ZOO DIGITAL GROUP PLC 
 
ANNUAL REPORT 
 
YEAR ENDED 31 MARCH 2010 ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 2 - 
 
 
25/06/2010/16:22:35 
WELCOME TO ZOO DIGITAL GROUP PLC 
 
We live at a time where everyday products are made for and sold to global audiences, and where efficiency 
is a word on every CEO’s lips.  Companies around the world and in practically every sector are repurposing 
creative media to suit the languages and customs of local audiences, yet this is a complex and costly 
process. 
 
At ZOO we are helping global organisations to save millions every year using our workflow automation 
systems.  In the entertainment industry we have helped major Hollywood studios to prepare worldwide 
video products in a fraction of the time using far fewer people. 
 
Our media collaboration platform and productivity software has been proven in some of the world’s most 
demanding organisations.  We are now poised to grow the business in entertainment and other markets. 
 
Why ZOO? 
 A capital growth strategy to deliver scalable software and software-led services 
 Products licensed as Software-as-a-Service and priced according to throughput giving a high proportion of 
recurring revenues 
 Established and proven with large film studios where there are opportunities to cross-sell to additional 
business units 
 Identified new product opportunities that will enable additional revenues to be generated from existing 
customers 
 Significant opportunities for existing products with other players in the entertainment market 
 Working with partners to deliver existing products into new markets such as pharmaceuticals and cosmetics 
 
 
 
Contents 
03 Highlights 
04 Group at a Glance 
06 Chairman's Statement 
07 Chief Executive's Statement 
11 Financial Review 
13 Directors and Advisors 
16 Directors' Report 
20 Corporate Governance Report 
22 Directors Remuneration Report 
25 Independent Auditors' Report 
26 Consolidated Statement of Comprehensive Income 
27 Consolidated Statement of Financial Position 
28 Company Statement of Financial Position 
29 Consolidated Statement of Changes in Equity 
29 Company Statement of Changes in Equity 
30 Consolidated Statement of Cash Flows 
31 Company Statement of Cash Flows 
32 Notes to the Financial Statements 
59 Group Directory 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 3 - 
 
 
25/06/2010/16:22:35 
HIGHLIGHTS 
 
Operational highlights 
• Continuing strong organic growth with existing major Hollywood studio where now engaged with four separate 
business units 
• Secured first engagement with a second major Hollywood studio and a further mid sized studio 
• Completed assignments for a number of other media companies 
• Expanded product offering in the areas of web-based collaboration and Blu-ray production and secured first 
customers 
• Further value driven from existing toolset  
• Post period end announcement of proposed strategic investment of $1.2m and partnership with Multi 
Packaging Solutions, Inc., a value-added print-based packaging solutions company enabling expansion of 
ZOO’s business into new markets 
Financial highlights 
• Revenue up 33% to $15.1m (2009: $11.3m) 
• Adjusted EBITDA of $1.6m (2009: Loss $0.1m)* 
• Adjusted operating profit of $0.8m (2009: Loss $0.7m)* 
• Cash generated from operating activities $2.1m (2009: $1.4m)  
• Year end cash balance $1.2m (2009: $1.4m) 
• Payment of final deferred consideration for Scope Seven acquisition and repayment of SYIF loan 
• No debt other than Convertible Unsecured Loan Stock for £3.54m ($5.1m) at 6% redeemable Q4 2011 held by 
major shareholders 
• Change in reporting currency to US$ reduces reporting inconsistencies for future years  
* Adjusted EBITDA and operating profit are stated before exchange gain on intercompany transactions and exceptional 
impairment. 
 
 
 
 
 
 
Revenue
6.6
11.3
15.1
$m
   
Operating profit*
(3.7)
(0.7)
0.8
$m
 
08 09 10  08 09 10 
 
*Operating profit/(loss) before exchange gain on intercompany transactions and exceptional impairment 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 4 - 
 
 
25/06/2010/16:22:35 
GROUP AT A GLANCE  
 
“Smarter Workflows for Global Media”  
 
At ZOO we enable global organisations to develop, process and deploy creative media content.  Using our 
innovative workflow optimisation software we deliver significant efficiency gains, benefiting our customers with 
savings of time and cost. 
 
Creating media for global distribution is a labour-intensive, time-consuming process for most companies. Our 
software efficiently automates complex production tasks. Our project management software links the many 
pieces together and takes care of the management of the process.  We license our proprietary software to 
businesses that need to adapt their media for different formats and languages.  Our software is used by film 
studios and TV content makers to prepare their products for international sale and licensing. 
 
For businesses that don’t have an in-house technical capability, we offer full implementation, creative and 
production services that use our own software to deliver rapid, accurate results at a very competitive price. 
 
We specialise in a number of areas, from the authoring of physical and digital video products for DVD-Video, 
Blu-ray Disc and Electronic Sell-Through formats, to the translation and production of video menus, website 
artwork, and even an entire range of printed marketing materials. Our on-line systems are used to manage our 
customers’ projects from start to finish. 
 
For businesses that are looking to either outsource the management and distribution of digital media globally, 
or for those wishing to enhance an in-house operation with our software, we can offer a solution developed 
and proven in some of the world’s most demanding marketplaces, including leading Hollywood studios. 
 
Our software is priced to reflect the benefit it brings to our customers.  Our online systems are licensed as 
Software-as-a-Service while our production tools are priced according to throughput.  This provides us with 
recurring revenue streams and ensures that our interests are perfectly aligned with those of our customers. 
 
Software Solutions 
ZOO provides a comprehensive suite of web-based software and desktop tools to support digital media 
production.  ZOO’s Media Collaboration Platform provides web-based services enabling users of different 
disciplines and across worldwide locations to work efficiently together, such as graphic designers, production 
artists, translators, video disc authors and QC operators.  A number of desktop tools are included in the suite 
to perform specific functions, such as video product authoring and automated quality control, and these are 
integrated with the Media Collaboration Platform.  Together, our web-based software and desktop tools work 
closely together to deliver enhanced efficiencies for our customers. 
 
Media Adaptation Tool 
MAT provides a production workflow for artwork such as product packaging and posters, automating the 
localisation process traditionally performed by highly skilled pre-press operators and graphic artists. 
 
Templated Authoring System 
TAS is a workflow automation system for the efficient creation of physical and digital video-based products 
such as DVDs, Blu-ray Discs and Electronic Sell-Through platforms.  It makes a costly and laborious process 
quick and easy. 
 
Menu Regionalisation Tool 
MRT automates the previously manual process of creating menu assets for physical and digital video products 
in multiple languages and has been shown in independent customer benchmarks to reduce time by up to 90%. 
 
Translation Management System 
TMS is an important component of the Media Collaboration Platform that allows clients to manage global 
projects with complex media workflows and thousands of translations. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 5 - 
 
 
25/06/2010/16:22:35 
Services 
We provide a range of value-added services to support our software licensing proposition.  Our services 
include the following: 
 
Authoring and Compression 
We provide a turn-key solution for media publishers from designing disc menus to authoring and compressing 
video for physical and digital video platforms, including DVD, Blu-ray Disc, video on demand and a host of 
Electronic Sell Through platforms. 
 
Video and Post Production 
We operate an in-house video and post-production facility. We provide complete support for materials like 
bonus features, electronic press kits, trailers and TV spots. 
 
Localisation 
When our customers are synchronizing physical and electronic video products and marketing material for a 
single, global release, localisation cannot be an afterthought. Producing materials that work in every region 
and language is a complex undertaking at which ZOO excels. 
 
Creative 
Our creative team includes designers, animators, visual effects artists and editors who specialize in the unique 
needs of global media producers and marketers. 
 
Consulting 
Our consulting team helps clients implement centralised workflows for localising media releases and marketing 
materials. We bring all of our creative, production and technological expertise to bear on the challenge of 
building efficient, effective global strategies for our customers. 
 
 
 
 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 6 - 
 
 
25/06/2010/16:22:35 
CHAIRMAN’S STATEMENT 
 
The board is pleased to report a strong performance ahead of market expectations for ZOO during the last financial 
year. Our revenues increased by 33% to $15.1m (2009: $11.3m), we achieved an operating profit (before exchange 
gain on intercompany transactions and exceptional impairment) of $821,000 (2009: loss of $745,000), and our cash 
generation improved to $2.1m (2009: $1.4m). Since nearly all of our revenue and over 70% of our costs are now 
incurred in US dollars, the board decided that ZOO’s functional and presentational currency should be changed from 
pound sterling to US dollars. This change in reporting currency has introduced some inevitable complications in the 
comparisons between this year’s results and last year’s, but we believe that it is in the best long term interests of 
shareholders to report in this way.  Notwithstanding the reporting currency, we regularly review our currency hedging 
position to mitigate the risk of exchange rate movements, although it is not economic to completely eliminate such risk. 
 
The Hollywood studios and other large media companies are looking for better ways to create, manage and distribute 
their content, while developments such as the adoption of High Definition TV and video, 3D, and web-based distribution 
of video, present them with particular challenges. ZOO’s innovative range of software and services, combined with our 
expert knowledge of the sector, have helped our customers automate and improve their workflow, and positioned us at 
the heart of their businesses. A range of licensing, software-as-a-service (SaaS), and pay-per use business models 
helps us develop long-lasting relationships with, and recurring revenues from, our customers.  
 
During the year we continued to deepen our relationship with our largest Hollywood customer, extending the number, 
type and geographic scope of the products and services which we provide to them. We are particularly pleased to be 
able to announce since the end of the year that another major Hollywood studio has now begun adoption of our 
technology and services. In a further significant step towards reducing our dependency on a small number of large 
customers, we announced in June 2010 a partnership with Multi Packaging Solutions Inc (MPS), which offers us an 
exciting opportunity to apply our existing technology to the management of printing and packaging media for the 
pharmaceutical and other sectors outside entertainment. 
 
ZOO is now positioned with a highly relevant set of products and services which help businesses deal with and profit 
from the impact of the digital revolution on the creation, management and distribution of all media. Our team has again 
shown itself capable of rapid development and delivery of highly innovative products and services, we count some of 
Hollywood’s major studios as our best customers, and are beginning an alliance with MPS to apply our technology 
outside of the entertainment sector. Therefore I hope that all our shareholders will share my confidence in the future 
prospects of the group. 
 
 
Board Changes 
 
Gordon Doran was appointed to the main board during the year in recognition of the importance of our Los Angeles 
based operation to the success of ZOO. Gordon has held senior positions in sales and marketing for a number of 
software companies in the USA and the UK. He was formerly Chief Operating Officer for Mediostream Inc. and joined 
ZOO in 2005 to establish our North American division. In his role as President he is responsible for all North American 
operations and has been central to the development of our relationships with a number of large US entertainment 
companies.  
 
On 28 April 2010 Christopher Honeyborne decided, in line with best practice, that he should stand down from the board 
after ten years service as a non-executive director, of which the last four were as Chairman.  ZOO has benefited greatly 
from Christopher’s stewardship and wise counsel, and on behalf of the board I extend my sincere thanks to him for his 
contribution to the transformation of the group.  I was delighted to be appointed as successor to Christopher, and look 
forward to working with the board to help build substantial and sustainable value for our shareholders. 
 
 
 
Roger D Jeynes 
Chairman 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 7 - 
 
 
25/06/2010/16:22:35 
CHIEF EXECUTIVE’S STATEMENT 
Introduction 
At ZOO we design innovative computer software to enable our customers to become more efficient.  Our customers are 
global organisations that develop, process and deploy creative media content used in digital and physical products, 
most usually video and digital images that are repurposed for different formats and languages.   
 
We are helping leading Hollywood film studios to take their movies to market in different packages – physical discs as 
well as digital downloads.  TV program makers have used our software to prepare their content for licensing to networks 
all around the world.  Film distributors are producing co-ordinated marketing campaigns for blockbuster releases in as 
many as 60 different languages.  The chances are that if you go to the cinema or watch movies at home then you will 
have seen productions where our software has been instrumental in delivering content to audiences all around the 
world. 
 
That a company in Sheffield should play a significant part of the operations of leading global organisations is unusual.  
ZOO is no ordinary company.  Our success stems from our entrepreneurial spirit and an innovative approach to solving 
business problems and tackling workflow inefficiencies.  We have built a suite of software that redefines the way in 
which our customers work with their creative media – we automate and centralise activities that are normally done 
manually by highly skilled operators.  We bring significant efficiencies in time and cost to our customers.  
 
ZOO has been transformed since I became CEO in 2006, during which time our new management team has redefined 
the business proposition, divested non-core assets and focused on delivering profitable revenues based on a clearly 
differentiated offering.  We passionately believe in our winning proposition and that it will demonstrate excellent growth 
and deliver enhanced shareholder value. 
Operational Review 
We are delighted with the excellent progress we have made over the past year in delivering solid results that have 
exceeded market expectations. 
Organisation 
Our corporate headquarters and software product development centre is in Sheffield while our commercial operation 
and implementation and production services facility is based in Los Angeles.  This arrangement gives us cost effective 
R&D with client services close to our customer base. 
 
During the year we have grown our talented team of software technologists to respond to the numerous new product 
opportunities that we continue to uncover.  Our Sheffield team of around 35 staff is made up mostly of software 
engineers, quality assurance engineers, product managers and others in supporting roles.   
 
Our facility in Los Angeles accommodates a further 71 staff who are located close to our major customers and provide a 
range of value-added client services.   
Sales and Marketing 
Due to the niche nature of our video-based offerings we are able to be highly targeted in our sales efforts, identifying 
first the organisations that we believe will gain the biggest benefits from the use of our software, and then the key 
decision makers within those businesses.  Our focus to date has been primarily in the filmed entertainment market 
where we aim to license software and provide related value-added services directly to brand owners. 
 
In contrast, our proposition for automated repurposing of digital imagery has a much broader appeal.  Since our 
entertainment customers create global marketing campaigns for their movies and TV programs, our initial commercial 
efforts have been within this market.  Over the course of the last year we have deployed these solutions for three major 
customer groups and now have several hundred users working on product packaging and marketing campaigns at 
locations around the world. 
 
We believe there is significant potential for our proposition outside the entertainment industry and have begun our 
search for strategic partners with whom we can work closely to secure new business in other markets.  We recently 
announced a relationship with Multi Packaging Solutions Inc., a US print-based packaging solutions company with 
customers in healthcare, media, cosmetics and value added consumer markets.  We are excited to be working closely 
with MPS over the coming months to secure new sales in the pharmaceuticals market, providing ZOO with significant 
growth potential. 
Products 
During the course of the year we have continued to broaden our product proposition by introducing the first component 
of our internet accessible Media Collaboration Platform – the Translation Management System (TMS).  This is a 
workflow automation solution that enables multiple operators around the world to collaborate efficiently in the design  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 8 - 
 
 
25/06/2010/16:22:35 
and delivery of internationalised creative content.  Further components of the Media Collaboration Platform are currently 
under development. 
 
The TMS integrates with our range of desktop productivity applications which we have enhanced further, and also with 
a number of new tools that we released during the year.  These combinations of software are enabling significant 
savings of time and cost – one of our customers has been able to reduce the time taken to produce complex marketing 
campaigns by half through the use of the TMS in conjunction with our Media Adaptation Tool. 
 
Our revenues are based on throughput – products are priced according to usage, either as a Software-as-a-Service 
subscription or on a pay-per-use basis.  This gives us solid recurring revenues whilst also aligning our interests with 
those of our customers – we are motivated to make our products more powerful and easier to use which encourages 
customers to use them more widely, so increasing our revenues. 
 
We have secured further UK government grant funding to support our R&D efforts, this time in the form of a 
collaborative project supported by the Technology Strategy Board entitled “Commercialising Motion Picture Archives”.  
We will be working on new technologies in association with UK rights holders and production services companies that 
we expect will lead to new video-related products in the future. 
 
We launched a new toolset for the preparation of products on Blu-ray Disc and announced that a first major film studio 
has adopted this for creating international product releases.  We believe that Blu-ray Disc represents a significant area 
of new revenue for ZOO and this new toolset gives us a unique position in a growth market that we intend to exploit. 
 
The first of our workflow automation tools reached a milestone this year – the Menu Regionalisation Tool is used to 
create regionalised content for home entertainment products and in May we announced that it had been used to create 
more than 100,000 menus.  Like all our products, this tool provides an automated solution that enables significant 
savings of time and cost.  We have a number of further such automation products in the pipeline and continue to be 
proactive in protecting our intellectual property through patents wherever possible; we have more than 20 patents 
granted. 
 
Our product suite continues to deliver clear competitive advantages and significant barriers to entry, enabling a 
differentiated proposition that addresses our customers’ needs to reduce time and cost. 
Services 
Our customers often complement us on how easy we are to do business with.  We set the highest standard for 
customer relationships and our Los Angeles client-facing team consistently delivers on our customer expectations.  The 
services we offer are closely linked to our product offerings, including implementation and production support, and we 
have introduced new services in the course of the year to reflect the expanding scope of our software portfolio.  
Providing these value-added services is our key strategy to help customers transition smoothly from their traditional 
vendors and move to the progressive and scalable approach we bring. 
 
