New Media Lottery Services Announcements
Final Results and Posting of Report and Accounts
30 October 2008 07:00:09
RNS Number : 9980G New Media Lottery Services PLC 30 October 2008
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30 October 2008
NEW MEDIA LOTTERY SERVICES PLC
("NMLS" or "the Company")
(AIM:NMLS)
FINAL RESULTS
FOR THE YEAR ENDED 30 APRIL 2008
The Board of New Media Lottery Services PLC, the AIM traded supplier and white label operator of lottery systems and games for government sanctioned lottery programs and charities, today announces that it has posted its annual report and accounts for the year ended 30 April 2008 to shareholders. Copies of the accounts will be available from the Company's website www.nmlsplc.com.
FINANCIAL HIGHLIGHTS
Revenues grew 104% to €848,379 (2007: €415,797) with sales continuing to grow quarter on quarter; €21.1 million
Sales on client's Lottery Bingo site increased by 99% to €21.1 million (2007: €10.6 million);
Corresponding client player deposits increased by 88% to over €1.6 million (2007: €867,000);
Professional and administrative costs reduced despite more than doubling revenue;
At the year end Net debt was €3.7m (2007: €2.4m), and overall net liabilities were €4.0m (2007: €2.2m); and
Losses fell to €1.8 million (2007 loss: €2.7 million).
BUSINESS HIGHLIGHTS
Well positioned to move into a period of rapid growth;
The Company has recently launched a second lottery game website in Ireland and full marketing support commenced in September 08;
Expected launch of multiple white label bingo and lottery gaming sites later this year;
Expected roll out of a Server based lottery program with Inspired Gaming later this year;
Ready to replicate lottery services in multiple jurisdictions throughout the coming year; and
Application filed for US patent protection on a prepaid mobile lottery application.
POST BALANCE SHEET HIGHLIGHTS
€1.3 million raised by way of a secured convertible loan from Trafalgar Capital Specialized Investment Fund.
Appointment of Jane Dresner Sadaka as Non-Executive Director has further strengthened the Board.
Commenting on today's announcement, Lord Mancroft, non-executive chairman, said: "The Company has made considerable progress during the year. NMLS is well positioned to move into a period of rapid growth through its various operations, supported by the continued growth at its client websites. The Company intends to replicate lottery services in multiple jurisdictions throughout the coming year."
This summary should be read in conjunction with the full announcement below and the Report and Accounts available as noted above.
---ends---
Enquiries:
New Media Lottery Services PLC (001) 540 437 1688
John Carson
www.nmlsplc.com
Bishopsgate Communications Ltd 020 7562 3350
Nick Rome
Michael Kinirons
www.bishopsgatecommunications.com
Arbuthnot Securities 020 7012 2000
Paul Vanstone
www.arbuthnotsecurities.co.uk
Directors' Report for the year ended 30th April 2008
The Directors present the report and the audited financial statements for the year ended 30 April 2008. These financial statements comprise the consolidated financial statements for New Media Lottery Services Public Limited Company (the "Company" or "NMLS plc") and its subsidiaries (the "Group").
Principal activity, business review and key performance indicators
The principal activity of the Group is the development, marketing, administration and on-line sale of lottery games to members of the public. NMLS plc provides and operates white label lottery gaming platforms to a number of International Lottery programs including charities, sports associations and state lottery organisations. Unlike many internet gaming companies, NMLS plc only works with legitimate Government sanctioned Lottery Programs. It does not market to players in jurisdictions with regulatory uncertainties such as North America.
The company also launched a new online social networking site Lonely.ie in November 2007. The site was launched to provide a forum for members looking to meet people and widen their social network. Revenues will be derived from banner advertising and additional dating functionality features. The company believes this site as an excellent means of pushing traffic to it's community oriented lottery sites. Revenues (external) for the period from launch to April 2008 were €1,935 (Total incl. internal was €6,185).
The state of affairs of the Group and Company are set out below. After the movements as detailed in the Statement of Changes in Equity, the net liabilities of the Group amount to €3,957,334 (2007: €2,167,807). Cash and cash equivalents amount to €132,896 (2007: €115,387). Please also refer to the chairman's statement below for other key performance indicators.
Although not measurable in the current period, the key factors in measuring the performance of the Group are the cost of acquiring new customers, the rate of customer retention and new customer growth rates.
Results for the year and state of affairs as at 30 April 2008
The loss for the financial year was €1,834,341 (2007: €2,696,480). Details are set out in the consolidated income statement below. The deficit on the profit and loss reserve amounts to €8,628,709 as at 30 April 2008 (2007: deficit of €6,794,368).
The Group is dependent on the continuing support of its parent and ultimate shareholders and this support and commitment is expected to continue for the foreseeable future. This has been illustrated during the year regarding funding that has been made available to the Group and this is fully disclosed in note 18 and note 19 to the accounts. The Group has three debentures outstanding and these are fully detailed in note 18 to the financial statements. There are demand notes owed to Milton Dresner and Joseph Dresner in the amount of $917,500 and $882,500 respectively. Mr. M. Dresner is a Director of the Company and both M. Dresner and J. Dresner are principal shareholders.
There is also a loan payable to New Media Lottery Services, Inc. (NMLS-INC) in the amount of $1,491,344 (€957,955). NMLS Inc. is the parent of NMLS plc.
In addition, the Group has two bank loans with Comerica Bank which are guaranteed by the Dresners as disclosed in note 19. The Company has extended the maturity date on these loans. The Dresners remain guarantors.
Financial Situation
The auditors have reported that at 30 April 2008, a financial situation existed within the meaning of the Companies (Amendment) Act, 1983 which, under Section 40(1) of the Act, may require the convening of an extraordinary general meeting of the company.
Dividends
There were no dividends paid or proposed in the year.
Principal risks and uncertainties
The Group is involved in the on-line sale of lottery games to members of the public in licensed markets. The key risk factors in the business are:
- changes in lottery licence regulations under which the Group operates - the Group only operates in markets where it has
a licence to operate and in accordance with the terms and conditions set out;
- maintenance of software capabilities - the Group transacts all of its business' over the Internet;
- winning new contracts - the Group is actively developing new markets for its activities;
Directors and Secretary
In accordance with the Articles of Association, John T. Carson, Milton Dresner, Lord Benjamin Lloyd Stormont Mancroft, Nigel Blythe-Tinker, Jane Dresner Sadaka and Paula Horan retire from the Board and, being eligible, offer themselves for re-election at the AGM.
