Betbull releases its Annual report 2006

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balance/Annual report 2006

London (euro adhoc) - Betbull plc ("Betbull") announces the release
of group consolidated audited financial statements

1. Financial highlights for the year

? Betbull has continued its growth during the year 2006, achieving a
record gross income of EUR 89.4 m up by 4 times compared with the year 2005 -
(2005 - EUR 20.1 m) and Net Gaming Revenue of EUR 15.0 m up by 3.75 times
compared with the year 2005 (2005 - EUR 4.0 m).
? EBITDA reached EUR (0.55) m - (2005 - EUR (5.2) m) and 0.08 m - (2005 -
EUR (4.0) m) before share benefit charge.
? The Adjusted Operating Loss amounted to EUR (0.97) m - (2005 - EUR (4.2)
m) before Share Benefit Charges of EUR 0.63 m - (2005 - EUR 1.2 m).
? Betbull maintains a healthy Cash Position of EUR 8.0 m as of 31 December
2006 - (2005 - EUR 10.7 m).

Total cost and expenditures included various extraordinary items, in
particular, for legal counsel and lobbying as well as the start up
costs of the business’s in Spain and Italy.

2. Business highlights for the year

? Private placing raising EUR 4.2 m by issuing 1,050,000 new ordinary
shares, 942,069 not accounted for in the balance sheet, (closed 28 February 2007
yielding a total of 7,621,431 shares issued overall) with the goals to fund
further business development and to maintain flexibility.
? Award of four licenses in Italy for the cities of Milan and Como in a
tender process.
? Joint Venture signed with Grupo Orenes, a leading Spanish leisure
operator, with the goal to establish a retail betting chain in Spain.
? Opening of the first retail betting units in Spain.
? Completion of repositioning the company as a retail betting operator
with complementary online offering. The portfolio of retail betting units was
restructured to achieve an overall better performance on fewer outlets.
? Major swing in continental Europe towards a liberalization of gaming, in
particular, the new legislation in Italy and Spain (Madrid). The German
monopoly is still heavily contested and must be newly regulated by the end of
2007 following a Constitutional Court Ruling in March 2006.

Commenting on today’s announcement Simon Bold, Director of Betbull,
said: "Considering the difficult regulatory circumstances under which
Betbull operated in the year 2006 I am very pleased with the growth
achieved. I am looking forward implementing business development
objectives in Spain which will help grow Betbull to the next level."
Günter Schmid, Director of Betbull, added: "We are still executing
our strategy of growth in continental Europe via acquisitions,
partnering and organic growth. Once the regulatory dust has settled
down a bit we have the clear sight required to speed up again."

- ENDS -

Contact

David De Marco, Group Finance Director

d.demarco@betbull.com
Phone +356 21480131
Fax +356 21480132

Betbull plc
Tower 42, Level 23/Pillsbury
25 Old Broad Street
London EC2N 1HQ
United Kingdom

Betbull plc is registered in England & Wales under the Registration
Number 05044730.

This communication can be downloaded from the website
www.betbullplc.com.

About Betbull

Betbull's goal is to establish itself as one of the leading
Continental European retail bookmakers. The Betbull group holds
bookmaking licences in the UK, Austria, Italy, and Malta and horse
betting licences in select districts of Germany and Spain.

The high caliber management team (Simon Bold, David De Marco,
Alexander Leip, and Günter Schmid) has a strong track record in the
betting industry with relevant bookmaking experience and know-how
including sector specific M&A expertise.

Betbull has been listed on the Vienna Stock Exchange since October
2004 ("BETB", "BETB.VI").

For further details please refer to the website www.betbullplc.com.

betbull plc

Consolidated Financial Statements

Year Ended

31 December 2006

Contents

Page:

1 Directors, advisors and company secretarial matters

2 Executive directors' review

3 Directors' report

4 Statement of directors' responsibilities

5 Report of the independent auditors

6 Consolidated financial statements

7 Consolidated income statement

8 Consolidated balance sheet

9 Consolidated statement of changes in equity

10 Consolidated cash flow statement

11 Notes forming part of the consolidated financial statements

Directors
Lorne Abony (resigned 13 September 2006)
Simon Bold
Andrew Rivkin (resigned 13 September 2006)
Günter Schmid
Norbert Teufelberger
Alexander Leip
Simon Fielder (appointed 13 September 2006)
David De Marco (appointed 13 September 2006)
David Morgan (appointed 15 December 2006)

Secretary

Pillsbury Secretarial Limited, Tower 42, Level 23, 25 Old Broad
Street, London EC2N 1HQ
(appointed 1 September 2006).

Principal bankers
NatWest Bank, 57 Line Wall Road, Gibraltar.
Erste Bank Der Österreichischen Sparkassen AG, Graben
21, A-1010 Vienna, Austria.

Principal solicitors
Pillsbury Winthrop Shaw Pittman LLP, Tower 42, Level 23,
25 Old Broad Street, London
EC2N 1HQ (appointed 1 August 2006).

Auditors

BDO Stoy Hayward LLP, 8 Baker Street, London, W1U 3LL.

Registered office

Tower 42, Level 23, 25 Old Broad Street London EC2N 1HQ (changed on 14
September 2006).

Executive Directors’ Review for the year ended 31 December 2006

Review of the financial highlights for the year

? betbull has continued its growth during the year 2006, achieving a
record gross income of EUR 89.4 m up by 4 times compared with the year 2005 -
(2005 - EUR 20.1 m) and Net Gaming Revenue of EUR 15.0 m up by 3.75 times
compared with the year 2005 - (2005 - EUR 4.0 m).
? EBITDA reached EUR (0.55) m - (2005 - EUR (5.2) m) and 0.08 m - (2005 -
EUR (4.0) m) before share benefit charge.
? The Adjusted Operating Loss amounted to EUR (0.97) m - (2005 - EUR (4.2)
m) before Share Benefit Charges of EUR 0.63 m - (2005 - EUR 1.2 m).
? betbull maintains a healthy Cash Position of EUR 8.0 m as of 31 December
2006 - (2005 - EUR 10.7 m).

