Private Media Group (PRVT)

Liquidity and Capital Resources

We reported a working capital surplus of EUR 13.2 million at March 31, 2009, a decrease of EUR 2.6 million compared to the year ended December 31, 2008. The decrease is principally attributable to a increase in current liabilities as a result of the acquisition of GameLink.

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Operating Activities

Net cash provided by operating activities was EUR 1.0 million for the three months ended March 31, 2009, and was primarily the result of net income, as adjusted for non-cash transactions, and cash related to changes in operating assets and liabilities. The net loss of EUR 0.8 million was adjusted to reconcile net income to net cash flows from operating activities with bad debt provision of EUR 0.1 million, amortization of web pages of EUR 0.3 million depreciation of EUR 0.2 million and amortization of photographs and videos of EUR 1.4 million making a total of EUR 2.1 million, providing a net balance of EUR 1.3 million. The total of EUR 1.3 million was added to by changes in trade accounts receivable, inventories, and prepaid expenses and other current assets totaling EUR 0.8 million offset by EUR 1.1 million from related party receivable, income taxes payable. accounts payable trade and accrued other liabilities. Net cash provided by operating activities was EUR 2.3 million for the three months ended March 31, 2008. The decrease in net cash provided by operating activities of EUR 1.3 million for the three months ended March 31, 2009 compared to the same period last year was primarily the result of changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2009 was EUR 0.7 million. The investing activities were principally capital expenditure of EUR 0.1 million and investment in library of photographs and videos of EUR 0.6 million, which was carried out in order to maintain the 2009 release schedules. Net cash used in investing activities decreased EUR 1.2 million over the same period last year. The decrease is principally due to lower investment activity in library of photographs and videos as a result of a lower demand for new releases on new media platforms as opposed to traditional media which required a higher frequency.

Financing Activities

Net cash used in financing activities for the three-month period ended March 31, 2009 was EUR 0.1 million. Compared to the three-month 2008 period there was no material change.

Liquidity and Capital Resources

We generate cash from our operating activities, borrowings from third parties, the exercise of warrants and private sales of our equity securities. Our principal uses of cash typically include building our library of photographs and movies.

We reported a working capital surplus of EUR 15.9 million at December 31, 2008, a decrease of EUR 3.8 million compared to the year ended December 31, 2007. The decrease was attributable to a decrease in current assets offset by a decrease in current liabilities. We reported a working capital surplus of EUR 19.6 million at December 31, 2007, a decrease of EUR 1.4 million compared to the year ended December 31, 2006. The decrease was attributable to an increase in current liabilities and a decrease in current assets.

Operating Activities

Net cash provided by our operating activities was EUR 5.2 million for 2008 compared to EUR 7.6 million for 2007, and was primarily the result of net loss, as adjusted for non-cash transactions and uses of cash related to changes in operating assets and liabilities. We adjusted our net loss of EUR 5.2 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 1.0 million, (2) bad debt provision of EUR 0.3 million, (3) amortization of other intangible assets of EUR 0.4 million and (4) amortization of photographs and videos of EUR 6.3 million which was offset by EUR 1.9 million from deferred income taxes, which resulted in an adjusted income of EUR 1.1 million. Changes in operating assets and liabilities added

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EUR 4.1 million net through trade accounts receivable, inventories, prepaid expenses and other current assets and income taxes payable totaling EUR 5.7 million, offset by EUR 1.6 million from, related party receivable, accounts payable trade and accrued other liabilities. The decrease in cash provided by operating activities for 2008 compared to 2007 is primarily the result of net loss, as adjusted for non-cash transactions, offset by changes in operating assets and liabilities.

Net cash provided by our operating activities was EUR 7.6 million for 2007 compared to EUR 7.4 million for 2006, and was primarily the result of net loss, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net loss of EUR 0.4 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 0.8 million, (2) bad debt provision of EUR 0.4 million, (3) amortization of other intangible assets of EUR 0.1 million and (4) amortization of photographs and videos of EUR 6.8 million which was offset by EUR 0.6 million from deferred income taxes, which resulted in an adjusted income of EUR 7.1 million. Changes in operating assets and liabilities added EUR 0.5 million net through inventories, accounts payable trade, accrued other liabilities and income taxes payable totaling EUR 1.5 million, offset by EUR 1.0 million from trade accounts receivable, related party receivable, prepaid expenses and other current assets. The increase in cash provided by operating activities for 2007 compared to 2006 is primarily the result of changes in operating assets and liabilities.

Net cash provided by our operating activities was EUR 7.4 million for 2006 compared to EUR 4.4 million for 2005, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net income of EUR 0.5 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 0.9 million, (2) convertible note adjustment of EUR 0.1 million, (3) bad debt provision of EUR 0.2 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.7 million making a total of EUR 8.5 million which was offset by EUR 0.9 million from deferred income taxes, providing a net balance of EUR 7.6 million. Changes in operating assets and liabilities reduced the net balance by EUR 0.2 million through trade accounts receivable, related party receivable, accounts payable trade and accrued other liabilities totaling EUR 2.4 million, offset by EUR 2.1 million from inventories, prepaid expenses and other current assets and income taxes payable. The increase in cash provided by operating activities for 2006 compared to 2005 is the result of both net income and adjustments to reconcile net income to net cash flows from operating activities and changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the fiscal year ended December 31, 2008 was EUR 5.4 million. The investing activities were investment in library of photographs and videos of EUR 4.3 million, which were carried out in order to maintain the 2008 and 2009 release schedules for magazines, DVDs. In addition to investment in library of photographs and videos, EUR 1.1 million was invested in capital expenditures. The decrease over the comparable twelve-month 2007 period is principally due to decreased investment in both library and capital expenditures. The decrease in investment in library is the result of our restructuring plans, see above under Restructuring.

Net cash used in investing activities for the fiscal year ended December 31, 2007 was EUR 8.5 million. The investing activities were investment in library of photographs and videos of EUR 7.1 million, which were carried out in order to maintain the 2007 and 2008 release schedules for magazines, DVDs. In addition to investment in library of photographs and videos, EUR 1.4 million was invested in capital expenditures. The increase over the comparable twelve-month 2006 period is principally due to increased investment in the library and the absence of cash flows from note receivable and cash received from sale of building in 2006.

Net cash used in investing activities for the fiscal year ended December 31, 2006 was EUR 7.1 million. The investing activities were investment in library of photographs and videos of EUR 6.5 million, which were carried out in order to maintain the 2006 and 2007 release schedules for magazines, DVDs. In addition to investment in library of photographs and videos, EUR 1.4 million was invested in capital expenditures. The total cash used in investing activities was offset by EUR 0.2 million from sale of part of the building and 0.6 million from note receivable. The increase over the comparable twelve-month 2005 period is principally due to the lower cash flows from sale of building in 2006.

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Financing Activities

Net cash provided by financing activities for the fiscal year ended December 31, 2008 was EUR 0.1 million, represented primarily by additions to short-term borrowings of EUR 0.4 million offset by EUR 0.3 million in repayments on short and long-term borrowings.

