achieving $20,000 in deferred income for annual license fees which schools are contractually obliged to pay each year, Income will commence to be realised in May 2005.
• Approximately $70,000 (and growing quarterly at 20-30%) in additional deferred income is being accumulated each quarter for annual license fees.
• Sale of unmarketable share parcels.
• Share placement of $210,000.
• Sale of non-core investments.

DIRECTORS' REPORT

Innovation

The founders of MGM Wireless have a strong history in innovation. The MsgU solution is unique, and the company continuously develops enhancements, new features and functionality based on Customer feedback.

We are also pleased to inform shareholders the company has been working on a new product that will increase our competitiveness and raise the bar even further.

MsoU Watchlists™ has been in development since March 2004, and reflects the significant experience the company has achieved working with schools. It has been designed to deliver improvements in student attendance to even greater heights. It will break down the barriers and significantly enhance communication between Parents, Schools, and third parties even further.

Three schools have been scheduled for the Beta release program in the December 2004 quarter, and the company is confident this innovation will further strengthen our lead in the education market.

MGM Wireless has already lodged and received a patent for MsgU Watchlists, and it is worth noting that now four (4) separate Australian Patents protect the company's products and technology.

At all times, the company is committed to enhancing our flagship products through innovation to capitalise our commanding lead in the markets we serve.

Keeping the Customer Satisfied

Excellent products attract customers. Excellent experience with those products will keep customers for the long run, and this is a key factor in rapidly growing our business and outpacing future competition.

Whilst never losing sight that MGM Wireless is a technology and communications company, we know how to deliver services well and profitably. Recent Customer satisfaction surveys showed 100% of schools surveyed would recommend MGM Wireless to another school, and their experience with our consultants and professional services exceeded their expectations.

We take Customer satisfaction very seriously. We measure customer satisfaction and make sure they are pleased with our service outcome. We look for ways to improve the customer experience. For example, as a natural consequence of MGM Wireless offering highly sophisticated SMS messaging solutions to schools, customers encounter complex situations, Bringing these into balance requires a range of skills. We have developed advanced service methodologies for schools to specifically address these complexities that result in remarkable improvements in Parent engagement with the school.

MGM Wireless professional services cover the full spectrum from implementation support for successful start-up, to maintenance services that protect the Customers investment.

However, no matter what kind of service is involved, the goal is clear: We are interested in building long-term relationships with our Customers.

The Path Ahead

The company is exceptionally well placed and confident moving forward. We are the pioneer and innovator in this emerging and rapidly growing mobile phone messaging solutions for schools market.

In the coming year, we will move rapidly to expand our commanding lead and accelerate sales growth. We will continue our aggressive push into Australian markets nationally and simultaneously move on international markets.

Our value proposition of the MsqU for schools solution has never been better, the company never stronger and the market opportunity significant. We possess the vision, leadership, and financial capability and are confident that we will achieve our goals.

DIRECTORS' REPORT

Significant Changes in the State of Affairs

During the year the Company completed the acquisition of 100% of MGM Wireless Holdings Pty Ltd. the consideration for which was the allotment and issue of 59,000,000 ordinary fully paid shares. Further particulars on MGM Wireless Holdings Pty Ltd are included in the Review of Operations.

As a result of the acquisition of MGM Wireless Holdings Pty Ltd, the company changed its name from "Ezyimage Limited" to "MGM Wireless Limited.

On 28 May 2004, 14,000,000 ordinary shares were issued at an issue price of 1.5 cents per share, thereby raising $210,000.

In the opinion of the Directors, there were no other significant changes in the state of affairs of the Company that occurred during the financial period under review, not otherwise disclosed in these financial statements and Directors' report.

Events subsequent to end of the financial year

Since the end of the financial year under review and the date of this report, there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to significantly affect the operations of the consolidated entity, in subsequent financial years, other than as detailed in the Review of Operations

Likely Developments

Comments on likely developments and expected results have been covered generally herein and in the Review of Operations.

Share Options

No options were issued during the year.

Directors' Interests in Shares and Options of the Company

Directors' interests in equity instruments of the Company are set out in Note 15 to the financial statements.

Directors' and Senior Executives' Remuneration

The remuneration of directors and senior executives are as disclosed in Note 15 to the financial report.

Meetings of Directors

The attendance of Directors at the meetings of the Company's Board of Directors held during the year is as follows:

Directors	Number of MeetingsHeld whilst in office	Number of meetingsattended
M Fortunatow
M Hurd
R Sciano	9
P Jackson
P Ruttledge

Corporate Governance Practices

The Company's corporate governance practices are set out in the Corporate Governance Statement contained in this Financial Report.

DIRECTORS' REPORT

Officers' Indemnity and Insurance

The Company has not, during or since the financial year, in respect of any person who is or has been an officer or auditor of the Company or a related body corporate:

• indemnified or made any relevant agreement for indemnifying against a liability incurred as an officer, including costs and expenses in successfully defending legal proceedings; or
• paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer for the costs or expenses to defend legal proceedings.

Environmental Requiation

The Company's operations are not regulated by any significant environmental regulation under a Law of the Commonwealth or of a State or Territory.

Legal Proceedings

No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

Signed in accordance with a resolution of directors

Mark foot

Mark Fortunatow Executive Chairman Signed at Perth on 30 September 2004

CORPORATE GOVERNANCE STATEMENT

CORPORATE GOVERNANCE

Board of Directors

The Board's primary role is the protection and enhancement of long-term shareholder value.

