U.S.Table SECURITIESof AND EXCHANGE COMMISSION Contents

~~Washington,~~UNITED ~~D.C.~~STATES ~~20549~~

~~Form~~SECURITIES ~~10-K~~AND EXCHANGE COMMISSION

þWASHINGTON, ~~ANNUAL~~D.C. ~~REPORT~~20549 ~~PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~FORM ~~the fiscal year ended December 31, 2010~~ 10-K

OR(Mark One)

¨x ~~TRANSITION~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the ~~transition~~fiscal ~~period~~year ~~from to~~ ended December 31, 2011

~~Commission~~or ~~file number 000-25067~~

~~PRIVATE~~¨ ~~MEDIA~~TRANSITION ~~GROUP,~~REPORT ~~INC.~~PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~(Name~~For ofthe ~~Registrant~~transition asperiod ~~specified in its Charter)~~ from to

Nevada		87-0365673
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

Commission file number: 000-25067

~~Calle~~PRIVATE ~~de la Marina 16-18, Floor~~MEDIA 18GROUP, ~~Suite~~INC. ~~D, 08005 Barcelona, Spain~~

(~~Address~~Exact name of ~~European~~registrant ~~principal~~as ~~executive~~specified ~~offices~~in its charter)

34-93-620-8090


Nevada		87-0365673
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

~~(Issuer’s~~Calle ~~telephone~~de ~~number~~la Marina 16-18, ~~including~~Floor ~~country~~18, ~~and~~Suite ~~area~~D, ~~code)~~08005 Barcelona, Spain

~~Securities registered pursuant to Section 12~~(b)Address of ~~the~~European ~~Exchange~~principal ~~Act:~~executive offices)

Title of each class		Name of each exchange on which registered
Common Stock, $0.001 par value		The Nasdaq Stock Market LLC (Nasdaq Global Market)

34-93-620-8090

~~Securities~~Issuer’s ~~registered~~telephone ~~pursuant to~~number, ~~Section 12(g)~~including ofcountry ~~the~~and area ~~Exchange~~code ~~Act: None~~

~~Indicate~~Securities ~~by check~~registered ~~mark~~pursuant ifto ~~the~~Section 12(b) ~~registrant is a well-known seasoned issuer, as defined in Rule 405~~ of the ~~Securities~~Exchange Act.: NONE

~~Yes ¨ No þ~~Securities registered pursuant to Section 12(g) of the Exchange Act:

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No þ


Title of Securities		Exchanges on which Registered
Common Stock, $.001 Par Value		None

Indicate by check mark ~~whether~~if the registrant ~~(1)~~is ~~has~~a ~~filed~~well-known ~~all~~seasoned ~~reports~~issuer, ~~required~~as todefined bein ~~filed~~Rule by405 ~~Section 13 or 15(d)~~ of the Securities ~~Exchange~~ Act ~~of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days~~. ~~Yes ¨ No þ~~

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ Yes Nox ¨ No

Indicate by check mark if ~~disclosure~~the ofregistrant ~~delinquent filers pursuant to Item 405 of Regulation S-K~~ is not ~~contained~~required ~~herein,~~to ~~and~~file ~~will not~~reports bepursuant ~~contained,~~ to ~~the~~Section 13 ~~best of registrant’s knowledge, in definitive proxy~~ or ~~information~~15(d) ~~statements incorporated by reference in Part III~~ of ~~this~~the ~~Form 10-K or any amendment to this Form 10-K~~Exchange Act. ¨ Yes x No

Indicate by check mark whether the registrant is(1) has afiled ~~large~~all ~~accelerated~~reports ~~filer,~~required ~~an accelerated~~to ~~file,~~be afiled ~~non-accelerated~~by ~~filer,~~Section 13 or a15(d) ~~smaller~~of ~~reporting~~the ~~company~~Securities Exchange Act of 1934 during the preceding 12 months (asor ~~defined~~for such inshorter ~~Rule~~period ~~12b-~~that the registrant was required to file such reports), and (2) has ofbeen subject to such filing requirements for the ~~Act)~~past 90 days. ¨ Yes x No

~~Large~~Indicate ~~Accelerated~~by ~~Filer~~check ¨mark ~~Accelerated~~whether ~~Filer~~the ¨registrant ~~Non~~has submitted electronically and posted on it corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-~~accelerated~~T ~~filer~~(§ 232.405 ¨of ~~Smaller~~this ~~Reporting~~chapter) ~~Company~~during þthe preceding 12 months (or for any such shorter time that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark ~~whether~~if ~~the~~disclosure ~~registrant~~of delinquent filers pursuant to Item 405 of Regulation S-K is anot ~~shell~~contained ~~company~~herein, ~~(as~~and ~~defined~~will innot ~~Rule~~be ~~12b-2~~contained, to the best of the ~~Exchange~~registrant’s knowledge, in ~~Act)~~definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ~~Yes~~ ¨ ~~No þ~~

AtIndicate ~~June 30,~~by ~~2010,~~check ~~the~~mark ~~aggregate~~whether ~~market~~the ~~value~~registrant ofis ~~the~~a ~~voting~~large ~~stock~~accelerated ~~and~~filer, ~~non-voting~~an ~~common~~accelerated ~~equity~~filer, ~~held~~a by non-~~affiliates~~accelerated offiler, ~~the registrant~~or ~~was~~a ~~$17,036,304~~smaller reporting company. See ~~The~~the ~~aggregate~~definitions ~~market~~of ~~value~~“large ~~has~~accelerated ~~been~~filer,” ~~computed~~“accelerated byfiler,” ~~reference~~and to“smaller ~~the~~reporting ~~last~~company” ~~sales~~in ~~price~~Rule 12b-2 of the ~~common~~Exchange ~~stock~~Act on(Check ~~June 30,~~one): ~~2010.~~

OnLarge ~~April 8,~~accelerated ~~2011~~filer ~~the~~¨ ~~registrant~~Accelerated ~~had~~filer ~~20,815,824~~¨ ~~shares~~Non-accelerated offiler ~~Common~~¨ ~~Stock~~Smaller ~~outstanding.~~reporting company x

~~PART~~Indicate Iby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ¨ Yes x No

~~ITEM~~At 1June 30, 2011, the aggregate market value of the voting stock and non-voting common equity held by non-affiliates of the registrant was $6,944,000. ~~BUSINESS~~The aggregate market value has been computed by reference to the last sales price of the common stock on June 30, 2011.

~~This~~On ~~Report includes forward-looking statements. Statements other than statements of historical fact included in this Report~~May 21, ~~including~~2013 the ~~statements~~registrant ~~under~~had ~~the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations~~27,~~” “Business” and elsewhere in this Report regarding future events or prospects~~806,211 ~~are~~shares ~~forward-looking statements. The words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “should” or variations~~ of ~~these words, as well as other statements regarding matters that are not historical fact, constitute forward-looking statements. We have based these~~ ~~forward-looking~~Common ~~statements~~Stock ~~on our current view with respect to future events and financial performance~~outstanding. These views involve a number of risks and uncertainties which could cause actual results to differ materially from those we predict in our forward-looking statements and from our past performance. Although we believe that the estimates and projections reflected in our forward-looking statements are reasonable, they may prove incorrect, and our actual results may differ, as a result of the following uncertainties and assumptions:

•Table ourof business development, operating development and financial condition;Contents

•TABLE ~~our~~OF ~~expectations~~CONTENTS ~~of growth in demand for our products and services;~~

• the impact of competition on revenues and margins;


		Page

PART I			2

ITEM 1.	BUSINESS		2

ITEM 1A.	RISK FACTORS		16

ITEM 1B.	UNRESOLVED STAFF COMMENTS		23

ITEM 2.	PROPERTIES		23

ITEM 3.	LEGAL PROCEEDINGS		24

ITEM 4.	MINE SAFETY DISCLOSURES		26

PART II			27

ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		27

ITEM 6.	SELECTED FINANCIAL DATA		28

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		28

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		36

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		36

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		36

ITEM 9A.	CONTROLS AND PROCEDURES		36

ITEM 9B.	OTHER INFORMATION		37

PART III			38

ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		38

ITEM 11.	EXECUTIVE COMPENSATION		40

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		43

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		46

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		51

PART IV			52

ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		52

INDEX TO EXHIBITS			53

SIGNATURES			56

•i ~~our expansion and acquisition plans;~~

•Table the impact of expansion on our revenue potential, cost basis and margins;Contents

•EXPLANATORY ~~the~~NOTE ~~effects of regulatory developments and legal proceedings on our business;~~

•As ~~the~~explained ~~impact~~in greater detail in this Annual Report on Form 10-K, the ~~company~~former principal executive officers of Private Media Group, Inc. were relieved of their duties in December 2011, and most of the former members of the Board of Directors were removed by the shareholders at the annual meeting of the shareholders held in January 2012. Upon assuming control, the new officers and directors discovered that many of Private Media Group, Inc.’s important financial and corporate records, including those necessary to complete the 2011 audited financial statements, were in disarray and/or missing. As a result of the change in management and the condition of the financial and corporate records, Private Media Group, Inc. and its ~~investors~~auditors ~~from~~were unable to complete the ~~outcome~~audited financial statements for the year ended December 31, 2011 until May 2013. As required by the rules and regulations of ~~legal~~the ~~proceedings~~Securities ~~discussed~~and ~~under~~Exchange ~~Item~~Commission, 3this –Annual ~~Legal~~Report ~~Proceedings;~~contains the financial statements and other required information for the fiscal year ended December 31, 2011. However, this Annual Report also describes both (i) events that have occurred since December 31, 2011 and (ii) the current state of the business and operations of Private Media Group, Inc.

•“SAFE ~~the~~HARBOR” ~~impact~~STATEMENT ~~of exchange rate fluctuations; and~~

•From ~~our~~time ~~ability~~to time, we make oral and written statements that may constitute “forward-looking statements” (rather than historical facts) as defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission (the “SEC”) in its rules, regulations and releases, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We desire to ~~obtain~~take ~~additional~~advantage ~~financing~~of the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995 for forward-looking statements made from time to time, including the forward-looking statements made in this Annual Report, as well as those made in our other filings with the SEC.

WeAll dostatements ~~not~~in ~~intend~~this toAnnual ~~update~~Report, orincluding ~~revise~~under ~~any~~the captions “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” other than statements of historical fact are forward-looking statements, ~~whether~~for aspurposes aof ~~result~~these provisions, including statements of ~~new~~our ~~information~~current views with respect to our business strategy, business plan and research and development activities, our future financial results, and other future events. orThese ~~otherwise~~statements ~~except~~include forward-looking statements both with respect to us, specifically, and the ~~extent~~adult ~~required~~entertainment byindustry, ~~law~~in general. ~~You~~In ~~should~~some ~~interpret~~cases, ~~all~~forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” ~~subsequent~~“anticipates,” ~~written~~“estimates,” “potential” or ~~oral~~“could” or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements ~~attributable~~contained herein toare usreasonable, orthere ~~persons~~can ~~acting~~be onno ~~our~~assurance ~~behalf~~that assuch ~~being~~expectations ~~expressly~~or ~~qualified~~any byof the ~~cautionary~~forward-looking statements inwill ~~this~~prove ~~Report.~~to Asbe ~~a result~~correct, ~~you~~and ~~should~~actual ~~not~~results ~~place~~could ~~undue~~differ ~~reliance~~materially onfrom ~~these~~ those projected or assumed in the forward-looking statements.

~~THE~~All ~~COMPANY~~forward-looking statements involve inherent risks and uncertainties, and there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, those factors set forth in this Annual Report under the captions “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all of which you should review carefully. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we anticipate. Please consider our forward-looking statements in light of those risks as you read this Annual Report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

~~OVERVIEW~~CONVENTIONS

Private Media Group, Inc., is a USNevada ~~incorporated~~holding company, ~~and its~~that ~~subsidiaries~~operates ~~(together~~through ~~referred~~various tocontrolled ~~hereinafter~~subsidiaries. asUnless ~~“Private~~the ~~Media~~context ~~Group”,~~indicates ~~“Private”~~otherwise, ~~“the~~all ~~Company” “we” or “us”) is a leading international provider of high quality adult media content for a wide range of media platforms. Any~~ references inherein ~~this report~~ to ~~Milcap~~“Private Media,” ~~Group~~“the ~~refers to Milcap Media Group S.L.U.(Spain)~~Company,” ~~and Milcap Media Limited refers to Milcap Media Limited (Cyprus).~~

~~Private~~1 Media Group, Inc. is incorporated in the State of Nevada. In accordance with Nevada law we maintain a registered office at 3230 Flamingo Road, Suite 156, Las Vegas, Nevada. Our European headquarters are located at the offices of one of our principal operating subsidiaries, Milcap Media Group, S.L.U, whose address is Calle de la Marina 16-18, Floor 18, Suite D, 08005 Barcelona, Spain, telephone +34-93-620 80 90.

WeTable acquire worldwide rights to still photography and motion pictures tailored to our specifications from independent producers/directors and process these images into products suitable for popular media formats such as print publications, DVDs and electronic media content for Internet, mobile and broadcasting distribution. We distribute our adult media content directly, and through a network of local affiliates and independent distributors, through multiple channels, including (1) newsstands, video rental stores, travel retail and adult bookstores, (2) mail order catalogues, (3) IPTV (Internet Protocol Television), cable, satellite and hotel television programming, (4) over the Internet via proprietary and third party websites and (5) wireless telephony. In addition to media content, we also market and distribute branded leisure and novelty products oriented to the adult entertainment lifestyle and generate additional sales through the licensing of our Private trademark to third parties. In the fiscal year ended December 31, 2010, we had net sales of EUR 23.3 million and a net loss of EUR 4.3 million. Contents

2 “we” or “us” refer collectively to Private Media Group, Inc. and its subsidiaries. References to “EUR” refer to the euro, the official currency of the eurozone countries of the European Union, and all references to “dollars” or $ are to United States dollars.

~~Our business was founded in 1965 and achieved initial success through our flagship~~ ~~publication,~~PART ~~Private,~~I the first full color, hard-core sex publication in the world. Today, we produce one X-rated periodical magazine: Private. As of December 31, 2010, we had compiled a digital archive of more than two million photographs and all of our 557 issues of print publications. Approximately 45,000 copies of our print publications are distributed together with DVDs each month at retail price of approximately Euro 14.50-19.50.

~~Since~~ITEM 1992, we have also acquired, processed and distributed adult motion picture entertainment. We acquire worldwide rights to motion pictures that meet our exacting standards for entertainment content and production value from independent producers/directors, either under exclusive contracts or on a freelance basis. We then process these motion pictures to ensure consistent image quality and prepare and customize them for distribution in several formats, including DVDs, broadcasting, which includes IPTV, cable, satellite and hotel television programming, and the Internet. Our proprietary motion pictures and those produced by joint ventures in which we participate have received more than 180 industry awards since 1994, evidencing our success in setting high quality standards for our industry. As of December 31, 2010, our movie library contained 1~~,443 titles~~. ~~We expect to add more than 50 titles in 2011.~~ BUSINESS

WeOVERVIEW license our content to cable & satellite television operators and IPTV platforms as well as to hotels. Through different partnerships, we have also launched two television channels, The Private Channel and PrivateSpice, which broadcast our content. Consumers pay for these products either on a video-on-demand, pay-per-view or subscription basis.

~~Since~~Private ~~1997~~Media Group, weInc. ~~have~~is ~~expanded~~a ~~our~~leading ~~presence~~international inprovider ~~emerging~~of ~~electronic~~branded ~~markets such~~adult asmedia ~~the~~across ~~Internet,~~a ~~broadcasting~~wide ~~and~~range ~~hand-held~~of ~~devices~~digital ~~including~~platforms ~~both~~and ~~smartphones,~~physical formats. ~~iPods,~~We ~~iPads~~conduct ~~and~~our ~~similar~~operations ~~devices.~~through Wevarious ~~believe~~non-U.S. ~~that~~subsidiaries ~~these~~located ~~technologies~~in ~~represent~~ a ~~substantial~~number ~~growth~~of ~~opportunity~~countries, ~~for~~including usCyprus, inSweden, ~~the~~Spain ~~future~~and Gibraltar.

We ~~launched~~acquire ~~our~~worldwide ~~first~~rights ~~Internet~~to ~~website~~adult media produced for us by independent producers and then process this content into products suitable for popular physical media formats such as print publications, DVDs, ~~www.private.com~~digital media platforms (such as internet websites, inmobile ~~1997.~~telephony Weand ~~now~~transactional ~~own~~television), aand ~~number~~broadcasting of(which ~~sites~~includes ~~directed~~cable, atsatellite ~~specific~~and ~~customer~~IPTV (Internet Protocol Television)). Our branded adult media is available at physical ~~bases~~retail locations and through electronic retailers as well as on mobile devices, ~~including~~transaction ~~www.gamelink.com~~television platforms and ~~www~~over the Internet.~~maleflixxx~~ In addition, we provide adult entertainment films to thousands of major hotels around the world.~~tv.~~ WeTo ~~also~~a ~~generate~~lesser extent, ~~incremental~~in ~~sales~~addition byto ~~licensing~~branded ~~our~~adult ~~trademarks~~media products, we also market and ~~proprietary~~distribute branded leisure and novelty products oriented to the adult ~~media~~entertainment ~~content~~lifestyle ~~for~~and ~~use~~generate onadditional sales through the ~~websites~~licensing of ~~other~~our ~~companies~~Private trademark to third parties.

OnRecent ~~January 20,~~Events—Changes ~~2009~~in weManagement; ~~expanded~~Current ~~our~~Restructuring; ~~Internet~~Issuance ~~operations through the acquisition~~ of ~~Game~~6% ~~Link~~Series ~~LLC~~B ~~and its affiliates, companies~~Convertible ~~engaged~~Preferred inStock ~~digital distribution of adult content over the Internet~~ and ~~eCommerce~~Change development. GameLink is a leading US adult entertainment VOD and eCommerce platform through its GameLink.com website. The site’s installed user base represents over one million domestic and international customers and it serves over100,000 users daily. Including 70,000 video titles, GameLink has the largest library of ~~digital and physical adult media and novelties in the United States~~Control.

