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Papa Entertainment plc: Final Results(Marketwire (UK Regulatory) Via Acquire Media NewsEdge) Press Release 29 August 2014 Papa Entertainment plc ("Papa Entertainment" or the "Company") Final Results Papa Entertainment Plc (ISDX: PAPP), a specialist UK group focused on the music and media industries, today announces its final audited results for the year ended 31 March 2014 (the "Period"). Highlights -Revenues for the Period totalled GBP 1.05 million (15 months to March 2013: GBP 31k) -Loss for the Period after taxation was GBP 2.3 million (15 months to March 2013: GBP 874k) -Revenues from 'Raiding the Rock Vault' at a record high -Favourable contract renewed with Westgate Las Vegas Rose & Casino for 'Raiding the Rock Vault' (formerly Las Vegas Hotel & Casino) Commenting on the final results, Korda Marshall, Non-Executive Chairman of Papa Entertainment plc, said: "Over the course of the year we have seen the Raiding the Rock Vault show grow both in popularity and attendance. It is frequently being ranked as the No. 1 show in Las Vegas (according to TripAdvisor) which has helped us achieve record revenues. In December 2013, the Company's contract with the Westgate Resort & Casino in Las Vegas (formerly known as the Las Vegas Hotel & Casino) was renewed on significantly enhanced financial terms for Papa Entertainment. We intend to keep developing Raiding the Rock Vault as well as develop the music publishing part of the business, Mission Group, in the coming year." For further information, please contact: Papa Entertainment plc Harry Cowell, Chief Executive Tel: +44 (0) 20 8977 0632 www.papaentertainmentplc.com Allenby Capital Limited Alex Price Tel: +44 (0) 20 3328 5657 www.allenbycapital.com Media enquiries: Abchurch Henry Harrison-Topham / Jamie Hooper Tel: +44 (0) 20 7398 7719 [email protected] www.abchurch-group.com Notes to Editors Papa Entertainment was incorporated as a vehicle for the purpose of acquiring companies or businesses engaged in the entertainment, music and media industries. Papa Entertainment acquired Mission Entertainment Group Limited and its subsidiaries (the "Mission Group") in July 2012. Papa Entertainment is led by its Chief Executive Officer, "Sir" Harry Cowell, who has over 30 years' experience in the music industry. The Company's Non-Executive Chairman is Korda Marshall, who has during his career signed artists, directed major label A&R departments, produced, executive produced and been a managing director of three recording companies and has worked with performers including Take That, MUSE, Ash, Paul Oakenfold, the Eurythmics, Dave Stewart, Peter Andre, Garbage, James Blunt, Gnarls Barkley and The Darkness, personally signing or negotiating with several of these artists. Korda's signings include Mercury Music Prize winning band Alt-J. Simon Napier-Bell, a Non-Executive Director of Papa Entertainment, has enjoyed a long career in the entertainment industry, commencing in the 1960s, with notable highlights including the management of well-known artists such as "Wham!" and the "Yardbirds" and the co-writing of the No. 1 Hit Single "You don't have to say you love me" for Dusty Springfield. Papa Entertainment was admitted to the ISDX Growth Market on 14 September 2012. For more information on the Company please visit: www.papaentertainmentplc.com Chairman and Chief Executive's statement On behalf of Papa Entertainment, a specialist UK group focused on the music and media industries, we are pleased to present our final audited results for the year ended 31 March 2014. Financial review The Group recorded revenues of GBP 1.05 million for the year ended 31 March 2014 (15 months to March 2013: GBP 31k) and the loss after taxation was GBP 2.3 million (15 months to March 2013: GBP 874k). As at 31 March 2014, cash on the balance sheet was GBP 101k (as at 31 March 2013: GBP 145k). Raiding the Rock Vault ("RTRV") RTRV is an award winning show, produced by the Group's subsidiary Rock Vault Tours Inc. ("RV Tours"). The show has been consistently rated by TripAdvisor as the number one performance in Las Vegas out of a total of 196 shows. RTRV is ranked ahead of other musicals such as Jersey Boys and Rock of Ages and, also recently beat rival nominee, Rock of Ages, to win the prestigious 'Best of Las Vegas - Best Musical 2014' award. The first classic rock concert of the Rock Vault project, 'Raiding the Rock Vault', debuted successfully on 29 November 2012 at The Mayan Theatre in Los Angeles. The two hour long concert narrates the story of classic rock and features songs by The Who, The Doors, Jimi Hendrix, Free, The Eagles, Led Zeppelin, Bryan Adams, Van Halen, Deep Purple, Queen and The Rolling Stones. The rock show differentiates itself from other shows in the space by the fact that its cast consists of members of well-known rock groups such as Bon Jovi, Heart, Bad Company, Whitesnake and Foreigner. In January 2013, the Company secured a one year contract with the Las Vegas Hotel & Casino ("LVH") to perform the RTRV concerts in the hotel's Showroom. The Showroom seats approximately 1,500 and the hotel has 2,956 rooms and 305 suites in total. The red carpet performance took place on 18 March 2013. The Show was met with positive reviews from critics in publications such as the 100 per cent. Rock Magazine and the Las Vegas Review Journal amongst others and quickly established itself as one of the most popular new shows in Vegas. On 20 December 2013, RV Tours and the LVH entered into their second exclusive entertainment engagement agreement (the "Second Contract") to produce and present the Show, five days per week, in the LVH