Net cash provided by financing activities for the fiscal year ended December 31, 2007 was EUR 0.4 million, represented primarily by additions to short-term borrowings of EUR 1.2 million as a result of increased bank line of credits offset by EUR 0.8 million in repayments on short and long-term borrowings. The main movements during the twelve-month period ended December 31, 2007 are described as follows: (1) The balance of EUR 0.5 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2007 the remaining balance on the loan was EUR 0.1 million. (2) The $4.0 million 7% Note held by Consipio Holding b.v. was reduced by EUR 0.4 million. As of December 31, 2007 the remaining balance on the Note was EUR 1.65 million. (3) The outstanding borrowings on our credit lines were increased by EUR 1.2 million and as of December 31, 2007 the outstanding balance was EUR 2.6 million.

Net cash used in financing activities for the fiscal year ended December 31, 2006 was EUR 0.9 million, represented primarily by EUR 1.0 million in repayments on short and long-term borrowings offset by EUR 0.1 million in cash provided by conversion of stock options. The main movements during the twelve-month period ended December 31, 2006 are described as follows: (1) The balance of EUR 1.0 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2006 the remaining balance on the loan was EUR 0.5 million. (2) The $4.0 million Note held by Consipio Holding b.v. was reduced by EUR 0.4 million. As of December 31, 2006 the remaining balance on the Note was EUR 2.1 million. (3) The balance of EUR 0.1 million on the EUR 4.2 million loan from an institutional lender was reduced by EUR 0.1 million in connection with the sale of the building and as of December 31, 2006 the loan was repaid in its entirety. (4) The outstanding borrowings on our credit lines was reduced by EUR 0.1 million and as of December 31, 2006 the outstanding balance was EUR 1.35 million.

Non-Cash Transactions

During 2006 convertible note holders converted the remaining principal of $1,325,000 on a $2.25 million Convertible Note. As of December 31, 2006, the Convertible Note was repaid in its entirety.

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Liquidity and Capital Resources

We reported a working capital surplus of EUR 16.6 million at September 30, 2008, a decrease of EUR 3.1 million compared to the year ended December 31, 2007. The decrease is attributable to a decrease in current assets offset by a decrease in current liabilities.

Operating Activities

Net cash provided by operating activities was EUR 4.8 million for the nine months ended September 30, 2008, and was primarily the result of net income, as adjusted for non-cash transactions, and cash related to changes in operating assets and liabilities. The net loss of EUR 2.7 million was adjusted to reconcile net income to net cash flows from operating activities with bad debt

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provision of EUR 0.2 million, amortization of other intangible assets of EUR 0.1 million, depreciation of EUR 0.8 million and amortization of photographs and videos of EUR 4.7 million making a total of EUR 5.8 million, providing a net balance of EUR 3.1 million. The total of EUR 3.1 million was added to by changes in trade accounts receivable, inventories and prepaid expenses and other current assets totaling EUR 3.8 million offset by EUR 1.7 million from accounts payable trade, related party receivable, income taxes payable and accrued other liabilities. Net cash provided by operating activities was EUR 5.5 million for the nine months ended September 30, 2007. The decrease in net cash provided by operating activities of EUR 0.7 million for the nine months ended September 30, 2008 compared to the same period last year was primarily the result of a decrease in cash from operating activities offset by an increase in cash related to changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2008 was EUR 4.4 million. The investing activities were principally capital expenditure of EUR 1.1 million and investment in library of photographs and videos of EUR 3.4 million, which was carried out in order to maintain the 2008 and 2009 release schedules. Net cash used in investing activities decreased EUR 1.9 million over the same period last year. The decrease is principally due to above average investment activity in library of photographs and videos in the nine month period ended September 30, 2007 and reduced investment in the same period 2008 as a result of our restructuring plan.

Financing Activities

Net cash used in financing activities for the nine-month period ended September 30, 2008 was EUR 0.0 million, represented by repayments of EUR 0.3 million on short- and long-term borrowings offset by additions to short-term borrowings of EUR 0.3 million. Compared to the nine-month 2007 period, net cash used in financing activities was EUR 0.6 million lower.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 17.6 million at June 30, 2008, a decrease of EUR 2.1 million compared to the year ended December 31, 2007. The decrease is principally attributable to a decrease in current assets.

Operating Activities

Net cash provided by operating activities was EUR 3.7 million for the six months ended June 30, 2008, and was primarily the result of net income, as adjusted for non-cash transactions, and cash related to changes in operating assets and liabilities. The net loss of EUR 1.7 million was adjusted to reconcile net income to net cash flows from operating activities with bad debt provision and amortization of other intangible assets of EUR 0.1 million, depreciation of EUR 0.6 million and amortization of photographs and videos of EUR 3.2 million making a total of EUR 3.9 million, providing a net balance of EUR 2.1 million. The total of EUR 2.2 million was added to by changes in trade accounts receivable, inventories and prepaid expenses and other current assets totaling EUR 3.1 million offset by EUR 1.6 million from accounts payable trade, related party receivable, income taxes payable and accrued other liabilities. Net cash provided by operating activities was EUR 3.7 million for the six months ended June 30, 2007. The increase in net cash provided by operating activities of EUR 0.1 million for the six months ended June 30, 2008 compared to the same period last year was primarily the result of cash related to changes in operating assets and liabilities.

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Investing Activities

Net cash used in investing activities for the six months ended June 30, 2008 was EUR 3.5 million. The investing activities were principally capital expenditure of EUR 0.9 million and investment in library of photographs and videos of EUR 2.6 million, which was carried out in order to maintain the 2008 release schedules. Net cash used in investing activities decreased EUR 1.2 million over the same period last year. The decrease is principally due to above average investment activity in library of photographs and videos in the six month period ended June 30, 2007 and reduced investment in the same period 2008 as a result of our restructuring plans.

Financing Activities

Net cash used in financing activities for the six-month period ended June 30, 2008 was EUR 0.1 million, represented by repayments on short- and long-term borrowings offset by additions to short-term borrowings. Compared to the six-month 2007 period, net cash used in financing activities was EUR 0.2 million lower.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 18.0 million at March 31, 2008, a decrease of EUR 1.6 million compared to the year ended December 31, 2007. The decrease is principally attributable to a decrease in current assets.