OnOperations ~~October 29,~~Under ~~2009~~Prior weManagement. ~~continued~~Private ~~the~~Media ~~ongoing~~was ~~expansion~~founded ofin ~~our~~1965 ~~global~~by Berth ~~digital~~H. ~~media~~Milton ~~platform~~Sr. and achieved initial success through our flagship publication, Private, the ~~acquisition~~world’s offirst ~~Sureflix Digital~~full ~~Distribution~~color, hard-core sex publication. In 1998 Private Media acquired a U.S. public company and, ~~its~~thereby, ~~affiliates~~became a public company. Since 1998, ~~companies~~Berth ~~engaged~~H. inMilton Jr., Berth H. Milton Sr.’s son (all further references to “Milton” refer to Berth H. Milton Jr.) was beneficially the ~~business~~principal shareholder of ~~digital~~Private ~~distribution~~Media and, during most of ~~premium~~those ~~gay~~years, ~~adult~~served as ~~content~~the Company’s Chief Executive Officer and Chairman. ~~Sureflix~~Since is1998 athe ~~leading~~Company ~~global~~engaged ~~supplier~~in a number of ~~adult~~transactions ~~programming~~with Mr. Milton, ~~The~~including ~~company~~the ~~operates~~purchase aof ~~vast~~its ~~network~~European headquarters from one of ~~more~~his ~~than~~affiliated ~~100~~companies in 2002. In ~~pay~~addition, during this period the Company made numerous “short-~~per~~term loans” to Mr. Milton’s off-~~view~~shore ~~VOD~~companies. ~~websites~~These ~~and~~loans ~~has~~were aunsecured, ~~North~~had ~~American~~no ~~broadcast~~maturity ~~presence~~date and no repayment terms. ItThe ~~represents~~outstanding ~~premium~~balance ~~production~~of ~~studios~~these loans grew from EUR 1 million in ~~global~~2001 ~~television~~to ~~broadcast~~over ~~(cable~~EUR 4.2 million in 2004, ~~satellite)~~to EUR 5.9 million at December 31, ~~mobile~~2005, ~~IPTV~~EUR 6.4 million at December 31, 2006, EUR 6.7 million at December 31, 2007, and ~~Internet~~EUR ~~VOD~~7.2 million ~~markets~~at December 31, 2011 (the “Slingsby Loans”). ~~Sureflix~~Mr. Milton has not ~~only~~repaid ~~in-depth~~the ~~knowledge~~Slingsby Loans, and, because of ~~adult~~ ~~programming~~the uncertainty as to Private Media’s ability to collect these loans, ~~but~~in ~~also~~2010 ~~significant~~the ~~VOD~~Company ~~technology~~fully ~~and~~reserved ~~marketing~~(wrote ~~expertise~~off) the entire amount of the Slingsby Loans on its financial statements.

WeIn ~~operate~~2001, inPrivate aMedia ~~highly~~borrowed ~~regulated~~$4 ~~industry.~~million from Commerzbank ~~This~~AG ~~requires~~(the us“Commerzbank toNote”). beThe ~~socially~~Company’s ~~aware~~obligations were secured by a guaranty and ~~sensitive~~by toa ~~government~~pledge ~~strictures~~of 5,600,000 ~~including~~shares ~~laws~~of ~~and~~Private ~~regulations~~Media’s ~~designed~~stock toheld ~~protect~~by ~~minors~~Slingsby ~~and~~Enterprises toLimited ~~prohibit~~(“Slingsby”), ~~the~~an ~~distribution~~affiliate of Mr. Milton, ~~obscene~~who, ~~material~~at the time, was the Company’s Chairman, Chief Executive Officer and principal shareholder. WeThe ~~take~~Commerzbank ~~great~~Note ~~care~~was toacquired ~~comply~~by ~~with~~Consipio ~~all~~Holding ~~applicable governmental~~BV ~~laws~~(“Consipio”). ~~and~~The ~~regulations~~Commerzbank Note matured in ~~each~~March ~~jurisdiction~~2003. Following ~~where~~the weacquisition ~~conduct~~of ~~business.~~the ~~Moreover~~Commerzbank Note by Consipio, wePrivate doMedia ~~not~~and ~~knowingly~~Consipio ~~engage~~engaged in discussions to revise the ~~services~~terms of ~~any~~the ~~business~~promissory ornote ~~individual~~and to extend its maturity date to 2008. In 2008 Consipio declared the promissory note to be in default and demanded that it be repaid. On May 1, ~~including~~2009, ~~producers/directors~~Consipio filed a lawsuit against Private Media, ~~that~~Slingsby, ~~does~~and ~~not~~Mr. Milton ~~adhere~~in U.S. federal court to enforce the ~~same~~Commerzbank ~~standards~~Note. ~~Since~~That ~~1965, we~~lawsuit ~~have~~was ~~never~~dismissed ~~been~~on ~~held~~technical togrounds ~~have~~and re-filed ~~violated~~in ~~any~~May ~~laws~~2010 orin ~~regulations~~New ~~regarding~~York ~~obscenity~~State orCourt. The complaint alleged the ~~protection~~failure ofto ~~minors~~pay the Commerzbank Note. On August 30, 2011 the New York Court issued an Order of

HistoryTable of Contents

~~The~~ Attachment ~~parent~~pursuant ~~company,~~to ~~Private~~which ~~Media~~New ~~Group,~~York ~~Inc.,~~City ~~was~~and ~~originally~~state ~~incorporated~~officials inwere ~~1980~~ordered asto aattach, ~~Utah~~by ~~corporation~~levy, ~~under~~Private ~~the~~Media’s ~~name~~New ~~Glacier~~York ~~Investment~~assets ~~Company, Inc.~~ for the ~~purpose~~sum of ~~acquiring or merging with an established company~~$7.35 ~~In 1991, we changed our domicile to the State of Nevada~~million. ~~The~~As ~~parent~~discussed ~~company~~below, ~~had no material business activity prior to its acquisition of Milcap~~ Private Media’s ~~Limited~~new ~~and~~management ~~Cine~~since ~~Craft~~then ~~Limited~~settled inthat ~~June 1998~~lawsuit.

OnIn ~~December 19~~2009, ~~1997~~ Private Media ~~Group,~~decided ~~Inc.~~to ~~entered~~expand ~~into~~its ~~acquisition~~operations ~~agreements~~by making ~~with~~two ~~Milcap~~acquisitions. In January 2009 Private Media ~~Limited~~expanded ~~and~~its ~~Cine~~internet ~~Craft~~operations ~~Limited to~~through ~~acquire~~the ~~all~~acquisition of ~~their~~Game ~~outstanding~~Link ~~capital~~LLC ~~stock~~and its affiliates (collectively, “Game Link”). Game Link is based in ~~exchange~~San ~~for~~Francisco, 7California,~~500,000~~ ~~shares~~U.S.A. and is engaged in digital distribution of ~~Common~~adult ~~Stock,~~content 7over the Internet and in eCommerce development,~~000,000~~ ~~shares~~primarily ofin the $4United States.00 ~~Series~~Shortly Aafter ~~Preferred~~this ~~Stock~~acquisition, ~~and~~Ilan ~~875~~Bunimovitz (“Mr. Bunimovitz”),~~000~~ ~~common~~a ~~stock~~principal ~~purchase~~of ~~warrants.~~Game Link, was appointed as the Chief Executive Officer of Private Media. ~~Group~~In October 2009, Private Media purchased the businesses of Entruphema Inc. ~~completed~~and ~~these acquisitions~~Sureflix onDigital ~~June 12~~Distribution Inc. (collectively, ~~1998~~“Sureflix”). InSureflix ~~connection~~is ~~with~~based ~~these~~in ~~acquisitions~~Toronto, Canada, and is engaged in ~~December~~the ~~1997~~digital distribution of branded gay adult media over the ~~parent~~Internet. ~~company~~As ~~changed~~part ~~its~~of ~~corporate~~the ~~name~~Sureflix acquisition, Eric Johnson (“Mr. Johnson”), an affiliate of Sureflix, was appointed to Private Media’s ~~Group,~~Board ~~Inc~~of Directors. These ~~and~~two ~~declared~~acquisitions asignificantly ~~one~~changed ~~for~~Private ~~five~~Media’s ~~reverse~~historical ~~split~~scope of operations, both geographically and by significantly increasing its ~~Common~~distribution ~~Stock~~of gay adult media. While the two acquisitions substantially increased the size of the operations of Private Media, prior management had internal management conflicts with the managers of the two acquired companies.

In July 2010, Mr. Bunimovitz was terminated as Chief Executive Officer of Private Media, and Mr. Milton was appointed as the Chief Executive Officer. On ~~January~~July 2023, ~~2009~~2010, Mr. Bunimovitz wefiled ~~expanded~~a ~~our~~JAMS ~~Internet~~arbitration ~~operations~~action ~~through~~against Private Media contesting his termination as Chief Executive Officer. Mr. Bunimovitz alleged, among other things, that his termination was taken in retaliation for Mr. Bunimovitz demanding an independent investigation of Mr. Milton’s alleged self-dealing transactions, including Mr. Milton’s failure to repay a part of the outstanding Slingsby Loans. That arbitration also alleged fraud in the acquisition of the Game Link ~~LLC~~companies, and ~~its~~allegations ~~affiliate,~~regarding ~~companies engaged~~the inshares ~~digital~~of ~~distribution~~Private ofMedia ~~adult~~stock ~~content~~due ~~over~~under ~~the~~various ~~Internet~~earn-out ~~and~~provisions ~~eCommerce~~to ~~development~~Mr. Bunimovitz.

On ~~October~~August 2911, ~~2009~~2010, ~~we continued~~Consipio, a creditor of the ~~ongoing~~Company ~~expansion~~by virtue of ~~our~~its ~~global~~ownership ~~digital~~of ~~media~~the ~~platform~~Commerzbank ~~through~~Note, together with Mr. Bunimovitz, and Tisbury Services Inc., the ~~acquisition~~holder of ~~Sureflix~~over ~~Digital~~13% ~~Distribution~~of Private ~~and~~Media’s ~~its~~outstanding ~~affiliates~~common stock, ~~companies~~filed ~~engaged~~a lawsuit against Private Media in Nevada County Court, Clark County, Nevada, alleging mismanagement of the Company’s business ofby ~~digital~~Private ~~distribution~~Media’s ofthree ~~premium~~independent ~~gay~~directors ~~adult~~and Mr. Milton ~~content~~(Consipio Holding BV et. al. v. Private Media Group, Inc., filed in Nevada State Court and herein referred to as the “Nevada Action”) The plaintiffs also sought to have a receiver appointed to run the business and affairs of Private Media.

~~Our~~Consipio, ~~Strategy~~Tisbury Services Inc. and certain other shareholders believed that a majority of Private Media’s independent members of the Board of Directors failed to direct the affairs of Private Media over many years in a manner that is in the best interests of the Company’s shareholders due to inappropriate influence and control exercised by Private Media’s Chairman and principal shareholder, Mr. Milton. Accordingly, in October 2010 Consipio nominated its own slate of directors to be elected at Private Media’s 2010 Annual Meeting of Shareholders that was to be held on November 18, 2010. In October 2010, the Nevada state court in the Nevada Action ordered Private Media to recognize the right of Consipio to vote the 5,600,000 shares that were pledged by Slingsby Enterprises as collateral for the Commerzbank Note. The Annual Meeting was held on November 18, 2010. Although the Nevada state court in the Nevada Action ordered that Consipio could vote the 5,600,000 pledged shares, the voting of those shares by Mr. Milton and/or Consipio was difficult to trace, and the inspector of elections in December 2010 determined that Mr. Milton and the other incumbent directors were re-elected. In January 2011, the Nevada state court re-examined the votes cast at the 2010 Annual Meeting to see if the 5,600,000 collateral shares pledged by Slingsby to Consipio were actually voted in favor of Consipio’s director nominees, and then ordered that a hearing be held in June 2011 to determine whether to confirm or modify the vote report of the inspector of elections. At the June 2011 hearing, the Nevada court determined that the election of the incumbent directors at the November 18, 2010 Annual Meeting was invalid. The Nevada court also ordered the prior Board of Directors to promptly call for a new annual meeting to elect directors. The incumbent directors did not call a new meeting of the shareholders as ordered by the court, and on August 25,

~~Our~~3 vision is to be the world’s preferred content provider of adult entertainment to consumers anywhere, at any time and across all distribution platforms and devices. We have developed the strategies described below to increase sales and operating margins while maintaining the quality of our products and services and the integrity of our brand name.

DevelopTable strategic alliances and joint ventures with businesses outside of the adult entertainment industry to broaden our distribution channels. We are entering into strategic alliances and joint ventures with leading media companies outside of the adult entertainment industry to distribute our adult media content for use on popular and newly developing media formats, including revenue sharing relationships with cable and satellite television operators, telecoms and Internet service providers with significant market positions. We expect these initiatives to widen the scope of our distribution network, enabling us to reach new customers while supplying our partners and licensees with content. Contents

To 2011 ~~be at~~ the ~~forefront~~Nevada ofState ~~the~~Court ~~adult~~appointed ~~entertainment~~Mr. Johnson ~~industry~~as inthe ~~adapting~~receiver ~~new technology~~for ~~and~~the ~~distribution~~Company ~~channels~~for ~~such~~the aspurposes ~~wireless and IPTV1 distribution~~ of ~~our~~(i) preserving ~~content.~~Private ByMedia’s ~~actively~~assets ~~seeking out~~ and ~~utilizing advanced technologies such as Internet~~business, ~~digital cable~~ and ~~satellite~~(ii) setting ~~television,~~the date ~~IPTV~~for and ~~wireless~~conducting ~~devices~~the to2011 ~~distribute our~~Annual ~~content,~~Meeting weof ~~expect to increase revenues with minimal incremental cost~~Shareholders.

ToPrior bemanagement’s ~~able~~actions toalso ~~deliver~~contributed ~~our~~to ~~entire~~the ~~movie~~de-listing ~~library~~of Private Media’s common stock from the Nasdaq Stock Market. In September 2011, ~~including~~the ~~metadata~~Company was notified by Nasdaq that Private Media’s common stock would be de-listed from the Nasdaq Stock Market because of the appointment of a receiver, ~~via~~the ~~any~~failure ~~new~~of ~~format~~our inprior ~~order~~Board of Directors to ~~facilitate~~collect ~~distribution~~the ~~and~~EUR ~~provide~~7 million ~~unparalleled~~owed ~~service~~by Mr. Milton Weunder ~~have~~the ~~developed~~Slingsby anLoans, ~~extensive~~the ~~library~~failure of ~~motion~~our ~~pictures~~prior ~~and~~Board ~~other~~to ~~pictorial~~demand ~~content~~repayment from Mr. Milton ~~Until~~of ~~recently,~~excess ~~this~~salary ~~library~~and ~~was~~instead allowing ~~archived~~Mr. Milton onto keep such excess salary as a ~~master~~“retention ~~print~~bonus,” ~~which~~and ~~would~~the ~~allow~~entry ~~duplication~~of inthe ~~traditional media~~$7.35 ~~New~~million ~~forms~~Order of ~~electronic~~Attachment ~~distribution~~against ~~provide~~the usCompany ~~with~~by anthe ~~opportunity~~New toYork ~~use~~State ~~this~~Court. ~~content~~Private byMedia’s ~~distributing~~common itstock ~~through~~was ~~new~~formally ~~forms~~delisted ~~of media~~on November 15, ~~such~~2011. ~~as,~~As ~~Internet~~a result, ~~IPTV broadcasting~~our ~~and~~common ~~wireless~~stock ~~devices~~is currently traded on the OTCQB tier of the OTC Markets.

~~Continue~~On September 19, to2011, ~~increase and strengthen brand awareness~~Mr. Johnson, Weas ~~have~~receiver ~~developed strong brand awareness within each~~ of ~~our~~the ~~magazines~~Company, ~~and~~demanded ~~videos’~~that ~~targeted markets~~Mr. Milton Weand ~~own~~Slingsby repay the ~~worldwide~~Slingsby ~~rights to all of our content~~Loans. WeAs ~~seek to strengthen awareness~~ of ~~our brand name by consistently featuring~~ the ~~Private~~date ~~label~~of ~~prominently~~this inAnnual ~~our product packaging~~Report, ~~cross-promoting~~Mr. Milton ~~our own products~~ and ~~distributing~~Slingsby ~~under~~have ~~the~~not ~~Private~~repaid ~~label~~any ~~complementary~~portion orof ~~ancillary~~the Slingsby ~~non-media products that are consistent with an adult entertainment lifestyle~~Loans.

1On ~~IPTV~~December 15, ~~(Internet~~2011, ~~Protocol~~Mr. Johnson, ~~Television)~~the ~~describes~~court-appointed areceiver, ~~system~~indefinitely ~~where~~suspended Mr. Milton afrom ~~digital~~all ~~television~~duties ~~service~~and ispowers ~~delivered~~as toour ~~subscribing~~President ~~consumers~~and ~~using~~CEO. Mr. Milton’s employment with Private Media was formally terminated on March 28, 2012. Also on December 15, 2011, Johan Gillborg was terminated as the Company’s ~~Internet~~Chief ~~Protocol~~Financial ~~over~~Officer aand ~~broadband~~Corporate ~~connection~~Secretary.