As we have built our reputation and earned the trust of our customers, we have been able in some cases to use 
services as a way to become involved in new areas of activity. Through first hand experience we build up knowhow that 
we can then use to design and build new automation tools.  These tools provide us with differentiation and the means to 
pass on cost savings to our customers. 
Markets 
While our focus to date has been primarily on the filmed entertainment market we are now poised to take our existing 
products into new areas.  The markets that are attractive to us are those that feature global companies producing 
creative content for many formats and languages.  These are often large US companies marketing products and 
services on a worldwide basis, and spending significant sums in repurposing creative content within the products 
themselves, or on packaging and marketing campaigns. 
 
The recent global economic changes have led to companies seeking cost saving opportunities more than ever before.  
Within the filmed entertainment market profit margins are under pressure and we have seen organisation-wide drives to 
cut costs.  Our proposition is therefore ideally placed to address these new customer requirements to make their 
operations more efficient. 
 
We are in the process of identifying partners to help us explore new markets for our existing products.  A first such 
initiative is with HudsonYards, the premedia division of The CAPS Group, a provider of integrated creative, marketing 
and production services for advertising agencies, design firms, publishing companies, and corporations worldwide. 
 
The focus of our direct sales and marketing efforts has been the filmed entertainment market.  Through a new strategic 
partnership with Multi Packaging Solutions Inc. we plan to make inroads into the pharmaceutical industry.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 9 - 
 
 
25/06/2010/16:22:35 
Entertainment 
Our growth has been achieved through a small number of large customers in the entertainment market.  While this may 
seem like a vulnerable position, we believe that it provides a strong platform for further growth since we are usually able 
to expand our business to several divisions of the same organisation.  The major Hollywood studios are quite diverse 
businesses structured as multiple divisions, yet the need to develop, process and deploy creative media is common to 
most of these divisions.  For our largest studio clients we are now working with four separate divisions, each largely 
autonomous and seeking ways to save time and cost. 
 
The proliferation of new consumer formats and platforms for delivery of home video over the past few years has led to a 
challenging economic situation for rights holders since content must now be prepared for multiple delivery formats in 
order to maximise sales.  This leads to a significant increase in costs and time to prepare new products for market, and 
is further compounded by the complexities of delivering regionalised content into many territories.  A growing proportion 
of content budgets will be spent on publishing across multiple devices and platforms and, based on the experience of 
the mobile phone industry, publishing costs could easily rise to 50% of total content budgets (source: Analysys Mason).  
Our proposition perfectly addresses this changing commercial landscape and provides brand owners with a way to 
reduce the costs of content repurposing across multiple platforms, formats and languages. 
 
We were pleased to announce a software licensing agreement with CBS Home Entertainment, responsible for creating 
products across all of the CBS Corporation lines of content including current hits, such as NCIS, Dexter and 90210, and 
classic series from the vast CBS library.  In an initiative to internalise production on selected titles, CBS Home 
Entertainment will use our products to design and produce certain titles in-house at its own facility, rather than 
outsource all of this work to traditional service providers. Our workflow automation systems enable video titles to be 
created quickly and easily without requiring specialist knowledge, and therefore can be used effectively by non-
specialist operators within the studio. 
 
In June 2010 we announced that a second major Hollywood film studio has adopted a solution using our Media 
Collaboration Platform. This allows the studio’s content from a variety of media to be repurposed and reused across 
multiple formats, from printed materials to on-line content and optical discs. We're particularly excited about working 
with another of the major brands in entertainment and providing a very broad solution that spans most of its formats. In 
the past, clients have licensed specific software products, but this client intends to use our Media Collaboration Platform 
in the most comprehensive way across its entire home entertainment business. This is a further validation of ZOO’s 
products and business model. 
 
Everyone is trying to standardise methods of managing content across multiple media and languages. We're at the 
forefront in this area and are now working with some of the biggest names in entertainment to establish these standards 
which we believe will be very widely adopted. 
 
Within the entertainment market we are tapping into areas of budgeted spend in activities currently outsourced to 
traditional service vendors.  We estimate that the total addressable market for our current portfolio of products is several 
hundreds of millions of dollars per year. 
Pharmaceutical 
In June 2010 we announced an exciting new development for ZOO in the form of a strategic partnership with Multi 
Packaging Solutions (MPS), a provider of value-added print-based packaging solutions.  We already share with MPS a 
number of film studio customers and we hope that our partnership will help us to grow our business further in this 
market, but the greatest value we anticipate from this new relationship is the entry it provides to customers in new 
markets.  Together with MPS we have identified the pharmaceutical market as being particularly receptive to our 
proposition for printed media adaptation, having similar characteristics to those we have seen in our entertainment 
market customers. 
 
The number of products introduced into international markets by healthcare companies is substantially greater than 
entertainment products, and therefore the partnership with MPS provides an exciting opportunity for us to scale the 
ZOO business by taking our existing products into clients of MPS.  We look forward to updating the market with our 
progress in due course. 
Strategy 
We have identified that there are many areas where creative media is developed by large corporations for international 
delivery involving work being outsourced to service vendors.  In many cases this work, while often highly complex, can 
be performed in a largely systematic fashion.  Our workflow automation software displaces manual labour, thereby 
delivering the potential for significant savings of time and cost when this software is licensed directly to the brand 
owners. 
 
Our licensing model is based on software utilisation and is levied as a combination of Software-as-a-Service 
subscription fees and usage fees, giving recurring and highly scalable revenues. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 10 - 
 
 
25/06/2010/16:22:35 
We develop and nurture open, transparent relationships with our clients and deliver to them first class customer service.  
This builds trust and fosters close collaborative working relationships that help us to uncover new areas of potential. 
 
Our competitors are usually traditional vendors providing labour-based services who tend to be inflexible and resistant 
to change.  Consequently we have a strong competitive advantage against them and our growth to date has been 
largely due to winning business from these companies. 
People 
 
Our current and future success is made possible only through our excellent people who continue to contribute to the 
business at the highest level.  Our product development team innovates relentlessly and delights our customers with 
high quality products, and our services and client-facing people succeed in taking our customer relationships to new 
heights.  On behalf of the Board I would like to extend my appreciation to all ZOO staff for their positive outlook and 
commitment to the business. 
Outlook 
I believe that ZOO is poised for an exciting future and I am confident that we will deliver further profitable growth from 
our current customers, the entertainment market and in new areas of activity.  The significant growth we have delivered 
to date has been achieved from a small customer base but the scalability of the business means that we can add new 
customers without significantly increasing headcount or cost base. 
 
We have made great strides in the development of our media platform in the past year and are now poised to scale the 
business through a wider rollout to new customers, with growth arising from licensing existing products in new markets 
and new products in existing markets, and delivering value-added services. 
 
We will continue to focus on major film studios and other global players in the entertainment market and are very 
enthusiastic about the new market openings that our strategic partnership with MPS brings.  
 
Stuart A Green 
CEO  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 11 - 
 
 
25/06/2010/16:22:35 
FINANCIAL REVIEW 
 
Year ended 31 March 2010 
 
The year ended 31 March 2010 was one of great financial progress.  The financial position at the end of the year is 
encouraging for the future. 
 
Reporting Currency 
Over the recent past an increasing proportion of the group’s trading transactions have been denominated in US dollars.  
In the year ended 31 March 2010 99% of revenue and 71% of costs were denominated in US dollars.  Consequently, 
the directors now consider US dollars to be more representative of the group’s operations, and therefore, with effect 
from 1 April 2009, the group has determined that its functional currency has changed from pound sterling to US dollars, 
and has elected to change its presentation currency from pound sterling to US dollars. 
 
The change in the functional currency does not in itself have any effect on the comparative figures, but due to the 
group’s outstanding convertible loan notes which are designated in pound sterling, the results now include an exchange 
loss deriving from currency movement on their principal value during the year; the comparative figures do not include an 
equivalent figure, since the functional currency at that time was pound sterling.  
 
The effect of changing the presentation currency has been to restate the comparative results by translating the figures 
in the Consolidated Statement of Comprehensive Income (“CSoCI”) at the prevailing exchange rate in the month of 
transaction, and the figures in the Consolidated Statement of Financial Position at the year end rate. However, the 
underlying comparative figures have not been reworked as if the functional currency had been the US dollar. The 
treatment adopted is that required by International Financial Reporting Standards. Consequently, the figures in the 
CSoCI relating to “exchange gain on intercompany transactions”, which arose from translation from US dollars into 
pound sterling in the prior year, have no comparable figure in the current year. 
 
We are required to show the exchange gains and losses in differing areas of the CSoCI which leads to difficulties in 
comparing the results for the two years.  Neither of the translation adjustments had any affect on the underlying 
business or on cash. Consequently, we have added a further analysis to the face of the CSoCI to help the reader of the 
statements to understand the true performance of the business.  
 
Results for the year 
The revenue for the period grew by 33% to $15.1m (2009: $11.3m).   
 
The margin earned in 2010 was $11.3m (75%) compared to $9.3m (82%) in 2009.  The reduction in the margin is due 
to the higher inclusion of work which is subcontracted to a third party supplier.  The subcontracted work earns a low 
margin compared to the other work we perform but offers a service required by our customers with minimal risk for 
ZOO. 
 
The overheads of the business have changed very little since the previous year.  On the face of the CSoCI the 
operating expenses show an increase from $8.4m to $11.5m but this includes the exchange gain on intercompany 
balances in 2009 and some exceptional impairment charges.  Once these are removed the other operating costs show 
an increase from $10.2m to $10.6m which is just 4% despite the significant increase in trade.  The overheads are 
primarily staff related costs which represent $7.2m of the operating expenses.   
 
We have taken advantage of grant funding throughout the period with a total amount of cash being claimed in 2010 of 
$0.6m (2009: $0.2m).  The amount recognised in the CSoCI is $0.2m (2009: $0.1m).  The amounts differ because 
some of the grant funding covers capital expenditure so is not recognised in the CSoCI.  We still have grant supported 
projects ongoing with over $0.7m of funding still available at the end of the financial year. 
 
In both 2009 and 2010 we have taken exceptional impairment charges on the write down of intangible assets from the 
purchase of Scope Seven LLC which took place in 2007.  In 2010 the charge is $0.9m and in 2009 it was $0.6m.  The 
assets impaired are software products that were developed by Scope Seven prior to our acquisition.  These 
developments were not significant in our decision to acquire the company but were an integral part of the assets on 
offer.  We have looked at deriving value from them and have concluded that, although there is potential future value, 
our commercial team is best employed on the ZOO developed products which show a higher potential reward.  
Consequently, the Board has made the decision that the assets should be fully impaired.  Following these impairment 
charges there are no further intangible assets arising from the acquisition aside from the goodwill on the transaction 
itself.  The goodwill retains its value as Scope Seven is providing a valuable service for ZOO and our clients and is 
generating profitability for the group.  The impairment of the intangibles has no impact on the trading operations and 
expectations.  There are no significant impairments required on the core assets developed by the ZOO team.   
 
An analysis of the result has been added to the CSoCI to help the reader to form a balanced view on the financial 
statements.  On this analysis we have highlighted the exchange gain which arose in 2009 when we were reporting in 
pound sterling and the exceptional impairment charges.  Removing these enables the reader to understand better the  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 12 - 
 
 
25/06/2010/16:22:35 
underlying performance of the business.  This analysis shows that ZOO achieved an operating profit for the year of 
$0.8m (2009: loss $0.7m) before these exceptional items.    
 
 
Cash flow and financial strength 
The net cash generated from operating activities increased considerably in the year with a result of $2.1m compared to 
$1.4m in 2009.   
 
The cash balance at 31 March 2010 was $1.2m (2009: $1.4m). 
 
During the year the remaining balance of $0.2m of loan notes issued on the acquisition of Scope Seven were repaid 
leaving the group with no debt other than the £3.54m ($5.1m) convertible loan note.  The convertible loan note matures 
in October 2011 and the Board’s expectation is that this will convert to equity.  Aside from this instrument, some leases 
for asset funding and the usual trade payables, ZOO has no debt. 
 
In addition to the cash within the business we have an on demand overdraft facility available for an amount of £0.5m 
(equivalent to $0.8m at the year end exchange rate) which gives a buffer for the peaks and troughs of cash flow 
throughout the trading year. 
 
Foreign currency 
With a change of reporting currency to US dollars and changes in the business over the past three years to match 
revenue and costs in US dollars the currency exposure has reduced.  From a trading perspective the foreign currency 
exposure is on the overheads denominated in pound sterling, primarily head office and product development costs. 
 
Within the trading business the currency exposure is controlled by monitoring exchange rates and planning transactions 
to take advantage of any changes.  Since the year end, we have entered forward exchange contracts to cover a portion 
of the expenditure we anticipate in pound sterling. 
  
The CSoCI shows an exchange loss of $0.3m on the translation of the convertible loan note.  This is required under 
IFRS and the only way we could mitigate reporting this loss is to enter a forward exchange contract to cover the loan 
note liability.  Since the liability is still some distance away and the expectation is for the loan note to convert into equity, 
we have chosen not to take out a forward exchange contract.  There would be no business benefits in such an action, 
merely an improvement to the reported position. 
 
Taxation 
Within the group ZOO has accumulated tax losses of $28m and consequently does not expect to pay taxes in the UK or 
the US for several years.  In the UK the group actively claims for R&D tax credits although the claims are limited since 
many projects are supported by grants so ineligible for tax credits.  
 
Summary 
With an increase in turnover of 33% to $15.1m ZOO has made a great deal of progress over the past 12 months and I 
share the Board’s optimism for the future.  With a change of reporting currency to US dollars the financial reporting will 
be clearer in future years as we will not have the unusual entries arising from the change in reporting currency.  We will 
continue to closely monitor the costs of the business and with no bank debts we are well placed for growth. 
 
 
Helen P Gilder 
Group Finance Director 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 13 - 
 
 
25/06/2010/16:22:35 
 
DIRECTORS AND ADVISERS 
 
Board of Directors 
 
Roger D Jeynes – Chairman (aged 57) 
Roger has over 20 years experience in the technology sector, encompassing senior sales, marketing and general 
management roles in the UK, Italy and the USA with IBM, Pyramid Technology, and EMC Corporation. From 1997 to 
2006 he was Chief Operating Officer at AIM-listed technology merchant bank Interregnum Plc through which he served 
on the boards of more than a dozen technology companies. He is a currently a non-executive director of Downing 
Distribution VCT1 (DDV1.L), Keycom plc, mxData Limited and Charborough Capital Limited, and Professor of 
Management Practice at the Ashcroft International Business School of Anglia Ruskin University. 
 
Dr Stuart A Green– Chief Executive Officer (aged 44) 
Stuart brings over 20 years of experience of team building and executive management in the software industry to his 
role as CEO. Prior to his appointment as CEO Stuart was Chief Technical Officer, where he was responsible for 
determining the technology strategy and expanding the core intellectual property of the company. Previously he 
founded Kazoo3D plc and prior to that was the co-founder of LightWork Design Limited where he served as Technical 
Director. Stuart received a Ph.D in Computer Science from the University of Bristol in 1989 for his research into 
multiprocessor systems for advance computer graphics. He is responsible for securing over 20 patents in the fields of 
image processing and digital media processing. 
 
Helen P Gilder– Group Finance Director (aged 43) 
Helen has been employed within the technical and services industry for over fifteen years. After qualifying as a 
Chartered Accountant with PKF in 1991 she moved into a more commercially focussed role. Her extensive managerial 
and transaction experience came through her role as Finance Director within a highly acquisitive listed IT company. She 
joined ZOO to assist with the initial float in 2000 as Group Financial Controller and has gathered an invaluable 
knowledge of the companies in the group. She became the Group Finance Director in 2006. 
 
Gordon Doran – Commercial Director (aged 43) 
Gordon has held senior positions in sales and marketing roles for a variety of companies in the software industry since 
the early 1990s, both in the UK and US. Most recently he was Chief Operating Officer for Mediostream Inc., a consumer 
DVD software developer, and joined ZOO in 2005 to establish a North American division. In his role as President he 
was responsible for all ZOO’s North America operations and has been pivotal in establishing relationships with a 
number of large US entertainment companies. Gordon became the Commercial Director in 2009. 
 
Ian C Stewart – Non-Executive Director (aged 56) 
Ian founded Gremlin Interactive Limited, a developer and publisher of computer games for consumers, in 1984. He 
grew that company organically and by strategic acquisition until 1997 when he floated it on the London Stock Exchange 
as Gremlin Group plc. Infogrames SA acquired Gremlin Group plc in 1999 at which point Ian founded The ZOO Media 
Corporation Limited, which was reversed into an AIM listed business in 2001 to form ZOO Digital Group plc. Ian is an 
honorary Doctor of Sheffield Hallam University and is an angel investor in a number of businesses. 
 