Review of the business highlights for the year

? Private placing raising EUR 4.2 m by issuing 1,050,000 new ordinary
shares, 942,069 not accounted for in the balance sheet, (closed 28 February 2007
yielding a total of 7,621,431 shares issued overall) with the goals to fund
further business development and to maintain flexibility.
? Award of four licenses in Italy for the cities of Milan and Como in a
tender process.
? Joint Venture signed with Grupo Orenes, a leading Spanish leisure
operator, with the goal to establish a retail betting chain in Spain.
? Opening of the first retail betting units in Spain.
? Completion of repositioning the company as a retail betting operator
with complementary online offering. The portfolio of retail betting units was
restructured to achieve an overall better performance on fewer outlets.
? Major swing in continental Europe towards a liberalization of gaming, in
particular, the new legislation in Italy and Spain (Madrid). The German
monopoly is still heavily contested and must be newly regulated by the end of
2007 following a Constitutional Court Ruling in March 2006.

Directors

The directors who served during this period and to the date of
signature of this report were as stated on page 1. Mr. David De
Marco joined the Board of Directors as Group Finance Executive
Director on 13 September 2006 and Mr. Simon Fielder joined the Board
of Directors as a Non-Executive on the same day. Mr. David Morgan
joined the Board of Directors as Non-Executive Director on 15
December 2006.

Directors’ Report for the year ended 31 December 2006

The directors submit their report and financial statements for the
group for the year ended 31 December 2006

Change of company name On 18 May 2006, the company changed its name
from Betbull - The European Betting Exchange plc to Betbull plc.

Principal activities for the year The principal activity for the year
ended 31 December 2006 was the operation of retail betting outlets
with complimentary online services.

Results and dividends for the year The results for the year ended 31
December 2006 are shown in the income statement on page 7. In view
that the functional currency has changed from GBP to EUR, the
reported figures are stated in EUR.

The directors do not recommend the payment of a dividend - (2005 -
EURNil)

A review of the financial and business highlights for the year is
contained within the Executive Directors’ Review on page 2.

Directors The directors who served during this period and to the date
of signature of this report were as stated on page 1. Andrew Rivkin
and Lorne Abony stepped down as non-executive directors on 13
September 2006. The board is very grateful to Mr. Rivkin and Mr.
Abony for their outstanding contributions and counsel since the start
of the company and wishes them all the best in the future.

Auditors All of the current directors have taken all the steps they
ought to have taken to make themselves aware of any information
needed by the company’s auditors for the purposes of their audit and
to establish that the auditors are aware of that information. The
directors are not aware of any relevant audit information of which
the auditors were unaware.

BDO Stoy Hayward LLP have expressed their willingness to continue in
office and a resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.

By order of the Board

Günter Schmid

Director
17 April 2007

Statement of directors’ responsibilities

The directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the group, for safeguarding the assets of the group and
for taking reasonable steps for the prevention and detection of fraud
and other irregularities.

The directors are responsible for preparing the financial statements.
The directors have chosen to prepare financial statements for the
group in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs).

International Accounting Standard 1 requires that financial
statements present fairly for each financial year the group’s
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of transactions,
other events and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expenses set
out in the International Accounting Standards Board’s ‘Framework for
the preparation and presentation of financial statements’. In
virtually all circumstances, a fair presentation will be achieved by
compliance with all applicable IFRSs. A fair presentation also
requires the directors to:

? consistently select and apply appropriate accounting policies;
? present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information; and
? provide additional disclosures when compliance with the specific
requirements in IFRSs is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the entity’s
financial position and financial performance.

Financial statements are published on the group's website in
accordance with legislation in Austria governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of
the group's website is the responsibility of the directors. The
directors' responsibility also extends to the ongoing integrity of
the financial statements contained therein.

Report of the Independent Auditors To the shareholders of Betbull plc
We have audited the consolidated financial statements (the
''financial statements'') of betbull plc for the year ended 31
December 2006 which comprise the consolidated income statement, the
consolidated balance sheet, the consolidated cash flow statement, the
consolidated statement of change in shareholders' equity and the
related notes. These financial statements have been prepared under
the accounting policies set out therein. Respective responsibilities
of directors and auditors The directors' responsibilities for
preparing the annual report and the financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union are set out in the statement of
directors' responsibilities. Our responsibility is to audit the
financial statements in accordance with International Standards on
Auditing (UK and Ireland). We report to you our opinion as to whether
the financial statements give a true and fair view and have been
properly prepared in accordance with IFRSs as adopted by the European
Union. We read the other information contained in the Annual Report
and consider whether it is consistent with the audited financial
statements. The other information comprises only the Executive
Directors’ Review and the Directors’ Report. We consider the
implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any other
information. Our report has been prepared pursuant to the terms of
our engagement letter dated 11 January 2007 and for no other purpose.
No person is entitled to rely on this report unless such a person is
a person entitled to rely upon this report by virtue of and for the
purpose of the terms of our engagement letter or has been expressly
authorised to do so by our prior written consent. Save as above, we
do not accept responsibility for this report to any other person or
for any other purpose and we hereby expressly disclaim any and all
such liability. Basis of audit opinion We conducted our audit in
accordance with International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgments made by the
directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the group's
circumstances, consistently applied and adequately disclosed. We
planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the
financial statements are free from material misstatement, whether
caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of
information in the financial statements. Opinion In our opinion the
consolidated financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the state
of the group’s affairs as at 31 December 2006 and of its loss for the
year then ended. Emphasis of matter - Regulatory issues In forming
our opinion, which is not qualified, we have considered the adequacy
of, and draw attention to, the disclosures made in note 21 to the
financial statements concerning the risk of adverse action arising
from regulatory developments in various countries. Note 21 includes a
statement that the group has not been able to quantify any potential
impact of the regulatory uncertainty on the financial statements for
the year ended 31 December 2006.