Directors' and Company secretary interests
The details of the Directors' and Company secretary share interests and interests in share options of the Company and the Group are set out in the Remuneration Committee Report in the Report and Accounts.
Substantial holdings
The Directors have been notified of the following significant interests in the ordinary share capital of the Company at 30 April 2008:
- New Media Lottery Services Inc., an American corporation quoted on the NASDAQ stock market, owns 20,205,129 shares or 81.03% of the voting rights of the Company.
- The Directors, Milton and Joseph Dresner (Joseph Dresner resigned as a director on 5 June 2008), in turn own 7 million shares each of the 21,442,143 outstanding shares of New Media Lottery Services Inc. Milton and Joseph Dresner also own 901,925 or 3.62% each of the shares in the Company.
Directors' interests in contracts
Randolph H. Brownell III, John T. Carson, Joseph Dresner, Milton Dresner, Lord Benjamin Lloyd Stormont Mancroft, Nigel Blythe-Tinker and Paula Horan were all Directors during the year. Save as disclosed, none of the Directors had a beneficial interest in any material contract to which the Company or any subsidiaries was a party during the year.
Books of account
The Directors acknowledge their responsibility under Section 202 of the Companies Act, 1990, with regard to books and records of the Company. To this end, the Group employs accounting personnel with appropriate expertise and provides adequate resources to the financial function. The books and records are maintained at 22/23 Upper Pembroke Street, Dublin 2, Ireland.
Political contributions
During the year neither the Group nor the Company made any donations that require disclosure in accordance with the Electoral Act, 1997.
Subsequent events
In June 2008 the Company raised €1.3 million by way of a secured convertible loan from Trafalgar Capital Specialized Investment Fund.
There have been no other events since the year-end that need to be disclosed or which would have an impact on the results in these financial statements except for those already mentioned under the heading 'Results for the year and state of affairs as at 30 April 2008' above.
Future developments
The Group is involved in the development, marketing, administration and on-line sale of lottery games to its clients. As such, the Group is continuing the development of game content, back office management systems, improved distribution and marketing techniques. In addition, Inspired's IP based terminals will require additional support as a full roll out plan is implemented and new games are developed.
The Group will continue to pursue long-term lottery contracts in the regions of South America, Eastern Europe and Asia.
Auditors
The auditors, Ernst & Young, Chartered Accountants, have expressed their willingness to continue in office in accordance with Section 160(2) of the Companies Act, 1963.
Chairman's Statement for the year ended 30th April 2008
I am pleased to present New Media Lottery Services Public Limited Company ("NMLS plc") results for the year ended 30 April 2008. We have made considerable progress this year and our performance is very promising.
NMLS plc provides and operates white label lottery gaming platforms to a number of International Lottery programs including charities, sports associations and state lottery organisations. Unlike many internet gaming companies, NMLS plc only works with legitimate Government sanctioned Lottery Programs. It does not market to players in jurisdictions with regulatory uncertainties such as North America.
Financials
Client site sales for the year to 30 April 2008 increased by 99% to €21.1 million compared to €10.6 million for the year to 30 April 2007. The net revenue to the Company for this year was €848,379 compared to €415,797 for the year to 30 April 2007. Corresponding client player deposits similarly saw a substantial increase of 88% to more than €1.6 million compared to €867,000 for the year to 30 April 2007.
NMLS' loss for the year to 30 April 2008 is €1,83 million (loss of €2,68 million in the year to 30 April 2007). Expenses were reduced this year, principally caused by a reduction in the Groups legal, professional and consultancy costs since its launch on AIM. This, along with the increases in revenues, has resulted in losses reducing.
In June 2008 the Company raised €1.3 million by way of a secured convertible loan from Trafalgar Capital Specialized Investment Fund.
Review and Current Prospects
There have been a series of developments at the Company during the period in review. NMLS has successfully launched its own social networking site called www.lonely.ie. The lonely.ie site is supported by advertiser revenue and drives significant traffic to the lottery gaming sites. Lonely.ie has exceeded expectations in both advertising revenue growth and user participation.
The Company has spent a great deal of time developing the server based platform for use in Ireland and expects it to be revenue generating in 2008/2009. NMLS is well positioned to develop and hopes to benefit from a period of rapid growth through its various operations. This will be supported by the continued growth at its client websites. The Company also intends to duplicate lottery services in multiple jurisdictions throughout the coming year.
The NMLS software development group has now fully developed tested and implemented the Company's Server Based Lottery System. Inspired Gaming Group plc and NMLS are currently assessing a number of lottery opportunities.
Rehab Lotteries
Sales at Rehab Bingo have been growing rapidly with the site benefiting from a growing profile on the back of a number of marketing initiatives which include the sponsorship of a local Football Franchise. On a quarter by quarter basis the Company continues to grow and exceed expectations. In addition, NMLS has launched a complementary Rehab Lottery Game site which will commence full scale marketing this September. During the next quarter the Company will be launching a variety of additional lottery gaming sites in association with strategic marketing partners.
US
The Company has filed for US patent protection on a new prepaid mobile lottery application. Management reviewed existing Mobile and Prepaid Mobile patents and identified a process that improves security, offers a variety of game types and is more conducive to working with a lottery Central Management System.
NMLS continues to leverage its investment in new software and expects to announce additional contracts over the coming year. I would like to take this opportunity to thank our staff for their support over this busy period and look forward to updating investors on our further progress in due course.
Lord Mancroft
Chairman
Statement of Directors' responsibilities in respect of the financial statements
for the year ended 30th April 2008
The Directors are responsible for preparing the Annual Report, and the Group and Company financial statements, in accordance with applicable law and those International Financial Reporting Standards ("IFRS") as adopted by the EU.
The Directors are required to prepare Group and Company financial statements for each financial year.
Irish Company Law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and of the Group and of the profit or loss of the Group for that year.