James A Livingston– Non-Executive Director (aged 29) 
James is an investment manager at Foresight Group, a leading UK asset manager. He works closely with 
the boards of a number of SME UK companies as non-executive director or board observer. Prior to 
Foresight James was a strategy consultant at Deloitte where he advised businesses in the healthcare, 
public sector and technology sectors. He has a first class degree in Natural Sciences and Management 
from Cambridge University and holds the CIMA advanced Diploma in Management Accounting. James has 
represented Great Britain at the Rowing World Championships and rowed for Cambridge in the Boat Race. 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 14 - 
 
 
25/06/2010/16:22:35 
Advisers 
 
Company Secretary and Registered Office 
Helen P Gilder 
ZOO Digital Group plc 
The Tower 
2 Furnival Square 
Sheffield 
S1 4QL 
 
Tel: 0114 241 3700 
 
Company no. 3858881 
 
Bankers 
Royal Bank of Scotland 
3
rd
 Floor 
2 Whitehall Quay 
Leeds 
LS1 4HR 
 
Nominated advisor and broker 
finnCap Limited 
4 Coleman Street 
London 
EC2R 5TA 
 
Auditors 
PKF (UK) LLP 
2
nd
 Floor 
Fountain Precinct 
Balm Green 
Sheffield 
S1 2JA 
 
Registrar 
Share Registrars Limited 
Suite E, First Floor 
Lion & Lamb Yard 
Farnham 
Surrey 
GU9 7LL 
 
Solicitors 
DLA Piper UK LLP 
1 St Paul’s Place 
Sheffield 
S1 2JX 
 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 15 - 
 
 
25/06/2010/16:22:35 
Senior Management 
 
Duncan A Wain – Chief Operating Officer (aged 47) 
 
Duncan joined ZOO following the acquisition of the assets of Scope Seven Inc. in August 2007. He co-founded Scope 
Seven in 1997 where he was responsible for operations and revenues from post-production, compression and 
authoring services provided to US entertainment companies. He is an accomplished executive in the Hollywood post 
production industry and has worked with many studios including Warner Home Video, Disney, 20th Century Fox, HBO, 
Lions Gate, New Line and the BBC. In his role as COO of ZOO Duncan is responsible for all production operations and 
for growing service revenues with studio clients. Duncan earned a Bachelors Degree in Business at Loyola Marymount 
University and is currently a member of New Media Council of the Producers Guild of America, an industry group that 
serves to represent the interests of professionals responsible for the art, craft and science of production in the 
entertainment industry. 
 
Simon L S Clark – Senior Vice President and Chief Marketing Officer (aged 46) 
 
Simon has worked in the pre-press industry since 1986 and has experience of setting up and rapidly growing 
businesses in a wide variety of geographical locations, for which he has developed customer relationships throughout 
Europe, Japan, Australia and the US. In 1998 Simon led the management buy-out of TM, a UK-based print and pre-
press service provider. In 2001 TM was acquired by AGI Media Inc. where Simon was appointed to the role of Senior 
Vice President of Creative Services based in the Los Angeles headquarters. Simon joined ZOO in 2006 to spearhead 
our business development in what is now referred to as the pre-media industry. 
 
 
Philip M Corio – Chief Technical Officer (aged 43) 
 
Phil has worked in the pre-press industry since 1985, most recently with AGI Media Inc, Los Angeles where he was 
Production Director working on the creation of marketing materials and special packaging for the entertainment 
industry. Phil joined ZOO in 2006 and has been instrumental in establishing the company’s product and service 
offerings for the pre-media marketplace. In his role as Chief Technical Officer, Phil is responsible for providing direction 
for ZOO’s product development efforts to differentiate the company’s service offerings for the entertainment industry. 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 16 - 
 
 
25/06/2010/16:22:35 
DIRECTORS’ REPORT 
 
The directors present their report on the affairs of the group, together with the financial statements and auditors' report, 
for the year ended 31 March 2010. 
 
Principal activities 
The principal activity of the group for the year under review was to provide productivity software tools and services for 
video post-production, pre-media and interactive markets and continue with ongoing research and development in 
those areas. 
 
Review of the Business and Future Developments 
A review of the development of the business together with an indication of future developments is included in the 
Chairman’s and Chief Executive’s statements set out on pages 6 to 10. 
The audited financial statements for the year ended 31 March 2010 are set out on pages 26 to 58. The directors do not 
recommend the payment of a dividend for the year. 
 
Change in Functional and Presentation Currency 
Over the recent past an increasing proportion of the group’s trading transactions have been denominated in US dollars. 
The directors now consider US dollars to be more representative of the group’s operations, and as a consequence with 
effect from 1 April 2009 the group has determined that its functional currency has changed from pound sterling to US 
dollars, and has elected to change its presentation currency from pound sterling to US dollars. 
 
The effect of the change in the functional currency has been to commence using the US dollar as the functional 
currency from 1 April 2009. This change does not in itself have any effect on the comparative figures, but since the 
convertible loan notes are designated in pound sterling, the results now include an exchange loss on the principle value 
of the loan notes deriving from currency movement during the year; the comparative figures do not include an 
equivalent figure, since the functional currency at that time was pound sterling.  
 
The effect of changing the presentation currency has been to restate the comparative figures by translating the figures 
in the Consolidated Statement of Comprehensive Income (“CSoCI”) at the average rate for the year, and the figures in 
the Consolidated Statement of Financial Position at the year end rate. However, the underlying comparative figures 
have not been reworked as if the functional currency had been the US dollar. The treatment adopted is that required by 
International Financial Reporting Standards. Consequently, the figures in the CSoCI relating to “exchange gain on 
intercompany transactions”, which arose from translation from US dollars into pound sterling, have no comparable 
figure in the current year. 
 
The directors recognise that the effect shown in the previous paragraph is non-recurring, whilst there will continue to be 
currency movements on the convertible loan notes. The directors recognise that the combined effect of these items may 
make it difficult for the reader of these financial statements to get a clear picture of the underlying trading and 
operational performance over the last two years. Consequently the CSoCI includes an analysis of operating profit/(loss). 
 
Research and development 
The group undertakes research and development into software solutions for media transformation.  The aim of the 
software developed is to improve efficiencies, therefore reducing time and costs of producing physical and digital video 
products. 
 
Charitable and political contributions 
During the year the group made no charitable or political donations. 
 
Employees 
Employee consultation 
The group places considerable value on the involvement of its employees and has continued to keep them informed on 
matters affecting them as employees and on the various factors affecting the performance of the group.  This is 
achieved through formal and informal meetings, questionnaires and regular feedback. 
 
Disabled employees 
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the 
applicant concerned.  In the event of members of staff becoming disabled every effort is made to ensure that their 
employment with the group continues and that appropriate training is arranged.  It is the policy of the group that the 
training, career development and promotion of disabled persons should, as far as possible, be identical with that of 
other employees. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 17 - 
 
 
25/06/2010/16:22:35 
Events after the reporting period 
On 15 April 2010 160,000 shares were issued following the exercise of employee share options. On the same day the 
Group purchased 160,000 of its own shares through ZOO Employee Share Trust Limited at an average price of $0.51 
(33p) per share. The total cost of the purchase was $81,660 (£52,800). 
 
On 25 June 2010 the company entered into an agreement, which is subject in part to the approval of the company’s 
shareholders, with Multi Packaging Solutions, Inc. Multi Packaging Solutions, Inc. will make a strategic investment of 
$1.2m (£0.8m) in the company.  This comprises of the allotment and issue of 2,148,642 new ordinary shares of $0.23 
(15p) each in the company, at a subscription price of $0.60 (40p) per share. It also comprises of, subject to the approval 
of the company's shareholders, a proposed issuance of warrants to subscribe for up to a maximum aggregate number 
of 2,148,642 new ordinary shares of 15 pence each in the company at a subscription price of $0.75 (50p) per share.  
Directors 
The directors who served during the year were as follows: 
Dr Christopher H B Honeyborne (1) Non-Executive Chairman 
Dr Stuart A Green Chief Executive Officer 
Helen P Gilder Group Finance Director 
Gordon Doran (2) Commercial Director 
James A Livingston (3) Non-Executive Director 
Matthew P Taylor (4) Non-Executive Director 
Ian C Stewart Non-Executive Director 
 
(1) Retired 28 April 2010 
(2) Appointed 28 July 2009 
(3) Appointed 12 June 2009 
(4) Retired 12 June 2009 
 
Roger Jeynes was appointed on 28 April 2010 and takes up the appointment of Non-Executive Chairman. 
 
Details of the interests in the shares of the company at the beginning or subsequent date of appointment and end of the 
financial year of those directors who held office at 31 March 2010 are disclosed in the Directors’ Remuneration report.  
In accordance with the company’s Articles of Association Stuart Green, Ian Stewart and Roger Jeynes retire by rotation 
at the next Annual General Meeting and, being eligible, offer themselves for re-election. 
 
Directors' indemnities 
The group has granted an indemnity to one or more of its directors against liability in respect of proceedings brought by 
third parties, subject to the conditions set out in the Companies Act 2006. The company has purchased and maintains 
directors' and officers' insurance cover against certain legal liabilities and costs for claims in connection with any act or 
omission by such director and officers in the execution of their duties. 
 
Policy and practice on payment of creditors 
The group’s policy is to settle terms of payment with suppliers when agreeing the terms of each transaction, ensure that 
suppliers are made aware of the terms of payment and abide by the terms of payment.  Trade creditors of the group at 
31 March 2010 were equivalent to 101 days (2009: 65 days) purchases, based on the average daily amount invoiced by 
suppliers during the year. During the year ended 31 March 2010 the group entered into an agreement with a supplier to 
settle the supplier’s invoices on receipt of payment, from the group’s customer, for which the services were performed. 
 
Key performance indicators 
In addition to the monthly management accounts and information that are produced and monitored against the 
company’s plan and the previous year’s performance, the Board uses Key Performance Indicators (KPI’s) in the 
management of the key risks of the business and as a measure of the business efficiencies of the company.  The KPI’s 
cover the following: 
 
 Sales performance is measured against budget and the latest expectations which are updated monthly. 
 Debtors are monitored by reviewing trends in debtor days and tracking the level of debt becoming overdue by 
30 days or more 
 Costs and overheads are monitored against budget and against current needs. 
 Employee satisfaction is monitored through monthly surveys, enabling management to act on emerging trends.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 18 - 
 
 
25/06/2010/16:22:35 
 
  2010 2009  
Revenue $000 15,056 11,336        
Adjusted EBITDA* $000 1,594 (79)        
Debtor days days 33 33 - 
Overdue debtors $000 156 505        
Employee satisfaction  76% 72%        
 
*EBITDA before exchange gain on intercompany transactions and exceptional impairment 
 
Principal risks and uncertainties 
Company law requires the group to report on principle risks and uncertainties facing the business, which the directors 
believe to be as follows: 
 
International business 
The group is domiciled in the UK, but has the LA operations and 99% of its revenues coming from overseas customers. 
As with most small yet international businesses the group’s risks are around managing the cash flow and exchange rate 
fluctuations.  The group continues to focus closely on conservative cash management and monitor currency 
transactions taking proactive actions when appropriate. 
 
Technology conservation 
The group continues with an aggressive patent protection policy, with 22 patents granted and 19 pending. These are 
integral to the business in the protection of our unique technologies. 
 
Operational risks 
The main operational risks are delays in the production of technology products and adoption of technology tools by 
customers. The production risk is managed by ensuring very tightly controlled schedules, thoroughly planning staff time 
and allowing time for contingencies. 
 
Loss of the group’s key customers 
Client relationships are crucial to the group and the strength of them are key to its continued success. The group 
mitigates this risk by a diverse number of contacts working closely with the customer across different business units and 
obtaining long term contractual agreements for supply of technology and services. 
 
Financial Risks 
The main financial risks faced by the group are foreign currency risk and liquidity risk.  The directors regularly review 
and agree policies for managing these risks. 
 
Foreign currency risk is managed by matching payments and receipts in foreign currency to minimise exposure. From 1 
April 2009 the functional currency and presentation currency of the group has changed to US dollars. The majority of 
the group’s transactions are undertaken in US dollars, however, the Consolidated Statement of Financial Position can 
be affected by movements between pound sterling and US dollars as the parent company and UK subsidiaries have 
some pound sterling debtors and creditors. 
 
Further information on the financial risks is given in note 28 to the accounts. 
 
Financial instruments 
The group has not actively used financial instruments as part of its financial risk management, however after 31 March 
2010 has entered into some forward exchange contracts to sell US dollars for pound sterling.  The group is also 
exposed to the usual credit risk and cash flow risk associated with selling on credit and manages this through credit 
control procedures. 
 
Purchase and disposal of Interest in Own Shares 
During the year the group purchased 473,500 shares (2009: nil). The total cost of the purchase was $71,823 (£48,939). 
Also during the year 451,686 ordinary shares with a nominal value of 15p were disposed of (2009: nil). No consideration 
was received for the disposal as these shares were transferred to the group’s share incentive plan or distributed as a 
staff bonus. The maximum number of own ordinary shares, with a nominal value of 15p, held in the year was 475,153 
(2009:1,653). Further dealings in own shares are disclosed in note 25, events after the reporting period. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 19 - 
 
 
25/06/2010/16:22:35 
Substantial shareholdings 
On 1 April 2010, the company had been notified, in accordance with sections 791 to 825 of the Companies Act 2006, of 
the following interests in the ordinary share capital of the company: 
 
 Percentage  
Name of holder held Number 
Dr S A Green 19.60% 4,179,835 
Funds managed and advised by Foresight Group 17.79% 3,794,689 
Herald Investment Trust plc 16.83% 3,590,102 
South Yorkshire Investment Capital Fund 8.36% 1,782,564 
Mr I C Stewart 7.86% 1,675,365 
Williams De Broe 4.09% 872,706 
 
Disclosure of information to auditors 
So far as each of the directors is aware at the time the report is approved: 
 there is no relevant information of which the company’s auditors are unaware, and 
 the directors have taken all steps that they ought to have taken to make themselves aware of any relevant 
audit information and to establish that the auditors are aware of that information. 
  
Auditors 
A resolution for the reappointment of PKF (UK) LLP will be proposed at the forthcoming annual general meeting. 
 
By order of the Board 
Helen P Gilder 
Director and Secretary 
25 June 2010 
 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 20 - 
 
 
25/06/2010/16:22:35 
CORPORATE GOVERNANCE REPORT 
 
 
Directors' responsibilities statement 
The directors are responsible for preparing the directors' report and the financial statements in accordance with 
applicable law and regulations.  
 
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors 
have, as required by the AIM Rules of the London Stock Exchange, elected to prepare the group financial statements in 
accordance with International Financial Reporting Standards as adopted by the European Union and have also elected 
to prepare the parent company financial statements in accordance with those standards. Under company law the 
directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the 
state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these 
financial statements the directors are required to: 
 
 select suitable accounting policies and then apply them consistently; 
 make judgments and estimates that are reasonable and prudent; 
 state whether the financial statements have been prepared in accordance with IFRSs as adopted by the 
European Union; and 
 prepare the financial statements on the going concern basis unless it is inappropriate to presume that the 
company and the group will continue in business. 
 
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the 
company's transactions and disclose with reasonable accuracy at any time the financial position of the company and 
the group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also 
responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities. 
 
The directors are responsible for the maintenance and integrity of the corporate and financial information included on 
the company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial 
statements and other information included in annual reports may differ from legislation in other jurisdictions. 
 
Compliance with the Combined Code 
Under the rules of AIM (The Alternative Investment Market of the London Stock Exchange) the Company is not required 
to comply with the Combined Code as annexed to the Listing Rules of the Financial Services Authority. Nethertheless, 
the Company has taken steps to comply with provisions set out in Section 1 of the Code so far as is practical given the 
size of the group and the nature of its operations. The directors consider the group insufficiently large to warrant the 
need for an internal audit function. 
 
Board of Directors 
Throughout the year the board consisted of the non-executive chairman, two non-executive directors and two executive 
directors. From 28 July 2009 the board consisted Non-Executive chairman, two Non-Executive directors and three 
Executive directors following the appointment of Gordon Doran . 
 
The Board meets formally at least eleven times a year to consider those matters which are required to be brought to it 
for decision, which ensures that it maintains full and effective control over appropriate strategic, financial, operational 
and compliance issues. Directors receive an information pack before each board meeting which contains background 
information on such matters. Additional meetings are held to review and approve special matters if necessary. 
 
Board Committees 
There are two committees to deal with remuneration and audit. They are comprised solely of the non-executive 
directors with certain executive directors attending by invitation when required. 
 
The Audit Committee was chaired by Matthew Taylor up until his resignation from the board on 12 June 2009 and has 
since been chaired by James Livingston. The committee meets at least twice a year. The group’s external auditors are 
invited to attend these meetings. Consideration is given to the auditors' pre- and post-audit reports and these provide 
opportunities to review the accounting policies, internal control and the financial information contained in the Annual and 
Interim Reports. 
 
The Remuneration committee is chaired by Ian Stewart and meets at least once per year. 
 
Internal Control 
The Board is ultimately responsible for the group's system of internal control and for reviewing its effectiveness. 
 
A comprehensive budgetary process is completed once a year and is reviewed and approved by the Board. The group's 
results are compared to the budget and prior year and are reported to the board on a monthly basis. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 21 - 
 
 
25/06/2010/16:22:35 
Going Concern 
After making enquires and taking into account the group's cash resources, the directors have a reasonable expectation 
that the group has adequate resources to continue in operational existence for the next twelve months and, for this 
reason, they continue to adopt the going concern basis in preparing the financial statements. 
 
