Private Media Group (PRVT)

2008 compared to 2007

Net sales. Our net sales in 2008 were EUR 19.7 million compared to EUR 25.0 million in 2007, a decrease of EUR 5.3 million, or 21%. Net sales in general were affected by the weakening dollar by EUR 0.3 million

DVD & Magazine sales decreased EUR 3.2 million, or 29%, to EUR 7.7 million. The reduction in DVD & Magazine sales was primarily attributable to an industry wide decrease in DVD sales (see discussion under Outlook below). Due to the weakening dollar⁹ and the restructuring of our web sites, Internet sales decreased EUR 0.2 million to EUR 4.4 million compared to the same period last year. Broadcasting sales decreased EUR 1.3 million, to EUR 5.8 million as a result of the absence of sales of EUR 2.25 million from a non-recurring title licensing deal for German speaking Europe in 2007 offset primarily by an increase in video on demand sales via IPTV. Wireless sales decreased EUR 0.6 million to EUR 2.0 million in the period as a result of a re-organization of content delivery structure. The re-organization was completed in the fall of 2008.

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Going forward, we expect Internet, Broadcasting and Wireless sales to increase (see discussion under Outlook below).

Net sales in general were affected by changes in exchange rates. The annual average dollar exchange rate for the fiscal year 2008 compared to 2007 decreased 7% which reduced all our sales in dollar by the same percentage. Fluctuations in exchange rates between the euro and the dollar can affect the comparability of our results from year to year. We translate our consolidated subsidiaries whose functional currency is not the euro into the euro for reporting purposes. Income statement amounts are translated into euros using the average exchange rate for the fiscal year. The balance sheet is translated at the year-end exchange rate.

Cost of Sales. Our cost of sales was EUR 13.5 million for 2008 compared to EUR 12.3 million for 2007, an increase of EUR 1.2 million, or 10%. Cost of sales as a percentage of sales was 69% for 2008 compared to 49% for 2007. We incur no cost of sales in dollars and subsequently we did not benefit from the weakening dollar in 2008 compared to 2007.

Included in cost of sales is printing, processing and duplication, amortization of library and Internet, broadcasting and wireless costs. Printing, processing and duplication cost was EUR 5.4 million for 2008 compared to EUR 4.1 million for 2007, an increase of EUR 1.3 million, or 32%. The increase was primarily the result of a program to reduce inventory of DVDs and magazines. Printing, processing and duplication cost as a percentage of DVD & Magazine sales was 70% for 2008 compared to 37% for 2007. The increase was the result of an increase in sales volume sold at a lower average price as part of the program to reduce inventory of DVDs and magazines. Amortization of library was EUR 6.3 million for 2008 compared to EUR 6.8 million for 2007, a decrease of EUR 0.5 million. Amortization of library does not vary with sales since it reflects the amortization of our investments in content which has been available for sale for a period of three to five years. The decrease was the result of lower amounts invested in content released during the period subject to amortization in 2008 compared to 2007. Internet, broadcasting and wireless costs was EUR 1.8 million for 2008 compared to EUR 1.4 million for 2008, an increase of EUR 0.4 million. Internet, Broadcasting and Wireless cost as a percentage of related sales was 15% for 2008 compared to 10% for the same period last year. The increase was primarily the result of increased Internet cost.

Gross Profit. Our gross profit for 2008 was EUR 6.2 million, or 31% of net sales, compared to EUR 12.7 million, or 51% of net sales for 2007. This represented a decrease of EUR 6.5 million, or 51%, compared to 2007. The decrease in gross profit of EUR 6.5 million was primarily the result of a EUR 4.5 million decrease in contribution to gross profit from DVD & Magazine sales, a EUR 2.5 million decrease in contribution to gross profit from Internet, Broadcasting and Wireless sales offset by the decrease in amortization of library of EUR 0.5 million. As the we are transitioning from traditional media to new media, our gross profit in 2008 has been impacted severally. However, during 2009, we expect gross profit to improve as new media sales is expected to increase and with low cost attached to it, positive impact on gross profit will be immediate.