Showroom for a period of 12 months, which commenced on 24 January 2014. The LVH embarked on an extensive and wide-ranging marketing and promotional campaign, including rebranding the hotel as the 'Home of Raiding the Rock Vault'. The Company estimates that the marketing, media and promotion costs covered by the hotel under the Second Contract are in the region of $120,000 per month. Papa Entertainment has been seeking to further commercialise RTRV by conducting merchandising activities in relation to the RTRV concerts, which has principally involved the sale of branded items, such as t-shirts, CD albums, posters, programmes and signed guitars. The show has also received interest from corporate sponsors, an area that Papa Entertainment is currently developing. Current trading One of the key performance indicators for the show in terms of revenues are the level of ticket sales and average ticket prices. Initially the LVH employed a strategy of giving a large percentage of complimentary tickets in order to increase awareness of the show but in the light of the show's positive reviews the strategy now is to focus on increasing paid ticket sales at the best prices possible. Since the show recommenced its second season the show has had average attendances of over 500 people with paid tickets well in excess of 200 with average ticket prices during the year of circa US$40. In addition the merchandise sales per tickets sold will be maximised by providing attractive and sought after items and personally signed memorabilia. For the period in question, the majority of the operating loss (86%) was generated by the RTRV concert. The cost of sales of running the show amounted to GBP 2.2 million, the major components of which were the staff costs of the cast and crew amounting to GBP 1.1 million and the LVH (now the Westgate) labour costs amounting to GBP 494k. Administrative costs of GBP 595k were incurred in the US (representing 63% of the total Group overheads before foreign exchange losses), the major component of which were marketing and promotion costs of GBP 426k. The show has attained significant popularity in a relatively short period of time and this initial success has been achieved in what is still quite an early stage of its development of the RTRV concept. Financially the show has incurred losses during the year establishing its name and reputation as it has initially had to bear a high portion of the overall costs as the show was unproven. The show's growing popularity has been well received by the Westgate and the terms of the second season contract are consequently more commercially beneficial to the Group and as a result the show related costs should reduce substantially in the current financial year. Mission Entertainment Group Limited Separate from the 'Rock Vault' project, on 24 July 2012 the Company acquired music production and publishing company, Mission Entertainment Group Limited ("Mission Group"). The Mission Group has two key divisions; the first is Mission Publishing, a Company providing song writing services to artists. Mission Publishing currently has three writers contracted to it on an exclusive basis and approximately five writers on a non-exclusive basis which it operates through its relationship with Notting Hill Music ("NHM"). Currently Mission Publishing has a catalogue of 42 songs signed under a sub-publishing agreement with Imagem and 24 songs signed as part of the relationship with NHM. The second division is Mission Recordings which offers audio, recording, production facilities and production services using the Group's recording studios. Tracks produced by Mission Recordings are principally purchased through internet downloads as opposed to CD sales. The strategy to drive growth at Mission is to expand its roster of writers in order to make a 'hit song'. The ultimate goal of Mission Group is to build a valuable long term catalogue asset. Mission Recordings currently has three artists signed to it including "AYO" (also known as Ayo Beatz) the stage name for Ezechiel Oyewole, a Pop / R&B artist, who released his first commercial single "Boom Ayo", an adaptation of the 1995 hit "Boom Boom Boom" by the Outhere Brothers on 22 July 2012 to positive reviews. AYO released the club track "Alive' featuring Ebony Day in clubs on 3 September 2013 and is planning a commercial release in Q1 2015. In February 2014, the Group announced that the Company had extended its lease agreement at its recording studio at Fairlight Mews, 15 St Johns Road, Kingston Upon Thames, Surrey KT1 4AN (the "Lease Extension"). This was subsequently further extended post-period end in July 2014 to 3 February 2015. Post-period end In addition, in April 2014 Mission Recordings signed two exclusive distribution agreements with Absolute Marketing and Distribution Ltd (Absolute). Under the contracts Mission Recordings has appointed Absolute as its distribution agent for electronic, mobile music and video sales and streaming of all of the recordings and music videos that Mission Recordings produces, covering both digital and physical label services although the contract will not provide any meaningful revenues this current financial year ending 31 March 2015. Post-period end, on 3 June 2014, the Company entered into a secured loan agreement with its largest creditor, Eoghan Hynes, a director and shareholder of the Company (the "Loan Agreement"). Under the terms of the Loan Agreement, Eoghan Hynes may make available a loan facility of up to GBP 3,750,000 of which GBP 3,495,990 had already been advanced. Interest is payable on the amounts already advanced from 1 May 2014 and subsequent sums when advanced at the