Final Results

Media Content PLC 26 November 2001 MEDIA CONTENT PLC ('MEDIA CONTENT') RESULTS FOR YEAR ENDED 30 JUNE 2001 CHAIRMAN'S STATEMENT Introduction I am pleased to report to my fellow shareholders on a year of substantial growth and change for Media Content plc. The second full year of operations as a public company saw significant growth in the size and scope of our business, the acquisition and recruitment of new management expertise, the launch of the sports industry's first and only online marketplace, and a re-defined and expanded mission for our business. Media Content is now established as a leader in the sports advisory and marketing industry and is rapidly establishing its credentials as a provider and distributor for sports and general program content for the television industry. Financial results Turnover in the year ended 30 June 2001 increased to £628,887 versus £328,989 in the previous year (+92%) due mainly to the addition of new advisory clients. Operating expenses increased at the same time to £1,585,431 (before exceptional items and goodwill) from £930,745 in year 2000 due primarily to the businesses and personnel acquired in the SDCi transaction. Net loss after exceptional items for 2001 decreased to £1,494,478 or 0.2 pence per share from £5,225,289 or 0.9 pence per share in Year 2000 (In financial year 2000, the write-off of remaining goodwill resulting from the reversal of Media Content Limited was an exceptional item). Operations review The original sports advisory services business, Sports Media Advisors, had a year of important growth in terms of client base and turnover. In June 2000, SMA was appointed advisor to the Board of Manchester United and performed a variety of projects and evaluations for that prestigious brand throughout the year. Throughout the year Media Content continued its advisory relationships with the NZ Rugby Union (All Blacks) and the World Wrestling Federation. In April 2001, Sports Media Advisors was appointed the advisor to the World Snooker Association, and following a strategic review, Media Content was appointed the world-wide international distributor for television rights by that organisation. In June 2001, Media Content launched SportsMediaRights.com (SMR) in conjunction with Sportel, the sports industry tradeshow organiser. Initial response to the online marketplace has been favourable with over 100 buyers and sellers of sports television rights registering as participants. The primary task for the first several months has been the loading of inventory information onto the marketplace and training the users in its operation. Media content anticipates users to initiate trading in rights on the marketplace during the fourth quarter of calendar year 2001. Operating environment The difficult economic environment which began in autumn 2000 has certainly affected advertising budgets which may in turn diminish the appetite for media rights. As an advisor to sports federations, leagues, and other content owners, Media Content's expertise in optimal commercial exploitation of television and other media rights has become even more valuable. An even more important industry trend positively affecting Media Content's business has been the consolidation in the sports marketing area climaxed by the bankruptcy of ISL and the nearly simultaneous merger between UFA Sports, the Bertelsmann agency, with that of Vivendi. In the new environment of four giant sports distributors, each fully-integrated with mega-media empires, there is an increased interest among content owners in the services of Media Content as an independent advisor and marketer. Management Following the SDCi acquisition, the Company gained new expertise and management capabilities. Several changes were made to operational and Board responsibilities. Stanley Fertig, a co-founder of SDCi and former media executive, brought his investment and mergers and acquisitions experience to take responsibility as Executive Vice President and Chief Financial Officer of Media Content plc. Robert J Morgado, formerly Chairman of Warner Music and board Member of SDCi, joined the Media Content Board of Directors as a non-executive Director, and Leonard M Fertig, co-founder of SDCi and television entrepreneur, became Executive Chairman. Directors and co-founders Jean-Paul de la Fuente and