To fulfill this role, the Board is responsible for oversight of the management and the overall corporate governance of the Company including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of separate or special committees at this time. The Board as a whole is able to address the governance aspects of the full scope of the Company's activities and to ensure that it adheres to appropriate ethical standards.

ASX Principles of Good Corporate Governance

The Board has reviewed its current practices in light of the ASX Principles of Good Corporate Governance and Best Practice Guidelines 2004 with a view to making amendments where applicable after considering the Company's size and resources it has available.

As the Company's activities develop in size, nature and scope, the size of the Board and the implementation of any additional formal corporate governance committees will be given further consideration.

During the financial year the Company has complied with each of the 10 Essential Corporate Governance Principles and the corresponding Best Practice Recommendations, other than in relation to the matters specified below:

Principle	Recommendation	Notification of Departure	Explanation for Departure
Ref	Ref
1	1.1	Formalisedisclosetheandlfunctions reserved to the Boardthosedelegatedandtomanagement	As from 28 June 2004 the Company achievedcompliance. Prior to this time the functions weredelegated and practised but without formalisationand disclosure.
$\overline{2}$	2.1	Majority of Board not independent	The size and scope of the Company's activitiesdoes not justify the cost of appointing twoadditional independent directors
2	2.2 & 2.3	Chairman is not independent	The Board considers that, at this stage of theCompany's development, the executive rolecarried out by the Chairman is in the best interestsof the Company.
$\overline{2}$	2.4	The Company does not have aNomination Committee	The role of the Nomination Committee has beenassumed by the full Board. The size and scope ofthe Company's activities does not justify theestablishment of such a Committee.
3	3.183.2	There was no written code offordirectorsconductandexecutives or a written securitiestrading policy	On 28 June 2004 the Company adopted a code ofconduct for executives and a written securitiestrading policy. These documents reflect theexisting but undocumented practices of theCompany's directors, executives and employeesin this area.
4	4.2.4.3 & 4.4	The Company does not have anAudit Committee	The role of the Audit Committee has beenassumed by the full Board. The size and scope ofthe Company's activities does not justify theestablishment of such a Committee.
4	4.5	No Audit Committee charter	All matters concerning the Company's financialstatements were scrutinised and determined bythe Board. The Company utilises the services ofan independent audit firm that is subject to partnerrotation.
5	5.1	Written policies and proceduresto ensure compliance with ASXRuleListinadisclosurerequirements were adopted on 28June 2004	Prior to 28 June 2004 the Companyhadundocumented policies for compliance.

CORPORATE GOVERNANCE STATEMENT

6	6.1	Formalisationοfаcommunicationswithstrategyshareholders	In line with adherence to continuous disclosurerequirements of ASX all shareholders are keptinformed of major developments affecting thecompany. This disclosure is through regularshareholder communications including the AnnualReport, Half-Year Report, Quarterly Reports andthe distribution of specific releases covering majortransactions or events. The Company's auditorsattend all shareholders' meetings.
7	7.1	The Board or appropriate boardcommitteeshouldestablishpolicies of risk oversight andmanagement	While the Company does not have formalisedpolicies on risk management the Board recognisesits responsibility for identifying areas of significantbusiness risk and for ensuring that arrangementsare in place for adequately managing these risks.This issue is regularly reviewed at Boardmeetings.
8	8.1	The process for evaluation of theBoard, individual directors andkey executives was not disclosed	The Company will consider formal procedures forevaluation in its 2004/2005 financial year.
9	9.2	The Company does not have aRemuneration Committee	The role of the Remuneration Committee hasbeen assumed by the full Board. The size andscope of the Company's activities does not justifythe establishment of such a Committee. Nodirector participated in any deliberation regardinghis own remuneration or related issues.
9	9.5	RemunerationCommitteeNo.Charter	All matters of remuneration were scrutinised byand determined by the Board.
10	10.1	There was no disclosed code ofconduct for the Company	On 28 June 2004 the Company adopted a codethe existingbusinessbasedon.practicespromoted in the Company.

Skills, Experience, Expertise and Term of Office of each Director

A profile of each director containing the applicable information is set out in the Directors' Report.

Identification of Independent Directors

The independent director of the Company is Mr R Sciano. Mr Sciano meets all the criteria for independence as set out in Box 2.1 of the ASX Principles and Recommendations ("Independence Criteria").

Independent Professional Advice

If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office as a director, then, provided the director first obtains approval for incurring such expense form the chairperson, the Company will pay the reasonable expenses associated with obtaining such advice.

Appointments to Other Boards

Directors are required to take into consideration any potential conflicts of interest when accepting appointments to other Boards.

Ethical Standards

All Directors and employees are expected to act with the utmost of integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

Conflict of Interest

In accordance with the Corporations Act 2001 and the Company's Constitution, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes that a significant conflict exists the Director concerned does not receive the relevant board papers and is not present at the meeting whilst the item is considered,

CORPORATE GOVERNANCE STATEMENT

Directors Dealings in Company Shares

The Constitution permits Directors to acquire shares in the Company. Company policy prohibits Directors from dealing in Company shares whilst in possession of price sensitive information. Directors must notify the Company Secretary once they have bought or sold shares in the Company or exercised options over ordinary shares. In accordance with the provisions of the Corporations Act 2001 and the Listing Rules of the Australian stock Exchange, the Company on behalf of the Directors must advise the Australian Stock Exchange of any transactions conducted by them in shares and/or options in the Company.

