Final Results

30.06.11 Parallel Media Group plc ("PMG" or "the Group") Financial Results for the year ended 31 December 2010 Parallel Media Group Plc, a leading sports marketing and media group, announces its final results for the year ended 31 December 2010. CHAIRMAN'S STATEMENT Headlines The last twelve months have been a transformational time for PMG. During this period we have: • Reduced the net liabilities of the Company by £2.27 million; • Acquired a date from the PGA European Tour for a new Asian based tournament; • Successfully completed a profitable 2010 Ballantine's Championship. 2010 During 2010, long term event and sponsorship contracts in Asia have continued to form the bedrock of the business. The PMG owned Ballantine's Championship remains Korea's primary men's golf tournament and is a key date on both the PGA European Tour's calendar and on the sister Asian and Korean Tour calendars. PMG has negotiated a new date on the PGA European Tour Calendar to create a golf tournament in mainland China which we plan to have operational by 2013 at the latest and is in discussion with leading golf courses to host this new event. This is a multiple year agreement with the European Tour that once again provides PMG with a platform to build long term, valuable sponsorship alliances. PMG has renegotiated its contract for the UBS Hong Kong Open becoming a long term commercial partner with the PGA European Tour as previously announced. Although this has meant that PMG's turnover has subsequently reduced, it has also meant that PMG has been able to reduce overhead costs in Hong Kong and open a new office in Seoul. In November 2010, PMG staged the Korean Ladies Masters for the third year running in association with the Ladies European Tour, where the elite players from Europe and Asia competed. PMG is now proposing to build on this success with an International Asia Ladies event. Parallel Smart Media I am pleased to announce that we have reached an agreement for the indirect acquisition of 50% of Parallel Smart Media Limited ("PSM"), a joint venture with Talspace Inc, for a consideration of approximately £1 million(please see separate announcement for full details.) PSM has launched a new "smart media" viewing platform, developed using Talspace's proprietorial technology, which provides a step-change in the way that sports, entertainment and lifestyle media can be delivered. The new viewing platform offers consumers the ability to dynamically stream multiple live and video-on-demand HD camera feeds across a global distribution network to all major `smart' device platforms including Apple's IOS, Android, Windows and Blackberry Tablet OS ("Apps"). I firmly believe that we should embrace the opportunities for user interaction in the sporting industry, with PSM using golf to lead the way in allowing fans to control their own viewing experience and encouraging the technological revolution happening in the world of sport. We expect PSM to contribute a significant proportion of PMG's revenues by 2012 The joint venture agreement with Talspace attributes a value of US$5m to the smart media viewing platform technology. Capital structure In 2010, the capital structure of PMG was re-organised. Previously expensive short-term debt has been repaid and a new banking relationship with Lloyds TSB has provided the Company with a fixed loan of £1 million repayable over a five year term. Convertible loans were converted into ordinary shares or repaid, demonstrating a renewed confidence in the short term prospects for the business. Financial results Turnover for the year is £6.7million (2009: £10.2 million). The reduction in turnover is due to a change in the operations and ownership of the Hong Kong Open. Gross margins increased to 33.8% (2009: 27.8%) resulting in gross profit for the year of £2.2 million (2009: £2.9 million). Administration costs increased to £2.9 million (2009: £2.2 million) largely due to the renegotiation of PMG's core contracts, the write-off of development costs and the capital restructuring resulting in a loss before interest, tax, depreciation and amortisation of £0.6 million (2009: profit before interest, tax, depreciation and amortisation of £0.7 million). The loss for the financial year was £1.27 million (2009: profit £0.1 million). The loss per share is 24.1p (2009: Earnings per share 3.1p). The net liabilities of the Group have reduced by £2.27 million, with the combination of new equity raised in 2010 and the conversion and repayment of loans. Future prospects With the capital restructuring complete and with all core rights agreements in place 2011 promises to be an exciting time for your Company. The introduction of PSM and its ground-breaking technology combined with the opening of a new office in Asia offers significant opportunities for the future. In April 2011, the Ballantine's Championship was held at the prestigious Black Stone Golf Course just outside of Seoul. The tournament which was also sponsored by Hyundai, Korean Telecom, Korean Insurance, Bank of America, Emirates Airline and Omega was won by the then world's number 1, Lee Westwood. I would like to take this opportunity to thank my fellow Board Members, Stewart Mison, Serenella Ciclitira, Ranjit Murugason and Leonard Fine for their invaluable contribution. I would also like to thank Edward Adams who recently left the Board, for his unswerving support to me personally and to the Company. With the London Olympics just over a year away our business is once again becoming fashionable. Companies such as ourselves are entirely dependent on its staff. This Company has a very committed and talented group of people working for it. We are all looking forward to the rest of 2011, and onto 2012. I would like to thank everyone for their invaluable continuing support. It is a pleasure to build the success of PMG with them. David Ciclitira Chairman 30 June 2011 For further information, please contact: Parallel Media Group 020 7225 2000 David Ciclitira, Charles Wale Northland Capital Partners 020 7796 8800 Luke Cairns, Edward Hutton Bishopsgate Communications Laura Stevens, Deepali Schneider, Natalie Quinn 020 7562 3350 pmg@bishopsgatecommunications.com CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2010 2010 2009 Note £'000 £'000 Continuing operations: Revenue 6,651 10,240 Cost of sales 5 (4,406) (7,390) Gross profit 2,245 2,850 Administrative (2,945) (2,195) expenses Administrative 77 46 expenses - Foreign exchange (Loss)/profit before (623) 700 interest, tax, depreciation and amortisation Depreciation of (7) (9) fixed assets Amortisation of (155) (207) intangibles Operating (loss)/ 6 (785) 485 profit Finance costs - non 9 (86) - recurring Finance costs 9 (398) (421) Investment income - 2 (Loss)/profit on (1,269) 65 ordinary activities before tax Taxation 11 - - (Loss)/profit for (1,269) 65 the year Attributable to: Non-controlling - - interests Equity holders of (1,269) 65 the parent (Loss)/profit for (1,269) 65 the financial year (Loss)/earnings per share - basic 12 (24.1p) 3.1p - diluted 12 (24.1p) 3.1p STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2010 GROUP 2010 2009 £'000 £'000 (Loss)/profit for the year (1,269) 65 Other comprehensive income Exchange difference on (34) 72 translation of foreign operations Tax effect of changes in total - - comprehensive income Total comprehensive (expense)/ (1,303) 137 income for the year Total comprehensive (expense)/ income attributable to: Equity holders of the parent (1,301) 126 Non-controlling interest (2) 11 (1,303) 137 STATEMENT OF FINANCIAL POSITION as at 31 December 2010 Registered GROUP GROUP COMPANY COMPANY Number 630968 2010 2009 2010 2009 Note £'000 £'000 £'000 £'000 Non-current assets Property, plant 13 6 13 6 13 & equipment Intangible 14 2,138 2,273 2,138 2,273 assets - Tournament rights Intangible 14 306 254 306 254 assets - Development costs Investments 15 12 12 1,100 1,100 Total 2,462 2,552 3,550 3,640 non-current assets Current assets Trade and other 16 1,388 1,351 1,045 1,196 receivables Cash and cash 17 142 322 139 309 equivalents Total current 1,530 1,673 1,184 1,505 assets Current liabilities Financial 18 104 983 104 983 liabilities - Borrowings Financial 19 39 2,427 