I am delighted to report on a year that has more than justified my statement last year that "…2005 will prove to be the year in which the Company demonstrates that it has returned to a pattern of growth and profitability".

In the first half of the year we generated a substantial sales increase of 34%. We did even better in the second half, achieving an increase of 39%, making the increase 37% for the full year. Although this significant increase was gained at the cost of a small decrease in our gross margins, mainly in the US, our continued tight control of costs has resulted in the virtual elimination of annual operating losses.

These results have been achieved with little or no benefit from the recent important long-term contracts that the Company has gained with major industry players and which we confidently expect will provide further impetus to our future growth.

During the year we also reached the end of the heavy cost of goodwill amortization arising from our acquisition of Telco Systems in 2000 and this too has benefited our final results.

Turnover for the period was $56,514,000 (2004: $41,218,000), an increase of 37.1% compared with 2004. Turnover for the second half of 2005 was $30,337,000 (2004: $21,757,000), an increase of 39.4%. This increase in the second half is mostly due to growth in our business with our strategic partners and VoIP based products including the new offerings from our Integral Access (now renamed Telco North (Boston)) operation which was acquired in July 2005.

Gross profit was $21,984,000 (2004: $17,540,000), representing an increase of 25.3% and a gross profit margin of 39% of turnover (2004: 42.5%). As a result of new extended agreements with US carriers, we have experienced a decline in the profitability of our legacy business in the US. Since these agreements establish fixed pricing for the next few years, our focus will be to improve profitability in 2006 by reducing the costs of some of our legacy products and by generating further growth in revenues from new products and maintenance agreements during the course of 2006.

R&D expenses in this period were $9,675,000 (2004: $9,909,000), representing a decrease of 2.4%. We have continued our strategy of increasing investment in IP based products and reducing investment in TDM based and legacy products.

Sales and Marketing expenses totaled $9,505,000 (2004: $8,984,000), representing an increase of 5.8%. As a percentage of sales, Sales and marketing expenses were 16.8% (2004: 21.8%). General and administrative expenses were $2,908,000 (2004: $3,394,000). Overall Sales, marketing and administration expenses have decreased from 30.0% of sales in 2004 to 22.0% in 2005.

Goodwill amortization was $2,713,000 (2004: $9,898,000). The majority of these expenses relate to the acquisition of Telco Systems which was finally fully amortized during H1 2005. It also includes the amortization of goodwill resulting from the acquisition of Integral Access.

Finance income was $1,459,000 (2004: $1,702,000). This decrease is primarily as a result of reductions in the value of our marketable securities acquired as part of the sale of Eldor shares in 2004.

Other expenses in 2005 of $1,378,000 include the partial write-down of one of the company's investments and the costs associated with the early termination of the lease agreement of one of our premises in the US. In 2004 other income of $423,000 included the gain on the sale of Eldor shares.

Pro forma profit after taxes, excluding the effect of the amortization of goodwill and other non-recurring expenses, was $1,168,000 (2004: loss $2,883,000). Actual loss after taxes, including the effect of goodwill amortization and other non-recurring expenses, amounted to $2,929,000 (2004: Loss $12,781,000), resulting in a loss per share of 0.75 cents (2004: Loss 3.29 cents).

Our balance sheet remains strong with cash (including short-term and long- term liquid investments) of $48.0m (2004: $50.7m) at the period end. Our cash position is slightly lower than in 2004 mainly due to an increase in inventory to support the significant growth in sales. We continue to exercise a conservative cash investment strategy, maintaining most balances in bank deposits.

Our OEM business and VoIP offerings continued to be our major growth drivers in 2005. In the OEM segment we managed to both expand existing relationships, as announced in November 2005, as well as securing new relationships, as announced in February 2006. We expect this trend to continue during 2006. We also expect our investment in the Advanced TCA standard as well as our position as the world leader in Quality Of service of modern Triple IP networks to improve our chances of winning new customers as well as expanding our relationships with existing customers.

Our VoIP business has continued to grow for both the residential and corporate markets. We experienced significant sequential growth in the residential market as our customers continued to roll out their services. The integration of Integral Access' product offerings has improved our solution for business needs and forged a new relationship with an important customer, Time Warner Telecom. We expect to see further progress upon the introduction of our SIP based Integrated Access Devices that will appear in the market in the second half of 2006.

We will also focus this year on expanding our business in the Far-East. As part of this initiative, we opened a branch in Singapore with a reputable locally residing executive to launch our presence in this region. We believe that there is significant opportunity for our IP based products in this area. We are looking to establish relationships with local carriers as well as cooperation with other vendors in the region.

We have expanded our line of IP based product and launched the T-Marc. TELEPHONY® magazine (www.itmag.com) granted a 2005 Product of the Year Award to the company's T-Marc product line, a family of extremely cost effective and compact intelligent Ethernet demarcation and service delivery customer premises equipment (CPE) devices. Greg Galitzine, editorial director of INTERNET TELEPHONY magazine,.said: "The challenge for carriers in delivering quality intelligent data and voice services over an Ethernet-based network is ensuring they meet a performance level that enterprises are used to and demand, Carriers can conquer this challenge by gaining control at the network edge, and T-Marc is one of the first intelligent demarcation devices to market."

This product complements our T-Metro which was released earlier in 2005.

In addition to our stand-alone advanced devices, we continue to develop IP based blades and cards for the Advanced TCA standard. This development is partly funded by some of our business partners. It will allow us to present a comprehensive solution of communication blades for this standard in 2006-2008. This standard, Advanced Telecommunication Computing Architecture, is gaining considerable traction both with telecom vendors and telecom service providers.

In VoIP we continue to improve the performance and costs of our CPE gateways. In January 2006, we launched the Access211N, a next-generation SIP-based VoIP gateway for broadband Internet telephone service. Through integrated routing capabilities, unique traffic shaping, and its implementation of advanced quality of service (QoS) standards, service providers and the end user enjoy superior voice quality and reduced cost since the need for an external router is eliminated.

In July 2005, we purchased certain assets and liabilities of Integral Access Inc., headquartered in Chelmsford, Massachusetts. We have completed the integration of this product line into Telco Systems' offerings.

The recovery, which started in 2004 and accelerated during 2005, has continued further into the beginning of 2006. The agreements that have been signed with major partners and our substantial recent long-term project tender wins support our conviction that we have embarked on a period of substantial growth.

I am confident that 2006 will be a year when BATM will demonstrate that it has become a significant player in our industry.

1. Loss per share for the years ended 31 December 2005 and 31 December 2004 are calculated using an average 388,578,761 shares in issue in 2005 and an average 388,486,036 shares in issue in 2004.

2. Reconciliation of movements in shareholders' funds