Nomination Committee

The full Board carries out the functions of the Nomination Committee. The Board did not meet formally as the Nomination Committee during the financial year, however any relevant matters were discussed on as-required basis from time to time during regular meetings of the Board.

Audit Committee

The Company does not have an Audit Committee. The role of the Audit Committee has been assumed by the full Board.

The Audit Committee will meet bi-annually in the future (in respect of the full year and half year reports).

Performance Evaluation of the Board and its Members

During the financial year an evaluation of the Board and its members was not formally carried out. To date, there has been no formal process in place for performance evaluation. During the reporting period the Chairman informally carried out an evaluation of the Board.

Company's Remuneration Policies

Remuneration levels for executives are competitively set to attract the most qualified and experienced candidates, taking into account prevailing market conditions and individual's experience and qualifications.

Each of the non-executive directors receives a fixed fee for their services as directors. There is no direct link between remuneration paid to any of the directors and corporate performance such as bonus payments for achievement of certain key performance indicators.

Existence and Terms of any Schemes for Retirement Benefits for Non-Executive Directors

There are no retirement benefits for non-executive directors.

RSM Bird Cameron Partners

Chartered Accountants

8 St Georges Terrace Perth WA 6000 GPO Box R1253 Perth WA 6844 T+61 8 9261 9100 F +61 8 9261 9101 www.rsmi.com.au

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF MGM WIRELESS LIMITED

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements and the directors' declaration for MGM Wireless Limited (the Company) and the consolidated entity, for the year ended 30 June 2004. The consolidated entity comprises both the Company and the entities it controlled during that year.

The directors of the Company are responsible for preparing a financial report that gives a true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit Approach

We conducted an independent audit of the financial report in order to express an opinion on it to the members of the Company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the Company's and the consolidated entity's financial position and of their performance as represented by the results of their operations and cash flows.

'Liability is limited by the Accountants' Scheme pursuant to the NSW Professional Standards Act 1994

Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036

10

RSM Bird Cameron Partners is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms.

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We formed our audit opinion on the basis of these procedures, which included:-

• examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report: and
• assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the Company.

Independence

We are independent of the Company and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit Opinion

In our opinion, the financial report of MGM Wireless Limited is in accordance with:

• $(a)$ the Corporations Act 2001, including:
  • giving a true and fair view of the financial position of MGM Wireless Limited and the $(i)$ consolidated entity at 30 June 2004 and of their performance for the year ended on that date; and
  • $(ii)$ complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
• $(b)$ other mandatory financial reporting requirements in Australia.

RSM Bird Cameron Partners

RSM BIRD CAMERON PARTNERS Chartered Accountants

Suulvitt

Perth, WA Dated: 30 September 2004

S C CUBITT Partner

STATEMENT BY DIRECTORS

The Directors declare that the financial statements and notes set out on pages 13 to 30 are in accordance with the Corporations Act 2001 and:

• comply with Accounting Standards, other mandatory professional reporting requirements and the $(a)$ Corporations Regulations 2001;
• $(b)$ give a true and fair view of the Company's financial position as at 30 June 2004 and of its performance, as represented by the results of its operations and its cash flows, for the year ended 30 June 2004; and

In the Directors' opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

Mark for

M Fortunatow Director

Signed at Perth on the 30th day of September 2004

STATEMENT OF FINANCIAL PERFORMANCE

For the year ended 30 June 2004

		Consolidated		Parent Entity
	Note	2004$	2003$	2004$	2003S
Revenues from operating activities		325,055	1,032	325,055	1,032
Revenues from non-operating activities		81,193	46,342	81,193	46,342
Total revenues from ordinary activities	2	406,248	47,374	406,248	47,374
Cost of salesDoubtful debtsBorrowing costsDepreciation and amortisation expenseAdvertising and marketingConsulting expensesCorporate and administration expensesEmployee benefit expensesCost of investments soldMerger and acquisition costsOther expenses from operating activities		(5, 492)(15,500)(206)(162, 521)(77, 291)(67, 385)(184, 771)(292, 636)(24, 084)(156, 350)	(98, 512)(544, 570)(84,999)(57,994)(12,650)	(5, 492)(15,500)(206)(41, 621)(77, 291)(67, 385)(184, 766)(292, 636)(24, 084)(156, 350)	(98, 512)(544, 570)(84,999)(57, 994)(12, 650)
Loss from ordinary activities before income taxexpense	3	(579, 988)	(751, 351)	(459, 083)	(751, 351)
Income tax expense relating to ordinary activities
Loss from ordinary activities after income taxexpense	4	(579, 988)	(751, 351)	(459, 083)	(751, 351)
Share issues costs		(27,000)		(27,000)
Total revenues, expenses and valuationadjustments attributable to members of MGMWireless Limited and recognised directly in equityTotal changes in equity other than those resulting		(27,000)		(27,000)
from transactions with owners as owners		(606, 988)	(751, 351)	(486, 083)	(751, 351)
Basic loss per share (cents per share)	18	(0.56)	(1.27)
Diluted loss per share (cents per share)	18	(0.56)	(1.27)