By order of the Board 
Helen P Gilder 
Director and Secretary 
25 June 2010 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 22 - 
 
 
25/06/2010/16:22:35 
DIRECTORS’ REMUNERATION REPORT 
 
Directors’ remuneration report 
As an AIM listed company, ZOO Digital Group plc is not required to comply with the principles and regulations of the 
Directors’ Remuneration Report Regulations 2002. However, management consider it good practice to comply so far as 
is appropriate for a company of its size and nature. 
 
The Remuneration Committee 
During the year ended 31 March 2010, the Remuneration Committee consisted of the following Non-Executive 
Directors: 
Ian Stewart (Chairman) 
Christopher Honeyborne 
James Livingston (Appointed 12 June 2009) 
Matthew Taylor (Retired 12 June 2009) 
 
The Remuneration committee is responsible for determining the Executive Directors’ remuneration packages, including 
bonuses, share options and other incentive schemes. 
 
Executive directors 
The committee aims to ensure compensation is fair and reasonable and that it motivates the executive directors on both 
the short and long-term. 
 
The remuneration packages include: 
 Basic salary 
 Defined contribution to personal pension plans 
 Private medical insurance 
 Discretionary bonus 
 
Non-Executive directors 
The Board determines the remuneration package of the non-executive directors. Ian Stewart is paid as an employee 
and Christopher Honeyborne was remunerated by fees invoiced from Brockhill Limited. Matthew Taylor (prior to 12 
June 2009) and James Livingston (subsequently to 12 June 2009) were remunerated by fees invoiced from Foresight 
Group. 
 
Directors’ remuneration 
Directors’ remuneration for the year to 31 March 2010 is: 
     2010 2009 
 Salary Bonus Benefits Pension Total Total 
  $000 $000 $000 $000 $000 $000 
Dr Stuart A Green 196 59 2 6 263 211 
Helen P Gilder 142 48 2 7 199 156 
Gordon Doran* 149 55 10 -               214 - 
Dr Christopher H B Honeyborne** 32 -                 - - 32 35 
Roger D Jeynes*** -                - - - - - 
Ian C Stewart 24 -                 - - 24 26 
Matthew P Taylor**** 7 -                 - - 7 36 
James A Livingston***** 27 -                 - - 27 - 
  577 162 14 13 766 464 
 
 
*Gordon Doran was appointed as a director on 28 July 2009. 
**Christopher Honeyborne retired on 28 April 2010. 
*** Roger Jeynes was appointed on 28 April 2010. 
**** Matthew Taylor retired on 12 June 2009. 
***** James Livingston was appointed on 12 June 2009. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 23 - 
 
 
25/06/2010/16:22:35 
Directors’ remuneration paid in pound sterling for the year to 31 March 2010 is: 
     2010 2009 
 Salary Bonus Benefits Pension Total Total 
  £000 £000 £000 £000 £000 £000 
Dr Stuart A Green 123 37 2 4 166 122 
Helen P Gilder 89 30 2 4 125 90 
Dr Christopher H B Honeyborne 20 -               - - 20 20 
Roger D Jeynes -                 - - - - - 
Ian C Stewart 15 -                 - - 15 15 
Matthew P Taylor 4 -                 - - 4 21 
James A Livingston 17 -                 - - 17 - 
  268 67 4 8 347 268 
Gordon Doran is remunerated in US Dollars 
 
 
The balance owing to Brockhill Limited at 31 March 2010 was $nil (2009: $nil). The balance owing to Foresight 
Group at 31 March 2010 was $16,000 (2009: $11,000). 
 
Two directors (2009: two) serving during the year have been members of money purchase pension schemes into 
which the company contributes. 
 
The highest paid director received emoluments and benefits as follows: 2010 2009 
 $000 $000 
Emoluments 257 201 
Money purchase pension contributions 6 10 
  263 211 
 
The highest paid director did not exercise any share options or received or was due any shares in the year. As at 
31 March 2010 $59,000 (2009: $nil) was due in respect of services performed as a director. 
 
Directors' share options 
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary 
shares in the company granted to or held by the directors.  Details of the options are as follows: 
Name of director 
1 April 
2009 
Granted 
during 
the year 
Surrendered 
during the 
year 
31 March 
2010 
Exercise 
price* 
Date from 
which 
exercisable 
Expiry 
date 
Dr Christopher H B 
Honeyborne 30,000             -              -  30,000 $0.21 Sep-09 Oct-18 
Dr Stuart A Green 175,000             -              -  175,000 $0.21 Sep-09 Oct-18 
Helen P Gilder 450,000             -              -  450,000 $0.21 Sep-09 Oct-18 
Helen P Gilder 100,000             -              -  100,000 $0.21 Oct-09 Oct-18 
Gordon Doran 450,000             -              -  450,000 $0.21 Sep-09 Oct-18 
Gordon Doran 100,000             -              -  100,000 $0.21 Oct-09 Oct-18 
Ian C Stewart 30,000             -              -  30,000 $0.21 Sep-09 Oct-18 
  1,335,000             -              -  1,335,000       
 
*The underlying exercise price of the share options is £0.15. 
The exercise of share options is staggered over the exercise period with typically 40% exercisable after the first 
year and a further 30% in each of the next two years. 
The charge to the Statement of Consolidated Income in respect of directors’ share options amounted to $54,000 
(2009: $30,000). 
 
The market price of the ordinary shares at 31 March 2010 was 38 cents (25p) and the range during the year was 
55 cents (33.5p) (high) to 12 cents (8.0p) (low). 
 
Service contracts 
The service contracts and letters of appointment of the directors include the terms in the table below.  
All the directors are on rolling Director appointments and offer themselves for re-election by rotation in accordance 
with the Company’s Articles of Association.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 24 - 
 
 
25/06/2010/16:22:35 
 
Upon termination of their service agreement, executive directors are entitled to salary equivalent to their notice 
period. 
Name of director  Date of appointment Notice period 
Executive directors   
Dr Stuart A Green 28 January 2000 12 months 
Helen P Gilder 29 September 2006   6 months 
Gordon Doran 28 July 2009 12 months 
Non-executive directors   
Dr Christopher H B Honeyborne 8 March 2000 * 
Roger Jeynes 28 April 2010 - 
Ian C Stewart 14 May 2001 - 
James A Livingston 12 June 2009 - 
 
*Dr C H B Honeyborne retired on 28 April 2010. 
 
Directors' interests 
The directors who held office at 31 March 2010 had the following interests, including any interests of a "connected 
person", in the 15p ordinary shares of ZOO Digital Group plc: 
  2010 2009 
Name of director   Beneficial Beneficial 
Dr Christopher H B Honeyborne Retired 28 April 2010 1,333 1,333 
Roger D Jeynes Appointed 28 April 2010 - - 
Dr Stuart A Green  4,179,835 4,179,835 
Helen P Gilder  46,843 226 
Gordon Doran Appointed 28 July 2009 - - 
Ian C Stewart  1,675,365 1,675,365 
James A Livingston Appointed 12 June 2009 - - 
Matthew P Taylor Retired 12 June 2009 - - 
 
Shares are held on behalf of four of the directors in the long term incentive plan. 
 
The directors also had the following interest in 6% unsecured convertible loan stock at 31 March 2010: 
  2010 2009 
Name of director   $000 $000 
Dr Christopher H B Honeyborne Retired 28 April 2010 6 6 
Roger D Jeynes Appointed 28 April 2010 - - 
Dr Stuart A Green  519 489 
Helen P Gilder  - - 
Gordon Doran Appointed 28 July 2009 - - 
Ian C Stewart  - 386 
James A Livingston Appointed 12 June 2009 - - 
Matthew P Taylor Resigned 12 June 2009 - - 
 
The underlying values of the convertible loan stock are as follows: 2010 2009 
   £000 £000 
Dr Christopher H B Honeyborne  4 4 
Dr Stuart A Green  342 342 
Ian C Stewart  - 270 
 
No changes took place in the interests of directors between 31 March 2010 and 25 June 2010. 
 
James Livingston has a non beneficial interest in both shares and loan notes as a representative of Foresight 
Group, manager of the Foresight VCTs, several of which have a direct beneficial interest in ZOO Digital Group plc. 
No other transactions have taken place with directors. 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 25 - 
 
 
25/06/2010/16:22:35 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ZOO DIGITAL GROUP PLC 
 
We have audited the financial statements of ZOO Digital Group plc for the year ended 31 March 2010 which comprise  
the Consolidated Statement of Comprehensive Income, the consolidated and parent company Statement of Financial 
Position, the consolidated and parent company Statement of Changes in Equity, the consolidated and parent company 
Statement of Cash Flows, and the related notes. The financial reporting framework that has been applied in their 
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European 
Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the 
Companies Act 2006.   
 
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the 
Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those 
matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted 
by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a 
body, for our audit work, for this report, or for the opinions we have formed. 
 
Respective responsibilities of directors and auditors 
 
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of 
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the 
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those 
standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. 
 
Scope of the audit 
 
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or 
error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent 
company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of 
significant accounting estimates made by the directors; and the overall presentation of the financial statements. 
 
Opinion on financial statements 
 
In our opinion: 
 the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs 
as at 31 March 2010 and of the group’s loss for the year then ended; 
 the group financial statements have been properly prepared in accordance with IFRSs as adopted by the 
European Union; 
 the parent company financial statements have been properly prepared in accordance with IFRSs as adopted 
by the European Union as applied in accordance with the provisions of the Companies Act 2006; and 
 the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 
 
Opinion on other matter prescribed by the Companies Act 2006 
 
In our opinion  the information given in the directors’ report for the financial year for which the financial statements are 
prepared is consistent with the financial statements.  
 
Matters on which we are required to report by exception 
 
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to 
you if, in our opinion: 
 adequate accounting records have not been kept by the parent company, or returns adequate for our audit 
have not been received from branches not visited by us; or 
 the parent company financial statements are not in agreement with the accounting records and returns; or 
 certain disclosures of directors’ remuneration specified by law are not made; or 
 we have not received all the information and explanations we require for our audit. 
 
 
 
 
 
Linda Cooper (Senior statutory auditor)                  Sheffield 
for and on behalf of PKF (UK) LLP, Statutory auditors                 UK 
25 June 2010 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 26 - 
 
 
25/06/2010/16:22:35 
 
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 
for the year ended 31 March 2010 
 
  2010 2009 
  Note $000 $000 
Revenue 5 15,056 11,336 
Cost of sales   (3,769) (2,085) 
Gross Profit  11,287 9,251 
Other operating income 6 177 136 
Operating expenses 9 (11,503) (8,423) 
Operating (loss)/profit  (39) 964 
Analysed as:    
Operating (loss)/profit before exceptional exchange gain on 
intercompany transactions and exceptional impairment   821 (745) 
Exceptional exchange gain on intercompany transactions 9 - 2,293 
Exceptional impairment 9 (860) (584) 
  (39) 964 
Finance income 7 1 15 
Exchange loss on borrowings 8  (290) - 
Finance cost 8 (540) (599) 
Total finance cost  (830) (599) 
(Loss)/Profit before taxation  (868) 380 
Tax on (loss)/profit 12  (4) (36) 
(Loss)/Profit for the year attributable to equity holders of the 
parent   
                            
(872) 344 
 
 
Other comprehensive income: 
Exchange difference on the change of presentation currency and on 
the translation of foreign operations    - (2,231) 
Other comprehensive income for the year, net of tax  - (2,231) 
Total Comprehensive income  (872) (1,887) 
Comprehensive income attributable to equity holders of the 
parent   (872) (1,887) 
 
(Loss)/Profit per share 14     
 basic    (4.09) cents  1.76 cents  
 diluted    (4.09) cents  1.15cents  
 
The notes on pages 32 to 58 are an integral part of these consolidated financial statements. 
 
The company has elected to take the exemption under section 408(2) of the Companies Act 2006 to not present the 
parent company statement of comprehensive income. 
 
The profit for the parent company for the year was $897,000 (2009: $441,000). 
 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 27 - 
 
 
25/06/2010/16:22:35 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
as at 31 March 2010 
 
  2010 2009 
  Note $000 $000 
ASSETS    
Non-Current Assets    
Property, plant and equipment 16 558 763 
Intangible assets 17 6,903 6,862 
    7,461 7,625 
Current Assets    
Inventories 18 365 - 
Trade and other receivables 19 2,667 2,076 
Cash and cash equivalents 20 1,221 1,414 
    4,253 3,490 
Total Assets   11,714 11,115 
LIABILITIES    
Current Liabilities    
Trade and other payables 23 (4,763) (3,519) 
Borrowings 22 (169) (523) 
    (4,932) (4,042) 
Non-current Liabilities    
Borrowings 22 (5,138) (4,726) 
Total Liabilities   (10,070) (8,768) 
Net Assets   1,644 2,347 
EQUITY    
Equity attributable to equity holders of the parent   
Called up share capital 21 4,573 4,573 
Share premium reserve  32,899 32,899 
Other reserves  12,293 12,293 
Share option reserve  267 110 
Warrant reserve  50 38 
Convertible loan note reserve  380 380 
Foreign exchange translation reserve  (992) (992) 
Accumulated losses  (47,822) (46,950) 
    1,648 2,351 
Interest in own shares  (4) (4) 
Attributable to equity holders   1,644 2,347 
 
The notes on pages 32 to 58 are an integral part of these consolidated financial statements. 
 
The financial statements on pages 26 to 58 were authorised for issue by the Board of Directors on 25 June 2010 and 
were signed on its behalf. 
 
Stuart A Green    Helen P Gilder 
Chief Executive    Group Finance Director 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 28 - 
 
 
25/06/2010/16:22:35 
COMPANY STATEMENT OF FINANCIAL POSITION 
as at 31 March 2010 
 
  2010 2009 
  Note $000 $000 
ASSETS    
Non-Current Assets    
Property, plant and equipment 16 232 34 
Intangible assets 17 2,290 2,282 
Investment in subsidiary undertakings 26 9,700 9,700 
    12,222 12,016 
Current Assets    
Trade and other receivables 19 18,353 16,950 
Cash and cash equivalents 20  8 10 
    18,361 16,960 
Total Assets   30,583 28,976 
LIABILITIES    
Current Liabilities    
Trade and other payables 23 (1,070) (881) 
Borrowings 22 - (107) 
    (1,070) (988) 
Non-current Liabilities    
Borrowings 22 (14,755) (14,296) 
Total Liabilities   (15,825) (15,284) 
Net Assets   14,758 13,692 
EQUITY    
Equity attributable to equity holders of the parent    
Called up share capital 21 4,573 4,573 
Share premium reserve  32,899 32,899 
Other reserves  10,569 10,569 
Share option reserve  267 110 
Warrant reserve  50 38 
Convertible loan note reserve  380 380 
Foreign exchange translation reserve  (13) (13) 
Accumulative losses  (33,963) (34,860) 
    14,762 13,696 
Interest in own shares  (4) (4) 
Attributable to equity holders   14,758 13,692 
 
Company registration number: 3858881 
 
The notes on pages 32 to 58 are an integral part of these consolidated financial statements. 
 
The financial statements on pages 26 to 58 were authorised for issue by the Board of Directors on 25 June 2010 and 
were signed on its behalf. 
 
