SPACETALK LTD — Annual Report 2004

Aug 30, 2004

Appendix 4E Preliminary Final ReportUnder Listing Rule 4.3A

MGM Wireless Limited

(ABN 93 091 351 530) Year Ending 30 June 2004(Previous corresponding period – Year ending 30 June 2003)

Results for announcement to the market

			$
Revenues from ordinary activities	up $358,874 - 757%	to	406,248
(Loss) from ordinary activities after taxattributable to members	down $$171,368 - 23%$	to	(579, 983)
Net (Loss) for period attributable to members	down $$171,368 - 23%$	to	(579, 983)
Dividends (distributions)	Amountper security	Franked amountper security
Final dividend	Nil¢		Nil¢
Previous corresponding period	Nil¢		Nil¢
Record date for determining entitlements todividends	Not applicable
The company has proposed not to pay a dividend.

MGM Wireless Limited Statement of Financial Performance For the Year Ended 30 June 2004

	Note	2004$	2003$
Revenues from ordinary activities	$\overline{2}$	406,248	47,374
Cost of salesDoubtful debtsBorrowing costsAmortisation & depreciationAdvertising and marketingConsulting feesCorporate and administration expensesEmployee benefit expensesOther expenses from ordinary activitiesCost of investments soldMerger & acquisition costs		(5, 492)(15,500)(206)(162, 521)(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		(579, 983)	(751, 351)
Income tax expense relating to ordinary activities
Net loss from ordinary activities after income taxexpense attributable to members of MGMWireless Limited		(579, 983)	(751, 351)
Basic earnings per share (cents per share)	3	(0.56)	(1.27)
Diluted earnings per share (cents per share)	3	(0.56)	(1.27)

The above Statement of Financial Performance should be read in conjunction with the attached notes.

MGM Wireless Limited Statement of Financial Position As at 30 June 2004

	Note	2004$	2003$
Current AssetsCash assetsReceivablesTax assetOther	6	378,764155,163548	704,06615012,9933,440
Total Current Assets		534,475	720,649
Non-Current AssetsOther financial assetsProperty, plant & equipmentIntangibles		88,681693,700	20,10667,27571,000
Total Non-Current Assets		782,381	158,381
Total Assets		1,316,856	879,030
Current LiabilitiesPayablesProvisions		70,0117,500	9,702
Total Current Liabilities		77,511	9,702
Total Liabilities		77,511	9,702
Net Assets		1,239,345	869,328
EquityContributed equityAccumulated losses	45	3,731,664(2,492,319)	2,781,664(1,912,336)
Total Equity		1,239,345	869,328

The above Statement of Financial Position should be read in conjunction with the attached notes.

MGM Wireless Limited Statement of Cash Flows For the Year Ended 30 June 2004

	Note	2004S	2003$
Cash flows from operating activitiesReceipts from customersPayments to suppliers and employeesInterest receivedInterest and other costs of finance		154,542(697, 343)19,771(206)	18,464(836, 041)56,182
Net cash (used in) operating activities	6(a)	(523, 236)	(761, 395)
Cash flows from investing activitiesPayments for plant & equipmentProceeds from sale of investmentsPayments for other financial assetsNet cash on acquisition of controlled entity	6(c)	(4,604)58,5381,000	(1, 494)(20, 102)
Net cash provided by investing activities		54,934	(21, 596)
Cash flows from financing activitiesProceeds from issue of sharesExpenses of share issuesRepayment of borrowingsNet cash provided by (used in) financing activities		210,000(27,000)(40,000)143,000
Net decrease in cash heldCash at beginning of the year		(325, 302)704,066	(782, 991)1,487,057
Cash at end of the year	6(b)	378,764	704,066

The above Statement of Cash Flows should be read in conjunction with the attached notes.

MGM Wireless Limited Notes to the Financial Statements For the Year Ended 30 June 2004

1. BASIS OF PREPARATION

this report has been prepared in accordance with Accounting Standards. Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

It has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

The accounting policies adopted in the preparation of this Preliminary Final Report are consistent with those adopted and disclosed in the financial statements for the year ended 30 June 2003.

International Financial Reporting Standards

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 2005. 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.

2.	REVENUE FROM ORDINARY ACTIVITIES	2004S	2003$
	Revenue from ordinary activities
	Sales revenue	325,055	1,032
	Sale of investments	58,538
	Other income	2,884
	Interest received – other persons	19,771	46,342
	Total Revenue from Ordinary Activities	406,248	47,374
3.	EARNINGS PER SHARE (EPS)
	Net loss from ordinary activities after income tax expenseattributable to members of the parent entity	(579, 983)	(751, 351)
share	Weighted average number of ordinary shares outstandingduring the year used in the calculation of basic earnings per	103,564,704	59,301,690
	Earnings per share (cents)	(0.56)	(1.27)

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.