Selling, general and administrative expenses. Our selling, general and administrative expenses were EUR 13.1 million for 2008 compared to EUR 13.6 million for 2007, a decrease of EUR 0.5 million. We attribute the decrease in selling, general and administrative expenses to a reduction in general expenses and bad debt provision of EUR 1.1 million and EUR 0.1 million, respectively, offset by an increase in depreciation and payroll of EUR 0.6 million and EUR 0.1 million, respectively.

Operating loss. We reported an operating loss of EUR 6.9 million for 2008 compared to EUR 0.9 million for 2007, an increase of EUR 6.0 million. The decrease in operating profit was primarily the result of the decrease in gross profit offset by reduced selling, general and administrative expenses.

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Interest expense. Our interest expense was EUR 0.3 million for 2008, compared to EUR 0.3 million for 2007.

Income tax benefit. Our income tax benefit was EUR 1.8 million for 2008, compared to 0.5 million for 2007. The increase in income tax benefit is a result of higher losses being recorded in jurisdictions with higher corporate tax rates.

Net loss. Our net loss was EUR 5.2 million for 2008, compared to EUR 0.4 million for 2007. We attribute the decrease in net income in 2008 of EUR 4.8 million to increased operating loss offset by increased income tax benefit.

Nine months ended September 30, 2008 compared to the nine months ended September 30, 2007

Net sales. For the nine months ended September 30, 2008, we had net sales of EUR 15.0 million compared to net sales of EUR 18.9 million for the nine months ended September 30, 2007, a decrease of EUR 3.9 million.

DVD & Magazine sales decreased EUR 1.9 million to EUR 5.8 million. The reduction in DVD & Magazine sales was primarily attributable to an industry wide decrease in DVD sales (see discussion under Outlook below). Due to the weakening dollar³ and the restructuring of our web sites, Internet sales decreased EUR 0.2 million to EUR 3.3 million compared to the same period last year. Broadcasting sales decreased EUR 1.3 million, to EUR 4.5 million as a result of the absence of sales of EUR 2.0 million from a non-recurring title licensing deal for German speaking Europe in 2007 offset primarily by an increase in video on demand sales via IPTV. Wireless sales decreased EUR 0.5 million to EUR 1.4 million in the period as a result of a re-organization of content delivery structure. The re-organization was completed in the fall of 2008.

Going forward, we expect Internet, wireless and Broadcasting sales, in particular, to increase (see discussion under Outlook below).

Net sales in general were affected by changes in exchange rates. The nine-month average US dollar exchange rate for the period was 12% lower compared to the same period in 2007. This reduced all our sales in dollar by the same percentage. Fluctuations in exchange rates between the euro and the dollar can affect the comparability of our results from year to year. We translate our consolidated subsidiaries whose functional currency is not the euro into the euro for reporting purposes. Income statement amounts are translated into euros using the average exchange rate for the period. The balance sheet is translated at the period-end exchange rate.

Cost of Sales. Our cost of sales was EUR 10.3 million for the nine months ended September 30, 2008 compared to EUR 10.2 million for the nine months ended September 30, 2007, an increase of EUR 0.1 million.

Included in cost of sales is printing, processing and duplication, amortization of library and Internet, broadcasting and wireless costs. Printing, processing and duplication cost was EUR 3.8 million for the nine months ended September 30, 2008 compared to EUR 4.0 million for the nine months ended September 30, 2007, a decrease of EUR 0.2 million. Printing, processing and duplication cost as a percentage of DVD & Magazine sales was 65% for the nine months ended September 30, 2008 compared to 51% in the same period last year. The increase was the result of an increase in sales volume sold at a lower average price as part of a program to reduce stock levels. Amortization of library was EUR 4.7 million for the nine months ended September 30, 2008 compared to EUR 5.0 million for the nine months ended September 30, 2007, which represents a decrease of EUR 0.3 million. Amortization of library

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does not vary with sales since it reflects the amortization of our investments in content which has been available for sale for a period of three to five years. Internet, broadcasting and wireless cost was EUR 1.9 million for the nine months ended September 30, 2008 compared to EUR 1.2 million for the nine months ended September 30, 2007. Internet, broadcasting and wireless cost as a percentage of related sales in the period was 21% compared to 11% in the same period last year. The increase was primarily the result of increased internet cost.

