SPACETALK LTD — Annual Report 2014

Aug 28, 2014

A SX Market A nnouncem e nts Office A ustralian S e curities Exc h ange 2 0 Bridge St r eet S ydney NS W 2000

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ASX Release MGM Wireless Ltd F riday Augu s t 29, 2014

New products drive MGM Wireless to Record Profit

H ighlights of the year include:

• Rev e nue increas e d 8% to $3 , 267,253 (2 0 13: $3,023, 1 44).

• Pre-tax profit inc r eased 38% t o $965,846 (2013: $70 0 ,828)

• Net p rofit increased 9% to $717,541 (201 3 : $657,835 )

• Cas h balance in c reased 105 % to $1,077, 8 40 (2013: $ 526,854)

• Cust o mer base o f operational schools gr e w by 15.7% to a total of 1,088 scho o ls (2013: 9 4 0)

• MG M Pinpoint s u ccessfully l a unched

• Stro n g growth in MGM RollM a rker Sales

• Dividend of 1.1 c e nt per shar e declared ( 2 013: 1.0c)

T he Director s of school c o mmunicati o ns group M G M Wireles s (ASX:MW R ) are pleas e d to report t h at the c ompany ac h ieved a net profit of $71 7 ,541 – an i n crease of 9 % on $657, 8 35 the previ o us year. T h e net profit r e sult was af f ected by a s ignificant in c reased tax e xpense of $ 205K, up 4 7 7% on the p revious year, a notional n on-cash co s t associate d with the issue of option s to Director s after last y e ar’s AGM o f $107K and a reduction i n amortisati o n to $498K.

A record pre - tax profit of $ 965,846 fo r the year e n ded 30 Jun e 2014 was a chieved, up 38% on the previous y ear. This w a s the comp a ny’s fourth c onsecutive y ear of risin g profits. T he solid res u lt was achi e ved from a n 8% increa s e in revenu e to $3.27 million and aft e r continued substantial s pending on research an d developm e nt which ex c eeded $1.46m; up from $1.4m in 2 0 13. The co m pany’s c ommitment t o R&D incl u ded ongoin g investment in our leadi n g edge stu d ent safety product, MG M Pinpoint, a nd a range o f other new products fo r market rel e ase. The R & D tax offset rebate declined due to a rise in non- c laimable ex p enditure.

M GM Wirele s s continued to develop t he market f o r its produc t base, with c ontinued n e w school si g nings and s trong sales o f MGM Rol l Marker in the most rece n t quarter. SMS messag e traffic cont i nued to expand, rising 14% year on year.

A ustralian S M S prices in c reased duri n g the year in review. M G M Wireless has sought to limit the e ffect of t h ese price i n creases on o ur school client base, however these charges h a ve now be e n passed o n in full, with s ome impact on margins across the year. Startin g in Februar y 2014, the c o mpany for m ulated and released a n ew and inn o vative appr o ach to SMS pricing plans, which resulted in the s uccessful m arket accep t ance of t h ese price i n creases.

Appendix 4E Preliminary final report Period ending 30 June 2014

To reflect the maturing of the company’s business development, the Board has performed an assessment of the useful life of its product base (which is comprised of capitalised R&D). In the current year, the company has capitalised $567,719 of the total of its $1.26M of claimable R&D expenditure, and has assessed the useful lives of the associated products to be three years. As such, the company plans to amortise this amount over a three-year period. Offsetting part of this effect was an amortisation charge of $44K to Distribution Rights, currently being recorded at a value of $441,017. The company plans to amortise the full amount over its 10year useful life.

“MGM Wireless has invested heavily in technology over the past decade and we feel it appropriate that some of the ongoing value of this investment should be reflected on the balance sheet,” commented MGM Wireless executive chairman, Mr Mark Fortunatow.

EBITDA was affected by these changes, resulting in a 16% decrease to $1,154,683 (2013: $1,384,563). Over the next year, we expect the effective tax rate to reach 30% as the carried forward losses are expected to be fully utilised, however, the company will generate franking credits as tax payments are made.

Net cash flow from operations jumped from $0.91M in 2012-13 to $1.06M in 2013-14, resulting in a large increase in cash balances, to $1.08M, as at 30 June 2014. This solid result was achieved after payment of a maiden Dividend ($83,691) and cash acquisition cost for PaySchool assets ($46,000). These cash balances offset shareholder loans to the company, the company’s only debt, of $200K (down from $300K as at 30 June 2012). In view of the stronger than expected financial results and the large cash balances, the Directors have resolved to declare an unfranked dividend of 1.1 cent per share, for the year ended 30 June 2014.