In preparing each of the Group and Company financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping proper books of account, which disclose with reasonable accuracy at any time the financial position of the Group and Company and to enable them to ensure the financial statements comply with the Companies Act, 1963 to 2006. They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and Company and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Independent auditors' report to the members of New Media Lottery Services Public Limited Company
We have audited the Group and Parent Company financial statements (the "financial statements") of New Media Lottery Services Public Limited Company for the year ended 30 April 2008 which comprise the Consolidated Income Statement, the Consolidated and Parent Company Balance Sheets, the Consolidated and Parent Company Cash Flow Statements, the Consolidated and Parent Company Statement of Changes in Equity, and the related notes 1 to 26. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance with section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors are responsible for the preparation of the financial statements in accordance with applicable Irish law and International Financial Reporting Standards (IFRS) as adopted by the European Union as 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 International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the Companies Act, 1963 to 2006. We also report to you our opinion as to: whether proper books of account have been kept by the company; whether at the balance sheet date, there exists a financial situation which may require the convening of an extraordinary general meeting of the company; and whether the information given in the Directors' Report is consistent with the financial statements. In addition, we state whether we have obtained all the information and explanations necessary for the purposes of our audit and whether the financial statements are in agreement with the books of account.
We also report to you if, in our opinion, any information specified by law regarding directors' remuneration and other transactions is not disclosed and, where practicable, include such information in our report.
We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements within it. The other information comprises only the Directors' Report, the Chairman's Statement, the Remuneration Committee Report and the Audit Committee Report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the parent company financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) 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 Group's and 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, in accordance with IFRS as adopted by the European Union, of the state of affairs of the Group and of the Company as at 30 April 2008, and of the loss of the Group for the year then ended and have been properly prepared in accordance with the Companies Act, 1963 to 2006.
We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Company. The financial statements are in agreement with the books of account.
In our opinion the information given in the Directors' Report is consistent with the financial statements.
The net assets of the company as stated in the balance sheet, are not more than half of the amount of its called up share capital and, in our opinion, on that basis, there did exist at 30 April 2008 a financial situation which under Section 40(1) of the Companies (Amendment) Act, 1983 may require the convening of an extraordinary general meeting of the company.
Ernst & Young
Registered Auditors and Chartered Accountants
Dublin
Consolidated Income Statement
For the year ended 30th April 2008
2008
2007
Notes
€
€
Revenue
21
863,099
432,695
Other income - Foreign exchange gain
441,507
140,574
Administrative expenses
6
(2,892,654)
(3,130,624)
Operating loss
(1,588,048)
(2,557,355)
Finance costs
6
(246,293)
(139,125)
Loss on ordinary activities before taxation
(1,834,341)
(2,696,480)
Tax on loss on ordinary activities
8
-
-
Loss on ordinary activities after taxation
(1,834,341)
(2,696,480)
Basic loss per ordinary share
9
€(0.07)
€(0.11)
Diluted loss per ordinary share
9
€(0.07)
€(0.11)
Consolidated Balance Sheet
As at 30th April 2008
Notes
2008
2007
€
€
Assets
Non-current assets
Property, plant and equipment
11
26,663
33,789
Intangible assets
12
143,518
230,967
170,181
264,756
Current assets
Trade and other receivables
14
324,981
460,023
Cash and cash equivalents
15
132,896
115,387
457,877
575,410
Total assets
628,058
840,166
Equity and liabilities
Equity attributable to equity holders of the parent
Issued share capital
17
242,822
241,618
Share premium
17
3,881,372
3,845,566
Merger reserve
539,377
539,377
Other reserve
Accumulated loss
23
7,804
(8,628,709)
-
(6,794,368)
Total equity
(3,957,334)
(2,167,807)
Current liabilities
Trade and other liabilities
18
736,354
524,730
Bank loan
18/19
1,220,452
1,281,113
Debentures
18
2,243,180
1,202,130
4,199,986
3,007,973
Non current liabilities
Other liabilities - Bank loan
18/19
385,406
-
Total liabilities
4,585,392
3,007,973
Total equity and liabilities
628,058
840,166
Company Balance Sheet
As at 30th April 2008
2008
2007
Assets
Notes
€
€
Non-current assets
Investment in subsidiary
13
1,445,210
1,445,210
Intangible assets
12
58,560
99,897
1,503,770
1,545,107
Current assets
Trade and other receivables
14
1,775,380
2,054,320
Cash and cash equivalents
15
2,780
3,450
1,778,160
2,057,770
Total assets
3,281,930
3,602,877
Equity and liabilities
Equity attributable to equity holders of the parent
Issued share capital
17
242,822
241,618
Share premium
Other reserve
17
23
3,881,372
7,804
3,845,566
-
Accumulated Loss
(973,714)
(607,706)
Total equity
3,158,284
3,479,478
Current liabilities
Trade and other payables
18
123,646
123,399
Total equity and liabilities
3,281,930
3,602,877
Consolidated Cash Flow Statement
For the year ended 30th April 2008
2008
2007
€
€
Cash from operating activities
Loss on ordinary activities before tax
(1,834,341)
(2,696,480)
Interest Income
(14,720)
(16,898)
Finance costs
246,293
139,125
Depreciation and amortisation
85,734
50,129
Costs incurred in exchange for shares
-
31,002
Employee benefit expense
44,814
-
Decrease/(Increase) in trade and other receivables
135,042
(132,857)
Loss on disposal
34,481
-
Increase /(Decrease) in trade and other payables
211,624
(94,310)
Net cash outflow from operating activities
(1,091,073)
(2,720,289)
Cash flow from investing activities
Amounts advanced to Joint Venture
-
(7,826)
Purchase of property, plant and equipment
(10,280)
(19,202)
Purchase of intangible assets
(15,360)
(59,542)
Net cash flow used in investing activities
(25,640)
(86,570)
Cash flows from financing activities
Issue of debentures
1,041,050
-
Interest Income
14,720
16,898
Finance costs
(246,293)
(139,125)
Loan Proceeds
324,745
1,281,113
Net cash flow from financing activities
1,134,222
1,158,886
Net increase/(decrease) in cash and cash equivalents
17,509
(1,647,973)
Cash and cash equivalents at beginning of year
115,387
1,763,359
Cash and cash equivalents at end of year
132,896
115,387