Gross Profit. In the nine months ended September 30, 2008, we realized a gross profit of EUR 4.7 million, or 31% of net sales compared to EUR 8.7 million, or 46% of net sales for the nine months ended September 30, 2007. The decrease in gross profit was primarily the result of reduced sales and increased variable cost offset by decreased amortization of library.

Selling, general and administrative expenses. Our selling, general and administrative expenses were EUR 8.7 million for the nine months ended September 30, 2008 compared to EUR 9.3 million for the nine months ended September 30, 2007, a decrease of EUR 0.6 million. The decrease is the result of our restructuring plan, see discussion above.

Operating loss. We reported an operating loss of EUR 4.0 million for the nine months ended September 30, 2008 compared to an operating loss of EUR 0.6 million for the nine months ended September 30, 2007. The increase in operating loss of EUR 3.5 million was the result of the decrease in gross profit offset by the decrease in selling, general and administrative expenses.

Interest expense. We reported interest expense of EUR 0.2 million for the nine months ended September 30, 2008, compared to EUR 0.2 million for the nine months ended September 30, 2007.

Income tax benefit. We reported income tax benefit of EUR 1.4 million for the nine months ended September 30, 2008, compared to EUR 0.6 million for the nine months ended September 30, 2007. The increase in income tax benefit is a result of higher losses being recorded in jurisdictions with higher corporate tax rates.

Net loss. We reported a loss of EUR 2.7 million for the nine months ended September 30, 2008, compared to EUR 0.1 million for the nine months ended September 30, 2007. We attribute the increase in loss in the period to increased operating loss offset by increased income tax benefit.

Six months ended June 30, 2008 compared to the six months ended June 30, 2007

Net sales. For the six months ended June 30, 2008, we had net sales of EUR 10.5 million compared to net sales of EUR 11.5 million for the six months ended June 30, 2007, a decrease of EUR 1.0 million. The decrease was the result of reduced DVD & Magazine, Broadcasting and Wireless sales offset by increased Internet sales.

DVD & Magazine sales decreased EUR 0.5 million, or 11%, to EUR 4.2 million. The reduction in DVD & Magazine sales was primarily attributable to an industry wide decrease in DVD sales (see discussion under Outlook below). Despite the weakening dollar³, Internet sales increased EUR 0.1 million to EUR 2.1 million, which represents an increase of 3% compared to the same period last year. Broadcasting sales decreased EUR 0.3 million, or 9%, to EUR 3.0 million as a result of the absence of sales of EUR 1.25 million from a non-recurring title licensing deal for German speaking Europe in 2007 offset primarily by an increase in video on demand sales via IPTV. Wireless sales decreased EUR 0.2 million to EUR 1.0 million in the period as a result of a re-organization of content delivery structure. The re-organization is expected to be completed in the fall of 2008.

Going forward, we expect Internet, wireless and Broadcasting sales, in particular, to increase (see discussion under Outlook below).

Net sales in general were affected by changes in exchange rates. The six-month average US dollar exchange rate for the period was 13% lower compared to the same period in 2007. This reduced all our sales in dollar by the same percentage. Fluctuations in exchange rates between the euro and the dollar can affect the comparability of our results from year to year. We translate our consolidated subsidiaries whose functional currency is not the euro into the euro for reporting purposes. Income statement amounts are translated into euros using the average exchange rate for the period. The balance sheet is translated at the period-end exchange rate.

