Exhibit 99.5
CARDS INC. LIMITED
Financial Statements for the
year ended 31st July 2005
Registered Office
25 School Lane
Bushey
Herts. WD23 1SS
25 School Lane
Bushey
Herts. WD23 1SS
| Registered Number: | 3329087 (England and Wales) | |
| Director: | Darren Epstein | |
| Secretary: | Paul Freedman |
| Contents | Page | |
| Report of the director | 2 – 4 | |
| Auditors report | 5 – 6 | |
| Profit and Loss Account | 7 | |
| Balance Sheet | 8 | |
| Cash Flow Statement | 9 | |
| Accounting Policies | 10 – 11 | |
| Notes to the Accounts | 12 – 18 |
CARDS INC. LIMITED
Independent auditors’ report to the shareholders of Cards Inc. Limited.
We have audited the financial statements of Cards Inc. Limited for the year ended 31st July 2005 which comprise a Profit and Loss Account, Balance Sheet, Cash Flow Statement and the related notes on pages 9 to 17. The financial statements have been prepared under the historical cost convention and the accounting policies set out therein.
This report is made solely to the company’s shareholders, as a body, in accordance with section 235 of the Companies Act 1985. Our work has been undertaken so that we might state to the company’s shareholder those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As described in the Statement of Director’s Responsibilities the company’s director is responsible for the preparation of the accounts in accordance with applicable law and United Kingdom Accounting Standards.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom Auditing Standards.
We report to you our opinion as to whether the accounts give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Director’s Report is inconsistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding director’s remuneration and transactions with the company is not disclosed.
We read the Director’s Report and consider the implications for our report if we become aware of any apparent misstatements within it.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial
2
CARDS INC. LIMITED
Independent auditors’ report to the shareholders of Cards Inc. Limited.
Basis of audit opinion(continued)
statements. It also includes an assessment of the significant estimates and judgements made by the director in the preparation of the financial statements, and whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanation which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state of the company’s affairs at 31st July 2005 and of its loss for the year then ended and have been properly prepared in accordance with the Companies Act 1985.
| /s/ Leslie Woolfson & Co. | ||
| Profex House | ||
| 25 School Lane | Leslie Woolfson & Co. | |
| Bushey | Chartered Accountants and | |
| Herts. WD23 1SS | Registered Auditors | |
19th December 2006
3
CARDS INC. LIMITED
Profit and Loss Account for the year ended 31st July 2005
| Note | 2005 | 2004 | ||||||||||
| £ | £ | |||||||||||
| TURNOVER | 1 | 13,679,800 | 18,487,021 | |||||||||
| Cost of sales | (10,930,224 | ) | (15,132,301 | ) | ||||||||
| GROSS PROFIT for the year | 2,749,576 | 3,354,720 | ||||||||||
| Distribution costs and administrative expenses | 2 | (3,258,554 | ) | (2,814,068 | ) | |||||||
| Operating (loss)/profit | 3 | (508,978 | ) | 540,652 | ||||||||
| Interest receivable and similar income | 4 | 19,844 | 11,435 | |||||||||
| Interest payable and similar charges | 5 | (120,435 | ) | (25,934 | ) | |||||||
| (Loss)/Profit on ordinary Activities before taxation | (609,569 | ) | 526,153 | |||||||||
| UK tax refund/(taxation) on loss/(profit ) on ordinary activities | 6 | 148,478 | (137,956 | ) | ||||||||
| (Loss)/Profit on ordinary Activities after taxation | (461,091 | ) | 388,197 | |||||||||
| Retained (Loss)/Profit For the financial year | 13 | £ | ( 461,091 | ) | £ | 388,197 | ||||||
Continuing Operations
Turnover and operating loss derive wholly from continuing operations.
Statement of total recognised gains and losses
The company has no recognised gains or losses other than the loss for the current period.