39 2,427 liabilities - Convertible loans Deferred income 20 958 1,041 - - Trade and other 20 2,598 2,399 2,874 3,004 payables Total current 3,699 6,850 3,016 6,414 liabilities Net current (2,169) (5,177) (1,832) (4,909) liabilities Non current liabilities Financial 21 896 248 896 248 liabilities - Borrowings Net liabilities (603) (2,873) 821 (1,517) Equity Share capital 24 3,362 3,070 3,362 3,070 Share premium 5,429 2,091 5,429 2,091 Equity element - 57 - 57 of convertible loans Other reserves 557 557 557 557 Capital 5,034 5,034 5,034 5,034 redemption reserve Foreign (12) 20 - - exchange reserve Retained (14,835) (13,566) (13,561) (12,326) earnings Equity (465) (2,737) 821 (1,517) attributable to equity holders of the parent Non-controlling (138) (136) - - interests (603) (2,873) 821 (1,517) The financial statements were approved and authorised for issue by the Board of directors on 30 June 2011 and were signed on its behalf by: David Ciclitira Chairman STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2010 Capital Non con- Ordinary Share Equity Other redemp- Forex Retained Sub trolling Share Premium reserve reserves tion reserve earnings total interests Total Capital Group At 31 3,070 2,091 57 557 5,034 20 (13,566) (2,737) (136) (2,873) December 2009 Loss for the - - - - - - (1,269) (1,269) - (1,269) year Foreign - - - - - (32) - (32) (2) (34) exchange Total - - - - - (32) (1,269) (1,301) (2) (1,303) comprehensive income Issued share 292 3,338 - - - - - 3,630 - 3,630 capital Conversion of - - (57) - - - - (57) - (57) loans At 31 3,362 5,429 - 557 5,034 (12) (14,835) (465) (138) (603) December 2010 Company At 31 3,070 2,091 57 557 5,034 - (12,326) (1,517) - (1,517) December 2009 Loss for the - - - - - - (1,235) (1,235) - (1,235) year Issued share 292 3,338 - - - - - 3,630 - 3,630 capital Conversion of - - (57) - - - - (57) - (57) loans At 31 3,362 5,429 - 557 5,034 - (13,561) 821 - 821 December 2010 The table below shows the statement of changes in equity for the year ended 31 December 2009: Capital Non con- Ordinary Share Equity Other redemp- Forex Retained Sub trolling Share Premium reserve reserves tion reserve earnings total interests Total Capital Group At 31 3,070 2,091 57 557 5,034 (41) (13,631) (2,863) (147) (3,010) December 2008 Profit for - - - - - - 65 65 - 65 the year Foreign - - - - - 61 - 61 11 72 exchange Total - - - - - 61 65 126 11 137 comprehensive income At 31 3,070 2,091 57 557 5,034 20 (13,566) (2,737) (136) (2,873) December 2009 Company At 31 3,070 2,091 57 557 5,034 - (12,221) (1,412) - (1,412) December 2008 Loss for the - - - - - - (105) (105) - (105) year At 31 3,070 2,091 57 557 5,034 - (12,326) (1,517) - (1,517) December 2009 The Equity Reserve is the difference between the net issue proceeds and the liability component of convertible loans at the time of issue, which is accounted for as an equity instrument. Other Reserves are non-distributable, created in 2001. The Capital Redemption reserve is a non-distributable reserve created in 2001, following the redemption or purchase of the Company's own shares. The Foreign Exchange translation reserve comprises foreign exchange differences arising from the translation of the financial statements of subsidiaries that do not have a sterling functional currency. STATEMENT OF CASHFLOWS for the year ended 31 December 2010 GROUP GROUP COMPANY COMPANY 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Cash flows from operating activity Operating (loss)/profit (785) 485 (753) 91 Depreciation 7 9 7 9 Amortisation of 136 136 136 136 intangibles - Tournament rights Amortisation of 19 71 19 71 intangibles - Development costs (Increase)/decrease in (104) (499) (297) 498 receivables Increase/(decrease) in 305 149 443 (389) payables Foreign exchange on (23) 11 (23) 11 non-operating activities Increase in translation (35) 74 - - reserve Cash (used in)/generated (480) 436 (468) 427 from operations Cash flow from investing activities Acquisition of (71) (166) (71) (166) development costs Sale of other investments - 4 - 4 Interest received 1 2 1 2 Net cash (used in) (70) (160) (70) (160) investing activities Cash flow from financing activities Proceeds from/(repayments (247) 131 (247) 131 of) Bank facility Cash received from - 14 - 14 convertible loans Convertible loans repaid (494) (158) (494) (158) Cash proceeds from issue 950 - 950 - of new shares Loan received 1,200 45 1,200 45 Loans repaid (783) (315) (783) (315) Interest paid (228) (293) (230) (293) Net cash generated from/ 398 (576) 396 (576) (used in) financing activities Cash and cash equivalents 322 728 309 724 at beginning of the year Net decrease in cash and (152) (300) (142) (309) cash equivalents Exchange losses on cash (28) (106) (28) (106) and cash equivalents Cash and cash equivalents 142 322 139 309 at end of the year NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2010 1. BASIS OF PREPARATION These financial statements have been prepared on the historical cost basis and in accordance with IFRS as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the financial statements which are disclosed in note 3. The area involving a high degree of judgement or complexity is the valuation of intangible assets with a carrying value of £2.4 million. The intangible assets represent rights to operate golf events on dates in the European Tour Calendar and are included in the financial statements at cost of acquisition less amortisation. Management are required to assess potential impairment and confirm the appropriateness of the useful life and amortisation period which may materially impact results for the year. Convertible loans during the year were calculated in accordance with IAS 32, requiring the separate recognition of debt and equity elements. The fair value of extension premiums settled by the issue of ordinary shares has been recognised in the Income Statement. A separate Income Statement for the parent company has not been presented as permitted by section 408 of the Companies Act 2006. The directors have prepared trading and cash flow forecasts for the Group for the period to 31 December 2012. The forecasts incorporate trading assumptions, including increased sponsorship from existing tournaments and new sponsorship revenues; and the completion of the acquisition of Parallel Smart Media ("PSM") rights from Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited. The forecasts also include assumptions on raising a minimum of £1 million of new funding from a combination of debt and equity investors. The Company is in advanced discussions with both debt and equity providers to secure this funding, which will enable the exploitation of the PSM rights acquired and provide the necessary working capital for the survival and growth of the business. Both the acquisitions of Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited and any proposed equity funding will require the consent of shareholders in general meeting. The directors believe these forecasts to be realistic, are confident that the necessary funding will be obtained, and that the necessary resolutions to allow the acquisitions and funding will be passed by shareholders at a general meeting. Consequently, the Directors have prepared the financial statements on the going concern basis, which assumes that the Group and Company will continue in operational existence for the foreseeable future. However, the above circumstances represent an uncertainty which may cast significant doubt about the Group's and the Company's ability to continue as a going concern. 1.1. Adoption of standards effective in 2010 The financial statements are prepared in accordance with International Financial Reporting Standards and Interpretations as adopted by the EU in force at the reporting date. IAS 27 Consolidated and separate financial statements has been applied by the Group from 1 January 2010. This standard includes guidance on accounting for changes in non-controlling interests (previously "minority interests") where there is no effect on control. This application has had no material impact on PMG results for the financial period, but has required some presentational changes. 