rate of 5 per cent. per annum and repayment of the loan advanced and interest is due on 4 April 2016. The Loan Agreement contains customary provisions in the event of a default by the Company and negative pledges, amongst other things, and is immediately repayable on the sale of a majority of shares in the Company or if a material asset of the Company is disposed of. The Loan Agreement is secured by a debenture entered into between the Company and Eoghan Hynes (the "Debenture"). The Debenture secures the Loan Agreement by way of fixed and floating charges over the Company's entire assets, intellectual property and shareholdings in its subsidiary companies, namely, Rock Vault Inc., Rock Vault Tours Inc. and Mission Entertainment Group Limited. The LVH was acquired by Westgate Resorts on 1 July 2014 and was subsequently renamed Westgate Las Vegas Resort & Casino ("Westgate") and all existing LVH contractual arrangements have remained in place. The Company views the acquisition of the LVH by Westgate with optimism owing to the ambitious and exciting plans the new owners have for the hotel, and Westgate Resorts' impressive track record. On 1 July 2014, the Group received a legal complaint filed with the District Court of Clark County, Nevada from John Payne, one of the writers and former performers in the Show, as plaintiff against Rock Vault Tours Inc. (a wholly owned subsidiary of the Company) (1), NAV-LVC LLC (the operator of the LVH) (2), Westgate Resorts Inc. (the new owner of the LVH) (3) Sir Harry Cowell (the Chief Executive Officer of the Company) (4) and persons unknown (5). The complaint, which seeks damages in excess of US$50,000 and injunctive relief, alleges, amongst other things, a breach of contract arising from John Payne's suspension on or about 14 May 2014 and subsequent termination on or about 18 June 2014 as a performer and musical director of the Show and a breach of contract under various royalty agreement entered into between the Group and John Payne. The Group considers that the complaint is wholly without merit and intends to defend it vigorously. That said, for such time as the Show incorporates material written or created by John Payne, the Group will comply with the terms of the royalty agreements entered into between the Group and John Payne. Finally, Andrew Morley resigned from his role as a non-executive director of the Company on 2 July 2014. The Board thanks him for his contribution to the Company. Emphasis of matter - going concern The auditor's report on the financial statements includes an emphasis of matter in relation to the group's ability to continue as a going concern. Notwithstanding this, the Directors are optimistic about the group's prospects and have a reasonable expectation that the Company has adequate resources for the foreseeable future. Outlook The Board believes that there is great potential in both RTRV and its concept and the Mission Group business of Papa Entertainment. In relation to RTRV, the Board believes that in much the same way as Cirque du Soleil created its brand through the concept of combining traditional circus acts with opera, dance, theatre and live music; the Company's RTRV show has the potential to replicate this with its brand in relation to the 'all-star tribute band' concept, using recognisable ex-rockstars, popular set lists, relevant visuals, facts on the band, and a chronological story. The Board believes that the Show is unique in combining the appeal of attending a live concert with watching a history of rock music to give an 'all-star tribute band' experience. The Board believes that through the management team's extensive experience and music industry contacts, the Company has access to unique talent within various music genres and that this will serve as the foundation for the formation of several productions using the Show's framework. It is the intention of the Group to pilot a new show in Las Vegas in December 2014, 'Raiding the Country Vault' during Rodeo Week which will, in a similar vein to RTRV, tell the chronological story of the evolution of country music using a band of well- known country musicians. It is the Company's intention to film the new show and to use this as a method of marketing the new concept to other venues in a similar way in which the RTRV was originally piloted and which led to the first LVH (now Westgate) contract. In addition to leveraging upon the success of the RTRV concept, Papa Entertainment views the future for Mission Group with optimism. The Company seeks to grow this business division by increasing its roster of writers which will ultimately assist Mission's chance of having a hit song. Papa Entertainment would like to thank our investors, customers and partners for their continued support. Korda Marshall Harry Cowell Chairman Chief Executive 29 August 2014 29 August 2014 Consolidated Profit and Loss Account For the Year ended 31 March 2014 Year 15 month ended period ended 31 March 31 March 2014 2013 Note GBP GBP Revenue 2 1,048,368 31,283 Cost of sales (2,382,926) (230,837) ------------------------------ Gross loss (1,334,558) (199,554) ------------------------------ ---------------------------------------------------------------------------- Administrative expenses (1,125,122) (480,067) Deemed cost of listing - (278,969) ---------------------------------------------------------------------------- Total administrative expenses (1,125,122) (759,036) ------------------------------ Operating loss (2,459,680) (958,590) Finance income 151,783 95,385 Finance expense (65) (10,407) Loss before taxation (2,307,962) (873,612) Tax on loss on ordinary activities 4 - - ------------------------------ Loss after taxation attributable to equity holders (2,307,962) (873,612) ------------------------------ ------------------------------ Other comprehensive income Exchange difference on translation of foreign subsidiaries 81,942 - ------------------------------ Total Comprehensive loss for the year attributable to equity holders (2,226,020) (873,612) ------------------------------ ------------------------------ Basic and diluted loss per share (pence) attributable to equity holders 5 (3.20) (1.28) ------------------------------ ------------------------------ All amounts relate to continuing operations. Consolidated Balance Sheet As at 31 March 2014 31 March 31 March 2014 2013 GBP GBP GBP GBP Non-current assets Property, plant and equipment 70,716 75,435 ------------ ----------- Total non-current assets 70,716 75,435 Current assets Inventory 436,902 547,050 Trade and other receivables 205,775 233,794 Cash and cash equivalents 100,824 144,601 --------- --------- Total current assets 743,501 925,455 ------------ ----------- Total assets 814,217 1,000,880 ------------ ----------- ------------ ----------- Liabilities Current liabilities Trade and other payables (297,064) (281,473) --------- --------- (297,064) (281,473) Non-current liabilities Long-term borrowings (3,415,385) (1,391,619) ------------ ----------- Total liabilities (3,712,449) (1,673,092) ------------ ----------- Net liabilities (2,898,232) (672,212) ------------ ----------- ------------ ----------- EQUITY Share capital 720,563 720,563 Share premium 1,973,412 1,973,412 Reverse acquisition reserve (2,102,490) (2,102,490) Exchange reserve 81,942 - Retained earnings (3,571,659) (1,263,697) ------------ ----------- TOTAL EQUITY (2,898,232) (672,212) ------------ ----------- ------------ ----------- Consolidated statement of changes in Equity For the Year ended 31 March 2014 Share Share Reverse Exchange Retained Total Capital Premium Acquisition Reserve Earnings Reserve GBP GBP GBP GBP GBP GBP ------------------------------------------------------------------ At 1 January 2012 64,002 16,000 206,633 - (399,071) (112,436) Effect of transition to IFRS - - - - 8,986 8,986 At 1 January 2012 as restated 64,002 16,000 206,633 - (390,085) (103,450) ------------------------------------------------------------------ Comprehensive income for the period: Loss for the period - - - - (873,612 (873,612) ------------------------------------------------------------------ Total comprehensive loss for the period - - - - (873,612) (873,612) Contributions by and distributions to owners: Issue of shares on reverse acquisition 640,021 1,920,062 (2,309,123) - - 250,960 Conversion of loan notes 7,000 28,600 - - - 35,600 Issue of shares 9,540 8,750 - - - 18,290 ------------------------------------------------------------------ Total issue of shares for the period 656,561 1,957,412 (2,309,123) - - 304,850 ------------------------------------------------------------------ ------------------------------------------------------------------ As at 31 March 2013 720,563 1,973,412 (2,102,490) - (1,263,697) (672,212) ------------------------------------------------------------------ Comprehensive income for the period: Loss for the year - - - - (2,307,962) (2,307,962) Other comprehensive income ------------------------------------------------------------------ Exchange differences on translation of foreign operations - - - 81,942 - 81,942 ------------------------------------------------------------------ Total comprehensive loss for the period - - - 81,942 (2,307,962) (2,226,020) ------------------------------------------------------------------ Balance at 31 March 2014 720,563 1,973,412 (2,102,490) 81,942 (3,571,659) (2,898,232) ------------------------------------------------------------------ ------------------------------------------------------------------ Consolidated Cash Flow Statement For the Year ended 31 March 2014 15 month period Year ended ended 31 March 31 March 2014 2013 GBP GBP Cash flows from operating activities Loss for the period before taxation (2,307,962) (873,612) Adjustment for:Depreciation of tangible fixed assets 21,966 21,470 Deemed cost of listing - 278,969 Finance income (151,783) (95,385) Finance expense 65 10,407 ------------------------- Operating cash flows before movements in working capital (2,437,714) (658,151) Decrease/(increase) in inventory 110,148 (547,050) Decrease in trade and other receivables 42,751 30,629 Increase in other payables and accruals 79,829 92,707 ------------------------- Cash used in operating activities (2,204,986) (1,081,865) Interest paid (65) (10,407) ------------------------- ------------------------- Net cash used in operating activities (2,205,051) (1,092,272) ------------------------- ------------------------- Cash flow from investing activities Acquisition of equipment (17,133) (19,187) ------------------------- Net cash used in investing activities (17,133) (19,187) ------------------------- Cash flow from financing activities Issue of shares - 25,431 Increase in long-term borrowings 2,175,549 1,367,189 ------------------------- Net cash from financing activities 2,175,549 1,392,620 ------------------------- Net (decrease)/increase in cash and cash equivalents (46,635) 281,161 Effect of exchange rate changes 2,858 - ------------------------- Cash and cash equivalents at beginning of period 144,601 (136,560) ------------------------- Cash and cash equivalents at end of period 100,824 144,601 ------------------------- 1. ACCOUNTING POLICIES 1.1 Transition to Adopted IFRSs The Group is preparing its financial statements in accordance with IFRS for the first time and consequently has applied IFRS 1. An explanation of how the transition to IFRSs has affected the reported financial position, financial performance and cash flows of the Group is provided in note 23. 