SPACETALK LTD — Annual Report 2008

Aug 28, 2008

Appendix 4E Preliminary final report Period ending 30 June 2008

Appendix 4E Preliminary Final Report Under Listing Rule 4.3A

MGM Wireless Limited (ABN 93 091 351 530) Year Ending 30 June 2008

(Previous corresponding period – Year ending 30 June 2007)

Results for announcement to the market

			$
Revenues from ordinary activities	down 13%	to	1,902,566
(Loss) after tax from continuing operations	up 184%	to	(2,227,502)
Net (Loss) for period attributable to members	up 184%	to	(2,227,502)
Dividends (distributions)	Amount	Franked amount
	per security		per security
Final dividend	Nil¢		Nil¢
Previous corresponding period	Nil¢		Nil¢
Record date for determining entitlements to
dividends	Not applicable
The company has proposed not to pay a dividend.

Appendix 4E – Page 1

Appendix 4E Preliminary final report Period ending 30 June 2008

MGM Wireless Limited Commentary on Results For the Year Ended 30 June 2008

Review of Operations

2008 has been the most invigorating and challenging year in our history. This past year, we invested and strongly focused on our operations to grow our business long term both in the US and Australia in order to maintain and extend our market leadership position.

In Australia, we are seeing a trend of market expansion and maturing in text based communication solutions for schools – as is the case in the US, where earlier in 2008, the Yankee Group predicted that our market sector – the fast-growing alert and notification market, would grow to an estimated $1.2 billion in revenue in the United States by 2011. This would represent a five-year compounded average annual growth rate of over 30 percent.

In line with the expansion of the market and signs of maturity – a second major Australian Government contract was let (NSW Education – Sydney Region and awarded to MGM). During the year, we continued steady and growing sales success into the new markets of Independent and Catholic schools sectors with a number of highly prestigious schools across Australia purchasing our solutions.

The result of our investment in operations has meant that we now have a broad and diverse customer base spanning two Australian Government contracts – Western Australia covering up to 800 schools, NSW Sydney region up to 2,300 schools and 144 TAFE colleges, and over 200 individual state, Independent and Catholic schools, in addition to 23 schools in the US. It should be noted that due to the ‘opt-in’ nature of the both Government agreements, the actual number of school in Western Australia installing our systems may be closer to the 300-400 range, and for NSW at this stage, is too early to forecast the actual school take-up numbers – but the company believes that collectively these agreements will lead to a much larger customer base than what is the case today.

As a result of our investment, the company has a more experienced and mature management team, a richer and broader product range that meets the needs of a greater variety of schools at different price points and requirements.

Income - New Revenue Recognition Policy

The company has taken the decision to recognise Annual Licence Fee revenue over the life of the contract with Schools rather than the previous practice of recognising revenue at the time of invoice. As our Company has grown and our sources of income have become more diversified and complex, we have recognised the need to standardise our revenue reporting to give shareholders a clearer picture of our business going forward.

Effect of Different Interpretations on Financial Statements

Using previous accounting policy, income for the year would have been $ 2.37 mill, an increase of 8% on the previous year. However, under the new Revenue Recognition Policy, this amount has been reduced by $ 468,826 to $ 1.902 mill.

Factors influencing top – line revenue growth were:

• Existing Western Australian Government schools migrating to the new contract arrangements with MGM. These agreements differ to our individual school model as a degree of implementation, training and professional services are performed by the Customer themselves – and MGM received a direct licensee fee and/or royalty. The company believes that as the number of new schools increases over time, the value of the new agreement will more compensate and exceed current shortfall in revenues.

Appendix 4E – Page 2

Appendix 4E Preliminary final report Period ending 30 June 2008

• No new direct sales in the WA Government sector due to the rollout of the new contract.

• Some NSW existing customers rolling over to the new agreement with NSW Education with similar rollout characteristics to WA.

• Individual NSW Government schools reluctance to make direct purchase decisions with MGM Wireless until all details of the new NSW Education contract were made available.