4
CARDS INC. LIMITED
Balance Sheet as at 31st July 2005
| Note | 2005 | 2004 | ||||||||||
| £ | £ | |||||||||||
FIXED ASSETS | ||||||||||||
| Tangible assets | 7 | 206,574 | 128,595 | |||||||||
CURRENT ASSETS | ||||||||||||
| Stocks | 8 | 3,624,785 | 847,228 | |||||||||
| Debtors | 9 | 3,114,115 | 4,871,241 | |||||||||
| Cash at bank | 1,539,067 | 1,718,047 | ||||||||||
| 8,277,967 | 7,436,516 | |||||||||||
Creditors: amounts falling due within one year | 10 | (7,461,348 | ) | (6,090,737 | ) | |||||||
| Net current assets | 816,619 | 1,345,779 | ||||||||||
| Total assets less current liabilities | 1,023,193 | 1,474,374 | ||||||||||
| Creditors: amounts falling due after more than one year | 10 | (27,727 | ) | (14,600 | ) | |||||||
| Provision for liabilities | 11 | ( — | ) | (3,217 | ) | |||||||
Total net assets | 995,466 | 1,456,557 | ||||||||||
| Financed by: | ||||||||||||
CAPITAL and RESERVES | ||||||||||||
| Called — up Share Capital | 12 | 100,000 | 100,000 | |||||||||
| Profit and Loss Account | 13 | 895,466 | 1,356,557 | |||||||||
Shareholders’ funds — Equity | 995,466 | 1,456,557 | ||||||||||
Approved by the board of directors on 19th December 2006 and signed on its behalf:
D. Epstein director
5
CARDS INC. LIMITED
Cash Flow Statement
Year ended 31st July 2005
| Notes | 2005 | 2004 | ||||||||||
| £ | £ | |||||||||||
Reconciliation of operating profit to net cash inflow from operating activities | ||||||||||||
| Operating (loss)/profit | (508,978 | ) | 540,652 | |||||||||
| Depreciation charges | 65,401 | 42,011 | ||||||||||
| (Increase)/decrease in stocks | (2,777,557 | ) | 133,701 | |||||||||
| Decrease/(increase) in debtors | 1,757,126 | (2,497,285 | ) | |||||||||
| Increase in creditors | 210,896 | 1,313,403 | ||||||||||
Net cash (outflow) / inflow from operating activities | (1,253,112 | ) | (467,518 | ) | ||||||||
CASH FLOW STATEMENT | ||||||||||||
| Net cash (outflow)/inflow from operating activities | (1,253,112 | ) | (467,518 | ) | ||||||||
| Returns on investments and servicing of finance | 15 | (100,591 | ) | (14,499 | ) | |||||||
| Taxation | (124,294 | ) | (32,119 | ) | ||||||||
| Capital expenditure | 15 | (143,380 | ) | (108,400 | ) | |||||||
| (1,621,377 | ) | (622,536 | ) | |||||||||
| Financing | 15 | 796,004 | (228,545 | ) | ||||||||
| (Decrease) in cash | (825,373 | ) | (851,081 | ) | ||||||||
Reconciliation of net cash flow to movement in net debt | ||||||||||||
(Decrease) in cash | (825,373 | ) | (851,081 | ) | ||||||||
| (Increase)/decrease in debt & lease financing | (796,004 | ) | 213,945 | |||||||||
| Change in net debt | 16 | (1,621,377 | ) | (637,136 | ) | |||||||
| Net funds at 1st August | (623,435 | ) | 13,701 | |||||||||
| Net funds at 31st July | (2,244,812 | ) | (623,435 | ) | ||||||||
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CARDS INC. LIMITED
ACCOUNTING POLICIES
Year ended 31st July 2005
The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards.
The following accounting policies have been applied:
Turnover
Turnover represents amounts derived from ordinary activities at invoiced amount less VAT where applicable.
Foreign Currencies
Transactions in foreign currencies are translated into Sterling and recorded at the rate ruling at the date of receipt or payment.
Stocks
Stocks are valued at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving stocks. Cost includes all direct expenditure.
Taxation
Corporation tax is provided on taxable profits at the current rate.
Deferred Taxation
Full provision is made for deferred taxation resulting from timing differences between the recognition of gains and losses in the accounts and their recognition for tax purposes.
Deferred tax is calculated at the tax rates which are expected to apply in the periods when the timing differences will reverse.
Depreciation
Depreciation has been provided at the following rates in order to write off the assets over their estimated useful lives.
| Plant | 20% per annum on cost | |
| Motor Vehicle | 25% per annum on cost |
The director does not feel the charge in the current period will materially affect any comparison with the comparative figures.
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CARDS INC. LIMITED
ACCOUNTING POLICIES
Year ended 31st July 2005
(continued)
Leasing and hire purchase commitments
Rentals paid under operating leases are charged to income on a straight line basis over the lease term.