Strong program of innovation

“We continue to build our business though a strong program of innovation based on recurring revenue business models,” Mr Fortunatow said. “We have a growing portfolio of exciting products, all of which complement each other in terms of workflow and data exchange. Our large, diversified and profitable customer base continues to grow, and our significant investments in R&D remain fully internally funded. We are pleased to be able to again declare a dividend which is reflective of the Board’s ongoing confidence in the business.

“Our organisational capability to develop and commercialise innovative leading products is truly impressive. In particular, over the past six months we were pleasantly surprised with the surge in market enthusiasm and sales of RollMarker – a product that we have been working on for almost four years. Suddenly this year, the market began to understand the unique capabilities RollMarker offers, and the interest, sales and enthusiasm from clients has been outstanding.

“The number of contracted school and child care centre clients was 1,124, a 7% increase from 1,053 over the year earlier. However, this indicator doesn’t reveal an important underlying trend of the company achieving a higher revenue per customer. Demand for the company’s leading products continues to expand – Outreach and messageyou typically achieve a $2K-$7K per annum revenue return, however RollMaker’s typical revenue yield is $7K-$13K per annum.”

Reflective of the Board’s assessment of the useful lives of its product base, for the six months to June 30, 2014, EBITDA was down by 30% to $669,124 (2013: $955,098) with an increase in net profit by 30% to $585,063 (2013: $448,656), and for the same period the company grew its customer base of operational schools by 44 new schools, as compared to an increase of 71 schools for the six months to June 30, 2013.

In February 2014, the company launched MGM Pinpoint – an App that works with MGM’s messageyou and Outreach SMS messaging solutions to allow parents to instantly locate their child if they are in danger or absent from school. Approximately 1,700 parents have since installed and used this service. The feedback from Parents and schools has been very positive, with requests for important additional functionality, which the company is currently developing. We expect to release an upgraded MGM Pinpoint version later this year.

Our acquisition of the PaySchool product announced in April 2014 has been completed. The company has developed a marketing and sales approach to release this solution to both existing and new clients, however some important additional functionality and integration with our current portfolio of products is first required.

Innovation and commercialisation of a market-leading suite of products remain the key drivers of the company’s success. MGM Wireless is aggressively expanding its product portfolio and is leveraging the

Appendix 4E – Page 2

Appendix 4E Preliminary final report Period ending 30 June 2014

opportunity afforded by cloud and smartphone technologies, as can be seen with the recent stunning success of MGM RollMarker and the expected success of MGM Pinpoint in due course.

These new product releases are diversifying the company’s revenue base and transforming MGM Wireless from a communications focus to a broader range of products for student safety, parent engagement and productivity improvements for school staff. Productivity improvements from MGM products lead to a sustainable increase in school funding – a key outcome all schools are trying to achieve.

Through 2014-15, the company will continue to progressively release a number of important upgrades to existing products and will launch new products for both schools and parents. Parents have demonstrated time and again their desire to be well engaged with their child’s school and seek more and more information on their activities, progress and security. It’s a well-accepted principle that learning outcomes improve when parents are informed and engaged in their child’s school activities.

Smartphones and tablets are great technology enablers that have the potential to engage parents and significantly improve teacher and school staff productivity. MGM Wireless is developing apps to help both schools and parents communicate and perform more effectively.

Mark Fortunatow added:

“The opportunity for MGM in the school and childcare markets is significant. Our new products are broadening our revenue base. Streamlining existing school business process with today’s technology to reduce school costs and improve educational outcomes for students is a great potential revenue opportunity for MGM.”

About MGM Wireless Ltd and Messageyou, LLC

MGM Wireless is recognised in Australia and internationally as a pioneer of socially responsible technologyenabled school communications with a proven track record to design, develop and successfully commercialise innovative world-class technology products.

The company’s patented SMS School communication solutions empower schools to effectively communicate to parents and caregivers using SMS text messaging to improve student attendance, welfare, safety and parent engagement. Measurable benefits for schools include reduced operating costs, increased productivity and improved parent and community engagement, which ultimately improve student learning and social outcomes.

Schools in Australia and New Zealand use messageyou software in their day to day operations.