Jean-Francois Denis remained Chief Executive Officer and Managing Director respectively. Robert Montgomery, also a co-founder of Media Content, became Non-Executive Chairman. The new management team of directors represents an extraordinary experience level in the areas of television and content management and opens up numerous opportunities for corporate growth. Management share options In order to provide incentive and retain key management employees, Media Content plc introduced a share option plan during 2001. A maximum cap of 15% of currently outstanding shares was established and the share options are all at levels greater than or equal to the share price at the time of their grants. Hong Kong and NY offices In November 2000, Media Content plc opened its first international office in Hong Kong, servicing the Asia-Pacific region. This office is playing an increasing role in securing clients for advisory, SportsMediaRights.com, distribution and marketing services for the Company in one of the world's fastest-growing media markets. In May 2001, the Company opened an office in New York City to take advantage of opportunities in the North American Market. Implementation of new corporate strategy After a thorough review of our capabilities and strengths, in recognition of the opportunities available, the directors established a new direction for the company. Key elements of our strategy include complementing our internal growth through strategic transactions, such as acquisitions and partnership agreements and other strategic relationships, to extend the scope of services that Media Content offers to our customers. In September 2001, we announced two strategic partnerships which added merchandising in Asia and North America to the capabilities of the group, while this past month we added the G-14 group football clubs to our client list. Future prospects and conclusion The Media Content Group is poised to take advantage of its knowledge and capabilities during the coming year, growing our existing business while developing new opportunities for growth through partnerships and acquisitions. We are looking forward to the upcoming year with hard work and confidence. SALIENT FEATURES 2001 2000 £ £ Turnover 628,887 328,989 Loss after taxation (1,494,478) (5,225,289) Loss per ordinary share (pence per share) (0.2) (0.9) The annual report for the year to 30 June 2001, details of the proposed AGM resolutions and associated proxy forms are expected to be posted to all shareholders today, copies of which will be available to the public free of charge for one month from 96-98 Baker Street, London, W1U 6RA. L Fertig Executive Chairman CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 30 June 2001 Note 2001 2000 £ £ TURNOVER - continuing operations 1,4 628,887 328,989 Administrative expenses Amortisation of goodwill (140,561) - Exceptional items: 6 Goodwill written off - (4,706,284) Impairment of investments (394,435) - Bad debt provision (220,134) - Other administrative expenses (1,585,431) (930,745) (2,340,561) (5,637,029) OPERATING (LOSS)/PROFIT 4,5 Continuing operations (1,715,261) (5,308,040) Acquisitions 3,587 - (1,711,674) (5,308,040) Interest receivable and similar income 8 217,196 82,751 LOSS ON ORDINARY ACTIVITIES BEFORE AND AFTER TAXATION BEING RETAINED LOSS FOR THE YEAR 19 (1,494,478) (5,225,289) Basic loss per share (pence) 10 (0.2) (0.9) Diluted loss per share (pence) 10 (0.2) (0.9) There were no other recognised gains or losses other than shown above. CONSOLIDATED BALANCE SHEET 30 June 2001 Note 2001 2000 £ £ FIXED ASSETS Intangible assets 12 3,586,387 - Tangible assets 13 46,948 32,389 Investments 14 42,168 375,102 3,675,503 407,491 CURRENT ASSETS Debtors 15 262,853 69,677 Cash at bank and in hand 2,169,789 4,190,385 2,432,642 4,260,062 CREDITORS: amounts falling due within one year 16 (185,362) (74,969) NET CURRENT ASSETS 2,247,280 4,185,093 TOTAL ASSETS LESS CURRENT LIABILITIES 5,922,783 4,592,584 CAPITAL AND RESERVES Called up share capital 17 7,010,915 6,359,114 Share premium account 18 6,692,829 4,519,953 Profit and loss account 19 (7,780,961) (6,286,483) EQUITY SHAREHOLDERS' FUNDS 5,922,783 4,592,584 CONSOLIDATED CASH FLOW STATEMENT Year ended 30 June 2001 Note 2001 2000 £ £ Net cash outflow from operating activities 20 (1,384,949) (566,965) Returns on investments and servicing