SPACETALK LTD — Management Reports 2011

May 17, 2011

Dear Shareholder,

Your company MGM Wireless has a strong commitment to a socially responsible business that is not only growing, innovative and profitable but also delivers strong positive social outcomes through its School Messaging technologies, delivered on both mobile phone and web platforms.

As you are probably well aware, companies of our size struggle to attract coverage in the media so we are writing to you today to provide you with an update on the progress so far in 2011. We believe our major achievements include:

• Profitable growth continuing
• Aggressive internally funded R&D programs
• Upcoming rollout of new, innovative products

Use of SMS by schools continues to grow, driven by the increased use of Text Messaging by a new generation of busy "Gen X" parents who grew up with mobile phones and social media. Parents are not just familiar with text messaging, they have a growing expectation of schools using this as a form of rapid, convenient communication.

The focus over the past two years, in the post GFC environment, has been to move forward the agenda for profitability and cash generation. This has resulted in a maiden profit result for Fiscal Year 2010, and we expect a profitable and positive cash flow result for this year. However, this low risk approach, necessitated by the GFC, has temporarily dampened rapid growth.

Despite tightened economic conditions and technology pricing trending lower, top line revenue continues to increase – albeit off a modest base of about \$ 2 million, showing strong growth in the underlying business. Since the commencement of the GFC in 2008, the company has grown its operational school customer base from 248 (September 08 Quarter) to 613 (March 2011 Quarter) schools – an increase of 154%.

The improving Balance Sheet shows that the business is maturing with strong focus and achievements of financial fundamentals. This includes renegotiation with NSW Education resulting in the transfer of school licensing arrangements previously held with the department to individual contracts with schools. Schools benefit from direct, tailored services while MGM benefits from better margins and the ability to expand by offering additional services.

The New Zealand installed base continues to grow following approval of the MGM product by the NZ Ministry in January 2011, with 28 schools now operational from the 55 signed to date. The rollout is likely to be extended with the announcement that Primary Schools are now eligible to use MGM services. The NZ business provides a sold beachhead for MGM to rollout other MGM products outside of the Government mandated program into the customer base that we have established there.

Moving forward, the company is focused on increasing momentum and revenue growth through:

• Continued product and business model innovation, funded from operations
• Expansion into the US market, once new models and products are bedded down in Australia

We believe this stage will generate increased profits and importantly free up cashflow, as these new products have higher margins. At a later stage, as cash reserves, share price and balance sheet further improve, the company will consider growth through acquisition of technology opportunities - not necessarily in the Education Sector.

New product releases have been supported by a transition to a cloud-based data centre which can grow with the business as well as providing increased levels of security and redundancy.

Smartsync™ substantially increases the attractiveness of the Outreach™ SMS School Messaging platform by eliminating manual data transfer from Student Management Systems. This ensures up-to-date contact details, enables messages to be sent from any web connection, and provides schools with more certainty, flexibility and risk management for emergencies.

Rollmarker™ is a new web-based rollmarking product that can operate as a standalone service or integrate with MGM's core SMS products.

Smartsync and Rollmarker are considered to be relatively low risk product releases, as the markets already exist for these products and the incremental revenues can be predicted with relative confidence, adding to revenues and profits.

School News Channel™ is expected to be a watershed product with increasingly tech savvy Gen X parents able to drive demand for better services, greater openness and accountability from schools. After a low-key test launch, the product rapidly generated significant interest and enquiries, enabling the company to validate its views of the market readiness for a product of this type.

School News Channel is a product designed for viral growth and as such the company has paved the way by ramping up infrastructure and associated business processes providing a growth path through our cloud-based data facility at North Ryde, NSW, which will be able to rapidly scale with increased viral growth in customer numbers. The workforce has been realigned and provided with training to be able to better cope with anticipated demand.

The company believes School News Channel is highly suited to the US market and represents a significant growth opportunity in terms of both revenues and profits, which in the test launch showed significant promise.

This product is protected by several patent applications and will be launched on completion of upgrading back-end systems and in particular marketing programs later this year.

MGM now has a significant customer base approaching 700 contracted schools, making us not only the market leader but giving us headroom for growth, with approximately 9,000 Australian schools not using a text messaging solution.

The fast growing area of School Messaging is a key driver for more customer usage, traffic and value for our customers. This type of communication now represents approximately 20% of all SMS communication delivered by the company.

Consulting and sales of value-added products and services to the existing customer base are an ever increasing and important aspect of the business and are contributing to revenue growth. Customer retention is a key focus.

The company has a very robust revenue model with all clients having multiyear licensing arrangements of around \$ 3.5 million in forward revenue, none of which appears in our balance sheet or P&L. The inability for the company to account for this asset on its Balance Sheet due to current accounting standards remains a source of frustration for the board and shareholders. We understand there is a discussion underway amongst regulators to modify the relevant accounting standards that would enable companies such as MGM Wireless to recognise such assets and we remain hopeful that these changes will occur in the not too distant future.

In summary, we see growth, growth and growth – in revenues, profits and free cashflow, with R&D funded from operations, expansion to the US and possible acquisitions as the balance sheet and share price improves. We intend to keep you in touch with these developments. Improved Investor Relations and marketing are a focus of the board in the coming year.

Looking forward to the coming year, we see demand for our products and expect to grow revenue and profitability to levels that will again demonstrate that MGM Wireless is the leader in School Messaging.

Mark Fortunatow

Chairman 18 May, 2011