BDO STOY HAYWARD LLP
Chartered Accountants
London

17 April 2007

Consolidated income statement

Consolidated balance sheet

Consolidated statement of changes in equity

Consolidated cash flow statement

Note 2006 2005
EUR EUR

Net gaming revenue 14,950,383 3,951,173

Operating expenses (4,088,098) (3,260,233)
Administrative and other expenses (12,472,657) (6,050,961)

Operating loss

Interest receivable 2 (1,610,372) (5,360,021)

5 94,184 180,801
Interest payable 5 (3,420) (2,953)

LOSS BEFORE TAX (1,519,608) (5,182,173)

Taxation 6 (1,053,487) (153,786)

LOSS AFTER TAX FOR THE YEAR ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT

(2,573,095)

(5,335,959)

LOSS PER SHARE 7

Basic EUR 0.35 EUR 1.10
Diluted EUR 0.35 EUR 1.10

The notes on pages 12 to 27 form part of these financial statements.

Note 2006 2006 2005 2005
EUR EUR EUR EUR
Assets

Non-current assets
Property, plant and equipment 8 2,534,990 1,636,991
Goodwill 9 18,284,300 20,947,659
Investments 23,400 23,400
Deferred tax assets 206,133 57,825

21,048,823 22,665,875

Current assets
Inventories 10 89,354 2,028
Trade and other receivables 11 2,632,509 2,936,893
Cash and cash equivalents 12 8,000,142 10,670,052

10,722,005 13,608,973

Total assets 31,770,828 36,274,848

Liabilities
Current liabilities
Trade and other payables 13 3,877,753 6,422,463
Corporation tax payable 1,426,467 1,242,288

Total current liabilities 5,304,220
7,664,751

Non-current liabilities
Financial liabilities 14 701,911 4,020,698

Total non-current liabilities 701,911 4,020,698

Total liabilities 6,006,131 11,685,449

TOTAL ASSETS LESS TOTAL LIABILITIES
25,764,697
24,589,399

Equity attributable to equity holders of the company

Share capital 15 560,649 521,146
Share premium 29,971,069 26,947,098
Merger reserve 2,963,270 2,963,270
Retained earnings (9,764,826) (7,191,731)
Share benefit reserve 1,807,993 1,172,837
Cumulative translation reserve 226,542 176,779

TOTAL EQUITY 25,764,697 24,589,399

Approved and authorised for issue by the Board on 17 April 2007.

Günter Schmid
Director

The notes on pages 12 to 27 form part of these financial statements.

Share
capital Share premium Merger
reserve Accumulated
loss Share
benefit
reserve Cumulative
translation
reserve Total
EUR EUR EUR EUR EUR EUR EUR

Balance at
1 January 2005 328,739
14,670,281

-

(1,855,771)

-

-
13,143,249

Share capital issued 192,407 12,276,817
-

-
-
-
12,469,224

Loss for the year -
-
-
(5,335,960)
-
-
(5,335,960)

Share benefit expense for the year - -
- -
1,172,837

- 1,172,837

Merger relief - - 2,963,270
- - - 2,963,270

Foreign exchange - - - - - 176,779
176,779

Balance at

1 January 2006 521,146
26,947,098
2,963,270
(7,191,731)

1,172,837
176,779
24,589,399

Share capital issued 39,503 3,023,971 - - - -
3,063,474
Loss for the year - - - (2,573,095) - -
(2,573,095)
Foreign exchange - - - - - 49,763 49,763
Share benefit expense for the year - -
- -
635,156
- 635,156
Balance at
31 December 2006 560,649 29,971,069
2,963,270 (9,764,826)
1,807,993
226,542 25,764,697

The following describes the nature and purpose of each reserve within total
equity:

Resource

Share capital: Nominal value of amounts subscribed for share
capital.

Share premium: Amount subscribed for share capital in excess of
nominal value.

Merger reserve: Amount subscribed for share capital in excess of
nominal value when the shares have been issued as part of an
acquisition and at least 90% of the share capital is acquired.

Accumulated loss: Cumulative net gains and losses recognised in
the consolidated Income statement.

Share benefit reserve: Fair value of share options and warrants granted.

Cumulative translation reserve: Cumulative foreign exchange movements.

The notes on pages 12 to 27 form part of these financial statements.

Note 2006 2006 2005 2005
EUR EUR EUR EUR
Cash flows from operating
activities
Loss before tax (1,519,608)
(5,182,173)

Adjustments for:
Depreciation 1,058,415
169,929

Impairment of goodwill reduction -
70,810

Loss on sale of property, plant
and equipment -
13,324

Interest received (94,184)
(180,801)

Interest paid 3,420
2,953

Income tax paid (1,017,616)
-

Foreign exchange (176,196)
-

Share benefit expenses 635,156
1,172,837

(1,110,613)
(3,933,121)

Movements in trade and other

receivables
304,384

983,136

Movements in trade and other
payables (2,890,934)
(1,660,260)

Movements in inventories (87,326)
10,350

(2,673,876)
(666,774)

Net cash used in operating
activities (3,784,489)
(4,599,895)

Cash flows from investing
activities
Purchase of property, plant
and equipment

(1,956,414)

(420,000)

Proceeds from sale of property,

plant and equipment -
28,769

Acquisitions net of cash acquired (83,245)
(9,094,167)

Interest Received 94,184
180,801

Net Cash used in investing
activities (1,945,475)
(9,304,597)

Cash flows from financing
activities

Issue of ordinary shares 3,063,474
11,439,802

Interest paid (3,420)
(2,953)

Net cash generated from
financing activities 3,060,054
11,436,849

Net movement in cash and
cash equivalents (2,669,910)
(2,467,643)

Cash and cash equivalents at
the beginning of the year
12
10,670,052

13,137,695

Cash and cash equivalents at
the end of the year
12 8,000,142
10,670,052

-

The notes on pages 12 to 27 form part of these financial statements.

