Final Results

Parallel Media Group Plc ("PMG" or the "Group") Final results for the year ending 31st December 2009 The Board of Parallel Media Group Plc, a leading sports marketing and media group, announces its final results for the year ending 31 December 2009 that show: Financial Highlights * Operating profit grows by 118.5% to £0.485 million (2008: £0.222 million) * Annual turnover increasing by 7.8% to £10.2 million (2008: £9.5 million) * Gross profit of £2.85 million (2008: £2.14 million) an increase of 33% * Earnings per share of 0.01p compared to a loss of 0.06p in 2008. * The main shareholders of PMG have indicated their continued support for the Company and the Board by agreeing to extend their Convertible Loans to 2012. Trading Highlights * In April 2009, PMG successfully staged the second Ballantine's Championship in Korea and in October 2009 entered into a further multi year deal with Pernod-Ricard (parent company of Ballantine's) to sponsor the event until 2013. * UBS has agreed to extend its sponsorship of the Hong Kong Open to 2010. * PMG has been granted a new date for the PGA European Tour with effect from 2012. * In 2009, PMG created the Korean Eye Exhibition which showcased Modern Korean Art at London's Saatchi Gallery. PMG will build on the success of this event with future exhibitions in London and Asia. * The Group is engaged in detailed discussions to restructure and strengthen its balance sheet and is currently in the advanced stages with a potential major overseas investor with regards to a significant injection of capital. Contact Details For further information please contact: Martin Doherty Finance Director, Parallel Media Group +44 (0) 20 7225 2000 Antony Legge, Katie Shelton Nominated Adviser, Astaire Securities +44 (0) 20 7492 4750 Alex Giacchetti Financial PR, Bishopsgate Communications +44(0)20 7562 3350 Copies of the Group's report and accounts for the year to date 31 December 2009 are being posted to shareholders today and will be available on PMG's website www.parallelmediagroup.com CHAIRMAN'S STATEMENT 2009 was a good year for the Company with progress achieved in many directions in an extremely challenging business environment. Parallel Media Group ("PMG") achieved growth in all its key events with the result that Turnover increased +7.8% to £10.2m; Gross Profits increased +33.1% to £2.85m and Operating Profit increased +118.5% to £0.485m. This is a strong performance and provides a good platform from which to build and grow in the coming years. We have taken steps to reorganise PMG into four divisions so that we are better placed to build on our growing success. These divisions are: • Parallel Sports (sponsorship sales and event delivery); • Parallel Media Korea (a geographically focussed sales and distribution office); • Parallel Television (distribution of TV programming rights); and • Parallel Thinking (a newly launched consulting division). Parallel Sports Parallel Sports is focused on the creation, development and operation of world class sporting events. In April 2009, PMG successfully staged the second Ballantine's Championship in Korea. In November 2009, we staged both the second Korean Ladies Masters and the Hong Kong Open where once again we had international banking group UBS as our sponsor. PMG is also the promoter of the Kazakhstan Open and provides consultancy services for key brands in relation to their commercial activities in sport. The Ballantine's Championship and Hong Kong Open are co-sanctioned by the PGA European Tour and the Asian Tour and are both leading dates in the international golfing calendar. Building on these strong relationships, PMG has been granted a new date for the PGA European Tour with effect from 2012. The inclusion of Golf as an Olympic sport from the 2016 Summer Games has led to the World Cup of Golf undergoing change and PMG is at the forefront of establishing a new format as the event becomes bi-annual from 2011. UBS has agreed to extend its sponsorship of the Hong Kong open to 2010. Going forward, PMG has agreed with the PGA European Tour for the latter to take over as promoter of the event with PMG focused on increasing third party sponsorship. PMG will continue to receive both a commission and a share of the event's profits. The Ballantine's Championship (Korea's Wimbledon) continues to grow and we have extended the title sponsorship for this event through to 2013. We expect that this event, already Korea's largest golf tournament, to be increasingly attractive to new sponsors. Parallel Media Korea Building on the success of the Ballantine's Championship, PMG has developed broader relationships across Korea which we expect to show benefit as the country hosts a number of international events in the coming years. In 2011 Korea will host the IAAF Championships, in 2014 it will host the Asia games and it is bidding for the 2018 Winter Olympics. In 2009, PMG created the Korean Eye, a showcase for leading international art sponsored by Standard Chartered which showcased in Korea and London's Saatchi Gallery. The success of this event has led to renewed and expanded events, which will take place in 2010 through to 2012. Korea is a rich, but difficult, market, and we believe that our decision to build a broad operational base will pay dividends in the future as PMG emerges as an influential force in the region. Parallel Television We continue to distribute the worldwide TV rights for the Ladies European Tour (LET) and shall continue to do so at least until 2016; during the year your company sought additional ways in which we can build on that expertise. We will look to grow our television business into other sports areas; new genres and to distribute this content across multiple media platforms. Parallel Thinking Parallel Thinking is a new consultancy business that provides insight and understanding on the use of sports and lifestyle events in brand marketing. From the end of February 2010, London will become the next host Olympic City and the eyes of the World will focus on this city. We are well placed through relationships at the highest levels in the Olympic movement to assist sponsors, federations and athletes realise their full potential in the summer of 2012 and over the next 18 months we will continue to develop these and new opportunities. Financial Results Turnover grew 7.8% to £10.2m, however gross margins increased to 27.8% (2008: 