1.2. Standards and interpretations issued but not yet applied Any standards and interpretations that have been issued but are not yet effective, and that are available for early application, have not been applied by the Group in these financial statements. Application of these Standards and Interpretations is not expected to have a material effect on the financial statements in the future. The standards and interpretations that have been issued, but are not yet effective are: • IFRS 7 Financial Instruments: Disclosure • IAS 32 Financial Instruments: Presentation • IFRS 9 Financial Instruments: Recognition and measurement • IAS 24 Related party disclosures • IFRS 1 First time adoption of IFRS • IFRIC 14 Prepayments to a minimum funding requirement • IFRIC 19 Extinguishing financial liabilities with equity instruments In addition to the above standards, The London Stock Exchange issued amended AIM Rules. An amendment to AIM Rule 19 requires entities with years ending on or after 31 March 2010 to disclose details of each director's remuneration in the annual accounts. This ruling has been applied in these financial statements. 2. ACCOUNTING POLICIES 2.1. Consolidation and investments The consolidated financial statements incorporate the results of the Company and all of its subsidiary undertakings as at 31 December 2010 using the purchase method of accounting. Under the purchase method the results of subsidiary undertakings are included from the date of acquisition. On disposal, the results are included up to the date of disposal. Inter-company balances, transactions, and unrealised gains/losses are eliminated on consolidation. 2.2. Intangible Assets - Tournament rights The rights to promote European Tour golf events were acquired in September 2006 and included in the statement of financial position as intangible assets in the audited financial statements for the year ended 31 December 2006 at fair value. These assets are amortised over their expected life of 20 years. Intangible assets acquired are held at cost less amortisation and are reviewed on an annual basis for impairment. 2.3. Intangible Assets - Development costs Development costs are included in the statement of financial position at cost less any impairment provision. Development costs are only recognised where it can be demonstrated that the project is technically feasible; where there is a clear intention to complete the project; that there is ability to use or sell the asset and that there is a high probability of future economic benefits and expenditure can be measured reliably. 2.4. Property, Plant & Equipment Depreciation is provided on office equipment, fixtures & fittings so as to write them off over their anticipated useful lives. Office equipment, fixtures & fittings are depreciated at 20% on a straight line basis. The carrying amounts of property, plant and equipment are reviewed for amendments to the residual value and useful economic life. This is performed annually or sooner, if there is an indication that they may be impaired. 2.5 Impairment of assets The carrying amounts of the Group's assets, other than inventories, are reviewed at each statement of financial position date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. The recoverable amount of assets is the greater of their net selling price and value in use. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognised. 2.6. Financial instruments The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on trade date when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are recognised initially at fair value plus, in the case of a financial instrument not at fair value through profit and loss, transactions costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments are derecognised on trade date when the Group is no longer a party to the contractual provisions of the instrument. 2.6.1. Available-for-sale financial assets Available-for-sale financial assets comprise equity investments. Subsequent to initial recognition available-for-sale financial assets are stated at fair value. Movements in fair values are taken directly to equity, with the exception of impairment losses which are recognised in profit or loss. Fair values are based on prices quoted in an active market if such a market is available. If an active market is not available, the Group establishes the fair value of financial instruments by using a valuation technique, usually discounted cash flow analysis. When an investment is disposed, any cumulative gains and losses previously recognised in equity are recognised in profit or loss. Dividends are recognised in profit or loss when the right to receive payments is established. 2.6.2. Trade receivables Trade receivables are stated at their amortised cost. Trade receivables are reduced by appropriate allowances for estimated irrecoverable amounts. 2.6.3. Cash and cash equivalents Cash equivalents comprise short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. 2.6.4. Trade payables Trade payables are stated at their amortised cost. 2.6.5. Interest-bearing borrowings (other than Compound financial instruments) Interest-bearing borrowings are stated at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability. 2.7. Share based payments Options are measured at fair value at grant date using the Black-Scholes model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest. Cash settled share based payment transactions results in the recognition of a liability at its current fair value. 2.8. Revenue recognition Revenue includes sponsorship, management fees, sales & consulting fees, and income from sales of broadcasting rights. Revenue is recognised when the Group has earned the right to receive consideration for its performance, measured on the following basis: (i) Management fees and other fees earned - on rendering of services to third parties. (ii) Income from sale of sponsorship and commercial rights - on a straight line basis in accordance with the terms of the agreement. (iii) Income from sale of broadcasting rights - on delivery of the programmes to broadcasters in accordance with the terms of the agreement. 2.9. Barter transactions When services are rendered in exchange for dissimilar goods or services, the revenue generated for the services rendered is measured at the fair value of the goods or services received, adjusted for the amount of any cash or cash equivalents transferred. 2.10. Leases Rentals under operating leases are charged to the Income Statement on a straight line basis over the lease term. 2.11. Deferred taxation Deferred tax is provided in full using the balance sheet liability method. Deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities shown on the statement of financial position. The amount of deferred tax provided is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the statement of financial position date. The Group does not recognise deferred tax liabilities, or deferred tax assets, on temporary differences associated with investments in subsidiaries, as it is not considered probable that the temporary differences will reverse in the foreseeable future. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The carrying amount of the deferred tax assets are reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. 2.12. Segmental reporting A segment is a distinguishable component of the Group that is engaged either in Event Promotion or Sales and Consultancy which are subject to risks and rewards that are different from one another. Disclosure of segment results is provided in note 4 of the financial statements. 2.13. Foreign currencies Monetary assets and liabilities expressed in foreign currencies are translated at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated at the rate ruling at the date of the transaction. Differences on exchange arising on translation of subsidiaries are charged directly to equity. All other exchange differences have been charged to the Income Statement. 