Assets held under finance leases are capitalised and depreciated over their useful lives. The corresponding lease obligation is treated in the balance sheet as a liability. The interest element of rental obligations is charged to profit and loss account over the period of the lease at a constant proportion of the balance of capital repayments outstanding.
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CARDS INC. LIMITED
Notes forming part of the financial statements for the year ended 31st July 2005.
1. TURNOVER
The turnover and result before taxation is attributable to the sales of cards and collectibles.
Turnover is attributable to one continuing activity, the sales of cards and collectibles.
| 2005 | 2004 | |||||||
| £ | £ | |||||||
| Turnover is analysed by market below: | ||||||||
| United Kingdom | 11,082,479 | 12,215,780 | ||||||
| E.E.C. | 1,956,096 | 5,431,076 | ||||||
| Non — E.E.C | 641,225 | 840,165 | ||||||
| 13,679,800 | 18,487,021 | |||||||
2. DISTRIBUTION COSTS and ADMINISTRATIVE EXPENSES | ||||||||
| Distribution costs | 1,501,123 | 1,219,869 | ||||||
| Administration expenses | 1,757,431 | 1,594,199 | ||||||
| 3,258,554 | 2,814,068 | |||||||
3. OPERATING (LOSS)/PROFIT | ||||||||
| This is stated after charging: | ||||||||
| Director’s remuneration | 144,000 | 245,000 | ||||||
| Auditors remuneration | 11,000 | 11,000 | ||||||
| Non — audit services | 4,000 | 4,000 | ||||||
| Operating lease charges: | ||||||||
| Land and buildings | 183,143 | 136,400 | ||||||
| Hire of plant | 7,544 | 7,016 | ||||||
| Depreciation of tangible fixed assets: | ||||||||
| Owned | 56,290 | 36,803 | ||||||
| Held under finance lease | 9,111 | 464 | ||||||
| Loss on sale of fixed asset | 3,756 | 4,744 | ||||||
4. INTEREST RECEIVABLE | ||||||||
| Bank interest received | 19,844 | 11,435 | ||||||
5. INTEREST PAYABLE AND SIMILAR CHARGES | ||||||||
| Bank loans and overdrafts | 115,985 | 23,529 | ||||||
| Finance charges in respect of finance leases | 4,450 | 2,405 | ||||||
| 120,435 | 25,934 | |||||||
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CARDS INC. LIMITED
Notes forming part of the financial statements for the year ended 31st July 2005.
| 2005 | 2004 | |||||||
| £ | £ | |||||||
6. TAXATION | ||||||||
| UK Corporation tax: | ||||||||
| Tax refund (tax) on income for the year | 137,000 | (137,344 | ) | |||||
| (see below) | ||||||||
| Deferred tax: | ||||||||
| Origination and reversal of timing differences. | 11,478 | (612 | ) | |||||
| Tax refund (tax) on profit on Ordinary activities | 148,478 | (137,956 | ) | |||||
| 2004: | ||||||||
| The tax assessed for the period is lower than the standard rate of corporation tax in the U.K. (30%). | ||||||||
| The differences are explained below: | ||||||||
| Loss on ord. activities before tax | 609,569 | — | ||||||
| Profit on ord. activities before tax | — | 526,153 | ||||||
| Profit on ordinary activities multiplied by the standard rate of UK Corporation tax (30% — 2004:30%) | — | 157,846 | ||||||
| Tax refund | (137,000 | ) | ||||||
| Effects of: | ||||||||
| Expenses not deductible for tax purposes | — | 8,219 | ||||||
| Capital allowances for year (in excess) of depreciation | — | (2,476 | ) | |||||
| Marginal rate relief | — | (26,245 | ) | |||||
| (Refund) tax on income for the period | (137,000 | ) | 137,344 | |||||
The company rate of 30% has been used as the director considers that this rate is the most convenient for comparison purposes.
Factors that may affect future tax charges:
It is likely in future years that capital allowances will be in excess of depreciation.
The tax claim for the year ended 31st July 2005 is restricted to the actual tax liability for the previous year.
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CARDS INC. LIMITED
Notes forming part of the financial statements for the year ended 31st July 2005.