22.5%) resulting in an 33% increase in gross profits to £2.8m. Continued tight control of our cost base saw operating margins increase to 4.7%, which, coupled with a reduction in our finance charges, resulted in the Group generating a profit of £65,000. Earnings per share were 0.01p compared to a loss of 0.06p in 2008. Cash flows from operations were £0.4m (2008: £0.7m). The Group had a net cash outflow of £0.4m as further investment was made in the Group's assets, with the capitalisation of £0.1m of development costs, and a net £0.6m was used to pay finance charges and pay down loans. The historic reliance on convertible loans to fund the business has created a balance sheet which does not fully reflect the operational success of the Group. Following the year end, the board has been working hard to restructure the Group's balance sheet and we are delighted to announce that your directors are taking steps to recapitalise the business and to position the Group take advantage of new commercial opportunities. Capital Structure On 30 June, 2010, the Company announced the extension of £1.8m of convertible loan notes due for conversion or repayment on 1 July 2010. These notes have now been extended to 31 December 2012. The Company is in advanced discussions to extend or repay convertible loan note holders of £0.6m and to increase the capital of the Company to support growth ambitions. Separate announcements will be made as these agreements are completed. FIFPRO Awards 2006 Judgement As I reported last time, PMG is the largest creditor of RAM Media Limited (in Administration) who have successfully pursued a case for damages against the Greek Government. I expect us to recover a substantial proportion of our claim. The total claim has now been agreed at £585,000 of which an interim payment of £274,000 was received in March 2010 from the administrators of RAM Media Limited. Board and Management Changes I am very pleased to tell you that we have strengthened the Company's management by recruiting two highly experienced people with whom we worked closely in 2009 - sports industry veteran Stewart Mison has joined us as Group Managing Director based in London and Sonia Hong has been appointed President of our Korean business joining us from Visit Korea tourism, where she was Secretary General. Stewart Mison has been in sport and media for 30 years, he joins PMG full time on 1 July 2010 having consulted to the Group for the previous two years. Stewart joins from Futures sport+entertainment, a strategic business unit which he created and was Managing Partner of within Interpublic Group's Mediabrands division. He recruited clients such as Manchester United, Roland-Garros, Tennis Australia, the UK Government and the International Olympic Committee. Prior to Futures sport+entertainment, Stewart saw tenure as a Senior Vice President with Octagon and prior to that he was Director of Sponsorship at TWI (then the TV arm of Mark McCormack's IMG). Future Prospects The worldwide economic downturn has affected all areas of marketing including sports sponsorship. We continue to actively develop new initiatives and forward looking projects which are gaining traction and the management team is tasked to deliver these in 2010 and beyond. I want to finish with one key point. The most important asset of any company is its staff. This Company has a very committed and talented group of people working for you. I would like to thank my fellow directors and staff for their invaluable continuing support; it is a pleasure to build the success of the Company with them. David Ciclitira Chairman 30 June 2010 CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2009 Year ended Year ended 31 December 31 December 2009 2008 Note £'000 £'000 Continuing operations: Revenue 10,240 9,500 Cost of sales 5 (7,390) (7,358) Gross profit 2,850 2,142 Administrative (2,195) (1,791) expenses Administrative 46 53 expenses - Foreign exchange Administration - - (38) Impairment loss on revaluation of investments Profit before 701 366 interest, tax, depreciation and amortisation Depreciation of (9) (8) fixed assets Amortisation of (207) (136) intangibles Operating profit 6 485 222 Finance costs 9 (421) (508) Investment income 1 16 Profit/(loss) on 65 (270) ordinary activities before tax Taxation 11 - - Profit/(loss) for 65 (270) the year Attributable to: Minority interests - - Equity holders of 65 (270) the parent Profit/(loss) for 65 (270) the financial year Earnings/(loss) per share - basic 12 0.01p (0.06p) - diluted 12 0.01p (0.06p) CONSOLIDATED AND COMPANY STATEMENTS OF COMPREHENSIVE INCOME as at 31 December 2009 GROUP GROUP COMPANY COMPANY 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Profit/(loss) for 65 (270) (105) (301) the year Other comprehensive income Exchange difference 61 (218) - - on translation of foreign operations - Group Tax effect of - - - - changes in other comprehensive income Total comprehensive 126 (488) (105) (301) income for the year Total comprehensive income attributable to: Equity holders of 115 (450) (105) (301) the parent Minority interest 11 (38) - - 126 (488) (105) (301) CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION as at 31 December 2009 Registered Number 630968 GROUP GROUP COMPANY COMPANY 31 December 31 December 31 December 31 December 2009 2008 2009 2008 Note £'000 £'000 £'000 £'000 Non-current assets Property, plant & 13 13 22 13 22 equipment Intangible assets 14 2,273 2,409 2,273 2,409 - Tournament rights Intangible assets 14 254 161 254 161 - Development costs Investments 15 12 17 1,100 1,105 Total non-current 2,552 2,609 3,640 3,697 assets Current assets Trade and other 16 1,351 851 1,196 1,305 receivables Cash and cash 17 322 728 309 724 equivalents Total current 1,673 1,579 1,505 2,029 assets Current liabilities Financial 18 983 514 983 514 liabilities - Borrowings Financial 19 2,427 208 2,427 208 liabilities - Convertible loans Trade and other 20 3,440 3,290 3,004 3,230 payables Total current 6,850 4,012 6,414 3,952 liabilities Net current (5,177) (2,433) (4,909) (1,923) liabilities Non-current liabilities Financial 21 248 3,186 248 3,186 liabilities - Borrowings Net liabilities (2,873) (3,010) (1,517) (1,412) Equity Share capital 24 3,070 3,070 3,070 3,070 Share premium 2,091 2,091 2,091 2,091 Equity element of 57 57 57 57 convertible loans Other reserves 557 557 557 557 Capital redemption 5,034 5,034 5,034 5,034 