4The 2011 Annual Meeting of Shareholders that the Nevada State Court had ordered in June 2011 was finally held on January 11, 2012. At that election, the shareholders removed Mr. Milton and all of the prior directors (other than Mr. Johnson and Mr. Bunimovitz) and elected Consipio’s slate of directors. Thereafter, the new Board of Directors appointed Charles Prast (“Mr. Prast”) as Private Media’s new President, Chief Executive Officer and Interim Chief Financial Officer, and the Nevada Court entered an order terminating the receivership of Mr. Johnson. Mr. Johnson remains a director of the Company.

~~Our~~On ~~Competitive~~May 22, ~~Strengths~~2012, the Nevada State Court (i) dismissed the Nevada Action, and (ii) ordered Private Media to reimburse plaintiffs Consipio Holding BV and Tisbury Services Inc. for their attorneys’ fees and costs incurred in that lawsuit in an amount to be agreed between the plaintiffs and Private Media, and approved by the Company’s Board of Directors.

WeOperations Under ~~believe~~New Management. The financial cost of prior management’s actions has severely weakened Private Media’s financial condition and detrimentally affected its on-going operations. Prior management’s failure to attempt to collect the ~~following~~Slingsby ~~strengths~~Loans (over EUR 7 million, ~~among~~much ~~others~~of which was outstanding for a decade), ~~will~~and ~~enable~~its usfailure to ~~exploit~~prevent Mr. Milton from receiving excessive salary and other payments, contributed to the ~~global~~Company’s ~~market~~weak ~~for~~financial ~~adult~~condition. ~~entertainment:~~This situation was, however, significantly exacerbated by the millions of dollars of legal and other fees and costs that were incurred related to the various lawsuits filed against Private Media by its shareholders and creditors, and by the fees related to the disputed annual meetings of the Company’s shareholders. As a result of the lawsuits, Private Media was ordered to repay the litigation fees and costs incurred by the plaintiffs. Because of these additional costs and fees, including default interest on the Commerzbank Note, Private Media’s obligation to Consipio under the Commerzbank Note increased to EUR 5,545,568 (approximately $7.3 million based on the euro-dollar exchange rate in effect on December 28, 2012, the date of settlement). In addition, Private Media was forced to pay the fees and costs of Tisbury Services Inc. and to enter into a settlement with Mr. Bunimovitz.

~~Recognized~~In ~~brand~~addition ~~name~~to the financial damage inflicted on the Company, Private Media’s operations during the past few years have also been severely affected by the disruption caused by management disputes, changes in its market and operating environment due to an influx of free, advertisement supported content delivered by other adult entertainment companies (referred to as advertainment), the various lawsuits filed by and against the

We4 believe that our target customers associate the Private brand name with high quality adult entertainment products and services. This name recognition attracts leading producers of adult media content, as well as distributors and prospective joint venture partners interested in working with Private Media Group. We believe that the strength of our brand name leads to more favorable economic terms than we could otherwise obtain in our processing and distribution contracts, and enables us to negotiate favorable revenue sharing arrangements and joint ventures from which we derive significant licensing fees and royalty income. We have entered into joint venture and co-branding agreements with leading participants in our industry, including Playboy and Penthouse. We seek to strengthen awareness of our brand name by consistently featuring the Private label prominently in our product packaging, cross-promoting our own products and distributing under the Private label complementary or ancillary non-media products that are consistent with an adult entertainment lifestyle. We believe that these activities engender a loyal customer base which, in turn, enables us to grow even with relatively modest external advertising and marketing expenditures.

EstablishedTable marketof position and distribution network Contents

We Company, ~~have~~the ~~access~~Nasdaq ~~to a well~~de-~~established~~listing, ~~worldwide distribution network which has been built up over~~ the ~~past~~ 40operational ~~years,~~and ~~including~~other ~~some~~difficulties ~~+ 100,000 points of sale~~ in ~~over~~integrating 40Private ~~countries~~Media’s asGame ofLink ~~December 31,~~and ~~2010.~~Sureflix ~~In many markets~~businesses, weand ~~believe that our established presence hinders our competitors’ ability to break into~~ the ~~market.~~deteriorating Inrelations ~~some~~between ~~cases, exclusive~~Private ~~distribution agreements improve our market position further. This broad distribution network provides an effective channel to introduce new products~~ Media and ~~services~~its ~~and~~distributors ~~new formats for existing products~~ and ~~services~~customers. ~~In electronic media categories~~Furthermore, weupon ~~have~~assuming ~~entered~~control ~~into~~following ~~strategic~~the ~~alliances~~January ~~with~~2012 aannual ~~number~~meeting of ~~leading international service providers. In addition~~shareholders, ~~we have assembled an internal team of Internet specialists to maintain and improve~~ our ~~Internet~~new ~~infrastructure~~officers and ~~electronic products~~directors ~~and~~discovered ~~services.~~that Inmany ~~January 2009, we expanded our Internet operations through the acquisition~~ of ~~Game~~Private ~~Link~~Media’s ~~LLC~~important financial and ~~its~~corporate ~~affiliate,~~records were ~~companies engaged~~ in ~~digital~~disarray ~~distribution of adult content over the Internet~~ and/or ~~eCommerce development~~missing. ~~On October 29,~~These ~~2009~~problems wehave ~~continued~~contributed ~~the~~to ~~ongoing~~delays ~~expansion~~in ofcompleting ~~our global digital media platform through~~ the ~~acquisition~~restructuring of ~~Sureflix~~the ~~Digital~~Company’s ~~Distribution~~operations and ~~its~~to ~~affiliates,~~a ~~companies~~delay ~~engaged~~ in ~~the~~completing ~~business~~and offiling ~~digital~~Private ~~distribution~~Media’s ofSEC ~~premium gay adult content~~reports. Sureflix is a leading global supplier of adult programming. We believe that our broad, multi-format distribution network affords our customers convenient access to high quality adult media content in the format of their choice.

~~Extensive~~Following ~~library~~the election of ~~high~~the ~~quality~~new ~~adult~~directors ~~media~~and ~~content~~the appointment of its new Chief Executive Officer, Private Media’s new management in 2012 initiated a plan to restructure and recapitalize Private Media. Management’s short-term goals included the following:

We1. ~~have~~Repay anits ~~extensive~~obligations ~~library~~to ofConsipio ~~high~~and ~~quality adult media content~~Tisbury. AsIn ofthe ~~December 31~~aggregate, ~~2009,~~Private ~~our~~Media ~~library~~owed ~~included~~Consipio ~~still~~in ~~photographs~~excess ~~developed for more than 500 back-issues~~ of ~~magazines~~EUR ~~and~~8 million 1(approximately $10,582,000 ~~movie titles.~~based Weon ~~hold~~the ~~exclusive~~euro-dollar ~~worldwide~~exchange ~~rights~~rate toin ~~this~~effect on ~~entire~~December ~~content~~31, ~~archive.~~2012) ~~This~~for ~~has~~the ~~enabled~~outstanding usprincipal toand ~~enter~~accrued ~~into~~interest ~~distribution~~on ~~arrangements~~the ~~with~~Commerzbank ~~a wide range of media content platforms~~Note, ~~including~~costs ~~leading~~associated ~~international~~with ~~telecoms~~enforcing ~~and~~Consipio’s ~~broadcasting~~rights ~~companies. To~~as ~~facilitate~~provided ~~electronic~~for ~~distribution~~under ofthe ~~our~~Commerzbank ~~products~~Note, wecourt-awarded ~~have~~attorney’s ~~converted~~fees ~~our~~and ~~entire~~additional amounts ~~archive~~representing ofdebt ~~print~~to ~~images~~third ~~into~~parties apreviously ~~digital~~assumed ~~format~~by Consipio. ~~Our~~In ~~video~~addition ~~archive~~to isits ~~now~~obligations ~~also~~to ~~stored in rich media digital format~~Consipio, ~~which~~Private ~~can~~Media bealso ~~converted~~owed ~~into~~Tisbury ~~any~~Services ~~known~~a ~~file~~total ~~format and delivered digitally online or on hard drives. We believe that this electronic archive constitutes one~~ of ~~the~~$450,000 ~~largest~~to ~~libraries~~repay ofTisbury’s ~~high~~legal ~~quality adult media content in the world~~costs.

~~Flexible~~2. ~~operating~~Settle ~~structure~~and dismiss the Nevada Action and ~~access~~the toother ~~capital~~pending lawsuits/arbitration proceedings with Consipio and with Mr. Bunimovitz.

~~We acquire adult media content from third-party producers/directors on a project basis~~3. ~~This~~Return ~~approach~~Private ~~gives~~Media’s usoperations ~~substantial~~to ~~flexibility~~the ingeographic ~~terms of production volume~~ and ~~delivery~~product ~~time,~~markets ~~significantly reduces our fixed production overhead and largely eliminates the risk to us of cost overruns~~ in ~~production.~~which ~~Because~~it ofhas ~~our~~historically ~~multiple~~operated ~~product~~ and ~~service formats and broad distribution network, we can afford to engage top directors~~ in ~~the industry,~~ which wethe ~~believe~~“Private” ~~results~~brand incan abe ~~higher~~most ~~quality~~effectively ~~product for our customers~~exploited. ~~Similarly~~Accordingly, wemanagement’s ~~reduce~~goal ~~our~~was ~~fixed~~to ~~processing~~divest ~~costs~~itself byof ~~outsourcing~~its ~~editing~~U.S. and ~~duplication~~Canadian ~~functions~~operations ~~for~~and ~~most of our products~~facilities, ~~although~~and weto ~~retain~~consolidate ~~oversight~~its ofoperations ~~the~~into ~~overall~~its ~~production process~~Barcelona, ~~for cost and quality control purposes~~Spain, headquarters. AsAlso, amanagement ~~public~~did ~~company~~not ~~with access to the capital markets we~~ believe that wethe ~~will~~digital ~~have~~distribution ~~sufficient~~of ~~financial~~gay ~~resources~~adult tocontent ~~increase~~was ~~our~~consistent ~~production~~with ~~and~~the ~~grow~~Company’s ~~through~~historic ~~acquisitions~~adult ~~without~~content ~~sacrificing our high quality standards~~offerings. ~~However, we cannot guarantee that funds will be available from the capital markets when needed.~~

54. Streamline and reduce Private Media’s facilities, operations, subsidiaries and employees in order to reduce the Company’s overhead and other operational expenses.

~~Experienced~~5. ~~professional~~Raise ~~management~~capital to fund its short-term working capital needs and its growth plans.

~~Our~~6. ~~management~~Restructure ~~team~~a ~~has~~EUR ~~extensive experience in the acquisition and distribution of adult media content and in general business administration~~1.0 million ~~Berth~~outstanding H.obligation ~~Milton,~~to ~~our~~an ~~Chairman~~institutional oflender ~~the~~under ~~Board~~a ~~and~~defaulted ~~CEO,~~line ~~has extensive knowledge~~ of ~~our industry and has successfully founded and developed other profitable businesses~~credit. ~~Other members of our management team have broad expertise in content acquisition, sales and marketing, technology and finance.~~

~~Our~~To ~~Principal~~date, ~~Products~~Private ~~and~~Media ~~Markets~~has successfully met a number of the foregoing goals. As discussed in greater detail below in this Annual Report, new management has accomplished the following:

~~Internet~~A. ~~Services~~Effective December 28, 2012, Private Media settled its lawsuit with Consipio. Private Media owed the outstanding balance of the Commerzbank Note, the legal fees and costs that the Nevada State Court ordered Private Media to pay, the legal fees and costs Private Media was required to pay Consipio because of the New York lawsuit, and approximately EUR 1.7 million that Private Media owed third parties, which obligations were acquired by Consipio. Since Private Media did not have the funds to repay Consipio in cash, Private Media offered to repay Consipio for all of the foregoing obligations by issuing shares of a new class of preferred stock. As a result, on December 28, 2012, Private Media issued to Consipio a total of 800,000 shares of its new 6% Series B Convertible Redeemable Preferred Stock as payment in full. Each share of preferred stock was issued in consideration for EUR 10.00 of debt. We have the right to redeem these shares at any time for EUR 10.00, plus unpaid dividends that accrue at a rate of 6% per annum. See, “Issuance of 6% Series B Convertible Preferred Stock; Change of Control” below. As a result of the settlement, all lawsuits with Consipio (in Nevada and New York) have now been dismissed.

~~We launched our first Internet website, private~~B.~~com,~~ inIn ~~1997.~~May ~~We now own a number of sites directed at specific customer bases~~2012, ~~including~~Private ~~gamelink.com~~Media settled and ~~maleflixxx.com.~~terminated Inboth ~~January 2009 we expanded our Internet operations through~~ the ~~acquisition~~Nevada ofAction ~~Game Link LLC~~ and ~~its affiliate, companies engaged in digital distribution of adult content over~~ the ~~Internet~~JAMS ~~and~~arbitration ~~eCommerce~~that ~~development~~Mr. ~~On October~~ ~~29,~~Bunimovitz ~~2009~~had wefiled against ~~continued~~ the ~~ongoing~~ ~~expansion~~Company. ofAs ~~our~~part ~~global~~of ~~digital media platform through~~ the ~~acquisition~~settlement ~~of Sureflix Digital Distribution~~ and ~~its affiliates, companies engaged~~ in ~~the~~exchange ~~business of digital distribution of premium gay adult content. We also generate incremental sales by licensing our trademarks and proprietary adult media content~~ for ~~use~~full ona ~~the~~release ~~websites~~from ~~of other companies.~~

~~Video~~ 5

SinceTable 1992, we have acquired and distributed adult motion picture entertainment. These productions generally feature men and women in a variety of erotic and sexual situations, in hardcore and softcore versions. We maintain the ownership and copyrights of every movie we acquire. As of December 31, 2010, our movie library contained 1,443 movie titles. We expect to release more than 50 movie titles in 2011, with distribution through our worldwide network. These products are sold by both traditional and technologically advanced distributors, and wholesalers worldwide. Distributors include national video store and newsstand distribution networks, Internet, IPTV, cable, satellite, mobile telephone networks and hotel television operators. Contents

~~Wireless~~ all claims, we (i) transferred to Messrs. Bunimovitz, Sullivan and Marinac (the former owners of the Game Link companies) all of the outstanding capital stock of the ThinkForward, Inc. and GreenCine, Inc. subsidiaries (i.e., the Game Link companies), and (ii) issued to Messrs. Bunimovitz, Sullivan and Marinac an aggregate of 1,772,875 shares of our common stock. The 1,772,875 shares represented the number of shares that Messrs. Bunimovitz, Sullivan and Marinac would have been entitled to under the earn-out ~~Mobile~~provisions ~~Entertainment~~under the Agreement and Plan of Reorganization dated as of January 20, 2009. The Agreement and Plan of Reorganization was the principal agreement pursuant to which we acquired ThinkForward, Inc. and GreenCine, Inc. See, “Item 13. Certain Relationships And Related Transactions, And Director Independence—Transaction Between the Company and Ilan Bunimovitz, our Former Chief Executive Officer and Director, and Mr. Bunimovitz’ Affiliates,” below.

WeC. ~~launched~~As part of our ~~mobile~~re-evaluation ~~content~~of prior ~~program~~management’s expansion of its operations outside of its historical European sphere of operations and the expansion of Private Media’s product offerings to include gay adult media, and in order to resolve claims made by the prior ~~2003~~owners of Sureflix, alleging misrepresentation and breach of contract, on June 29, 2012 we entered into a settlement agreement with the former owners of Sureflix. WeUnder ~~generate~~the ~~revenues~~Settlement ~~from~~Agreement, ~~wireless~~in ~~deals~~exchange ~~both~~for a full general release, we transferred back to the former owners (including Mr. Johnson, the current Chairman of this Company’s Board of Directors) all of the outstanding capital stock of Sureflix. All intercompany allocations, receivables and payables between Sureflix, on- one hand, and ~~off-portal~~the Company, on the other hand, were netted, and ~~our~~we ~~current~~are ~~principal~~obligated ~~market~~to isre-pay ~~Europe~~Sureflix the net amount ($224,969) by the end of 2012. ~~Our~~The ~~product~~foregoing ~~offering~~amount ~~consist~~has not been fully repaid, and, as of ~~rich-media~~May 21, ~~mobile~~2013, ~~downloads~~we ~~including;~~will ~~MMS~~owe Sureflix approximately $74,000. ~~wallpapers~~See, ~~screensavers~~“Item 13. Certain Relationships And Related Transactions, ~~video~~And ~~clips~~Director Independence—Transaction Between the Company and ~~video~~Eric ~~streaming~~Johnson, a Director, and Mr. Johnson’s Affiliate,” below.

~~Magazine~~D. ~~Publications~~Our principal subsidiary owed a European bank EUR 1,073,500 under a defaulted loan that the Company had guaranteed. In December 2012, our new management renegotiated and restructured the loan so that the loan is no longer in default. Under the new terms, the loan will bear interest at a rate of 3% per annum, with interest payments due annually at the end of each calendar year. The repayment dates for the unpaid principal balance have been extended, so that the outstanding principal amount must be repaid as follows: (i) EUR 350,000 is due on January 1, 2016, (ii) EUR 350,000 is due on January 1, 2017, and the balance, (iii) EUR 373,500 is due on January 1, 2018.

WeE. ~~are~~In order to obtain working capital and to be able to renegotiate the ~~publisher~~repayment of ~~Private~~other short-term obligations at a discount, anin ~~international~~February ~~X-rated~~2013 ~~magazine~~we entered into a Loan Agreement with three unaffiliated foreign lenders. ~~Private~~Under ~~was~~the ~~founded~~Loan inAgreement, ~~1965~~the three lenders agreed to advance us a total of EUR 800,000. The loans bear interest at a rate of 9.9% per annum and ~~was~~are ~~the~~due ~~first~~and ~~full~~payable ~~color~~on December 31, ~~hardcore~~2014. ~~sex~~Interest ~~publication~~is inpayable ~~the~~quarterly ~~world~~in arrears. WeOur ~~distribute~~obligations under the ~~magazine~~ ~~through~~loans ~~newsstands~~are ~~and~~secured ~~other~~by ~~retail~~a ~~outlets~~lien on certain motion pictures in our film library.