Company Cash Flow Statement
for the year ended 30th April 2008
2008
2007
€
€
Cash outflow from operating activities
Loss on ordinary activities before tax
(366,008)
(467,175)
(Decrease)/Increase in trade and other receivables
278,940
(1,167,258)
(Decrease)/Increase in trade and other payables
247
(74,272)
Costs incurred in exchange for shares
44,814
31,002
Amortisation
41,337
24,113
Net cash outflow from operating activities
(670)
(1,653,590)
Cash flow from financing activities
Proceeds from the issue of shares
-
-
Transaction costs on the issue of shares
-
-
Net cash flows from financing activities
-
-
Net (Decrease)/Increase in cash and cash equivalents
(670)
(1,653,590)
Cash and cash equivalents at start of year
3,450
1,657,040
Cash and cash equivalents at end of year
2,780
3,450
Interest Income
14,674
11,193
Consolidated Statement of Changes in Equity
for the year ended 30th April 2008
Issued Share Capital
Share premium
Accumulated Loss
Merger reserve
Other
Reserve
Total
€
€
€
€
€
€
As at 1 May 2006
238,130
3,619,413
(4,097,888)
539,377
-
299,033
Loss for the year
-
-
(2,696,480)
-
-
(2,696,480)
Issue of shares (note 17)
3,488
226,153
-
-
-
229,640
As at 30 April 2007
241,618
3,845,566
(6,794,368)
539,377
-
(2,167,807)
As at 1 May 2007
241,618
3,845,566
(6,794,368)
539,377
-
(2,167,807)
Loss for the year
-
-
(1,834,341)
-
-
(1,834,341)
Issue of shares (note 17)
1,204
35,806
-
-
-
37,010
Issue of warrants (note 23)
-
-
-
-
7,804
7,804
As at 30 April 2008
242,822
3,881,372
(8,628,709)
539,377
7,804
(3,957,334)
Company Statement of Changes in Equity
for the year ended 30th April 2008
Issued Share Capital
Share Premium
Accumulated Loss
Other
Reserve
Total
€
€
€
€
€
As at 1 May 2006
238,130
3,619,413
(140,531)
-
3,717,012
Loss for year
-
-
(467,175)
-
(467,175)
Issue of Shares (note 17)
3,488
-
-
-
3,488
Premium on issue of Shares (note 17)
-
226,153
-
-
226,153
As at 30 April 2007
241,618
3,845,566
(607,706)
-
3,479,478
At 1 May 2007
241,618
3,845,566
(607,706)
-
3,479,478
Loss for the year
-
-
(366,008)
-
(366,008)
Issue of Shares (note 17)
35,806
-
-
35,806
Premium on issue of Shares (note 17)
Issue of Warrants (note 23)
1,204
-
-
-
7,804
1,204
7,804
As at 30 April 2008
242,822
3,881,372
(973,714)
7,804
3,158,284
Notes to the Company and Consolidated Financial Statements
for the year ended 30th April 2008
1. Corporate information
New Media Lottery Services Public Limited Company (the "Company" or "NMLS plc") was incorporated on 14 November 2005. The financial statements of the Group for the year ended 30 April 2008 were authorised for issue in accordance with a resolution of the Directors on the 29th October 2008. NMLS plc is a public limited company incorporated and domiciled in Ireland whose shares are publicly traded on the Alternative Investment Market in London.
The ultimate holding company and controlling party is New Media Lottery Services Inc, an American corporation, which owns 81.03% of the voting rights of NMLS plc. The accounts of New Media Lottery Services Inc are available to the public at 370 Neff Avenue, Suite L, Harrisonburg, VA22801, USA.
2. Basis of preparation and going concern
The financial statements are prepared on the historical cost basis. The financial statements are presented in Euro ('€').
The Group does not have sufficient financing of its own to continue in operational existence for the foreseeable future and is dependent on the continuing support of its parent and ultimate shareholders for its cash requirements in that period. This is fully described in the Directors' Report. The Directors expect the support of its parent and ultimate shareholders to be forthcoming. The Directors consider that the Group has the ability to continue as a going concern for the foreseeable future. The financial statements have been prepared on this basis.
Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
Basis of consolidation
The consolidated financial statements comprise the financial statements of NMLS plc and its subsidiaries as at 30 April each year. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.
All intra-Group balances, transactions, income and expenses and profits and losses resulting from intra-Group transactions that are recognised in assets, are eliminated in full.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
3. New accounting standards
IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:
International Accounting Standards (IAS / IFRS)
Effective date
IFRS 3R
Amendment - Business Combinations and consequential amendments
1 July 2009
IFRS 7
Financial Instruments: Disclosures
1 January 2007
IAS 1
Amendment - Presentation of Financial Statements: Capital Disclosures
1 January 2007
IAS 1R
Amendment - Presentation of Financial Statements
1 January 2009
IAS 23
Borrowing Costs
1 January 2009
IAS 27
Consolidated and Separate Financial Statements and consequential amendments
1 July 2009
IAS 32R and IAS 1R
Amendment - Puttable Financial Instruments and Obligations Arising on Liquidation
1 January 2009
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 9
Reassessment of Embedded Derivatives
1 June 2006
IFRIC 10
Interim Financial Reporting and Impairment
1 November 2006
IFRIC 11
IFRS 2 - Group and Treasury Share Transactions
1 March 2007
IFRIC 12
Service Concession Arrangements
1 January 2008
IFRIC 13
Customer Loyalty Programmes
1 July 2008
IFRIC 14 /
IAS 19
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
1 January 2008
IFRIC 15
Agreements for the Construction of Real Estate
1 January 2009
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
1 October 2008
The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application.
On adoption of IFRS 7, the Group will disclose additional information about its financial instruments, their significance and the nature and extent of risks that they give rise to. More specifically the Group will disclose the fair value of its financial instruments and its risk exposure in greater detail. There is no effect on reported income or net assets.
4. Summary of significant accounting policies
Foreign currency translation
The financial statements are presented in Euro (denoted by symbol '€'), which is the Company's and Group's functional and
presentation currency. Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional
currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.
The financial statements of the Company's subsidiaries are also presented in Euro.
Property, plant and equipment
Property, plant and equipment is stated at cost, excluding the costs of maintenance, less accumulated depreciation and accumulated impairment in value. Such costs include the cost of replacing parts of such property, plant and equipment when that cost is incurred, if the recognition criteria are met. Depreciation is calculated on a straight-line basis over the useful life of the assets as follows:
Fixtures and fittings - over 3 to 7 years straight line
Computer equipment - over 3 years straight line
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and carrying amount of the asset) is included in the income statement in the year the asset is derecognised.