For further information contact: Mobile: +61 421 328 984 MGM Wireless Ltd. - (ASX:MWR) Phone: +61 8 8431 2300 Mark Fortunatow, CEO Email: Web: www.mgmwireless.com mfortunatow@mgmwireless.com

Appendix 4E – Page 3

Appendix 4E Preliminary final report Period ending 30 June 2014

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A p pendix 4 E Prelimi n ary Final Report Under Listing Rule 4.3A MGM Wireless Limited (ABN 9 3 091 35 1 530) Year En d ing 30 June 2014 ( Previous corresponding period – Ye a r ending 30 June 2013)

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A ppendix 4 E – Page 4

Appendix 4E Preliminary final report Period ending 30 June 2014

Appendix 4E Preliminary Final Report

MGM Wireless Limited

(ABN 93 091 351 530) Year Ending 30 June 2014

(Previous corresponding period – Year ending 30 June 2013)

Results for announcement to the market

				$
Revenue from ordinary activities		Up 8%	to	3,267,253
Profit/(loss) from ordinary activities after tax attributable		Up 9%	to	717,541
to members
Net Profit/(loss) for period attributable to members		Up 9%	to	717,541
Dividends (distributions)		Amount		Franked amount per
		per security		security
Final dividend		1.1¢		Nil¢
Previous corresponding period		1.0¢		Nil¢
Record date for determining entitlements to
dividends	September 22,2014
Date dividend payable	November 10, 2014
Net tangible asset backing		30 June 2014		30 June 2013
Net tangible asset backing per ordinary security		$0.17		$0.13
Control gained or lost over entities during the
period
Name of entity		Not applicable
Date of gaining or losing control		Not applicable
Amount per security (foreign sourced dividend)		Nil
Dividends or distributions to shareholders		1.1¢ dividend declared
Dividend or distribution reinvestment plan details		Not applicable
Joint venture and associate details		Not applicable
Foreign entities' accounting standards used		Not applicable

Explanation of results

Refer to commentary in attached report MGM Wireless Limited

Appendix 4E – Page 5

Appendix 4E Preliminary final report Period ending 30 June 2014

Commentary on Results For the Year Ended 30 June 2014

MGM Wireless Ltd is pleased to report that during the period, the Company achieved its previously stated goals of maintaining and improving revenue growth whilst simultaneously improving operations to increase profit, improve cash flow and strengthen its balance sheet.

During the year ended 30 June 2014, the Company continued its initiatives to underpin accelerated growth in the medium and long term. Specifically, spending on research and development was significant at $1.46 million (2013: $1.4 million) and there was continued high investment in the Company’s sales and marketing capability. Research and development spending was directed at both existing products, to ensure that they are able to sustain their position as market leaders, and new products which will open new avenues for revenue generation.

The Board has performed an assessment of the useful life of its product base (which is comprised of capitalised R&D). In the current year, the company has capitalised $567,719 of the total of its $1.26M of claimable R&D expenditure, and has assessed the useful lives of the associated products to be three years. As such, the company plans to amortise this amount over a three-year period. Offsetting part of this effect was an amortisation charge of $44K to Distribution Rights, currently being recorded at a value of $441,017. The company plans to amortise the full amount over its 10-year useful life.

EBITDA was affected by these changes resulting in a 16% decrease to $1,154,683 (2013: $1,384,563). Over the next year, we expect the effective tax rate to reach 30% as the carried forward losses are expected to be fully utilised, however, the company will generate franking credits as tax payments are made.

Key financial results for the year include:

1. Revenue for the full year was 8% higher at $3,267,253 (2013: $3,023,144).

2. Net profit increased 9% to $717,541 (2013: $657,835)

3. Cash balance increased 105% to $1,077,840 (2013: $526,854)

4. EBITDA decreased 16% to $1,154,683 (2013: $1,384,563)

5. Customer base of operational schools increased by 15.7% to a total of 1,088 schools (2013: 940).

6. Customer base of contracted schools increased by 7% to a total of 1,124 schools (2013: 1053).

7. For the six months to June 30, 2014 EBITDA of $669,124 (2013: $955,098) with a net profit of $585,063 (2013: $448,656).

8. For the six months to June 30, 2014, the company grew its customer base of operational schools by 44 new schools, as compared to an increase of 71 schools for the six months to June 30, 2013.

Balance Sheet

The company improved its net asset position by $898,806 from $2,158,200 as at 30 June 2013 to $3,057,006 as at 30 June 2014.

The Company is pleased with the progress achieved in 2014. The company is well positioned for the future, with ongoing profitable operations from existing products and new revenue opportunities and further associated profit growth potential with the release of its new products later this year.