reserve Foreign exchange 20 (41) - - reserve Retained earnings (13,566) (13,631) (12,326) (12,221) Equity (2,737) (2,863) (1,517) (1,412) attributable to equity holders of the parent Minority interests (136) (147) - - (2,873) (3,010) (1,517) (1,412) The financial statements were approved and authorised for issue by the board of directors on 30 June 2010 and were signed on its behalf by David Ciclitira Chairman CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2009 The table below shows the statement of changes in equity for the year ended 31 December 2009: Ordinary Share Equity Other Capital Forex Minority Retained Share Premium reserve reserves redemption reserve interests earnings Total Capital Group At 31 3,070 2,091 57 557 5,034 (41) (147) (13,631) (3,010) December 2008 Profit for - - - - - - - 65 65 the year Foreign - - - - - 61 11 - 72 exchange Total - - - - - 61 11 65 137 comprehensive income At 31 3,070 2,091 57 557 5,034 20 (136) (13,566) (2,873) December 2009 Company At 31 3,070 2,091 57 557 5,034 - - (12,221) (1,412) December 2008 Loss for the - - - - - - - (105) (105) year At 31 3,070 2,091 57 557 5,034 - - (12,326) (1,517) December 2009 The table below shows the statement of changes in equity for the year ended 31 December 2008: Ordinary Share Equity Other Capital Forex Minority Retained Share Premium reserve reserves redemption reserve interests earnings Total Capital Group At 31 3,064 2,077 92 557 5,034 177 (109) (13,453) (2,561) December 2007 Loss for the - - - - - - - (270) (270) year Foreign - - - - - (218) - - (218) exchange Minority - - - - - - (38) - (38) interests Total - - - - - (218) (38) (270) (526) comprehensive income Equity - - (92) - - - - 92 - element of old convertible loan Equity - - 57 - - - - - 57 element of new convertible loan Proceeds of 6 14 - - - - - - 20 share issue At 31 3,070 2,091 57 557 5,034 (41) (147) (13,631) (3,010) December 2008 Company At 31 3,064 2,077 92 557 5,034 - - (12,012) (1,188) December 2007 Loss for the - - - - - - - (301) (301) year Equity - - (92) - - - - 92 - element of old convertible loan Equity - - 57 - - - - - 57 element of new convertible loan Share premium 6 14 - - - - - - 20 arising in the period At 31 3,070 2,091 57 557 5,034 - - (12,221) (1,412) December 2008 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. 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. CONSOLIDATED AND COMPANY STATEMENTS OF CASHFLOWS for the year ended 31 December 2009 GROUP GROUP COMPANY COMPANY 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Cash flows from operating activity Operating profit 485 222 91 192 Depreciation 9 8 9 8 Amortisation of 136 136 136 136 intangibles - Tournament rights Amortisation of 71 - 71 - intangibles - Development costs Impairment loss on - 38 - - revaluation of investments (Increase)/decrease in (499) (196) 498 (389) debtors Increase/(decrease) in 149 592 (389) 592 creditors Foreign exchange on 11 129 11 129 non-operating activities Increase in translation 74 (259) - - reserve Cash generated from 436 670 427 668 operations Cash flow from investing activities Development costs (166) (161) (166) (161) capitalised Purchase of property, - (6) - (6) plant & equipment Sale of other investments 4 - 4 - Interest received 2 16 2 16 Net cash used in investing (160) (151) (160) (151) activities Cash flow from financing activities Proceeds from/(repayments 131 (188) 131 (188) of) Bank facility Cash received from 14 198 14 198 convertible loans Convertible loans repaid (158) (577) (158) (577) Increase in share capital: - 20 - 20 elimination of debt Loan received 45 761 45 761 Loans repaid (315) (480) (315) (480) Costs incurred re: share - (106) - (106) consolidation Interest paid (293) (417) (293) (417) Net cash used in financing (576) (789) (576) (789) activities Cash and cash equivalents 728 837 724 835 at beginning of the year Exchange (losses)/gains on (106) 161 (106) 161 cash and cash equivalents Net decrease in cash and (300) (270) (309) (272) cash equivalents Cash and cash equivalents 322 728 309 724 at end of the year NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2009 1. BASIS OF PREPARATION These financial statements have been prepared 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 £ 2.3m. 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. A separate Income statement for the parent company has not been presented as permitted by section 408 of the Companies Act 2006. The Group had net liabilities of £2.9m as at 31 December 2009 and has convertible loans totalling £2.4m falling due for conversion or repayment as at 1 July 2010, at the option of the loan note holder. On 30 June 2010 the directors have entered into agreements to extend the conversion or repayment date of £1.8m of convertible loans to 31 December 2012. On 30 June 2010, negotiations are continuing with £0.6m of convertible loan note holders who are expected to be repaid in the near future. At the same time, the directors are in advanced negotiations to agree new banking facilities of £1.15m to replace current banking facilities and medium term loans totalling £0.95m, subject to a number of conditions precedent, including the settlement, conversion or deferral of the convertible loan notes. In order for the convertible loan notes to be settled, converted or deferred as agreed with individual loan note holders, the directors have been in negotiation with a potential new equity investor to provide £2.6m of funding which, in addition to meeting any repayment demands from convertible loan note holders, will provide additional working capital to support the Group's growth plans. The completion of new equity funding is expected to result in the early conversion of convertible loan agreements. The planned conversion of loan notes and the raising of new equity will require a Rule 9 waiver from the Takeover Panel in respect of David Ciclitira and parties with whom he is deemed to be working in concert and approval by the shareholders at the Annual General Meeting. In addition, the directors have prepared trading and cash flow forecasts for the Group for the period to 31 December 2011. The forecasts incorporate trading assumptions, including increased sponsorship from existing tournaments and new sponsorship revenues, as well as assumptions regarding the funding of the business in future. The directors believe these forecasts to be realistic, and consequently have prepared the financial statements on the going concern basis, which assumes that the Group will continue in operational existence for the foreseeable future. However, due to the approvals noted above and the need to successfully conclude negotiations with the potential investor, there is a material uncertainty which may cast significant doubt about the ability of the Company to continue as a going concern. The directors have alternative plans that they would need to act upon in the event that the necessary negotiations and approvals are not completed satisfactorily but these will require them to reopen negotiations with some or all of the parties noted above. 