6F. As part of our efforts to streamline our operations and reduce overhead expenses, new management has, to date, reduced the Company’s headcount from 45, not including 48 employees of Game Link and Sureflix, in 2011 to 38 employees as of May 21, 2013, and significantly reduced the amount of space we rent. The reduction in headcount, management costs and rental expenses is expected to save this Company an estimated EUR 741,000 annually. We are also working on closing and consolidating various subsidiaries in order to simplify our financial reporting procedures and to eliminate the corporate costs of maintaining so many subsidiaries (we had 20 subsidiaries as of December 31, 2011 and as of May 21, 2013 we had 12 subsidiaries which number is expected to be further reduced).

~~INTERNET~~Issuance ~~SERVICES~~of 6% Series B Convertible Preferred Stock; Change of Control. As of December 28, 2012, we owed Consipio over EUR 8,000,000 (including principal and interest on the Commerzbank Note, legal fees and costs that we were required to pay as a result of the various legal proceedings related to the collection of the Commerzbank Note, and other liabilities). As of December 28, 2012, we did not have the financial resources to repay all, or even a significant portion of the foregoing amounts owed to Consipio. Accordingly, as payment in full, we agreed to issue to Consipio 800,000 shares of a new series of preferred stock designated as our “6%

~~Private~~6 Media Group’s Internet team has combined its extensive media library with the most advanced technology to take advantage of the growth of Internet access and new distribution methods. The Company’s online offering centers around three core concepts: pay-site platforms, e-commerce platforms, and mobile platforms. Through a combination of acquisitions and custom software development efforts, during 2009 and 2010, the Company has been able to significantly improve and expand its online infrastructure.

Pay-siteTable platformsof Contents

~~Private.com~~ Series B Convertible Redeemable Preferred Stock” (~~www.private.com~~the “Series B Preferred Stock”). isBecause each share of Series B Preferred Stock was issued at a ~~membership~~price ~~site~~of ~~which~~EUR 10.00 per ~~offers~~share, ~~access~~the total amount of consideration paid to ~~high-quality~~Consipio ~~adult~~for ~~content~~the ~~that~~global ~~includes~~settlement ~~full-length Private~~was ~~movies~~EUR 8,000,000. ~~video~~A ~~clips~~total of 1,300,000 ~~photosets~~shares of Series B Preferred Stock have been authorized, aof ~~library~~which 800,000 are currently owned by Consipio. We anticipate that we may issue additional shares of ~~all~~the ~~Private~~Series ~~magazines~~B ~~ever~~Preferred ~~published~~Stock into ~~image~~repay other creditors and/or ~~downloadable~~to ~~PDF~~raise ~~format~~additional capital. The principal terms of the Series B Preferred Stock include the following:

In• ~~May~~Upon ~~2010~~the ~~we launched our new membership platform~~liquidation, ~~which~~dissolution ~~manages~~or ~~and~~winding ~~optimizes~~up ~~traffic across a large network~~ of ~~membership pay-sites. The first properties to leverage~~ the ~~new~~Company ~~offering~~(including ~~are~~a ~~the~~Deemed ~~company’s~~Liquidation ~~flagship membership site~~Event), ~~www.private.com~~the ~~and~~holders ~~affiliate~~of ~~program~~the ~~www.privatecash.com.~~Series ~~The~~B ~~two~~Preferred ~~sites~~Stock ~~have~~shall ~~been~~be ~~completely~~entitled ~~overhauled~~to ~~following~~be ~~extensive~~paid ~~feedback~~an ~~from~~amount ~~the affiliate~~per ~~community~~share equal to ~~maximize~~EUR ~~conversion, retention and traffic~~11.00 ~~With~~plus ~~the~~any ~~launch~~accrued ofand ~~the~~unpaid ~~membership~~dividends ~~pay-site~~thereon. ~~platform,~~The ~~the~~liquidation ~~Company~~payment ~~now~~is ~~offers~~payable ~~the~~before ~~most~~any ~~comprehensive~~payment ~~Internet~~made ~~marketing,~~to ~~sales and distribution solution in~~ the ~~adult~~holders ~~market,~~of ~~fueled~~our ~~by a~~Common ~~traffic~~Stock. ~~network~~A ~~that~~Deemed ~~the~~Liquidation ~~company~~Event ~~has~~includes ~~developed over~~ the ~~past~~merger ~~year. Managed by the Company’s team~~ of ~~experts~~this ~~and industry veterans~~Company, the ~~membership~~sale ~~platform offers daily updates~~ of ~~content~~its ~~and~~assets, aan ~~content~~uninsured ~~delivery~~judgment ~~system~~rendered ~~that~~against isthis ~~optimized~~Company for ~~traffic~~ ~~conversion.~~EUR ~~In addition~~1,000,000 ~~the~~or ~~new~~more, ~~platform~~or ~~has~~commencing ~~been~~after ~~built~~July to1, be2013, ~~substantially~~our ~~less~~failure ~~labor~~to ~~intensive~~file towith ~~operate~~the ~~compared~~SEC toany ~~the~~of ~~previous~~our ~~one.~~Quarterly ~~During~~Reports ~~the~~on ~~second~~Form ~~half~~10-Q ofor ~~2010~~Annual ~~the~~Reports ~~new~~on ~~membership~~Form ~~pay~~10-~~site~~K ~~attracted~~by ~~73%~~no ~~more~~later ~~unique~~than ~~visitors~~30 ~~compared to~~calendar days after the ~~previous~~required ~~one~~filing indate (including the ~~same~~expiration ~~period~~of inany ~~2009.~~permitted extensions).

~~The~~• ~~Company~~Each ~~has~~share also opened the membership pay-site to all major adult studios who are looking for an externally managed solution to maximize their online sales. The platform can be branded to each studio’s graphic requirements to ensure the end consumer has a true experience of ~~the~~Series ~~studio’s~~B ~~brand positioning.~~Preferred ~~The~~Stock ~~platforms~~is ~~flexibility~~convertible ~~ensures that websites can be created quickly, at low cost and are immediately integrated~~ into ~~the~~50 ~~affiliate~~shares ~~industry standard NATS system via Private’s affiliate program. As more studios join Private’s network~~ of ~~sites~~our ~~the~~common ~~platform will become a one-stop shop with a variety of high quality content, creating more opportunities to up-sell the content to affiliate driven traffic and ensuring greater conversion~~stock.

e• Holders of the Series B Preferred Stock are entitled to receive dividends at an annual rate of 6% of the EUR 10.00 Series B Preferred Stock original issue price, which shall be cumulative, accrue daily and be payable quarterly, in arrears, in cash on the third business day following March 31, June 30, September 30 and December 31. However, dividends will cease accruing on the Series B Preferred Stock during any fiscal quarter if all three of the following conditions are met on any day during that fiscal quarter: (i) The Common Stock has been listed or quoted for trading for no less than 60 consecutive trading days on any national U.S. stock exchange (including any market that is part of the Nasdaq Stock Market), the OTC Bulletin Board, and/or on the OTCQX or OTCQB levels of the OTC Markets Group; (ii) The average daily trading volume of the Common Stock for 20 consecutive trading days prior to such date exceeds 10,000 shares, and (iii) The average of the volume weighted average price such 20 consecutive trading days exceeds $1.00 per share (adjusted to reflect any stock split, reverse stock split, stock dividend or stock combination). The dividends payable with respect to the Series B Preferred Stock shall, at the option of Private Media, be paid in Euros or by means of a one-~~Commerce~~year ~~platforms~~unsecured promissory note. Any such promissory note will bear interest at a rate of 7.5% per annum and be payable in four quarterly payments commencing one year after the date of the dividend payment. The holders of the Series B Preferred Stock may, however, elect to receive shares of our Common Stock in place of some or all of any quarterly dividend (the value of the shares is based on the 10-day trading price of our Common Stock).

~~GameLink.com.~~• OnProvided ~~January 20,~~that ~~2009~~ we ~~expanded~~have ~~our~~registered ~~Internet~~with ~~operations~~the ~~through~~SEC the ~~acquisition~~public resale of the ~~company~~shares ~~Game~~of ~~Link~~Common ~~LLC~~Stock ~~and~~into ~~its~~which ~~affiliates, companies engaged in digital distribution of adult content over~~ the ~~Internet~~Series ~~and~~B ~~eCommerce~~Preferred ~~development.~~Stock ~~GameLink~~ is aconvertible, ~~leading~~at USour ~~adult~~option ~~entertainment~~we ~~VOD and eCommerce platform through its GameLink.com website. The site’s installed user base represents over one million domestic and international customers and it serves over 100~~may,~~000~~ ~~users~~at ~~daily.~~any ~~Including 70~~time,~~000~~ ~~video~~redeem ~~titles, GameLink has~~ the ~~largest~~shares ~~library~~ of ~~digital~~the ~~and~~Series ~~physical~~B ~~adult~~Preferred ~~media~~Stock, ~~and novelties~~ in ~~the~~whole ~~United~~or ~~States. GameLink offers VOD~~ in ~~multiple~~part, ~~media~~for ~~formats including~~a ~~streaming~~cash ~~and~~redemption ~~downloads~~price equal to ~~computers~~EUR ~~and mobile phones~~10.00 ~~GameLink’s~~plus ~~infrastructure~~any isaccrued ~~the most robust in the industry~~ and isunpaid ~~highly flexible, customizable and scalable designed to support multiple retail strategies and products simultaneously~~dividends. ~~Additionally,~~The ~~through~~redemption ~~its~~price ~~related~~is ~~company,~~payable ~~GameLink~~in ~~offers third-party and white-label ecommerce solutions and development~~Euros.

~~Maleflixxx.com.~~• OnAt ~~October 29~~any time between December 31, ~~2009~~2015 and December 31, 2018, a holder of the Series B Preferred Stock may demand that we ~~continued~~redeem some or all of the ~~ongoing~~holder’s ~~expansion~~shares of ~~our~~Series ~~global~~B ~~digital~~Preferred ~~media~~Stock, ~~platform~~to ~~through~~the extent permitted under Nevada law. Each holder may demand that one third of the ~~acquisition~~number of ~~Sureflix~~shares ~~Digital~~of ~~Distribution~~Series ~~and~~B ~~its~~Preferred ~~affiliates~~Stock the holder initially acquired be redeemed in each calendar year 2016, ~~companies~~ ~~engaged~~2017, and 2018. The redemption price is equal to EUR 10.00 plus any accrued and unpaid dividends and is required to be paid in cash, provided that we do not have to pay cash to the ~~business~~extent ofthat ~~digital~~such ~~distribution~~payments ofwould ~~premium~~(i) ~~gay~~reduce ~~adult~~our ~~content.~~cash ~~Sureflix~~balance to below EUR 1,000,000, or (ii) cause our current assets to be less than three times our current liabilities, whichever is aless. ~~leading~~If ~~global~~we ~~supplier~~can’t ofpay ~~adult~~the ~~programming~~entire redemption price in cash, we have to pay the balance in a promissory note. The ~~company~~promissory ~~operates~~note used to pay any portion of the redemption price shall: (a) ~~vast~~bear ~~network~~interest at a fixed rate of ~~more~~prime ~~than~~plus ~~100~~4% ~~pay-~~per~~-view~~ ~~VOD~~annum; ~~websites.~~(b) Itbe ~~represents~~payable ~~premium production~~in ~~studios.~~four ~~Sureflix~~equal ~~has~~quarterly ~~not~~installments ~~only~~of ~~in-depth~~principal ~~knowledge~~and interest on the last day of ~~adult~~each ~~programming~~calendar quarter; (c) be prepayable by us at any time, ~~but~~in ~~also~~whole ~~significant~~or ~~VOD~~in ~~technology~~part, ~~and~~without ~~marketing~~premium ~~expertise.~~or penalty; and (d) if

PrivateTable VOD (www.privatevod.com) is an eCommerce site which offers a catalogue of proprietary and third party content in multiple media formats including streaming and downloads. The site is based on GameLink’s outstanding technology for eCommerce sites. Contents

~~Online~~necessary ~~Mobile~~to ~~platforms~~comply with Nevada law governing distributions to shareholders, be subordinated to all of our creditors. We also will have the right to defer any payment under the promissory notes if such payment would violate Nevada law.

In• ~~April~~The ~~2010,~~holders ~~GameLink,~~of ~~launched~~the aSeries ~~proprietary~~B ~~mobile~~Preferred ~~solution~~Stock ~~enabling~~vote ~~users~~together towith ~~instantly~~the ~~stream~~holders ~~over~~of ~~15,000~~Common ~~movies~~Stock as a single class. ~~The~~Each ~~mobile~~holder ~~Internet~~of ~~platform~~Series B Preferred Stock is ~~accessible~~entitled ~~via~~to ~~www.gamelink.com~~cast ~~and~~the itnumber isof ~~an extension~~votes equal to the number of ~~GameLink’s~~whole ~~leading~~shares ~~Video-on-Demand~~of ~~e-commerce~~Common ~~platform,~~Stock into which ~~allows~~the ~~consumers~~shares toof ~~purchase~~Series ~~and~~B ~~consume~~Preferred ~~content~~Stock ~~instantly~~held by such holder would be convertible. ~~All~~However, ~~content~~we ismay ~~available~~not ~~for~~take ~~future~~certain ~~viewing~~actions inwithout the ~~customer’s~~approval ~~virtual~~of ~~media~~a ~~center,~~majority ~~stored~~of in the ~~Company’s~~ ~~“Cloud”~~then outstanding shares of Series B Preferred Stock. ~~The~~These ~~platform~~actions ~~has~~that ~~initially~~require ~~been~~the ~~optimized~~approval toof ~~work~~the ~~with~~holders ~~Apple~~of ~~devices~~the ~~including~~Series B Preferred Stock include (i) changing the ~~iPhone~~rights, ~~iPod,~~preferences and privileges of the ~~iPad~~ asSeries ~~well~~B asPreferred ~~Android~~Stock ~~devices.~~or Increating ~~addition~~a class that is senior to ~~streaming~~the Series B Preferred Stock, ~~consumers~~(ii) ~~can~~selling ~~choose~~all toor ~~download~~substantially ~~their~~all ~~movies~~of our assets or ~~purchase~~ ~~DVDs~~merging ~~and~~with ~~novelties~~another ~~from~~entity if following the ~~globally~~merger ~~accessible~~our ~~platform.~~shareholders Aown ~~white~~less ~~label2~~than ~~version~~50% of the ~~mobile~~voting ~~platform~~power isin ~~available~~the election of directors, (iii) paying dividends on, or redeeming any shares of our Common Stock, (iv) borrowing more than EUR 2,000,000 in the aggregate, other than trade payables and ~~will~~accrued beexpenses ~~marketed~~incurred toin ~~adult~~the ~~studios~~ordinary course of business, and ~~affiliates~~(v) ~~worldwide.~~issuing more than 5,000,000 shares of Common Stock in any single transaction or related set of transactions.

• In ~~August~~order ~~2010,~~to ~~Sureflix~~allow ~~Digital~~certain ~~Distribution~~holders ~~launched~~of aour ~~new~~Series ~~mobile~~B ~~VOD~~Preferred ~~platform~~Stock ~~for~~to ~~its~~maintain ~~Maleflixxx~~their ~~network~~percentage ofinterest ~~sites.~~in ~~The~~our ~~new mobile platform~~Company, ~~Maleflixxx~~until ~~Mobile~~December 31, ~~allows~~2017 ~~consumers~~each toholder ~~view~~of ~~gay~~more ~~content~~than ~~on all mobile devices~~50,000 ~~including~~shares ~~the~~of ~~iPad,~~Series ~~iPod~~B ~~Touch,~~Preferred ~~iPhone~~Stock ~~and~~shall ~~Android~~have ~~handsets.~~the ~~The~~right ~~platform~~to isparticipate ~~accessible~~in ~~via~~our ~~www.maleflixxx.tv~~future ~~and~~capital ~~from~~raising ~~Maleflixxx’s~~transactions, ~~network~~including ofthe ~~hundreds~~issuances of ~~white~~common ~~label~~stock, ~~websites~~debt, ~~which~~preferred ~~includes~~stock, ~~Private’s~~options, ~~gay~~warrants ~~content~~or ~~brand Man-Size~~other atinstrument ~~www.man-size.tv.~~that ~~Sureflix’s~~are ~~proprietary~~convertible ~~technology~~into ~~detects~~or ~~which~~exchangeable ~~devices~~for ~~are~~shares ~~being~~of ~~used~~Common toStock. ~~access~~The ~~the~~number ~~site~~of ~~and~~securities ~~delivers~~that ~~the interface for~~ a ~~particular~~qualified ~~device.~~holder ~~Users~~of ~~can~~Series ~~access~~B ~~their~~Preferred ~~account~~Stock ~~from~~can ~~any~~purchase ~~device,~~in ~~experiencing~~our ~~the~~future ~~same functionality.~~capital ~~The~~raising ~~platform’s~~issuances ~~easy-to-navigate~~is ~~interface~~equal ~~allows users~~ to ~~instantly~~the ~~browse~~ratio ~~content~~of by(x) ~~category,~~the ~~theme~~number ~~and~~of ~~studio.~~shares ~~Broadcasting~~of inCommon ~~video~~Stock ~~quality,~~beneficially ~~equal~~owned toby athe ~~high~~qualified ~~speed Internet connection~~holder, ~~more~~to ~~than~~(y) ~~44,000~~the ~~scenes~~sum ~~from~~of ~~over~~the ~~200 studios~~number ~~are~~of ~~available.~~shares ~~The~~of ~~platform~~Common isStock ~~localized~~then inoutstanding ~~seven~~plus ~~languages:~~the ~~English,~~number ~~French,~~of ~~Spanish,~~shares ~~German,~~of ~~Portuguese,~~Common ~~Italian~~Stock ~~and~~issuable ~~Japanese.~~upon Athe ~~white~~exercise ~~label~~or ~~version~~conversion of ~~the~~all ~~mobile~~outstanding ~~platform~~options, iswarrants, ~~also available~~ and ~~will~~other beconvertible ~~marketed to studios and affiliates worldwide~~securities.