of finance 21 217,196 82,751 Capital expenditure and financial investment 21 (409,242) (435,960) Acquisitions and disposals 21 (462,234) - NET CASH OUTFLOW BEFORE FINANCING (2,039,229) (920,174) FINANCING 21 18,633 4,670,550 (DECREASE)/INCREASE IN CASH 22 (2,020,596) 3,750,376 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS (SEE NOTE 22) Year ended 30 June 2001 2001 2000 £ £ (Decrease)/increase in cash in year (2,020,596) 3,750,376 Net funds at beginning of year 4,190,385 440,009 Net funds at end of year 2,169,789 4,190,385 RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS Year ended 30 June 2001 2001 2000 £ £ Shareholders' funds at 30 June 2000 4,592,584 5,147,323 Loss for the financial year (1,494,478) (5,225,289) Shares issued in the year 2,824,677 4,670,550 Shareholders' funds at 30 June 2001 5,922,783 4,592,584 1. ACCOUNTING POLICIES The financial statements are prepared in accordance with applicable accounting standards. The particular accounting policies adopted are described below. Accounting convention The financial statements are prepared under the historical cost convention. Basis of consolidation The consolidated financial statements incorporate the financial statements and all its subsidiaries. The consolidation does not include Sportev Limited as an associated undertaking as the company cannot demonstrate significant influence over the activities of this company. Turnover Turnover represents fees and expense reimbursements receivable by the company net of any applicable VAT. Tangible fixed assets Depreciation is provided to write off the cost less estimated residual value at rates equivalent to estimated useful economic lives. The periods of depreciation are as follows: Computer equipment 4 years Fixtures and fittings 4 years Investments Investments held as fixed assets are stated at cost less provision for any impairment. Goodwill and intangible fixed assets For acquisitions of a business in accordance with the provisions of FRS 10 'Goodwill and Intangible Assets', purchased goodwill is capitalised in the year in which it arises, and amortised over its estimated useful life up to a maximum of 5 years. Acquisitions On the acquisition of a business fair values are attributed to the group's share of net separable assets. Where the cost of acquisition exceeds fair values attributable to such net assets the difference is treated as purchased goodwill and capitalised in the balance sheet in the year of acquisition. The results and cash flows relating to a business are included in the consolidated profit and loss account and the consolidated cash flow statement from the date of acquisition. Research and development Research and development expenditure is written off as incurred except that development expenditure incurred on an individual project is carried forward when its technological feasibility is reasonably established and the commercial viability can be foreseen with reasonable assurance. Capitalisation of development expenditure ceases when the products derived from the project are completed and fully tested. Any expenditure carried forward is amortised on a straight line basis over four years or the estimated useful life, if shorter, of the related products generated from the project, commencing in the accounting period in which the product is available for sale. Expenditure considered to be irrecoverable is written off immediately. Foreign exchange Transactions denominated in foreign currencies are translated into sterling at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates ruling at that date. These translation differences are dealt with in the profit and loss account. Deferred taxation Deferred taxation is provided on timing differences, arising from the different treatment of items for accounting and taxation purposes, which are expected to reverse in the future without replacement, calculated at the rates at which it is expected the tax will arise. Pension costs Pension costs are charged to the profit and loss account in the period incurred and relate to payments to private pension arrangements. 