Operating Activities

Net cash provided by operating activities was EUR 2.3 million for the three months ended March 31, 2008, and was primarily the result of net income, as adjusted for non-cash transactions, and cash related to changes in operating assets and liabilities. The net loss of EUR 0.8 million was adjusted to reconcile net income to net cash flows from operating activities with depreciation of EUR 0.3 million and amortization of photographs and videos of EUR 1.6 million making a total of EUR 1.9 million, providing a net balance of EUR 1.1 million. The total of EUR 1.1 million was added to by changes in trade accounts receivable, inventories, accounts payable trade and prepaid expenses and other current assets totaling EUR 2.0 million offset by EUR 0.8 million from related party receivable, income taxes payable and accrued other liabilities. Net cash provided by operating activities was EUR 2.6 million for the three months ended March 31, 2007. The decrease in net cash provided by operating activities of EUR 0.3 million for the three months ended March 31, 2008 compared to the same period last year was primarily the result of net income, as adjusted for non-cash transactions.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2008 was EUR 1.9 million. The investing activities were principally capital expenditure of EUR 0.3 million and investment in library of photographs and videos of EUR 1.6 million, which was carried out in order to maintain the 2008 release schedules. Net cash used in investing activities decreased EUR 0.6 million over the same period last year. The decrease is principally due to above average investment activity in library of photographs and videos in the three month period ended March 31, 2007.

Financing Activities

Net cash used in financing activities for the three-month period ended March 31, 2008 was EUR 0.3 million, represented by repayments on short- and long-term borrowings. Compared to the three-month 2007 period there was no material change.

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Liquidity and Capital Resources

We generate cash from our operating activities, borrowings from third parties, the exercise of warrants and private sales of our equity securities. Our principal uses of cash typically include building our library of photographs and movies. We reported a working capital surplus of EUR 19.6 million at December 31, 2007, a decrease of EUR 1.4 million compared to the year ended December 31, 2006. The decrease is attributable to an increase in current liabilities and a decrease in current assets. We reported a working capital surplus of EUR 21.1 million at December 31, 2006, an increase of EUR 1.0 million compared to the year ended December 31, 2005. The increase was principally attributable to a decrease in current liabilities.

Operating Activities

Net cash provided by our operating activities was EUR 7.6 million for 2007 compared to EUR 7.4 million for 2006, and was primarily the result of net loss, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net loss of EUR 0.4 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 0.8 million, (2) bad debt provision of EUR 0.4 million, (3) amortization of other intangible assets of EUR 0.1 million and (4) amortization of photographs and videos of EUR 6.8 million which was offset by EUR 0.6 million from deferred income taxes, which resulted in an adjusted income of EUR 7.1 million. Changes in operating assets and liabilities added EUR 0.5 million net through inventories, accounts payable trade, accrued other liabilities and income taxes payable totaling EUR 1.5 million, offset by EUR 1.0 million from trade accounts receivable, related party receivable, prepaid expenses and other current assets. The increase in cash provided by operating activities for 2007 compared to 2006 is primarily the result of changes in operating assets and liabilities.

Net cash provided by our operating activities was EUR 7.4 million for 2006 compared to EUR 4.4 million for 2005, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net income of EUR 0.5 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 0.9 million, (2) convertible note adjustment of EUR 0.1 million, (3) bad debt provision of EUR 0.2 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.7 million making a total of EUR 8.5 million which was offset by EUR 0.9 million from deferred income taxes, providing a net balance of EUR 7.6 million. Changes in operating assets and liabilities reduced the net balance by EUR 0.2 million through trade accounts receivable, related party receivable, accounts payable trade and accrued other liabilities totaling EUR 2.4 million, offset by EUR 2.1 million from inventories, prepaid expenses and other current assets and income taxes payable. The increase in cash provided by operating activities for 2006 compared to 2005 is the result of both net income and adjustments to reconcile net income to net cash flows from operating activities and changes in operating assets and liabilities.

Net cash provided by our operating activities was EUR 4.4 million for 2005 compared to EUR 8.3 million for 2004, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net income of EUR 0 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 1.1 million, (2) convertible note adjustment of EUR 0.2 million, (3) bad debt provision of EUR 0.2 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.4 million making a total of EUR 7.9 million which was offset by EUR 1.3 million from gain on sale of building and EUR 0.5 million from deferred income taxes, providing a net balance of EUR 6.2 million. Changes in operating assets and liabilities reduced the net balance by EUR 2.7 million through trade accounts receivable, related party receivable, accounts payable trade, inventories and prepaid expenses and other current assets totaling EUR 2.9 million, offset by EUR 0.8 million from income taxes payable and accrued other liabilities. The decrease in cash provided by operating activities for 2005 compared to 2004 is primarily the result of both net income and adjustments to reconcile net income to net cash flows from operating activities and changes in operating assets and liabilities.

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Investing Activities

Net cash used in investing activities for the fiscal year ended December 31, 2007 was EUR 8.5 million. The investing activities were investment in library of photographs and videos of EUR 7.1 million, which were carried out in order to maintain the 2007 and 2008 release schedules for magazines, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 1.4 million was invested in capital expenditures. The increase over the comparable twelve-month 2006 period is principally due to increased investment in the library and the absence of cash flows from note receivable and cash received from sale of building in 2006.

Net cash used in investing activities for the fiscal year ended December 31, 2006 was EUR 7.1 million. The investing activities were investment in library of photographs and videos of EUR 6.5 million, which were carried out in order to maintain the 2006 and 2007 release schedules for magazines, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 1.4 million was invested in capital expenditures. The total cash used in investing activities was offset by EUR 0.2 million from sale of part of the building and 0.6 million from note receivable. The increase over the comparable twelve-month 2005 period is principally due to the lower cash flows from sale of building in 2006.

Net cash used in investing activities for the fiscal year ended December 31, 2005 was EUR 1.0 million. The investing activities were investment in library of photographs and videos of EUR 8.3 million, which were carried out in order to maintain the 2005 and 2006 release schedules for magazines, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 0.3 million was invested in capital expenditures. The total cash used in investing activities was offset by EUR 6.9 million from sale of part of the building and 0.8 million from note receivable. The decrease over the comparable twelve-month 2004 period is principally due to sale of building, offset by a 69% increase in investment in library of photographs and videos in order to return to the optimum level of approx. eight new movie releases per month.

Financing Activities

Net cash provided by financing activities for the fiscal year ended December 31, 2007 was EUR 0.4 million, represented primarily by additions to short-term borrowings of EUR 1.2 million as a result of increased bank line of credits offset by EUR 0.8 million in repayments on short and long-term borrowings. The main movements during the twelve-month period ended December 31, 2007 are described as follows: (1) The balance of EUR 0.5 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2007 the remaining balance on the loan was EUR 0.1 million. (2) The $4.0 million 7% Note held by Consipio Holding b.v. was reduced by EUR 0.4 million. As of December 31, 2007 the remaining balance on the Note was EUR 1.65 million. (3) The outstanding borrowings on our credit lines were increased by EUR 1.2 million and as of December 31, 2007 the outstanding balance was EUR 2.6 million.