2.14. Compound financial instruments - Convertible loans Compound financial instruments comprise both liability and equity components. At issue date, the fair value of the liability component is estimated by discounting its future cash flows at an interest rate that would have been payable on a similar debt instrument without any equity conversion option. The liability component is accounted for as a financial liability. The difference between the net issue proceeds and the liability component, at the time of issue, is the residual or equity component, which is accounted for as an equity instrument. Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components of the instrument in proportion to the allocation of the proceeds. The interest expense on the liability component is calculated by applying the effective interest rate for the liability component of the instrument. 3. ACCOUNTING ESTIMATES AND JUDGEMENTS The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows: 3.1. Intangible Assets: Tournament rights are the rights to promote European Tour golf events acquired in a market transaction in September 2006. These assets are carried at cost less amortisation. Amortisation is calculated to write-off the assets over their expected useful life of 20 years. Management use a combination of discounted cash flow and valuation multiples to assess the value of the assets at each reporting date. If the assets are deemed to be impaired, the amount of this impairment is taken directly to the income statement. 3.2. Development Costs: Development costs are incurred in the creation of new media assets and propositions, the benefits of which are expected to be derived in future years. Development costs are written-off over the expected useful life of the asset. The development assets are assessed for impairment annually. 4. SEGMENT REPORTING Operating Segments The Group is organised into two main segments Event Promotion and Consultancy & Sales. • Parallel Sports is the new Event Promotion brand and operates professional golf tournaments in Asia which are sanctioned by The European Tour and Ladies European Tour. The Sales and Consultancy division is comprised of three units: • Parallel Thinking is the sales and consultancy brand based in London and works with major international brands and federations on sports related marketing opportunities and projects. • Parallel Media Korea has been established to provide a greater focus on the development of new opportunities in the Korean market, providing sales and marketing presence in Korea which enhances existing sports properties and provides a platform for the creation of new properties. • Parallel Television is responsible for the worldwide distribution of TV rights. Segment results for the year Operating Segments Event Sales & Consolidated Promotion Consultancy 2010 2009 2010 2009 2010 2009 £'000 £'000 £'000 £ £'000 £'000 '000 Revenue 5,350 9,355 1,301 885 6,651 10,240 Segment result 1,020 1,155 1,249 809 2,269 1,964 Unallocated (3,054) (1,479) corporate expenses Operating (loss)/ (785) 485 profit Finance costs (484) (421) Investment income - 2 (Loss)/profit for (1,269) 65 the year Revenue by major customers Operating Event Event Sales & Sales & Consolidated Consolidated Segments Promotion Promotion Consultancy Consultancy 2010 2009 2010 2009 2010 2009 £'000 £'000 £'000 £'000 £'000 £'000 Client 1 4,429 4,230 - - 4,429 4,230 Client 2 - 3,169 - - - 3,169 Other 1,268 1,956 954 885 2,222 2,841 clients Total by 5,697 9,355 954 885 6,651 10,240 client and segment Geographic analysis Operating Revenues Revenues Non-current Non-current Segments Assets Assets 2010 2009 2010 2009 £'000 £'000 £'000 £'000 South Korea 5,697 5,397 506 605 Hong Kong - 3,957 1,569 1,669 China - 281 - - UK 954 605 386 278 Total by 6,651 10,240 2,462 2,552 geography Segment assets and liabilities Operating Event Event Sales & Sales & Consolidated Consolidated Segments Promotion Promotion Consultancy Consultancy 2010 2009 2010 2009 2010 2009 £'000 £'000 £'000 £'000 £'000 £'000 Segment 2,339 2,560 850 290 3,189 2,850 assets Unallocated 803 1,375 corporate assets Consolidated 3,992 4,225 total assets Segment (2,077) (2,276) (69) (70) (2,146) (2,346) liabilities Unallocated (2,449) (4,752) corporate liabilities Consolidated (4,658) (7,098) total liabilities Net (603) (2,873) liabilities Other Segment Information for the year Operating Event Event Sales & Sales & Consolidated Consolidated Segments Promotion Promotion Consultancy Consultancy 2010 2009 2010 2009 2010 2009 £'000 £'000 £'000 £'000 £'000 £'000 Depreciation (1) (1) (6) (8) (7) (9) of tangible assets Capital - - 164 164 164 164 expenditure on intangible assets Amortisation - - (19) (71) (19) (71) of intangible assets Non-cash (136) (136) - - (136) (136) expenses other than depreciation Impairment - - - (8) - (8) losses recognised in segment results 5. COST OF SALES The Group's Cost of Sales comprises: 2010 2009 £'000 £'000 Prize purse and sanction 2,240 3,951 fees Commissions payable 106 46 Direct delivery costs 2,060 3,393 Cost of sales 4,406 7,390 6. OPERATING (LOSS)/PROFIT 2010 2009 £'000 £'000 This is stated after charging: Depreciation 7 9 Amortisation 155 207 Operating lease rentals - 29 29 Land & buildings Gain on foreign exchange (77) (46) 7. AUDITOR'S REMUNERATION 2010 2009 £'000 £'000 Fees payable to the 30 25 Company's auditor for the audit of the Company's annual accounts Fees payable to the 5 5 Company's auditor and associates in respect of the auditing of accounts of subsidiaries and associates of the Company pursuant to legislation Services relating to 5 6 taxation and subsidiaries 40 36 8. EMPLOYEES 2010 2009 Number Number Group The average number of employees (including directors) during the year was: Administration 14 18 £'000 £'000 The aggregate payroll costs including directors were: Wages, salaries and fees 1,294 1,009 Social security costs 38 34 Compensation for loss of - 35 office 1,332 1,077 9. FINANCE COSTS 2010 2009 £'000 £'000 On fair value of 86 - convertible extension premium and 2012 interest Finance costs - non 86 - recurring On bank overdrafts 12 9 On convertible loans 85 138 Interest on related party 21 - loans On loans guarantee from 54 99 related parties On other loans 226 175 Finance costs 398 421 10. REMUNERATION OF DIRECTORS Directors' remuneration, including non executive directors, during the year was as follows: 2010 2009 £'000 £'000 Group & Company David Ciclitira (Chairman) 221 221 Edward Adams 30 30 (Non-Executive - resigned 29 November 2010) Leonard Fine 30 30 (Non-Executive) Stewart Mison (Managing 88 - Director) Serenella Ciclitira 15 - (Non-Executive) Ranjit Murugason - - (Non-Executive) Total emoluments 384 281 11. TAX 2010 2009 £'000 £'000 UK Corporation tax in respect of current year: Current taxation - - Total tax charge for the - - year (Loss)/profit on ordinary (1,269) 65 activities before tax The tax assessed for the year is lower from the standard UK corporation tax rate of 28% due to the following factors: (Loss)/profit on ordinary (355) 18 activities at the standard rate of corporation tax of 28% (2009: 28%) Effect of: Expenses not deductible 7 5 for tax purposes Tax losses utilised in (7) (23) year - not recognised through deferred tax Tax losses carried forward (355) - - deferred tax not recognised Total tax charge for the - - year 12. EARNINGS PER SHARE The basic earnings per share is calculated by dividing the profit or loss attributable to equity shareholders by the weighted average number of shares in issue during the year. In calculating the diluted earnings per share, outstanding share options, warrants and convertible loans are taken into account where the impact of these is dilutive. Restated for consolidation 2010 2009 (i) Basic (Loss)/profit for the (1,269) 65 financial year (£'000) Weighted average number of 5,257,672 2,123,057 shares in issue (Loss)/earnings per share (24.1p) 3.1p (ii) Diluted (Loss)/profit for the (1,269) 65 financial year (£'000) Add back interest charged 57 138 on convertible loans where the impact of these loans is dilutive (£'000) Diluted (loss)/profit (£ (1,212) 203 '000) Weighted average number of 5,257,672 2,123,057 shares in issue Weighted average of - 2,032,161* potential dilutive effect of ordinary shares issuable under Convertible loan agreements 5,257,672 4,155,218** Fully diluted (loss)/ (24.1p)*** 3.1p earnings per share *Ordinary shares issuable under outstanding convertible loan agreements, share options and warrants are anti-dilutive. **The potential dilutive effect in 2009 relates to ordinary shares that were issuable under Convertible loan agreements and Bonus shares as approved by shareholders on 24 October 2008. All other share issues under convertible agreements, share options and warrants were non-dilutive. ***The fully diluted loss per share is the same as the basic loss per share as the effect of potential shares are anti-dilutive. 