The asset's residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each financial year-end.
Impairment of property, plant and equipment
The Group assesses at each reporting date or more frequently if events or changes in circumstances indicate that the carrying value may be impaired, whether there is an indication that a non-financial asset may be impaired. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
Borrowing costs
Borrowing costs are recognised as an expense when incurred.
Intangible assets
Intangible assets representing technology licences and software acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be finite. Intangible assets with finite lives are amortised over the useful economic life on a straight-line basis and assessed for impairment whenever there is an indication that the asset may be impaired. Currently technology licences and software are assessed to a have a 10-year useful life. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.
Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. Provisions are made when there is objective evidence that the Company will not be able to collect the debts. Bad debts are written off when identified.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
Joint ventures
Joint ventures are those entities for which the Group exercises control jointly, under a contractual agreement, with one or more parties. Investments in joint ventures are accounted for using proportionate consolidation.
Investments in subsidiary
Investments in subsidiary are stated at cost less provision for impairment.
Impairment of investment in subsidiary
The Group assesses at each balance sheet date whether there is any objective evidence that the financial asset is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Share-based payment
Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments. The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value is determined to be the market price of the equity at the date on which the option was granted. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the service conditions are fulfilled. The income statement charge for the year is recorded in 'Employee benefit expense'..
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.
Taxes
Current Tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred Tax
Deferred tax is provided on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except:
where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carried-forward or unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carried-forward or unused tax credits and unused tax losses can be utilised except:
where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Current tax and deferred tax relating to items recognised directly in equity are also recognised in equity and not in the income statement.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Pensions
The subsidiary Company operates a defined contribution scheme on behalf of certain Directors. There were no pension costs charged to the income statement during the year. The Directors waived their entitlement to these pension contributions for the year ended 30 April 2008 and 30 April 2007.
Earnings per share
Basic loss per ordinary share has been computed by dividing the net loss attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is computed by adjusting the weighted average number of ordinary shares in issue for all potentially dilutive ordinary shares outstanding during the year and adjusting earnings for any changes that would result from the conversion of ordinary shares.
Revenue recognition
Revenue is recognised to the extent that is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and sales taxes. The following specific recognition criteria must also be met before revenue is recognised:
Supply of service
Revenue is earned as fees are charged by our client lotteries for the provision of on-line lottery games to the public. The Groups revenue is a commission and is recognised as games are played to the extent that the Group believes it will be recovered.
Interest income
Revenue is recognised as interest accrues. Interest on cash and cash equivalents is included here.
Significant estimates and judgements
In the course of applying the Group's accounting policies, management has used its judgement and made estimates in determining the amounts recognised in the financial statements. The most significant use of judgement and estimation uncertainty relates to the deferred tax assets, amortisation period and possible impairment of tangible and intangible assets. The Group reviews the amortisation period of tangible and intangible assets at least annually and also considers whether there are factors in existence which would result in impairment having to be recognised. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. Further details are contained in Note 8.
5. Segment information
The primary segment reporting format is geographic segments as the Group's risks and rates of return are affected predominately by the fact that it operates in different geographical areas. The Group's geographical segments are based on the location of the Group's assets. There is no secondary segment as all of the Group's services are provided to internet lotteries and on its online dating internet site. Sales to external customers disclosed in geographical segments are based on the geographical locations of its customers.
2008
2007
€
€
Geographical market
Turnover (all external customers)
Ireland (RehabBingo.com)
860,978
427,565
South America
2,121
5,130
863,099
432,695
Results
Ireland
(245,298)
(467,175)
South America
(46,639)
(31,459)
Unallocated expenses
(1,296,111)
(2,058,721)
_________
_________
(1,588,048)
(2,557,355)
Other segment information
Segment assets
Ireland
56,346
87,675
South America
5,206
13,798
Unallocated assets
566,506
738,693
628,058
840,166
Segment liabilities
Ireland
-
-
South America
-
7,031
Unallocated liabilities
4,585,392
3,000,942
4,585,392
3,007,973
Depreciation and amortisation of segment assets
Ireland
-
-
South America
-
-
Unallocated assets
85,734
50,129
85,734
50,129
Capital expenditure on tangible and intangible
assets
Ireland
-
-
South America
-
-
Unallocated assets
25,640
202,754
25,640
202,754
6. Loss on ordinary activities before taxation
Loss on ordinary activities before taxation has been arrived at after charging the following amounts:
2008
2007
Administration expenses
€
€
- Auditor's remuneration
40,000
42,000
- Employee benefit expense
756,674
583,887
- Directors' fees
321,793
433,654
- Programming costs
33,090
55,899
- Other administration expenses
425,811
707,716
- Depreciation and amortisation
85,734
50,129
- Website hosting
113,315
122,619
- Advertising
479,015
396,823
- Consultancy fees
157,083
323,041
- Legal and professional
- Bingo royalties
- Loss on disposal of assets
- Lonely.ie marketing
202,401
174,271
34,481
68,986
298,046
116,810
-
-
2,892,654
3,130,624
Finance charges (loan interest and interest on debentures) disclosed separately on the face of the income statement
246,293
139,125
7. Employee benefit expense
The average monthly number of employees (including the Directors) during the year were:
2008
2007
Employees
Ireland
6
6
North America
20
20
26
26
Employment costs
2008
2007
€
€
Wages and salaries (inc. Directors fees)
889,482
900,755
Social welfare costs
48,169
40,735
937,651
941,490
8. Tax on loss on ordinary activities
2008
2007
€
€
Charge for the year based on loss on ordinary activities
-
-
The following table relates the applicable Republic of Ireland taxation at standard rate of 12.5% with the actual tax charge for the year:
2008
2007
€
€
Loss on ordinary activities before tax
Loss on ordinary activities multiplied by the standard
rate of corporation tax in the Republic of Ireland of 12.5%
Effects of:
Loss relief carried forward to future years
Joint venture losses at higher rates
Non deductible expenses
Charge for year
(1,834,341)
(229,293)
217,633
11,660
-
_____-
(2,696,480)
(337,060)
329,195
7,865
-
____ -
A deferred tax asset, in respect of unutilised tax losses available against taxable profits of €707,612 (2007: €478,319) is unrecognised.