Net cash used in financing activities for the fiscal year ended December 31, 2006 was EUR 0.9 million, represented primarily by EUR 1.0 million in repayments on short and long-term borrowings offset by EUR 0.1 million in cash provided by conversion of stock options. The main movements during the twelve-month period ended December 31, 2006 are described as follows: (1) The balance of EUR 1.0 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2006 the remaining balance on the loan was EUR 0.5 million. (2) The $4.0 million Note held by Consipio Holding b.v. was reduced by EUR 0.4 million. As of December 31, 2006 the remaining balance on the Note was EUR 2.1 million. (3) The balance of EUR 0.1 million on the EUR 4.2 million loan from an institutional lender was reduced by EUR 0.1 million in connection with the sale of the building and as of December 31, 2006 the loan was repaid in its entirety. (4) The outstanding borrowings on our credit lines was reduced by EUR 0.1 million and as of December 31, 2006 the outstanding balance was EUR 1.35 million.

Net cash used in financing activities for the fiscal year ended December 31, 2005 was EUR 2.9 million, represented primarily by EUR 3.4 million in repayments on long-term borrowings offset by EUR 0.4 million in cash provided by short-term borrowings. The main movements during the twelve-month period ended December 31, 2005 are described as follows: (1) The $3.0 million loan from Beate Uhse AG was reduced by EUR 0.7 million, inclusive of exchange rate changes. As of December 31, 2005 loan was repaid in its entirety. (2) The balance of EUR 2.3 million on the EUR 4.2 million loan from an institutional lender was reduced by EUR 2.2 million in connection with the sale of the building and as of December 31, 2005 the remaining balance on the loan was EUR 0.1 million. (3) The balance of EUR 1.4 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2005 the remaining balance on the loan was EUR 1.0 million.

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Non-Cash Transactions

During 2006 the convertible note holders converted the remaining principal of $1,325,000 on the $2.25 million Convertible Note. As of December 31, 2006, the Convertible Note was repaid in its entirety.

The Company had a note payable to an entity controlled by the Company’s principal shareholder. The amount payable at December 31, 2004 was EUR 0.7 million as a result of a claim made in connection with the building in 2005 the amount was netted off the claim and as of December 31, 2005 the loan was repaid in its entirety.

In December 2005 a holder of a convertible note converted $0.6 million (EUR 0.5 million) of principal into common stock. As of December 31, 2005, the amount recorded under current portion of long term borrowings, after charging debt discount of EUR 0.6 million to additional paid in capital in 2003, was EUR 1.0 million.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 20.3 million at September 30, 2007, a decrease of EUR 0.7 million compared to the year ended December 31, 2006. The decrease is principally attributable to a decrease in current assets.

Operating Activities

Net cash provided by operating activities was EUR 5.5 million for the nine months ended September 30, 2007, and was primarily the result of net income, as adjusted for non-cash transactions. The net loss of EUR 0.1 million was adjusted to reconcile net income to net cash flows from operating activities with depreciation of EUR 0.6 million, bad debt provision of EUR 0.3 million, amortization of other intangible assets of EUR 0.1 million and amortization of photographs and videos of EUR 5.0 million making a total of EUR 5.9 million. The total of EUR 5.9 million was added to by changes in inventories, accounts payable trade and accrued other liabilities totaling EUR 1.1 million offset by EUR 1.6 million from trade accounts receivable, related party receivable, prepaid expenses and other current assets and income taxes payable. Compared to the same period in 2006, there was an increase of EUR 0.7 million in net cash provided by operating activities. The increase was primarily the result of changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2007 was EUR 6.3 million. The investing activities were principally investment in library of photographs and videos of EUR 5.6 million, which was carried out in order to maintain the 2007/2008 release schedules for both magazines and DVDs and capital expenditure of EUR 0.8 million. Net cash used in investing activities increased EUR 1.4 million over the same period last year. The increase is principally due increased investment in library of photographs and videos offset by the absence of cash received from sale of building and note receivable.

Financing Activities

Net cash used in financing activities for the nine-month period ended September 30, 2007 was EUR 0.6 million, represented by repayments on short- and long-term borrowings. Compared to the nine-month 2006 period there was no material change.

Non-Cash Transaction

During the nine month period ending September 30, 2006 three convertible note holders converted a total of $1,325,000 of principal into common stock. As of September 30, 2006, the $2,250,000 convertible note was fully converted and subsequently all debt related to the note was repaid.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 19.7 million at June 30, 2007, a decrease of EUR 1.3 million compared to the year ended December 31, 2006. The decrease is principally attributable to a decrease in current assets.

Operating Activities

Net cash provided by operating activities was EUR 3.6 million for the six months ended June 30, 2007, and was primarily the result of net income, as adjusted for non-cash transactions. The net loss of EUR 0.5 million was adjusted to reconcile net income to net cash flows from operating activities with depreciation of EUR 0.4 million, bad debt provision of EUR 0.1 million, amortization of other intangible assets of EUR 0.1 million and amortization of photographs and videos of EUR 3.4 million making a total of EUR 4.0 million. The total of EUR 4.0 million was added to by changes in trade accounts receivable, inventories and accounts payable trade totaling EUR 1.3 million offset by EUR 1.2 million from related party receivable, prepaid expenses and other current assets, income taxes payable and accrued other liabilities. Compared to the same period in 2006, there was no change in net cash provided by operating activities.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2007 was EUR 4.7 million. The investing activities were principally investment in library of photographs and videos of EUR 4.1 million, which was carried out in order to maintain the 2007 release schedules for both magazines and DVDs and capital expenditure of EUR 0.6 million. Net cash used in investing activities increased EUR 1.4 million over the same period last year. The increase is principally due increased investment in library of photographs and videos offset by the absence of cash received from sale of building and note receivable.

Financing Activities

Net cash used in financing activities for the six-month period ended June 30, 2007 was EUR 0.4 million, represented by repayments on short- and long-term borrowings. Compared to the six-month 2006 period there was no material change.

Non-Cash Transaction

During the six month period ending June 30, 2006 two convertible note holders converted a total of $0.9 million of principal into common stock.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 20.0 million at March 31, 2007, a decrease of EUR 1.1 million compared to the year ended December 31, 2006. The decrease is principally attributable to a decrease in current assets.

Operating Activities

Net cash provided by operating activities was EUR 2.6 million for the three months ended March 31, 2007, and was primarily the result of net income, as adjusted for non-cash transactions, and cash related to changes in operating assets and liabilities. The net loss of EUR 0.6 million was adjusted to reconcile net income to net cash flows from operating activities with depreciation of EUR 0.2 million and amortization of photographs and videos of EUR 1.7 million making a total of EUR 2.0 million, providing a net balance of EUR 1.4 million. The total of EUR 1.4 million was added to by changes in trade accounts receivable, inventories and accounts payable trade totaling EUR 1.8 million offset by EUR 0.7 million from related party receivable, prepaid expenses and other current assets, income taxes payable and accrued other liabilities. Net cash provided by operating activities was EUR 0.8 million for the three months ended March 31, 2006. The increase in net cash provided by operating activities of EUR 1.8 million for the three months ended March 31, 2007 compared to the same period last year was primarily the result effects of changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2007 was EUR 2.5 million. The investing activities were principally investment in library of photographs and videos of EUR 2.2 million, which was carried out in order to maintain the 2007 release schedules for both magazines and DVDs and capital expenditure of EUR 0.3 million. Net cash used in investing activities increased EUR 0.9 million over the same period last year. The increase is principally due increased investment in library of photographs and videos offset by the absence of cash received from sale of building and note receivable.