Stuart A Green    Helen P Gilder 
Chief Executive    Group Finance Director 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 29 - 
 
 
25/06/2010/16:22:35 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
for the year ended 31 March 2010 
 
 
Ordinary 
shares 
Share 
premium 
reserve 
Foreign 
exchange 
translation 
reserve 
Convertible 
loan note 
reserve 
Share 
option 
reserve 
Share 
warrant 
reserve 
Other 
reserves 
Accumulated 
losses 
Interest in 
own 
shares 
  $000 $000 $000 $000 $000 $000 $000 $000 $000 
Balance at 1 April 
2008 5,336 45,735 111 528 107  17,075 (65,643) (4) 
Issue of shares 896         
Issue costs  (31)        
Foreign exchange 
translation adjustment (1,659) (12,805) (1,103) (148) (20) (10) (4,782) 18,297  
Share based 
payments     120 48    
Forfeited Share 
options     (97)   52  
Profit for the year               344   
Balance at 31 March 
2009 4,573 32,899 (992) 380 110 38 12,293 (46,950) (4) 
Share based 
payments     157 12    
Loss for the year               (872)    
Balance at 31 March 
2010 4,573 32,899 (992) 380 267 50 12,293 (47,822) (4) 
 
 
COMPANY STATEMENT OF CHANGES IN EQUITY 
for the year ended 31 March 2010 
 
 
 
Ordinary 
shares 
Share 
premium 
reserve 
Foreign 
exchange 
translation 
reserve 
Convertible 
loan note 
reserve 
Share 
option 
reserve 
Share 
warrant 
reserve 
Other 
reserves 
Accumulated 
losses 
Interest in 
own 
shares 
  $000 $000 $000 $000 $000 $000 $000 $000 $000 
Balance at 1 April 
2008 5,336 45,735                  -  528 107  14,682 (49,095) (4) 
Issue of shares 896         
Issue costs  (31)        
Foreign exchange 
translation adjustment (1,659) (12,805) (13) (148) (20) (10) (4,113) 13,742  
Share based 
payments     120 48    
Forfeited Share 
options     (97)   52  
Profit for the year               441   
Balance at 31 March 
2009 4,573 32,899 (13) 380 110 38 10,569 (34,860) (4) 
Share based 
payments     157 12    
Profit for the year                897   
Balance at 31 March 
2010 4,573 32,899 (13) 380 267 50 10,569 (33,963) (4) 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 30 - 
 
 
25/06/2010/16:22:35 
CONSOLIDATED STATEMENT OF CASH FLOWS 
for the year ended 31 March 2010 
 
  2010 2009 
  Note $000 $000 
Cash flows from operating activities    
Operating (loss)/profit for the year  (39) 964 
Finance income 7 1 15 
Depreciation 16 419 429 
Amortisation & Impairment 17 1,214 821 
Share based payments 27 169 119 
Disposal of intangible assets 17 1 - 
Disposal of property, plant and equipment 16 1 5 
Exchange gain on foreign operations  - (2,384) 
Changes in working capital:    
(Increases)/decreases in Inventories 18 (365) 291 
(Increases)/decreases in Trade and other receivables 19 (591) (52) 
Increases/ (decreases) in Trade and other payables 23 1,244 1,099 
Cash flow from operations  2,054 1,307 
Tax (paid)/ received   (4) 132 
Net cash flow from operating activities   2,050 1,439 
Investing Activities    
Purchase of intangible assets 17 (1,256) (1,044) 
Purchase of property, plant and equipment 16 (215)                      (148) 
Net cash flow from investing activities   (1,471) (1,192) 
Cash flows from financing activities    
Repayment of borrowings 22 (521) (541) 
Proceeds from borrowings 22 120 116 
Finance cost  (371) (436) 
Share and convertible loan note issue costs 21 - (31) 
Issue of Share capital 21 - 896 
Net cash flow from financing   (772) 4 
Net increase/(decrease) in cash and cash equivalents   (193) 251 
Cash and cash equivalents at the beginning of the year   1,414 1,340 
Exchange (loss)/gain on cash and cash equivalents  - (177) 
Cash and cash equivalents at the end of the year 20 1,221 1,414 
 
The notes on pages 32 to 58 are an integral part of these consolidated financial statements. 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 31 - 
 
 
25/06/2010/16:22:35 
COMPANY STATEMENT OF CASH FLOWS 
for the year ended 31 March 2010 
 
  2010 2009 
  Note $000 $000 
Cash flows from operating activities    
Operating profit for the year  1,346 958 
Finance income  1 12 
Depreciation 16 13 27 
Amortisation & Impairment 17 - 5 
Share based payments 27 169 119 
Exchange (gain)/loss  - (79) 
Changes in working capital:    
(Increases)/ decreases in Trade and other receivables 19 (1,579) (2,523) 
Increases/ (decreases) in Trade and other payables 23 191 145 
Cash flow from operations  141 (1,336) 
Tax received/(paid)   (2) - 
Net cash flow from operating activities   139 (1,336) 
Investing Activities    
Purchase of intangible assets 17 - (1) 
Purchase of property, plant and equipment 16 - - 
Net cash flow from investing activities   - (1) 
Cash flows from financing activities    
Proceeds from borrowings 22 - 116 
Repayment of borrowings 22 (107)  
Finance cost  (34) (344) 
Share and convertible loan note issue costs 21 - (31) 
Issue of Share capital 21 - 896 
Net cash flow from financing   (141) 637 
Net decrease in cash and cash equivalents   (2) (700) 
Cash and cash equivalents at the beginning of the year   10 663 
Exchange (loss)/gain on cash and cash equivalents  - 47 
Cash and cash equivalents at the end of the year 20 8 10 
 
The notes on pages 32 to 58 are an integral part of these consolidated financial statements. 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 32 - 
 
 
25/06/2010/16:22:35 
NOTES TO THE FINANCIAL STATEMENTS 
for the year ended 31 March 2010 
 
 
1. General Information 
 
ZOO Digital Group plc ('the company') and its subsidiaries (together 'the group') provide productivity tools and 
services for the video post-production, pre-media and interactive markets and continue with ongoing research and 
development in those areas. The group has operations in both the UK and US. 
 
The company is a public limited company which is listed on the Alternative Investment Market and is incorporated 
and domiciled in the UK. The address of the registered office is The Tower, 2 Furnival Square, Sheffield. 
 
The registered number of the company is 3858881. 
 
The consolidated financial statements are presented in US dollars, the currency of the primary economic 
environment in which the company operates (note 2.4). 
 
2. Summary of significant accounting policies 
 
The principal accounting policies applied in the preparation of these financial statements are set out below. These 
policies have been applied consistently to all the years presented, unless otherwise stated. 
 
2.1 Basis of preparation 
These financial statements have been prepared in accordance with IFRS as adopted by the European 
Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  
 
The preparation of financial statements in conformity with IFRS requires management to make judgements, 
estimates and assumptions that effect the application of policies and reported amounts in the financial 
statements. The areas involving a higher degree of judgements or complexity, or areas where assumptions 
or estimates are significant to the financial statements are disclosed in note 3. 
 
A separate Statement of Comprehensive Income for the parent company has not been presented as 
permitted by section 408 (2) of the Companies Act 2006. 
 
The directors have prepared trading and cash flow forecasts for the group for the period to 31 March 2013.  
Recent months sales figures have shown increases in the group’s sales of new and existing products to its 
existing customers, and an encouraging roll out of products to new customers.  The forecasts assume, inter 
alia, that sales of products to existing and new customers will continue to increase. In line with industry 
practice in this sector the directors have had informal indications from major and other customers to 
substantiate a significant proportion of the forecast increased sales. 
 
The directors have considered the consequences if the increase in sales volume is less than the level 
forecast. The directors are confident that in this eventuality alternative steps could be taken to ensure that 
the group can continue to operate without the need for additional funding. 
 
The bank funding facilities are due for renewal in October 2010 and the directors have no reason to believe 
that this will not be renewed. 
 
The directors believe these assumptions to be realistic, and consequently that the group will continue in 
operational existence for the foreseeable future. The financial statements have therefore been prepared on 
a going concern basis. 
 
 
2.1.1 Adoption of standards effective in 2009 
The following standards have been applied by the group from 1 April 2009: 
 
 IFRS 8 Operating segments 
 IAS 1 (Revised) Presentation of financial statements 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 33 - 
 
 
25/06/2010/16:22:35 
IFRS 8 - replaced IAS 14 and requires entities whose debt or equity instruments are traded on a public 
market to adopt the 'management approach' to reporting the financial performance and position of its 
operating segments. Information to be reported is what management (specifically the Chief operating 
decision maker (‘CODM’)) uses internally for evaluating performance and deciding how to allocate resources 
to operating segments. There is no longer a requirement to make disclosure based on primary and 
secondary reporting formats, nor is there a requirement to distinguish between business and geographical 
segments. 
 
Despite these changes application of the new standard has not significantly impacted the way management 
reports segmental information. Management believes that under the new standard the reporting segments 
continue to be based on the two main operating divisions of: Software solutions and Media production, as 
this is the basis on which the group is organised and managed.  
 
It is also management’s opinion that the allocation of goodwill to cash-generating units based on reportable 
segments has not been significantly changed and therefore no further impairment charges against goodwill 
are necessary. 
 
IAS 1 – The revised standard has changed the way the group’s primary financial statements have been 
presented. The revision required information to be aggregated on the basis of shared characteristics and 
introduced a ‘Statement of Comprehensive Income’ to enable readers to analyse changes in an entity’s 
equity resulting from transactions with owners separately from ‘non-owner’ changes. The revisions included 
changes in the titles of the primary statements to reflect their function more clearly (for example, the balance 
sheet is renamed a ‘Statement of Financial Position’). The new titles are not mandatory but have been 
adopted by the group. Comparative information has been re-presented so that it also is in conformity with 
the revised standard. 
 
 
 
 
2.1.2 IFRS effective in 2009 but not relevant 
The following standards and interpretations were mandatory for the current accounting period, but are not 
relevant to the operations of the group. 
 IFRS 1 (Amendment) First time adoption of IFRS 
 IFRS 2 (Amendment) Share based payments 
 IFRS 7 (Amendment) Financial instruments: Disclosures 
 IAS 1 and IAS 32 (Amendment) Presentation of financial statement and Financial instruments: 
Presentation 
 IAS 23 (Amendment) Borrowing costs 
 IAS 27 (Amendment) Consolidated and separate financial statements 
 IAS 39 and IFRS 7 (Amendment) Reclassification of financial instruments 
 IAS 39 and IFRIC 9 (Amendment) Financial instruments: Recognition and measurement, and 
Reassessment of embedded derivatives 
 IFRIC 13 Customer loyalty programmes 
 IFRIC 16 Hedges of a net investment in a foreign operation 
 
2.1.3 Standards and interpretations issued but not yet applied 
Any standards and interpretations that have been issued but are not yet effective, and that are available 
for early application, have not been applied by the group in these financial statements. Application of 
the majority of these Standards and Interpretations is not expected to have a material effect on the 
financial statements in the future. 
 
The standards that are expected to have a material effect on the financial statements in the future are: 
 IAS 27 (Amendment) Consolidated and separate financial statements 
 IFRS 3 (Amendment) Business Combinations 
 
In accordance with the transitional provisions these standards will be prospectively applied and changes 
in accounting policy resulting from their application will have no impact on the opening balances in 
future financial statements. 
 
IAS 27 (Amendment) - The amendment introduced guidance on accounting for changes in non-
controlling interests (currently ‘minority interests’) where there is no effect on control. The amended IAS 
27 states that such transactions should be accounted for as equity transactions, and that any difference 
between the amount which the non-controlling interests will be adjusted by and the consideration paid 
or received should be recognised directly in equity. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 34 - 
 
 
25/06/2010/16:22:35 
IFRS 3 (Revised) - There have been some significant changes to IFRS 3 that will impact on the way 
that business combinations will be accounted for by the group. These changes will be accounted for 
prospectively and only effect acquisitions made in the future financial years. The main changes brought 
about by the revision are: 
 The inclusion of an accounting policy option to account for non-controlling interests (currently 
‘minority interests’); 
 Amendments to the calculation of goodwill; 
 Accounting for acquisitions in stages; 
 Requirement to immediately expense acquisition costs; 
 Accounting for contingent liabilities 
 Recognition and measurement of certain assets and liabilities. 
 
 
2.2 Consolidation 
 
Subsidiaries are all entities over which the group has the power to govern the financial and operating 
policies so as to obtain benefit from their activities. Subsidiaries are fully consolidated from the date on 
which control is transferred until the date that control ceases. 
 
The consolidated financial statements of ZOO Digital Group plc include the results of the Company and its 
subsidiaries.  Subsidiary accounting policies are amended where necessary to ensure consistency within the 
Group and intra group transactions are eliminated on consolidation. 
 
2.3 Segment reporting 
 
Operating segments are reported in a manner consistent with the internal reporting regularly reviewed by the 
group’s chief operating decision maker to make decisions about resource allocation to the segments and to 
assess their performance. 
 
2.4 Foreign currency translation 
 
2.4.1 Functional and presentation currency 
 
Items included in the financial statements of each of the group's entities are measured using the currency of 
the primary economic environment in which the entity operates ('the functional currency'). The consolidated 
financial statements are presented in US dollars which is the company's functional and presentation 
currency. 
 
2.4.2 Change in Functional and Presentation currency 
 
Over the recent past an increasing proportion of the group’s trading transactions have been denominated in 
US dollars. The directors now consider US dollars to be more representative of the group’s operations, and 
as a consequence with effect from 1 April 2009 the group has determined that its functional currency has 
changed from pound sterling to US dollars, and has elected to change its presentation currency from pound 
sterling to US dollars. 
 
The effect of the change in the functional currency has been to commence using the US dollar as the 
functional currency from 1 April 2009. This change does not in itself have any effect on the comparative 
figures, but since the convertible loan notes are designated in pound sterling, the results now include an 
exchange loss on the principle value of the loan notes deriving from currency movement during the year; the 
comparative figures do not include an equivalent figure, since the functional currency at that time was pound 
sterling.  
 
The effect of changing the presentation currency has been to restate the comparative figures by translating 
the figures in the Consolidated Statement of Comprehensive Income (“CSoCI”) at the prevailing exchange 
rate in the month of transaction, and the figures in the Consolidated Statement of Financial Position at the 
year end rate. However, the underlying comparative figures have not been reworked as if the functional 
currency had been the US dollar. The treatment adopted is that required by IFRS. Consequently, the figures 
in the Consolidated Statement of Comprehensive Income relating to “exchange gain on intercompany 
transactions”, which arose from translation from US dollars into pound sterling, have no comparable figure in 
the current year. 
 
The pound sterling/US dollar exchange rate at 31 March 2010 was 0.6589 (2009: 0.6995). 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 35 - 
 
 
25/06/2010/16:22:35 
 
2.4.3 Transactions and balances 
 
Transactions in foreign currencies are recorded at the prevailing rate of exchange in the month of the 
transaction. Foreign exchange gains or losses resulting from the settlement of such transactions and from 
the translation of monetary assets and liabilities denominated in foreign currencies at the year end exchange 
rates are recognised in the profit/(loss) for the year in the Consolidated Statement of Comprehensive 
Income. 
 
2.4.4 Group companies 
 
The results and financial position of all group entities that have a functional currency different from the 
presentation currency are translated into the presentation currency as follows: 
 
 assets and liabilities for each entity are translated at the closing rate at the year end date; 
 income and expenses for each Statement of Comprehensive Income are translated at the 
prevailing monthly exchange rate for the month in which the income or expense arose and all 
resulting exchange rate differences are recognised with the foreign exchange translation 
reserve. 
 
 
2.5 Intangible assets 
 
2.5.1 Goodwill 
 
Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of 
the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, 
is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment 
losses. Impairment losses on goodwill are not reversed. 
 
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made 
to those cash-generating units that are expected to benefit from the business combination in which the 
goodwill arose. 
 
 
2.5.2 Patent and Trademark costs 
 
Patent and trademark costs are stated at cost, net of amortisation and any provision for impairment. Patents 
and trademarks have a finite useful life and amortisation is charged on a straight line basis over the 
estimated useful economic life which is assessed to be ten years. 
 
2.5.3 Research and Development costs 
 
Research expenditure is charged to the Statement of Comprehensive Income in the period in which it is 
incurred.  Development costs are recognised as an intangible asset if they fulfil the following criteria: 
 
- it is technically feasible to complete the intangible asset so that it will be available for use; 
- management intends to complete the intangible asset and use or sell it; 
- there is an ability to use or sell the intangible asset; 
- it can be demonstrated how the intangible asset will generate probable future economic benefits; 
- there are adequate technical, financial and other resources to complete the development and to use or 
sell the intangible asset; 
- the expenditure attributable to the intangible asset during its development can be reliably measured. 
 
Other development expenditures that do not meet these criteria are recognised as an expense as incurred. 
Development costs previously recognised as an expense are not recognised as an asset in a subsequent 
period. 
 
Development costs recognised as an intangible asset are amortised on a straight line basis over three years 
or the length of any current sales contracts, from the point at which the asset is ready for sale or use.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 36 - 
 
 
25/06/2010/16:22:35 
 
2.5.4 Computer Software 
 
Acquired computer software is shown at historical cost less accumulated amortisation and impairment 
losses. Amortisation is charged to the Statement of Comprehensive Income on a straight-line basis over 
three years from the date the asset is available for use. 
 
Costs that are directly associated with the development of identifiable and unique software products 
controlled by the group, and are expected to generate economic benefits exceeding costs beyond one year, 
are recognised as development costs within intangible assets. See note 2.5.3 Research and Development 
costs. 
 
Amortisation is included within 'Other operating expenses' in the Statement of Comprehensive Income. 
 
 
2.6 Investments in subsidiary undertakings 
 
In the company, investments in subsidiary undertakings are carried at cost less any impairment. The 
investments are reviewed on an annual basis to test for any indication of impairment. The investments are 
eliminated on consolidation. 
 
2.7 Property, plant and equipment 
 
All property, plant and equipment assets are stated at cost less accumulated depreciation and impairment. 
Depreciation is provided on all such assets at rates calculated to write off the cost of each asset less 
estimated residual value, on a straight-line basis, over its expected useful life, as follows: 
 
- Leasehold improvements   5 years or over the term of the lease, if shorter 
- Computer hardware    between 2 and 3 years 
- Office equipment, fixtures and fittings  between 2 and 5 years 
-      Production equipment   between 2 and 3 years 
 
2.8 Impairment of assets 
 
The group assesses at each year end date whether there is any indication that any of its assets have been 
impaired. If such indication exists, the asset's recoverable amount is estimated and compared to its carrying 
value. 
 
For goodwill, intangible assets that have an indefinite life and intangible assets not yet available for use, the 
recoverable amount is estimated at each year end date and whenever there is an indication of impairment 
an impairment loss is recognised for the amount by which the asset's carrying value amount exceeds its 
recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income within 
‘Other operating expenses’. 
 
2.9 Financial Instruments 
 
The group classifies financial instruments, or their component parts, on initial recognition as a financial 
asset, a financial liability or an equity instrument in accordance with the substance of the contractual 
agreement. 
 