1.1. Adoption of standards effective in 2009 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. The following standards have been applied by the Group from 1 January 2009: IFRS 8 Operating segments IAS 1 (Revised) Presentation of financial statements IAS 23 (Amendment) Borrowing Costs IFRS 2 (Amendment) Share based payments IAS 27 (Amendment) Consolidated and separate financial statements IFRS 7 (Amendment) Financial Instruments: Disclosures IFRS 8 - replaced IAS 14 and requires entities whose debt or equity instruments are traded on a public market to adopt the "management approach" to reporting the financial performance and position of its operating segments. Information to be reported is what management (specifically the Chief operating decision maker ("CODM") uses internally for evaluating performance and deciding how to allocate resources to operating segments. There is no longer a requirement to make disclosure based on primary and secondary reporting formats, nor is there a requirement to distinguish between business and geographical segments. Despite these changes application of the new standard has not significantly impacted the way management reports segmental information. Management believe that under the new standard, the reporting segments continue to be based on the two primary operating divisions of: Event staging and Sales & Consultancy, as this is the basis on which the Group is organised and managed. 1. Basis of preparation (continued) 1.1. Adoption of standards effective in 2009 (continued) IAS 1 - The revised standard has changed the way the Group's primary financial statements have been presented. The revision required information to be aggregated on the basis of shared characteristics and introduced a `statement of comprehensive income' to enable readers to analyse changes in an entity's equity resulting from transactions with owners separately from `non-owner' changes. The revisions included changes in the titles of the primary statements to reflect their function more clearly (for example, the balance sheet is renamed a `statement of financial position'). The new titles are not mandatory but have been adopted by the Group. Comparative information has been re-presented so that it also is in conformity with the revised standard. Amendments to IAS 23, IFRS 2 and IAS 27 have been reviewed. There has been no impact on the Group financial statements as a result of these amendments for the year ended 31 December 2009. IFRS 7 - The amendment introduced a three-level hierarchy for fair value measurement disclosures and required entities to provide additional disclosures about the relative reliability of those fair value measurements. In addition, the amendment clarified and enhanced liquidity risk disclosure requirements to enable users to better evaluate the nature and extent of liquidity risk arising from financial instruments and how the entity managed that risk. The Group has provided these additional disclosures in note 23 to the financial statements. 1.2. IFRS effective in 2009 but not relevant The following standards and interpretations were mandatory for the current accounting period, but are not relevant to the operations of the Group. • IFRS 1 (Amendment) First time adoption of IFRS • IAS 1 and IAS 32 (Amendment) Presentation of financial statements and Financial instruments: Presentation • IAS 39 and IFRS 7 (Amendment) Reclassification of financial instruments • IAS 39 and IFRIC 9 (Amendment) Financial instruments: Recognition and measurement, and Reassessment of embedded derivatives • IFRIC 13 Customer loyalty programmes • IFRIC 15 Agreements for the construction of real estate • IFRIC 16 Hedges of a net investment in a foreign operation 1.3. 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 the majority 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: • IAS 27 (Amendment) Consolidated and Separate Financial Statements • IFRS 3 (Revised) Business Combinations 2. ACCOUNTING POLICIES 2.1. Consolidation and investments in associates and joint ventures The consolidated financial statements incorporate the results of the Company and all of its subsidiary undertakings as at 31 December 2009 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 Balance Sheet as intangible assets in the audited financial statements for the year ended 31 December 2006. These assets are amortised over their expected life of 20 years. Intangible Assets are held at cost less amortisation. 2.3. Intangible Assets - Development costs Development costs are included in the Balance Sheet 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. All research costs are expensed as incurred. Similarly, sales and marketing costs of exploiting assets are expensed through the Income Statement as incurred. Development costs are amortised over their expected useful lives and are reviewed for impairment at regular intervals. 2.4. Property, Plant & Equipment Depreciation is provided on office equipment and fixtures & fittings so as to write them off over their anticipated useful lives. Office equipment and 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 and deferred tax assets, are reviewed at each Balance Sheet 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 of, 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 original invoiced value, as the interest that would be recognised from discounting future cash receipts over the short credit period is not considered to be material. 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 original invoiced value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material. 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 result in the recognition of a liability at its current fair value. 