17

Financing Activities

Net cash used in financing activities for the three-month period ended March 31, 2007 was EUR 0.2 million, represented by repayments on short- and long-term borrowings. Compared to the three-month 2006 period there was no material change.

Non-Cash Transaction

In March 2006, a holder of a convertible note converted $0.2 million of principal into common stock.

Liquidity and Capital Resources

We generate cash from our operating activities, borrowings from third parties, the exercise of warrants and private sales of our equity securities. Our principal uses of cash typically include, building our library of photographs and movies. We reported a working capital surplus of EUR 21.1 million at December 31, 2006, an increase of EUR 1.0 million compared to the year ended December 31, 2005. The increase is principally attributable to decreases in current liabilities We reported a working capital surplus of EUR 20.1 million at December 31, 2005, an increase of EUR 2.9 million compared to the year ended December 31, 2004. The increase is principally attributable to increases in current assets.

Operating Activities

Net cash provided by our operating activities was EUR 7.4 million for 2006 compared to EUR 4.4 million for 2005, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net income of EUR 0.5 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 0.9 million, (2) convertible note adjustment of EUR 0.1 million, (3) bad debt provision of EUR 0.2 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.7 million making a total of EUR 8.5 million which was offset by EUR 0.9 million from deferred income taxes, providing a net balance of EUR 7.6 million. Changes in operating assets and liabilities reduced the net balance by EUR 0.2 million through trade accounts receivable, related party receivable, accounts payable trade and accrued other liabilities totaling EUR 2.4 million, offset by EUR 2.1 million from inventories, prepaid expenses and other current assets and income taxes payable. The increase in cash provided by operating activities for 2006 compared to 2005 is the result of both net income and adjustments to reconcile net income to net cash flows from operating activities and changes in operating assets and liabilities.

Net cash provided by our operating activities was EUR 4.4 million for 2005 compared to EUR 8.3 million for 2004, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net income of EUR 0 million to reconcile it to net cash flows from operating activities. Adjustments

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included (1) depreciation of EUR 1.1 million, (2) convertible note adjustment of EUR 0.2 million, (3) bad debt provision of EUR 0.2 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.4 million making a total of EUR 7.9 million which was offset by EUR 1.3 million from gain on sale of building and EUR 0.5 million from deferred income taxes, providing a net balance of EUR 6.2 million. Changes in operating assets and liabilities reduced the net balance by EUR 2.7 million through trade accounts receivable, related party receivable, accounts payable trade, inventories and prepaid expenses and other current assets totaling EUR 2.9 million, offset by EUR 0.8 million from income taxes payable and accrued other liabilities. The decrease in cash provided by operating activities for 2005 compared to 2004 is primarily the result of both net income and adjustments to reconcile net income to net cash flows from operating activities and changes in operating assets and liabilities.

Net cash provided by our operating activities was EUR 8.3 million for 2004 compared to EUR 10.3 million for 2003, and was primarily the result of net income and adjustments to reconcile net income to net cash flows from operating activities. We adjusted our net loss of EUR 0.8 million annual report to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 2.1 million, (2) convertible note adjustment of EUR 0.1 million, (3) bad debt provision of EUR 1.6 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.6 million making a total of EUR 9.7 million annual report which was offset by EUR 0.7 million from deferred income taxes, providing a net balance of EUR 9.0 million (restated). Changes in operating assets and liabilities reduced the net balance by EUR 0.7 million annual report through trade accounts receivable, related party receivable, accounts payable trade, income taxes payable and accrued other liabilities totaling EUR 3.1 million, offset by EUR 2.4 million annual report from inventories and prepaid expenses and other current assets.

Investing Activities

Net cash used in investing activities for the fiscal year ended December 31, 2006 was EUR 7.1 million. The investing activities were investment in library of photographs and videos of EUR 6.5 million, which were carried out in order to maintain the 2006 and 2007 release schedules for magazines, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 1.4 million was invested in capital expenditures. The total cash used in investing activities was offset by EUR 0.2 million from sale of part of the building and 0.6 million from note receivable. The increase over the comparable twelve-month 2005 period is principally due to the lower cash flows from sale of building in 2006.

Net cash used in investing activities for the fiscal year ended December 31, 2005 was EUR 1.0 million. The investing activities were investment in library of photographs and videos of EUR 8.3 million, which were carried out in order to maintain the 2005 and 2006 release schedules for magazines, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 0.3 million was invested in capital expenditures. The total cash used in investing activities was offset by EUR 6.9 million from sale of part of the building and 0.8 million from note receivable. The decrease over the comparable twelve-month 2004 period is principally due to sale of building, offset by a 69% increase in investment in library of photographs and videos in order to return to the optimum level of approx. eight new movie releases per month.

Net cash used in investing activities for the fiscal year ended December 31, 2004 was EUR 5.1 million. The investing activities were investment in library of photographs and videos of EUR 4.9 million, which were carried out in order to maintain the 2003 and 2004 release schedules for magazines, videos, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 3.3 million was invested in capital expenditures, which was principally related to the completion of our building, and EUR 1.3 million was invested in a note receivable which was acquired in connection with our US subsidiary’s restructuring of its US distribution. The total cash used in investing activities was offset by EUR 4.4 million from sale of part of the building. The decrease over the comparable twelve-month 2003 period is principally due to decreases in investment in library of photographs and videos and building related activities included in capital expenditures and sale of part of building, offset by the net effect of note receivable and the absence of investment in other intangible assets and sale of short-term investment. In 2003 and the first half of 2004, investment in new movie productions was temporarily cut back due to cash-flow restrictions as a result of overspending in 2002 and 2003, which in turn has affected the release frequency of new productions on both Video and DVD. During the latter half of 2004 cash-flow improved and we increased the acquisition of movie productions and the Company expects to attain optimum release frequency of new movie productions during the first half of 2005.

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Financing Activities

Net cash used in financing activities for the fiscal year ended December 31, 2006 was EUR 0.9 million, represented primarily by EUR 1.0 million in repayments on short and long-term borrowings offset by EUR 0.1 million in cash provided by conversion of stock options. The main movements during the twelve-month period ended December 31, 2006 are described as follows:

(1) The balance of EUR 1.0 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2005 the remaining balance on the loan was EUR 0.5 million. (2) The $4.0 million Note held by Consipio Holding b.v. was reduced by EUR 0.4 million. As of December 31, 2006 the remaining balance on the Note was EUR 2.1 million. (3) The balance of EUR 0.1 million on the EUR 4.2 million loan from an institutional lender was reduced by EUR 0.1 million in connection with the sale of the building and as of December 31, 2006 the loan was repaid in its entirety. (4) The outstanding borrowings on our credit lines was reduced by EUR 0.1 million and as of December 31, 2006 the outstanding balance was EUR 1.35 million.