The accompanying notes form part of these financial statements

STATEMENT OF FINANCIAL POSITION

As at 30 June 2004

		Consolidated		Parent Entity
	Note	2004$	2003$	2004$	2003$
CURRENT ASSETSCash assetsReceivablesTax assetOther current assets	16(a)567	378,760155,163548	704,06615012,9933,440	377,760155,163548	704,06615012,9933,440
TOTAL CURRENT ASSETS		534,471	720,649	533,471	720.649
NON CURRENT ASSETSOther financial assetsReceivablesPlant and equipmentIntangible assets	85910	88.681693,700	20,10767,27571,000	767,00540,00054.68142,600	20,10767,27571,000
TOTAL NON CURRENT ASSETS		782,381	158,382	904,286	158,382
TOTAL ASSETS		1,316,852	879,031	1,437,757	879,031
CURRENT LIABILITIESPayablesProvisions	1112	70,0127,500	9,703	70,0127,500	9,703
TOTAL LIABILITIES		77,512	9,703	77,512	9.703
NET ASSETS		1,239,340	869,328	1,360,245	869,328
EQUITYContributed equityAccumulated losses	1314	3,731,664(2, 492, 324)	2,781,664(1,912,336)	3,731,664(2, 371, 419)	2,781,664(1,912,336)
TOTAL EQUITY		1,239,340	869,328	1,360,245	869,328

The accompanying notes form part of these financial statements

STATEMENT OF CASH FLOWS

For the year ended 30 June 2004

		Consolidated		Parent Entity
	Note	2004S	2003S	2004S	2003S
Cash flows from operating activitiesReceipts from customersPayments to suppliers and employeesInterest receivedInterest and other costs of finance		154.542(697, 347)19,771(206)	18,464(836,041)56,182	154.542(697, 347)19,771(206)	18.464(836, 041)56,182
Net cash used in operating activities	16(b)	(523, 240)	(761, 395)	(523, 240)	(761, 395)
Cash flows from investing activitiesPayments for other financial assetsProceeds from sale of investmentsPayments for plant and equipmentNet cash on acquisition of controlled entity		58,538(4,604)1,000	(20, 102)(1,494)	58.538(4,604)	(20, 102)(1,494)
Net cash provided by/(used in) investing activities		54,934	(21, 596)	53,934	(21, 596)
Cash flows from financing activitiesProceeds from issue of sharesExpenses of share issuesRepayment of borrowings		210,000(27,000)(40,000)		210,000(27,000)(40.000)
Net cash provided by financing activities		143,000		143,000
Net increase/ (decrease) in cash heldCash held at the beginning of the financial year		(325, 306)704,066	(782, 991)1,487,057	(326, 306)704,066	(782, 991)1,487,057
Cash held at the end of the financial year	16(a)	378,760	704,066	377,760	704.066

The accompanying notes form part of these financial statements

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.

$(a)$ Basis of preparation

The financial report is a general purpose financial report that has been prepared in accordance with Accounting Standards, other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) and the Corporations Act 2001.

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non current assets. Cost is based on the fair values of the consideration given in exchange for assets.

The financial report has been prepared on a going concern basis taking to account the following factors:

Increased sales revenue subsequent to balance date in the period in the period to the date of these financial statement, from the MsoU™ platform, leading to projected profitable trading during the course of the vear ended 30 June 2005:

Contributing to the above trading performance, the company commencing to receive deferred annual license fee revenue in May 2005, estimated to be $120,000 annually; and

The future appointment of licensed operators under agreements whereby for each agreement entered into, $150,000 is payable to the company to distribute the MsqU™ platform.

In consideration of the above matters, the Directors believe the going concern basis to be appropriate in the preparation of the financial statements.

The accounting policies have been consistently applied, unless otherwise stated.

$(b)$ Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of MGM Wireless Limited (the parent entity) and all entities which MGM Wireless Limited controlled from time to time during the vear and at balance date.

Information from the financial statements of controlled entities is included from the date the parent entity obtains control until such time as control ceases. Where there is a loss of control of a controlled entity. the consolidated financial statements include the results for the part of the reporting period during which the parent entity has control.

Acquisitions of entities are accounted for using the purchase method of accounting.

The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line dissimilar accounting policies which may exist.

All inter-company balances and transactions have been eliminated in full on consolidation.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

$\overline{1}$ . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

$(c)$ Income tax

The company adopts the liability method of tax effect accounting whereby the income tax expense shown in the statement of financial performance is based on the operating profit before income tax adjusted for any permanent differences.

Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of operating profit before income tax and taxable income, are brought to account as either provision for deferred income tax or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit. The amount of these benefits is based on the assumption that no adverse change will occur in income tax legislation and the anticipation that the company will derive sufficient future assessable income and comply with the conditions of deductibility imposed by the law to permit a future income tax benefit to be obtained.

$(d)$ Cash and cash equivalents

Cash on hand and in banks and short-term deposits are stated at nominal value.

For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdraft.

Trade and other receivables $(e)$

Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate of doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

Receivables from related parties are recognised and carried at the nominal amount due. Interest is taken up as income on an accrual basis.

$(f)$ Investments

Investments in controlled entities are valued in the parent entity's financial statements at cost less amounts written off for permanent diminution in the value of investments.

All other non-current investments are carried at the lower of cost and recoverable amount.

Plant and equipment $(q)$

Plant and equipment are brought to account at cost, less where applicable, any accumulated depreciation. The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employed and subsequent disposal. The expected net cash flows have not been discounted to present values in determining recoverable amount.