Note

Accounting policies 1

Operating loss 2
Staff costs 3
Segment information 4

Interest receivable/(payable) 5
Taxation 6
Loss per share 7

Property, plant and equipment 8
Intangible assets 9
Inventories 10

Trade and other receivables 11
Cash and cash equivalents 12
Trade and other payables 13
Non-current financial liabilities 14
Share capital 15
Financial risk management 16
Acquisitions 17
Related party transactions 18
Subsidiaries 19
Operating leases 20
Contingent liabilities 21

1 ACCOUNTING POLICIES

betbull plc is a company registered in the United Kingdom. The
consolidated financial statements that are presented are those of the
company and its subsidiaries (the group). The consolidated financial
statements comprise the following: income statement, statement of
changes in net equity, balance sheet, statement of cash flows and the
notes contained on pages 12 to 26 of this report. The following
principal accounting policies have been applied in the preparation of
the financial statements:

Basis of preparation

The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
issued by the International Accounting Standards Board (IASB) and
endorsed for use by companies listed on an EU regulated market.

The significant accounting policies applied in the financial
statement of the group in the prior years are applied consistently in
these financial statements.

Basis of consolidation

Where the company has the power, either directly or indirectly, to
govern the financial and operating policies of another entity or
business so as to obtain benefits from its activities, it is
classified as a subsidiary. The consolidated financial statements
present the results of the company and its subsidiaries ("the group")
as if they formed a single entity. Intercompany transactions and
balances between group companies are therefore eliminated in full.

Accounting principles

In the current year, the Group has adopted all of the new and revised
Standards and Interpretations issued by the International Accounting
Standards Board (IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB, as they have been
adopted by the European Union, that are relevant to its operations
and effective for accounting periods beginning on 1 January 2006. The
adoption of these new and revised Standards and Interpretations has
not resulted in any significant changes to the Group's accounting
policies nor have they had a material effect on the amounts reported
for the current or prior years.

The Group has chosen not to adopt early those standards which will
become applicable in subsequent years. These include IFRS7 Financial
instruments - disclosures, effective for periods beginning 1 January
2009: IFRS 8 Operating segments, effective for periods beginning 1
January 2009: IAS 23 (revised) Borrowing costs, effective for periods
beginning 1 January 2009; and IFRICs 7 to 12, effective for periods
beginning between 1 March 2006 and 1 January 2008. The implementation
of these standards and interpretations is not expected to have a
significant impact on the financial statements.

The areas requiring the use of estimates and critical judgments that
may significantly impact the Group's earnings and financial position
are taxation, regulatory compliance and contingent liabilities, share
based payments, impairment of goodwill and the determination of the
liabilities under earn out arrangements. Estimates and judgments are
continually evaluated and are based on historic experience and other
factors including expectations of future events that are believed to
be reasonable. Actual results may differ from these estimates.

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management’s best knowledge of current events
and actions, actual results ultimately may differ from those
estimates. These areas include the carrying value of fixed assets,
the treatment of transactions in foreign currencies and liabilities
under share-based payments and tax. The accounting policies for these
should be read in conjunction with relevant notes.

Business combinations

The consolidated financial statements incorporate the results of
business combinations using the purchase method. In the consolidated
balance sheet, the acquiree’s identifiable assets, liabilities and
contingent liabilities are initially recognized at their fair values
at the acquisition date. The results of acquired operations are
included in the consolidated income statement from the date on which
control is obtained.

1 ACCOUNTING POLICIES (Continued)

Goodwill

Goodwill represents the excess of the cost of a business combination
over the interest in the fair value of identifiable assets,
liabilities and contingent liabilities acquired. Cost comprises the
fair values of assets given, liabilities assumed and equity
instruments issued, plus any direct costs of acquisition.

Goodwill is capitalised as an intangible asset with any impairment in
carrying value being charged to the income statement.

Where the fair value of identifiable assets, liabilities and
contingent liabilities exceeds the fair value of consideration paid,
the excess is credited in full to the income statement.

Impairment of non-financial assets

Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually on 31
December. Other non-financial assets are subject to impairment tests
whenever events or changes in circumstances indicate that their
carrying amount may not be recoverable. Where the carrying value of
an asset exceeds its recoverable amount (i.e., the higher of value in
use and fair value less selling costs), the asset is written down
accordingly.

Where it is not possible to estimate the recoverable amount of an
individual asset, the impairment test is carried out on the asset’s
cash-generating unit (i.e., the lowest group of assets in which the
asset belongs for which there are separately identifiable cash
flows). Goodwill is allocated on initial recognition to each of the
group’s cash-generating units that are expected to benefit from the
synergies of the combination giving rise to the goodwill.

Impairment charges are included within the administrative expenses in
the income statement.

Presentation currency

In view that the operating and functional currency has changed from
GBP to EUR, the presentation currency has also been changed.

Foreign currency

Transactions entered into by group entities in a currency other than
the currency of the primary economic environment in which it operates
(the "functional currency") are recorded at the rates ruling when the
transactions occur. Foreign currency monetary assets and liabilities
are translated at the rates ruling at the balance sheet date
including goodwill arising on the acquisition of a foreign operation.
Exchange differences arising on the retranslation of unsettled
monetary assets and liabilities are similarly recognised immediately
in the income statement.