Appendix 4E – Page 6

Appendix 4E Preliminary final report Period ending 30 June 2014

Consolidated statement of comprehensive income Notes Continuing Operations Revenue 2 Cost of sales Doubtful debts Borrowing costs Amortisation & depreciation Consulting fees Corporate and administration Employee costs Profit before tax Income tax expense 3 Profit for the year from continuing operations Profit for the year Other comprehensive income Exchange differences on translating foreign operations Transfer to foreign currency reserve Other comprehensive income net of tax Total comprehensive income for the year Profit attributable to: Owners of the Company Total comprehensive income attributable to: Owners of the Company Note 5.2 details profit by segment. Earnings per share From continuing and discontinued operations: Basic (cents per share) 4 Diluted (cents per share) 4 From continuing operations Basic (cents per share) 4 Diluted (cents per share) 4	Group
	Year Ended
	30/06/2014 30/06/2013
	$ $
	3,267,253 3,023,144 (293,969) (94,764) (713) 7,389 (16,719) (26,789) (172,119) (656,946) (99,537) (78,695) (349,668) (187,970) (1,368,682) (1,284,541)
	965,846 700,828 (248,305) (42,993)
	717,541 657,835
	717,541 657,835
	- - - -
	- -
	717,541 657,835
	717,541 657,835
	717,541 657,835
	8.49 8.14 8.33 8.14 8.49 8.14 8.33 8.14

Appendix 4E – Page 7

Appendix 4E Preliminary final report Period ending 30 June 2014

Consolidated statement of financial position

Notes ASSETS Current Assets Cash and cash equivalents 6 Trade and other receivables 7 Other 8 Total Current Assets Non-Current Assets Property, plant and equipment 10 Intangibles 11 Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables 12 Borrowings 13 Provisions Current tax liabilities 3.1 Total Current Liabilities Non-Current Liabilities Borrowings 13 Total Liabilities Net Assets EQUITY Parent entity interest: Issued capital 15 Reserves 16 Accumulated losses 17 Outside equity interest: Issued capital Accumulated losses Total Equity	Group
	As At
	30/06/2014 30/06/2013
	$ $
	1,077,840 526,854 685,763 483,331 574,186 651,267
	2,337,789 1,661,452
	201,485 194,530 1,570,456 1,063,240
	1,771,941 1,257,770
	4,109,730 2,919,222
	451,812 429,666 - - 190,301 88,363 210,611 42,993
	852,724 561,022
	200,000 200,000
	200,000 200,000
	1,052,724 761,022
	3,057,006 2,158,200
	7,376,993 7,195,825 307,735 225,375 (4,627,722) (5,263,000)
	3,057,006 2,158,200
	- - - -
	- -
	3,057,006 2,158,200

Appendix 4E – Page 8

Appendix 4E Preliminary final report Period ending 30 June 2014

Consolidated statement of changes in equity

Consolidated At 30 June 2012 Profit attributable to members Shares issued to directors Shares issued to investors Options issued to directors Currency translation differences At 30 June 2013 Profit attributable to members Payment of dividends Shares issued to directors Share issue costs Shares issued in acquisition of intangible assets Options issued to directors Options exercised by directors Currency translation differences At 30 June 2014	Issued Accumulated Option Foreign Total
	Capital Losses Issue Currency Equity
	Reserve Translation
	Reserve
	$ $ $ $ $
	7,010,826 (5,920,969) 170,808 5,973 1,266,638 - 657,835 - - 657,835 159,999 - - - 159,999 25,000 - - - 25,000 - - 54,241 - 54,241 - 134 (5,647) - (5,513)
	7,195,825 (5,263,000) 219,402 5,973 2,158,200 - 717,541 - - 717,541 (83,691) (83,691) 159,968 - - - 159,968 (10,500) - - - (10,500) 31,700 - - - 31,700 - - 107,340 - 107,340 - - (30,737) - (30,737) - 1,428 5,757 - 7,185
	7,376,993 (4,627,722) 301,762 5,973 3,057,006