Financial instruments are recognised on the Statement of Financial Position at fair value when the group 
becomes a party to the contractual provisions of the instrument. 
 
2.9.1 Borrowings 
 
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are 
subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and 
the redemption value is recognised in the Statement of Comprehensive Income over the period of the 
borrowings using the effective interest rate method. 
 
The convertible loan notes are accounted for in accordance with IAS 32 ‘Financial Instruments: presentation’ 
and split between debt and equity based upon the market rate of similar loans not carrying conversion 
options.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 37 - 
 
 
25/06/2010/16:22:35 
 
2.9.2 Trade receivables 
 
Trade receivables are stated at their amortised cost as reduced by appropriate allowances for estimated 
irrecoverable amounts. They are recognised on the trade date of the related transactions. Subsequent 
recoveries of amounts previously written off are credited to the Statement of Comprehensive Income. 
 
2.9.3 Cash and cash equivalents 
 
Cash and cash equivalents include cash in hand and deposits held with banks. 
 
 
2.9.4 Trade payables 
 
Trade payables are stated at their amortised cost. They are recognised on the trade date of the related 
transactions. 
 
2.10 Share based payments 
 
Options are measured at fair value at grant date using the binomial model. The fair value is expensed on a 
straight line basis over the vesting period, based on an estimate of the number of options that will eventually 
vest. 
 
Under the group's share option scheme, share options are granted to directors and selected employees. The 
options are expensed in the period over which the share based payment vests. A corresponding increase to 
the share option reserve under shareholder's funds is recognised. When share options are exercised, or 
when share options are forfeited, cancelled or expire, the corresponding fair value is transferred to the 
accumulated losses reserve. The group has no legal or constructive obligation to repurchase or settle the 
options in cash. 
 
2.11 Pension costs and other post retirement benefits 
 
The Group operates only defined contribution schemes and pays contributions to publicly or privately 
administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no 
further obligations once the contributions have been paid. The amount charged to the Statement of 
Comprehensive Income in respect of pension costs and other post-retirement benefits is the contributions 
payable in the period.  Differences between contributions payable in the period and contributions actually 
paid are shown as either accruals or prepayments in the Statement of Financial Position. 
 
 
2.12 Revenue 
 
Revenue comprises the consideration receivable for services provided, software usage fees and royalty 
income. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales 
within the group. 
 
2.12.1 Sales of services 
 
The group sells design, development and other services relating to the media production industry. These 
services are provided either on a time and material basis or as a fixed price contract. 
 
Revenue from time and material contracts is recognised as labour hours and direct expenses are incurred, 
at the contracted rates. 
 
Revenue from fixed price contracts is recognised in accordance with the substance of the contract as 
services are performed by the group and accepted by the customer. 
 
If circumstances arise that may change the original estimates of revenue and costs or extent of progress 
toward completion, estimates are revised. These revisions resulting in increases or decreases in the 
estimated revenues and costs are reflected in the Statement of Comprehensive Income in the period in 
which the circumstances that give rise to the revision become known to management. 
 
2.12.2 Software license fees 
 
Revenue attributable to the use of software products is credited to the Statement of Comprehensive Income 
in line with the usage of these products. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 38 - 
 
 
25/06/2010/16:22:35 
2.12.3 Royalty income 
 
Under IAS18 royalties are recognised on an accruals basis in accordance with the substance of the relevant 
agreement. Based on the substance of the contract agreements, revenue is recognised to match with 
estimated sales. Estimates of expected sales are reviewed at each year end date. 
 
2.13 Inventories 
 
Inventories are stated at the lower of cost and net realisable value.  Cost includes all direct costs incurred 
and attributable production overheads.  Net realisable value is based on estimated selling price allowing for 
all further costs of completion and disposal. 
 
Product development expenditure is carried forward to the extent that it is considered to be recoverable.  
The amount carried forward is written off on release over the expected sales life of each product. 
 
2.14 Leases 
 
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are 
classified as operating leases. Payments made under operating leases are recognised in the Statement of 
Comprehensive Income on a straight line basis over the term of the lease 
 
Leases of equipment where the group has substantially all the risks and rewards of ownership are classified 
as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value 
of the leased property and the present value of the minimum lease payments. 
 
Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate 
on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are 
included in other long-term payables. The interest element of the finance cost is charged to the Statement of 
Comprehensive Income over the lease period so as to produce a constant periodic rate of interest on the 
remaining balance of the liability for each period. The equipment acquired under finance leases is 
depreciated over the shorter of the useful life of the asset or the lease term. 
 
2.15 Deferred taxation 
 
Deferred tax, including UK corporation tax and foreign tax, is provided in full using the Statement of 
Financial Position liability method. Deferred tax is the future tax consequences of temporary differences 
between the carrying amounts and tax bases of assets and liabilities shown on the Statement of Financial 
Position. Deferred tax assets and liabilities are not recognised if they arise in the following situations; the 
initial recognition of goodwill; or the initial recognition of assets and liabilities that affect neither accounting 
nor taxable profit. The amount of deferred tax provided is based on the expected manner of recovery or 
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at 
the year end date. 
 
The group does not recognise deferred tax liabilities, or deferred tax assets, on temporary differences 
associated with investments in subsidiaries, joint ventures and associates as it is not considered probable 
that the temporary differences will reverse in the foreseeable future.  
 
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be 
available against which the asset can be utilised. The carrying amount of deferred tax assets are reviewed 
at each year end date and reduced to the extent that it is no longer probable that sufficient taxable profit will 
be available to allow all or part of the asset to be recovered. 
 
2.16 Government grants 
 
Grants from the government are recognised at their fair value where there is a reasonable assurance that 
the grant will be received and the group will comply with all attached conditions. 
 
Government grants relating to operating costs are deferred and recognised in the Statement of 
Comprehensive Income over the period necessary to match them with the costs they are intended to 
compensate. 
 
Government grants relating to property, plant and equipment are credited to the cost of the asset and 
released to the Statement of Comprehensive Income on a straight line basis over the expected lives of the 
related assets.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 39 - 
 
 
25/06/2010/16:22:35 
 
2.17 Exceptional items 
 
Exceptional items are those significant items which are separately disclosed by virtue of their size or 
incidence to enable a full understanding of the group's financial performance. The transactions giving rise to 
exceptional items are the gains and losses on disposal of operations, the exchange gain on the translation 
of intercompany transactions and the discontinuation of activities, including the decisions not to continue 
certain development projects. 
 
 
3. Accounting estimates and judgements 
 
Estimates and judgments are continually evaluated and are based on historical experience and other 
factors, including expectations of future events that are believed to be reasonable under the circumstances. 
 
3.1 Critical accounting estimates and assumptions 
 
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, 
by definition, seldom equal the related actual results. The estimates and assumptions that have a significant 
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial 
year are discussed below. 
 
Goodwill 
Goodwill is tested annually for impairment at the year end date. The recoverable amounts of cash 
generating units have been estimated based on value in use calculations. Value in use calculations have 
been based on a subjective pre-tax discount rate of 8%. No impairment loss incurred at this discount rate. 
Had the discount rate used been 1% greater or lower than estimated, there still would be no material impact 
on impairment. 
 
Financial Instruments 
Discounted cash flow analysis is used to determine the fair value of financial instruments that are not traded 
on the open market. The non-traded financial instrument is the convertible loan note. Calculations have 
been based on a subjective pre-tax discount rate of 8%. Had the discount rate used been 1% greater or 
lower than estimated, the fair value would have been decreased by $155,000, or increased by $165,000 
respectively. 
 
3.2 Critical judgements in applying the group’s accounting policies 
 
Operating lease commitments 
The group has entered into property leases for its Sheffield and Los Angeles offices. As management have 
determined that the group has not obtained substantially all the risks and rewards of ownership of the 
property, the lease has been classified as an operating lease and accounted for accordingly. 
 
 
4. Segmental reporting 
 
Business segments 
 
At 31 March 2010, the group is organised on a worldwide basis into two main business segments: 
- Software solutions, including development , consultancy and software sales 
- Media production and design 
 
These divisions are the basis on which the group reports its segment information. Other group operations comprise 
of head office operations. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 40 - 
 
 
25/06/2010/16:22:35 
The Segment results are as follows: 
 
 Software Solutions Media Production                    Total                
 2010 2009 2010 2009 2010 2009 
  $000 $000 $000 $000 $000 $000 
Total Revenue 7,329 6,329 11,458 7,585 18,787 13,914 
Inter-segment revenue (205) (149) (3,526) (2,429) (3,731) (2,578) 
Revenue 7,124 6,180 7,932 5,156 15,056 11,336 
Segment result 1,811 3,159 (35) (823) 1,776 2,336 
Unallocated corporate expense       (1,815) (1,372) 
Operating (loss)/profit     (39) 964 
Finance income     1 15 
Finance cost         (830) (599) 
(Loss)/Profit before taxation     (868) 380 
Tax on (loss)/profit         (4) (36) 
(Loss)/Profit for the year         (872) 344 
 
Other segmental information included in the Statement of Comprehensive Income is as follows: 
 
 Software Solutions Media Production Group Operations 
 2010 2009 2010 2009 2010 2009 
  $000 $000 $000 $000 $000 $000 
Depreciation 
                       
55 63 351 339 13 27 
Amortisation 240 143 114 89 - 5 
Impairment losses 91 51 769 533 - - 
 
Segment assets consist primarily of property, plant and equipment, intangible assets, trade and other receivables 
and cash and cash equivalents. Segment liabilities comprise operating liabilities. Unallocated liabilities comprise 
items such as borrowings. 
 
Capital expenditure includes additions to property, plant and equipment and intangible assets, including additions 
resulting from acquisitions through business combinations. 
 
 Software Solutions Media Production Total 
 2010 2009 2010 2009 2010 2009 
  $000 $000 $000 $000 $000 $000 
Assets 7,259 6,214 1,827 2,717 9,086 8,931 
Unallocated corporate assets     2,628 2,184 
Consolidated total assets         11,714 11,115 
Liabilities 1,259 1,749 2,726 1,704 3,985 3,453 
Unallocated corporate liabilities     6,085 5,315 
Consolidated total liabilities         10,070 8,768 
 
Capital Expenditure 1,158 1,203 313 336 1,471 1,539  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 41 - 
 
 
25/06/2010/16:22:35 
 
Geographical segments 
 
The Group's operating divisions operate in two principal geographical areas of the world, the UK and the US. All 
European operations are run from the UK office. 
 
 Revenue Total Assets 
Additions to property, 
plant and equipment 
and intangible assets 
 2010 2009 2010 2009 2010 2009 
  $000 $000 $000 $000 $000 $000 
United Kingdom 140 330 8,144 7,195 1,152 1,182 
US 14,916 11,006 3,570 3,920 319 357 
  15,056 11,336 11,714 11,115 1,471 1,539 
 
 
5. Revenue 
The group's revenue comprises: 
 2010 2009 
  $000 $000 
Software Solutions 7,124 6,180 
Media Production 7,932 5,156 
  15,056 11,336 
 
Continuing operations 15,056 11,336 
Discontinued operations - - 
  15,056 11,336 
 
Revenue from services 9,439 10,313 
Royalty income and software license fees 5,617 1,023 
  15,056 11,336 
 
Major customers 
The group currently has one major customer representing 92% (2009:71%) of the group's revenues. These 
revenues are generated from both of the group's operating segments. The revenues are as follows: 
 2010 2009 
  $000 $000 
Major customer 13,786 8,039 
Other customers 1,270 3,297 
  15,056 11,336 
 
 
 
 
6. Other operating income 
 2010 2009 
 $000 $000 
Government grants  177 136 
 
7. Investment income 
 2010 2009 
 $000 $000 
Interest on short term deposits  1 15 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 42 - 
 
 
25/06/2010/16:22:35 
 
8. Finance costs 
 2010 2009 
  $000 $000 
Interest on bank overdraft (25) - 
Interest on borrowings (515) (599) 
Exchange losses on borrowings (290) - 
  (830) (599) 
 
9. Operating(loss)/profit 
Group operating (loss)/profit for the year is stated after charging/(crediting) the following: 
 2010 2009 
  $000 $000 
Exceptional exchange gains or losses on intercompany transactions (note 15)               - (2,293) 
Other exchange gains or losses (2) (196) 
Staff Costs 7,164 6,682 
Depreciation 419 429 
Amortisation of other intangible assets                        354 237 
Exceptional impairment losses on other intangible assets (note 15)              860 584 
Research and non-capitalised development costs                   170 394 
Operating lease expense 785 649 
Auditor's remuneration 77 79 
Exceptional gain on disposal of operations (note 15) - (52) 
Other expenses 1,676 1,910 
Other operating expenses 11,503 8,423 
 
 
10. Auditor’s remuneration 
 2010 2009 
  $000 $000 
Fees payable to group's auditor for the audit of the group's annual financial statements                     34 37 
The audit of the group's subsidiaries, pursuant to legislation                     35 33 
Tax services 8 7 
All other services - 2 
  77 79 
 
11. Employees including directors 
The average number of employees (including executive directors) was: 
 2010 2009 
  No. No. 
Product design  82 74 
Sales and marketing  7 9 
Administration  10 13 
  99 96 
 
Their aggregate remuneration comprised: 
 2010 2009 
  $000 $000 
Wages and salaries  6,254 5,448 
Social security costs  694 1,110 
Other pension costs  59 80 
Share based payments 157 44 
  7,164 6,682 
 
The group pension arrangements are operated through a defined contribution scheme.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 43 - 
 
 
25/06/2010/16:22:35 
 
Compensation of key management personnel (including directors) 
 2010 2009 
  $000 $000 
Short-term employee benefits 1,571 1,329 
Post-employment benefits 13 17 
Share based payments 127 96 
  1,711 1,442 
 
Directors’ remuneration for the year to 31 March 2010 is: 
     2010 2009 
 Salary Bonus Benefits Pension Total Total 
  $000 $000 $000 $000 $000 $000 
Dr Stuart A Green 196 59 2 6 263 211 
Helen P Gilder 142 48 2 7 199 156 
Gordon Doran* 149 55 10 -                214 - 
Dr Christopher H B Honeyborne** 32 -    - - 32 35 
Roger D Jeynes*** -                - - - - - 
Ian C Stewart 24 -                  - - 24 26 
Matthew P Taylor**** 7 -                  - - 7 36 
James A Livingston***** 27 -                  - - 27 - 
  577 162 14 13 766 464 
*Gordon Doran was appointed as a director on 28 July 2009. 
**Christopher Honeyborne retired on 28 April 2010. 
*** Roger Jeynes was appointed on 28 April 2010. 
**** Matthew Taylor retired on 12 June 2009. 
***** James Livingston was appointed on 12 June 2009. 
 
Two directors (2009: two) serving during the year have been members of money purchase pension schemes into 
which the company contributes. 
 
The highest paid director received emoluments and benefits as follows: 2010 2009 
 $000 $000 
Emoluments 257 201 
Money purchase pension contributions 6 10 
  263 211 
 
 
 
 
12. Income tax expense 
 
12.1 Current tax: 
 2010 2009 
  $000 $000 
UK corporation tax   
- Current tax on income for the year - - 
- Adjustments in respect of prior years (3) (35) 
Foreign tax (1) (1) 
  (4) (36) 
Corporation tax is calculated at 28% (2009:28%) of the estimated assessable profit for the year.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 44 - 
 
 
25/06/2010/16:22:35 
 
12.2  Tax charge for the year 
The tax charge for the year can be reconciled to the (loss)/profit for the year as follows: 
 2010 2009 
  $000 $000 
(Loss)/profit before tax (868) 380 
Tax calculated at standard rate of corporation tax of 28% (2009: 28%) (243) (106) 
Depreciation in excess of capital allowances 22 393 
Capital allowances in excess of depreciation (68) - 
Disallowable items (48) (5) 
(Profits)/Losses carried forward 333 (282) 
Foreign tax charged at lower rates the UK standard rate - - 
Release of withholding tax - (36) 
Research and development tax credit - - 
Tax charge (4) (36)                       
 
12.3 Tax losses carried forward 
The group has tax losses carried forward of approximately $28,000,000 (2009: $28,000,000). 
 
 
13. Dividends 
There were no dividends paid or proposed. 
 
14. (Loss)/profit per share 
Earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the company by the 
weighted average number of ordinary shares in issue during the year. 
  Basic and Diluted       
  2010 2009 
  $000 $000 
(Loss)/profit for the financial year (872) 344 
 
     2010 2009 
     
Number of 
shares 
Number of 
shares 
Weighted average number of shares for basic & diluted (loss)/profit per share     
Basic     21,326,421 19,558,970 
Effect of dilutive potential ordinary shares:       
Convertible loan note     7,263,590 7,263,590 
Share options     3,134,565 2,619,121 
Share warrants     525,000 513,493 
Diluted         32,249,576 29,955,174 
 
 
15. Exceptional items 
Changes in market expectations led to a management decision not to continue certain development projects 
acquired through the purchase of Scope Seven LLC. Capitalised costs relating to these projects were considered 
to be impaired. The amount of this impairment was $797,000 (2009:$533,000) and this is included within 
‘Exceptional impairment losses on other intangible assets’, the balance being in respect of cancelled patents (note 
17). 
 