All assets and liabilities of overseas operations, including goodwill
arising on the acquisition of those operations, are translated at the
rate ruling at the balance sheet date. Exchange differences arising
on translating the opening net assets at opening rate and the results
of overseas operations at actual rate are recognised directly in
equity (the "foreign exchange reserve"). Exchange differences
recognised in the income statement of group entities’ separate
financial statements on the translation of long-term monetary items
forming part of the group’s net investment in the overseas operation
concerned are reclassified to the foreign exchange reserve if the
item is denominated in the functional currency of the group or the
overseas operation concerned.

On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
income statement as part of the profit or loss on disposal.

1 ACCOUNTING POLICIES (Continued)

Net gaming revenue

Net gaming revenue comprises the following:

a) Exchange revenue: This comprises amounts for the provision of the
group’s betting exchange services and this is recognised at the date the market
is settled.
b) Gaming revenue: This comprises stakes taken net of returns, wins,
bonuses and commissions earned from betting on horses and sports both over the
Internet and through the group’s agents. Revenue is recognised on the date the
bet is placed.
c) Commission earned: This comprises commissions earned from third parties
on activities connected with gaming.

Tax

The major components of income tax on the profit or loss ordinary
activities include current and deferred tax.

Current tax is based on the profit or loss from ordinary activities
adjusted for items that are non-assessable or disallowed for tax
purposes and is calculated using tax rates that have been
substantively enacted by the balance sheet date.

Deferred tax assets and liabilities are recognised where the carrying
amount of an asset or liability in the balance sheet differs to its
tax base, excluding differences arising on:

• The initial recognition of goodwill;
• Goodwill for which amortization is not tax deductible;
• The initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction affects neither
accounting or taxable profit; and
• Investments in subsidiaries and jointly controlled entities where the
group is able to control the timing of the reversal of the difference and it is
probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances
where it is probable that taxable profit will be available against
which the difference can be utilised.

The amount of the asset or liability is determined using tax rates
that have been substantively enacted by the balance sheet date and
are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered).

Deferred tax assets and liabilities are offset when the group has a
legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either: • The same
taxable group company; or • Different group entities which
intend either to settle current tax assets and liabilities on a net
basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of
deferred tax assets or liabilities are expected to be settled or
recovered.

Cash and cash equivalents

Cash comprises cash in hand and balances with banks. Cash equivalents
are short term, highly liquid investments that are readily
convertible to known amounts of cash.

Trade receivables

Trade receivables are recognised and carried at the original
transaction value and an estimate for doubtful debts is made when
collection of the full amount is no longer probable. Bad debts are
written off when identified.

1 ACCOUNTING POLICIES (Continued)

Property, plant and equipment

All property, plant and equipment is initially recognised at cost.

Depreciation is provided to write off the cost or valuation, less
estimated residual values, of all property, plant and equipment,
evenly over their expected useful lives. It is calculated at the
following rates:

Plant, machinery and motor vehicles - 25% straight line

Furniture, fixtures and fittings - 25% straight line
Computer equipment - 25% straight line
Leasehold property

improvements
- 25% straight line
Inventories

Inventories are initially recognised at cost, and subsequently at the
lower of cost and net realisable value. Cost comprises all costs of
purchase, costs of conversion and other costs incurred in bringing
the inventories to their present location and condition.

Financial instruments

The carrying amounts of cash and cash equivalents, trade and other
receivables and trade and other payables approximate to their fair
value.

The group does not hold or issue derivative financial instruments for
trading purposes.

Trade and other payables

Trade and other payables are recognised and carried at original
transaction values.

Equity

Equity issued by the company is recorded as proceeds received.

Leases

Where leases are classified as operating lease rentals payable are
charged to the income statement on a straight-line basis over the
term of the lease.

Segmental information

The group operates mainly in two primary segments, the exchange and
gaming. These are situated primarily in the UK and Continental Europe
respectively.

Share-based payments

Where share options or warrants are awarded to employees, the fair
value of the options (or warrants) at the date of grant is charged to
the income statement over the vesting period. Non-market vesting
conditions are taken into account by adjusting the number of equity
instruments expected to vest at each balance sheet date so that,
ultimately, the cumulative amount recognised over the vesting period
is based on the number of options that eventually vest. Market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether the market vesting conditions
are satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.

Where the terms and conditions of options are modified before they
vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the
income statement over the remaining vesting period.

Where equity instruments are granted to persons other than employees,
the income statement is charged with the fair value of goods and
services received.

2 OPERATING LOSS
2006

EUR 2005
EUR
This is arrived at after charging

Staff costs (excluding directors' remuneration) 5,053,005 1,865,796

Directors’ remuneration including non-executive directors 826,218 506,073

Share benefit charge 635,156 1,172,837

Depreciation on property. plant and equipment 1,058,415 169,929

Audit fees 126,184 182,743

Goodwill impairment - 70,810

Lease expenses 1,569,551
228,236

Loss on disposal of fixed assets - 13,324

3 STAFF COSTS 2006
EUR 2005

EUR

Staff costs (including directors) comprise

Wages & Salaries 5,160,897 2,219,356

Employer’s national insurance contributions and similar taxes
718,326 152,513

5,879,223 2,371,869

The average number of employees of the group during the period,
including executive directors, was 109 (2005 - 150).

4 SEGMENT INFORMATION

The group’s primary format for reporting segment information is
business segments.

