Preliminary Results

Internet Music & Media PLC 13 July 2001 Embargoed - not to be released until 7.00 a.m. 13th July, 2001 Internet Music & Media PLC ('Internet Music & Media' or 'the Company') Preliminary results for the period ended 31st December, 2000 Chairman's Statement I am delighted to present my first report to shareholders since the acquisition of Groovetech LLC and Lupine Ventures Limited in May 2000, which transformed Chandra, a cash shell, into an Internet broadcaster and online retailer of electronic dance music. The results for the period ended 31st December 2000 showed a loss of £1,858,146 and a loss before taxation, but after goodwill amortisation and depreciation, of £4,141,023. In many ways, your Directors are satisfied with progress made to date. The objectives set out in the prospectus issued by the Company in March 2000 have, to a large extent, been achieved. These objectives were the establishment of a London office to house an internet radio station, which became operational in December 2000, the launch of Groovetech's own record label, which is proceeding according to plan and the upgrading and updating of Groovetech's website to allow greater interactivity and e-commerce in currencies and territories outside the USA. The London facility also includes a recording studio and a warehouse, which serves as the European distribution centre for vinyl records, CDs and other merchandise. This progress has been achieved at a cost which is in excess of the Company's original budget and in a slower timeframe than originally envisaged. The principal reason for this relates to the development of the Company's new website. This entailed a significant amount of costly programming which exceeded budget and did not produce a satisfactory result. Your Directors came to the conclusion that it was necessary to spend significant further sums to deliver a functional solution and to ensure the future robustness of the website. I am pleased to report that this has now been achieved and the Company's new website (www.groovetech.com) is now fully operational and generating increasing sales. As a result of the cost overrun and delay, however, the Company has found it necessary to raise additional funds. We announced today a placing and open offer to raise £1.85 million (after expenses) of new equity and full details of this are set out in the prospectus which will be sent to shareholders today. Following the difficulties encountered by the Company as set out above and the costs of establishing a global business, the Directors now consider that matters are improving due to a number of factors. The London facility is now fully operational and this, in addition to the recording studio and internet radio station, has given the Company a warehousing and distribution centre from which to service the UK and continental Europe. Prior to the establishment of the London distribution centre, products were despatched from Seattle, which was both costly and slow. Products can now be supplied more cheaply and more quickly than hitherto. A feature of the Company's new website is the ability to list different prices and fulfilment costs for UK and European customers and the Directors believe that this will increase sales in these markets. Sales have been rising steadily since November last year and early evidence shows that the impact of the new website has increased sales in the USA. Furthermore, the new UK and European section of the website is generating sales for the first time. The Company's new record label is now operational. In May we released our first compilation album on CD and vinyl, our second is due to be released shortly, along with two 12 inch vinyl singles and we have signed a global terrestrial distribution agreement with a well-established independent distributor. Your directors are optimistic for this new source of revenue. Negotiations for sponsorship deals continue and the Company is beginning to market general merchandise through the new website. For all these reasons, we now feel justified in looking to the future with a measure of optimism and I hope to be able to describe significant progress when I report to you next. Nicholas Cowan Chairman 13th July, 2001 Consolidated profit and loss account for the period ended 31st December, 2000 Notes 2000 £ Turnover 294,242 Cost of sales (227,572) -------- Gross profit 66,670 Administrative expenses (4,261,784) -------- Operating loss (4,195,114) Other interest receivable and similar income 56,445 Interest payable and similar charges (2,354) -------- Loss on ordinary activities before taxation (4,141,023) Tax on loss on ordinary activities - -------- Loss on ordinary activities after taxation (4,141,023) ==== Loss per share 1 Pence Basic (38.99) Diluted (38.16) The profit and loss account has been prepared on the basis that all operations are continuing operations. Consolidated balance sheet at 31st December, 2000 Group 2000 £ Fixed assets Intangible assets 14,177,813 Tangible assets 1,725,741 -------- 15,903,554 -------- Current assets Stocks 276,386 Debtors 72,665 Cash at bank and in hand 191,976 -------- 541,027 Creditors: amounts falling due within one year (594,257) -------- Net current liabilities (53,230) -------- Total assets less current liabilities 15,850,324 Creditors: amounts falling due after more than one year (572,302) -------- 15,278,022 ==== Capital and reserves Called up share capital 4,262,500 Share premium account 15,175,548 Profit and loss account (4,160,026) -------- Shareholders' funds - equity interests 15,278,022 ==== Consolidated cash flow statement for the period ended 31st December, 2000 2000 £ Net cash outflow from operating activities (2,736,162) Returns on investments and servicing of finance Interest received 56,445 Interest paid (2,354) -------- Net cash inflow for returns on investments and 54,091 servicing of finance Capital expenditure Payments to acquire tangible assets (1,603,323) -------- Net cash outflow for capital expenditure (1,603,323) Acquisitions and disposals Purchase of subsidiary undertakings (net of cash 108,898 acquired) -------- Net cash inflow for acquisitions and disposals 108,898 -------- Net cash outflow before management of liquid resources (4,176,496) and financing Financing Issue of ordinary share capital 4,381,000 Cost of share issue (584,952) -------- Issue of shares 3,796,048 -------- New long term bank loan 572,302 --------- Increase in debt 572,302 -------- Net cash inflow from financing 4,368,350 -------- Increase in cash in the period 191,854 ==== Notes to the Consolidated Cash Flow Statement 1. Reconciliation of operating loss to net cash outflow from operating activities 2000 £ Operating loss (4,195,114) Depreciation of tangible assets 101,675 Amortisation of intangible assets 2,181,202 Increase in stocks (137,556) Decrease in debtors 199,026 Decrease in creditors (866,392) Net effect of foreign exchange differences (19,003) -------- Net cash outflow from operating activities (2,736,162) ==== 2. Analysis of net (debt)/funds 1 Cash Other non- 31 September flow cash changes December 1999 2000 £ £ £ £ Net cash: Cash at bank and in - 191,976 - 191,976 hand Bank overdrafts - (112) - (112) -------- -------- -------- -------- Net debt - 191,864 - 191,864 Debt: Debts falling due - (572,302) - (572,032) after one year -------- -------- -------- -------- Net debt - (380,438) - (380,438) ==== ==== ==== ==== 3. Reconciliation of net cash flow to movement in net debt 2000 £ Increase in cash in the period 191,864 Cash inflow from increase in debt (572,302) -------- Movement in net (debt)/funds in the period (380,438) Opening net funds/(debt) - -------- Closing net debt (380,438) ==== Notes 1 Loss per share The calculation of the basic loss per share is based on the loss on ordinary activities after taxation of £4,177,087 and on 10,851,240 ordinary shares, being the weighted average number of shares in issue during the period. 2 Dividends The Directors are not proposing the payment of a dividend in respect of the period ended 31st December, 2000. 3 Publication of non-statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the period ended 31st December, 2000 is extracted from the Group's financial statements to that date which received an unqualified auditor's report and will be filed with the Registrar of Companies in due course. 4 Copies of the Report and Accounts will be sent to shareholders later today and are available from Unit 10, Latimer Road Industrial Estate, Latimer Road, London W10 6RQ. For Further Information please contact:- Internet Music & Media PLC Tel: 07957 364 721 Nicholas Cowan - Chairman Holborn Public Relations Tel: 020 7929 5599 David Bick John East & Partners Limited Tel: 020 7628 2200 David Worlidge / Simon Clements

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