13. PROPERTY, PLANT & EQUIPMENT The useful lives of each class of fixed assets are reviewed annually to assess impairment. Where the asset is found to be impaired an appropriate charge is taken to the Income Statement. Group Group Company Company Office Office Office Office Equipment Equipment Equipment Equipment 31 December 31 December 31 December 31 December 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Cost Cost at start 246 246 45 45 of year Additions in - - - - year Cost at end of 246 246 45 45 year Depreciation Cumulative 233 224 32 23 depreciation at start of year Charge for year 7 9 7 9 Cumulative 240 233 39 32 depreciation at end of year Net book value 6 13 6 13 at end of year Net book value 13 22 13 22 at start of year 14. INTANGIBLE ASSETS Tournament Rights Tournament rights are the rights to promote European Tour golf events acquired in a market transaction in September 2006. These assets are carried at cost less amortisation. Amortisation is calculated to write-off the assets over their expected useful life of 20 years. 2010 2009 £'000 £'000 Group and Company Cost Cost at start of year 2,713 2,713 Additions in the year - - Cost at end of year 2,713 2,713 Amortisation Cumulative amortisation at 440 304 start of year Amortisation for the year 135 136 Cumulative amortisation at 575 440 end of year Net book value at end of 2,138 2,273 year Net book value at start of 2,273 2,409 year Development Costs Development costs are incurred in the creation of new media assets and propositions, the benefits of which are expected to be derived in future years. Development costs are written-off over the expected useful life of the asset. The development assets are assessed for impairment annually. 2010 2009 £'000 £'000 Group and Company Cost Cost at start of year 325 161 Additions in the year 71 164 Cost at end of year 396 325 Amortisation Cumulative amortisation at 71 - start of year Amortisation for the year 19 71 Cumulative amortisation at 90 71 end of the year Net book value at end of 306 254 year Net book value at start of 254 161 year All research costs are expensed as incurred. Similarly, sales and marketing costs of exploiting assets are expensed through the Income statement as incurred. 15. NON-CURRENT ASSETS - INVESTMENTS Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Investment in - - 1,100 1,100 Subsidiaries Other 12 12 - - investments available for sale 12 12 1,100 1,100 Company £'000 Subsidiaries Investments in subsidiaries are stated at cost less impairment: At 1 January 2010 1,100 Provision charged in the year - At 31 December 2010 1,100 Group Company £'000 £'000 Other investments available for sale At 1 January 2010 12 - At 31 December 2010 12 - 16. TRADE AND OTHER RECEIVABLES Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Trade 909 825 695 517 receivables Other 205 257 160 457 receivables Prepayments and 274 269 190 382 accrued income 1,388 1,351 1,045 1,196 At 31 December 2010 all amounts included under trade receivables are due within one year. Group and Company trade receivables include £0.68 million due from related parties (2009: £0.27 million). (See note 27 for more details). 17. CASH AND CASH EQUIVALENTS Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Sterling Bank (24) (28) (24) (28) Accounts Euro Bank 139 115 139 115 Accounts Dollar Bank 27 217 24 215 Accounts Cash balances - 18 - 7 142 322 139 309 18. FINANCIAL LIABILITIES - BORROWINGS Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Bank facility 104 128 104 128 Medium Term - 855 - 855 Lending 104 983 104 983 The bank facility totalling £1 million (of which £104,000 is repayable within one year) is secured by a personal guarantee provided by David Ciclitira, Serenella Ciclitira and Luna Trading. Medium Term lending was repaid in full during the year. 19. FINANCIAL LIABILITIES - CONVERTIBLE LOANS The value of the convertible loans at the balance sheet date has been determined in accordance with IAS 32, as described under Accounting Policies, Note 1. This requires the separate recognition of the debt and equity components of the amounts received, with equity components shown directly in equity reserves. Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Convertible 39 2,427 39 2,427 loans due in less than one year As at 31 December 2010, the convertible loans are convertible and/or repayable on demand. All other convertible loans together with accrued interest were converted and/or repaid during the year. 20. TRADE AND OTHER PAYABLES AND DEFERRED INCOME Group Group Company Company 2010 2009 2010 2009 TRADE AND OTHER £'000 £'000 £'000 £'000 PAYABLES Trade payables 1,961 1,494 833 688 Amounts owed to - - 1,462 1,747 subsidiary entities Other payables 189 264 250 114 Other tax and 81 66 82 63 social security Accruals 367 575 247 392 Trade and other 2,598 2,399 2,874 3,004 payables Other payables in both Group and Company statements include amounts due to Luna Trading totalling £113,868 (2009: £296,000) which has an option to convert and or is repayable on or before 31 December 2011. Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Deferred income 958 1,041 - - Deferred income of £958,000 is income received in advance as at 31 December 2010 which will be recognised as revenue in 2011 when services are rendered. 21. NON-CURRENT LIABILITIES - FINANCIAL BORROWINGS Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Bank facility 896 119 896 119 Other loans (1 - 129 - 129 to 2 years) 896 248 896 248 Lloyds Bank has provided a loan totalling £1 million (of which £104,000 is included in current liabilities and £896,000 is included in non-current liabilities above). The loan is repayable in 48 consecutive monthly instalments representing principle and interest commencing on the date which is 12 months after the date the loan was borrowed (i.e. a effective term of five years with a one year repayment holiday). The loan carries interest payable at 3% over base rate. The loan may be repaid early at the discretion of the Company. The loan is secured by personal guarantees provided by the David Ciclitira concert party. 22. FINANCIAL INSTRUMENTS The Group and Company operations expose it to a number of financial risks. The directors aim to protect the Group and Company against the potential adverse effects of these financial risks. Financial Assets Financial assets include cash and trade and other receivables (excluding prepayments) which are classified as "loans and receivables"; and equity investments which are classified as "available for sale" (excluding investments in subsidiaries). These amounts have been shown separately on the face of the statement of financial position. Funds not immediately required for the Group and Company's operations are invested in bank deposits. It is the directors' opinion that the carrying value of cash, trade receivables and investments approximate to their fair value. Financial Liabilities Financial liabilities include current and non-current borrowings, convertible loans and trade and other payables (excluding tax & social security, and deferred income). All amounts are carried at amortised cost. These amounts have been disclosed in the notes to the statement of financial position. It is the directors' opinion that the carrying value of financial liabilities approximate to their fair value. Liquidity Risk The Group and Company's surplus liquid resources were maintained on short-term interest bearing deposits. The Group and Company plan to continue to meet operating and other loan commitments as they fall due. Liquidity risk is managed through cashflow forecasts and regular planning. Remaining Contractual Maturities year ended 31 December 2010 Within > 3 months > 1 year Total carrying Group 3 months < 1 year < 5 years amount Bank loans & - 104 896 1,000 borrowings Convertible - 39 - 39 loans Trade & other 2,517 - - 2,517 payables (excluding tax and deferred income) 2,517 143 896 3,556 Within > 3 months > 1 year Total carrying Company 3 months < 1 year < 5 years amount Bank loans & - 104 896 1,000 borrowings Convertible - 39 - 39 loans Trade & other 2,792 - - 2,792 payables (excluding tax and deferred income) 2,792 143 896 3,831 Set out below are liquidity risk comparative tables as at 31 December 2009: Remaining Contractual Maturities year ended 31 December 2009 Within > 3 months > 1 year Total carrying Group 3 months < 1 year < 5 years amount Bank loans & 195 792 115 1,102 borrowings Convertible - 2,427 - 2,427 loans Trade & other 2,333 - - 2,333 payables (excluding tax and deferred income) 2,528 3,219 115 5,862 Within > 3 months > 1 year Total carrying Company 3 months < 1 year < 5 years amount Bank loans & 195 792 115 1,102 borrowings Convertible - 2,427 - 2,427 loans Trade & other 2,941 - - 2,941 payables (excluding tax and deferred income) 3,136 3,219 115 6,470 Credit Risk Financial assets past due but not impaired as at 31 December 2010: Not impaired Not impaired Not impaired Not impaired but past due but past due but past due but past due by the by the by the by the following following following following amounts amounts amounts amounts Not impaired >30 days >60 days >90 days >120 days (£'000) Group: Trade 1,114 - 7 33 496 & other receivables (excluding prepayments) Company: 855 - 7 - 302 Trade & other receivables (excluding prepayments) Financial assets past due but not impaired as at 31 December 2009: Not impaired Not impaired Not impaired Not impaired but past due but past due but past due but past due by the by the by the by the following following following following amounts amounts amounts amounts Not impaired >30 days >60 days >90 days >120 days (£'000) Group: Trade & 1,081 - 56 33 41 other receivables (excluding prepayments) Company: Trade 813 - 190 - 41 & other receivables (excluding prepayments) Trade and other receivables excluding prepayments as at 31 December 2010 were £ 1,284,000. Assets not impaired but past due were £536,000. PMG have contra supply arrangements which are expected to enable the recovery of the unimpaired but past due amounts and/or consider these collectable. Impaired trade receivables for the year ended 31 December 2010 represent specifically identified amounts which are past due and for which collection is deemed unlikely. All remaining Trade and other receivables as at 31 December 2010 are collected and/or collectable and are therefore considered of low credit risk. All bank deposits are maintained in the UK and are considered to be low credit risk. The Group and Company's maximum exposure to credit risk during the year ended 31 December 2010 was £909,000. Allowance for credit losses (Group and Company) 2010 2009 £'000 £'000 Allowances at start of 53 233 year Amounts written back - (188) during the year Additions charged to 41 8 Income Statement in year 94 53 Market Risk (a) Interest rate risk Bank loans totalling £1 million are at variable interest rates and are therefore exposed to interest rate fluctuations. Sensitivity: For each +/- 1% change in the bank rate, the profit for the year will be positively or negatively impacted by £10,000 (2009: £25,000) (b) Foreign currency risk Although the Company is based in the UK, a significant part of the Group's and Company's operations are overseas, primarily in Asia, and the operating or functional currency of a large part of the Asian business is in US Dollars. As a result, the Company's consolidated Sterling accounts can be affected by movements in the US Dollar/Sterling exchange rate. The foreign assets and liabilities of the Group and Company are closely matched as at the year ended 31 December 2010. The table below sets out the carrying amounts of assets and liabilities for the Group in their presentational currency (i.e. Sterling) and a total impact for each 10% fluctuation in exchange rates. Based on the carrying amounts of foreign assets and liabilities as at 31 December 2010, for each 10% fluctuation in exchange rates, net assets are expected to be impacted by +/- £103,000 (2009: £257,000). The Company (standalone) exposure to foreign currency risk is +/- £103,000 (2009: £257,000) for each 10% move in exchange rates and is similar to that of the Group. The Group and Company seek in so far as it is practical, to match foreign currency income and expense. The Company has not entered into foreign exchange hedging arrangements. Year ended 31 December 2010 Total carrying Forex Forex Risk Risk Carrying Carrying Carrying Carrying amount -10% +10% Amount Amount Amount Amount (Sterling (Sterling (Sterling (Sterling equivalent) equivalent) equivalent) equivalent) £'000 $'000 €'000 HK$'000 £'000 £'000 £'000 Financial Assets Cash (24) 27 139 - 142 17 (17) Trade 478 309 122 - 909 43 (43) receivables Investments 12 - - - 12 - - held for sale Other 160 44 - - 205 4 (4) debtors 720 381 261 - 1,268 64 (64) Financial Liabilities Borrowings 104 - - - 104 - - <1 year Convertible 39 - - - 39 - - loan Trade 477 1,281 14 189 1,961 (148) 148 creditors Other 29 2 - - 94 - - creditors Accruals & 246 120 - - 367 (12) 12 provisions Non current 896 - - - 896 - - borrowings 1,792 1,403 14 189 3,461 (160) 160 Net Impact (96) 96 Year ended 31 December 2009 Total carrying Forex Forex Risk Risk Carrying Carrying Carrying Carrying amount -10% +10% Amount Amount Amount Amount (Sterling (Sterling (Sterling (Sterling equivalent) equivalent) equivalent) equivalent) £'000 $'000 €'000 HK$'000 £'000 £'000 £'000 Financial Assets Cash (20) 224 115 - 322 34 (34) Trade 534 256 34 1 825 29 (29) receivables Investments 12 - - - 12 - - held for sale Other 153 103 - - 257 10 (10) debtors 679 583 149 1 1,416 73 (73) Financial Liabilities Borrowings 128 - 855 - 983 (86) 86 Convertible 2,427 - - - 2,427 - - loan Trade 413 725 - 356 1,494 (108) 108 creditors Other 268 63 - - 330 (6) 6 creditors Accruals & 224 351 - - 575 (35) 35 provisions Non current 248 - - - 248 - - borrowings 3,708 1,139 855 356 6,058 (235) 235 Net Impact (162) 162 23. DEFERRED TAXATION The actual and potential liability to deferred tax is nil. Due to the availability of tax losses, subject to agreement with the HM Revenue and Customs, there is an estimated deferred tax asset of £4,073,926 which has not been recognised in these accounts (31 December 2009: £3,873,000). The deferred tax asset is based on gross losses of £14,331,478 (2009: £13,348,478). No deferred tax asset has been recognised due to the uncertainty over making sufficient profits in the future. 24. SHARE CAPITAL The Authorised Share Capital is set out in the table below: 2010 2009 £'000 £'000 Authorised share capital 69,737,713,750 ordinary - 6,974 shares of 0.01p 316,989,608 ordinary 6,974 - shares of 2.2p 199,831,545 deferred 999 999 ordinary shares of 0.5p each 103,260 deferred B shares 2,024 2,024 of £19.60 9,997 9,997 The Issued Share Capital is set out in the table below: 2010 2009 £'000 £'000 Issued and fully paid as at 31 December 2010 15,437,437 ordinary shares 339 - of 2.2p 467,072,593 ordinary - 47 shares of 0.01p 199,831,545 deferred 999 999 ordinary shares of 0.5p each 103,260 deferred B shares 2,024 2,024 of £19.60 3,362 3,070 2010 2009 Reconciliation of the Number Number number of shares outstanding is: Ordinary shares of 0.01p 467,072,593 467,072,593 each in issue at start of year Ordinary shares of 0.01p 598,951,267 - each issued during the period Ordinary shares of 0.01p 1,066,023,860 - each at consolidation Ordinary shares of 0.01p - 467,072,593 each in issue at end of year Consolidation of ordinary Number Number shares at 220:1 Ordinary shares of 2.2p 4,845,563 - following consolidation Ordinary shares of 2.2p 10,591,874 - each issued during the period Ordinary shares of 2.2p 15,437,437 - each in issue at end of year Issued and fully paid Number Number deferred shares Deferred shares of 0.5p 199,831,545 199,831,545 each in issue Deferred B shares of £ 103,260 103,260 19.60 (i) Ordinary shares During the year ordinary shares were issued as follows: Issue 2010 price (Number) Consideration Ordinary shares of 0.01p each issued during the year 30 June 2010 0.25p 531,751,071 Being £1,329,378 equivalent, issued in settlement of 2008 convertible extension premiums and convertible loan interest to 30 June 2010 6 August 0.25p 67,200,000 Being £168,000 equivalent issued 2010 in settlement of 2008 convertible extension premiums at the placing price 10 August 0.25p 196 49p to effect consolidation 2010 Total shares 598,951,267 of 0.01p each issued during the year Ordinary shares of 2.2p each issued during the year 1 September 55p 1,327,903 Being £730,347 settlement of creditors, 2010 convertible loan extension premiums and interest to December 2012 at the issue price 9 November 40p 9,263,971 Being £3,705,589 settlement of creditors, 2010 conversion of convertible loans and placement of new shares at the issue price Total shares 10,591,874 of 2.2p each issued during the year The issued share capital at 1 January 2010 was 467,072,593 ordinary shares of 0.01p each. During the year (and prior to 31 August 2010) the Company issued 598,951,267 ordinary shares of 0.01p totalling 1,066,023,860. On 31 August 2010, 1,066,023,860 ordinary shares of 0.01p each in the capital of the Company were consolidated into 4,845,563 New Ordinary Shares of 2.2p each on the basis of one ordinary share of 2.2p for every 220 Ordinary shares of 0.01p each in issue at the consolidation date. Following consolidation, on 1 September and 9 November 2010, a total of 10,591,874 ordinary shares of 2.2p were issued. The issued ordinary share capital of the Company as at 31 December 2010 was 15,437,437. (ii) Deferred shares The deferred shares do not entitle their holders to receive any dividend or other distribution, they do not entitle their holders to receive notice of or to attend, speak or vote at any General Meeting of the Company, and they do not entitle their holders on a return of assets on a winding-up of the Company or otherwise only to the repayment of the capital paid up on such Deferred Shares and only after repayment of the capital paid up on each Ordinary Share in the capital of the Company and the payment of a further £100,000 on each such Ordinary Share (£1,000,000 in the case of each deferred B share). 25. SHARE BASED PAYMENTS At 1 January 2010, there were options and warrants in issue in respect of 46,869,000 ordinary shares of 0.01p. On 31 August 2010 on consolidation of the ordinary shares, options and warrants were similarly consolidated with options and warrants for one New Ordinary Shares of 2.2p each on the basis of one ordinary share of 2.2p for every 220 Ordinary shares of 0.01p each in issue at the consolidation date. Share Options and warrants outstanding at the year ended 31st December 2010 had a weighted average exercise price of 45p and a weighted average remaining contract life of 2.7 years. No options were exercised during the year. Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2010 2010 2009 2009 Weighted Weighted Number of average Number of Average options & exercise price options & exercise price warrants (pence) warrants (pence) Outstanding at 46,869 0.46p 46,869 0.46p start of year Share warrants 213 51p - - and options following consolidation and repricing during the year Share options & 232 40p - - warrants granted during the year Outstanding at 445 45p 46,869 0.46p the end of the year Exercisable at 445 45p 46,869 0.46p the end of the year The weighted average vesting period is estimated at 2.7 years. There is no charge to the Income Statement for the twelve months to 31 December 2010 (31 December 2009: £nil) for share based payments as reported under IFRS 2. The options and warrants are underwritten at 31 December 2010 and are not expected to vest or be exercised. There is therefore no charge fo the year. Share Option Scheme The Group operates approved and unapproved share option schemes. No new share options were issued during the year. The following share options were outstanding at 31 December 2010. Options New Exercise Options as consolidated exercise Options as at at Latest price 31 December during the price 31 December year Scheme exercise (pence) 2009 at 220:1 (pence) 2010 date Approved October 0.25 7,437,500 33,806 55p 33,806 2016 pence Unapproved October 0.25 7,725,250 35,113 55p 35,113 2016 pence 15,162,750 68,919 68,919 Options granted to directors and not exercised at 31 December 2010 (included above) were as follows: Latest Approved Unapproved Scheme Scheme Name exercise Exercise Number Exercise Number dates price price D Ciclitira October 2016 55 pence 11,818 55 pence 33,117 E Adams October 2016 55 pence 10,909 55 pence 998 L Fine October 2016 55 pence 10,909 55 pence 998 33,636 35,113 Share warrants No new warrants grants were entered into during the year. Warrants outstanding at 31 December 2010 are: Exercise price Warrants as Exercise price Warrants as at at (pre-consolidation) 31 December Consolidated (post-consolidation) 31 December Latest (pence) 2009 during the (pence) 2010 exercise year date 31 December 0.25 19,456,202 88,437 55p 88,437 2010 29 April 1.105 500,000 2,272 40p 2,272 2012 29 April 0.7875 250,000 1,136 40p 1,136 2012 1 November 1.26 2,500,000 11,363 40p 11,363 2012 1 November 0.7825 1,000,000 4,545 40p 4,545 2012 28 February 1.0 3,000,000 13,636 40p 13,636 2013 28 February 1.0 5,000,000 22,727 40p 22,727 2013 8 November 231,562 40p 231,562 2013 31,706,202 375,678 - 375,678 26. CAPITAL MANAGEMENT The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders. The Group has net liabilities of £0.5 million which includes convertible debt of £39,000 (2009: £ 2.4 million). It is the Group's aim to increase value sufficiently to encourage conversion. The Group's capital management strategy is to retain sufficient working capital for day to day operating requirements and to ensure sufficient funding is available to meet commitments as they fall due and to support growth. 2010 2009 £'000 £'000 Bank facility 1,000 128 Medium Term lending - 855 repayable within 1 year Convertible loans 39 2,427 Other loans 161 248 Total debt 1,200 3,658 Cash (142) (322) Net debt 1,058 3,336 The Medium Term bank loan is secured by way of a debenture with a fixed and floating charge over the assets of the Company. Convertible loans due for repayment within one year totalling £39,000 have a debenture which ranks behind in priority that provided to bank loans. In order to maintain or adjust the capital structure the Group may issue new shares or sell assets to reduce debt. 27. RELATED PARTIES Walbrook Trustees (Jersey) Limited Walbrook Trustees (Jersey) Limited is a company who are trustees of a discretionary trust (the Tokyo Settlement) of which David Ciclitira is a potential beneficiary. The Tokyo Settlement provided convertible loans totalling £1.175 million to the company, which were converted during the year. 2010 2009 £'000 £'000 Opening balance at 1 (1,296) (1,227) January Interest charged in the (30) (69) year (not paid) Settled by the issue of 1,326 - ordinary shares Closing balance at 31 - (1,296) December Luna Trading Loan balances and conversions Luna Trading Ltd is a company under the control of David Ciclitira. The movements in the payable balances due to the company in 2010 were as follows: Luna Trading Ltd At 31 December 2009 296 Net interest earned and expenses paid (15) by PMG on behalf of Luna as at 31 October Costs incurred to convert Luna loan and 55 short-term loans Balance of Luna loan at 31 October 336 Amount of loan converted (175) Amount of ring-fenced (convertible) 161 loan outstanding as at 31 December 2010 Luna Intercompany Balances Interest on short-term Luna loan 30 (payable but not paid during the year) Net movement in PMG/Luna balances in (77) November and December 2010 Amount of Luna intercompany balances as (47) at 31 December 2010 Total loan amounts outstanding to Luna 114 at 31 December 2010 During the year, Luna Trading Ltd provided a guarantee on a £300,000 bridging loan facility provided by Royal Bank of Scotland. Luna Trading Ltd charged interest at 1.5% per month for the provision of this guarantee. This loan was repaid in full during the year. Luna Trading Ltd is the company through which PMG contract with D Ciclitira for consulting and business services. During the year, Luna Trading Ltd charged PMG (and PMG paid) for Consultancy fees