1.2 Basis of measurement and preparation of financial statements The consolidated financial statements of Papa Entertainment Plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), issued by the International Accounting Standards Board (IASB), including interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified for any financial assets which are stated at fair value through profit or loss. The financial information is presented in British Pounds Sterling ("GBP"), the Company's reporting currency. The Company's functional currency is GBP, given its operating activities in United Kingdom. The preparation of the financial information in conformity with IFRS requires the Company to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Accounting estimates will, by definition, seldom equal the actual results. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future years affected. Basis of consolidation of Papa Entertainment plc The consolidated financial statements incorporate the financial statements of Papa Entertainment Plc and its subsidiaries. On 24 July 2012, Papa Entertainment plc became the legal holding company of Mission Entertainment Group Limited and its subsidiaries via a share for share exchange. Under IFRS3 (Revised) "Business Combinations", the acquisition of Mission by the Company has been accounted for as a reverse acquisition and the consolidated IFRS financial information of the Company is therefore a continuation of the financial information of the Mission Group. The reporting reference date for the subsidiary companies was extended to a 15 month comparative period to 31 March 2013 in order to match that of the Company, the holding company of the Group. As a result of the above changes in accounting reference dates the comparative financial information is not directly comparable to the current period financial information of 12 months. 1.3 Critical accounting estimates and judgements Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are as stated below: Long-term borrowings The long-term borrowings are provided by Eoghan Hynes, a Director and shareholder of the Company and three other individuals. The loans were provided interest-free during the year. They have no specified maturity date and are subject to at least 12- months' notice of repayment. On initial recognition, the Directors were required to make assumptions as to the fair value of the loans, taking into account an arms' length interest rate and expected repayment date. The Directors assumed an interest rate of 7.5% as this is the expected borrowing rate of the group and that they would be repaid in 12 months from each balance sheet date to calculate a fair value for each loan. Inventory - work in progress The inclusion of project work in progress in the financial statements represents pre-production work in progress costs for the Raiding the Rock Vault show which the Directors expect to generate future benefits over the life of the show. These costs therefore are released over the life of the show in line with the revenues generated through ticket sales. During the year the Group recognised GBP 110,497 within cost of sales. Should the show be deemed not commercially viable the loss for the year would be increased by GBP 436,902 (2013: GBP 547,050). Other receivables - recoupable advances Royalties due to an artist are credited against any outstanding advances in the year of receipt until the advance is fully recovered. Royalties are payable to the artist only when the sales of the album exceed the advance paid. An impairment review is carried out on each artist's advance position at the balance sheet date. If it is thought that future earnings will not amount to the net value of an advance, then a provision for the estimated shortfall is recorded. Advances are included within other receivables as recoverable within one year, although certain amounts may be recovered after more than one year. Should the recoupable advances be impaired by 10%, the loss for the period would be increased by GBP 15,140 (2013: GBP 17,194). 1.4 Going concern The financial statements have been prepared assuming the group will continue as a going concern. Under the going concern assumption, a group is ordinarily viewed as continuing in business for the foreseeable future with neither the necessity of liquidity, nor ceasing trading or seeking protection from creditors pursuant to laws or regulations. In assessing whether the going concern assumption is appropriate, management takes into account all available information for the foreseeable future, in particular for the twelve months from the date of approval of the financial statements. Management have a reasonable expectation that the entity has adequate resources to continue in its operational exercises for the foreseeable future and has adopted the going concern basis of accounting in preparing the financial statements. Eoghan Hynes, a director and shareholder of the Company, has advised the Company that he intends to continue to support the Group financially, so that the Group maintains adequate financial and working capital resources for a minimum period of 12 months commencing from the date of the signing of these financial statements and is able to pay its existing and future liabilities or commitments with third parties as they fall due. 1.5 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The specific recognition criteria described below must also be met before revenue is recognised; Recording and