The exchange gain on intercompany transactions in the year ended 31 March 2009 of $2,293,000 arose from 
translation from US dollars into pound sterling. There is no comparable figure in the current year as the group 
changed its functional and presentation currency on 1 April 2009 from pound sterling to US dollar. 
 
During the year ended 31 March 2009 the group recovered $52,000 of the $250,000 provided, in March 2008, for 
the write off of the consideration outstanding from the sale of its UK interactive DVD production business in 
October 2006. 
 
These items are considered exceptional by virtue of their size and omission of their disclosure would not give a fair 
presentation of the group’s financial position and performance. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 45 - 
 
 
25/06/2010/16:22:35 
 
16. Property, plant and equipment 
Group 
Production 
Equipment 
Leasehold 
improvements 
Computer 
hardware 
Office 
equipment, 
fixtures & 
fittings Total 
 $000 $000 $000 $000 $000 
Cost           
Opening cost at 1 April 2008 132 444 1,636 700 2,912 
Additions 144 - 142 - 286 
Disposals (6) - (5) - (11) 
Exchange differences (6) (123) (448) (196) (773) 
Opening cost at 1 April 2009 264 321 1,325 504 2,414 
Additions 19 - 191 5 215 
Disposals - - (209) (51) (260) 
Closing cost at 31 March 2010 283 321 1,307 458 2,369 
 
Accumulated depreciation/ impairment          
Opening balance at 1 April 2008 6 59 1,249 458 1,772 
Depreciation 87 91 186 65 429 
Disposals (1) - (5) - (6) 
Exchange differences (1) (32) (371) (140) (544) 
Opening balance at 1 April 2009 91 118 1,059 383 1,651 
Depreciation 98 75 200 46 419 
Disposals - - (208) (51) (259) 
Closing balance at 31 March 2010 189 193 1,051 378 1,811 
 
Opening carrying value at 1 April 2008 126 385 387 242 1,140 
Opening carrying value at 1 April 2009 173 203 266 121 763 
Closing carrying value at 31 March 2010 94 128 256 80 558 
 
Depreciation expense of $419,000 (2009: $429,000) is included in 'Other operating expenses'. 
 
Property, plant and equipment for the group includes the following amounts where the group is a lessee under a 
finance lease: 
At 31 March 2010 
Production 
Equipment 
Computer 
hardware 
Office 
equipment
, fixtures & 
fittings Total 
  $000 $000 $000 $000 
Cost - capitalised finance leases 249 332 100 681 
Accumulated depreciation (78) (158) (60) (296) 
Net book value 171 174 40 385 
 
At 31 March 2009 
Production 
Equipment 
Computer 
hardware 
Office 
equipment
, fixtures & 
fittings Total 
  $000 $000 $000 $000 
Cost - capitalised finance leases 231 230 100 561 
Accumulated depreciation (77) (103) (37) (217) 
Net book value 154 127 63 344 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 46 - 
 
 
25/06/2010/16:22:35 
 
Company 
Leasehold 
improvements 
Computer 
hardware 
Office 
equipment
, fixtures & 
fittings Total 
 $000 $000 $000 $000 
Cost         
Opening cost at 1 April 2008 - 550 441 991 
Exchange differences - (154) (123) (277) 
Opening cost at 1 April 2009 - 396 318 714 
Additions 128 29 54 211 
Closing cost at 31 March 2010 128 425 372 925 
 
Accumulated depreciation/ impairment         
Opening balance at 1 April 2008 - 544 370 914 
Depreciation -                         6 21 27 
Exchange differences - (154) (107) (261) 
Opening balance at 1 April 2009 - 396 284 680 
Depreciation - - 13 13 
Closing balance at 31 March 2010 - 396 297 693 
 
Opening carrying value at 1 April 2008 - 6 71 77 
Opening carrying value at 1 April 2009 - - 34 34 
Closing carrying value at 31 March 2010 128 29 75 232 
 
Property, plant and equipment for the company includes the following amounts where a subsidiary company is the 
lessee under a finance leases: 
At 31 March 2010 
Computer 
hardware 
Office 
equipment, 
fixtures & 
fittings Total 
  $000 $000 $000 
Cost - capitalised finance leases 149 100 249 
Accumulated depreciation (128) (60) (188) 
Net book value 21 40 61 
 
There were no assets held under finance leases at 31 March 2009.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 47 - 
 
 
25/06/2010/16:22:35 
 
17. Intangible assets 
Group Goodwill 
Development   
Costs 
Patents and 
trademarks 
Computer 
Software Total 
 $000 $000 $000 $000 $000 
Cost           
Opening cost at 1 April 2008 22,409 2,885 666 401 26,361 
Additions                  -  1,015 138 96 1,249 
Exchange differences (5,799) (550) (211) (109) (6,669) 
Opening cost at 1 April 2009 16,610 3,350 593 388 20,941 
Additions                  -  1,035 102 119 1,256 
Disposals                  -                   -                  -  (34) (34) 
Closing cost at 31 March 2010 16,610 4,385 695 473 22,163 
 
Accumulated amortisation/ impairment         
Opening balance at 1 April 2008 17,532 416 147 254 18,349 
Amortisation                  -  157 15 65 237 
Impairment loss (note 9) - 533 51 - 584 
Exchange differences (4,912) (57) (41) (81) (5,091) 
Opening balance at 1 April 2009 12,620 1,049 172 238 14,079 
Amortisation                  -  222 20 112 354 
Disposals                  -                   -                  -  (33) (33) 
Impairment loss (note 9)                  -  797 63                  -  860 
Closing balance at 31 March 2010 12,620 2,068 255 317 15,260 
 
Opening carrying value at 1 April 2008 4,877 2,469 519 147 8,012 
Opening carrying value at 1 April 2009 3,990 2,301 421 150 6,862 
Closing carrying value at 31 March 
2010 3,990 2,317 440 156 6,903 
 
Development costs are internally generated software development costs. All other intangible assets are acquired 
externally. 
The remaining life of the majority of development costs is 12 years. 
 
Following the decision by management not to renew or pursue some of the group's patent applications, $63,000 
(2009: $51,000) of previously capitalised patent costs was found to be impaired. 
 
Changes in market expectations led to a management decision not to continue certain development projects 
acquired through the purchase of Scope Seven LLC. Capitalised costs relating to these projects were considered 
to be impaired. The amount of impairment was $797,000 (2009:$533,000). 
 
Amortisation and impairment costs are included within 'Other operating expenses' in the Statement of 
Comprehensive Income. 
 
Computer software includes the following amounts where the group is a lessee under a finance lease: 
 2010 2009 
  $000 $000 
Cost - capitalised finance leases  133 133 
Accumulated amortisation  (50) (32) 
Net book value 83 101 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 48 - 
 
 
25/06/2010/16:22:35 
 
Company Goodwill 
Computer 
Software Total 
 $000 $000 $000 
Cost       
Opening cost at 1 April 2008 15,225 77 15,302 
Additions - 1 1 
Exchange differences (4,265) (21) (4,286) 
Opening cost at 1 April 2009 10,960 57 11,017 
Additions - 8 8 
Closing cost at 31 March 2010 10,960 65 11,025 
 
Accumulated amortisation/ impairment       
Opening balance at 1 April 2008 12,057 72 12,129 
Amortisation - 5 5 
Exchange differences (3,378) (21) (3,399) 
Opening balance at 1 April 2009 8,679 56 8,735 
Closing balance at 31 March 2010 8,679 56 8,735 
 
Opening carrying value at 1 April 2008 3,168 5 3,173 
Opening carrying value at 1 April 2009 2,281 1 2,282 
Closing carrying value at 31 March 2010 2,281 9 2,290 
 
Computer software includes the following amounts where a subsidiary of the company is the lessee under the 
finance leases: 
 2010 2009 
  $000 $000 
Cost - capitalised finance leases  54 - 
Accumulated amortisation (47) - 
Net book value 7 - 
There were no assets held under finance leases at 31 March 2009. 
 
Impairment tests for goodwill 
Goodwill is subject to annual impairment testing, or more frequently if there are indications that goodwill might be 
impaired. The recoverable amount of a cash-generating unit is determined based on value-in-use calculations. The 
calculations use pre-tax cash flow projections which are based on financial budgets approved by management 
covering a five-year period. Management determined the budgets based on past performance and its expectations 
of market development. 
 
Goodwill is allocated to the group's cash-generating units (CGUs) identified according to the business segment. 
Goodwill is allocated as follows: 
 
Software Solutions Media Production Group 
2010 2009 2010 2009 2010 2009 
$000 $000 $000 $000 $000 $000 
2,281 2,281 1,709 1,709 3,990 3,990 
 
 
Following the impairment tests, goodwill was considered not to be impaired. 
 
Key assumptions 
 
Discount rate 
The discount rate used was 8%. 
 
Cash flow growth rates 
The cash flow growth rates are derived from forecast sales growth taking into consideration past experience of 
operating margins achieved in each cash generating unit.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 49 - 
 
 
25/06/2010/16:22:35 
 
Sensitivities 
The group's impairment review is sensitive to changes in the key assumptions. Based on a sensitivity analysis a 
change of 5% in any one of the assumptions will not cause any impairment of the group's CGUs. 
 
18. Inventories 
 Group 
 2010 2009 
 $000 $000 
Products in the course of development 365 - 
 
The group held no inventory at 31 March 2009. 
During the year ended 31 March 2009 $230,000 was recognised as an expense within ‘cost of sales’ and $95,000 
was capitalised as an intangible asset under development costs from inventories held at the beginning of the year. 
 
19. Trade and other receivables 
 Group Company 
 2010 2009 2010 2009 
  $000 $000 $000 $000 
Trade receivables 2,247 1,729 1 1 
Less: provision for impairment of trade receivables (65) (117) (1) (1) 
Trade receivables - net 2,182 1,612                  -                   -  
Amounts owed by subsidiary undertakings                  -                   -  18,193 16,807 
VAT 22 26                  -                   -  
Other debtors 234 226 3                  -  
Prepayments and accrued income 229 212 157 143 
  2,667 2,076 18,353 16,950 
 
The fair values of trade and other receivables equal their carrying amounts. 
 
As of 31 March 2010, trade receivables of $156,000 (2009: $505,000) were overdue. The ageing analysis of these 
trade receivables is as follows: 
 Group Company 
 2010 2009 2010 2009 
  $000 $000 $000 $000 
Less than 3 months 129 489 - - 
3 to 6 months 25                  -                   -  - 
7 to 12 months 1 9                  -                   -  
Over 12 months 1 7 1 1 
  156 505 1 1 
 
The carrying amounts of trade and other receivables are denominated in the following currencies: 
 
 Group Company 
 2010 2009 2010 2009 
  $000 $000 $000 $000 
Pound sterling 200 292 160 15,911 
US Dollar 2,465 1,764 18,193 1,039 
Euros 2 20 - - 
  2,667 2,076 18,353 16,950 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 50 - 
 
 
25/06/2010/16:22:35 
 
Provision for impairment of trade receivables: 
 Group 
 2010 2009 
  $000 $000 
At 1 April  117 140 
Provision for receivables impairment 5 121 
Receivables written off in the year as uncollectible (47) (128) 
Unused amounts reversed (10) - 
Exchange differences - (16) 
At 31 March 65 117 
 
The other classes within trade and other receivables do not contain impaired assets. 
The maximum exposure to credit risk at the reporting date is the carrying value of Trade receivables, other debtors 
and cash and cash equivalents. The group does not hold any collateral as security. 
The directors believe that a reasonable provision has been made for outstanding amounts or values impaired and 
the remaining unprovided amounts are considered to be recoverable. 
The amounts owed by the subsidiary undertakings to the parent company, have no payment terms and bear no 
interest, but they are considered to be recoverable in the future. 
 
20. Notes to the cash flow statement 
 
20.1 Significant non-cash transactions 
During the year the group acquired property, plant and equipment and computer software with a cost of $334,000 
(2009:$382,000) of which $120,000 (2009: $274,000) was acquired by the means of finance leases. 
 
20.2  Cash and cash equivalents 
Cash and cash equivalents consist of cash on hand and balances with banks. Cash and cash equivalents included 
in the cash flow statement comprise the following statement of financial position amounts. 
 Group Company 
 2010 2009 2010 2009 
 $000 $000 $000 $000 
Cash on hand and balances with banks 1,221 1,414 8 10 
 
The fair value of the cash and cash equivalents are considered to be at their book value. 
 
21. Share capital and reserves 
 
Share capital 
Group and Company 2010 2009 
  $000 $000 
Authorised    
26,666,667 ordinary shares of 15p each 5,719 5,719 
 
Allotted, called-up and fully paid    
21,326,421 ordinary shares of 15p each 4,573 4,573 
 
Reconciliation of the number of shares outstanding:   
Opening balance 21,326,421 17,913,089 
Shares issued -  3,413,332 
Closing balance 21,326,421 21,326,421 
 
On 6 October 2008 3,413,332 15p ordinary shares were issued at a price of 15p for total consideration of $732,000 
(£512,000). 
 
On 9 April 2009 the group purchased 473,500 of its own shares through ZOO Employee Share Trust Limited at an 
average price of $0.15 (10.3p) per share. The total cost of the purchase was $71,823 (£48,939). 
 
Transactions after the reporting period are shown in note 25. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 51 - 
 
 
25/06/2010/16:22:35 
Reserves 
The following describes the nature and purpose of each reserve within owner's equity: 
Reserve  Description and purpose  
Share premium reserve 
Represents the amount subscribed for share capital in excess of the nominal 
value. 
Accumulative losses Cumulative net losses recognised in the Consolidated Statement of 
Comprehensive Income for the group or the Statement of Comprehensive 
Income for the company. 
Foreign exchange translation 
reserve 
Cumulative exchange differences resulting from translation of foreign 
operations into the reporting currency. 
Convertible loan note reserve Represents the equity element of the Convertible loan note. 
Share option reserve Cumulative cost of share options issued to employees. 
Share warrant reserve Cumulative cost of share warrants issued to customers. 
Other reserves 
Created as part of the reverse takeover between Kazoo3D plc and ZOO Media 
Corporation Ltd in 2001. 
 
22. Borrowings 
 Group Company 
 2010 2009 2010 2009 
 $000 $000 $000 $000 
Non-current      
Amounts owed to subsidiary undertakings - - 9,701 9,701 
6% Unsecured convertible loan note stock 5,054 4,595 5,054 4,595 
Finance lease liabilities 84 131 - - 
  5,138 4,726 14,755 14,296 
 
Current      
Promissory note - Scenewise Inc. - 246 - - 
South Yorkshire Investment fund loan                  -  107 - 107 
Finance lease liabilities 169 170 - - 
  169 523 - 107 
Total borrowings 5,307 5,249 14,755 14,403 
 
On 27 September 2006 the Group issued $5,062,000 6% Unsecured convertible loan note stock which is 
redeemable on 31 October 2011. The underlying value of the loan stock is £3,541,000. The loan stock holder is 
entitled, at any time after the first anniversary, to convert all or part of the loan stock into fully paid ordinary shares 
on the basis of 1 Ordinary share for every $0.6969 (£0.4875) of principal amount of loan stock. The company can 
force conversion if the mean average closing bid price of an ordinary share, as shown in the daily official list of the 
London Stock Exchange for at least 30 consecutive days is equal to or exceeds $12.87 (£9.00) on or before the 
third anniversary or $16.08 (£11.25) after the third anniversary. 
 
The convertible loan stock has been accounted for in accordance with IAS 32 (Financial instruments: Presentation) 
and split between debt and equity based upon the market rate of similar loan stock not carrying conversion options, 
estimated to be 8%. The fair value of the convertible loan note is considered to be the carrying value. 
 
The final instalment of Scenewise Inc. promissory note was repaid in December 2009. The loan carried a fixed 
interest rate of 10%. The promissory note arose on the acquisition of Scope Seven LLC. The South Yorkshire 
Investment fund loan was fully repaid on 15th May 2009. The loan carried a fixed interest rate of 12%. The fair 
values of the promissory note and the short term loan are considered to be their book values.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 52 - 
 
 
25/06/2010/16:22:35 
 
Finance lease liabilities 
 
Finance lease liabilities are payable as follows: 
At 31 March 2010 
Future 
minimum 
lease 
payments Interest 
Present 
value of 
minimum 
lease 
payments 
 $000 $000 $000 
Less than one year 169 - 169 
Between one and five years 84 - 84 
More than five years - - - 
 253 - 253 
 
At 31 March 2009 
Future 
minimum 
lease 
payments Interest 
Present 
value of 
minimum 
lease 
payments 
 $000 $000 $000 
Less than one year 170 - 170 
Between one and five years 131 - 131 
More than five years - - - 
 301 - 301 
 
The lease periods of the finance leases range from between 3 and 4 years, with options to purchase the asset at 
the end of the term. 
 
23. Trade and other payables 
 Group Company 
 2010 2009 2010 2009 
 $000 $000 $000 $000 
Trade Creditors 1,894 761 207 241 
Amounts owed to subsidiary undertakings - - 13 - 
Accrued expenses 2,869 2,758 850 640 
  4,763 3,519 1,070 881 
 
The fair values of trade and other payables equal their carrying amounts. 
 