Net cash used in financing activities for the fiscal year ended December 31, 2005 was EUR 2.9 million, represented primarily by EUR 3.4 million in repayments on long-term borrowings offset by EUR 0.4 million in cash provided by short-term borrowings. The main movements during the twelve-month period ended December 31, 2005 are described as follows: (1) The $3.0 million loan from Beate Uhse AG was reduced by EUR 0.7 million, inclusive of exchange rate changes. As of December 31, 2005 loan was repaid in its entirety. (2) The balance of EUR 2.3 million on the EUR 4.2 million loan from an institutional lender was reduced by EUR 2.2 million in connection with the sale of the building and as of December 31, 2005 the remaining balance on the loan was EUR 0.1 million. (3) The balance of EUR 1.4 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2005 the remaining balance on the loan was EUR 1.0 million.

Net cash used in financing activities for the fiscal year ended December 31, 2004 was EUR 0.5 million, represented primarily by EUR 4.8 million in repayments on short- and long-term borrowings offset by EUR 2.6 million in cash provided by short- and long-term borrowings and EUR 1.8 million in cash received for conversion of warrants. The main movements resulting in a net decrease of EUR 2.3 million in borrowings during the twelve-month period ended December 31, 2004 are described as follows: (1) The $2.0 million and $3.0 million loans from Beate Uhse AG were reduced by EUR 2.2 million, inclusive of exchange rate changes. As of December 31, 2004 the $2.0 million was repaid and the remaining balance on the $3.0 million loan was EUR 0.7 million. (2) The $4.0 million Note held by Consipio Holding b.v. was reduced by EUR 0.4 million inclusive of exchange rate changes. As of December 31, 2004 the remaining balance on the Note was EUR 2.2 million. (3) In May 2003 Euro 1.65 million of the related party note payable to Luthares was re-financed by an institutional lender at the same interest rate as on the note payable, EURIBOR + 1%. The loan is repayable in equal monthly installments over a four year period starting June 29, 2004. During the twelve months ended December 31, 2004, the Company repaid Euro 0.3 million and subsequently the remaining balance was Euro 1.4 million. (4) In March 2003, the Company was granted a loan from an institutional lender in the principal amount of EUR 4.2 million of which EUR 1.75 million was received. The loan bears interest at the rate of EURIBOR + 1.5%, repayable over 12 years, including an initial period of 18 months during which only interest is payable. The loan was obtained for the purpose of financing the construction of an office building and is secured by a mortgage on the building. In 2004 an additional EUR 2.45 million was received in order to pay for the completion of the construction of the building. In connection with the sale of part of the property in 2004 EUR 1.9 million was repaid and as of December 31, 2004 the remaining balance on the loan was EUR 2.3 million.

Non-Cash Transactions

During 2006 the convertible note holders converted the remaining principal of $1,325,000 on the $2.25 million Convertible Note. As of December 31, 2006, the Convertible Note was repaid in its entirety.

The Company had a note payable to an entity controlled by the Company’s principal shareholder. The amount payable at December 31, 2004 was EUR 0.7 million as a result of a claim made in connection with the building in 2005 the amount was netted off the claim and as of December 31, 2005 the loan was repaid in its entirety.

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In December 2005 a holder of a convertible note converted $0.6 million (EUR 0.5 million) of principal into common stock. As of December 31, 2005, the amount recorded under current portion of long term borrowings, after charging debt discount of EUR 0.6 million to additional paid in capital in 2003, was EUR 1.0 million.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 22.1 million at September 30, 2006, an increase of EUR 1.9 million compared to the year ended December 31, 2005. The increase is principally attributable to a decrease in current liabilities.

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Operating Activities

Net cash provided by operating activities was EUR 4.7 million for the nine months ended September 30, 2006, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. Net income of EUR 1.0 million was adjusted to reconcile net income to net cash flows from operating activities including some minor adjustments, depreciation of EUR 0.8 million and amortization of photographs and videos of EUR 4.9 million making a total of EUR 6.9 million. The total of EUR 6.9 million was then reduced by changes in trade accounts receivable, related party receivable, prepaid expenses and other current assets, accounts payable trade, income taxes payable and accrued other liabilities totaling EUR 3.0 million offset by EUR 0.7 million from inventories. Net cash provided by operating activities was EUR 2.8 million for the nine months ended September 30, 2005. The increase in cash of EUR 1.9 million provided by operating activities for the nine months ended September 30, 2006 compared to the same period last year is primarily the result of adjustment to reconcile net income to net cash flows from operating activities.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2006 was EUR 5.0 million. The investing activities were principally investment in library of photographs and videos of EUR 5.1 million, which was carried out in order to maintain the 2006/2007 release schedules for both magazines and DVDs and capital expenditure of EUR 0.7 million offset by EUR 0.8 million from the last payment on sale of building and note receivable. Net cash used in investing activities increased EUR 2.7 million over the same period last year. The increase is principally due to less cash received from sale of building.

Financing Activities

Net cash used in financing activities for the nine-month period ended September 30, 2006 was EUR 0.7 million, represented by repayments on short- and long-term borrowings, which included the final payment on the loan related to the building, offset by cash received from conversion of stock options. Net cash used in financing activities for the nine-month period ended September 30, 2006 decreased by EUR 1.1 million as a result of reduced requirements on repayments on borrowings.

Non-Cash Transaction

During the nine month period ending September 30, 2006 three convertible note holders converted a total of $1,325,000 of principal into common stock. As of September 30, 2006, the $2,250,000 convertible note was fully converted and subsequently all debt related to the note was repaid.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 20.8 million at June 30, 2006, an increase of EUR 0.6 million compared to the year ended December 31, 2005. The increase is principally attributable to a decrease in current liabilities.

Operating Activities

Net cash provided by operating activities was EUR 3.6 million for the six months ended June 30, 2006, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of

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cash related to changes in operating assets and liabilities. Net income of EUR 0.0 million was adjusted to reconcile net income to net cash flows from operating activities including some minor adjustments, depreciation of EUR 0.4 million and amortization of photographs and videos of EUR 3.3 million making a total of EUR 3.9 million. The total of EUR 3.9 million was then reduced by changes in related party receivable, prepaid expenses and other current assets, income taxes payable and accrued other liabilities totaling EUR 1.3 million offset by EUR 1.0 million from trade accounts receivable, inventories and accounts payable trade. Net cash provided by operating activities was EUR 1.8 million for the six months ended June 30, 2005. The increase in cash of EUR 1.8 million provided by operating activities for the six months ended June 30, 2006 compared to the same period last year is primarily the result of adjustment to reconcile net income to net cash flows from operating activities.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2006 was EUR 3.3 million. The investing activities were principally investment in library of photographs and videos of EUR 3.5 million, which was carried out in order to maintain the 2006 release schedules for both magazines and DVDs and capital expenditure of EUR 0.4 million offset by EUR 0.6 million from the last payment on sale of building and note receivable. Net cash used in investing activities increased EUR 3.0 million over the same period last year. The increase is principally due to less cash received from sale of building.