publishing Revenue presents net invoiced sales of goods and services, exclusive of Value Added Tax. Revenues are recognised on a right to consideration basis. Concerts Revenue represents net invoiced sales of services and ticket sales net of credit card commissions, exclusive of Value Added Tax. Revenues are recognised on completion of a concert in line with the agreement in place with the venue, over the expected life of the show. 1.6 Announcement information The information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 31 March 2014 as defined in Section 434 of the Companies Act 2006, but was extracted from those audited financial statements. The auditors have reported on the statutory financial statements for the period ended 31 March 2014; this report was unqualified but included the following emphasis of matter in respect of going concern: "In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in note 1 to the financial statements concerning the company?s and the group?s ability to continue as a going concern. The financial position and the current liabilities of the group are disclosed on the statement of financial position on page 11. These conditions, along with the other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group?s ability to continue as a going concern though our opinion is not qualified in this respect. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern.? The financial information set out in this announcement was approved by the board on 29 August 2014. The directors do not recommend the payment of a dividend (2013: nil). 2. REVENUE Revenue is generated from the principal activities of the group: Year 15 month ended period ended 31 March 31 March 2014 2013 GBP GBP Concerts 1,048,368 29,998 Recording and publishing - 1,285 ------------------------------ Total 1,048,368 31,283 ------------------------------ All revenue was derived from external customers and an analysis by geographical market was as follows: Year 15 month ended period ended 31 March 31 March 2014 2013 GBP GBP United Kingdom - 1,285 USA 1,048,368 29,998 ------------------------------ Total 1,048,368 31,283 ------------------------------ 3. REVERSE ACQUISITION On 24 July 2012, Papa Entertainment plc became the legal holding company of Mission Entertainment Group Limited and its subsidiaries via a share for share exchange. The aggregate consideration was GBP 2,560,083, which was satisfied by the issue of 64,002,070 ordinary shares of GBP 0.01 each in Papa Entertainment plc at an issue price of GBP 0.04 per ordinary share. The accounting policy adopted by the Directors applies the principles of IFRS 3 in identifying the accounting acquirer and the presentation of the consolidated financial information of the legal parent (the Company) as a continuation of the accounting acquirer's financial information (Mission). This policy reflects the commercial substance of this transaction as follows: -- the original shareholders of the subsidiary undertakings are the most significant shareholders post initial public offering, owning 90 per cent. of the issued share capital; and -- the cash consideration paid as part of the initial public offering returned equity to the original shareholders of the legal subsidiary undertaking and as a consequence diluted their shareholding to 10 per cent. Accordingly, the following accounting treatment and terminology has been applied in respect of the reverse acquisition: -- the asset and liabilities of the legal subsidiary Mission Entertainment Group Limited are recognised and measured in the Group financial information at the pre-combination carrying amounts, without reinstatement to fair value; -- the retained earnings and other equity balances recognised in the Group financial information reflect the retained earnings and other equity balances of Mission Entertainment Group Limited immediately before the business combination, and the results of the period from 1 September 2010 to the date of the business combination are those of Mission Entertainment Group Limited. However, the equity structure appearing in the Group financial information reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the business combination; -- the cost of the combination has been determined from the perspective of Mission Entertainment Group Limited. The fair value of the shares in Mission Entertainment Group Limited has been determined from the admission price of Papa Entertainment plc on admission to trading on ISDX for GBP 0.04 pence per share. The value of the consideration shares was GBP 2,560,083. The fair value of the notional number of equity instruments that the legal subsidiary would have had to have issued to the legal parent to give the owners of the legal parent the same percentage ownership in the combined entity is 10 per cent of the market value of the shares after issues, being GBP 256,008. The difference between the notional consideration paid by Papa Entertainment plc for Mission Entertainment Group Limited and the Papa Entertainment plc net liabilities acquired of GBP 22,961 has been recorded as goodwill, and charged to the consolidated profit and loss account at a cost of GBP 278,969 with a corresponding entry to the reverse acquisition reserve. Papa Entertainment plc had no significant assets nor significant other liabilities or contingent liabilities of its own at the time that the share for share exchange took effect. 