Final Results

Yoomedia PLC 26 June 2002 YooMedia plc ('YooMedia') Announcement of preliminary results for the year ended 31 December 2001 â€¢Business stabilised and well-positioned to take a lead in the growing interactive television sector â€¢Top-level management team strengthened â€¢Agreement signed with Sky to provide its wholly-owned channels with a comprehensive enhanced TV chat solution â€¢New pay per play and subscription-based games portal to be launched on UK digital cable â€¢Potential litigation involving the Company's former Chief Executive brought to a conclusion â€¢Rebranding completed and name changed to YooMedia Michael Sinclair, Executive Chairman and Chief Executive said: 'The efforts of the last year are now bearing fruit through the deployment of our services by broadcasters and network operators, and we can confidently expect revenue to accrue to our Company. Accurate forecasts of quantum and timing of revenues are extremely difficult to make, especially for a technology business in the early stages of growth. However, revenues from interactive and enhanced TV applications now feature prominently in financial research and reporting on international broadcast networks, and YooMedia is well positioned to realise its strategy in this exciting sector. We hope to be in a position to report more confidently on these matters later in the year.' For further information, please contact: Michael Sinclair 020-8515-2800 Graham Prince 020-7690-0879 07973-323840 CHAIRMAN'S STATEMENT In November 2001 I joined you as a shareholder in YooMedia plc and assumed the roles of Chairman and Chief Executive. As a new investor, I am sensitive to the fact that many shareholders, particularly those who made their investment at the time of the initial public offering, will be nursing substantial losses. However, I would not have made my own investment in the Company unless I believed that it had the potential to deliver value to shareholders. As a result of the hard work undertaken by all at the Company we are now well placed to take a leading position in the growing interactive television sector. When the Company's now well-known problems first emerged early in 2001, many might have expected the Board and management team to close down the business and abandon ship. To their great credit they chose an alternative path. Through a mixture of talent, determination and energy, the Board and management team of our Company have instead laid the foundations of what could become a leading international participant in the interactive television industry. It was this that impressed me so much in the Autumn of 2001 and prompted me to invest in, and become part of, the Company. At that time, together with the Board, I identified a number of short-term objectives; all of these have been achieved within the timescale that we set for ourselves. Briefly they were: 1. To augment and strengthen the Company's top-level management team. This has been achieved with three key appointments: Andrew Fearon as Chief Operating Officer, Charles Golding as Editorial and Content Director, and Suzie Cameron as Sales and Marketing Director. Each comes with a wealth of experience in media and interactive television. 2. To bring to a conclusion the potential litigation involving the Company's former Chief Executive, Steve Laitman. This was clearly a drain on cash and management time. Significant legal costs had been incurred in 2001 and there was every prospect of these continuing indefinitely. The Board reached an agreement with Steve Laitman, which was approved by the High Court in February 2002, resulting in Steve Laitman's shareholding in the Company being distributed to shareholders. 3. To initiate a comprehensive re-branding exercise. This has been successfully completed and, at an EGM in April 2002, the Company's name was changed to YooMedia plc. This new name not only marks a symbolic separation from the past but more accurately reflects the Company's business going forward. 4. To deliver a comprehensive presentation of the Company's business and prospects to shareholders. This was done at the Company's EGM in April 2002. YooMedia is a people business made up of an impressive collection of individuals with talent and technological expertise in the interactive television arena. This enables YooMedia to 'punch above its weight' in this new and growing sector, a sector in which the UK is a world leader. As a result, in March 2002, against tough and impressive competition from much larger international organisations, the Company won and signed an agreement with Sky to provide its wholly-owned channels with a comprehensive enhanced TV chat solution. This chat service has since launched successfully on Sky News with further channels to follow. Demand from other broadcasters and from network operators is strong. Development of YooMedia's second generation chat service for digital cable TV is on schedule to be launched within the next few months. YooMedia has also made great progress in delivering on its premium games strategy. A new pay per play and subscription-based games portal will be