9. Loss per ordinary share
2008
2007
€
€
Loss attributable to Group shareholders
(1,834,341)
(2,696,480)
Weighted average number of outstanding ordinary shares
24,833,750
24,625,000
Basic loss per ordinary share
€(0.07)
€(0.11)
Diluted loss per ordinary share
€(0.07)
€(0.11)
There were no potential ordinary shares at the year-end or at the prior year-end.
As disclosed in note 23, share warrants were issued to employees in February 2008 in recognition of continued contribution and loyalty. The warrants are for 30,000 Ordinary Shares with an option price of GBP 1 pence each. The diluted loss per ordinary share as calculated above takes account of the existence of these instruments.
10. Company income statement
The Parent Company is availing of the exemption set out in Section 148 (8) of the Companies Act, 1963 and Section 7 (1A) of the Companies (Amendment) Act, 1986 from presenting its individual income statement to the annual general meeting and from filing it with the Registrar of Companies. The loss for the year for the Parent Company amounted to €366,008 (2007: €467,175).
11. Property, plant and equipment - Group
Fixtures,
Fittings and
Computer
Equipment
Equipment
Total
2007
€
€
€
Cost
At beginning of year
11,553
50,994
62,547
Additions
-
19,202
19,202
At end of year
11,553
70,196
81,749
Depreciation
At beginning of year
3,196
25,987
29,183
Charge for year
2,445
16,332
18,777
At end of year
5,641
42,319
47,960
Net book values
At 30 April 2007
5,912
27,877
33,789
At 30 April 2006
8,357
25,007
33,364
Fixtures,
Fttings and
Computer
Equipment
Equipment
Total
2008
€
€
€
Cost
At beginning of year
11,553
70,196
81,749
Disposals
Additions
-
-
(5,472)
10,280
(5,472)
10,280
At end of year
11,553
75,004
86,557
Depreciation
At beginning of year
5,641
42,319
47,960
Disposals
Charge for year
-
2,015
(5,249)
15,168
(5,249)
17,183
At end of year
7,656
52,238
59,894
Net book values
At 30 April 2008
3,897
22,766
26,663
At 30 April 2007
5,912
27,877
33,789
12. Intangible assets - Group
2007
Software
Technology Licence
Total
Cost
At 1 May 2006
€
-
€
79,764
€
79,764
Additions
124,010
59,542
183,552
At 30 April 2007
124,010
139,306
263,316
Amortisation
At 1 May 2006
-
997
997
Additions
24,113
7,239
31,352
At 30 April 2007
24,113
8,236
32,349
2008
Cost
At 1 May 2007
124,010
139,306
263,316
Disposals
Additions
-
-
(51,387)
15,360
(51,387)
15,360
At 30 April 2008
124,010
103,279
227,289
Amortisation
At 1 May 2007
24,113
8,236
32,349
Disposals
Additions
-
41,337
(17,129)
27,214
(17,129)
68,551
At 30 April 2008
65,450
18,321
83,771
Net Book Values
At 30 April 2008
58,560
84,958
143,518
At 30 April 2007
99,897
131,070
230,967
Intangible assets - Company
2008
2007
Software &
Software &
Technology
Technology
Licences
Total
Licences
Total
€
€
€
€
Cost
At beginning of year
124,010
124,010
-
-
Additions
-
-
124,010
124,010
At end of year
124,010
124,010
124,010
124,010
Depreciation
-
-
At beginning of year
24,113
24,113
24,113
24,113
Charge for year
41,337
41,337
24,113
24,113
At end of year
65,450
65,450
Net book values
At 30 April
58,560
58,560
99,897
99,897
13. Financial assets - Company Investments Investments
in Subsidiary in Subsidiary
2008 2007
€ €
Opening Balance 1,445,210 1,445,210
Additions - -
Closing Balance 1,445,210 1,445,210
14. Trade and other receivables - Group 2008 2007
€
€
Due within one year
Trade debtors
215,054
163,388
Amounts owed by Joint Venture
4,709
53,476
Other debtors
48,984
155,484
Amounts due by Lottery
56,234
87,675
______
______
324,981
460,023
Trade and other receivables - Company
2008
2007
€
€
Due within one year
Amounts owed by Group undertakings
1,764,822
2,054,318
Other debtors
10,558
2
________
________
1,775,380
2,054,320
15. Cash and cash equivalents
Cash and cash equivalents are short term, highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.
The carrying value of cash and cash equivalents is as follows:
2008 2007
Group
Company
Group
Company
€
€
€
€
Cash at bank and in hand
132,896
2,780
115,387
3,450
Cash at bank earns interest at floating rates based on daily bank deposit rates between 3% to 5% (2007: 3% to 5%). The Directors consider that the fair value of cash and cash equivalents is €132,896 (2007: €115,387) for the Group.
16. Interest in a joint venture
New Media Lottery Services (International) Limited has a 50% interest in New Media Lottery Services de Internet Ltda, a jointly controlled entity that is involved in on-line sale of lottery games to the public in Brazil. New Media Lottery Services de Internet Ltda has a registered office at Rua Pedro Procopio, 88 - comj. 217, 06501-130, Santana de Parnaiba, Brazil.
Investments in joint ventures are accounted for using proportionate consolidation.
The share of the assets, liabilities, income and expenses of the jointly controlled entity at 30 April 2008, which is included in the consolidated financial statements, is as follows:
Impact on Group balance sheet
2008
2007
€
€
Current assets
5,206
13,798
Current liabilities
-
(7,032)
5,206
6,766
Impact on Group income statement
Revenue
2,121
5,131
Administrative expenses
(48,760)
(36,590)
Loss before tax
(46,639)
(31,459)
Tax
-
-
_______
_______
Net loss
(46,639)
(31,459)
Impact on Group cash flow statement
Year ended 30 April 2008
Group share of:
Net cash outflow from operating activities
(8,218)
(9,282)
Cash and cash equivalents at the end of the year
5,279
13,497
17. Issued capital 2008 2007
GBP GBP
Authorised equity
150,000,000 Ordinary Shares of GBP0.66667 pence each
1,000,000
1,000,000
Allotted, called up and fully paid equity
€
€
24,935,000 Ordinary Shares of GBP0.66667 pence each
242,822
241,618
(2007: 24,800,000 Ordinary Shares of GBP0.66667 pence each )
Share Premium
3,881,372
3,845,566
The Company was incorporated on 14 November 2005 with an authorised share capital of 100,000,000 ordinary shares of GBP1 pence each. On 20 February 2006 the authorised share capital of the Company were re-designated as ordinary share of GBP0.66667 pence each. Accordingly the authorised share capital was increased to 150,000,000 Ordinary Shares of GBP0.66667 pence each on that date.