Exchange Gaming Total Exchange Gaming Total
2006 2006 2006 2005 2005 2005
EUR EUR EUR EUR EUR EUR
Net gaming revenue 77,855
14,872,528
14,950,383
99,943
3,851,230

3,951,173

Segment expenses (1,258,494)
(12,203,026)
(13,461,520)
(3,560,883)
(3,307,109)
(6,867,992)

Segment results (1,180,639)
2,669,502
1,488,863
(3,460,940)
544,121
(2,916,819)

Unallocated corporate expenses

(3,099,235)

(2,443,203)

Operating loss (1,610,372)
(5,360,022)

Interest Receivable 94,184
180,801

Interest Payable (3,420)
(2,953)

Taxation (1,053,487)
(153,787)

Loss after taxation for the year (2,573,095)
(5,335,961)

EUR EUR
Assets

Exchange 60,892 623,184

Gaming 2,796,811
6,603,035

Unallocated corporate assets 28,913,125
29,048,629

Total Assets 31,770,828
36,274,848

Liabilities
Exchange 401,294
882,394

Gaming 863,791
3,707,143

Unallocated corporate liabilities 4,741,046
7,095,912

Total liabilities 6,006,131
11,685,449

The group’s secondary reporting format for reporting segment
information is on a geographic basis.

External revenue by

location of customer Total assets by
location of assets Capital expenditure by
location of assets
2006 2005 2006 2005 2006 2005
EUR EUR EUR EUR EUR EUR

UK 77,855

99,943
20,629,213
29,383,732
-
24,410

Continental Europe 14,872,528
3,851,229
11,141,615
6,891,116
2,018,259
395,587

14,950,383

3,951,172
31,770,828
36,274,848
2,018,259
419,997

5 INTEREST RECEIVABLE/(PAYABLE)
2006
EUR 2005
EUR

Interest receivable 94,184
180,801

Finance income 94,184
180,801

Interest payable (3,420)

(2,953)

Total finance expense (3,420)
(2,953)

Net finance income 90,764
177,848

6 TAXATION 2006
EUR 2005
EUR

Current tax expense for the year 1,053,487
153,786

1,053,487
153,786

The tax expense for the year can be reconciled to the loss per the income
statement as follows:

Loss before tax (1,519,608)
(5,182,174)

Tax calculated at the UK tax rate of 30% (455,882)

(1,554,652)

Effect of different tax rates of subsidiary operations in other jurisdictions
and unutilised tax losses across the group 1,509,369
1,352,995

Tax losses carried forward -

47,871

Total tax expense for the year 1,053,487
153,786

The current tax is calculated with relevance to the loss of the company and its
subsidiaries in their respective countries of operation:

UK Rate of 30.0%
Malta Rate of 35.0%

Germany Rate of 30.5%

There is a deferred tax asset at the year end of EUR 206,133 - (2005
- EUR 57,825) in respect of temporary timing differences in Malta.

Due to the structure of the group it is not possible to relieve
unutilised tax losses of approximately EUR 2.75 m - (2005 - EUR 1.98
m) at the present time and therefore no further deferred tax asset
has been provided.

7 LOSS PER SHARE

Basic loss per share

Basic loss per share had been calculated by dividing the net loss
attributable to ordinary shareholders by the weighted average number
of ordinary shares in issue during the year.

2006
EUR 2005
EUR
Net loss attributable to ordinary shareholders (2,573,095)
(5,335,959)

Weighted average number of ordinary shares 7,295,719
4,855,993

Basic loss per share EUR 0.35

EUR 1.10

Diluted loss per share EUR 0.35
EUR 1.10

As the company has made a loss for the period, the impact of issued
share options and warrants is to reduce the loss per share. In
consequence, the potential ordinary shares are antidilutive and are
not taken into account when calculating diluted earnings per share.

Details of share options and warrants that are potentially dilutive
are disclosed in note 15 to the financial statements.

8 PROPERTY, PLANT AND EQUIPMENT

Leasehold property improvements Plant machinery and motor vehicles
Fixtures and fittings Computer equipment Total
Cost EUR EUR EUR EUR EUR
At 1 January 2006
Cost or valuation 66,156

54,428
1,493,599
197,913
1,812,096

Additions -
63,534
1,869,096
23,784
1,956,414

At 31 December 2006 66,156

117,962
3,362,695
221,697
3,768,510

Depreciation
At 1 January 2006 -

3,401
103,045
68,659
175,105

Charge for year -
34,811
1,009,784
13,820
1,058,415

At 31 December 2006 -
38,212

1,112,829
82,479
1,233,520

Net book value

At 31 December 2006
66,156

79,750

2,249,866

139,218

2,534,990

Net book value
At 31 December 2005
66,156
51,027
1,390,554
129,254
1,636,991

8 PROPERTY, PLANT AND EQUIPMENT (Continued)

Leasehold property improvements Plant machinery and motor vehicles
Fixtures and fittings Computer equipment Total
Cost EUR EUR EUR EUR EUR
At 1 January 2005
Cost or valuation 32,056
-
43,122

164,222
239,400

Additions 74,168
54,428
1,459,483
45,109
1,633,188

Disposals (40,068)
-
(9,006)
(11,418)
(60,492)

At 31 December 2005 66,156

54,428
1,493,599
197,913
1,812,096

Depreciation
At 1 January 2005 3,339

-
4,175
16,062
23,576

Charge for year 10,016
3,401
100,155
56,356
169,928

Disposals (13,355)
-
(1,285)
(3,759)
(18,399)

At 31 December 2005 -
3,401

103,045
68,659
175,105

Net book value
At 31 December 2005
66,156
51,027

1,390,554

129,254

1,636,991

Net book value
At 31 December 2004
28,717
-
38,947
148,160
215,824

9 INTANGIBLE ASSETS - GOODWILL
2006 2005
EUR EUR

Brought forward 20,947,659
-

Additions
-through business combinations (see Note 17) -
20,841,690

-through business purchases (see Note 17) 124,437 -
Additional fees connected with acquisition in prior year 82,245 -
Foreign exchange 225,959
176,779

Impairment losses - (70,810)

Reduction in earn out consideration (3,096,000)
-

At 31 December 2006 18,284,300
20,947,659

10 INVENTORIES 2006 2005
EUR EUR

Goods held for resale 89,354
2,028

11 TRADE AND OTHER RECEIVABLES
2006
EUR 2005
EUR

Prepayments and accrued income 145,515
260,213

Other receivables 2,486,994
2,676,680

2,632,509
2,936,893

The carrying amount of trade and other receivables approximates to
their fair value.