launched on UK digital cable in the next few months. In support of this launch, the Company has signed exclusive licensing agreements to distribute some of the most interesting and successful interactive TV games. These include Tetris, one of the world's all-time best selling video games. The rapid development of interactive television has been mirrored by the growth of digital interactive services delivered through mobile telephony. The Company recognises the strength of those offerings, which provide users with valuable functionality both at home and on the move. In May 2002 YooMedia announced that it had acquired the worldwide rights to market and distribute a recently patented technology that allows for the delivery of interactive services via mobile phone and other wireless devices, synchronised with broadcast media such as TV and radio. The technology enables viewers to interact with programmes such as quiz and sports shows without the requirement for a digital TV set top box. It also means that every member of a family in the home, or indeed any number of people in a social venue such as a pub or sports stadium, can participate in interactive TV and radio programmes using nothing more than a mobile phone. Over the last 18 months YooMedia's human and financial resources have been devoted to achieving the successes outlined above. In effect, in its new form YooMedia is barely 15 months old. Now that these efforts are bearing fruit through the deployment of our services by broadcasters and network operators, we can confidently expect revenue to accrue to our Company. However, as in all businesses at an early stage of growth, particularly those associated with new technologies, generating accurate forecasts of quantum and timing of revenues is extremely difficult. I would hope, however, to be in a position to report on these matters more confidently later this year. I would say, though, that when examining financial research and analyst reports on major international broadcast networks it is notable that revenues from interactive and enhanced TV applications feature prominently. YooMedia is positioned remarkably well to play a key part in fulfilling this strategy (with over Â£5.5 million in cash at 31 May 2002 the Board believes the Company has sufficient cash reserves to see it through to the point where we are generating solid revenues). Legal Proceedings I have referred above to the settlement which was approved by the High Court with the Company's former chief executive and the. distribution of his shareholding to shareholders. The Company continues to co-operate with the authorities in their ongoing investigation into the matter of financial irregularities discovered in February 2001. However, this no longer represents any significant drain upon its resources or management time. In addition, the Board has instigated discussions with lawyers acting on behalf of certain minority shareholders to explore ways in which our Company could collaborate with them in achieving some form of compensation for their clients from third parties. This could potentially result in the Company incurring additional costs. We are hopeful that these amicable and productive discussions will shortly reach a point where an announcement can be made. I have in this statement placed a great deal of emphasis on the talented team that constitutes YooMedia. In my experience it is rare to find an organisation which survives through such difficult times and emerges in robust shape. It is also rare for a Company to successfully combine technological and commercial skills. YooMedia has achieved both of these things. It would be unrealistic to expect the market capitalisation of our Company to reflect these strengths or achievements until such time as they deliver revenues and earnings. I very much look forward to the day, though, when we can report such revenues and earnings in detail. It is usual at this stage of this type of communication to thank members of staff. On this occasion however, it is we who wish to thank you, our shareholders, for your support and encouragement. I know that I speak for all my colleagues when I say how deeply we have been touched by the many expressions of goodwill and encouragement that we have received over the last few months. Michael Sinclair Executive Chairman and Chief Executive OPERATING AND FINANCIAL REVIEW Operating Results The operating loss for the year was Â£4.5m. The majority of the loss arises through the costs of developing the technology, recruitment and remuneration of management and staff, premises costs and the legal and professional costs associated with the proceedings against Steve Laitman. Balance Sheet Shareholders' funds totalled Â£8.8m at the year end. Creditors at 31 December were Â£0.4m, a decrease of Â£0.6m. Liquidity During the year Â£4.8m was absorbed by operations. Cash balances at the year end were Â£8m. The current monthly cash burn rate (excluding exceptional expenditure) is approximately Â£0.4m. Taxation The Company made a trading loss for the year and no taxation charge arises. The trading losses incurred are available