2. Accounting policies (continued 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. 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 Balance Sheet. 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 Balance Sheet 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 Balance Sheet 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 Balance Sheet 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: Intangible assets 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 profit and loss account. 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 Consultancy and Sales 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 Event Event Sales & Sales & Consolidated Consolidated Segments Promotion Promotion Consultancy Consultancy 2009 2008 2009 2008 2009 2008 £'000 £'000 £'000 £'000 £'000 £'000 Revenue 9,355 8,681 885 819 10,240 9,500 Segment 1,155 1,025 809 654 1,964 1,679 result Unallocated (1,479) (1,457) corporate expenses Operating 485 222 profit Finance (421) (508) costs Investment 1 16 income Profit/ 65 (271) (loss) for the year Revenue by major customers Operating Event Event Sales & Sales & Consolidated Consolidated Segments Promotion Promotion Consultancy Consultancy 2009 2008 2009 2008 2009 2008 £'000 £'000 £'000 £'000 £'000 £'000 Client 1 4,230 4,087 - - 4,230 4,087 Client 2 3,169 3,947 - - 3,169 3,947 Other 1,956 647 885 819 2,841 1,466 clients Total by 9,355 8,681 885 819 10,240 9,500 client and segment Geographic analysis Operating Revenues Revenues Non-current Non-current Segments Assets Assets 2009 2008 2009 2008 £'000 £'000 £'000 £'000 South Korea 5,397 4,437 605 641 Hong Kong 3,957 4,222 1,669 1,769 China 281 313 - - UK 605 528 279 199 Total by 10,240 9,500 2,553 2,609 geography Segment assets and liabilities Operating Event Event Sales & Sales & Consolidated Consolidated Segments Promotion Promotion Consultancy Consultancy 2009 2008 2009 2008 2009 2008 £'000 £'000 £'000 £'000 £'000 £'000 Segment 2,560 3,072 290 369 2,850 3,441 assets Unallocated 1,375 747 corporate assets Consolidated 4,225 4,188 total assets Segment (2,276) (2,346) (70) (18) (2,346) (2,364) liabilities Unallocated (4,752) (4,834) corporate liabilities Consolidated (7,098) (7,198) total liabilities Net (2,873) (3,010) liabilities Other Segment Information for the year Operating Event Event Sales & Sales & Consolidated Consolidated Segments Promotion Promotion Consultancy Consultancy 2009 2008 2009 2008 2009 2008 £'000 £'000 £'000 £'000 £'000 £'000 Capital - - - 5 - 5 expenditure on tangible assets Depreciation (1) (2) (8) (6) (9) (8) on tangible assets Capital - - 164 161 164 161 expenditure on intangible assets Amortisation - - (71) - (71) - of intangible assets Non-cash (136) (136) - - (164) (136) expenses other than depreciation Impairment - (13) (8) - (8) (13) losses recognised in segment results 5. COST OF SALES The Group's Cost of Sales comprises: Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Prize purse and sanction 3,951 3,699 fees Commissions payable 46 190 Direct delivery costs 3,393 3,469 7,390 7,358 6. OPERATING PROFIT ON ORDINARY ACTIVITIES BEFORE TAX Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 This is stated after charging: Depreciation 9 8 Amortisation 207 136 Operating lease rentals - 29 28 Land & buildings Gain on foreign exchange (46) (53) 7. AUDITORS' REMUNERATION Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Fees payable to the 25 30 Company's auditor for the audit of the Company's annual accounts Fees payable to the 5 - Company's auditors in respect of the auditing of accounts of associates of the Company pursuant to legislation Services relating to 6 6 taxation and subsidiaries 36 36 8. EMPLOYEES Year ended Year ended 31 December 31 December 2009 2008 Number Number Group The average number of employees (including directors) during the year was: Administration 18 17 £'000 £'000 The aggregate payroll costs including directors were: Wages, salaries and fees 1,009 896 Social security costs 34 43 Compensation for loss of 35 - office 1,077 939 9. FINANCE COSTS Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 On bank overdrafts 9 21 On convertible loans 138 169 On loans from related 99 57 parties Share consolidation costs - 104 Other loans 175 157 Total 421 508 10. REMUNERATION OF DIRECTORS Directors' remuneration, including non executive directors, during the year was as follows: Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Group & Company David Ciclitira (Chairman) 221 221 Edward Adams 30 24 (Non-Executive) Leonard Fine 30 24 (Non-Executive) Total emoluments 281 269 The non-executive directors are each awarded £30,000 per annum for their services. £18,000 is agreed to be settled in cash; £12,000 is agreed to be settled in ordinary shares. No shares have been issued during the year, but these amounts have been accrued in the financial statements. 11. TAX Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 UK Corporation tax in respect of current year: Current taxation - - Total tax charge for the - - year Profit/(loss) on ordinary 65 (270) 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: Profit (loss) on ordinary 18 (81) activities at the standard rate of corporation tax of 28% (2008: 28.5%) Effect of: Expenses not deductible 5 5 for tax purposes Tax losses utilised in (23) (5) year - not recognised through deferred tax Tax losses carried forward - (81) - deferred tax not recognised Total tax charge for the - - year 12. EARNINGS PER SHARE The basic earnings per share is calculated by dividing the 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. Year ended Year ended 31 December 31 December 2009 2008 (i) Basic Profit/(loss) for the 65 (270) financial year (£'000) Weighted average number of 467,072,593 422,540,236 shares in issue Earnings/(loss) per share 0.01p (0.06p) (ii) Diluted Profit/(loss) for the 65 (270) financial year (£'000) Add back interest charged 138 169 on convertible loans where the impact of these loans is dilutive (£'000) Revised profit/(loss) (£ 203 (101) '000) Weighted average number of 467,072,593 422,540,236 shares in issue Weighted average of 447,075,493* 83,290,777 potential dilutive effect of ordinary shares issuable under Convertible loan agreements 914,148,086 505,831,012 Fully diluted earnings/ 0.01p** (0.06p)** (loss) per share * The potential dilutive effect of ordinary shares issuable under convertible loan agreements relates to bonus shares as approved by shareholders on 24 October 2008. All other share issues under convertible agreements, share options and warrants are non-dilutive. ** The fully diluted earnings/(loss) per share is the same as the basic earnings/(loss) per share in 2008 and 2009. It is not reduced as a result of dilution. 