12 CASH AND CASH EQUIVALENTS
2006
EUR 2005
EUR

Cash on hand and current accounts 7,930,288
7,924,550

Deposits in unitised cash funds 69,854

2,745,502

Cash at bank and on hand 8,000,142
10,670,052

Deposits in unitised cash funds comprise deposits invested in money
markets and are available for withdrawal at short notice. The
carrying value of these deposits are approximate to their fair value.

13 TRADE AND OTHER PAYABLES 2006 2005
EUR EUR

Players' balances 307,491
418,240

Trade payables 957,593
960,203

Other payables 495,287
249,587

Accruals and deferred income 617,382
1,587,463

Bank borrowings -
23,971

Amount due to shareholders (see note 17) 1,500,000
3,182,999

3,877,753
6,422,463

Bank borrowings due within one year incur interest at the rate of 6.7% per
annum.

The carrying value of trade and other payables equates to their fair
value.

14 NON-CURRENT FINANCIAL LIABILITIES

2006

2005
EUR EUR

Amount due to shareholders (see note 17) 701,911
3,913,002

Bank borrowings -
107,696

701,911
4,020,698

Bank borrowings are due for repayment between two and five years and incur
interest at 6.69% - (2005 - 6.69%) per annum.

15 SHARE CAPITAL

2006 2006 2005 2005
Number of ordinary shares Number EUR Number EUR

Issued and fully paid 7,621,431
560,649
7,087,500

521,146

Authorised 100,000,000

7,399,000
100,000,000
7,353,000

Shares issued during the year and significant terms and conditions:

• On 22 May 2006, 105,000, 5p ordinary shares were issued for a total
consideration of EUR735,000
• On 12 July 2006, 300,000, 5p ordinary shares were issued for a total
consideration of EUR 1,797,957
• On 21 December 2006, 21,000 5p ordinary shares were issued for a total
consideration of EUR 84,000
• On 28 December 2006, 25,000, 5p ordinary shares were issued for a total
consideration of EUR 100,000
• On 29 December 2006, 82,931, 5p ordinary shares were issues for a total
consideration of EUR 346,517

All issued shares are fully paid. The holders of ordinary shares are
entitled to receive dividends when declared and are entitled to one
vote per share at meetings of the company.

Warrants and Share Options

The group has issued warrants to two directors and to Erste Bank and
issued options to certain employees.

Warrants 2006 2006
Number of warrants Exercise price
EUR

At 1 January 2006 354,228

Warrants exercised (105,000)
Granted during the year:
Mr. G. Schmid (Kapsner & Schmid GmbH) 50,772
3.60

Mr. S. Bold 90,000

3.60

At 31 December 2006 390,000

Warrants 2005 2005
Number of warrants Exercise price
EUR

At 1 January 2005 105,000 7.00

Granted during the year:
Mr. G. Schmid (Kapsner & Schmid GmbH) 114,228 3.60
Mr. S. Bold 135,000 3.60

At 31 December 2005 354,228

The warrants granted during the year were granted in equal
installments on a monthly basis from January to June 2006 and were
granted in lieu of salary. Warrants vest on the grant date and this
is also the date from which they become exercisable. The life of the
warrants is 5 years.

Warrants in existence at 1 January 2006 amounting to 105,000 were
exercised on 22 May 2006.

15 SHARE CAPITAL (Continued)

2006
No. of
options 2006

Exercise
Price
EUR
Options

At 1 January 2006 103,166

Lapsed during the year (42,833)

Granted during the year 60,000
4.88

At 31 December 2006 120,333

2005

No. of
options 2005
Exercise
Price
EUR
Options

At 1 January 2005 236,000 4.76
Lapsed during the year (152,834) 4.76
Granted during the year 20,000 3.95

At 31 December 2005 103,166

The above options vest in tranches over five years from the date of
grant based on non-market performance conditions. If such conditions
are not met the options lapse. None of the outstanding options at 31
December 2006 had vested. The options are exercisable on the date
they vest.

The warrants and options have all been valued using the Black-Scholes
model.

The following table gives the assumptions made during the year ended
31 December 2006

2006 2005

Dividend yield (%) - -
Expected volatility (%) 93 64
Risk free interest rate (%) 4.5 4.5

All options and warrants granted during the year are equity settled.
The share price at the date the options were granted was EUR 4.40 and
the scheme price on the date the warrants were granted was EUR 3.60.

In accordance with International Financial Reporting Standards, a
charge to the income statement in respect of any warrants or options
granted under the above schemes will be recognised and spread over
the vesting period based on fair value at the date of grant, adjusted
for changes in vesting conditions at each balance sheet date. The
charge has no cash impact.

2006 2005
EUR EUR

Charges in respect of warrants 573,237 1,029,273
Charges in respect of options 61,919 143,564

635,156 1,172,837

16 FINANCIAL RISK MANAGEMENT

The group’s financial instruments comprise cash and liquid resources
and various items, such as trade receivables and payables that arise
directly from the operations. The main purpose of these financial
instruments is to raise finance for the group’s operations.

In carrying out its various operations, the group is exposed to
currency and liquidity risk. Betbull’s policy for managing and
investing funds that are not immediately required is to place such
funds in products that provide a return of around 3.5% per annum,
carry only a very small amount of risk and are near instant access.
Given the nature of the group’s transactions and the level of liquid
resource available, the directors do not consider the level of
financial risk to be significant at the current time. However, the
directors will continue to monitor this situation. There is no
significant concentration of credit risk.