for relief against future profits but in accordance with the Company's policy this potential deferred tax asset has not been recognised. Treasury Policy The Company's policy with regard to cash balances is to monitor short and medium-term interest rates and to place cash on deposit for periods that optimise interest earned while maintaining access to sufficient funds to meet day-to-day cash requirements. Going Concern After making appropriate enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Board is not aware of any significant litigation against the Company which might arise, and be successful, in respect of the matters referred to in the Chairman's Statement. For this reason, they continue to adopt the going concern basis in preparing the Company's financial statements. Litigation Between November 1999 and February 2001 Â£980,615 was received into the Company's bank accounts and recorded as being received from sales agencies when in fact it was received from Steve Laitman. The Company commenced legal proceedings against Steve Laitman but it became clear in February 2002 that Steve Laitman had limited remaining assets and that the legal costs that would be incurred in bringing the matter to a conclusion could exceed the amount of damages ultimately recoverable. Accordingly, the Company reached an agreement with Steve Laitman on 7 February 2002 that his entire shareholding in the Company (approximately 11% of the shares in issue) would be utilised directly for the benefit of the Company's minority shareholders in return for the Company not pursuing further action. The Â£980,615 has been released to the profit and loss account in 2001 as other operating income. Frank Lewis Deputy Chairman, Finance Director and Company Secretary PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2001 Year ended 31 December Year ended 31 December 2000 Note Â£ Â£ Turnover 2 15,200 39,703 Cost of sales (526,907) (252,979) Gross loss (511,707) (213,276) Administrative expenses 3 (4,971,119) (2,626,130) Other operating income 4 980,615 - Operating loss 5 (4,502,211) (2,839,406) Interest receivable and similar income 8 519,330 646,553 Loss on ordinary activities before taxation (3,982,881) (2,192,853) Tax on loss on ordinary activities 9 - - Loss for the financial year 19 (3,982,881) (2,192,853) Loss per 10p share - basic and diluted 10 (5.19p) (2.9p) The above results are derived entirely from continuing operations. There is no difference between the loss on ordinary activities before taxation and the loss for the financial years stated above and their historical cost equivalents. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 31 December 2001 Year ended 31 December 2000 Note Â£ Â£ For the year ended 31 December Loss for the year (3,982,881) (2,192,853) Total recognised loss for the year (3,982,881) (2,192,853) Prior year adjustment 11 - (444,656) Total losses recognised since last annual report (3,982,881) (2,637,509) BALANCE SHEET AS AT 31 DECEMBER 2001 2001 2000 Note Â£ Â£ Fixed assets Intangible assets 12 4,840 33,829 Tangible assets 13 733,320 828,472 738,160 862,301 Current assets Debtors 14 473,148 440,713 Cash at bank and in hand 8,031,776 12,598,041 8,504,924 13,038,754 Creditors - Amounts falling due within one year 15 (438,381) (1,062,253) Net current assets 8,066,543 11,976,501 Total assets less current liabilities 8,804,703 12,838,802 Provision for liabilities and charges 17 - (94,016) Net assets 8,804,703 12,744,786 Capital and reserves Called up share capital 18 7,675,807 7,675,807 Share premium account 19 7,033,171 7,033,171 Capital redemption reserve 19 455,331 455,331 Profit and loss account 19 (6,359,606) (2,419,523) Equity shareholders' funds 21 8,804,703 12,744,786 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001 Year ended 31 December 2001 Year ended 31 December 2000 Note Â£ Â£ Net cash outflow from operating activities 23 (4,823,938) (1,868,265) Returns on investments and servicing of finance Interest received 526,588 617,774 Net cash inflow from returns on investments and 526,588 617,774 servicing of finance Taxation - (20,682) Capital expenditure and financial investment Purchase of tangible fixed assets (268,915) (914,440) Net cash outflow from capital expenditure and (268,915) (914,440) financial investment Net cash outflow before management of liquid (4,566,265) (2,185,613) resources and financing Management of liquid resources Decrease/(increase) in short-term deposits with 25 4,522,006 (12,474,309) banks Financing Issue of ordinary share capital - 16,446,547 Expenses of share issue - (1,738,733) Repayment of loan - (14,044) Net cash inflow from financing - 14,693,770 (Decrease)/increase in cash in the year 24 (44,259) 33,848 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2001 1 ACCOUNTING POLICIES These financial statements have been prepared under the historical cost convention and are in accordance with applicable accounting standards. Goodwill Goodwill arises on the excess of the consideration over the fair value of the identifiable assets acquired. Goodwill is amortised through the profit and loss account over its useful economic life. Depreciation Depreciation is calculated so as to write off the cost of fixed assets, less their estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: Computer equipment 33% Office equipment 33% Fixtures and fittings 33% Short-leasehold improvements 20% Deferred taxation The charge for taxation is based on the loss for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. FRS 19, Deferred Taxation, was issued on 7 December 2000 and is mandatory for years ending on or after 23 January 2002. The group has decided to adopt FRS 19 early. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more, or a right to pay less tax in the future have occurred at the balance sheet date, with the following exception: â€¢deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Turnover Turnover, which excludes value added tax, comprises mainly revenues from the sales of mobile ring tones through a revenue-sharing agreement (2000 - advertising revenues generated under several agency arrangements). Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at rates of exchange ruling at the end of the financial year. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences on retranslation of assets and liabilities are taken to the profit and loss account in the year in which they arise. Operating leases Rentals payable in respect of operating leases are charged in the profit and loss account on a straight line basis over the lease term. Development expenditure Development expenditure is written off in the profit and loss account as incurred. Financial instruments The Company's financial instruments comprise cash and liquid resources together with debtors and creditors that arise directly from its operations. The Company does not enter into derivative or hedging transactions. It has been, throughout the year under review, the Company's policy that no trading in financial instruments shall be undertaken. The Company does not have any committed borrowing facilities because the cash balances held are adequate to fund its current activities. The Company places the majority of its cash on short-term deposit. The Company's objective is to minimise the risk of loss to the Company by limiting the Company's credit exposure to quality institutions maintaining a very high credit rating. The main risk arising from the Company's financial instruments is interest rate risk. Numerical disclosures relating to this risk are given in note 16 to the financial statements. The Company's policy in relation to interest rate risk is to monitor short and medium-term interest rates and to place cash on deposit for periods that optimise the amount of interest earned while maintaining access to sufficient funds to meet day to day cash requirements. Movements in the exchange rates can affect the Company's balance sheet. The magnitude of this risk is not currently significant to the Company and therefore no specific measures are currently undertaken to manage the risk. Related party disclosures FRS 8, Related Party Disclosures, requires the disclosure of the details of material transactions between the reporting entity and any related parties. These are set out in note 26. Share options issued to employees Under Urgent Issue Task Force statement 17 (UITF 17), the Company is required to recognise as a charge in the profit and loss account the amount by which the fair market value of any share options issued to employees exceeds their respective exercise prices at the date of grant. These costs are recognised over the vesting period. The charge is notional in that there is no underlying cash flow or other financial liability associated with the charge, nor does it give rise to a reduction in net assets or shareholders' funds. In addition there is no impact on distributable profits. As a result of the grant of share options under unapproved schemes since 6 April 1999, the Company will be obliged to pay National Insurance contributions on the difference between the market value of the underlying shares and their exercise price when the options are exercised. The liability is calculated on the difference between the exercise price and the market value at the date the options are exercised. The liability is recalculated by reference to the market value at each balance sheet date and the charge is recognised over the performance period. Going concern The financial statements have been prepared on a going concern basis, the validity of which depends on the lack of any significant, and successful, litigation against the Company which might arise in respect of the matters referred to in the Chairman's statement. The Board is not aware of any such litigation. 2. SEGMENTAL REPORTING The Company's turnover and loss on ordinary activities before taxation are derived entirely from its principal activity which arose mainly in the United Kingdom. 3. ADMINISTRATIVE EXPENSES Included within Administrative expenses is an exceptional charge of Â£1,038,692 relating to legal and professional fees arising as a result of the investigation into the financial irregularities as described in the Chairman's Statement. 