2. ACQUISITIONS SDCi Limited The entire share capital of SDCi Limited was acquired on 6 March 2001 by Media Content plc for a consideration of £3,001,082. This acquisition has been consolidated using the acquisition method of accounting. Goodwill of £2,692,451 arose as a result of the acquisition, which has been capitalised on the balance sheet. SDCi Limited has subsidiary undertakings and the consolidated book values at the date of acquisition were: Book value £ Intangible fixed assets 646,243 Tangible fixed assets 5,851 Debtors 26,730 Bank overdraft (568) Current liabilities (369,625) 308,631 The directors have reviewed fair value of the assets and liabilities acquired and concluded provisionally that these are equal to book value and that there are no reorganisation costs for which to provide. The consideration comprised a cash payment of £195,039 and £2,806,043 in 64,804,703 ordinary shares of 1p each issued at 4.33p per share. For the period 1 May 2000 to 6 March 2001, the SDCi Limited group generated turnover of £2,023, and incurred an operating loss of £620,021. There were no taxation charge, minority interest, exceptional items, or extraordinary items in this period. This was the first period the company traded. 3. ANALYSIS OF CONTINUING OPERATIONS AND ACQUISITIONS 2001 2000 Continuing Aquisitions Total Continuing £ £ £ £ Turnover 628,887 - 628,887 328,989 Administrative expenses (2,344,148) 3,587 (2,340,561) (5,637,029) Operating (loss)/profit (1,715,261) 3,587 (1,711,674) (5,308,040) 4. ANALYSIS OF TURNOVER OPERATING LOSS AND NET ASSETS All of the entity's operations derive from the provision of sports media advice and investment. A geographical analysis of operations is given below: Operating Net Operating Net Turnover loss assets Turnover loss assets 2001 2001 2001 2000 2000 2000 £ £ £ £ £ £ Geographical analysis by origin United Kingdom 628,887 (1,711,674) 5,922,783 328,989 (5,308,040) 4,592,584 Geographical analysis of turnover by destination North America 325,097 268,764 United Kingdom 110,600 30,000 Rest of the World 193,190 30,225 628,887 328,989 5. OPERATING LOSS Operating loss is stated after charging: 2001 2000 £ £ Goodwill amortised 140,561 4,706,284 Depreciation of owned assets 12,280 8,051 Operating lease rentals - property 29,932 20,932 Auditors' remuneration - audit fee 20,000 13,500 Write down of investment (Note 6) 394,435 47,169 Cost associated with acquisitions - 31,000 6. EXCEPTIONAL ITEMS Impairment of investments The impairment of investment relates to the write down of Sportev Limited due to uncertainties over its ability to generate returns. See Note 14. Bad debts A bad debt provision of £220,134 has been charged in the year due to the financial difficulties of a client, Bedford Communications Inc. The current year charge is equal to the revenue recognised in that financial year. Amortisation of Goodwill In the previous year the directors reviewed the carrying value of goodwill arising on consolidation of Media Content Sports Media Advisers Limited and wrote off the full balance remaining in that year. 7. INFORMATION REGARDING DIRECTORS AND EMPLOYEES Directors' remuneration 2001 2000 Basic salary Benefits Fees Pensions Total Total £ £ £ £ £ £ R B Montgomery - - 65,000 - 65,000 50,000 J P de la Fuente 128,301 1,370 - 6,000 135,671 104,924 J F Denis 125,534 1,364 - 6,000 132,898 104,920 L M Fertig 38,860 - 34,410 - 73,000 19,971 S B Fertig 39,988 2,859 - - 42,847 - R J Morgado - - - - - - M Edelson - - - - - 6,041 332,683 5,593 99,140 12,000 449,416 285,856 Directors' interests The tables below show directors' interest in the shares of the company: At 30 June 2000 or At Date of Additions 30 June appointment in year 2001 No. No. No. R B Montgomery 133,857,000 - 133,857,000 J P De la Fuente 173,821,500 - 173,821,500 J F Denis 173,821,500 - 173,821,500 L M Fertig 161,360 12,802,380 12,963,740 S B Fertig 12,580,241 - 12,580,241 R J Morgado 3,012,366 - 3,012,366 No director held share options at anytime during the year. Staff costs (including directors' emoluments) incurred in the year were as follows: 2001 2000 £ £ Wages and salaries 670,633 341,116 Social security costs 65,035 31,352 Pension costs 12,000 9,870 747,668 382,338 Pension costs represent payments to private pension arrangements of two directors. The average weekly number of employees during the year was made up as follows: 2001 2000 No. No. Administrative 2 1 Operational 6 4 8 5 8. INTEREST RECEIVABLE AND SIMILAR INCOME 2001 2000 £ £ Bank interest 217,196 82,751 9. TAX CHARGE ON LOSS ON ORDINARY ACTIVITIES Due to the size of current