17 ACQUISITIONS

During the year

Fair value of assets acquired EUR EUR

Property, plant and equipment 1,960

1,960

Consideration payable

Cash 1,000

Earn out consideration 125,397
126,397

Goodwill (Note 9) 124,437

On 1st January 2006 Penalty GmbH acquired the business of a third
party sub-agent which operates three retail betting units.

In prior year

On 30th September 2005 the group acquired 100% of the voting equity
instruments of the Leip Group. The Group consists of four entities :

Primebet International Limited
Wettenleip GmbH
Penalty GmbH
OST GmbH

The principal activities of these companies are detailed in note 19
to the financial statements.

Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:

Fair value of assets acquired EUR EUR

Property, plant and equipment 1,186,305

Cash 1,827,031

Inventories 11,378

Receivables 3,643,088

Payables (5,486,375)

1,181,427

17 ACQUISITIONS (Continued)

Consideration payable

Cash paid 9,935,043

Costs of acquisition 727,350

700,000 ordinary shares 3,992,691

Earn out consideration 7,096,001

21,751,085

Goodwill (Note 9)

20,569,658

The fair value of the shares issued was determined by reference to
their quoted market price at the date of acquisition. The fair
value of assets and liabilities acquired are equal to their book
value.

The Earn-out consideration is dependent on the performance of the
Leip Group in the period to 31 December 2010. Earn-out hurdles are
applicable in each of the years to that date and the directors have
based the fair value of consideration due under the earn-out
agreements on projected results as at 31 December 2005.

On 30 November 2005 the group acquired 100% of the voting equity
instrument of GBO Limited, the principal activity of which is
detailed in note 19 to the financial statements.

Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows.

Fair value of assets acquired EUR EUR

Property, plant and equipment 26,868

Cash 92,958

Inventories 1,000

Receivables 76,378

Payables (117,491)

79,713

Consideration Paid

Cash paid 351,745

351,745

Goodwill (Note 9)
272,032

If the acquisitions had occurred on 1 January 2005, group turnover
would have been EUR 7,227,840 and group loss for the year would have
been EUR 2,026,815.

Total goodwill arising:

30 September 2005 20,569,658
30 November 2005 272,032

Total Goodwill 20,841,690

In view of the legal situation in Germany (note 21) and based on
current evidence the company has at its disposal, the maximum earn
out hurdles will not be met and as a consequence goodwill and
creditors have been reduced by the value of EUR 3.1 m.

18 RELATED PARTY TRANSACTIONS

Related party transactions

During the year the group obtained services totaling EUR 18,215 -
(2005 - EUR Nil) from Pillsbury Winthrop Shaw Pittman LLP, an entity
in which one of the non-executive directors can exercise significant
influence. In addition, the balance due by Bwin International
Limited to the group at 31 December 2006 was EUR 16,357 - (2005 - EUR
19,261).

Amounts paid to key management during the year totaled EUR 826,218 -
(2005 - EUR 506,073). Key management also received warrants with a
fair value of EUR 573,237 - (2005 - EUR 874,956).

19 SUBSIDIARIES

The following companies were subsidiaries of betbull Plc at the end
of the year and have been included in the consolidated financial
statements:

Name Country of registration and operation Proportion of voting rights and
ordinary share capital held Nature of business

Betbull Limited Gibraltar 100% Internet betting services
Betbull Bookmakers Limited UK 100% Internet betting services
Betmart Bookmakers Limited UK 100% Internet betting services
Betpoint SL Spain 100% Betting agencies
Primebet International Limited Malta 100% Gaming services
Wettenleip GmbH Germany 100% Betting agencies
Penalty GmbH Germany 100% Betting agencies
GBO Limited UK 100% Betting agencies
OST GmbH Germany 100% Administrative services

20 OPERATING LEASES

Future minimum lease payments due by the group under operating leases are set
out below:

Land and

buildings
2006 Land and
buildings
2005
EUR EUR

Not later than one year 1,027,972
398,134

Later than one year and not later than five years 3,169,835
2,195,651

Later than five years 143,200
178,446

4,341,007

2,772,231

21 CONTINGENT LIABILITIES

From time to time the Group is subject to legal claims and actions.
The Group takes legal advice as to the likelihood of success of the
claims and actions and no provision or disclosure is made where the
directors feel, based on that advice, that action is unlikely to
result in a material loss or a sufficiently reliable estimate of the
potential obligation cannot be made.

As part of the Board’s ongoing operational risk assessment process,
the Board continues to monitor legal and regulatory developments, and
their potential impact on the business, and continues to take
appropriate advice in respect of these developments.

Regulatory developments- United States of America

On 29 September 2006 the United States Congress passed the Unlawful
Internet Gambling Enforcement Act (UIGEA). The Act makes it a crime
for anyone involved in the business of betting and wagering to
knowingly accept, from transactions originating in the United States
of America, payments, wire transfers or any other bank instrument in
connection with unlawful internet gambling. The Act was enacted into
law when signed by President Bush on 13 October 2006. The activity by
the regulatory authorities in the US has created uncertainty as to
further actions that may occur, if any.

The Company is not aware of having ever taken any bets from US
customers.

Current legal situation - Germany

The German law on gaming is currently surrounded with a level of
legal uncertainty in the areas of public law, criminal law and civil
law. A majority of federal states strive for the maintenance,
strengthening and expansion of the existing national gaming monopoly
and as noted in the Executive directors’ review, a number of retail
betting units were closed by the authorities in the year. The ruling
in respect of sports betting by the federal constitutional court in
March 2006 could not clarify all relevant general policy matters.
Pending proceedings on national and supranational levels these issues
will still