4. OTHER OPERATING INCOME Other operating income comprises an exceptional credit of Â£980,615 relating to monies received from a bank account linked to Steve Laitman. Of this amount, Â£558,226 had been received as at 31 December 2000 and was recorded as exceptional receipts within creditors (note 15) in the 2000 financial statements. 5. OPERATING LOSS Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Depreciation of owned assets 364,067 180,884 Amortisation of goodwill 28,989 28,989 Auditors' remuneration - audit services to Ernst & Young LLP 37,000 - to PricewaterhouseCoopers - 55,000 - non-audit services 97,124 - to Ernst & Young LLP 307,731 101,613 to PricewaterhouseCoopers Operating lease charges - land and buildings 139,000 123,460 6. DIRECTORS' EMOLUMENTS Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Aggregate emoluments 268,942 353,856 Sums paid to Foresight Technology VCT plc for services 15,000 14,167 of Bernard Fairman No retirement benefits are accruing to any directors. Emoluments payable to the highest paid director are as follows: Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Aggregate emoluments 128,145 121,887 7. STAFF COSTS AND EMPLOYEE INFORMATION Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Wages and salaries 1,390,527 1,054,416 Social security costs (including NIC on share options) 46,598 207,026 Other pension costs 3,365 - Staff costs 1,440,490 1,261,442 The monthly average number of persons (including executive directors) employed by the Company during the year was: Year ended 31 December 2001 Year ended 31 December 2000 By activity Number Number Office and management 14 13 Platform and development 16 9 Sales and marketing 7 4 37 26 8. INTEREST RECEIVABLE AND SIMILAR INCOME Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Bank interest receivable 519,330 646,553 9. TAX ON LOSS ON ORDINARY ACTIVITIES There is no taxation charge in the year (2000 - Â£nil). The tax assessed on the loss on ordinary activities for the year differs from the standard rate of tax of 20%. The differences are reconciled below: Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Loss on ordinary activities before taxation 3,982,881 2,192,853 Loss on ordinary activities multiplied by 20% (796,576) (438,571) Effect of expenses not deductible for tax purposes 190,074 41,557 Losses not recognised 606,502 397,014 Current year tax charge - - 10. LOSS PER SHARE The basic loss per share has been calculated by dividing the net loss for the year by the weighted average number of 76,758,071 shares in issue during the year (year ended 31 December 2000 - 76,056,035). The Company had no dilutive potential ordinary shares in either of the years, and therefore there is no difference between the loss per ordinary share and the diluted loss per ordinary share. 11. PRIOR YEAR ADJUSTMENT The prior year adjustment was a restatement of the opening reserves figure in the financial statements for the year ended 31 December 2000 as a result of the financial irregularities discussed in the Chairman's Statement. 12. INTANGIBLE ASSETS Goodwill Â£ Cost At 1 January 2001 and 31 December 2001 86,976 Accumulated amortisation At 1 January 2001 53,147 Provided during the year 28,989 At 31 December 2001 82,136 Net book value At 31 December 2001 4,840 At 31 December 2000 33,829 Goodwill is amortised through the profit and loss account over its useful economic life, which the directors consider to be three years. 13. TANGIBLE FIXED ASSETS Short-leasehold Computer Office equipment Fixtures and fittings Total improvements equipment Â£ Â£ Â£ Â£ Â£ Cost or valuation At 1 January 2001 11,552 338,030 285,908 407,987 1,043,477 Additions - 200,376 63,793 4,746 268,915 At 31 December 2001 11,552 538,406 349,701 412,733 1,312,392 Depreciation At 1 January 2001 1,155 101,050 58,568 54,232 215,005 Provided during the year 2,310 150,875 109,676 101,206 364,067 At 31 December 2001 3,465 251,925 168,244 155,438 579,072 Net book value At 31 December 2001 8,087 286,481 181,457 257,295 733,320 Net book value At 31 December 2000 10,397 236,980 227,340 353,755 828,472 14. DEBTORS Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Amounts falling due within one year Trade debtors 5,591 22,951 Other debtors 362,420 327,439 Prepayments 84,455 69,641 Corporation tax recoverable 20,682 20,682 473,148 440,713 15. CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Trade creditors 171,809 86,817 Other taxation and social security 38,591 49,494 Other creditors 4,522 51,608 Accruals and deferred income 223,459 316,108 Exceptional receipts - 558,226 438,381 1,062,253 Exceptional receipts A substantial proportion of the monies received by the Company's bankers and recorded in the Company's records as being received from sales agencies in 1999 and 2000 were in fact received from bank accounts linked to Steve Laitman. These receipts were recorded as exceptional receipts as at 31 December 2000 pending the outcome of legal action. As described in the Chairman's Statement, due to the settlement reached with Steve Laitman, these monies have been taken to the profit and loss account as an exceptional credit within other operating income (note 4). 