13. PROPERTY, PLANT & EQUIPMENT The useful lives of each class of fixed assets are reviewed annually to assess remaining life and residual value accordingly. Group Group Company Company Office Office Office Office Equipment Equipment Equipment Equipment 31 December 31 December 31 December 31 December 2009 2008 2009 2000 £'000 £'000 £'000 £'000 Cost Cost at start 246 240 45 39 of year Additions in - 6 - 6 year Cost at end of 246 246 45 45 year Depreciation Cumulative 224 216 23 15 depreciation at start of year Charge for year 9 8 9 8 Cumulative 233 224 32 23 depreciation at end of year Net book value 13 22 13 22 at end of year Net book value 22 24 22 21 at start of year 14. INTANGIBLE ASSETS Tournament Rights Intangible Assets 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. Year ended Year ended 31 December 31 December 2009 2008 £'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 304 168 start of year Amortisation for the year 136 136 Cumulative amortisation at 440 304 end of year Net book value 2,273 2,409 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. Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Group and Company Cost Cost at start of year 161 161 Additions in the year 164 - Cost at end of year 325 161 Amortisation Cumulative amortisation at - - start of year Amortisation for the year 71 - Cumulative amortisation at 71 - end of the year Net book value 254 161 15. NON-CURRENT ASSETS - INVESTMENTS Group Group Company Company 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Investment in - - 1,100 1,100 Subsidiaries Other 12 17 - 5 investments available for sale 12 17 1,100 1,105 Company £'000 Subsidiaries Investments in subsidiaries are stated at cost less impairment: At 1 January 2009 1,100 Provision charged in the year - At 31 December 2009 1,100 Group Company £'000 £'000 Other investments available for sale At 1 January 2009 17 5 Disposals 5 5 At 31 December 2009 12 - 16. TRADE AND OTHER RECEIVABLES Group Group Company Company 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Amounts owed - - - 472 from group undertakings Trade 825 347 517 337 receivables Other 257 122 457 114 receivables Prepayments and 269 382 222 382 accrued income 1,351 851 1,196 1,305 At 31 December 2009 all amounts included under Trade Receivables are due within one year. Trade receivables includes £0.26m due from related parties (see note 27 for more details) and £0.18m due from RAM Media Limited in administration (see note 30 for more details). 17. CASH AND CASH EQUIVALENTS Group Group Company Company 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Sterling Bank (28) (12) (28) (13) Accounts Euro Bank 115 304 115 304 Accounts Dollar Bank 217 421 215 418 Accounts Cash balances 18 15 7 15 322 728 309 724 18. FINANCIAL LIABILITIES - BORROWINGS Group Group Company Company 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Bank facility 128 116 128 116 Medium Term 855 398 855 398 Lending 983 514 983 514 The bank facility is secured by a personal guarantee provided by David Ciclitira. The Medium Term debt is secured by way of a debenture with a fixed and floating charge over all the assets of the Company, which have a carrying value at the year end of £4.2m. 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 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Convertible 2,427 208 2,427 208 loans due in less than one year Convertible - 2,235 - 2,235 loans due after more than one year (note 21) 2,427 2,443 2,427 2,443 As at 31 December 2009, the convertible loans are convertible and/or repayable on 1 July 2010. The convertible loan agreements carry interest at Euro Libor + 4% and have a convertible price of 0.25p. The convertible loans carry a maximum premium of 50% payable in cash or shares at the option of PMG as agreed by shareholders on 24 October 2008. Assuming full conversion of loans, premiums and accrued interest, this will create an additional 1,426 million ordinary shares at 0.25p. 20. TRADE AND OTHER PAYABLES Group Group Company Company 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Trade payables 1,494 1,447 688 1,389 Amounts owed to - - 1,747 - subsidiary entities Other payables 264 267 114 267 Other tax and 66 57 63 55 social security Accruals 575 589 392 589 Deferred income 1,041 930 - 930 3,440 3,290 3,004 3,230 Deferred income of £1.04 million, is income received in advance which will be recognised as revenue in 2010. Included in other payables are amounts due to companies under the control of D Ciclitira totalling £113,000. 21. NON-CURRENT LIABILITIES - FINANCIAL BORROWINGS Group Group Company Company 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Bank facility 119 - 119 - Convertible - 2,235 - 2,235 loans (1 to 2 years) Other loans (1 129 129 129 129 to 2 years) Medium term - 822 - 822 lending (1 to 2 years) 248 3,186 248 3,186 Other loans The loan of £129,000 is payable to Luna Trading Ltd (a company under the control of D Ciclitira). This loan is unsecured and carries interest at 14%. 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 Balance Sheet. 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 Balance Sheet. 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. Convertible loans are to be converted, repaid or agreement reached on their extension on 1 July 2010. 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 Remaining Remaining Remaining Contractual Contractual Contractual Contractual Maturities year Maturities year Maturities year Maturities year ended 31 ended 31 ended 31 ended 31 December 2009 December 2009 December 2009 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) 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) Set out below are liquidity risk comparative tables as at 31 December 2008: Remaining Remaining Remaining Remaining Contractual Contractual Contractual Contractual Maturities year Maturities year Maturities year Maturities year ended 31 ended 31 ended 31 ended 31 December 2008 December 2008 December 2008 December 2008 Within > 3 months > 1 year Total carrying Group 3 months < 1 year < 5 years amount Bank loans & 37 477 951 1,465 borrowings Convertible 35 173 2,235 2,443 loans Trade & other 2,303 - - 2,303 payables (excluding tax and deferred income) Within > 3 months > 1 year Total carrying Company 3 months < 1 year < 5 years amount Bank loans & 37 477 951 1,465 borrowings Convertible 35 173 2,235 2,443 loans Trade & other 2,243 - - 2,243 payables (excluding tax and deferred income) Credit Risk Financial assets past due but not impaired: 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 - 41 & other receivables (excluding prepayments) Company: 813 - 190 - 41 Trade & other receivables (excluding prepayments) Trade and other receivables excluding prepayments as at 31 December 2009 were £ 627,000. Assets not impaired but past due were £97,000. 