Appendix 4E – Page 9

Appendix 4E Preliminary final report Period ending 30 June 2014

Consolidated statement of cash flows

Notes Cash flows from operating activities Profit (loss) for the year Amortisation Non-cash salaries Depreciation Doubtful debts provision Income tax expense recognised Movements in working capital: (Increase) / decrease in trade and other receivables (Increase) / decrease in other assets Increase / (decrease) in trade and other payables Increase / (decrease) in provisions Decrease in unearned revenue Net cash generated from / (used in) operations Cash flows from investing activities Payments for plant and equipment Payments for intangible assets Payment for research and development Net cash provided / (used) by investing activities Cash flows from financing activities Proceeds from issue of shares Costs associated with the issue of shares Payment of dividends Proceeds from borrowing Non cash movement of Retained Earnings Net cash provided / (used) by financing activities Net increase / decrease in cash held Cash at the beginning of the year Effect of exchange rate changes Cash at the end of the year 6	Group
	Year Ended
	30/06/2014 30/06/2013
	$ $
	717,541 657,835 144,503 642,000 - - 27,616 14,946 713 (7,389) 221,143 42,993
	1,111,516 1,350,385 (203,144) (113,212) 77,081 - (32,019) (102,875) 101,937 4,974 - (229,714)
	1,055,371 909,558
	(34,572) (43,569) (44,000) - (567,719) (642,000)
	(646,291) (685,569)
	159,967 184,999 (10,500) - (83,691) - - (100,000) 64,347 48,727 30,737 -
	160,860 133,726
	569,950 357,715 526,854 169,139 (18,954) -
	1,077,840 **526,854 **

Appendix 4E – Page 10

Appendix 4E Preliminary final report Period ending 30 June 2014

MGM Wireless Limited Notes to the Financial Statements for the Year Ended 30 June 2014

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 2014 annual financial report.

	Group
	Year Ended
30/06/2014	30/06/2013
$	$

2. Revenue

The following is an analysis of the Group's revenue for the year from continuing operations.

Revenue Sales revenue R&D tax incentive revenue Total revenue Note 5.2 details revenue by segment 3. Income Tax 3.1 Income tax expense The income tax expense for the year differs from the prima facie tax as follows: Profit / loss for the year Prima facie tax benefit at 30% (2013, 30%) Non-assessable items Non-deductible items Deferred tax assets not brought to account Adjustments recognised in the current year in relation to the current tax of prior years	2,698,473 2,381,144 568,780 642,000
	3,267,253 3,023,144
	965,846 700,828 289,754 210,248 (247,366) (276,707) 395,726 690,540 (227,322) (581,088)
	210,793 42,993
	37,513 -

Appendix 4E – Page 11

Appendix 4E Preliminary final report Period ending 30 June 2014

3.2 Deferred tax asset Deferred tax assets not brought to account arising from tax losses, the benefits of which will only be realised if the conditions for deductibility occur: 4. Earnings per share Basic earnings per share From continuing operations (cents per share) From discontinued operations (cents per share) Total basic earnings per share (cents per share) Diluted earnings per share From continuing operations (cents per share) From discontinued operations (cents per share) Total diluted earnings per share (cents per share) 4.1 Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows. Net profit / (loss) for the year attributable to owners of the Company Earnings used in the calculation of total basic earnings per share Profit for the year from discontinued operations used in the calculation of basic earnings per share from discontinued operations Earnings used in the calculation of basic earnings per share from continuing operations Weighted average number of ordinary shares for the purposes of basic earnings per share (all measures)

Group Year Ended

30/06/2014 30/06/2013 $ $ 275,816 275,428 8.49 8.14 0.00 0.00 8.49 8.14 8.33 8.14 0.00 0.00 8.33 8.14 717,541 657,835 717,541 657,835 - - 717,541 657,835 8,451,465 8,081,208

Appendix 4E – Page 12

Appendix 4E Preliminary final report Period ending 30 June 2014

		Group
		Year Ended
	30/06/2014	30/06/2013
	$	$
4.2 Diluted earnings per share
The earnings and weighted average number of ordinary
shares used in
the calculation of diluted earnings per share are as
follows.
Net profit / (loss) for the year attributable to owners of the
Company	717,541	657,835
Earnings used in the calculation of total diluted earnings
per share	717,541	657,835
Profit for the year from discontinued operations used in
the calculation
of diluted earnings per share from discontinued
operations	-	-
Earnings used in the calculation of diluted earnings per
share
from continuing operations	717,541	657,835
Weighted average number of ordinary shares for the
purposes of diluted earnings per share (all measures)	8,615,353	8,081,208

5. Segment Revenues and Results

5.1 Products and services from which reportable segments devise their revenues

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of services delivered or provided. In the current and previous financial years, the Group has only operated in one business sector and reporting to management has been on a geographical basis.

The Group operates predominately in one business segment being the provision of school messaging services and internet related services. The Group functions with a subsidiary operating in each geographical segment. Each company represents a strategic business unit that offers different risks and rates of returns. This is the basis by which management controls and reviews the operations of the Group.

No operations were discontinued during the current financial year.

Appendix 4E – Page 13

Appendix 4E Preliminary final report Period ending 30 June 2014

5.2 Segment revenues and results

The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment.