On 20th October 2006, 200,000 Ordinary Shares of GBP0.66667 pence each were issued to Las Vegas Gaming Inc, (LVGI) a Nevada Corporation for GBP0.66667 pence each in consideration for the International rights to the 'Optima' System being transferred to New Media Lottery Services Plc. The value of the shares issued is €124,010, creating a share premium on this issue of €122,017.
On the 20th October 2006, 50,000 Ordinary Shares of GBP0.66667 pence each were issued to Tony Caporicci for GBP0.66667 pence each in consideration for services rendered in arranging the International rights to the 'Optima' System being transferred to New Media Lottery Services Plc. Tony Caporicci is an external consultant to the Company. The value of the shares issued is €31,002, creating a share premium on this issue of €30,506. The shares have been recognised as have the associated costs incurred in lieu of the shares.
In October 2006, 100,000 Ordinary Shares of GBP0.66667 pence each were issued to Lord Mancroft with a value of GBP50,000 in consideration for services. The value of the shares issued is €74,626, creating a share premium on this issue of €73,630.
In February 2008, 135,000 Ordinary Shares of GBP0.66667 pence each were issued to staff of the company in recognition of continuing contribution and loyalty. The value of the shares is €37,010, creating a share premium on this issue of €35,806.
The premium on issue of shares is as follows:
2008
€
2007
€
Opening premium
3,845,566
3,619,413
Issued during the year
35,806
226,153
3,881,372
3,845,566
The number of shares in issue is as follows:
2008
2007
Opening shares
24,800,000
24,450,000
Issued during the year
135,000
350,000
24,935,000
24,800,000
18. Trade and other payables 2008 2007
€ €
Current liabilities - Group
Trade payables
344,430
252,976
Accruals
391,924
271,754
Debentures
2,243,180
1,202,130
Bank loan
1,220,452
1,281,113
4,199,986
3,007,973
Non-current liabilities - Group
Bank loan
385,406
-
Current liabilities - Company
Trade payables
48,794
39,047
Accruals
74,852
84,352
123,646
123,399
Debentures
A schedule of the movements on debentures is as follows:
2008
2007
Particulars
Milton Dresner
Joseph Dresner
Total
Milton Dresner
Joseph Dresner
Total
US$
US$
US$
US$
US$
US$
As at 1 May
150,000
-
150,000
-
-
-
Issued during the year
767,500
882,500
1,650,000
150,000
-
150,000
As at 30 April
917,500
882,500
1,800,000
150,000
-
150,000
Euro equivalent (€)
589,350
566,868
1,156,218
109,810
-
109,810
Interest Rates
Prime rate charged by Citibank NI plus
2%
525,000
260,000
785,000
150,000
-
150,000
3%
392,500
622,500
1,015,000
-
-
-
Total Debt
917,500
882,500
1,800,000
150,000
-
150,000
Euro equivalent (€)
589,350
566,868
1,156,218
109,810
-
109,810
Milton Dresner is a director of the Company. Joseph Dresner was a director of the Company until he resigned on 5 June 2008. The above debentures are unsecured and repayable on demand. Interest has been provided in full for the year ended April 2008, based on the above rates. These funds were raised in order to assist the Group's cashflow for the period.
Other loan
During the year the company received funds of US$200,000 (€128,469) from Milton Dresner through Citibank NI. The company paid interest on this loan, and the principal was repaid in full after the year end.
Parent Company
On 16 March 2006, a debenture was issued in favour of New Media Lottery Services Inc. the ultimate parent Company, in the amount of US$1,500,530 (€958,493) (2007: US$1,500,530, € 1,092,320). This bears interest at the per annum rate equal to the Eurodollar rate applicable at monthly rests.
The Directors consider that the fair values of the Debentures are €2,243,180 (2007: €1,202,130)
Summary
2008
2007
€
€
Joseph Dresner
566,868
-
Milton Dresner
589,350
109,810
Other Loan
128,469
-
Parent Company
958,493
1,092,320
2,243,180
1,202,130
19. Bank loan
The Group has a floating rate Eurodollar loan with Comerica Bank, a Michigan banking corporation, in the name of New Media Lottery Services (International) Limited. As at April 2008, funds to the value of US$2,500,000 (€1,605,858) (2007: US$1,750,000(€1,281,113)) were drawn down. This loan is repayable as set out below. This facility is fully guaranteed by Milton and Joseph Dresner jointly. They are both shareholders of the Group and Milton Dresner is a Director of the Group. The average interest rate charged during the year was 7.81%. The Company has extended the maturity date on these loans as set out below:
Facility Repayable
US$1,900,000 20 February 2009
US$ 600,000 1 June 2009
20. Related party transactions
Group and Company
The principal related party relationships that require disclosure in the consolidated financial statements of the Group under IAS24 - Related Party Transactions pertain to the existence of subsidiaries, joint ventures and associates and transactions with these entities entered into by the Group and the identification and compensation of key management personnel as addressed in greater detail below.
The consolidated financial statements of the Company and its subsidiary and joint venture are listed below:
Country of % equity interest
Subsidiary Incorporation 2008 & 2007
New Media Lottery Services (International) Limited Ireland 100%
Joint Venture
The Group has a 50% interest in New Media Lottery Services de Internet Ltda, a Brazilian entity. The Group also owns 45% of a local company in Venezuela established to hold the Aragua Lottery contract.
Parent
New Media Lottery Services, Inc, an American Corporation owns 81.03% of the voting rights of the Group.