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 2009 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 2009 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 2009 was £949,000. Allowance for credit losses (Group and Company) Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Allowances at start of 233 220 year Amounts written back (188) - during the year Additions charged to 8 13 Income Statement in year 53 233 Market Risk (a) Interest rate risk The interest rate liability arises primarily from convertible loan borrowings at floating interest rates. The principal risk is any adverse fluctuation in the Euro Libor rate. At 31 December 2009, the weighted average rate of interest on interest bearing convertible loans was 4.7% fixed for a weighted average of 90 days (31 December 2008: 8.5%). Total convertibles at the 31 December 2009 were £2.4m which are all interest bearing. Bank and medium term loans totalling £1.0 million are at fixed interest rates and are therefore not exposed to interest rate fluctuations. Sensitivity: For each +/- 1% change in the Euro Libor exchange rate, the Profit for the year will be negatively impacted by £ 25,000 (2008: £24,000) (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 Company has Short Term loans of €0.95m as at 31 December 2009. This loan is matched by contracted Euro revenue streams. The foreign assets and liabilities of the Group and Company are closely matched as at the year ended 31 December 2009. 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 2009, for each 10% fluctuation in exchange rates, net assets are expected to be impacted by +/- £257,000 (2008: £153,000). The Company (standalone) exposure to foreign currency risk is +/- £257,000 for each 10% move in exchange rates and is similar to that of the Group. Year ended 31 December 2009 Forex Forex Risk Risk Carrying Carrying Carrying Carrying -10% +10% Total Amount Amount Amount Amount (Sterling (Sterling (Sterling (Sterling equivalent) equivalent) equivalent) equivalent) £'000 $'000 €'000 HK$'000 £'000 £'000 £'000 Financial Assets Cash (20) 227 115 - 322 34 (34) Trade 534 256 34 1 825 29 (29) receivables Investments 12 - - - 12 - - held for sale Other 153 104 - - 257 10 (10) debtors 679 587 149 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 - - liabilities 3,708 1,139 855 356 6,058 (236) 236 Net Impact (161) 161 Year ended 31 December 2008 carrying Forex Risk Carrying Carrying Carrying Carrying -10% +10% Total Amount Amount Amount Amount (Sterling (Sterling (Sterling (Sterling equivalent) equivalent) equivalent) equivalent) £'000 $'000 €'000 HK$'000 £'000 £'000 £'000 Financial Assets Cash (13) 436 305 - 728 74 (74) Trade 18 250 79 - 347 33 (33) receivables Investments 17 - - - 17 - - held for sale Other 85 37 - - 122 4 (4) debtors 107 723 384 - 1,214 110 (110) Financial Liabilities Borrowings 116 - 398 - 514 (40) 40 Convertible 2,443 - - - 2,443 - - loan Trade 366 725 - 356 1,447 (108) 108 creditors Other 198 69 - - 267 (7) 7 creditors Accruals & 228 361 - - 589 (36) 36 provisions Non current 129 - 822 - 951 (82) 82 liabilities 3,480 1,155 1,220 356 6,211 (274) 274 Net Impact (163) 163 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 £3,737,574 which has not been recognised in these accounts (31 December 2008: £3,900,000). This deferred tax asset is based on Group gross losses of £13,348,478 (31 December 2008: £ 13,348,478). No deferred tax asset has been recognised due to the uncertainty over making sufficient profits in the future. 24. CALLED UP SHARE CAPITAL The Authorised and Issued Share Capital are set out in the table below: Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Authorised Share Capital 69,737,713,750 ordinary shares of 0.01p 6,974 6,974 199,831,545 deferred shares of 0.5p each 999 999 103,260 deferred B shares of £19.60 2,024 2,024 9,997 9,997 Issued and fully paid as at 31 December 2009 467,072,593 ordinary shares of 0.01p 47 47 199,831,545 deferred ordinary shares of 0.5p each 999 999 103,260 deferred B shares of £19.60 2,024 2,024 3,070 3,070 Reconciliation of the number of shares outstanding is: Year ended Year ended 31 December 31 December 2009 2008 (Number) (Number) Issued and fully paid ordinary shares Ordinary shares of 0.5p - 413,037,700 each in issue at start of year Ordinary shares of 0.5p - 2,300 each issued during the year Ordinary shares of 0.5p - 413,040,000 each prior to consolidation Ordinary shares of 0.01p 467,072,593 - each in issue at start of year Ordinary shares of 0.01p - 413,040,000 each at consolidation Ordinary shares of 0.01p - 54,032,593 each issued during the period Ordinary shares of 0.01p 467,072,593 467,072,593 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 no ordinary shares were issued. (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 Share Options and warrants outstanding at the year ended 31 December 2009 had a weighted average exercise price of 0.46p and a weighted average remaining contract life of 3.2 years. No options were exercised during the year. Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 2009 2009 2008 2008 Weighted Weighted Number of average Number of average options & exercise price options & exercise price warrants (Pence) warrants (Pence) Outstanding at 46,869 0.46p 36,249 1.76p start of year Share options - - 2,620 0.25p granted during the year Share warrants - - 8,000 1.00p granted during the year Outstanding at 46,869 0.46p 46,869 0.46p the end of the year Exercisable at 46,869 0.46p 46,869 0.46p the end of the year The weighted average vesting period is estimated at 3.2 years. There is no charge to the Income Statement for the twelve months to 31 December 2009 (31 December 2008: £nil) for share based payments as reported under IFRS 2. Non Executive director fees for the year of £24,000 will be settled in equity post year end. The valuation is based on the direct method valuing the cost of services provided. The shares to be issued are calculated based on the bid price that existed on each month-end invoice date. 