Cost of Sales. Our cost of sales was EUR 7.0 million for the six months ended June 30, 2008 compared to EUR 6.2 million for the six months ended June 30, 2007, an increase of EUR 0.8 million, or 13%.

Included in cost of sales is printing, processing and duplication, amortization of library and Internet, broadcasting and wireless costs. Printing, processing and duplication cost was EUR 2.6 million for the six months ended June 30, 2008 compared to EUR 1.9 million for the six months ended June 30, 2007, an increase of EUR 0.6 million. Printing, processing and duplication cost as a percentage of DVD & Magazine sales was 61% for the six months ended June 30, 2008 compared to 41% in the same period last year. The increase was the result of an increase in sales volume sold at a lower average price as part of a program to reduce stock levels. Amortization of library was EUR 3.2 million for the six months ended June 30, 2008 compared to EUR 3.4 million for the six months ended June 30, 2007, which represents a decrease of EUR 0.2 million. Amortization of library does not vary with sales since it reflects the amortization of our investments in content which has been available for sale for a period of three to five years. Internet, broadcasting and wireless cost was EUR 1.2 million for the six months ended June 30, 2008 compared to EUR 0.8 million for the six months ended June 30, 2007. Internet, broadcasting and wireless cost as a percentage of related sales in the period was 20% compared to 12% in the same period last year. The increase was primarily the result of increased internet cost.

³ Our Internet sites collect a significant part of their sales from US customers.

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Gross Profit. In the six months ended June 30, 2008, we realized a gross profit of EUR 3.5 million, or 33% of net sales compared to EUR 5.3 million, or 46% of net sales for the six months ended June 30, 2007. The decrease in gross profit was primarily the result of reduced sales and increased variable cost offset by decreased amortization of library.

Selling, general and administrative expenses. Our selling, general and administrative expenses were EUR 6.1 million for the six months ended June 30, 2008 compared to EUR 6.2 million for the six months ended June 30, 2007, a decrease of EUR 0.1 million, or 1%.

Operating loss. We reported an operating loss of EUR 2.6 million for the six months ended June 30, 2008 compared to an operating loss of EUR 0.9 million for the six months ended June 30, 2007. The increase in operating loss of EUR 1.8 million was the result of the decrease in gross profit offset by the decrease in selling, general and administrative expenses.

Interest expense. We reported interest expense of EUR 0.1 million for the six months ended June 30, 2008, compared to EUR 0.2 million for the six months ended June 30, 2007.

Income tax benefit. We reported income tax benefit of EUR 1.0 million for the six months ended June 30, 2008, compared to EUR 0.4 million for the six months ended June 30, 2007. The increase in income tax benefit is a result of higher losses being recorded in jurisdictions with higher corporate tax rates.

Net loss. We reported a loss of EUR 1.7 million for the six months ended June 30, 2008, compared to EUR 0.5 million for the six months ended June 30, 2007. We attribute the increase in loss in the period to increased operating loss offset by increased income tax benefit.

Three months ended March 31, 2008 compared to the three months ended March 31, 2007

Net sales. For the three months ended March 31, 2008, we had net sales of EUR 5.3 million compared to net sales of EUR 5.4 million for the three months ended March 31, 2007, a decrease of EUR 0.1 million. The decrease was the result of reduced DVD & Magazine sales offset by increased Broadcasting and Internet sales. Net sales in general were affected by Easter taking place in the first quarter of 2008 as opposed to the second quarter in 2007.

DVD & Magazine sales decreased EUR 0.5 million, or 18%, to EUR 2.7 million. The reduction in DVD & Magazine sales was primarily attributable to an industry wide decrease in DVD sales (see discussion under Outlook below). Despite the weakening dollar², Internet sales increased EUR 0.1 million to EUR 1.1 million, which represents an increase of 7% compared to the same period last year. Broadcasting sales increased EUR 0.2 million, or 21%, to EUR 1.3 million primarily as a result of an increase in video on demand sales via IPTV. Wireless sales generated EUR 0.6 million in the period.