16. FINANCIAL INSTRUMENTS Details of the Company's objectives with respect to financial instruments are given in note 1 to the financial statements. There have been no significant changes in these objectives from the prior year and before the approval of the financial statements. The numerical disclosures in this note deal with the financial assets and liabilities defined in FRS13 as financial instruments. Short-term debtors and creditors Short-term debtors and creditors have been excluded from the disclosures. In the opinion of the directors, they contain no material financial risks for the Company. There are no creditors due after more than one year. Interest rate risk profile of financial assets 2001 2000 Floating Fixed rate Total Floating Fixed rate Total rate rate Â£ Â£ Â£ Â£ Â£ Â£ Sterling 5,262,583 2,900,000 8,162,583 5,329,044 7,400,000 12,729,044 US dollars 4,024 - 4,024 3,828 - 3,828 5,266,607 2,900,000 8,166,607 5,332,872 7,400,000 12,732,872 Of which: Cash at bank and in hand 79,474 - 79,473 123,732 - 123,732 Short-term bank deposits 5,052,303 2,900,000 7,952,303 5,074,309 7,400,000 12,474,309 Other debtors (rent 134,831 - 134,831 134,831 - 134,831 deposit) 5,266,607 2,900,000 8,166,607 5,332,872 7,400,000 12,732,872 Floating rate cash and rent deposits earn interest at prevailing bank rates. Floating rate short-term deposits earn interest at 10 basis points below the prevailing bank rate. The fixed rate short-term deposits in sterling are placed with banks for periods of up to two weeks. Contracts in place at 31 December 2001 had a weighted average annualised rate of interest of 3.5% (2000 - 5.43%) and a weighted average period for which the rate is fixed of seven days (2000 - 14 days). The directors are of the opinion that there is negligible exchange rate risk. Fair value The directors consider that the fair values of the financial instruments of YooMedia plc are not significantly different from their book value. 17. PROVISION FOR LIABILITIES AND CHARGES Employers' National Insurance on share options Â£ At 1 January 2001 94,016 Transfer to the profit and loss account (94,016) At 31 December 2001 - Employers' National Insurance on share options On exercise of share options issued after 5 April 1999, under an unapproved executive option scheme, the Company is required to pay National Insurance on the difference between the exercise price and market value at the exercise date of the shares issued. The Company will become unconditionally liable to pay the National Insurance upon exercise of the options, which are exercisable over a period of 10 years from date of grant. The Company therefore makes a provision following the grant of options as opposed to on vesting or on exercise. The amount of National Insurance payable will depend on the number of employees who remain with the Company and exercise their options, the market price of the Company's ordinary shares at the time of exercise, and the prevailing National Insurance rates at that time. The provision at 31 December 2001 has been released to the profit and loss account during the year as the share price at 31 December 2001 was 7 pence, which was below the option exercise price of 10 pence. Deferred taxation Deferred taxation provided in the financial statements is Â£nil (2000 - Â£nil) and the amounts not provided are as follows: Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Losses (1,057,544) (451,041) The deferred tax asset has not been recognised on the grounds that there is insufficient evidence at the balance sheet date that it will be recoverable. The asset would start to become potentially recoverable if and to the extent the group was to become profitable. 18. SHARE CAPITAL Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Authorised 100,000,000 ordinary shares of 10p each 10,000,000 10,000,000 Allotted, called up and fully paid 76,758,071 ordinary shares of 10p each 7,675,807 7,675,807 19. RESERVES Capital redemption reserve Share premium account Profit and loss account Â£ Â£ Â£ At 1 January 2001 455,331 7,033,171 (2,419,523) UITF 17 charge - - 42,798 Loss for the financial year - - (3,982,881) At 31 December 2001 455,331 7,033,171 (6,359,606) 20. SHARE OPTIONS The Company has an approved and an unapproved executive option scheme. The unapproved executive option scheme relates to options granted to certain directors and senior management. The approved option scheme is an Inland Revenue-approved scheme available to eligible directors and employees. The total number of options outstanding over ordinary shares of 10p each that had been granted at 31 December 2001 and had not lapsed since were as follows: Number of shares Exercise price Grant date Date from which exercisable Expiry date 1,043,400 10p 28 January 2000 1 April 2001 28 January 2010 78,649 68p 20 June 2000 20 June 2003 20 June 2010 Options over 195,990 ordinary shares of 10p at an exercise price of 10p each lapsed in February 2001 as a result of an employee leaving the Company. Options over 92,187 ordinary shares of 10p at an exercise price of 68p each lapsed in February 2001 as a result of employees leaving the Company. 21. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ Loss for the year (3,982,881) (2,192,853) Proceeds of ordinary shares issued - 16,446,547 Expenses of share issue - (1,738,733) UITF 17 credit 42,798 156,928 Repurchase of deferred shares - (1) Net (reduction in)/addition to shareholders' funds (3,940,083) 12,671,888 Opening shareholders' funds 12,744,786 72,898 Closing shareholders' funds 8,804,703 12,744,786 22. FINANCIAL COMMITMENTS At 31 December 2001 the Company had annual commitments under non-cancellable operating leases expiring as follows: Land and Land and Buildings Buildings 2000 2001 Â£ Â£ Within two to five years 139,000 139,000 23. NET CASH OUTFLOW FROM OPERATING ACTIVITIES Reconciliation of operating loss to net cash outflow from operating activities: Year ended 31 December 2001 Year ended 31 December 2000 Continuing operations Â£ Â£ Operating loss (4,502,211) (2,839,406) Depreciation charge 364,067 180,884 Amortisation of goodwill 28,989 28,989 UITF 17 charge 42,798 156,928 UITF 25 provision for National Insurance on share (94,016) 94,016 options Increase in debtors (39,692) (341,672) (Decrease)/increase in creditors (623,873) 851,996 Net cash outflow from continuing operations (4,823,938) (1,868,265) 24. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Year ended 31 December 2001 Year ended 31 December 2000 Â£ Â£ (Decrease)/increase in cash in the year (44,259) 33,848 Movement in deposits (4,522,006) 12,474,309 Borrowings - 14,044 Movement in net funds in the year (4,566,265) 12,522,201 Net funds at beginning of the year 12,598,041 75,840 Net funds at end of the year 8,031,776 12,598,041 25. ANALYSIS OF NET FUNDS At 1 Jan Cash flow At 31 Dec 2001 2001 Â£ Â£ Â£ Cash at bank and in hand 123,732 (44,259) 79,473 Liquid resources 12,474,309 (4,522,006) 7,952,303 Total 12,598,041 (4,566,265) 8,031,776 Liquid resources comprise short-term deposits with banks. 26. RELATED PARTY TRANSACTIONS The Company reached an agreement with Steve Laitman, the former Chief Executive on 7 February 2002 that his entire shareholding in the Company (approximately 11% of shares in issue) would be utilised directly for the benefit of the Company's minority shareholders in return for the Company not pursuing further action. 27. POST-BALANCE SHEET EVENTS Details of post-balance sheet events are set out within the Chairman's Statement. 28. CONTINGENT LIABILITIES As discussed more fully in the Chairman's statement on page 2 the Company continues to co-operate with the authorities in their ongoing investigation into the matter of financial irregularities discovered in February 2001. The Company has not received any legal claims regarding those irregularities and the Company does not believe that there are any further allegations relating to the financial irregularities that could result in significant claims. However, in the unlikely event that claims are made, and to the extent that they are successful, they could have an impact on the financial resources of the Company. The Board has instigated discussions with lawyers acting on behalf of certain minority shareholders to explore ways in which our Company could collaborate with them in achieving some form of compensation for their clients from third parties. This could potentially result in the Company incurring additional costs. AUDITORS' REPORT TO THE SHAREHOLDERS OF YOOMEDIA PLC We have audited the Company's financial statements for the year ended 31 December 2001, which comprise the Profit and Loss Account, Statement of Total Recognised Gains and Losses, Balance Sheet, Cash Flow Statement, and the related notes 1 to 28. These financial statements have been prepared on the basis of the accounting policies set out therein. Respective Responsibilities of Directors and Auditors The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and accounting standards are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and transactions with the Company is not disclosed. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises the Directors' Report, Chairman's Statement, Operating and Financial Review and Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of Audit Opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Company as at 31 December 2001 and of its loss for the year then ended and have been properly prepared in accordance with the Companies Act 1985. As stated in the Statement of Directors' Responsibilities on page 9, following the discovery of accounting irregularities on 19 February 2001, a comprehensive investigation of revenues and costs and balances was undertaken to correct the underlying accounting records. As a result of the matter referred to above, in our opinion proper accounting records were not adequately kept at all times throughout the financial year or prior year so as to comply in all respects with section 221 of the Companies Act 1985. Ernst &Young LLP Registered Auditor London 26 June 2002 This information is provided by RNS The company news service from the London Stock Exchange

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