The Australian Market

The size of the opportunity for our products and services grew over the past year. We have seen a greater number and broader spread of schools expressing interest in communication solutions than ever before. The application of our products has expanded well beyond the traditional areas of attendance communication, to sport, event reminders and emergency notification. During the year we released new products specifically for the Independent, Catholic School market and Primary schools with the School News Channel service. With the growth in demand came more complexities, some new competition, challenges in sales channels and meeting the needs of customers at different price points. Moving forward, our challenge is to meet these opportunities head on and maintain our high standards of product and perhaps more importantly, customised service to our school and school district clients.

US market

Since opening our offices in January 2007 in the US market – we have acquired 23 schools. In the past year, we invested $ 494,645. We are proud of this achievement and remain focussed on building on this foothold in the biggest education market in the world. The challenge for the company moving forward in the US market is to change and leverage our current sales processes, successes and customer base into more cost effective sales channels. To this effect, in July 2008, MGM signed the first stage of a re-seller channel agreement for the US with an Miami based provider of School Infraction Management solutions with an existing customer base of over 700 schools.

Our products have been demonstrated to be highly effective in improving student attendance and mass communication in the US, and the company is keen to make greater inroads and at a faster rate in to this large market.

As previously mentioned, our market in the US - the fast-growing alert and notification market is estimated $1.2 billion in revenue in the United States by 2011, representing a fiveyear compounded average annual growth rate of over 30 percent (Yankee Group).

Sales

Throughout 2008 the company experienced a proportion of its existing customers migrating to major account / high school number systemic wide agreements. These agreements differ to our individual school pricing model due to the fact the Government Departments normally perform a degree of implementation, training and professional services themselves – and pay MGM a direct licensee fee and/or royalty.

This had a downward effect on the company’s top line revenue number – which was not adequately offset by sufficient numbers of new individual school sales, but the company believes that if the individual Education Departments in Western Australia and NSW can maintain and increase momentum in the rate of their respective rollouts, then the effect of greater numbers of schools using MGM solutions will compensate and exceed the current situation in the next 9 – 24 months.

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Appendix 4E Preliminary final report Period ending 30 June 2008

R&D

The company ongoing success to a large degree rests on its ability to re-invent itself with new and exciting products and new organisational structure appropriate for the market. As a greater proportion of School operating environments move to a web based solution, MGM in the past year released its first web application - School News Channel. Released as an operating environment or portal with sub-modules that can be enabled for school customers as their needs grow, School News Channel was initially released with the 191 ASK - Parent Question and Answer service, and then a second module – Outreach – a powerful broadcasting tool.

With the ability to import data from student management systems and send and receive personalised SMS from any web enabled computer, Outreach is an ideal product for Junior / Primary schools or schools with a limited budget. School News Channel scales very well, with minimal effort required at the school level and from the company’s point of view simpler to support.

School News Channel – Outreach was chosen by NSW Education and is currently being deployed across schools in the Sydney Region and is being made available to all Government Schools and TAFE colleges across NSW. The company also continued to expand all enhance all of its existing products, especially our communication network and billing infrastructure – or Message Centre to improve performance, connectivity to multiple carrier networks in Australia and the US. The Message Centre remains highly valuable, strategic infrastructure that enables the company to offer higher levels of functionality and services to schools, and in particular Government Departments.

Communication Traffic and Message Centre

MGM operates its own highly sophisticated network infrastructure – collectively called Message Centre - which enables the company to provide and maintain a higher degree of services, flexibility and functionality to Schools and Parents.

During the course of 2008, MGM developed and refined the Message Centre to enable SMS, email and voice mail delivery from multiple regions and countries to specific carriers directly. Traffic optimisation was improved, new features and billings were enhanced.

This has resulted in a for more powerful platform to meet the needs of international markets and local systemic Education organisations. In addition to this, MGM has developed this infrastructure as a product in its own right, and has licensed this platform to both NSW and WA Education.