4. TAXATION 15 month Year ended period ended 31 March 31 March 2014 2013 GBP GBP Analysis of tax charge in the period Current tax UK corporation tax charge on profit for the period - - ------------------------------ Tax on profit on ordinary activities - - ------------------------------ Factors affecting tax charge for the period 15 month Year ended period ended 31 March 31 March 2014 2013 GBP GBP Loss before tax (2,307,962) (873,612) ----------------------- ----------------------- Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 20% (2013- 20%) (461,592) (174,722) Effects of: Expenses not deductible for tax purposes 804 1,135 Capital allowances for year in excess of depreciation 4,294 Current year losses carried forward 460,788 169,293 ----------------------- Current tax charge for the period - - ----------------------- The group has tax losses of GBP 3,459,862 (2013: GBP 1,155,920) available to offset against future profits. No deferred tax asset has been recognised in respect of these losses due to the uncertainty of the group generating future profits. 5. LOSS PER SHARE Basic (loss) per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. A reconciliation is set out below: 15 month Year to period to 31 March 31 March 2014 2013 Basic loss per share GBP GBP Loss for the period (2,307,962) (873,612) Weighted average number of shares 72,056,290 68,424,483 Loss per share (pence) (3.20) (1.28) In calculating the weighted average number of ordinary shares outstanding (the denominator of the earnings per share calculation) during the period in which the reverse acquisition occurs: (a) the number of ordinary shares outstanding from the beginning of that period to the acquisition date shall be computed on the basis of the weighted average number of ordinary shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement; and (b) the number of ordinary shares outstanding from the acquisition date to the end of that period shall be the actual number of ordinary shares of the legal acquirer (the accounting acquiree) outstanding during that period. The basic earnings per share for each comparative period before the acquisition date presented in the consolidated financial statements following a reverse acquisition shall be calculated by dividing: (a) the profit or loss of the legal acquiree attributable to ordinary shareholders in each of those periods by (b) the legal acquiree's historical weighted average number of ordinary shares outstanding multiplied by the exchange ratio established in the acquisition agreement. There are no current dilutive instruments in issue; therefore the diluted loss per share is the same as the basic loss per share. 6. SUBSEQUENT EVENTS On 3 June 2014, the Company entered into a secured loan agreement with its largest creditor, Eoghan Hynes, a Director and shareholder of the Company (the "Loan Agreement"). The Loan Agreement is secured by a debenture entered into between the Company and Eoghan Hynes (the "Debenture"). Under the terms of the Loan Agreement, Eoghan Hynes may make available a loan facility of up to GBP 3,750,000. Interest is payable on the amounts already advanced from 1 May 2014, and subsequent sums when advanced, at the rate of 5% per annum. Repayment of the loan advanced, and interest, is due on 4 April 2016. The Debenture secures the Loan Agreement by way of fixed and floating charges over the Company's and Group's assets. On 3 June 2014, the Company entered into simple loan agreements with each of Carlo Grossi for GBP 60,000, Sara Stoneham for GBP 81,000 and Mandy Bradmore for GBP 81,000. The loans are for general business purposes, are unsecured and are repayable by 4 April 2016. Interest is calculated at a rate of 3% per annum, payable from 1 May 2014. Interest on late payment is calculated at a rate of 5% above the Bank of England's base rate. Subsequent to the year end John Payne, a performer and musical director of the RTRV show has left the Group following which in early July the Group was notified of a potential lawsuit. The Group considers that the complaint is wholly without merit and intends to defend it vigorously. It does not consider there to be a material exposure in this respect. On 3 July 2014, 500,000 Ordinary Shares of GBP 0.01 each were issued by the Company at a premium of GBP 0.035 per share in consideration of the assignment by Iain Cooper of certain intellectual property rights in relation to the Company's Raiding the Rock Vault show. 7. RELATED PARTY TRANSACTIONS On 24 July 2012, the Company issued the following GBP 0.01 ordinary shares to directors of the Company: E. Hynes 18,071,173 H. E. Cowell 16,314,254 A. D. Morley 4,118,100 S. R. Napier-Bell 142,000 Eoghan Hynes a director and shareholder of the Company has provided a long term loan to the Company. On 4 February 2011, Mission Publishing Limited and Mission Recordings Limited entered into a lease agreement with Eoghan Hynes, Eoghan Joseph Hynes and Harry Cowell (the "Landlord") whereby the Landlord agreed to rent the property known as Fairlight Mews, 15 St Johns Road, Kingston Upon Thames, Surrey KT1 4AN for a period of three years for an annual rent of GBP 72,000 payable in equal quarterly payments in advance. The lease has been extended for a further 12 months to 4 February 2015 on the same terms. During the year ended 31 March 2014 rental costs were incurred of GBP 72,000 (2013: GBP 90,000). 