	Segment revenue	Segment revenue	Segment	profit
	Year Ended		Year Ended
	30/06/2014	30/06/2013	30/06/2014	30/06/2013
MGM Wireless Holdings	3,221,046	3,005,993	702,546	662,712
MGM Wireless	-	-	-	-
USA Message YOU LLC	-	-	(5,334)	(5,440)
NZ MGM Wireless (NZ) Pty Ltd	46,207	17,151	20,329	563
Total for Continuing Operation	3,267,253	3,023,144
Profit before tax (continuing operations)			717,541	657,835

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current year (2013: nil).

The segment result for NZ and the USA represents the profit earned by each segment without allocation of central administration costs and directors' salaries, investment revenue, finance costs and income tax expense. These costs are routinely considered to be part of the Australian operations. This is the basis on which segment results are routinely reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

5.3 Segment assets and liabilities

5.3 Segment assets and liabilities
		Assets	Liabilities
	Year Ended		Year Ended
	30/06/2014	30/06/2013	30/06/2014	30/06/2013
MGM Wireless Holdings	4,010,708	2,852,943	1,030,794	744,542
MGM Wireless	250	1,000	-
USA Message YOU LLC	-	-	10,917	11,259
NZ MGM Wireless (NZ) Pty Ltd	98,772	65,279	11,013	5,221
Consolidated Assets	4,109,730	2,919,222
Consolidated Liabilities			1,052,724	761,022

Each segment's assets and liabilities are accounted for within their own entity. Other assets and liabilities are retained within the Australian entity. General intellectual property is retained by the parent company.

Appendix 4E – Page 14

Appendix 4E Preliminary final report Period ending 30 June 2014

5.4 Other segment information

			Additions to non-current	Additions to non-current
	Depreciation and amortisation		assets
	Year Ended		Year Ended
	30/06/2014	30/06/2013	30/06/2014	30/06/2013
MGM Wireless Holdings	172,119	656,946	34,571	43,570
MGM Wireless	-	-	-	-
USA Message YOU LLC	-	-	-	-
NZ MGM Wireless (NZ) Pty Ltd	-	-	-	-
Depreciation and Amortisation	172,119	656,946
Additions to Non-Current Assets			34,571	43,570

5.5 Geographical Information

l revenues in New Zealand result from the Group's preferred supplier status (1 of 3 companies) to New Zealand Government's Early Notification initiative whereby the Government funded the first year's license fees for all eligible schools.

5.6 Information about major customers

No single customer contributed 10% or more to the Group’s revenue for both 2014 and 2013.

6. Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the statement of cash flows can be reconciled to the related items in the statement of financial position as follows:

Cash & cash equivalents

Cash & cash equivalents
	Group
	30/06/2014	30/06/2013
	$	$
Cash and bank balances	1,077,840	526,854

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Appendix 4E – Page 15

Appendix 4E Preliminary final report Period ending 30 June 2014

7. Trade and Other Receivables	Group
	30/06/2014	30/06/2013
7.1 Trade and other receivables	$	$
Current
Trade receivables	705,350	502,205
Provision for doubtful debts	(19,587)	(18,874)
	685,763	483,331

Trade and other receivables have been reviewed and Provision for potential Doubtful Debts of $19,587 has been established. No further impairment loss is considered necessary.

		Group
	30/06/2014		30/06/2013
	$		$
Non-current
Amount owed by controlled entities		-		-
Provision for impairment		-		-
		-		-

Terms and conditions relating to the above financial instruments:

• Trade debtors are non-interest bearing and generally repayable in the range within 30-180 days.

• Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.

-Transactions between the parent entity and its subsidiary consist of intercompany loans, upon which no interest is charged and no repayment schedule exists. The fair value approximates the carrying value of the receivable.

7.2 Past due but not impaired trade receivables

As at 30 June 2014, trade receivables of $356,759 (2013: $89,729) were past due but not impaired. These relate to a number of recent accounts where there is no recent history of default.

	Group	Group
	30/06/2014	30/06/2013
	$	$
Past due 0-30 days	34,293	3,676
Past due 31-90 days	35,889	6,215
Past due over 91 days	286,577	79,838
	356,759	89,729
Movement in the provision for doubtful
debts
Balance at the beginning of the year	(18,874)	(27,332)
Amounts recovered during the year	-	11,757
(Increase)/Decrease in provision attributable to
new sales	(713)	(3,299)

Appendix 4E – Page 16

Appendix 4E Preliminary final report Period ending 30 June 2014

Balance at the end of the year	(19,587)	(18,874)
8. Other Current Assets
R&D tax incentive	568,221	642,000
Prepayments	5,715	8,059
Sundry debtors	250	1,208
	574,186	651,267
9. Other Financial Assets
Non-current
Shares in unlisted controlled entities	-	-
Provision for impairment	-	-
	-	-