$(h)$ Intangible assets

Intellectual property rights and website development costs are carried at cost and amortised on a straight line basis over the period of the expected benefit, not exceeding five years.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

$\mathbf{1}$ . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Recoverable amount of non-current assets $(i)$

The carrying amounts of non-current assets valued on a cost basis, including the intellectual property of the MSGU™ Messaging System ('the system'), are reviewed to determine whether they are in excess of their recoverable amount at reporting date. If the carrying amount exceeds its recoverable amount, the asset is written down to the lower amount. The write-down is expensed in the reporting period.

The Company's and consolidated entity's financial statements have been prepared taking into account the Directors' current assessment of the prospects for successful development, deployment and the commercialisation of the Company's and consolidated entity's messaging system. Recoverability of the Company's and consolidated entity's recorded amounts for non-current assets depends on the future events which involve risk and uncertainties.

These events include consumer acceptance of the messaging system and the achievement of the Company's and consolidated entity's business forecasts. The Directors have carefully considered the above factors and have reviewed the progress of the Company and consolidated entity in achieving these business plans and forecasts to date. At this time the Directors are of the view that the outlook for continued successful development, deployment and commercialisation of the Company's and consolidated entity's technology is positive and that the recorded amounts of the Company's and consolidated entity's non-current intangible assets are not stated in excess of their recoverable amounts. The Directors will continue to regularly monitor progress against plans and, where necessary, any required write-downs in the carrying value of these assets will be made.

$\theta$ Trade and other payables

Liabilities for trade creditors and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity.

Payables to related parties are carried at the principal amount. Interest, when charged, by the lender, is recognised as an expense on an accruats basis.

$(k)$ Employee benefits

Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave and long service leave

Liabilities arising in respect to wages and salaries, annual leave and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefits are measured at the present value of the estimated future cash outflow to be made in respect of services provided employees up to the reporting date. In determining the present value of future cash outflows, the interest rates attaching to government quaranteed securities which have terms to maturity approximating the terms of the related liability are used.

$(1)$ Contributed equity

Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in the proceeds received.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) 1.

$(m)$ Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of Goods Control of the goods has passed to the buyer.

Interest

Control of a right to receive consideration for the provision of, or investment in, assets has been attained.

Dividends

Control of a right to receive consideration for the investment in assets is attained, usually evidenced by approval of the dividend at a meeting of shareholders.

$(n)$ Eamings per share

Basic earnings per share (EPS) is calculated by dividing the net profit attributable to the Company for the reporting period, by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue

Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after-tax of financing costs associated with dilutive potential ordinary shares and the effect of revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus issues.

Goods and Services Tax (GST) $(0)$

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST.

$(p)$ Comparative figures

Where required by Accounting Standards, comparative figures have been adjusted to conform with changes in presentation for current financial year.

International Financial Reporting Standards $(q)$

Australia is currently preparing for the introduction of International Financial Reporting Standards (IFRS) effective for financial years commencing 1 January 2005. This requires the production of accounting data for future comparative purposes at the beginning of the current financial year, being 1 July 2004. The adoption of Australian equivalents to IFRS will be first reflected in the consolidated entity's financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006.

The Company's Board of Directors, along with its auditors, are continuing to assess the significance of these changes and prepare for their implementation. This process involves evaluating the key differences in accounting policies and their financial impact, and identifying the changes to the company's financial reporting systems.

Set out below are the key areas where accounting policies will change and may have an impact on the financial report of the Company. At this stage the Company has not been able to reliably quantify the impacts on the financial report.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

International Financial Reporting Standards (cont.) $(q)$

Internally Generated Brands

Under the pending AASB 138: Intangible Assets, internally generated brands may not be capitalised to the statement of financial position, but should be expensed in the period in which they are incurred. Current accounting policy is to capitalise these costs and amortise them over the period in which their benefit is expected to be realised. The result of this change will be to derecognise the patents and trademarks that currently are recorded as intangible assets, with an adjustment being made to opening retained earnings.

Research and Development Expenditure

Pending standard AASB 138: Intangible Assets further requires that costs associated with research be expensed in the period in which they are incurred. In terms of current policy, research costs are capitalised to the statement of financial position where it is expected beyond any reasonable doubt that sufficient future benefits will be derived so as to recover these deferred costs.

Classification of Financial Instruments

Under AASB 139 Financial Instruments: Recognition and Measurement, financial instruments will be required to be classified into one of five categories which will, in turn, determine the accounting treatment of the item. The classifications are loans and receivables - measured at amortised cots, held to maturity - measured at amortised cost, held for trading - measured at fair value with fair value changes charged to net profit or loss, available for sale - measured at fair value with fair changes taken equity and non-trading liabilities - measured at amortised cost. This will result in a change in the currentaccounting policy that does not classify financial instruments. The future financial effect of this change in accounting policy is not yet known as the classification and measurement process has not yet been fully completed.

Impairment of Assets

Under the Australian equivalent to IAS 36 Impairment of Assets the recoverable amount of an asset is determined as the higher of the net selling price and value in use. This will result in a change in the consolidated entity's current accounting policy which determines the recoverable amount of an asset on the basis of net cash flows. Under the new policy it is likely that impairment of assets will be recognised sooner and that the amount of write-downs will be greater. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because the conditions under which impairment will be assessed are not yet known.