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Monthly Communication Traffic

We continue to see communication traffic grow and with the increased volumes the company is building a solid revenue stream that continues to financially improve with economies of scale.

Customer Satisfaction

We continue to be pleased to hear that our customers are delighted with our products and services. Revenue from existing customers represents an ever increasing proportion of total revenues, and moving forward into 2009, the company believes it will achieve approximately $ 1.3 million of revenue commitments from existing Customers and grant income.

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Appendix 4E Preliminary final report Period ending 30 June 2008

Moving Forward

MGM’s challenge moving forward is to continue adapting to a increasingly larger and more complex market opportunity both in the US and Australia. With our market sector now recognised as a fast growing sector, the company needs to build on its existing market share and dominance at an even faster rate. This will need to be achieved by improving existing sales channels, leveraging our current market dominance, adapting to new business and organisational structure and ongoing product R&D. We look forward to this exciting opportunity and reporting to Shareholders of our progress.

Appendix 4E – Page 5

Appendix 4E Preliminary final report Period ending 30 June 2008

MGM Wireless Limited Income Statement For the Year Ended 30 June 2008

Note Revenue 2 Cost of sales Doubtful debts Borrowing costs Amortisation & depreciation Advertising and marketing Consulting fees Corporate and administration expenses Share based payment expense Employee benefit expenses Net foreign currency losses Loss before income tax expense Income tax expense Loss after tax Net loss attributable to minority interest Net loss attributable to members of MGM Wireless Limited Basic earnings per share (cents per share) 3 Diluted earnings per share (cents per share) 3	2008 $ 2007 $ 1,902,566 2,198,029 (905,664) (86,089) (13,950) (338,797) (195,060) (144,530) (619,114) (109,560) (1,714,683) (2,621) (737,550) (22,960) (17,253) (184,255) (121,199) (151,153) (484,259) - (1,257,278) (6,054)
	(2,227,502) (783,932) - -
	(2,227,502) (783,932) - -
	(2,227,502) (783,932)
	(1.20) (0.46) (1.20) (0.46)

The above Income Statement should be read in conjunction with the attached notes.

Appendix 4E – Page 6

Appendix 4E Preliminary final report Period ending 30 June 2008

MGM Wireless Limited Balance Sheet As at 30 June 2008

Note ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other 6 Total Current Assets Non-Current Assets Property, plant & equipment Intangibles Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Provisions Total Current Liabilities Total Liabilities Net Assets EQUITY Parent entity interest Issued capital Reserves Accumulated losses 4 5 Outside equity interest Issued capital Accumulated losses Total Equity	2008 $ 2007 $
	236,651 670,001 3,236 806,812 475,076 1,342
	909,888 1,283,230
	196,643 584,386 158,557 615,383
	781,029 773,940
	1,690,917 2,057,170
	1,478,047 56,038 351,906 39,758
	1,534,085 391,664
	1,534,085 391,664
	156,832 1,665,506
	6,677,112 134,024 (6,654,304) 6,016,512 75,796 (4,426,802)
	156,832 1,665,506
	20 (20) 20 (20)
	- -
	156,832 1,665,506

Total Equity

The above Balance Sheet should be read in conjunction with the attached notes.

Appendix 4E – Page 7

Appendix 4E Preliminary final report Period ending 30 June 2008

MGM Wireless Limited Statement of Changes in Equity For the Year Ended 30 June 2008

At 1 July 2006 Loss attributable to members of parent entity Transfer of accumulated losses of minority interest in accordance with AASB 127 Shares issued Transaction costs At 30 June 2007 At 1 July 2007 Loss attributable to members of parent entity Shares issued Cost of share based payment Currency translation differences At 30 June 2008	Issued Capital $ Accumulated Losses $ Option Issue Reserves $ Outside Equity Interest $ Total Equity $ 4,663,584 (3,637,805) 75,796 (5,065) 1,096,510 - (783,932) - - (783,932) - (5,065) - 5,065 - 1,430,000 - - - 1,430,000 (77,072) - - - (77,072)
	6,016,512 (4,426,802) 75,796 - 1,665,506
	Issued Capital $ Accumulated Losses $ Option Issue Reserves $ Foreign Currency Translation Reserve $ Total Equity $ 6,016,512 (4,426,802) 75,796 - 1,665,506 - (2,227,502) - - (2,227,502) 611,100 - - - 611,100 49,500 - 60,060 - 109,560 - - - (1,832) (1,832)
	6,677,112 (6,654,304) 135,856 (1,832) 156,832