				Cost of
				Parent
				Entities
				Investment
	Date of	Country of	Class of	30/06/2014
Unlisted Controlled Entity	Acquisition	Incorporation	Shares	$
MGM Wireless Holdings Pty Ltd	8/10/2003	Australia	Ordinary	767,000
Message You LLC	11/09/2006	USA	Ordinary	124,440
MGM Wireless (NZ) Pty Ltd	18/05/2010	Australia	Ordinary	80
				891,520

The equity holding in all companies is 100%

10. Plant, Equipment and Leasehold Improvements

	Plant and	Plant and	Leasehold
	Equipment		Improvements	Total
		$	$	$
Balance at 30 June 2012		414,235	127,237	541,472
Additions		6,621	36,949	43,570
Disposals		-	-	-
Balance at 30 June 2013		420,856	164,186	585,042
Additions		16,150	18,421	34,571
Disposals		-	-	-
Balance at 30 June 2014		437,006	182,607	619,613

Appendix 4E – Page 17

Appendix 4E Preliminary final report Period ending 30 June 2014

10. Plant, Equipment and Leasehold Improvements (continued)

Accumulated depreciation and impairment

Balance at 30 June 2012	(320,056)	(55,510)	(375,566)
Amortisation/Depreciation expense	(11,060)	(3,886)	(14,946)
Eliminated on disposal of assets	-	-	-
Balance at 30 June 2013	(331,116)	(59,396)	(390,512)
Amortisation/Depreciation expense	(15,788)	(11,828)	(27,616)
Eliminated on disposal of assets	-	-	-
Balance at 30 June 2014	(346,904)	(71,224)	(418,128)
		Written Down Value	201,485

10.2 Impairment losses recognised in the year

The following useful lives are used in the calculation of depreciation. Plant and Equipment 5 years Leasehold Improvements 10 years

The useful lives used in the calculation of depreciation were considered appropriate estimations of expense allocations in the period. An assessment of the remaining net values was also deemed an appropriate estimation of the remaining useful life of the items with no provision for impairment required.

At cost Accumulated amortisation and impairment Carrying Value	Group
	30/06/2014 30/06/2013
	$ $
	3,205,093 2,646,259 (1,634,637) (1,583,019)
	1,570,456 1,063,240

Cost Balance at 30 June 2012 Additions from internal developments Disposals Balance at 30 June 2013 Additions from internal developments	Intellectual Property Message Distribution You Rights $ $ 766,000 441,017 - - (766,000) - - 441,017 - -

Appendix 4E – Page 18

Appendix 4E Preliminary final report Period ending 30 June 2014

	Appen Preliminary final Period ending 30Jun
Disposals Balance at 30 June 2014 Accumulated amortisation and impairment Balance at 30 June 2012 Amortisation Disposal Balance at 30 June 2013 Amortisation Disposal Balance at 30 June 2014 Carrying Value	- - - 441,017
	(766,000) (848,134) - - (642,000) 766,000 - -
	- - (1,490,134) - (44,102) (100,401) - - -
	- (44,102) (1,590,535)
	- 396,915 1,173,541

11. Intangible Assets (cont.)

Other than 'Distribution Rights', the remaining value of Intangible assets have finite useful lives considered to be 5 years.

The current amortisation charges for these intangible assets are included under depreciation and amortisation expense in the Statement of Comprehensive Income. The useful life of intangible assets and impairment considerations of intangibles are subject to management estimates and judgements.

Distribution rights have arisen from the acquisition of territory rights from former distributors. These assets have provided the Company the right to operate in the respective territories. The income from those territories, WA, SA, Queensland, Victoria and Tasmania, is the major part of MGM Wireless's income. As the amount of income in respect of these distribution rights has not decreased in any of the territories since acquisition, the Board is of the opinion that the value of the assets remain unchanged and no amortisation is appropriate.

12. Trade and Other Payables

Trade creditors and accruals: Other corporations Directors and director related entities Tax liability Accrued SMS charges Unearned revenue - licence fees	Group
	30/06/2014 30/06/2013
	$ $
	235,336 210,294 - - 131,077 139,568 80,173 74,578 5,226 5,226
	451,812 429,666

Terms and conditions relating to the above financial instruments:

• Trade creditors and accrued charges are non-interest bearing and normally settled on terms between 30-180 days.

Appendix 4E – Page 19

Appendix 4E Preliminary final report Period ending 30 June 2014

• Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.

• Unearned or deferred revenue represents annual license fees charged under purchase contracts.