8. FIRST TIME ADOPTION OF IFRS As stated in note 1, these are the Company's first financial statements prepared in accordance with Adopted IFRS's. The accounting policies set out in note 1 have been applied in preparing the financial statements for the year ended 31 March 2014, the comparative information presented in these financial statements for the 15 month period ended 31 March 2013 and in the preparation of an opening IFRS balance sheet at 31 December 2011 (the Company's date of transition). In preparing its opening IFRS statement of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with its old basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to Adopted IFRSs has affected the Company's financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables. Reconciliation of Equity 1 January 31 March 2012 2013 Effect of Effect of transition transition to Adopted to adopted UK GAAP IFRS IFRS UK GAAP IFRS IFRS GBP GBP GBP GBP GBP GBP Non-current assets Property, plant and equipment 77,718 - 77,718 75,435 - 75,435 ------------------------------------------------------------------- 77,718 - 77,718 75,435 - 75,435 ------------------------------------------------------------------- Current assets Inventory - - - 547,050 - 547,050 Trade and other receivables 264,423 - 264,423 233,794 - 233,794 Cash and cash equivalents 6,989 - 6,989 144,601 - 144,601 ------------------------------------------------------------------- 271,412 - 271,412 925,445 - 925,445 ------------------------------------------------------------------- Total assets 349,130 - 349,130 1,000,880 - 1,000,880 ------------------------------------------------------------------- ------------------------------------------------------------------- Current liabilities Trade and other payables 333,066 - 333,066 281,473 - 281,473 ------------------------------------------------------------------- 333,066 - 333,066 281,473 - 281,473 ------------------------------------------------------------------- Non-current liabilities Long term borrowings 128,500 (8,986) 119,514 1,495,990 (104,371) 1,391,619 ------------------------------------------------------------------- 128,500 (8,986) 119,514 1,495,990 (104,371) 1,391,619 ------------------------------------------------------------------- Total liabilities 461,566 (8,986) 452,580 1,777,463 (104,371) 1,673,092 ------------------------------------------------------------------- ------------------------------------------------------------------- Net liabilities (112,436) 8,986 (103,450) (776,583) 104,371 (672,212) ------------------------------------------------------------------- ------------------------------------------------------------------- Equity Share capital 64,002 - 64,002 720,563 - 720,563 Share premium 16,000 - 16,000 1,973,412 - 1,973,412 Reverse acquisition reserve 206,633 - 206,633 (2,102,490) - (2,102,490) Retained earnings (399,071) 8,986 (390,085) (1,368,068) 104,371 (1,263,697) ------------------------------------------------------------------- Total equity (112,436) 8,986 (103,450) (776,583) 104,371 (672,212) ------------------------------------------------------------------- ------------------------------------------------------------------- Notes to the reconciliation of equity The long-term borrowings are provided by Eoghan Hynes, a Director and shareholder of the Company. The loans are provided interest-free. They have no specified maturity date and are subject to at least 12-months' notice of repayment. Under IFRS on initial recognition, the Directors are required to make assumptions as to the fair value of the loans, taking into account an arms' length interest rate and expected repayment date. The Directors assumed an interest rate of 7.5% and they have discounted for one year in line with the notice period. Reconciliation of Statement of Comprehensive Income for 2013 2013 Effect of transition to Adopted Note UK GAAP IFRSs Adopted IFRSs GBP GBP GBP Revenue 31,283 - 31,283 Cost of sales (230,837) - (230,837) -------------------------------------- Gross profit (199,554) - (199,554) Administrative expenses (480,067) - (480,067) Deemed cost of listing (278,969) - (278,969) -------------------------------------- Total administrative expenses (759,036) - (759,036) -------------------------------------- Operating loss (958,590) - (958,590) Financial income - 95,385 95,385 Financial expenses (10,407) - (10,407) -------------------------------------- Net financing (expense)/income (10,407) 95,385 84,978 -------------------------------------- Loss before tax (968,997) 95,385 (873,612) Taxation - - - -------------------------------------- Loss for the year (968,997) 95,385 (873,612) -------------------------------------- -------------------------------------- Notes to the reconciliation of statement of comprehensive income: See above notes to the reconciliation of equity The transition adjustments noted above are non-cash movements and therefore there is no effect on the Group's statement of cash-flows. STATEMENT Papa Entertainment plc is quoted on the ISDX Growth Market and it is incorporated in England & Wales. The Annual Report for 2014 will be available to the shareholders and the public on the Company's web site (www.papaentertainmentplc.com) during early September 2014 and the Company will make a further announcement in this regard as appropriate. GUIDANCE NOTE 69.1 OF ISDX GROWTH MARKET - RULES FOR ISSUERS During the 12 month period ended 31 March 2014 the Company did not comply with Guidance Note 69.1 of the ISDX Growth Market - Rules for Issuers (as amended on 9 July 2013). This was as a result of certain of the Directors of the Company, namely Korda Marshall, Harry Cowell, Eoghan Hynes, Norman Lott and Andrew Morley, holding levels and combinations of third party directorships outside of the Company (and its group), which did not meet the recommendation in the Guidance Note. The Directors believe that the Company's individual Board members currently have sufficient time to commit to the performance of their duties as Directors of the Company and that the current composition of the Company's Board is appropriate given the Company's size and stage of development. - Ends - © 2014 - Marketwire |