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 2009. Options Options Options granted as at granted granted as at Scheme Latest Exercise 31 December during the 31 December exercise price 2008 year 2009 date Approved October 2016 0.25 pence 7,437,500 - 7,437,500 Unapproved October 2016 0.25 pence 7,725,250 - 7,725,250 15,162,750 - 15,162,750 Options granted to directors and not exercised at 31 December 2009 (included above) were as follows: Approved Approved Unapproved Unapproved Scheme Scheme Scheme Scheme Name Latest Exercise Number Exercise Number exercise price price dates D Ciclitira October 2016 0.25 pence 2,600,000 0.25 pence 7,285,750 E Adams October 2016 0.25 pence 2,400,000 0.25 pence 219,750 L Fine October 2016 0.25 pence 2,400,000 0.25 pence 219,750 7,400,000 7,725,250 Share warrants No new warrants grants were entered into during the year. Warrants outstanding at 31 December 2009 are: Options granted Options granted Options granted as at as at Latest exercise Exercise price 31 December during the year 31 December date 2008 2009 30 June 2010 0.25 19,456,202 - 19,456,202 29 April 2012 1.105 500,000 - 500,000 29 April 2012 0.7875 250,000 - 250,000 1 November 2012 1.26 2,500,000 - 2,500,000 1 November 2012 0.7825 1,000,000 - 1,000,000 28 February 1.0 3,000,000 - 3,000,000 2013 28 February 1.0 5,000,000 - 5,000,000 2013 31,706,202 - 31,706,202 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 £2.9m which includes convertible debt of £2.4m (2008: £2.4m). 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. Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Bank facility 128 116 Medium Term lending 855 1,220 repayable within 1 year Convertible loans 2,427 2,443 Other loans 248 129 Total debt 3,658 3,908 Cash (322) (728) Net debt 3,336 3,180 The Medium Term debt 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 £50,000 have a debenture which ranks behind in priority that provided to Medium Term loan note holders. The remainder of convertibles are unsecured and are due for conversion or repayment on 1 July 2010. In order to maintain or adjust the capital structure, the Group may convert existing loans into equity, issue new shares, or sell assets to reduce debt. 27. RELATED PARTIES Walbrook Trustees (Jersey) Limited is a company who are trustees of a discretionary trust (the Tokyo Settlement) of which D Ciclitira is a potential beneficiary. The Tokyo Settlement provides convertible loans totalling £1.175m to the Company. Interest is charged on the loan at Euro Libor + 4%. The convertible loan amount at 31 December 2009 was: Year ended Year ended 31 December 31 December 2009 2008 £'000 £'000 Opening balance at 1 (1,227) (1,175) January Interest charged in the (69) (52) year (not paid) Closing balance at 31 (1,296) (1,227) December Elysian Group Ltd, Luna Trading Ltd and 56 Ennismore Gardens ELY Ltd are companies under the control of D Ciclitira. The movements in the payable balances due to these companies in 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 Ltd provided a guarantee on a £300,000 bridging loan facility provided by Royal Bank of Scotland. Luna Trading charges interest at 1.5% per month for provision of this guarantee. Luna Trading Ltd is the company through which PMG contract with D Ciclitira for international consulting and business services. During the year ended 31 December 2009, Luna Trading Ltd invoiced PMG (and PMG paid) for Consultancy fees of £221,000. Under the agreement PMG paid for remote office costs of £39,000, loan guarantee and interest amounts of £ 99,000 and the reimbursement of business expenses incurred overseas of £23,000. The movements in the payable balances due to related parties in the year ended 31 December 2008 were as follows: 56 Ennismore Elysian Group Ltd Luna Trading Ltd Gardens ELY Ltd £'000 £'000 £'000 At 31 December 2007 (89) - (247) Repayment of 9 - - balances At 31 December 2008 (80) - (247) During the year ended 31 December 2009, Parallel Media Group plc traded with Parallel Media (Africa) Limited, a company under the control of David Ciclitira, to develop World Cup 2010 sales and sponsorship packages. Amounts invoiced by Parallel Media Group plc during the year totalled £0.18 million and was outstanding at the year end date. During the year ended 31 December 2009, Parallel Media Group plc traded with Parallel Media (Korea) Limited, a company under the control of David Ciclitira, to develop Formula One and other Korea centric sales and marketing opportunities. Amounts invoiced by Parallel Media Group plc during the year totalled £0.08 million and was outstanding at the year end date. 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 (2008: £28,000). Group Group Company Company 31 December 31 December 31 December 31 December 2009 2008 2009 2008 £'000 £'000 £'000 £'000 Lease 14 28 14 28 commitments payable within 1 year Lease - 28 - 28 commitments payable within 2 - 3 years 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 RAM Media Limited (in Administration) PMG is the largest creditor to RAM Media Limited (in Administration) who successfully pursued a case for damages against the Greek Government in respect of the non-payment of fees for the Fifpro awards in 2006. The total claim has now been agreed at £585,000 of which an interim payment of £274,000 was received from the administrators in March 2010. Amounts historically provided in the PMG Financial Statements as at 31 December 2009 were £188,000. These provisions have been reversed in the Income Statement for the year ended 31 December 2009, reducing the Administrative expenses charge by £160,000. Convertible Loan Notes As at 31 December 2009, PMG had convertible loans and accrued interest of £2.4m due for conversion and/or repayment on 1 July 2010. On 30 June 2010, agreement was reached with convertible loan note holders totalling £1.8m to extend their conversion or repayment date to 31 December 2012. On 30 June 2010, negotiations are continuing to extend or repay convertible loan note holders totalling £ 0.6m.

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