InChange ~~contrast~~of toControl. The 800,000 shares of Series B Preferred Stock owned by Consipio are currently convertible into 40,000,000 shares of Private’s ~~other~~Media ~~mobile~~Common ~~content~~Stock ~~business~~and, ~~which~~until isconverted, ~~based~~are entitled to vote on anall matters, including the election of directors, on~~-portal~~ ~~model~~an ~~going~~“as ~~through~~converted” basis. ~~content~~Taking ~~aggregators~~into ~~and~~account ~~carriers~~the 3,000,000 shares issued to Tisbury under the ~~new~~Tisbury ~~online~~Settlement ~~mobile~~Agreement, ~~platforms~~the ~~are~~Company ~~off-portal~~had ~~and~~a ~~provides~~total ~~substantially~~of ~~improved~~27,259,869 ~~margins~~shares asof ~~content~~Common isStock ~~sold~~outstanding ~~directly~~on byDecember 28, 2012. Accordingly, since the ~~Company~~shares of Series B Preferred Stock that were issued to Consipio have 40,000,000 votes, Consipio acquired 59.4% of the ~~consumer~~aggregate voting power of Private Media’s capital stock. As a result, Consipio currently has the ability to elect a majority of the members of our board of directors.

~~VIDEO~~Business Summary Overview

~~Production~~We acquire worldwide rights to adult media produced for us by independent producers and then process this content into products suitable for popular physical media formats such as print publications, DVDs, digital media platforms (such as internet websites, mobile telephony and transactional television), and broadcasting (which includes cable, satellite and IPTV). Our branded adult media is available at physical retail locations and through electronic retailers as well as on mobile devices, transaction television platforms and over the Internet. In addition, we provide adult entertainment films to thousands of major hotels around the world. To a lesser extent, in addition to branded adult media products, we also market and distribute branded leisure and novelty products oriented to the adult entertainment lifestyle and generate additional sales through the licensing of our Private trademark to third parties.

InOur ~~1992,~~business wewas ~~began~~founded ~~releasing~~in ~~movies~~1965 ~~under~~and ~~the~~achieved ~~Private~~initial ~~label.~~success Asthrough aour then ~~result~~flagship ofprint ~~technology~~publication, ~~advances during recent years~~Private, wethe ~~currently spend~~first onfull ~~average~~color, ~~approximately~~hard-core ~~$50,000~~sex ~~per~~publication ~~acquired~~in ~~movie~~the world. ~~This~~As ~~amount~~of ~~includes~~December 31, ~~post-production~~2011, ~~master~~we ~~production~~had ~~and~~compiled ~~language~~a ~~customization.~~digital ~~Generally,~~archive weof ~~create~~more ~~and~~than ~~design~~two ~~all~~million ~~artwork~~photographs ~~for~~and ~~promotional~~had ~~items~~more ~~and~~than ~~packaging~~500 ~~and~~issues ~~contracts~~of ~~for printing~~print ~~services~~publications. ~~With~~Approximately ~~respect~~20,000 tocopies ~~DVDs~~of ~~they~~our print publications are ~~duplicated~~distributed byeach ~~independent~~month ~~laboratories~~and include a DVD.

We8 do not produce movies ourselves, we acquire our content from independent producers that are carefully selected for being the best in their genre on each particular time and are subject to strict quality controls. All producers assume production costs, obligations and legal responsibilities, including among other things, the delivery of rights, model releases and all production and performers related paperwork. The free lance producers deliver the movies on digital masters to us. Digital masters are customized, dubbed, sub-titled, duplicated by third parties and sent to different distributors and duplication centers. All marketing material and artwork for video covers is created in-house.

AsTable of December 31, 2010, our movie library contained 1,443 movie titles. During 2011, we expect the total to increase by more than 50 titles. Almost all titles are available on any available format. We presently market our content in over 40 countries. Contents

2In A1992, ~~white~~we ~~label~~expanded ~~product~~our oroperations ~~service~~to isinclude athe ~~product~~production, oracquisition, ~~service~~and distribution of adult movies. Our movies, and those that were produced by ~~one~~us ~~company~~in ~~(the~~a ~~producer)~~joint ~~that~~venture ~~other~~with ~~companies~~third ~~(the~~parties, ~~marketers)~~have ~~rebrand~~to date received more than 200 industry awards. As of December 31, 2012, our video library contained in excess of 1,400 titles. Our goal is to ~~make~~add itapproximately ~~appear~~over as140 ifhours ~~they~~of ~~made~~video itto our library annually.

8Since 1997, we have expanded our presence in growing distribution channels such as the Internet and over hand-held devices, including smartphones, tablets and similar devices. We believe that these channels represent a substantial growth opportunity for us in the future.

MOVIE LIBRARY	As of December 31,
	2010		2009
Title	Nº of titles		Nº of Titles
Amanda’s Private Diary		5		5
Best - End of Year		12		12
Best of by Private		137		114
Bukkakke		7		7
Cum on my face		7		7
Phantom Seducer		2		2
Gaia		6		6
Horny Housewives		9		9
Ionie Luvecoxxx		20		20
Mansize		14		13
Peepshow Special		12		12
Pirate Fetish Machine		32		32
Pirate Video		12		12
Pirate Video de Luxe		16		16
Private Auditions		10		10
Private Black Label		56		56
Private Blockbuster		5		4
Private Bluebird		18		—
Private Castings		53		53
Private Festish		4		4
Private Films		28		28
Private Gold		111		106
Private Independent		2		1
Private Interactive		1		1
Private Lesbian		10		9
Private Lust Treasures		9		9
Private Man		14		14
Private Man – Stars		12		12
Private Movies		51		48
Private Porn Vacation		3		3
Private Presents		2		—
Private Reality Video		26		26
Private Specials		49		29
Private Sports		12		12
Private Stories		27		27
Private Superf*ckers		12		12
Private Exotic		4		4
Private Tropical		42		42
Private Video Magazine		26		26
Private X-Treme		45		44
Private XXX		39		39
Private-Ninn		4		4
Private-Penthouse Movies		12		12
The Best of the Year		14		13
The Matador Series		15		15
The Private Adventures of Pierre Woodman		10		10
The Private Life of		77		66
The Private Story of		9		9
Triple X Files		12		12
Triple X Video		32		32
Virtualia		6		6
When Pornstars Play		6		6
Erotica (soft titles)		284		283
Total		1,443		1,354

We launched our first internet website, www.private.com, in 1997. This website provides content directly to consumers over the Internet. We derive revenues from the website primarily through subscriptions.

9On January 20, 2009 we expanded our Internet operations through the acquisition of Game Link LLC and its affiliates, companies engaged in digital distribution of adult content over the Internet and eCommerce development. Game Link is a leading US adult entertainment video-on-demand and eCommerce platform through its Game Link.com website. Game Link is based in San Francisco, U.S. On October 29, 2009 we continued the expansion of our digital media platform through the acquisition of Sureflix Digital Distribution and its affiliates, companies engaged in the business of digital distribution of premium gay adult content. Sureflix is a leading global supplier of gay adult programming based in Toronto, Canada. As described elsewhere in this Annual Report, in order to settle on-going litigation, and in order to re-focus our business on our historical geographic and target markets, we transferred ownership of these two businesses to their original owners in 2012. Accordingly, we no longer own or operate either the Game Link or Sureflix businesses.

~~Distribution~~Corporate Information

WePrivate ~~distribute~~Media ~~our~~Group, ~~productions~~Inc. ~~worldwide~~was ~~via~~incorporated ~~digital~~in ~~files~~the ~~and~~State ~~digital~~of ~~masters~~Nevada, U.S.A. WeIn ~~license~~accordance ~~our~~with ~~movies~~Nevada tolaw ~~IPTV,~~we ~~cable~~maintain ~~and~~a ~~satellite~~registered ~~television~~office ~~networks~~at 3230 ~~and~~Flamingo ~~adult~~Road, ~~pay-per-view~~Suite ~~television~~156, ~~channels.~~Las ~~These licenses~~Vegas, ~~generally~~Nevada. ~~grant~~Our ~~the~~European ~~operator~~headquarters aand ~~specific~~principal ~~right~~offices ofare ~~transmission~~located ~~and~~at ~~we retain~~ the ~~intellectual~~offices ~~property rights~~ of ~~every~~one ~~production. We edit many~~ of our ~~new~~principal ~~feature~~operating ~~movie~~subsidiaries, ~~releases~~Milcap ~~into~~Media ~~several~~Group, ~~versions~~S.L.U., ~~depending~~whose onaddress ~~the~~is ~~media~~Calle ~~through~~de ~~which~~la ~~they are~~Marina to16-18, beFloor 18, ~~distributed.~~Suite ~~Versions~~D, ~~edited~~08005 ~~for~~Barcelona, ~~cable~~Spain, ~~satellite~~telephone ~~and~~+34-93-620 ~~hotel~~80 ~~television~~90. ~~programming~~Our ~~may~~corporate bewebsite ~~less~~address ~~sexually~~is ~~explicit~~www.prvt.com. ~~than~~We ~~the~~do ~~versions~~not ~~edited~~incorporate ~~for~~the ~~home~~information ~~video~~on ~~distribution.~~our ~~DVDs~~website ~~are~~into ~~sold~~this orAnnual ~~rented in video stores~~Report, ~~sex~~and ~~shops,~~you ~~newsstands~~should ~~and~~not ~~other retail~~consider ~~outlets,~~such ~~and~~information ~~where~~part ~~permitted,~~of this ~~through~~annual ~~direct mail~~report.

~~Broadcasting~~We currently operate through 12 subsidiaries, of which only 8 actively conduct business. The parent company, Private Media Group, Inc., was originally incorporated in 1980 as a Utah corporation under the name Glacier Investment Company, Inc. for the purpose of acquiring or merging with an established company. In 1991, we changed our domicile to the State of Nevada. On December 19, 1997 Private Media Group, Inc. entered into acquisition agreements with Milcap Media Limited and Cine Craft Limited to acquire all of their outstanding capital stock in exchange for shares of its common stock, $4.00 Series A Preferred Stock, and common stock purchase warrants. Private Media Group, Inc. completed these acquisitions on June 12, 1998. In connection with these transactions, in December 1997 the parent company changed its corporate name to Private Media Group, Inc. Glacier Investment Company, Inc. had no material business activity prior to its acquisition of Milcap Media Limited and Cine Craft Limited in June 1998.

~~TV-Channels~~9

SinceTable launching our broadcasting business in 2000, we have rapidly expanded in Europe and Latin America. The broadcasting business was launched through an exclusive joint venture agreement with International Film Productions and Distributions, Ltd., (“IFPD”). IFPD was a European-based television broadcasting company associated with major content providers that specialized in the distribution of adult cable and satellite television channels. Under the joint venture agreement, IFPD was responsible for promoting and broadcasting two channels, namely Private Gold (hardcore) and Private Blue (soft core), globally. In 2003 the joint venture was dissolved and the Company acquired the channel names Private Gold and Private Blue, but continued licensing them to affiliated companies of IFPD under a two-year agreement with a minimum guarantee. The license was worldwide excluding North and Latin America and expired in 2005. Contents

~~The~~Our ~~Private~~Strategy Gold channel was originally launched in Europe under an exclusive joint venture agreement with IFPD. As mentioned above, the Company later acquired the channel name and continued licensing it to an affiliate company of IFPD for a fixed fee. By the end of 2005, Private Gold had become the leading Adult Pay-TV channel in Europe and was distributed via satellite and cable in 25 countries in the region. In November 2005 the agreement with IFPD expired and the Company and Playboy TV International signed a five-year agreement to merge their two adult pay-TV channels, Private Gold and Spice Platinum, and thereby consolidating their market leadership in Europe. The new channel was launched under the name of Private Spice and under the terms of the agreement, Playboy TV International is operating, distributing and marketing the new channel and Private provides content, brand and marketing support. Prior to the merging of the two channels, Spice Platinum had rapidly become one of Europe’s most sought after and fastest growing premium adult networks reaching over 15 countries. In May 2006, the Private Spice Channel was launched in Europe and the new channel makes available unique and proprietary quality content, offering flexible language tailoring and market localization and platforms are able to offer their viewers a unique channel developed and serviced by the world’s leading adult television brands, while ensuring professional reliability and continuity. In 2010, the Private Spice agreement with Playboy was renewed for another five years. The channel is receivable in all of Europe and it currently has distribution in 22 countries via 101 cable, satellite, DTT and IPTV platforms.

10Our goal is to be a preferred content provider of branded adult media to adult consumers across all distribution platforms and devices. To date, we have developed the strategies described below to compete in our markets. Our strategy is continually evolving to face the changing conditions in our markets and advances in technology. In general, our current strategy is as follows:

~~The~~Leverage ~~Private~~our ~~Gold channel was also launched in Latin America in 2001, via the joint venture agreement with IFPD and under a distribution agreement with Pramer S~~brand.~~C.A.~~ The agreement was terminated in 2005 and in May the same year, the Company partnered with Playboy TV Latin America, by signing an exclusive agreement to operate and distribute the Private branded channel throughout Latin America. Under the terms of the agreement, Playboy TV Latin America is operating and distributing the channel via its Pay TV distribution network. In 2009, the channel was re-branded to the Private Channel. The channel is receivable in all of Latin America and it currently has distribution in 19 countries via 63 cable, satellite and IPTV platforms and reaches 38 million subscribers to these platforms.

~~IPTV~~As ~~driven~~Europe’s ~~Video-~~leading producer and distributor of adult media for over 45 years, we have developed strong brand awareness within our markets. Our strategy is to leverage our “Private” brand name to increase our market share for adult entertainment products in existing distribution channels, and to gain access to new consumers in new markets and on~~-Demand~~ new platforms.

~~While~~Distribute ~~European~~our ~~broadband~~adult ~~users are signing up for IPTV services in the hundreds of thousands each month, making Europe the biggest and fastest growing IPTV region in the world, we have successfully~~entertainment ~~implemented~~products ~~part~~through ofall ~~our~~ new ~~media~~technology ~~strategy~~ and ~~contracted~~distribution ~~for supplying content for TVOD3 services to a total of 26 major platform operators in 18 countries in the region~~channels. During 2010 the European IPTV market grew by 25% to 20.7 million IPTV subscribers and by the end of the year we had more than 75% market coverage. France remains the “world champion” IPTV country with 10.3 million subscribers and we cover 100% of this market.

~~General~~We ~~Licensing~~actively seek out and utilize new and developing delivery platforms and technologies to distribute our existing and new content. Since we can convert our content to many digital platforms for a minimal incremental cost and thereby increase revenues and our brand exposure, our strategy is to make our content available to all existing and new digital devices, such as computers, digital cable and satellite television, IPTV and, more recently, hand-held devices including smart phones, tablet computers, similar devices.

InExploit ~~Europe we license~~ our ~~content~~large ~~to channel operators. Typically we contract for a certain time period for a) a set quantity of specific titles, or b) access to our entire~~ library ~~for a limited quantity~~ of ~~unspecified titles~~content. ~~The operators distribute via Digital Terrestrial Television (DTT) and Cable & Satellite and are spread across Europe and include companies such as: Sky Italy and Canal+.~~

~~In-Room~~We own an extensive library of adult media that we have produced and acquired since our formation. Our strategy is to distribute our vast library of content, which was created for one type of media, in ~~Entertainment~~other distribution channels. Accordingly, our strategy is to convert and/or repackage our existing products and then distribute these products across all digital platforms and devices.

~~The~~Our ~~Company~~Competitive ~~also~~Strengths ~~licenses the right to use its content to In-Room Entertainment operators.~~

~~DVDs~~We believe the following strengths, among others, are critical to our future within the market for adult media:

~~We have~~Recognized ~~entered~~brand ~~into~~name distribution agreements in Europe, North America and Australia. Under these distribution agreements we provide our back catalogue of titles and all our new titles each month during the term of the agreement, and a licensee normally serves as the exclusive distributor throughout its own country or language territory. In general, we believe that national distribution agreements enable us to have an ongoing branded presence in international markets and to generate higher and more consistent revenues, than we could achieve selling directly to retailers.

~~WIRELESS~~We –believe ~~MOBILE~~that ~~CONTENT~~our target customers associate the Private brand name with high quality adult media. This name recognition attracts leading producers of adult media, as well as distributors and prospective joint venture partners interested in working with the Company. We believe that the strength of our brand name leads to more favorable economic terms than we could otherwise obtain in our processing and distribution contracts, and enables us to negotiate favorable revenue sharing arrangements and joint ventures from which we derive significant licensing fees.

WeEstablished generate revenues from wireless deals both on and off portal. Our ability to effectively use and re-use our content creates a high-margin business model for wireless since distribution costs are almost non-existent. The market ~~currently~~position ~~consist of SMS, games~~ and ~~rich-media mobile downloads including; MMS, wallpapers, screensavers, video clips and video streaming. During 2010, the~~ distribution ~~of Private content continued to increase and by the end of the year it was available to 1.5 billion handsets via 114 mobile~~ network operators in 37 countries. The markets of Asia and the Americas are still underexploited by us and therefore represent a significant growth potential. Furthermore, Mobile TV, increased penetration of Smart Phones and the implementation of age verification systems offer additional growth potential with both current and future operators in 2011 and beyond4.