Financing Activities

Net cash used in financing activities for the six-month period ended June 30, 2006 was EUR 0.5 million, represented by repayments on short- and long-term borrowings, which included the final payment on the loan related to the building, offset by cash received from conversion of stock options. Net cash used in financing activities for the six-month period ended June 30, 2006 decreased by EUR 1.0 million as a result of reduced requirements on repayments on borrowings.

Non-Cash Transaction

During the six month period ending June 30, 2006 two convertible note holders converted a total of $0.9 million of principal into common stock. As of June 30, 2006, the amount recorded for the convertible note under current portion of long term borrowings was EUR 0.3 million.

Liquidity and Capital Resources

We reported a working capital surplus of EUR 19.5 million at March 31, 2006, a decrease of EUR 0.6 million compared to the year ended December 31, 2005. The decrease is principally attributable to a decrease in current assets.

Operating Activities

Net cash provided by operating activities was EUR 0.8 million for the three months ended March 31, 2006, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. The net loss of EUR 0.5 million was adjusted to reconcile net income to net cash flows from operating activities with some minor adjustments, depreciation of EUR 0.2 million and amortization of photographs and videos of EUR 1.5 million making a total of EUR 1.8 million, providing a net balance of EUR 1.3 million. The total of EUR 1.3 million was then reduced by changes in related party receivable, income taxes payable, accounts payable trade and accrued other liabilities totaling EUR 1.0 million offset by EUR 0.4 million from trade accounts receivable, inventories and prepaid expenses and other current assets. Net cash provided by operating activities was EUR 0.4 million for the three months ended March 31, 2005. The increase in cash provided by operating activities for the three months ended March 31, 2006 compared to the same period last year is the result of adjustment to reconcile net income to net cash flows from operating activities.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2006 was EUR 1.6 million. The investing activities were principally investment in library of photographs and videos of EUR 1.6 million, which was carried out in order to maintain the 2006 release schedules for both magazines and DVDs and capital expenditure of EUR 0.4 million offset by EUR 0.4 million from the last payment on sale of building and note receivable. Net cash used in investing activities increased EUR 0.3 million over the same period last year. The increase is principally due to less cash received from sale of building.

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Financing Activities

Net cash used in financing activities for the three-month period ended March 31, 2006 was EUR 0.3 million, represented by repayments on short- and long-term borrowings, which included the final payment on the loan related to the building. Compared to the three-month 2005 period there was no change.

Non-Cash Transaction

In March 2006 a holder of a convertible note converted $0.2 million of principal into common stock. As of March 31, 2006, the amount recorded for the convertible note under current portion of long term borrowings was EUR 0.8 million.

Liquidity and Capital Resources

We generate cash from our operating activities, borrowings from third parties, the exercise of warrants and private sales of our equity securities. Our principal uses of cash typically include, building our library of photographs and movies.

We reported a working capital surplus of EUR 20.1 million at December 31, 2005, an increase of EUR 2.9 million compared to the year ended December 31, 2004. The increase is principally attributable to increases in current assets.

We reported a working capital surplus of EUR 17.2 million annual report at December 31, 2004, an increase of EUR 3.9 million compared to the year ended December 31, 2003. The increase is principally attributable to a decrease in current liabilities.

Operating Activities

Net cash provided by our operating activities was EUR 4.4 million for 2005 compared to EUR 8.3 million for 2004, and was primarily the result of net income, as adjusted for non-cash transactions, offset by uses of cash related to changes in operating assets and liabilities. We adjusted our net income of EUR 0 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 1.1 million, (2) convertible note adjustment of EUR 0.2 million, (3) bad debt provision of EUR 0.2 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.4 million making a total of EUR 7.9 million which was offset by EUR 1.3 million from gain on sale of building and EUR 0.5 million from deferred income taxes, providing a net balance of EUR 6.2 million. Changes in operating assets and liabilities reduced the net balance by EUR 2.7 million through trade accounts receivable, related party receivable, accounts payable trade, inventories and prepaid expenses and other current assets totaling EUR 2.9 million, offset by EUR 0.8 million from income taxes payable and accrued other liabilities. The decrease in cash provided by operating activities for 2005 compared to 2004 is primarily the result of both net income and adjustments to reconcile net income to net cash flows from operating activities and changes in operating assets and liabilities.

Net cash provided by our operating activities was EUR 8.3 million for 2004 compared to EUR 10.3 million for 2003, and was primarily the result of net income and adjustments to reconcile net income to net cash flows from operating activities. We adjusted our net loss of EUR 0.8 million annual report to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 2.1 million, (2) convertible note adjustment of EUR 0.1 million, (3) bad debt provision of EUR 1.6 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 6.6 million making a total of EUR 9.7 million annual report which was offset by EUR 0.7 million from deferred income taxes, providing a net balance of EUR 9.0 million (restated). Changes in operating assets and liabilities reduced the net balance by EUR 0.7 million annual report through trade accounts receivable, related party receivable, accounts payable trade, income taxes payable and accrued other liabilities totaling EUR 3.1 million, offset by EUR 2.4 million annual report from inventories and prepaid expenses and other current assets.

Net cash provided by our operating activities was EUR 10.3 million for 2003 compared to EUR 4.3 million for 2002, and was primarily the result of net income and adjustments to reconcile net income to net cash flows from operating activities. We adjusted our net income of EUR 0.6 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 1.2 million, (2) convertible note adjustment of EUR 0.1 million, (3) bad debt provision of EUR 0.8 million, (4) amortization of goodwill and other intangible assets of EUR 0.1 million and (5) amortization of photographs and videos of EUR 7.1 million making a total of EUR 8.7 million which was offset by EUR 1.2 million from deferred income taxes, providing a net balance of EUR 7.5 million. Changes in operating assets and liabilities added a total of EUR 2.8 million through trade accounts receivable, prepaid expenses and other current assets, accounts payable trade, accrued other liabilities and income taxes payable totaling EUR 4.7 million, offset by EUR 1.9 million from inventories.

Investing Activities

Net cash used in investing activities for the fiscal year ended December 31, 2005 was EUR 1.0 million. The investing activities were investment in library of photographs and videos of EUR 8.3 million, which were carried out in order to maintain the 2005 and 2006 release schedules for magazines, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 0.3 million was invested in capital expenditures. The total cash used in investing activities was offset by EUR

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6.9 million from sale of part of the building and 0.8 million from note receivable. The decrease over the comparable twelve-month 2004 period is principally due to sale of building, offset by a 69% increase in investment in library of photographs and videos in order to return to the optimum level of approx. eight new movie releases per month.