The following table provides the total amount of transactions, which have been entered into with related parties for the relevant financial year:
Amounts owed
Related Party to related parties
2008 2007
€ €
Parent
Debenture Loan (958,493) (1,092,320)
(Finance charge in year - €75,660)
Director
Milton Dresner - Debenture Loan
(Finance charge in year - € 28,777) (589,350) (109,810)
Joseph Dresner - Debenture Loan (566,868) -
(Finance charge in year - €20,478)
Joint Venture
New Media Lottery Services de Internet Ltda 4,709 53,476
Loans extended by the Group to joint ventures are included in the financial assets (whilst the Group's share of corresponding loans payable by joint ventures are included in interest-bearing loans and borrowings due to the application of proportionate consolidation in accounting for the Group's interest in these entities).
Terms and conditions of transactions with related parties
Outstanding balances at the year-end are unsecured, interest-free (except where disclosed above in relation to debenture loans) and settlement occurs in cash. There are no guarantees provided or received for any related party receivables or payables except where disclosed in note 19. For the year ended 30 April 2008 and 30 April 2007 the Group has not made any provision for doubtful debts relating to amounts owed by related parties except as disclosed below. This assessment is undertaken each year through examining the financial position of the related party and market in which the related party operates.
Key management personnel
For the purposes of the requirements of IAS 24, the term "key management personnel" comprises of the Board of Directors, which manages the business and affairs of the Company. The Directors, other than the Non-Executive Directors, serve as executive officers of the Company. During the year, following payments have been paid to the directors and the non-executive directors.
2008
2007
Salary
and
Salary and
Emoluments of the Directors
Fees
Benefits
Total
Fees
Benefits
Total
Executive Directors
€
€
€
€
€
€
R. Brownell
23,702
2,508
26,210
168,718
11,145
179,863
J. Carson
126,733
10,033
136,766
148,595
11,145
159,740
Sub-Total
150,435
12,541
162,976
317,313
22,290
339,603
Non-Executive Directors
M. Dresner
-
-
-
-
-
-
J. Dresner
-
-
-
-
-
-
Ld. B. Mancroft
116,549
-
116,549
58,051
-
58,051
P. Horan
36,000
-
36,000
36,000
-
36,000
N. B. Tinker
6,268
-
6,268
-
-
-
Sub-total
158,817
-
158,817
94,051
-
94,051
Total
309,252
12,541
321,793
411,364
22,290
433,654
21. Revenue 2008 2007
€ €
Turnover from client sites 848,379 415,797
Interest Income 14,720 16,898
863,099 432,695
22. Capital commitments
There were no capital commitments at 30 April 2008 (2007: nil).
23. Issue of warrants
Share warrants were issued to employees in February 2008 in recognition of continued contribution and loyalty. The warrants are for 30,000 Ordinary Shares with an option price of GBP 1 pence each. The value of these warrants is €7,804 (2007: €nil).
On 1st of February 2008, NMLS plc issued share options to key employees to purchase a total of 30,000 shares at GBP0.01 pence per share. The fair value of the shares is determined to be its market value on the date of the grant. The market value of the shares at the grant date was GBP0.205 pence each. The options can be exercised from the date of the agreement. The option will lapse 5 years from the option date. The options are available to be exercised at the date of the option, so there is no vesting period. This has been reflected in the weighted average share price as disclosed in note 9.
There were no outstanding options at the beginning of the year and 30,000 Ordinary Shares at the end of the year and none expired during the year. There were no forfeited options during the year and none were exercised save as disclosed.
The warrants were accounted for by creating a warrant expense in the income statement and a corresponding capital reserve in the balance sheet for an amount of €7,804 (2007: €nil).
24. Financial risk management
Market risk and Interest rate risk
The Group has exposure to financial risks of changes in foreign currency exchange rates and interest rates. The carrying amount of US dollar monetary assets as at the reporting date are included in note 18 and 19 to these accounts. Management review and manage the potential impacts of changes in the US dollar on the group. The management keep abreast of changes in foreign rates on an ongoing basis and the main movements relate to the gains on intercompany accounts with the ultimate shareholder NMLS Inc. The group is exposed to interest rate risk as the group borrow funds at variable interest rates. Management perform reviews its rates and facilities on an ongoing basis and review where necessary.
Interest rate risk
The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's long-term debt obligations with floating interest rates.
Interest rate risk table
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group's profit before tax (through the impact on floating rate borrowings). There is no impact on the Group's equity
Increase/decrease in basis points Effect on PBT
2008 25bps 7,915
2007 25bps 4,740
Foreign currency risk
As a result of significant investment operations in the United States, the Group's balance sheet can be affected significantly by movements in the US$/euro exchange rates
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate, with all other variables held constant, of the Group's profit before tax.
Increase/decrease in US dollar rate Effect on PBT
2008 5% 105,114
2007 5% 8,774
Liquidity risk
The group manages liquidity risk by maintaining adequate reserves, banking facilities and financial support from parent and ultimate shareholders of the parent. The maturities of financial instruments are detailed in notes 18 and 19.
Credit risk
The Group trades only with recognised, creditworthy third parties. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in Note 14. There are no significant concentrations of credit risk within the Group.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of this instruments.
Capital management
The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. No changes were made in the objectives, policies or processes during the year end 30 April 2008 and 30 April 2007.
25. Financial instruments
Fair values
Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments, including company's financial instruments, that are carried in the financial statements:
Group
Carrying amount
Fair value
2008
2007
2008
2007
€
€
€
€
Financial assets
Cash and cash equivalents
132,896
115,387
132,896
115,387
Trade and other receivables
324,981
460,023
324,981
460,023
Financial liabilities
Trade and other liabilities
736,354
524,730
736,354
524,730
Bank loan
1,605,858
1,281,113
1,605,858
1,281,113
Debentures
2,243,180
1,202,130
2,243,180
1,202,130
Company
Carrying amount
Fair value
2008
2007
2008
2007
€
€
€
€
Financial assets
Investment in subsidiary
1,445,210
1,445,210
1,445,210
1,445,210
Cash and cash equivalents
2,780
3,450
2,780
3,450
Trade and other receivables
1,775,380
2,054,320
1,775,380
2,054,320
Financial liabilities
Trade and other payables
123,646
123,399
123,646
123,399
26. Subsequent events
There have been no events since the year-end that need to be disclosed or which would have an impact on the results in these financial statements except in June 2008 the Company raised €1.3 million by way of a secured convertible loan from Trafalgar Capital Specialized Investment Fund.
This information is provided by RNSThe company news service from the London Stock Exchange END FR VKLFLVBBZFBD
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