3We ~~True~~have ~~Video~~access Onto ~~Demand~~a well-established ~~(TVOD)~~worldwide -distribution ~~TVOD~~network iswhich has been built up over the ~~ideal~~past ~~VOD~~45 ~~service~~years, ~~where~~including ~~individual~~over ~~users~~100,000 physical ~~get~~points ~~immediate~~of ~~responses~~sale ~~when~~in ~~interacting~~over ~~with~~40 ~~the~~countries ~~VOD~~as ~~system~~of December 31, 2011. ~~With~~Some ~~TVOD,~~of ~~the~~our ~~user~~distribution ~~can~~relationships ~~not~~are ~~only~~exclusive ~~get~~distribution ~~instant~~arrangements, ~~access~~which toimprove ~~the~~our ~~program~~market ~~online~~position and ~~watch~~enhance itour ondistribution ~~TV,~~capabilities. ~~but~~This ~~also~~broad distribution benetwork ~~able~~provides an effective channel to dointroduce ~~any~~new ~~VCR~~products orand ~~DVD-like~~services ~~commands~~and onnew ~~the~~formats ~~VOD~~for ~~system~~existing ~~with~~products ~~the~~and ~~same~~services. ~~quick~~In ~~response~~digital ~~time~~media ascategories, itwe ishave ~~when~~entered ~~working~~into strategic alliances with a ~~VCR~~number orof ~~DVD~~leading international service providers.

410 Juniper Research estimates in its 2010 study 'Mobile Adult Strategies: Downloads, Video Chat, Apps & Messaging 2010-2015.' that global revenues from all mobile adult services will rise from $1.7 billion in 2009 to $2.8 billion by 2015.

11Table of Contents

~~MAGAZINE~~Extensive ~~PUBLICATIONS~~library of high quality adult media

~~Our~~We ~~publishing~~have ~~operations~~an ~~include~~extensive ~~the~~library ~~publication~~ of ~~the~~high quality adult ~~magazines~~media. ~~identified~~As inof ~~the~~December 31, ~~table~~2012, ~~below.~~our ~~All~~library ofincluded ~~these~~still ~~magazines~~photographs ~~are~~developed for ~~distributed~~more ~~Europe,~~than ~~North~~500 ~~America~~back-issues ~~and~~of ~~Australia.~~magazines ~~Our~~and ~~magazines~~in ~~feature pictures~~excess of ~~men~~1,400 ~~and~~movie ~~women~~titles. ~~engaged~~We inhold ~~erotic~~exclusive ~~and~~worldwide ~~sexually~~rights ~~explicit~~to ~~situations~~this entire content archive. ~~During~~This ~~2010~~has weenabled ~~distributed~~us ~~approximately~~to ~~45,000~~enter ~~copies~~into ofdistribution ~~our~~arrangements ~~print~~with ~~publications~~a wide range of media platforms, including ~~packaged~~leading ~~together~~international ~~with~~telecoms and broadcasting companies. To facilitate electronic distribution of our ~~DVDs~~products, ~~per~~we ~~month~~have atconverted anour ~~average~~entire ~~retail~~archive ~~price~~ of ~~approximately (Euro)~~print 14images into a digital format.~~50-19.50.~~ Our ~~current~~video ~~publication~~archive is ~~Private~~now also stored in rich media digital format, which can be converted into any known file format and delivered digitally online or on hard drives.

MAGAZINE LIBRARY	As of December 31,
	2010		2009
Title	Nº of Issues		Nº of Issues
Private		222		216
Pirate		111		111
Triple-X		85		85
Private Sex		85		81
Private Man		4		4
Mansize		4		4
Special Editions		30		30
Best of Private (Book)		15		15
Special Editions (Book)		1		1
Total		557		547
	Quantities of MagazinesProduced(Printed, not sold)
Title	2010		2009
Private		148,413		211,931
Pirate		—		93,913
Triple-X		—		72,948
Private Sex		61,254		114,467
Special Editions		—		—
Total		209,667		493,259

Content acquisition strategy

~~Circulation~~We acquire adult media from third-party producers/directors on a project-by-project basis. This approach gives us substantial flexibility in terms of production volume and delivery time, significantly reduces our fixed production overhead and largely eliminates the risk to us of cost overruns in production.

Our magazines are distributed to newsstands and other public retail outlets through a network of national distributors, who maintain a local network of wholesale and retail distributors. Newsstand retailExperienced ~~sales~~management are permitted in most of Europe and we distribute our magazines to newsstands in: Norway, Sweden, Finland, Denmark, the Netherlands, Germany, Austria, Switzerland, Belgium, France, Italy, Portugal and Spain. Independent distributors who distribute our magazines do so under individual firm sales distribution agreements. Agreements with both national and independent distributors are normally subject to automatic yearly extensions unless either party terminates the arrangement.

~~Production,~~Our ~~Distribution~~management team has extensive experience in the acquisition and ~~Fulfillment~~distribution of adult media and in general business administration.

WeOur ~~print~~Principal ~~and~~Products ship all of our proprietary magazines from Barcelona, Spain. We determine the amount of printed publications bi-monthly with input from each of our national distributors. Most of our products are packaged and ~~delivered~~Markets ~~directly by the printer or supplier.~~

12Physical Media Segment (Magazine and DVD Publications)

~~PROPRIETARY~~We ~~RIGHTS~~are the publisher of Private, an international X-rated magazine, and Private branded adult media on DVDs. Private was founded in 1965, and was the first full color, hard-core sex publication in the world. Although this market has declined significantly in recent years we still maintain a robust presence in points of sale across Europe including retail, e-commerce platforms and newspaper kiosks.

~~General~~Direct-to-Consumer Segment (Internet Services)

WeOur ~~believe that our branded video and magazine titles and logos~~Direct-to-Consumer ~~are~~segment ~~valuable~~derives ~~assets~~revenue ~~and~~primarily ~~are~~through ~~vital~~subscriptions to ~~the~~our ~~success~~adult ~~and~~consumer ~~future~~websites, ~~growth~~including of our ~~businesses~~private.com Wesite. ~~have~~Content ~~filed~~for ~~trademark~~the ~~registration~~websites ~~applications~~is ~~with~~primarily ~~respect~~obtained tofrom ~~most of~~ our ~~trade~~own ~~names and logos~~productions. WeTraffic ~~believe~~to ~~that~~our ~~the~~consumer ~~name~~websites ~~recognition~~is ~~and~~derived through ~~image~~either ~~that~~a wetargeted ~~have developed~~network ~~in each~~ of ~~our~~affiliates ~~markets~~that ~~significantly~~earn ~~enhance~~a ~~customer~~referral ~~response~~fee tofrom ~~our~~us ~~sales~~when ~~promotions.~~diverted Wetraffic ~~intend~~converts tointo ~~aggressively~~paying ~~defend~~members, ~~our~~or ~~trademarks~~type-in ~~throughout~~traffic ~~the~~whereby ~~world,~~users ~~and~~navigate wedirectly ~~constantly~~to ~~monitor~~ the ~~marketplace~~websites ~~for~~by ~~counterfeit~~typing ~~products.~~the Weaddresses ~~initiate legal~~of ~~proceedings~~our ~~from~~websites ~~time~~into their toweb ~~time to prevent unauthorized use of our trademarks~~browsers.

~~Piracy~~Content ~~Problems~~Segment (Wireless—Mobile Entertainment)

~~Our~~We ~~content~~launched isour ~~constantly~~mobile ~~being~~content ~~pirated~~program onin ~~the Internet~~2003. We ~~have~~generate anrevenues ~~internal~~from ~~program~~mobile ~~for~~telephony ~~challenging~~transactions ~~websites~~both ~~who~~on-portal ~~publish~~and off-portal. Currently, our ~~content without~~principal ~~permission.~~markets ~~The~~for ~~program~~this ~~includes~~product ~~subscribing~~are Europe and South America. Our product offering to ~~different~~operator ~~legal~~portals ~~programs~~consists of mobile downloads, including wallpapers, screensavers, video clips and ~~services~~video ~~concerned~~streaming. ~~with~~Our ~~Internet~~off-portal ~~piracy~~business is increasingly an extension of our direct-to-consumer segment.

~~Our~~Transactional ~~legal~~TV ~~counsel~~Segment ~~handles most piracy problems and attempts to resolve these matters or litigate them on a case-by-case basis.~~

~~COMPETITION~~Our transactional television segment was our largest segment in fiscal year 2011. This segment of our operations generates revenues primarily through the distribution of adult programming on video-on-demand (VOD) platforms. VOD distribution primarily occurs through cable operators or IPVT providers. VOD presents viewers with layered menus that allow viewers to interactively select a motion picture/video and then view it either immediately or at a later time. We believe consumers prefer VOD services relative to our pay-per-view (PPV) offerings because of the variety of content available through VOD platforms, and because of the flexibility VOD services provide in viewing times.

~~General~~11 ~~Considerations~~

OurTable products compete with other products and services that utilize leisure time or disposable income of adult consumers. The adult internet industry is highly competitive and highly fragmented given the relatively low barriers to entry. We have few long-term or exclusive service agreements with our customers. Business generation is based primarily on customer satisfaction with key factors in a purchase decision, including reliability, timeliness, quality and price. We believe that our extensive and longstanding international operations, our brand name, image and reputation, as well as the quality of our content and our distributors, provide a significant competitive advantage over many of our competitors. Contents

Our ~~primary~~Transactional ~~competitors~~TV insegment ~~the~~also ~~movie~~distributes ~~industry are~~ adult ~~motion~~programming ~~picture~~to ~~studios,~~cable ~~with~~and ~~in-house~~satellite television ~~production~~companies ~~and post-production~~for ~~capabilities~~PPV channels. ~~These~~PPV ~~include~~typically ~~U.S.~~provides ~~producers~~consumers ~~such~~access asto ~~Hustler,~~a ~~Vivid~~timed ~~Film,~~block ~~Wicked~~of ~~Pictures~~programming ~~and~~(programming ~~Evil~~that ~~Angel~~is ~~Productions.~~available ~~Some~~only ~~competitors~~at ~~are~~specified ~~smaller,~~times) ~~but~~for ~~locally~~a fee payable to their cable or ~~regionally~~satellite ~~they~~provider. Our PPV programming is offered on channels that are ~~capable~~available ofto ~~quickly~~viewers ~~identifying~~through ~~niche~~the ~~markets~~same electronic program guides that ~~could~~ ~~compete~~display ~~for~~basic ~~our~~cable ~~customers~~channels.

~~Although~~We wetypically ~~believe~~earn ~~our~~revenue ~~products are well-established~~ in ~~the~~our ~~adult~~Transactional ~~entertainment~~TV ~~industry, we~~segment ~~compete~~by ~~with~~receiving ~~entities~~a ~~selling~~percentage ~~adult oriented products via any type~~ of ~~distribution network, including~~ the ~~Internet.~~total ~~Many~~retail ofpurchase ~~these~~price ~~products~~paid ~~are~~by ~~similar to ours. Over the past few years, the adult entertainment industry has undergone significant~~consumers ~~change. Traditional producers of softcore content as well as mainstream providers of media content have shifted~~ to ~~producing~~purchase ~~hardcore~~our content. Ason acustomers’ ~~result,~~VOD we face greater competition to distribute hardcore content. This shift has also led to industry consolidation, creating fewer, more financially formidable competitors. Recently, the introduction of a large number of free content Internet sites that allow users to access large libraries of content has created an even more challenging environment where both sales volume and ~~margins~~PPV ~~are decreasing substantially~~platforms.

~~Internet~~Branded Broadcast Channel Segment

~~The~~We ~~Internet~~initiated ~~market~~our ~~for~~broadcasting ~~adult~~business ~~oriented~~in ~~content~~2000, ~~has~~and ~~expanded~~currently ~~dramatically~~offer ~~over~~two ~~the~~adult ~~past~~content ~~years.~~broadcast ~~Because~~channels, itone ~~costs~~in asEurope ~~little~~and asone ~~$5,000~~in toLatin ~~establish~~America. anOur ~~Internet~~two ~~presence,~~branded ~~there~~channels isare ~~significant~~provided ~~competition~~as ~~among~~part ~~distributors~~ of ~~adult~~a ~~media~~joint ~~content~~venture ~~over~~with ~~the~~Playboy ~~Internet.~~TV ~~There~~and ~~are~~a ~~numerous~~South ~~adult~~American ~~media~~partner ~~content~~respectively. ~~websites~~These ~~competing~~channels ~~with ours, some of which~~ are ~~operated~~distributed byto ~~companies~~cable ~~that possess global distribution~~operators, ~~broadcasting~~IPTV and ~~branding.~~direct ~~Historically~~broadcast ~~pay~~satellite ~~sites~~platforms ~~have contained most of the adult media content~~ on ~~the Internet, but recently “tube” sites, offering free content, have become~~ a ~~serious~~revenue ~~threat to both the Internet and~~share ~~DVD~~or ~~distribution~~CPS of(cents ~~adult~~per ~~entertainment~~subscriber) basis.

13VIDEO

~~Broadcasting~~Production

~~The~~In ~~distribution~~1992, ofwe ~~adult~~began releasing movies onunder ~~cable~~the ~~and~~Private label. ~~satellite~~We ~~television~~acquire ~~systems~~our ~~and~~content ~~hotel~~from ~~pay-per-view~~independent ~~systems~~producers isthat ~~highly~~are ~~competitive. Competition~~carefully inselected ~~this~~and ~~area~~are issubject ~~increasing~~to instrict ~~line~~quality ~~with~~controls. ~~increasing~~All ~~consumer~~producers ~~demand~~assume ~~for~~production ~~hardcore~~costs, ~~adult~~obligations ~~entertainment~~and ~~generally.~~legal ~~Our~~responsibilities, ~~strongest~~including ~~geographical~~among ~~market~~other ~~position~~things, ~~for~~the delivery ~~cable~~of ~~and~~rights, ~~television~~model releases and ~~distribution~~all isproduction-related inpaperwork. ~~Europe~~The ~~and~~producers ~~Latin~~deliver ~~America, with~~ the ~~channels,~~ ~~Private~~movies ~~Spice~~on ~~and~~digital ~~The~~masters ~~Private~~to ~~Channel,~~us. ~~and~~We ~~licensing~~then ~~arrangements~~arrange ~~with~~for ~~established~~the ~~European~~digital ~~television~~masters, ~~networks~~as necessary, ~~such~~to asbe ~~Canal+~~customized, dubbed, sub-titled and ~~SKY~~encoded. ~~Italy,~~All marketing material and ~~IPTV~~artwork ~~platforms~~for ~~operated~~video bycovers ~~international~~is ~~telcos~~created in-house.

~~DVDs~~As of December 31, 2012, our movie library contained in excess of 1,400 movie titles. Almost all titles are available on any available digital format.

~~The distribution of adult entertainment DVDs is a highly competitive business. Revenue generation for motion picture entertainment~~Distribution products depends, in part, upon general economic conditions, but the competitive position of a producer or distributor is still greatly affected by the quality of, and public response to, the entertainment product it makes available to the marketplace. Competition arises from established adult video producers and from independent companies distributing low-quality material. The introduction of a large number of free content Internet sites that allow users to access large libraries of content has created an even more challenging environment where both sales volume and margins are decreasing substantially.

~~Magazines~~We distribute our productions worldwide via digital files and digital masters. We license our movies to IPTV, cable and satellite television networks and adult pay-per-view television channels. These licenses generally grant the operator a specific right of transmission and we retain the intellectual property rights of every production. We edit many of our new feature movie releases into several versions depending on the media through which they are to be distributed. Versions edited for cable, satellite and hotel television programming may be less sexually explicit than the versions edited for home video distribution. DVDs are sold or rented in video stores, adult lifestyle retailers, newsstands and other retail outlets, and where permitted, through direct mail.

WeDIRECT-TO-CONSUMER ~~meet~~(INTERNET ~~with~~SERVICES) minimal direct competition from other publishers of hardcore adult magazines and paperback books. We believe that our print publications are dissimilar to other adult publications in style and format. The only similar business of which we are aware was represented by Rodox N.V., a Dutch/ Danish corporation, which has discontinued its publishing operation. We do not believe there is presently any significant competition in this segment of our business. Magazines such as Playboy and Penthouse and similar print publications do not compete directly with our publications, since we consider them to be softcore publications. There are several hardcore publications in each country where our magazines are sold. In general, these are printed in limited editions and are of lower quality than our publications.

~~EMPLOYEES~~Private Media’s internet platform offers adult content directly to consumers.

AsPrivate.com ~~of December 31, 2008, 2009 and 2010 we employed 97, 168 and 112 people~~(www.private.com) ~~The~~is ~~2008,~~our ~~2009~~membership ~~and~~site ~~2010~~that ~~numbers~~offers access ~~include~~to ~~12,~~high-quality 12adult ~~and 3 part time employees~~content, ~~respectively.~~including ~~The~~video ~~2009 and 2010 number of people includes the addition of 84 and 56 full time employees~~clips, ~~respectively~~photosets, as a ~~result~~library of ~~the~~all ~~acquisitions~~“Private” ofmagazines ~~GameLink~~ever ~~and Sureflix~~published. ~~Our employees in Spain are represented by two labor unions and we have never experienced a work stoppage. We believe that we have a good relationship with our employees.~~

~~GOVERNMENT~~Revenue ~~REGULATION~~from our websites is generated primarily through subscriptions purchased by our customers. Content for the websites is primarily obtained from our own productions. Traffic to our consumer websites is derived through either a targeted network of affiliates that earn a referral fee from us when diverted traffic converts into paying members, or type-in traffic whereby users navigate directly to the websites by typing the addresses of our websites into their web browsers.

We12 operate in a highly regulated industry. This requires us to be socially aware and sensitive to government strictures, including laws and regulations designed to protect minors or which prohibit the distribution of obscene material. We take great care to comply with all applicable governmental laws and regulations in each jurisdiction where we conduct business. Moreover, we do not knowingly engage the services of any business or individual, including producers/directors, that does not adhere to the same standards. Since 1965, we have never been held to have violated any laws or regulations regarding obscenity or the protection of minors.