Share based payments

Under AASB 2 Share based Payments, the Company will be required to determine the fair value of options issued to employees as remuneration and recognise an expense in the Statement of Financial Performance. This standard is not limited to options and also extends to other forms of equity based remuneration. It applies to all share-based payments issued after 7 November 2002 which have not vested as at 1 January 2005. Reliable estimation of the future financial effects of this change in accounting policy is impracticable as the details of future equity bases remuneration plans are unknown.

Income faxes

Under the Australian equivalent to IAS 12 Incomes Taxes, the Company will be required to use a balance sheet liability method which focuses on the tax effects of transactions and other events that affect amounts recognised in either the Statement of Financial Position or a tax-based balance sheet. The most significant impact will be the recognition of a deferred tax liability in relation to the asset revaluation reserve. Previously, the capital gains tax effects of asset revaluations were not recognised. It is not expected that there will be any further material impact as a result of adoption of this standard.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

		Consolidated		Parent Entity
		2004S	2003S	2004S	2003S
2.	REVENUE FROM ORDINARYACTIVITIES
	Revenue from operating activitiesSales revenueRevenue from outside of operating activities	325,055	1,032	325,055	1,032
	Sale of investmentsInterestOther income	58,53819,7712,884	46,342$\blacksquare$	58,53819,7712,884	46,342
	Total revenue from ordinary activities	406,248	47,374	406,248	47,374
3.	EXPENSES AND LOSSES/(GAINS)
	Depreciation of plant and equipmentAmortisation of intangibles	19,221143,300	16,71281,800	13,22128,400	16,71281,800
	Total depreciation and amortisation expense	162,521	98,512	41,621	98,512
	Doubtful debts	15,500		15,500
	Loss on sale of plant and equipmentProfit on sale of investments	3,977(38, 431)	$\tilde{\phantom{a}}$	3,977(38, 431)
	Auditor's remunerationAudit and review of financial reports	7,500	3,500	7,500	3,500
4.	INCOME TAX EXPENSE
	The prima facie tax on the loss fromordinary activities is reconciled toincome tax expenses as follows:
	Loss from ordinary activities	579,988	751,351	459.083	751,351
	Prima facie tax benefit at 30%$(2003:30%)$	173,996	225,405	137,725	225,405
	Less tax effect of non-deductibleExpenses	(71, 226)	(2, 373)	(36, 756)	(2, 373)
	Less tax effect of future income taxbenefits not brought to account	(102, 770)	(223, 032)	(100, 969)	(223, 032)
	Income tax benefit relating to ordinaryactivities

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

INCOME TAX EXPENSE (Cont.) $\overline{4}$

No income tax is payable by the company as it incurred a loss for the year for income tax purposes.

Losses for income tax unrecouped at balance date amounted to approximately $2,318,687 (2003: $1,976,119) (subject to confirmation by the Commissioner of Taxation). The future income tax benefit of $695,606 (2003: $592,836) which may be derived from such losses has not been carried forward as an asset in the statement of financial position and will only be obtained if:

• the company derives future assessable income of a nature and of an amount sufficient to enable the $(a)$ benefit from the deductions for the loss to be realised;
• $(b)$ the company continues to comply with the conditions for deductibility imposed by the law; and
• no changes in tax legislation adversely affect the company in realising the benefit from the deductions for $(c)$ the losses.

	Consolidated		Parent Entity
	2004$	2003$	2004$	2003$
RECEIVABLES
CurrentTrade debtorsLess: Provision for doubtful debts	170,663(15,500)	150$\mathbf{u}$	170,663(15,500)	150
	155,163	150	155,163	150
Non-CurrentAmount owed by controlled entity			40,000

Terms and conditions relating to the above financial instruments:

• Trade debtors are non-interest bearing and generally on 30 day terms. $\left( i\right)$
• λ'n Amount receivable from the controlled entity are non-interest bearing and repayable on request from the parent entity.

TAX ASSET 6.

$\overline{I}$

GST refundable	$\bullet$	12.993	$\bullet$	12,993
OTHER CURRENT ASSETS
Prepayments	548	3.440	548	3,440

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

			Consolidated			Parent Entity
			2004$	2003$	2004S	2003$
8.	OTHER FINANCIAL ASSETS
	Shares in unlisted controlled entitiesShares in listed parent entity			520,10220,107	767,005767,005	520,10220,107
	Market value of listed shares			27,510		27,510
	Controlled entities:
	Name of entity	Date of Acquisition	Country ofIncorporation	Class ofShares	EquityHolding	Cost of ParentEntity'sInvestment
	MGM Wireless Holdings Pty LtdEzyalbum Pty LtdEzyauto Pty LtdEzyrealty Pty LtdEzytours Pty LtdLand Fund Pty Ltd	8 October 20037 July 20007 July 20007 July 20007 August 200031 January 2002	AustraliaAustraliaAustraliaAustraliaAustraliaAustralia	OrdinaryOrdinaryOrdinaryOrdinaryOrdinaryOrdinary	100%100%100%100%100%100%	767,00011111767,005
			Consolidated			Parent Entity
			2004$	2003$	2004$	2003s
9.	PLANT AND EQUIPMENT
	Plant and equipmentCostAccumulated depreciation		149,893(61, 212)	111,086(43, 811)	109,893(55, 212)	111,086(43, 811)
	Total written down amount		88,681	67,275	54,681	67,275
	Reconciliation of the carrying amounts ofplant and equipment at the beginningand end of the current and previousfinancial year:
	Plant and equipmentOpening balanceAdditionsDisposalsDepreciation		67,27544,604(3, 977)(19, 221)	82,4931,494(16, 712)	67,2754,604(3, 977)(13,221)	82,4931,494(16, 712)
	Closing balance		88,681	67,275	54,681	67,275