² Our Internet sites collect a significant part of its sales from US customers.

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Going forward, we expect Internet, wireless and Broadcasting sales, in particular, to increase (see discussion under Outlook below).

Net sales in general were affected by changes in exchange rates. The three-month average dollar exchange rate for the period was 12% lower compared to the same period in 2007. This reduced all our sales in dollar by the same percentage. Fluctuations in exchange rates between the euro and the dollar can affect the comparability of our results from year to year. We translate our consolidated subsidiaries whose functional currency is not the euro into the euro for reporting purposes. Income statement amounts are translated into euros using the average exchange rate for the fiscal year. The balance sheet is translated at the year-end exchange rate.

Cost of Sales. Our cost of sales was EUR 3.4 million for the three months ended March 31, 2008 compared to EUR 3.2 million for the three months ended March 31, 2007, an increase of EUR 0.2 million, or 7%.

Included in cost of sales is printing, processing and duplication, amortization of library and Internet, broadcasting and wireless costs. Printing, processing and duplication cost was EUR 1.3 million for the three months ended March 31, 2008 compared to EUR 1.1 million for the three months ended March 31, 2007, an increase of EUR 0.2 million. Printing, processing and duplication cost as a percentage of DVD & Magazine sales was 56% for the three months ended March 31, 2008 compared to 41% in the same period last year. The increase was the result of an increase in sales volume sold at a lower average price as part of a program to reduce stock levels. Amortization of library was EUR 1.6 million for the three months ended March 31, 2008 compared to EUR 1.7 million for the three months ended March 31, 2007, which represents a decrease of EUR 0.1 million. Amortization of library does not vary with sales since it reflects the amortization of our investments in content which has been available for sale for a period of three to five years. Internet, broadcasting and wireless cost was EUR 0.5 million for the three months ended March 31, 2008 compared to EUR 0.3 million for the three months ended March 31, 2007. Internet, broadcasting and wireless cost as a percentage of related sales in the period was 17% compared to 12% in the same period last year. The increase was primarily the result of increased internet and wireless cost.

Gross Profit. In the three months ended March 31, 2008, we realized a gross profit of EUR 1.9 million, or 35% of net sales compared to EUR 2.2 million, or 41% of net sales for the three months ended March 31, 2007. The decrease in gross profit as a percentage of sales was primarily the result of reduced margins on DVD & Magazine sales.

Selling, general and administrative expenses. Our selling, general and administrative expenses were EUR 3.3 million for the three months ended March 31, 2008 compared to EUR 3.1 million for the three months ended March 31, 2007, an increase of EUR 0.2 million, or 5%. The increase was the result of moving part of our European headquarters’ office and increased depreciation of property, plant and equipment.

Operating loss. We reported an operating loss of EUR 1.4 million for the three months ended March 31, 2008 compared to an operating loss of EUR 0.8 million for the three months ended March 31, 2007. The decrease in operating profit of EUR 0.6 million was the result of the decrease in gross profit combined with the increase in selling, general and administrative expenses.

Interest expense. We reported interest expense of EUR 0.1 million for the three months ended March 31, 2008, compared to EUR 0.1 million for the three months ended March 31, 2007.

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Income tax benefit. We reported income tax benefit of EUR 0.6 million for the three months ended March 31, 2008, compared to EUR 0.3 million for the three months ended March 31, 2007. The increase in income tax benefit is a result of higher losses being recorded in jurisdictions with higher corporate tax rates.

Net loss. We reported a loss of EUR 0.8 million for the three months ended March 31, 2008, compared to EUR 0.6 million for the three months ended March 31, 2007. We attribute the increase in loss in the period to increased operating loss offset by increased income tax benefit.