The above Statement of Changes in Equity should be read in conjunction with the attached notes.

Appendix 4E – Page 8

Appendix 4E Preliminary final report Period ending 30 June 2008

MGM Wireless Limited Cash Flow Statement For the Year Ended 30 June 2008

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest and other costs of finance Net cash (used in) operating activities 6(a) Cash flows from investing activities Payments for plant & equipment Payment for research and development Net cash provided by investing activities Cash flows from financing activities Proceeds from issue of shares Expenses of share issues Proceeds from borrowings Net cash provided by (used in) financing activities Net decrease in cash held Cash at beginning of the year Effect of exchange rate changes Cash at end of the year 6(b)	2008 $ 2007 $ 2,121,217 (2,958,171) 12,361 (13,950) 2,015,639 (2,659,918) 13,408 (17,253)
	(838,543) (648,124)
	(74,648) (271,238) (30,889) (288,883)
	(345,886) (319,772)
	611,100 - 5,000 1,295,000 (77,072) -
	616,100 1,217,928
	568,329 250,032 806,812 562,834 (1,832) (6,054)
	236,651 806,812

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

Appendix 4E – Page 9

Appendix 4E Preliminary final report Period ending 30 June 2008

MGM Wireless Limited

Notes to the Financial Statements for the Year Ended 30 June 2008

1. Significant Accounting Policies

Statement of Compliance

The Appendix 4E preliminary final report has been prepared in accordance with ASX listing rules and the recognition and measurement criteria of Accounting Standards and interpretations. Accounting Standards include Australian equivalents to International Financial Reporting Standards.

Basis of Preparation

The Appendix 4E has been prepared on the basis of historical cost. The accounting policies and methods of computation adopted in the preparation of the Appendix 4E are consistent with those adopted and disclosed in the company’s 2007 annual financial report except for the change in account policy detailed below.

The company has changed its revenue recognition policy for the year ended 30 June 2008 and is now recognising Annual Licence Fee revenue over the life of the contract rather than the previous practice of recognising revenue at the time of signing the purchase contract. Management believes that this will result in the financial report providing reliable and more relevant information about the entity's financial performance and financial position. The change in accounting policy has led to a once-off write-down of revenue by $486,826. The effect of the change is detailed below.

	Net loss under old	Effect of change in	Net loss under new
	policy	accounting policy	policy
	$	$	$
2008	(1,758,676)	468,826	(2,227,502)

Management has concluded that it is impracticable to apply the change in accounting policy retrospectively due to the unavailability of reliable information relating to prior year’s annual licence fees.

2. Revenue from Ordinary Activities Revenue from ordinary activities Sales revenue Interest received – other persons Total Revenue from Ordinary Activities 3. Earnings per Share (EPS) Net loss from continuing operations attributable to members of the parent entity Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earnings per share Earnings per share (cents)	2008 $ 2007 $ 1,890,205 12,361 2,184,621 13,408
	1,902,566 2,198,029
	(2,227,502) (783,932) 187,000,624 168,296,113 (1.20) (0.46)

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 4E – Page 10

Appendix 4E Preliminary final report Period ending 30 June 2008

Notes to the Financial Statements for the Year Ended 30 June 2008 (Cont.)