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

		Consolidated		Parent Entity
		2004S	2003$	2004$	2003S
10.	INTANGIBLE ASSETS
	Intellectual Property - MSGU™CostAccumulated amortisation	766,000(114,900)651,100	$\tilde{\phantom{a}}$u.	۰$\bullet$
	Website development expenditureCostAccumulated amortisation	142,000(99, 400)42,600	142,000(71,000)71,000	142,000(99, 400)42,600	142,000(71,000)71,000
	Licence feeCostAccumulated amortisation	÷	49,000(49,000)u.	$\bullet$	49,000(49,000)
		693,700	71,000	42,600	71,000
	The basis of recovery of the MsgU™platform is disclosed in Note 1(i).
11.	PAYABLES
	Trade creditors and accrualsOther corporationsDirectors and director related entitiesTax liability	37,41221,76310,837	9,703u,	37,41221,76310,837	9,703
		70,012	9,703	70,012	9,703

Trade creditors are non-interest bearing and are normally settled on 30 day terms.

$12.$ PROVISIONS

J.

Current
Employee benefits	.500	'.500

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

				Consolidated		Parent Entity
			Note	2004S	2003$	2004S	2003$
13.		CONTRIBUTED EQUITY
	(a)	Issued and paid up capital
		Ordinary shares, fully paid		3,731,664	2,781,664	3,731,664	2,781,664
	(b)	Movement in shares on issue		Number	2004	Number	2003
		Balance at beginning of yearIssue at 1.3 cents - Acquisition of		59,301,690	S2,781,664	59.301,690	$2,781,664
		MGM Wireless LimitedCash issue at 1.5 centsExpenses of issue	$\left( i\right)$(i)	59,000,00014,000,000	767,000210,000(27,000)
		Balance at end of year		132,301,690	3,731,664	59,301,690	2,781,664

• $(i)$ On 8 October 2003, 59,000,000 ordinary shares were issued as consideration for acquisition of 100% of MGM Wireless Holdings Pty Ltd. The value placed on the issue was the market price at the date of entering into the acquisition agreement.
• On 28 May 2004, 14,000,000 ordinary shares were issued at an issue price of 1.5 cents per share, $(ii)$ thereby raising $210,000.
• Share Options $(c)$

• 14,103,380 listed options expiring 30 November × 2010 at an exercise price of 20 cents.
• 5,100,000 unlisted options expiring 31 December ň 2010 at an exercise price of 20 cents.
• (d) Terms and conditions of contributed equity

Ordinary shares have the right to receive dividends as declared and, in the event of the winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holders to one vote, either in person or by proxy, at a meeting of the company.

		ConsolidatedParent Entity
	2004S	2003s	2004S	2003ŝ
ACCUMULATED LOSSES
Balance at beginning of yearNet loss attributable to members	(1,912,336)(579.988)	(1, 160, 985)(751.351)	(1,912,336)(459.083)	(1,160,985)(751, 351)
Balance at end of year	(2,492,324)	(1.912.336)	(2.371.419)	(1.912.336)

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

$15.$ DIRECTOR AND EXECUTIVE DISCLOSURES

Directors

Executive Chairman M Fortunatow (Appointed 3 October 2003)

Executive Director - Technical M Hurd (Appointed 3 October 2003)

Non Executive Director R Sciano P Jackson (Resigned 3 October 2003) P Ruttledge (Resigned 3 October 2003)

Executive (other than directors) with the greatest authority for strategic direction and management

As the Board of the Company has total authority for the strategic direction and management of the consolidated entity, no person within the consolidated entity has been classified as a "specified executive".

Details of remuneration

Details of the remuneration of each director of MGM Wireless Limited, including their personally-related entities, are set out in the following table.

Director	Year	Primary		Post Employment	Equity	Other
		Salary andfees	CashBonus	Superannuation	Options		Total
				$	Ś.	s
M Fortunatow	2004	103,273					103,273
	2003
M Hurd	2004	64,364					64,364
	2003
R Sciano	2004	35,000					35,000
	2003	26,800					26,800
P Jackson	2004	5,625					5,625
	2003	24,375	w			$\overline{\phantom{a}}$	24,375
P Ruttledge	2004	5,625	$\overline{\phantom{a}}$				5,625
	2003	27,459	$\overline{\phantom{a}}$	-		$\bullet$	27,459

Equity instruments disclosures relating to directors and executives

Option holdings

The number of options over ordinary shares in the Company held by a director of MGM Wireless Limited or by their personally-related entities, are set out below.

Director	Held at1 July 2003.	OptionsGranted	OptionsExercised	OtherChanges	Held at30 June 2004
M Fortunatow
M Hurd
R Sciano
P Jackson	425,000				425,000#
P Ruttledge	425,000		$\bullet\bullet$		425,000#

Balance at date of resignation of Mr Jackson and Mr Ruttledge, being 3 October 2003.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

15. DIRECTOR AND EXECUTIVE DISCLOSURES (Cont.)

Share holdings

The numbers of shares in the Company held during the financial year by each director of MGM Wireless Limited. including their personally-related entities, are set out below.