24. Commitments 
 
Capital commitments 
The group had no capital commitments at the 31 March 2010. 
 
Operating lease commitments 
The group has a number of operating leases, as a lessee, for equipment and premises under non-cancellable 
agreements. The lease terms are between 3 and 6 years, and the majority of lease agreements are renewable at 
the end of the lease period at market rate. The lease expenditure charged to the Statement of Comprehensive 
Income during the year is disclosed in note 9.The lease expenditure on premises is charged to the Statement of 
Comprehensive Income on an average annual charge over the life of the lease. 
 
The future minimum lease payments under non-cancellable operating leases are as follows: 
 2010 2009 
 $000 $000 
Within one year 552 486 
From one to five years 380 1,015 
After five years - - 
  932 1,501 
The group does not sub-lease any of its leased premises. 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 53 - 
 
 
25/06/2010/16:22:35 
25. Events after the reporting period 
On 15 April 2010 160,000 shares were issued following the exercise of employee share options. 
 
On 15 April 2010 the group purchased 160,000 of its own shares through ZOO Employee Share Trust Limited at an 
average price of $0.51 (33p) per share. The total cost of the purchase was $81,660 (£52,800). 
 
Since the year end the group has entered into four foreign exchange contracts to sell US dollars and purchase 
pound sterling on specific dates in the six months following the year end. 
 
On 25 June 2010 the company entered into an agreement, which is subject in part to the approval of the 
company’s shareholders, with Multi Packaging Solutions, Inc. Multi Packaging Solutions, Inc. will make a strategic 
investment of $1.2m (£0.8m) in the company.  This comprises of the allotment and issue of 2,148,642 new ordinary 
shares of $0.23 (15p) each in the company, at a subscription price of $0.60 (40p) per share. It also comprises of, 
subject to the approval of the company's shareholders, a proposed issuance of warrants to subscribe for up to a 
maximum aggregate number of 2,148,642 new ordinary shares of 15 pence each in the company at a subscription 
price of $0.75 (50p) per share. 
 
26. Related parties 
 
Subsidiaries 
The parent company has investments in the following subsidiary undertakings: 
 
Subsidiary 
undertakings 
Country of 
incorporation Principle activity Holding % 
ZOO Digital Limited UK Technology development 2 ordinary shares 100 
Scope Seven Limited UK 
Media production and design and 
development of interactive DVDs 100 ordinary shares 100 
ZOOtech Limited UK 
Dormant 
95,714 ordinary 
shares 100 
ZOO Digital Inc. USA 
Sale & distribution technology products 
10,000 shares of 
common stock 100 
ZOO Employee 
Share Trust Limited 
UK 
Employee share scheme 2 ordinary shares 100 
Scope Seven LLC USA Media production and design and 
development of interactive DVDs 
100 shares of 
common stock 100* 
*Scope Seven LLC is indirectly held by ZOO Digital Group plc through ZOO Digital Inc. 
 
Transactions between ZOO Digital Group plc and its subsidiaries, which are related parties, have been eliminated 
on consolidation. 
 
Subsidiary undertakings 
 Company 
 2010 2009 
 $000 $000 
Cost 11,797 11,797 
Provision for impairment 2,097 2,097 
Net book value 9,700 9,700 
 
On 31 March 2010 the group ceased the activities of Scope Seven Limited and transferred the trade and assets 
into ZOO Digital Group plc. 
 
Key Management personnel 
The details of key management remuneration is disclosed in note 11, Employees including directors. 
 
Related Party Transactions 
 Company 
 2010 2009 
 $000 $000 
Sales of services to subsidiaries:   
Administration services 3,441 2,369 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 54 - 
 
 
25/06/2010/16:22:35 
 
Amounts owed by subsidiary undertakings 
 Company 
 2010 2009 
 $000 $000 
ZOO Digital Limited 14,097 14,984 
Scope Seven Limited - 796 
Scope Seven LLC 3,816 492 
ZOO Digital Inc 280 535 
 18,193 16,807 
 
Amounts owed to subsidiary undertakings 
 Company 
 2010 2009 
 $000 $000 
ZOO Employee Share Trust Limited 13 - 
 
 
 
27. Share based payments 
Share options have been granted under the following schemes to subscribe for ordinary shares of the company. 
Movements in the number of options, under each of the schemes, and their related weighted average exercise 
price are as follows: 
 2010 2009 
 Options 
Weighted 
average 
exercise 
price Options 
Weighted 
average 
exercise 
price 
 No. $ No. $ 
ZOO Digital Group plc EMI scheme (2007)*     
Outstanding at the beginning of the year - - 422,979 0.39 
Granted during the year - - - - 
Surrendered during the year - - (422,979) 0.39 
Outstanding at the end of the year - - - - 
Exercisable at the end of the year - - - - 
 
 
ZOO Digital Group plc Unapproved (2007)*     
Outstanding at the beginning of the year - - 1,842,437 0.39 
Granted during the year - - - - 
Surrendered during the year - - (1,842,437) 0.39 
Outstanding at the end of the year - - - - 
Exercisable at the end of the year - - - - 
 
ZOO Digital Group plc EMI scheme (2008)**     
Outstanding at the beginning of the year 995,647 0.21 - - 
Granted during the year - - 995,647 0.21 
Outstanding at the end of the year 995,647 0.21 995,647 0.21 
Exercisable at the end of the year 398,259 0.21 - - 
 
ZOO Digital Group plc Unapproved (2008)**     
Outstanding at the beginning of the year 2,138,918 0.21 - - 
Granted during the year - - 2,138,918 0.21 
Outstanding at the end of the year 2,138,918 0.21 2,138,918 0.21 
Exercisable at the end of the year 855,567 0.21 - - 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 55 - 
 
 
25/06/2010/16:22:35 
Under these schemes the percentage of shares that can be exercised is staggered over the exercise period with 
typically 40% exercisable after the first year and a further 30% in each of the following two years. 
*The underlying weighted average exercise price for 2007 shares under option at 31 March 2010 was 26.5p 
(2009:26.5p). 
**The underlying weighted average exercise price for 2008 shares under option at 31 March 2010 was 15p 
(2009:15p). 
 
Out of the 3,134,565 outstanding options (2009: 3,134,565 options), 1,253,826 were exercisable (2009:nil). No 
options were exercised during the years ended 31 March 2010 or 31 March 2009. On 15 April 2010 160,000 
options were exercised. 
 
During the year ended 31 March 2009 2,265,416 were surrendered as they were deemed to be underwater and not 
providing an incentive to employees. New options were issued to replace the surrendered options. 
 
All share options outstanding at the end of the year have an expiry date of 13 October 2018 and an exercise price 
of $0.21 (15p). 
 
In arriving at the fair value, each option grant has been valued separately using the binomial model and the 
resulting fair value is expensed over the vesting period. The following table lists the range of assumptions used in 
the model: 
Expected Volatility (%) 100 
Risk-free Interest rate(%) 4.49 
Expected life of option (years) 5 
Expected dividends none 
Volatility has been estimated by taking the historical volatility in the company’s share price over a three year period. 
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of 
non-transferability, exercise restrictions and behavioural considerations. 
 
Share warrants have been granted under the following scheme to subscribe for ordinary shares of the company. 
Movements in the number of warrants and their related weighted average exercise price is as follows: 
 
 2010 2009 
 Options 
Weighted 
average 
exercise 
price Options 
Weighted 
average 
exercise 
price 
 No. $ No. $ 
Share Warrants     
Outstanding at the beginning of the year 525,000 0.21 - - 
Granted during the year - - 525,000 0.21 
Outstanding at the end of the year 525,000 0.21 525,000 0.21 
Exercisable at the end of the year 250,000 0.21 125,000 0.21 
Under this scheme the percentage of shares that can be exercised is staggered over the exercise period based on 
cumulative cash received from the Warrant holder. 
 
Out of the 525,000 outstanding warrants (2009: 525,000), 250,000 were exercisable (2009: 125,000). No warrants 
were exercised since grant. 
 
All share warrants outstanding at the end of the year have an expiry date of 15 August 2013 and an exercise price 
of $0.21 (15p). 
 
In arriving at the fair value, the share warrants have been valued using the binomial model and the resulting fair 
value is expensed over the vesting period. The following table lists the range of assumptions used in the model: 
Expected Volatility (%) 100 
Risk-free Interest rate(%) 4 
Expected life of option (years) 2 
Expected dividends none 
 
Volatility has been estimated by taking the historical volatility in the company’s share price over a three year period. 
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of 
non-transferability, exercise restrictions and behavioural considerations.  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 56 - 
 
 
25/06/2010/16:22:35 
 
 2010 2009 
 $000 $000 
Total expense/(credit) recognised from share option transactions 157 71 
Total expense/(credit) recognised from share warrant transactions 12 48 
Share based payment liability 317 148 
 
28. Financial instruments 
 
The group's financial instruments comprise cash and liquid resources, a long term convertible loan, and various 
items, such as trade receivables and trade payables that arise directly from its operations.  The main purpose of 
these financial instruments is to provide working capital for the group's operations. 
 
It is, and has been throughout the year under review, the group’s policy that no trading in financial instruments shall 
be undertaken, however following the year end the group entered into four forward exchange contracts. 
 
Categories of financial instruments 
 Group Company 
 2010 2009 2010 2009 
 $000 $000 $000 $000 
Current financial assets     
Trade receivables (note 19) 2,182 1,612 - - 
Amounts owed by subsidiary undertakings (note 
19) - - 18,193 16,807 
Cash at bank and in hand (note 20) 1,221 1,414 8 10 
 3,403 3,026 18,201 16,817 
 
 
Group Company 
 2010 2009 2010 2009 
 $000 $000 $000 $000 
Current financial liabilities     
Finance lease liabilities (note 22) 169 170 - - 
Promissory note - Scenewise Inc. (note 22) - 246 - - 
South Yorkshire Investment fund loan (note 22) - 107 - 107 
Trade and other payables (note 23) 4,763 3,519 1,070 881 
Total current financial liabilities 4,932 4,042 1,070 988 
 
Non-current financial liabilities     
Finance lease liabilities (note 22) 84 131 - - 
Amounts owed to subsidiary undertakings (note 22) - - 9,701 9,701 
6% Unsecured convertible loan note stock (note 
22) 5,054 4,595 5,054 4,595 
Total non-current financial liabilities 5,138 4,726 14,755 14,296 
Total financial liabilities 10,070 8,768 15,825 15,284 
 
Market Risk 
Foreign currency risk 
The main risks arising from the group’s financial instruments are from foreign currency risk. 
 
Over the recent past an increasing proportion of the group’s trading transactions have been in US dollars. The 
majority of group’s revenue and costs are now denominated in US dollars. The directors now consider US dollars 
to be more representative of the group’s operations, and as a consequence with effect from 1 April 2009 the group 
has determined that its functional currency has changed from pound sterling to US dollars, and has elected to 
change its presentation currency from pound sterling to US dollars. 
 
The Group includes subsidiaries operating in both the UK and USA. The majority of the group' transactions are 
denominated in US dollars, however the costs arising from the UK subsidiaries are denominated in pound sterling 
therefore exposing it to a currency risk of fluctuations in the pound sterling/US Dollar exchange rate. During the 
year ended 31 March 2010 there was less volatility in the pound sterling/US Dollar rate than in the previous year 
with the rate peaking at 0.6945 and falling to a low of 0.5878, with an average rate of 0.6264.  If the US Dollar had  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 57 - 
 
 
25/06/2010/16:22:35 
remained at its highest level throughout the full year the group would have shown a post tax loss of $315,000 
(2009: Profit $1.4m), if US Dollar had been at its lowest level throughout the full year the group would have shown 
a post tax loss of $1.6million (2009: Loss $1.5m) and if the US Dollar had remained at the average rate throughout 
the year the post tax loss would have been $1.1million (2009: Loss $482,000). 
 
Transactions between the company and its subsidiaries are in US Dollars, however the company is exposed to 
exchange rate fluctuations due to the majority of its costs being denominated in pound sterling and through the 
revaluation of the Company’s pound sterling creditors. 
 
The main exposure for the group and the company to fluctuation in the pound sterling/US dollar rate is through the 
Convertible loan note creditor which is denominated in pound sterling. The value of the loan is translated at the 
year end exchange rate. 
 
The pound sterling/US dollar exchange rate at the 31 March 2010 was 0.6589 (2009: 06995) 
 
Interest rate risk 
In September 2006 the company issued $5,062,000 (£3,541,000) Unsecured convertible redeemable loan stock, 
redeemable on 31 October 2011. The loan carries a fixed interest rate of 6%. During the year the group fully repaid 
the Scenewise Inc promissory note. The balance of the promissory note outstanding at 31 March 2009 was 
$246,000. During 2009 the company also obtained a $107,000 (£75,000) loan from South Yorkshire investment 
fund, this loan was fully repaid on 15th May 2009. The group and company consider the interest rate risk on the 
loans to be minimal as rates are fixed. 
 
Liquidity risk 
Liquidity risk is the risk that the group and company will not be able to meet their financial obligations as they fall 
due. Management monitors rolling forecasts of the group's cash and cash equivalents on the basis of expected 
cash flows, reducing its liquidity risk through management of bank accounts, trade debtors and trade creditors, by 
utilising the availability of finance leases and through controls on expenditure. 
 
The tables below analyse the financial liabilities which will be settled on a net basis into relevant maturity groupings 
based on the remaining period at the year end to the contractual maturity date. The amounts disclosed in the table 
are the contractual undiscounted cash flows. 
 
Group 
 
Less than 1 
year 
Between 1 
and 2 years 
Between 2 
and 5 years Over 5 years 
At 31 March 2010 $000 $000 $000 $000 
Borrowings - 5,054 - - 
Finance lease liabilities 169 68 16 - 
Trade and other payables 4,763 - - - 
 
 
Less than 1 
year 
Between 1 
and 2 years 
Between 2 
and 5 years Over 5 years 
At 31 March 2009 $000 $000 $000 $000 
Borrowings 353 - 4,595 - 
Finance lease liabilities 170 125 6 - 
Trade and other payables 3,519 - - - 
 
Company 
 
Less than 1 
year 
Between 1 
and 2 years 
Between 2 
and 5 years Over 5 years 
At 31 March 2010 $000 $000 $000 $000 
Amount owed to subsidiary undertakings - - - 9,701 
Borrowings - 5,054 - - 
Trade and other payables 1,070 - - - 
 
 
Less than 1 
year 
Between 1 
and 2 years 
Between 2 
and 5 years Over 5 years 
At 31 March 2009 $000 $000 $000 $000 
Amount owed to subsidiary undertakings - - - 9,701 
Borrowings 107 - 4,595 - 
Trade and other payables 881 - - -  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 58 - 
 
 
25/06/2010/16:22:35 
 
Credit risk 
Credit risk arises from cash and cash equivalents and credit exposures on outstanding receivables. The group's 
and company's main credit risks are on the outstanding trade receivables. This risk is reduced through credit 
control procedures. An analysis of outstanding receivables is included in note 19. 
 
29. Capital management 
The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern, 
so that it can provide returns for shareholders and benefits for other stakeholders and to provide an adequate 
return to shareholders by pricing products and services commensurately with the level of risk. 
 
The group sets the amount of capital in proportion to risk. The group manages the capital structure and makes 
adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. 
In order to maintain or adjust the capital structure, the group may return capital to shareholders, issue new shares, 
or sell assets to reduce debt. 
 
Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is 
calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'current and non-
current borrowings' as shown in the Consolidated Statement of Financial Position) less cash and cash equivalents. 
Total capital is calculated as 'equity' as shown in the Consolidated Statement of Financial Position plus net debt. 
 
 2010 2009 
 $000 $000 
Total borrowings 5,307 5,249 
Less cash and cash equivalents (1,221) (1,414) 
Net Debt 4,086 3,835 
Total equity 1,644 2,347 
Total capital 5,730 6,182 
 
Gearing ratio 71% 62% 
 
 
  ZOO DIGITAL GROUP PLC 
Annual report and accounts 2010 
 
 
- 59 - 
 
 
25/06/2010/16:22:35 
 
GROUP DIRECTORY 
 
Head Office Software Solutions Media Production 
ZOO Digital Group plc ZOO Digital Limited Scope Seven LLC 
The Tower The Tower 2201 Park Place 
2 Furnival Square 2 Furnival Square Suite 100 
Sheffield Sheffield El Segundo 
S1 4QL S1 4QL CA 90245 
United Kingdom United Kingdom USA 
T: +44 (0)114 241 3700 T: +44 (0)114 241 3700 T: +1 310 220 3939 
F: +44 (0)114 241 3701 F: +44 (0)114 241 3701 F: +1 310 220 3958 
ZOO Employee Share Trust Limited ZOO Digital Inc. Scope Seven Limited 
The Tower 2201 Park Place The Tower 
2 Furnival Square Suite 100 2 Furnival Square 
Sheffield El Segundo Sheffield 
S1 4QL CA 90245 S1 4QL 
United Kingdom USA United Kingdom 
T: +44 (0)114 241 3700 T: +1 310 220 3939 T: +44 (0)114 241 3700 
F: +44 (0)114 241 3701 F: +1 310 220 3958 F: +44 (0)114 241 3701