7. TANGIBLE ASSETS
| Motor | ||||||||||||
| Plant | Vehicle | Total | ||||||||||
| £ | £ | £ | ||||||||||
| COST: | ||||||||||||
| As at 1st August 2004 | 152,129 | 22,264 | 174,393 | |||||||||
| Additions | 122,511 | 38,495 | 161,006 | |||||||||
| Sales | — | (22,264 | ) | (22,264 | ) | |||||||
| As at 31st July 2005 | 274,640 | 38,495 | 313,135 | |||||||||
| DEPRECIATION | ||||||||||||
| As at 1st August 2004 | 45,334 | 464 | 45,798 | |||||||||
| Charge for the period | 56,290 | 9,111 | 65,401 | |||||||||
| Charge on sales | — | (4,638 | ) | (4,638 | ) | |||||||
| As at 31st July 2005 | 101,624 | 4,937 | 106,561 | |||||||||
| Net Book Value | ||||||||||||
| As at 31st July 2005 | 173,016 | 33,558 | 206,574 | |||||||||
| As at 31st July 2004 | 106,795 | 21,800 | 128,595 | |||||||||
The net book value of the motor vehicle £33,558 (2004 - £21,800) is in respect of an asset held under a finance lease. The depreciation charge in respect of the asset amounted to £4,937 — (2004 - £464 ).
| 2005 | 2004 | |||||||
| £ | £ | |||||||
8. STOCKS | ||||||||
| Cards and collectibles for re-sale | 3,624,785 | 847,228 | ||||||
9. DEBTORS | ||||||||
| Trade | 2,880,039 | 4,775,345 | ||||||
| Other | 234,076 | 95,896 | ||||||
| 3,114,115 | 4,871,241 | |||||||
10. CREDITORS | ||||||||
| Falling due within one year: | ||||||||
| Bank overdrafts (secured) | 2,965,975 | 2,326,882 | ||||||
| Bank loan accounts (secured) | 785,000 | — | ||||||
| Finance lease obligations | 5,177 | 7,300 | ||||||
| Trade | 2,426,646 | 2,295,749 | ||||||
| Other | 1,075,671 | 1,072,905 | ||||||
| Taxation and social security | 201,923 | 124,690 | ||||||
| Corporation tax | 956 | 263,211 | ||||||
| 7,461,348 | 6,090,737 | |||||||
| Falling due after more than one year: | ||||||||
| Finance lease obligations | 27,727 | 14,600 | ||||||
| 27,727 | 14,600 | |||||||
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CARDS INC. LIMITED
Notes forming part of the financial statements for the year ended 31st July 2005.
The bank loans are secured on the company’s assets by way of a debenture dated 24th February 1999.
The company has annual commitments under non-cancellable operating leases which expire as follows:
| 2005 | 2004 | |||||||||||||||
| Land and | Land and | |||||||||||||||
| buildings | other | buildings | other | |||||||||||||
| £ | £ | £ | £ | |||||||||||||
| Operating leases which expire | ||||||||||||||||
| Within one year | — | — | 56,100 | — | ||||||||||||
| In the 2nd to 5th year inclusive | — | 7,544 | 13,800 | 7,016 | ||||||||||||
| Over 5 years | 249,170 | — | 122,090 | — | ||||||||||||
| 249,170 | 7,544 | 191,990 | 7,016 | |||||||||||||
| 2005 | 2004 | |||||||
| £ | £ | |||||||
11 PROVISION for LIABILITIES — deferred taxation | ||||||||
| At beginning of the year | 3,217 | 2,605 | ||||||
| Charge for year in the profit and loss account | (3,217 | ) | 612 | |||||
| At end of year | — | 3,217 | ||||||
| The amounts provided are as follows: | ||||||||
| Accelerated capital allowances | — | 3,217 | ||||||
12. CALLED-UP SHARE CAPITAL | ||||||||
| Authorised: | ||||||||
| 100,000 Ordinary shares of £1 each | 100,000 | 100,000 | ||||||
| Allotted, called-up and fully paid: | ||||||||
| 100,000 Ordinary shares of £1 each | 100,000 | 100,000 | ||||||
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CARDS INC. LIMITED
Notes forming part of the financial statements for the year ended 31st July 2005.