year losses no corporation tax charge is expected to arise. The group has unrelieved tax losses of approximately £501,017 at the year end (2000 - £180,632). No provision for deferred taxation arises in the current or previous year, and no unprovided deferred taxation liabilities arise in the current or previous year. 10. LOSS PER SHARE Basic The loss per share figure for the year ended 30 June 2001 is based on the loss for the year on ordinary activities after taxation of £1,494,478 (2000 - £5,225,289). The weighted average number of shares used in the calculation of basic earnings per share was 655,147,543 (2000 - 607,491,600) shares. Diluted The weighted average number of shares used in the calculation of diluted earnings per share was 662,262,408 (2000 - 607,519,446). The number of shares reflects the share options in existence at 30 June 2001. 11. PROFIT OF PARENT COMPANY As permitted by Section 230 of the Companies Act, the profit and loss account of the parent company is not presented as part of these accounts. The parent company's loss for the financial year amounted to £536,733 (2000 - £260,077). 12. INTANGIBLE FIXED ASSETS The Group Development expenditure Goodwill Total £ £ £ Cost At 1 July 2000 - 4,947,034 4,947,034 Acquired with subsidiary 640,305 5,938 646,243 Additions 388,254 2,692,451 3,080,705 At 30 June 2001 1,028,559 7,645,423 8,673,982 Accumulated amortisation At 1 July 2000 - (4,947,034) (4,947,034) Charge for year - (140,561) (140,561) At 30 June 2001 - (5,087,595) (5,087,595) Net book value At 30 June 2001 1,028,559 2,557,828 3,586,387 At 30 June 2000 - - - 13. TANGIBLE FIXED ASSETS The Group Fixtures Computer and equipment Fittings Total £ £ £ Cost At 1 July 2000 23,572 18,651 42,223 Acquired with subsidiary 8,110 - 8,110 Additions 19,364 1,624 20,988 At 30 June 2001 51,046 20,275 71,321 Depreciation At 1 July 2000 (4,764) (5,070) (9,834) Acquired with subsidiary (2,259) - (2,259) Provided during the year (7,211) (5,069) (12,280) At 30 June 2001 (14,234) (10,139) (24,373) Net book value At 30 June 2001 36,812 10,136 46,948 At 30 June 2000 18,808 13,581 32,389 There were no assets held under finance leases or hire purchase contracts at the year end. 14. INVESTMENTS HELD AS FIXED ASSETS The Group Other investments £ Cost At 1 July 2000 422,271 Additions 61,501 At 30 June 2001 483,772 Provisions At 1 July 2000 (47,169) Charge in year (Note 5) (394,435) At 30 June 2001 (441,604) Net book value At 30 June 2001 42,168 At 30 June 2000 375,102 Name of Company Country of incorporation Proportion of Nominal value of shares and voting rights Sportev Limited Great Britain 20.6% (1999- 25%) 30 June 30 June 2001 2000 £ £ Sportev Limited Share capital and reserves Share capital 1,378,981 490,309 Profit and loss account (1,086,171) (222,456) 292,810 267,853 Loss for the year ended 30 June 2001 (863,715) (222,456) 15. DEBTORS Group 30 June 30 June 2001 2000 £ £ Trade debtors 54,896 33,678 Other debtors and prepayments 206,957 34,999 Amounts owed by group undertakings due after more than one year - - Called up share capital not paid 1,000 1,000 262,853 69,677 16. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Group 30 June 30 June 2001 2000 £ £ Trade creditors 73,973 30,194 Other taxation and social security 26,047 20,902 Other creditors 53,034 1,748 Accruals and deferred income 32,308 22,125 185,362 74,969 17. CALLED UP SHARE CAPITAL The Company Number of 30 June Number of 30 June shares 2001 shares 2000 £ £ Authorised: Ordinary shares of 1p each 800,000,000 8,000,000 800,000,000 8,000,000 Called up, allotted and fully paid: Ordinary shares of 1p each 701,091,543 7,010,915 635,911,360 6,359,114 On 30 September 2000 the company issued 98,685 ordinary shares of 1p each at 7.4p each for cash. On 31 December 2000 the company issued 190,297 ordinary shares of 1p each at 4.25p each for cash. On 6 February 2001 the company issued 86,498 ordinary shares of 1p each at 3.75p each for cash. In relation to the purchase of the SDCi Limited and its subsidiaries the company issued the following shares: Date Number Class of share Issue price 12 March 2001 59,752,617 1p ordinary share 4.33p 29 March 2001 3,319,984 1p ordinary share 4.33p 23 May 2001 1,732,102 1p ordinary share 4.33p The company received non-cash consideration for these shares in the form of the entire share capital of