	Appendix 4EPreliminary final reportPeriod ending 30 June 2003
CONTRIBUTED EQUITY4.	2004$	2003S
Issued and paid up capital
Ordinary shares - fully paid	3,731,664	2,781,664
Movement in ordinary shares on issueBalance at beginning of yearIssue at 1.3 cents-- Acquisition of MGM Wireless Holdings LtdIssue at 1.5 cents - 28 May 2004Expenses of issue	Number59,301,69059,000,00014,000,000	$2,781,664767,000210,000(27,000)
Balance at end of year	132,301,690	3,731,664
5.ACCUMULATED LOSSES	2004$	2003$
Accumulated losses at beginning of yearNet loss attributable to members of MGM Wireless LimitedAccumulated losses at end of year	(1,912,336)(579, 983)(2, 492, 319)	(1, 160, 985)(751, 351)(1,912,336)
STATEMENT OF CASH FLOWS6.(a) Reconciliation of cash
Cash at the end of the year as shown in the statement ofcash flows is reconciled to the related items in the statementof financial position as follows:
Cash at bank and on hand	378,764	704,066
(b) Reconciliation of net cash used in operatingactivities to loss ordinary activities after income tax:
Net lossNon-cash itemsAmortisationDepreciation	(579, 983)143,30019,2213,977	(751, 351)81,80016,712
Loss on disposal of plant & equipmentProfit on sale of investmentsProvision for doubtful debtsProvision for employee entitlements	(38, 431)15,5007,500
Changes in assets and liabilitiesReceivablesPayablesTax assetsOther assetsNet cash used in operating activities	(170, 513)49,47123,8302,892(523, 236)	27,170(150, 083)17,797(3, 440)(761, 395)

(c) Acquisition of controlled entity

During the period the company issued 59,000,000 fully paid ordinary shares at a deemed issue price of 1.3 cents each as consideration for the acquisition of all of the issued capital of MGM Wireless Holdings Pty Ltd. Details of the transaction are as follows:

	2004S	2003S
Consideration - Shares issued	767,000
Net assets of MGM Wireless Holdings Limited at date ofacquisition:
Cash	1,000
Plant and equipment	40,000
Intangible - Intellectual Property	767,000
Borrowings	(40,000)
	768,000
Net cash effect:Cash consideration paid
Cash included in net assets acquired	1,000
Cash inflow on purchase of controlled entity as reflected in
the consolidated statement of cash flows	1,000

$\overline{7}$ . NET TANGIBLE ASSET PER SECURITY

Net tangible assets	545.645	798.328
Number of shares on issue at 30 June	132,301,690	59.301.690
Net tangible assets per share (cents)	0.41	1.34

8. DIVIDENDS PAID

No dividends were paid or proposed during the financial year ended 30 June 2004.

$9.$ DIVIDEND REINVESTMENT PLANS

The Company does not have Dividend Reinvestment Plans.

$101$ SEGMENT INFORMATION

The company operates predominantly in one business segment, being the provision of business messaging solutions and intent related services and in one geographic region, namely Australia.

$11.$ COMMENTARY ON RESULTS

$(a)$ Earnings per Security (EPS)

Basic EPS for the year ended 30 June 2004 was 0.56 cents.

Details of the calculation of basic and diluted EPS is outlined in note 3.

$(b)$ Returns to Shareholders

The Company has not made any distributions or buy backs during the financial year ended 30 June 2004.

$(c)$ Review of Operations and Likely Developments

The result for the year ended 30 June 2004 was a loss of $579,983 (2003: $751,351).

During the year the company completed the acquisition of MGM Wireless Holdings Pty Ltd ("MGM"), the consideration for which was the allotment and issue of 59 million ordinary fully paid shares.

MGM is a single-source provider of mobile phone messaging solutions for schools and business enterprises. MGM is the developer of Message You™ (MSGU™), a software application that enables PC users to send and receive messages from their desktop to mobile phones

The company's specialised solutions for schools deliver immediate improvements in student attendance, reduction of truancy, improved retention rates and significantly enhance communication to Parents. Since entry into the education market on October 1st, 2003, over 70 high schools across Australia have purchased the MsqU solution and are reporting sustained 25-80% improvements in daily student attendance.

MGM's corporate solutions enable enterprises to reduce costs, improve productivity, increase revenues and allow enterprise to implement new business processes to take advantage of reaching a mobile audience on their phones. (Shareholders are invited to visit the MGM website www.mgmwireless.com)

MGM's founders have over 15 years of experience in the IT industry and have a proven track record for results. The founders of MGM are also the recipient of a number of industry awards including being a finalist in the Inaugural Australian Marketing Awards 2002 for the best mobile phone sales / marketing campaign for Message You™.

The report covers a transition period for the company reflecting ongoing Ezyimage Image serving operations, completion of the MGM acquisition and resulting change in the company's operations to provider of mobile phone messaging solutions.

The Company is experiencing strong interest in its Messaging products and services, particularly in the education market. Revenues and operating results are in-line with management's expectations and forward sales pipelines are solid.

SUBSEQUENT EVENTS $12.$

Any event of material significance has been reported. There has been no other event, item or transaction between the end of the financial year and the date of this report of a material and unusual nature likely, in the opinion of the Directors, to have a significant effect on the Company operations, results or outcomes in subsequent years.

STATUS OF AUDIT OR REVIEW $13.$

The statutory financial statements of the consolidated entity are in the process of being audited.

Sianed: Mark Fortunatow Director

Appendix $4E$ – Page 8