| 2005 | 2004 | |||||||
| £ | £ | |||||||
13. PROFIT AND LOSS ACCOUNT | ||||||||
| Balance as at 1st August 2004 | 1,356,557 | 1,068,358 | ||||||
| Retained (loss)/profit for the year | (461,091 | ) | 388,197 | |||||
| less: increase in issued share capital | — | (99,998 | ) | |||||
| Balance as at 31st July 2005 | 895,466 | 1,356,557 | ||||||
14. RECONCILIATION of MOVEMENT in SHAREHOLDER’S FUNDS
| 2005 | 2004 | |||||||
| £ | £ | |||||||
| At 1st August 2004 | 1,456,557 | 1,068,360 | ||||||
| (Loss)/ Profit for the financial year | (461,091 | ) | 388,197 | |||||
| At 31st July 2005 | 995,466 | 1,456,557 | ||||||
| Shareholder’s Funds: Equity | 995,466 | 1,456,557 | ||||||
15. GROSS CASH FLOWS | ||||||||
Returns on investments and servicing of finance | ||||||||
| Interest receivable | 19,844 | 11,435 | ||||||
| Interest payable | (115,985 | ) | (23,529 | ) | ||||
| Interest element of finance lease rentals | (4,450 | ) | (2,405 | ) | ||||
| (100,591 | ) | (14,499 | ) | |||||
Capital expenditure | ||||||||
| Payments to acquire tangible fixed assets | (161,006 | ) | (114,000 | ) | ||||
| Receipts from sales of tangible fixed assets | 17,626 | 5,600 | ||||||
| (143,380 | ) | (108,400 | ) | |||||
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CARDS INC. LIMITED
Notes forming part of the financial statements for the year ended 31st July 2005.
| 2005 | 2004 | |||||||
| £ | £ | |||||||
Financing | ||||||||
| Loan (repayments) | 785,000 | (219,987 | ) | |||||
| Capital element of finance lease payments | 11,004 | (8,558 | ) | |||||
| 796,004 | (228,545 | ) | ||||||
16. ANALYSIS of CHANGES in NET DEBT
| At 1/8/04 | Cash flows | At 31/7/2005 | ||||||||||
| £ | £ | £ | ||||||||||
| Cash at bank | 1,718,047 | (178,980 | ) | 1,539,067 | ||||||||
| Overdrafts | (2,319,582 | ) | (646,393 | ) | (2,965,975 | ) | ||||||
| (825,373 | ) | |||||||||||
| Debt due within 1 year | — | (785,000 | ) | (785,000 | ) | |||||||
| Hire Purchase | (21,900 | ) | (11,004 | ) | (32,904 | ) | ||||||
| (796,004 | ) | |||||||||||
| Total | (623,435 | ) | (1,621,377 | ) | (2,244,812 | ) | ||||||
Cash at bank relates to monies at the company’s bankers on current account and any interest bearing accounts held on short term notice.
17. DIRECTOR
Staff costs include the following emoluments in respect of a director:
| 2005 | 2004 | |||||||
| £ | £ | |||||||
| Emoluments | 144,000 | 245,000 | ||||||
18. EMPLOYEES
Number of employees:
The average monthly number of employees (including the director) during the period was:
| 2005 | 2004 | |||||||
| no. | no. | |||||||
| Administration | 24 | 17 | ||||||
| Warehouse | 4 | 5 | ||||||
| Sales | 7 | 9 | ||||||
| 35 | 31 | |||||||
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CARDS INC. LIMITED
Notes forming part of the financial statements for the year ended 31st July 2005.
| Employment costs: | £ | £ | ||||||
| Wages and salaries | 994,442 | 969,759 | ||||||
| Social security costs | 147,203 | 77,294 | ||||||
| 1,141,645 | 1,047,053 | |||||||
19. CONTROLLING PARTY
Darren Epstein, the company’s director, controls the company as a result of controlling directly 92% ( 2004 — 100% ) of the issued Ordinary share capital. Mr. Epstein has lent money to the company on an interest free basis. The amount outstanding on this loan at 31st July 2005 was £405,810 (2004 — £237,659.)
20. RELATED PARTY TRANSACTIONS
During the year the company purchased, on normal commercial terms, goods to the value of £164,821 from Strictly Ink Limited, a company in which Darren Epstein is a director and materially interested as a shareholder. The company sold goods to this firm amounting to £983. The net balance due to Strictly Ink Limited at the end of the year was £14,662 (2004-£10,445)
Darren Epstein has given a personal guarantee up to £150,000 to the company’s bankers to secure any borrowings by the company.
21. In the year ended 31st July 2005 bank charges have been included in ‘Administration expenses’. This is a departure from previous accounts which included the expense in ‘Interest payable and similar charges’. As a result of this change in accounting practice certain comparative figures have been restated.
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