SDCi Limited and professional services in relation to the acquisition. Share options At 30 June 2001, the companies had in issue the following share options: Number of Option price Option period Option period options per share beginning ending 600,000 10p 10 April 2001 10 April 2011 600,000 10p 10 April 2002 10 April 2011 600,000 10p 10 April 2003 10 April 2011 6,750,000 4p 9 January 2002 9 January 2012 6,750,000 4p 9 January 2003 9 January 2012 6,750,000 4p 9 January 2004 9 January 2012 During the year 21,600,000 4p share options were granted. Also 360,000 10p share options and 1,350,000 4p share options lapsed during the year. The share price ranged between 3p and 12.25p per share during the year. The company also had an arrangement with a director, Len Fertig , who was obliged to purchase shares, at the lower of current market price at date of purchase and 7.4p from his net first year's salary of £50,000 per annum. As at 30 June 2001 no further amounts remain to be paid (1999 - £30,029). 18. SHARE PREMIUM ACCOUNT £ At 30 June 2000 4,519,953 Arising on issue of shares in the year 2,172,876 At 30 June 2001 6,692,829 Issue costs of £nil (1999 - £101,000) were charged to the share premium account upon issue by the company of shares during the year. 19. STATEMENT OF MOVEMENTS ON RESERVES Group Share premium Profit and account loss account £ £ As at 30 June 2000 4,519,953 (6,286,483) Retained loss for the year - (1,494,478) Premium on issue of shares 2,172,876 - As at 30 June 2001 6,692,829 (7,780,961) 20. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2001 2000 £ £ Operating loss (1,711,674) (5,308,040) Depreciation 12,280 8,051 Goodwill amortised/written off 140,561 4,706,284 Increase in debtors (166,444) (50,473) Increase/(decrease) in creditors (54,107) 30,044 Provision for impairment of investments 394,435 47,169 Net cash outflow from operating activities (1,384,949) (566,965) 21. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 30 June 2001 30 June 2000 £ £ £ £ Returns on investments and servicing of finance Interest received 217,196 82,751 217,196 82,751 Capital expenditure and financial investment Payments to acquire intangible fixed assets (388,254) Payments to acquire tangible fixed assets (20,988) (13,690) Purchase of other investments - (422,270) (409,242) (435,960) Acquisitions and disposals Payments to acquire investment in subsidiary (Note 24) (195,039) - Net overdraft acquired with subsidiary (Note 24) (568) - Purchase of interest in other investments (61,501) - Loans to other entities (205,126) - (462,234) - Financing Issue of ordinary share capital 18,633 4,670,550 22. ANALYSIS OF NET FUNDS At At 30 June Cash 30 June 2000 Flow 2001 £ £ £ Cash at bank and in hand 4,190,385 (2,020,596) 2,169,789 23. COMMITMENTS UNDER OPERATING LEASES Land and Land and Other buildings Total buildings 2001 2001 2001 2000 £ £ £ £ Lease payments expiring within one year 33,275 - 33,275 16,075 Lease payments expiring between two and five years - 130,000 130,000 - 24. ACQUISITIONS SDCi Limited £ Goodwill 2,692,451 Intangible fixed assets 520,190 Tangible fixed assets 131,904 Debtors 26,730 Bank overdraft (568) Current liabilities (369,625) 3,001,082 Consideration satisfied by cash 195,039 Shares issued 2,806,043 3,001,082 The subsidiary acquired during the year accounted for £107,423 of the group's operating cash outflows. See Note 2 for further details of the acquisition. 25. RELATED PARTY TRANSACTIONS The company has taken advantage of the provisions of Financial Reporting Standard 8, paragraph 3(c). Accordingly transactions with other group companies are not disclosed. Prior to its acquisition Media Content had lent SDC International Services Limited £40,000. This loan was not repaid prior to the acquisition of the SDCi Limited group. L M Fertig, S B Fertig and R J Morgado who are all directors, were significant shareholders in SDCi Limited prior to its acquisition by Media Content plc. 26. CAPITAL COMMITMENTS The group The company 2001 2000 2001 2000 £ £ £ £ Contracted for but not provided 92,000 - 92,000 - 27. EVENT OCCURRING AFTER THE END OF YEAR On 10 July 2001 the company passed an ordinary resolution to increase the authorised share capital by 150,000,000 ordinary shares of 1p each to 950,000,000 ordinary shares of 1p each.

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