	30/06/2014	30/06/2013
	$	$
13. Borrowings
Current	-	-
Unsecured loans from related parties	-	-
Secured loans other	-	-
Non - Current
Unsecured loans from related parties	200,000	200,000

	Group
	30/06/2014	30/06/2013
14. Provisions	$	$
Current
Employee benefits	190,301	88,363
Movement in provisions
Opening	88,363	83,389
Amounts provided	116,839	38,917
Amounts used	(14,901)	(33,943)
Closing balance	190,301	88,363
Number of employees	17	16

The provision for employee benefits represents annual leave and long service leave entitlements accrued.

Appendix 4E – Page 20

Appendix 4E Preliminary final report Period ending 30 June 2014

15.1 Issued and paid up capital Ordinary shares, fully paid (30 June 2014: 8,567,414, 30 June 2013: 8,359,110) 15.2 Fully paid ordinary shares Balance as at 30 June 2012 Shares issued to Directors Shares issued to Investors Balance as at 30 June 2013 Shares issued to Directors Shares issued to Payschool vendors Balance as at 30 June 2014		Group 30/06/2014 30/06/2013 $ $ 7,376,993 7,195,825 Group Number of Share Shares capital $ 7,992,441 7,010,826 266,669 159,999 100,000 25,000 8,359,110 7,195,825 180,000 149,468 28,304 31,700 8,567,414 7,376,993
		Group Number of Share Shares capital $ 7,992,441 7,010,826 266,669 159,999 100,000 25,000 8,359,110 7,195,825 180,000 149,468 28,304 31,700 8,567,414 7,376,993

15.3 Share options

At 30 June 2014 there were options over 470,000 (2013: 300,000) ordinary shares of the Company.

Details of these options and movement since 30 June 2013 follow:

Expiry Date	Exercise Price	Number	Expired New	Closing
30/04/2016	$0.70 each		- - 130,000	130,000
30/04/2017	$1.60 each		- - 310,000	310,000
27/08/2018	$1.10 each		- - 30,000	30,000
			- - 470,000	470,000

Share options granted under the employee share option plan carry no rights to dividends and no voting rights.

Appendix 4E – Page 21

Appendix 4E Preliminary final report Period ending 30 June 2014

16. Reserves

6. Reserves
Option issue reserve Foreign currency translation reserve Balance as at 30 June 2012 Options issued Currency translation differences Balance as at 30 June 2013 Options issued Options exercised Currency translation differences Balance as at 30 June 2014	Group
	30/06/2014 30/06/2013
	$ $
	301,762 219,402 5,973 5,973
	307,735 225,375
	Option Issue Foreign Currency
	Reserve Translation Reserve
	170,808 5,973 54,241 - (5,647) -
	219,402 5,973 107,340 - (30,737) - 5,757 - 301,762 5,973 .

Nature and purpose of reserve

The option issue reserve is used to accumulate amounts received on the issue of options and records items recognised as expenses on valuation of incentive based share options.

The foreign currency translation reserve is used to record exchange rate differences arising from the translation of the financial statements of foreign subsidiaries and is recognised directly in the Statement of Comprehensive Income before accumulation in this reserve.

	Group
	30/06/2014	30/06/2013
17. Retained earnings	$	$
Retained Earnings/(Accumulated losses)	(4,627,722)	(5,263,000)
Balance at the beginning of the year	(5,263,000)	(5,920,969)
Net profit / (loss) attributable to members	717,541	657,835
Payment of dividends	(83,691)	-
Currency translation	1,428	134
Adjusted accumulated depreciation	-	-
Balance at the end of the year	(4,627,722)	(5,263,000)

Appendix 4E – Page 22

Appendix 4E Preliminary final report Period ending 30 June 2014

18. Subsequent Events

O n 7 July 2014, the Directors o f MGM Wirele s s appointed m e dia and IT sp e cialist Leila H e nderson as a N on-Executive Director to the B oard. Leila H e nderson holds no shares or options in the C o mpany as at t h e date of auth o rising these fi n ancial statem e nts for issue ( 2 9 August 201 4 ). Except for a s disclosed ab o ve, there has n ot been any m atter or circumstance that ha s arisen since 3 0 June 2014, w hich has significantly affecte d , or may significantly affect th e operations of the Group, the result of thos e operations, or the state of a ffairs of the Gr o up in subsequent financial y e ars.

19. Status of Audit or Review

T he statutory fi n ancial statements of the cons o lidated entity a re in the proc e ss of being au d ited.

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S igned: Mark F ortunatow Direct o r

A ppendix 4 E – Page 2 3