RegulationTable of the Adult Entertainment Industry in the U.S. Contents

~~The~~TRANSACTIONAL ~~following~~TELEVISION isSEGMENT a description of some of the laws and regulations in the United States which impact the adult entertainment industry. It is not an exhaustive description of all such laws. Moreover, we conduct business in over 40 countries around the world, each of which has its own regulatory framework. This regulatory environment is constantly changing in the geographical areas in which we conduct business, and in some instances laws which are enacted are subsequently determined by the courts to be unconstitutional.

14The transaction television segment of our operations consists of the distribution of adult programming on the IPTV and cable system (VOD) platforms.

~~The~~Our ~~Classification~~transactional ~~and~~television ~~Rating~~segment ~~Administration~~was ofour ~~the~~largest ~~Motion~~segment ~~Picture~~in ~~Association~~fiscal ofyear ~~America, MPAA,~~2011. aThis ~~motion~~segment ~~picture~~of ~~industry~~our ~~trade~~operations generates ~~association,~~revenues ~~assigns~~primarily ~~ratings~~through ~~for~~the ~~age~~distribution ~~group~~of ~~suitability~~adult ~~for~~programming ~~theatrical~~on ~~and home~~ video-on-demand ~~distribution~~(VOD) ~~of motion pictures~~platforms. ~~Submission~~VOD ofdistribution aprimarily ~~motion~~occurs ~~picture~~through tocable ~~the~~operators ~~MPAA~~or ~~for~~IPVT ~~rating~~providers. isVOD ~~voluntary,~~presents ~~and~~viewers wewith dolayered ~~not~~menus ~~submit~~that ~~our motion~~allow ~~pictures~~viewers to interactively ~~the~~select ~~MPAA~~a ~~for~~motion ~~review.~~picture/video ~~However,~~and ~~with~~then ~~the~~view ~~exception~~it ofeither ~~several~~immediately ~~titles~~or ~~which~~at ~~have~~a ~~been~~later ~~re-edited~~time. ~~for~~We ~~cable~~believe ~~television,~~consumers ~~most~~prefer ofVOD ~~the~~services ~~movies~~relative ~~distributed~~to byour ~~us,~~pay-per-view if(PPV) soofferings ~~rated,~~because ~~would~~of ~~most likely fall into~~ the ~~NC-17~~variety -of Nocontent ~~Children~~available ~~Under~~through 17VOD ~~Admitted~~platforms, ~~rating~~and ~~category~~ because of ~~their~~the ~~depiction~~flexibility ofVOD ~~nudity~~services ~~and~~provide ~~sexually~~in ~~explicit~~viewing ~~content~~times.

~~The~~Our ~~right~~Transactional toTV ~~distribute~~segment ~~adult~~also ~~videocassettes,~~distributes ~~magazines~~adult programming to cable and ~~DVD~~satellite ~~products~~television incompanies ~~the~~for ~~United~~PPV ~~States~~channels. PPV typically provides consumers access to a timed block of programming (programming that is ~~protected~~available byonly ~~the~~at ~~First~~specified ~~and~~times) ~~Fourteenth~~for ~~Amendments~~a fee payable to ~~the~~their cable ~~United~~or ~~States~~satellite ~~Constitution,~~provider. ~~which~~Our ~~prohibits~~PPV ~~Congress~~programming oris ~~the~~offered ~~several~~on ~~States~~channels ~~from~~that ~~passing~~are ~~any~~available ~~law~~to ~~abridging~~viewers through the ~~freedom~~same ~~of speech~~electronic program guides that display basic cable channels.

The First and Fourteenth Amendments, however, do not protect the dissemination of obscene material, and several states and communities in which our products are distributed have enacted laws regulating the distribution of obscene material, with some offenses designated as misdemeanors and others as felonies, depending on numerous factors. The consequences for violating these state statutes are as varied as the number of states enacting them. Similarly, specific U.S. federal regulations prohibit the dissemination of obscene material. The potential penalties for individuals (including directors, officers and employees) violating the Federal obscenity laws include fines, community service, probation, forfeiture of assets and incarceration. The range of possible sentences requires calculations under the Federal Sentencing Guidelines, and the amount of the fine and the length of the period of the incarceration under those guidelines are calculated based upon the retail value of the unprotected materials. Also taken into account in determining the amount of the fine, length of incarceration or other possible penalty are whether the person accepts responsibility for his or her actions, whether the person was a minimal or minor participant in the criminal activity, whether the person was an organizer, leader, manager or supervisor, whether multiple counts were involved, whether the person provided substantial assistance to the government, and whether the person has a prior criminal history. In-Room ~~addition~~Entertainment Federal law provides for the forfeiture of: (1) any obscene material produced, transported, mailed, shipped or received in violation of the obscenity laws; (2) any property, real or personal, constituting or traceable to gross profits or other proceeds obtained from such offense; and (3) any property, real or personal, used or intended to be used to commit or to promote the commission of such offense, if the court in its discretion so determines, taking into consideration the nature, scope and proportionality of the use of the property in the offense.

~~With~~The ~~respect~~Company toalso ~~the~~licenses ~~realm of potential penalties facing an organization such as ours,~~ the ~~forfeiture~~right ~~provisions detailed above apply~~ to ~~corporate~~use ~~assets~~its ~~falling~~content ~~under the statute. In addition, a fine may be imposed, the amount of which is tied~~ to ~~the~~hospitality ~~pecuniary~~service ~~gain~~entertainment tooperators ~~the~~primarily organization from the offense or determined by a fine table tied to the severity of the offense. Also factored into determining the amount of the fine are the number of individuals in the organization and whether an individual with substantial authority participated in, condoned, or was willfully ignorant of the offense; whether the organization had an effective program to prevent and detect violations of the law; and whether the organization cooperated in the investigation and accepted responsibility for ~~its~~hotel ~~criminal~~room ~~conduct~~systems. ~~In addition, the organization may be subject to a term of probation of up to five years.~~

~~Federal~~WIRELESS—MOBILE ~~and~~CONTENT state obscenity laws define the legality or illegality of materials by reference to the U.S. Supreme Court’s three-prong test set forth in Miller v. California, 413 U.S. 1593 (1973). This test is used to evaluate whether materials are obscene and therefore subject to regulation. Miller provides that the following must be considered: (a) whether the average person, applying contemporary community standards would find that the work, taken as a whole, appeals to the prurient interest; (b) whether the work depicts or describes, in a patently offensive way, sexual conduct specifically defined by the applicable state law; and (c) whether the work, taken as a whole, lacks serious literary, artistic, political or scientific value. The Supreme Court has clarified the Miller test in recent years, advising that the prurient interest prong and patent offensiveness prong must be measured against the standards of an average person, applying contemporary community standards, while the value prong of the test is to be judged according to a reasonable person standard.

We ~~are~~generate ~~engaged~~revenues infrom ~~the~~on-portal ~~wholesale distribution of our products to U.S.~~and ~~wholesalers~~off-portal ~~and/or~~mobile ~~retailers~~content. WeThe ~~have~~market ~~taken~~currently ~~steps~~consists toof ~~ensure compliance with all Federal~~wallpapers, ~~State and local regulations regulating the content of motion pictures and print products~~screensavers, byvideo ~~staying~~clips ~~abreast of all legal developments in the areas in which motion pictures~~ and ~~print~~video ~~products are distributed and by specifically avoiding distribution of motion pictures and print products in areas where the local standards clearly or potentially prohibit these products~~streaming. ~~In light of our efforts to review, regulate and restrict the distribution of our materials, we believe that the distribution of our products does not violate any statutes or regulations.~~

15PHYSICAL MEDIA SEGMENT (MAGAZINE PUBLICATIONS/DVDs)

~~Many~~Magazines. ofOur ~~the~~publishing ~~communities~~operations ininclude the ~~areas~~publication inof ~~which~~Private magazine. weThis ~~offer~~magazine oris ~~intend~~distributed toprimarily ~~offer~~in ~~products~~Europe. ~~or franchises,~~Our ~~have~~magazines ~~enacted~~feature ~~zoning~~pictures ~~ordinances~~of ~~restricting~~men ~~the~~and ~~retail~~women ~~sale~~engaged ofin ~~adult~~erotic ~~entertainment~~and ~~products~~sexually explicit situations. WeDuring ~~supply~~2011 ~~products~~we ~~only~~distributed inapproximately ~~locations~~20,000 ~~where~~copies ~~the~~of ~~retail~~our ~~sale~~print ofpublications ~~adult~~packaged together ~~entertainment~~with ~~products~~our isDVDs ~~permitted~~per month.

InOur ~~February~~magazines ~~1996, the U.S. Congress passed the Telecommunications Act. Some provisions of the Telecommunications Act~~ are ~~directed exclusively~~distributed atto ~~cable~~newsstands ~~programming in general~~ and ~~adult~~other ~~cable~~public ~~programming~~retail inoutlets ~~particular.~~through ~~In some cable systems, audio or momentary bits of video of premium or pay-per-view channels may accidentally become available to non-subscribing cable customers.~~a ~~This~~network ~~is called bleeding. The practical effect~~ of ~~Section 505~~national ~~of the Telecommunications Act is to require many existing cable systems to employ additional blocking technology in every household in every cable system that offers adult programming~~distributors, ~~whether~~who ormaintain ~~not~~a ~~customers~~local ~~request~~network ~~it or need it, to prevent any possibility~~ of ~~bleeding,~~wholesale orand toretail ~~restrict the period during which the programming is transmitted from 10:00 p~~distributors.m. toNewsstand ~~6:00~~retail ~~a.m.~~sales ~~Penalties for violation of the Telecommunications Act~~ are ~~significant~~permitted ~~and~~in ~~include~~most ~~fines and imprisonment. Surveying~~ of ~~cable~~Europe ~~operators~~ and ~~initial~~we ~~results~~distribute ~~indicate~~our ~~that~~magazines ~~most will choose~~ to ~~comply~~newsstands ~~with~~in ~~Section 505~~these ~~by restricting the hours of transmission~~markets. WeIndependent ~~believe~~distributors ~~that~~who distribute our ~~revenues~~magazines ~~will~~do ~~be marginally~~so ~~adversely~~under ~~affected~~individual asfirm asales ~~result~~distribution ~~of enforcement of Section 505~~agreements. ~~However, as digital technology (which is unaffected by Section 505) becomes more available, we believe that ultimately the impact will be insignificant.~~

AsWe ~~discussed~~print ~~above,~~all federal and state government officials have targeted sin industries, such as tobacco, alcohol, and adult entertainment for special tax treatment and legislation. In 1996, U.S. Congress passed the Communications Decency Act of ~~1996,~~our orproprietary ~~the CDA. Recently, the U.S. Supreme Court,~~ magazines in ~~ACLU v. Reno~~Barcelona, ~~held~~Spain ~~certain~~and ~~substantive~~ship ~~provisions~~them offrom the ~~CDA unconstitutional~~Netherlands. ~~Businesses~~We indetermine the ~~adult~~amount ~~entertainment and programming industries expended millions~~ of ~~dollars~~printed inpublications ~~legal~~bi-monthly ~~and other fees in overturning the CDA. Investors should understand that the adult entertainment industry may continue to be a target for legislation. In the event we must defend ourselves and/or join~~ with ~~other~~input ~~companies~~from ineach ~~the~~of ~~adult programming business to protect~~ our ~~rights,~~national ~~we may incur significant expenses that could have a material adverse effect on our business and operating results~~distributors.

~~Child~~DVDs. ~~Pornography~~We have entered into distribution agreements in over 20 countries. Under these distribution agreements we provide our back catalogue of titles and ~~Non-Mainstream~~all ~~Content~~our new titles each month during the term of the agreement, and a licensee normally serves as the exclusive distributor throughout its own country or language territory. In general, we believe that national distribution agreements enable us to have an ongoing branded presence in international markets and to generate higher and more consistent revenues than we could achieve selling directly to retailers.

We13 believe that roughly 90% of the adult material produced and distributed over the past 15 years contains mainstream sexual acts between consenting adults. The rest could be classified as specialty material which does not contain explicit sex, but which still involves consenting adults (i.e. fetish, bondage, etc.). Mainstream sex acts means intercourse, oral sex, anal sex, group sex, etc. Our adult movies do not contain any depictions, let alone actual performances of rape, sex with coercion, animals, urination, defecation, violence, incest or child pornography.

SinceTable 1990, the Free Speech Coalition has worked with the U.S. government to create a workable regulatory system designated to prevent minors from working in the adult industry. Child Protection Restoration and Penalties Enhancement Act of 1990 (18 U.S.C. section 2257) requires, in essence, that no one can work without having copies of their passport or driver’s license, and a declaration under perjury of their age and true name, on file with a designated Custodian of Records, and available for inspection by law enforcement. Contents

AsBRANDED ~~indicated~~BROADCASTING above, all of our products are all in compliance with 18 U.S.C. Section 2257 and all models performing in our productions are 18 years of age or older. We specifically require compliance from the third-party producers/directors to which we acquire our contents.

~~Internet~~In ~~Regulation~~November 2005 the Company and Playboy TV International signed a non-exclusive five-year agreement to launch an adult pay-TV channel in Europe. The new channel was launched, and currently still operates, under the name of Private Spice. In 2010, we renewed the Private Spice agreement with Playboy for an additional five-year term. Under our agreement, Playboy TV International operates, distributes and markets the channel, and we provide the video content, the use of our “Private” brand, and some marketing support. We generate revenues from our joint venture with Playboy on a profit sharing basis commensurate with our content contribution to the channel. The programming in the Private Spice channel, including the language and content, is tailored to the local market in Europe in which the channel is offered. The channel is available in Europe via cable, satellite, Digital Terrestrial Television (“DTT”) and IPTV platforms.

~~Government~~The ~~regulation~~Private ofGold ~~the~~channel ~~Internet~~was islaunched ain ~~rapidly~~Latin ~~developing~~America ~~area~~in ~~and,~~2001. ~~therefore~~In 2005, ~~adds~~we ~~additional~~entered ~~uncertainty~~into toan ~~our~~exclusive ~~business.~~agreement with ~~New~~Playboy ~~laws or~~TV ~~regulations~~Latin ~~relating~~America to ~~the~~operate ~~Internet,~~and ordistribute ~~more~~a ~~aggressive~~“Private” ~~application~~branded ofchannel ~~existing~~throughout ~~laws,~~Latin ~~could~~America. ~~decrease~~Under the ~~growth~~terms of ~~our~~the ~~websites~~agreement, ~~prevent~~Playboy usTV ~~from~~Latin ~~making~~America ~~our~~operates ~~content~~and ~~available~~distributes inthe ~~various~~channel ~~jurisdictions~~via orits ~~otherwise~~pay ~~have a material adverse effect on~~television ~~our~~distribution ~~business, financial condition and operating results~~network. ~~These~~The ~~new~~channel ~~laws~~originally orwas ~~regulations~~titled ~~could~~“Private ~~relate to liability for information retrieved from or transmitted over the Internet, taxation, user privacy and other matters relating to our products and services~~Gold.” ~~For~~In ~~example~~2009, the ~~U.S.~~channel ~~government~~was ~~has~~re-branded ~~recently~~as ~~enacted~~the ~~laws~~“Private ~~regarding website privacy, copyrights and taxation~~Channel.” ~~Moreover,~~We ~~the~~generate ~~application~~revenues tofrom ~~the~~our ~~Internet~~agreement ofwith ~~other~~Playboy ~~existing~~TV ~~laws~~Latin ~~governing~~America ~~issues~~on ~~such~~a asrevenue ~~intellectual~~share ~~property ownership and infringement, pornography, obscenity, libel, employment and personal privacy is uncertain and developing~~basis.

16PROPRIETARY RIGHTS

~~Regulation~~General ~~of the Internet outside the United States~~

We ~~may~~believe ~~also~~that beour ~~subject~~branded tovideo ~~claims~~and ~~based~~magazine ~~upon~~titles ~~the~~and ~~content~~logos are ~~that~~valuable isassets ~~available~~and onare ~~our~~vital ~~websites~~to ~~through~~the ~~links~~success toand ~~other~~future ~~sites~~growth ~~and~~of ~~in jurisdictions~~our ~~that~~businesses. weWe have ~~not~~filed ~~previously~~trademark ~~distributed~~registration ~~content~~applications ~~in.~~with ~~For~~respect ~~example,~~to amost ~~recent~~of ~~French~~our ~~ruling~~trade ~~banning~~names ~~the~~and ~~sale~~logos. ofWe ~~Nazi~~believe ~~memorabilia~~that inthe ~~France~~name ~~suggests~~recognition ~~that~~and ~~website~~image ~~operators~~that ~~may~~we behave developed ~~forced~~in toeach ~~undertake~~of ~~expensive~~our ~~security~~markets ~~measures~~significantly toenhances ~~block certain~~customer ~~users~~response orto ~~face~~our ~~significant~~sales ~~fines~~promotions. ~~Implementing~~We ~~such~~intend ~~security measures~~ to ~~reduce~~aggressively defend our ~~exposure~~trademarks tothroughout ~~this~~the ~~liability~~world, ~~may~~and ~~require~~we usconstantly tomonitor ~~take~~the ~~steps~~marketplace ~~that~~for ~~would~~counterfeit ~~substantially~~products. ~~limit~~We ~~the~~initiate legal ~~attractiveness~~proceedings offrom ~~our~~time ~~websites~~to ~~and/or~~time ~~their~~to ~~availability~~prevent inunauthorized ~~various geographic~~use ~~areas,~~of ~~which~~our ~~could~~trademarks. ~~negatively~~Our ~~impact~~principal ~~their~~trademark ~~ability~~name toand ~~generate~~logo ~~revenue~~is “Private.”