4. Contributed Equity Issued and paid up capital Ordinary shares – fully paid Movement in ordinary shares on issue Balance at beginning of year Issue for cash on exercise of options – 3 cents per option Issue for cash on exercise of options – 7 cents per option Share based payment Issue for cash at 5 cents – Share purchase plan Balance at end of year 5. Reserves Option issue reserve Foreign currency translation reserve (a) Option issue reserve (i) Movements in reserve Opening balance 1 July Share-based payments Closing balance 30 June (ii) Nature and purpose of reserve The option issue reserve contains amounts received or the value on the issue of options over unissued capital of the company. (b) Foreign currency translation reserve (i) Movements in reserve Opening balance 1 July Currency translation differences Closing balance 30 June (ii) Nature and purpose of reserve The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled entity. Net cash used in operating activities	2008 $ 2007 $ 6,677,112 6,016,512
	Number 182,046,348 $ 6,016,512 8,250,000 247,500 1,142,857 80,000 450,000 49,500 5,672,000 283,600
	197,561,205 6,677,112
	135,856 75,796 (1,832) -
	134,024 75,796
	75,796 60,060 75,796 -
	135,856 75,796
	- (1,832) - -
	(1,832 -
	(838,543) (648,124)

Appendix 4E – Page 11

Appendix 4E Preliminary final report Period ending 30 June 2008

Notes to the Financial Statements for the Year Ended 30 June 2008 (Cont.)

6. Cash Flow Statement (a)Reconciliation of cash Cash at the end of the year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash at bank and on hand (b)Reconciliation of net cash used in operating activities to loss ordinary activities after income tax: Net loss Non-cash items Amortisation Depreciation Bad and doubtful debts Provision for employee entitlements Equity settled share based payment Foreign exchange loss Changes in assets and liabilities Receivables Payables Tax assets Other assets Net cash used in operating activities 7. Net Tangible Asset per Security Net tangible assets Number of shares on issue at 30 June Net tangible assets per share (cents) 8. Dividends Paid	2008 $ 2007 $ 236,651 806,812
	(2,227,502) 302,235 36,562 86,089 16,280 109,560 - (281,014) 1,151,225 (30,085) (1,893) (783,932) 153,200 31,055 22,960 16,940 - 6,054 (168,982) 34,554 36,214 3,813
	(838,543) (648,124)
	(427,554) 1,050,123 197,561,205 182,046,348 (0.22) 0.58

No dividends were paid or proposed during the financial year ended 30 June 2008.

9. Dividend Reinvestment Plans

The Company does not have Dividend Reinvestment Plans.

Appendix 4E – Page 12

Appendix 4E Preliminary final report Period ending 30 June 2008

Notes to the Financial Statements for the Year Ended 30 June 2008 (Cont.)

10. Segment Information

The company operates predominantly in one business segment, being the provision of business messaging solutions and internet related services. The Group’s primary segment format is geographical as each segment represents a strategic business unit that offers different risks and rates of return. The following table presents the revenue and earnings information regarding geographical segments and the assets and liabilities.

	Australia	USA	Total
	$	$	$
2008
Segment revenue	1,806,909	95,657	1,902,566
Segment results	(1,918,263)	(309,239)	(2,227,502)
Segment assets	1,657,499	33,418	1,690,917
Segment liabilities	1,514,210	19,875	1,534,085
2007
Segment revenue	2,163,977	34,052	2,198,029
Segment results	(805,110)	21,178	(783,932)
Segment assets	1,971,122	86,048	2,057,170
Segment liabilities	384,663	7,001	391,664

11. Additional Commentary on Results

(a) Earnings per Security (EPS)

Basic EPS for the year ended 30 June 2008 was (1.20) 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 2008.

12. Subsequent Events

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.

13. Contingent Liability

In June 2008, MGM Wireless Holdings Pty Ltd received a request from the ACCC for information regarding its dealings with the Western Australia and South Australian Licensees. The Company has responded to the ACCC’s requests for information. At this point, the Company is not able to determine what financial impact (if any) this may have on the Company.

14. Status of Audit or Review

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

Signed: Mark Fortunatow Director

Appendix 4E – Page 13