of £221,000 and remote office costs of £ 39,000. During the year, Luna Trading Ltd, David Ciclitira and Serenella Ciclitira agreed to provide personal guarantees of £1 million to Lloyds Bank to support medium term PMG loans. As consideration for providing personal guarantees, Luna Trading Ltd charges interest at 5% per annum of the guarantee amount for the period of the guarantee. In addition David Ciclitira has been granted a fixed and floating charge over the Company's assets for the period of the guarantee and has been granted an option to acquire at fair market value, Parallel Media (Championships) Limited (a wholly owned subsidiary of PMG which holds rights to the Company's major sporting events). During the year Luna Trading Ltd converted loan amounts totalling £175,000 into ordinary share capital. On 19 April 2010, Luna Trading entered into a short term loan agreement to advance £100,000 to PMG to be repaid on or before 19 July 2010 together with a redemption premium of £15,000 for each three month period that the loan was not repaid. A total £30,000 due on the loan remains outstanding. The short-term loan of £100,000 was subsequently converted into ordinary shares of PMG. Costs totalling £55,000 and £18,000 of professional expenses were agreed to be paid on Luna's behalf in consideration for the conversion of £1.475 million of the David Ciclitira Concert Party loans. The movements in the payable balances due to related parties in the year ended 31 December 2009 were as follows: 56 Ennismore Elysian Group Ltd Luna Trading Ltd Gardens ELY Ltd £'000 £'000 £'000 At 31 December 2008 (80) - (247) Loans consolidated 80 (327) 247 Repayment of - 31 - balances At 31 December 2009 - (296) - Luna Trading Limited - Trading Balances During the year ended 31 December 2009, Parallel Media Group plc traded with Parallel Media (Africa) Limited, a company under the control of Luna Trading Limited. Amounts invoiced by PMG during 2009 totalled £188,439 and were outstanding from Luna Trading Limited at 31 December 2010. This company was acquired by the Group in 2011 (see Post Balance Sheet Events). During the year ended 31 December 2009, Parallel Media Group plc traded with Parallel Media Korea (New Media) Limited (formerly Parallel Media (Korea) Limited), a company under the control of Luna Trading Limited. Amounts invoiced by PMG during 2009 totalled £80,947 and were outstanding at 31 December 2010. This company was acquired by the Group in 2011 (see Post Balance Sheet Events). During the year ended 31 December 2010, Parallel Media Group plc invoiced Luna Trading Limited for the costs incurred in the development of Parallel Smart Media Limited (a joint venture with Talspace) for £337,182. The investment in Parallel Smart Media Limited is owned by Parallel Media (Korea) Limited (formerly Parallel Media (Korea) Limited). Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited were acquired by the Group in 2011 (see Post Balance Sheet Events). During the year ended 31 December 2010, David Ciclitira, a consultant of Luna Trading Limited received a management bonus of £40,000 settled by the issue of ordinary shares. Parallel Contemporary Arts Limited During the year PMG incurred costs in the staging and management of Art Projects owned by Parallel Media Contemporary Arts Limited, a company under the control of David Ciclitira. Recoverable debtor amounts outstanding as at 31 December 2010 are £71,116. 28. OPERATING LEASES The amounts payable in respect of operating leases are shown below. All of the operating lease amounts relate to the rental of premises. The future minimum lease payments under non-cancellable operating leases is £14,000. The Group does not sub-lease any of its leased premises. Lease payments recognised in the in profits for the period amounted to £28,000 (2009: £28,000). Group Group Company Company 2010 2009 2010 2009 £'000 £'000 £'000 £'000 Lease 14 14 14 14 commitments payable within 1 year 29. SUBSIDIARIES The following were subsidiaries at the end of the year and have all been included in the consolidated financial statements. Country of PMG Incorporation % of ordinary Nature of Business shares Holding companies: Held Directly Parallel Media (Jersey) Jersey 100% Holding company Ltd Held Indirectly Parallel Media Group Jersey 100% Holding company International Ltd Parallel Media BVI 100% Holding company (Americas) Ltd Trading subsidiaries: Held directly: Parallel Media Hong HK 100% Management of sports Kong Ltd events Parallel Media UK 100% Management of sports (Championships) Ltd events Held Indirectly Parallel Media Europe UK 100% Marketing of sports Ltd events Parallel Television UK 100% Marketing of sports (2001) Ltd events PGAA Media Limited BVI 83.9% Exploitation and sale of commercial and broadcasting rights relating to golf tournaments Dormant : Held Indirectly Parallel Media Americas US 100% Dormant Inc 30. POST BALANCE SHEET EVENTS - FULL DISCLOSURE OF IFRS 3 BUSINESS COMBINATIONS Background In the Financial Year ended 31 December 2009, PMG invoiced two companies, namely Parallel Media (Africa) Limited (£188,000) and Parallel Media Korea Limited (£81,000). These companies were held by Luna Trading Limited (an investment vehicle of Mr. D Ciclitira) who undertook to develop these assets to the proof of concept stage. The development assets are held by Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited, as to 99% by Luna and 1% by Stewart Mison. Stewart Mison is also a director of PMG. In the year ended 31 December 2010, Parallel Media Korea Limited changed its name to Parallel Media Korea (New Media) Limited and signed a joint venture agreement with Talspace, a Korean JV partner for the development and sale of new technology solutions. Luna, Parallel Media Korea (New Media) Limited and Talspace have jointly developed a series of smart phone applications for the live streaming and digital media presentation of sporting events. These have been developed to the proof of concept stage and were trialled in the recent Ballantine's golf tournament in Korea and Korean Eye Art event presentations. The worldwide rights for the Parallel Smart Media brand, which is the name which has been assigned to these new technology products, and associated development agreements cover sales and distribution rights in all international markets outside of Korea. These rights are held through Parallel Media Korea (New Media) Limited and will be deployed in Parallel Media (Africa) Limited as part of the worldwide rollout. Acquisition of Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited by PMG Luna has been able to establish that the new products developed as part of the Parallel Smart Media brand ("PSM") could be realized separately for a fair value in excess of £1 million. On 29 June 2011, Luna Trading and Stewart Mison, have agreed to sell and PMG has agreed to buy Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited for a total consideration of £ 1,010,947 to be satisfied by: £ Cancellation of the amounts owed by £606,568 Luna to PMG Issue of ordinary shares to Luna at the £404,379 placing price Total £1,010,947 PMG will acquire the Luna and Mison interests being 100% of the voting equity interests in Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited. The intangible assets will be recognized as assets in the statement of financial position at their fair value. PMG is acquiring the worldwide rights for the sale and exploitation of the Parallel Smart Media brand, technology platform rights and order book. The companies acquired, Parallel Media Korea (New Media) Limited and Parallel Media (Africa) Limited, have not yet traded. The revenues, costs, and profit and losses of the combined Group is therefore the same as if the companies had not been acquired. The above transaction is conditional on the passing of a ordinary resolution in a vote of shareholders at a General Meeting. It will expand the operating base of PMG through the acquisition of the PSM products which are expected to make a material contribution to the future profitability of the business.

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Live Company Group (LVCG)
UK 100
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