Net cash used in investing activities for the fiscal year ended December 31, 2004 was EUR 5.1 million. The investing activities were investment in library of photographs and videos of EUR 4.9 million, which were carried out in order to maintain the 2003 and 2004 release schedules for magazines, videos, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 3.3 million was invested in capital expenditures, which was principally related to the completion of our building, and EUR 1.3 million was invested in a note receivable which was acquired in connection with our US subsidiary’s restructuring of its US distribution. The total cash used in investing activities was offset by EUR 4.4 million from sale of part of the building. The decrease over the comparable twelve-month 2003 period is principally due to decreases in investment in library of photographs and videos and building related activities included in capital expenditures and sale of part of building, offset by the net effect of note receivable and the absence of investment in other intangible assets and sale of short-term investment. In 2003 and the first half of 2004, investment in new movie productions was temporarily cut back due to cash-flow restrictions as a result of overspending in 2002 and 2003, which in turn has affected the release frequency of new productions on both Video and DVD. During the latter half of 2004 cash-flow improved and we increased the acquisition of movie productions and the Company expects to attain optimum release frequency of new movie productions during the first half of 2005.

Net cash used in investing activities for the fiscal year ended December 31, 2003 was EUR 9.6 million. The investing activities were investment in library of photographs and videos of EUR 7.0 million, which were carried out in order to maintain the 2003 and 2004 release schedules for magazines, videos, DVDs and broadcasting. In addition to investment in library of photographs and videos, EUR 3.3 million was invested in other intangible assets and EUR 2.0 million was invested in capital expenditures. The total cash used in investing activities was offset by EUR 2.7 million from sale of short-term investment, which was used to reduce the related party note payable. The decrease over the comparable twelve-month 2002 period is principally due to the absence of investments in a building included in capital expenditures in 2002.

Financing Activities

Net cash used in financing activities for the fiscal year ended December 31, 2005 was EUR 2.9 million, represented primarily by EUR 3.4 million in repayments on long-term borrowings offset by EUR 0.4 million in cash provided by short-term borrowings. The main movements during the twelve-month period ended December 31, 2005 are described as follows:

The $3.0 million loan from Beate Uhse AG was reduced by EUR 0.7 million, inclusive of exchange rate changes. As of December 31, 2005 loan was repaid in its entirety.

The balance of EUR 2.3 million on the EUR 4.2 million loan from an institutional lender was reduced by EUR 2.2 million in connection with the sale of the building and as of December 31, 2005 the remaining balance on the loan was EUR 0.1 million.

The balance of EUR 1.4 million on the EUR 1.65 million loan from an institutional lender was reduced by EUR 0.4 million and as of December 31, 2005 the remaining balance on the loan was EUR 1.0 million.

Net cash used in financing activities for the fiscal year ended December 31, 2004 was EUR 0.5 million, represented primarily by EUR 4.8 million in repayments on short- and long-term borrowings offset by EUR 2.6 million in cash provided by short- and long-term borrowings and EUR 1.8 million in cash received for conversion of warrants. The main movements resulting in a net decrease of EUR 2.3 million in borrowings during the twelve-month period ended December 31, 2004 are described as follows:

The $2.0 million and $3.0 million loans from Beate Uhse AG were reduced by EUR 2.2 million, inclusive of exchange rate changes. As of December 31, 2004 the $2.0 million was repaid and the remaining balance on the $3.0 million loan was EUR 0.7 million. The $4.0 million Note held by Consipio Holding b.v. was reduced by EUR 0.4 million inclusive of exchange rate changes. As of December 31, 2004 the remaining balance on the Note was EUR 2.2 million.

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In May 2003 Euro 1.65 million of the related party note payable to Luthares was re-financed by an institutional lender at the same interest rate as on the note payable, EURIBOR + 1%. The loan is repayable in equal monthly installments over a four year period starting June 29, 2004. During the twelve months ended December 31, 2004, the Company repaid Euro 0.3 million and subsequently the remaining balance was Euro 1.4 million.

In March 2003, the Company was granted a loan from an institutional lender in the principal amount of EUR 4.2 million of which EUR 1.75 million was received. The loan bears interest at the rate of EURIBOR + 1.5%, repayable over 12 years, including an initial period of 18 months during which only interest is payable. The loan was obtained for the purpose of financing the construction of an office building and is secured by a mortgage on the building. In 2004 an additional EUR 2.45 million was received in order to pay for the completion of the construction of the building. In connection with the sale of part of the property in 2004 EUR 1.9 million was repaid and as of December 31, 2004 the remaining balance on the loan was EUR 2.3 million.

Net cash used in financing activities for the fiscal year ended December 31, 2003 was EUR 2.2 million, represented primarily by EUR 7.7 million in repayments on short- and long-term borrowings and related party note payable offset by EUR 5.5 million in cash received provided by short- and long-term borrowings and convertible notes. We attribute the change over the comparable twelve-month 2002 period to the following:

The $2.0 million and $3.0 million loans from Beate Uhse AG were reduced by EUR 2.0 million, inclusive of exchange rate changes. As of December 31, 2003 the remaining balance on the Loans was EUR 2.9 million. The $4.0 million Note held by Consipio Holding b.v. was reduced by EUR 1.2 million inclusive of exchange rate changes. As of December 31, 2003 the remaining balance on the Note was EUR 2.6 million.

In May 2003 Euro 1.65 million of the related party note payable to Luthares was re-financed by an institutional lender at the same interest rate as on the note payable, EURIBOR + 1%. The loan is repayable in equal monthly installments over a four year period starting June 29, 2004. In December 2003 the Company sold its short-term investment and paid Euro 2.7 million on the related party note payable. The note was originally payable at December 31, 2004, but has been re-negotiated and matures December 31, 2008. The note carries interest payable annually at EURIBOR + 1%. As of December 31, 2003, the balance outstanding on the note was EUR 2.2 million.

Effective September 2003, pursuant to securities purchase agreements entered into separately with four accredited institutional investors, we agreed to issue and sell to each of these investors convertible notes in the aggregate principal amount of $2.25 million (see Note 12 to the financial statements). Pursuant to the conditions of the agreements, the financing was completed October 27, 2003 and an aggregate net cash amount of EUR 1.9 million was received.

In March 2003, the Company was granted a loan from an institutional lender in the principal amount of EUR 4.2 million of which EUR 1.75 million was received. The loan bears interest at the rate of EURIBOR + 1.5%, repayable over 12 years, including an initial period of 18 months during which only interest is payable. The loan was obtained for the purposes of financing the construction of an office building and is secured by a mortgage on the building. The balance of the loan will be paid out over the remaining period of construction of the building, which is expected to be completed in May 2004.

Non-Cash Transactions

The Company had a note payable to an entity controlled by the Company’s principal shareholder. The amount payable at December 31, 2004 was EUR 0.7 million as a result of a claim made in connection with the building in 2005 the amount was netted off the claim and as of December 31, 2005 the loan was repaid in its entirety.

In December 2005 a holder of a convertible note converted $0.6 million (EUR 0.5 million) of principal into common stock. As of December 31, 2005, the amount recorded under current portion of long term borrowings, after charging debt discount of EUR 0.6 million to additional paid in capital in 2003, was EUR 1.0 million.

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