Director	Held at1 July 2003	Purchases	Exercise ofOptions	Sales	Held at30 June 2004
M Fortunatow		49.206.576*	$\overline{\phantom{a}}$	(2,911,154)	46.295.422
M Hurd		10.582.500**			10,582,500
R Sciano	2.586.307		$\tilde{\phantom{a}}$	(2,586,307)
Jackson	190.384		w.		190.384#
P Ruttledge			$\overline{\phantom{a}}$

$\star$ Includes 45,906,576 shares acquired pursuant to acquisition by the Company of MGM Wireless Holdings Pty Ltd.

** Includes 9,882,500 shares acquired pursuant to acquisition by the Company of MGM Wireless Holdings Pty Ltd.

Balance at date of resignation of Mr Jackson, being 3 October 2003.

Other transactions with directors

All fees paid or payable to directors and their director-related entities have been included in directors remuneration disclosed above.

The terms and conditions of the transactions with directors and director-related entities were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to nondirector related entities on an arms length basis.

No amounts were receivable from directors and their director-related entities at balance date arising from these transactions.

Amounts payable to directors and their director-related entities at balance date arising from these transactions were as follows:

		Consolidated		Parent Entity
	Note	2004	2003	2004S	2003$
Current payablesTrade creditors	11	21.763	$\mathbf{u}_\mathbf{r}$	21.763	$\overline{\phantom{a}}$

Wholly owned group

Details of interests in wholly owned controlled entities are set out in Note 8.

MGM WIRELESS LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2004

l.

			Consolidated		Parent Entity
			2004$	2003$	2004$	2003$
16.		NOTES TO THE STATEMENT OFCASH FLOWS
	(a)	Reconciliation of cash:Cash at the end of the financialyear as shown in the statementof cash flows and the statementof financial position:
		Cash at bank	378,760	704,066	377,760	704,066
	(b)	Reconciliation of net cashused in operating activitiesto loss from ordinary activities:
		Loss from ordinary activitiesafter income tax expense	(579, 988)	(751, 351)	(459, 083)	(751, 351)
		Non-cash itemsAmortisationDepreciationLoss on sale of plant and equipmentProfit on sale of investmentsProvision for doubtful debts	143,30019,2213,977(38, 431)15,500	81,80016,712	28,40013,2213,977(38, 436)15,500	81,80016,712
		Changes in assets and liabilities:ReceivablesTax assetOther assetsPayablesProvisions	(170, 513)23,8302,89249,4727,500	27,17017,797(3,440)(150,083)	(170, 513)23,8302,89249,4727,500	27,17017,797(3,440)(150,083)
		Cash flows used by operating activities	(523, 240)	(761, 395)	(523, 240)	(761, 395)
	(c)	Acquisition of controlled entity:During the year the Company issued 59,000,000 ordinary fully paid shares at a deemed issue price of1.3 cents each as consideration for the acquisition of all of the issued capital of MGM Wireless HoldingsPty Ltd. Details of the transaction are as follows:
		Consideration-Shares issued	767,000
		Net assets of MGM Wireless Ltd at dateof acquisition:
		CashPlant and equipmentIntangible - Intellectual PropertyBorrowings	1,00040,000766,000(40,000)
			767,000
		Net cash effect:Cash consideration paidCash included in nets assets acquired	1,000

Cash influed in hels assess acquiredCash inflow on purchase of controlledentity as reflected in the statement ofcash flows

$1,000$

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

	Consolidated		Parent Entity
2004	2003	2004	2003

17. SEGMENT REPORTING

The company operates predominantly in one business segment, being provision of business messaging solutions and internet related services utilising Web server technology and one geographic region, namely Australia.

18. EARNINGS PER SHARE

Reconciliation of earnings to net lossNet loss for year	(579.988)	(751, 351)
Earnings used in calculation of basic
EPS.	(579, 988)	(751, 351)
Weighted average number of ordinary	No of Shares	No of Shares
shares used in the calculation of basicearnings per share	103.564.704	59,301,690

There are no potential ordinary shares on issue that are considered to be dilutive, therefore basic earnings per share also represents diluted earnings per share.

19. CONTINGENT LIABILITIES

There were no contingent liabilities at balance date.

$20.$ COMMITMENTS

There were no commitments at balance date.

$21.$ FINANCIAL INSTRUMENTS

$(a)$ Interest rate risk exposure

The consolidated entity's exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on those financial assets and liabilities, is as follows:

	Weighted AverageInterest Rate		Floating InterestRate		Non-InterestTotalBearing
	2004	2003	2004$	2003$	2004$	2003s	2004	2003S
Financial Assets
Cash	4.80%	3.80%	378,760	704.066		$\overline{\phantom{a}}$	378.760	704.066
Receivables				$\overline{\phantom{a}}$	155,163	150	155.163	150
Other financial assets				$\mathbf{r}$		20,107		20.107
Total financial assets			378,760	704.066	155,163	20,257	533.923	724.323
Financial Liabilities
Payables					70.012	9,703	70,012	9.703
Total financial liabilities				$\mathbf{r}$	70.012	9.703	70.012	9.703

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2004

$21.$ FINANCIAL INSTRUMENTS (Cont.)

$(b)$ Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements.

$(c)$ Net fair values

The net fair value of financial assets and liabilities of the company approximates their carrying amount. The company has no financial assets and liabilities where the carrying amount exceeds the net fair value at balance date.

No financial assets and financial liabilities are readily traded on organised markets in standardised form. other than listed investments. The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement of financial position and notes to the financial statements.