~~SEASONALITY~~Piracy Problems

Our ~~businesses~~content ~~are~~is ~~generally~~constantly ~~not~~being ~~seasonal~~pirated inon ~~nature~~the Internet. We ~~However,~~have ~~June,~~an ~~July~~internal ~~and~~program ~~August~~for ~~are~~challenging ~~typically~~websites ~~impacted~~that bypublish ~~smaller~~our ~~orders~~content ~~from~~without ~~some European~~our ~~and U~~permission.S. ~~distributors,~~The ~~due~~program includes subscribing to ~~the~~different ~~holiday~~legal ~~season~~programs and services concerned with internet piracy.

~~AVAILABLE~~Our ~~INFORMATION~~legal counsel handles most piracy problems and attempts to resolve these matters or litigate them on a case-by-case basis. During 2011, we had eleven lawsuits pending to enforce our proprietary rights against alleged illegal copyright infringers.

~~As a public company, we are required to file annual, quarterly and special reports, proxy statements and other information with the SEC.~~COMPETITION You may read and copy any of our materials on file with the SEC at the SEC’s Public Reference Room at 100 F Street N.E., Washington, DC 20549. Our filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. We also make available copies of our Forms 8-K, 10-K, 10-Q, Proxy Statement and Annual Report at no charge to investors through our website, http://www.prvt.com, as soon as reasonably practicable after filing such material with the SEC. Information on our website is not part of this Report.

17General Considerations

~~ITEM~~The 1Aadult media industry is highly competitive, highly fragmented, consists of a very large number of competitors, and is constantly changing. ~~RISK~~We ~~FACTORS~~believe our most challenging competition recently has been from low-cost and free adult internet websites. The increase in the availability of free and low-cost internet websites, as well as the decline in global economic conditions, has caused consumers to seek lower-cost options for obtaining adult content. We believe that consumers who would otherwise purchase our content have been obtaining their content through low-cost and free adult internet websites. Additionally, consumers are generally migrating away from television as a viewing platform of choice. We believe these developments have resulted and may continue to result in further competitive pressures on us from free and low-cost adult internet websites. Furthermore, we have traditionally competed against other, larger companies that offer competing products.

~~You should~~14 carefully consider the risks described below, together with all of the other information contained in this Annual Report on Form 10-K in evaluating our business and us. If any of the following risks actually occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

AsTable a result of operating losses our independent registered public accounting firm has substantial doubt about our ability to continue as a going concern. In each of the past three years we have experienced losses from operations. At December 31, 2010, we had cash and cash equivalents of EUR 370,000 and a working capital deficit of EUR 1,102,000. As a result, our independent registered public accounting firm has concluded that there is substantial doubt as to our ability to continue as a going concern, and has modified its report in the form of an explanatory paragraph describing the events that have given rise to this uncertainty. Our ability to continue as a going concern is based on our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations. We currently expect future growth and a return to profitability provided that we are successful with the following objectives: Contents

• However, ~~rolling~~because ~~out~~of ~~our~~the ~~Internet~~relatively ~~platforms,~~low ~~including:~~barrier a)to ~~our~~entry ~~newly~~and ~~built~~the ~~signature~~ease ~~property~~with ~~and~~which ~~membership~~media ~~platform~~can ~~private.com,~~be b)produced ~~our~~and ~~cutting~~made ~~edge~~available ~~mobile~~over ~~platform~~the ~~for~~Internet, ~~Smartphones~~our ~~and~~competitors c)now ~~our~~also ~~multinational~~include ~~eCommerce~~numerous ~~VOD~~small publishers ~~platform;~~of adult content.

•We ~~the~~believe ~~successful~~that ~~marketing~~we have a competitive advantage because of (i) our ~~affiliate~~established ~~programs~~and ~~for~~highly recognized ~~all~~“Private” brand, (ii) the quality of our ~~properties~~content, toand ~~compete~~(iii) the ~~aggressively~~existing ~~for~~distribution arrangements that we have established over numerous years. We have few long-term or exclusive service agreements with our customers. Business generation is based primarily on customer satisfaction with key factors in a purchase decision including reliability, timeliness, quality and ~~attract~~price. We believe that our extensive and longstanding international operations, ~~affiliate~~our brand ~~traffic;~~name, image and reputation, as well as the quality of our content and our distributors, provide a significant competitive advantage over many of our competitors.

•Internet ~~continuing the rollout of our content on cable and IPTV video-on demand platforms;~~

•The ~~completing~~internet market for adult oriented content has expanded dramatically over the ~~integration~~past years. Because it is easy and inexpensive to establish an Internet presence, there is significant competition among distributors of ~~businesses~~adult ~~acquired~~media inover ~~2009;~~the Internet. There are numerous adult media websites competing with ours, some of which are operated by companies that possess global distribution, broadcasting and branding. Historically pay sites have contained most of the adult media on the Internet, but recently the “YouTube-like” adult video sites that are commonly known as “tube sites,” offering free content, have become a serious threat to both paid internet and DVD distribution of adult media. The “tube sites” feature free adult videos, some of which consists of unlicensed, or pirated, excerpts of professionally produced adult movies (including at times pirated versions of Private Media’s proprietary videos). The availability of these free adult videos has diminished the demand for our paid video offerings on our proprietary websites and for our other products, and has diluted the market presence of our website. The tube sites have materially affected the revenues we generate from our website and other product offerings.

•Broadcasting ~~consolidating and restructuring our operations into an efficient new media business;~~

•The ~~outsourcing~~distribution of ~~non~~adult movies on cable and satellite television systems and hotel pay-~~cost~~per-view ~~effective~~systems ~~parts~~is ofhighly ~~our~~competitive. ~~operations;~~Competition in this area is increasing in line with increasing consumer demand for hard-core adult entertainment generally. Our strongest geographical market position for cable and television and distribution is in Europe and Latin America, with the channels, Private Spice and Private, and licensing arrangements with established European television networks and IPTV platforms operated by international telcos.

~~• identifying and exploring new online business opportunities which are less dependent on content.~~DVDs

IfThe wedistribution ~~are~~of ~~not~~adult ~~successful~~entertainment DVDs is a highly competitive business. Revenue generation for motion picture entertainment products depends, in ~~implementing~~part, ~~the~~upon ~~above~~general ~~objectives~~economic conditions, but the competitive position of a producer or ifdistributor weis ~~otherwise~~still dogreatly ~~not~~affected ~~successfully~~by ~~respond~~the quality of, and public response to, ~~changing~~the ~~conditions~~entertainment inproduct it makes available to the marketplace. Competition arises from established adult ~~entertainment~~video ~~industry,~~producers weand ~~may~~from ~~continue~~independent tocompanies ~~incur~~distributing ~~significant~~low-quality ~~losses~~material. ~~There~~ ~~can~~The beintroduction noof ~~assurance~~a ~~that~~large wenumber ~~will~~of befree ~~able~~content internet sites that allow users to ~~operate~~access ~~profitably~~large inlibraries of ~~the~~content ~~future~~has created an even more challenging environment where both sales volume and margins are decreasing substantially.

~~Our~~Magazines future capital requirements and needs for additional financing are uncertain. Although we expect that our available cash resources and cash generated from operations will be sufficient to meet our presently anticipated working capital and capital expenditure requirements for at least the next 12 months based upon our present plan of operation, we may need to raise additional funds to support more rapid growth or respond to unanticipated requirements. In this regard, we are presently engaged in a dispute with a third party lender regarding our obligations under a promissory note with an outstanding principal balance of not less than $2.9 million. Although we believe that we have valid claims and defenses against the holder of the promissory note and its affiliates which may ultimately reduce our obligations relating to the promissory note, we cannot assure you that we will be able to reach agreement with the holder of the promissory note or that we will ultimately prevail on our claims and defenses. An adverse outcome in this dispute would likely have a material impact upon our liquidity if we are unable to obtain additional debt or equity financing to satisfy any resulting liability.

WeThere ~~currently~~are ~~have~~numerous nopublishers ~~additional availability under our existing credit facilities and we cannot assure you that additional financing will be available to us in the future. The existence~~ of ahard-core ~~going~~adult ~~concern~~magazines ~~exception by our auditors may make it more difficult to obtain additional bank financing if~~ and ~~when~~paperback ~~required~~books. ~~If additional~~However, ~~funds~~we ~~are~~believe ~~raised~~that ~~through the issuance of equity securities,~~ our ~~shareholders’~~print ~~percentage~~publications ~~ownership will be reduced, they may experience additional dilution, or these newly issued equity securities may have rights, preferences, or~~are ~~privileges~~dissimilar ~~senior~~ to ~~those~~many of ~~our~~the ~~current~~other ~~shareholders.~~adult ~~Additional~~publications ~~financing~~in ~~may~~style ~~not~~and ~~be available when needed on terms favorable to us, or at all~~format. InMagazines ~~this~~such ~~regard,~~as inPlayboy ~~the~~and ~~past~~Penthouse ~~most~~and ofsimilar ~~our~~print ~~bank~~publications ~~financing~~do ~~has~~not ~~included~~compete ~~the~~directly ~~guaranty~~with ~~of affiliated companies of~~ our ~~Chairman and principal shareholder~~publications, ~~Berth~~since ~~Milton,~~we ~~and~~consider athem ~~pledge~~to ofbe ~~shares~~softcore ~~of common stock owned by him or his affiliated companies~~publications. ~~We cannot assure you that Mr. Milton or his affiliated companies will guaranty future debt~~There ~~financings~~are orseveral ~~that~~hard-core ~~such~~publications ~~guaranties~~in ~~will~~each becountry ~~sufficient~~where toour ~~obtain~~magazines ~~future~~are ~~debt financings~~sold. IfIn ~~adequate~~general, ~~funds~~these are ~~not~~printed ~~available~~in orlimited ~~are~~editions ~~not available on acceptable terms, we may be unable to develop or enhance our products~~ and ~~services,~~are ~~take advantage~~ of ~~future~~ ~~opportunities,~~lower ~~maintain~~quality ~~the~~than ~~scope of~~ our ~~operations or respond to competitive pressures or unanticipated requirements, which could harm our business~~publications.

1815

OurTable business is highly competitive. We compete in all aspects of our business, including price, promptness of service and product quality. We compete with a number of other businesses, offering various adult-oriented leisure-time activities, including Playboy Enterprises, Inc., Vivid Entertainment, Larry Flynt Publications, Inc. (Hustler), and Beate Uhse AG. Some of our competitors have significantly greater market presence, name recognition and financial and technical resources than we do. In addition, these companies may develop products or services that are more effective than our products or services and/or they may be more successful than us in marketing their products or services. We believe that the adult entertainment market will continue to shift towards the use of explicit sexual content, our principal market, resulting in increased competition in this area of our business. In our Internet business, we compete with other adult media content websites as to the content of their programming and the subscription fees that are offered to members. In addition, the growing availability of free adult entertainment through free websites has resulted in additional pressure on our business, which has adversely affected revenues and margins. Contents

~~Our~~EMPLOYEES business involves the provision of sexually explicit content which can create negative publicity, lawsuits and boycotts. We are engaged in the business of providing adult-oriented, sexually explicit products worldwide. Many people regard our primary business as unwholesome. Various national and local governments, along with religious and children’s advocacy groups, consistently propose and enact legislation to restrict the provision of, access to, and content of such entertainment. These groups also often file lawsuits against providers of adult entertainment, encourage boycotts against such providers and mount negative publicity campaigns. In this regard, our magazines, and some of our distribution outlets and advertisers, have from time to time been the target of groups who seek to limit the availability of our products because of their content. We expect to continue to be subject to these activities.

~~The~~As ~~adult-oriented~~of ~~content~~December 31, of2011 ~~our~~we ~~websites~~employed ~~may~~93 ~~also subject~~people uswhich toincluded ~~obscenity~~37 orand ~~other~~11 ~~legal~~employees, ~~claims~~respectively, employed by ~~third~~our ~~parties.~~Game WeLink ~~may~~and ~~also~~Sureflix becompanies. ~~subject~~During to2012, ~~claims~~we ~~based~~disposed ~~upon~~of the ~~content~~Game ~~that~~Link isand Sureflix ~~available~~companies, onand ~~our~~the ~~websites~~number ~~through~~of ~~links~~our toemployees ~~other~~has ~~sites~~decreased ~~and~~as ina ~~jurisdictions~~result. ~~that~~In weaddition, ~~have~~as ~~not~~part ~~previously~~of ~~distributed content~~the ~~in.~~internal ~~Implementing~~reorganization ~~measures~~undertaken toby ~~reduce~~ our ~~exposure~~new tomanagement, ~~this~~we ~~liability~~have ~~may~~further ~~require~~reduced usthe tonumber ~~take~~of ~~steps~~persons ~~that~~we ~~would~~employ. ~~substantially~~As ~~limit~~of ~~the~~May 21, ~~attractiveness~~2013, ofwe employed ~~our~~a ~~websites~~total ~~and/or~~of ~~their~~38 ~~availability~~employees. inAll ~~various~~of ~~geographic~~our ~~areas,~~employees ~~which~~are ~~could~~employed ~~negatively impact~~at ~~their~~our ~~ability~~headquarters toin ~~generate~~Barcelona, ~~revenue~~Spain.

InOur ~~addition,~~employees ~~some investors, investment banks, market makers, lenders and others~~ in ~~the~~Spain ~~investment~~are ~~community~~represented ~~may~~by ~~refuse~~two tolabor ~~participate~~unions. inWe ~~the~~have ~~market~~never ~~for~~experienced ~~our~~a ~~common~~work ~~stock,~~stoppage ~~financings~~and orbelieve ~~other~~that ~~activities~~we ~~due~~have toa ~~the~~good ~~nature~~relationship ofwith our ~~primary business~~employees. ~~These refusals may negatively impact the value of our common stock and our opportunities to attract market support.~~

WeGOVERNMENT ~~face~~REGULATION online security risks in connection with our Internet business .Online security breaches could materially adversely affect our business. Any well-publicized compromise of security could deter use of the Internet in general or use of the Internet to conduct transactions that involve transmitting confidential information or downloading sensitive materials in particular. For example, events such as the November 2001 security breach of the Playboy.com website that allowed a computer hacker to steal customers’ credit card numbers could deter current and future subscribers from using or subscribing to our website. In offering online payment services, we will increasingly rely on technology licensed from third parties to provide the security and authentication necessary to effect secure transmission of confidential information, such as consumer credit card numbers. Advances in computer capabilities, new discoveries in the field of data encryption or other developments could compromise or breach the methods and procedures that we use to protect our consumers’ transaction data. In addition, experienced programmers may attempt to steal proprietary information or cause interruptions in our services. To prevent such developments we may need to expend significant capital and other resources to protect against these problems.

~~Continued~~We ~~imposition~~operate ofin ~~tighter~~a ~~processing~~highly ~~restrictions~~regulated byindustry, ~~credit~~both domestically ~~card~~and ~~associations~~internationally. The laws and ~~acquiring~~ ~~banks~~regulations ~~would~~of ~~make~~the itvarious ~~more~~jurisdictions ~~difficult~~and tocountries ~~generate~~in ~~revenues~~which ~~from~~we operate regulate all aspects of our ~~websites~~business and products. Our ~~ability~~materials toare ~~accept~~currently ~~credit~~published ~~cards~~and asdistributed ain, ~~form~~or otherwise available in many countries, each of ~~payment~~which ~~for~~has ~~our~~its ~~online~~own ~~products~~regulatory ~~and~~framework. ~~services~~In isparticular, ~~critical~~these toregulations require us. ~~There~~to ~~are~~be ~~ongoing~~aware ~~efforts~~of, byand ~~credit~~to ~~card associations~~comply with, varying laws relating to ~~restrict~~decency and obscenity and the ~~processing~~provisions that apply to the protection of ~~credit~~minors, ~~cards~~as ~~for~~well ~~online~~as ~~adult-related~~regulations ~~content~~that relate to licensing, foreign investment and use of confidential customer information. ToIn ~~protect~~addition, ~~against~~as ~~such~~a ~~restrictions~~publisher and distributor of entertainment in printed and other formats, we ~~must~~have ~~invest~~to ~~heavily~~comply inwith all ~~new~~of ~~technologies~~the other rules and regulations that apply to ~~protect~~publishers ~~against~~and ~~fraud~~distributors of other forms of publication. ~~Unlike~~Changes ain ~~merchant~~the ~~handling~~regulation aof ~~sales~~our ~~transaction~~operations or changes in ainterpretations of existing regulations by courts or regulators or our ~~non-Internet~~inability ~~environment,~~to ~~e-commerce~~comply ~~merchants~~with ~~are~~current ~~fully~~or ~~responsible~~future ~~for~~regulations ~~all~~could ~~fraud~~have ~~perpetrated~~a ~~against~~material ~~them~~adverse impact on our financial position and results of operations.

19SEASONALITY

Our ~~ability~~businesses toare ~~accept~~generally ~~credit~~not ~~cards~~seasonal asin ~~a form of payment for our online products and~~nature. ~~services could be restricted or denied for many reasons, including:~~

•AVAILABLE ~~Visa~~INFORMATION ~~Tier 1 capital ratio requirements for financial institutions have significantly reduced the total dollar sales volume of Visa credit card activity that any bank can process in any given month;~~

•As ifa public company, we ~~experience~~are ~~excessive~~required ~~chargeback~~to file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any of our materials on file with the SEC at the SEC’s Public Reference Room at 100 F Street N.E., Washington, DC 20549. Our filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. We also make available copies of our Forms 8-K, 10-K, 10-Q, Proxy Statement and Annual Report at no charge to investors through our corporate website, http:/or/www.prvt.com, ~~credits;~~as soon as reasonably practicable after filing such material with the SEC.

•Information ifon weour ~~experience~~website ~~excessive~~is ~~fraud~~not ~~ratios;~~part of this Annual Report.

•ITEM if1A. ~~there~~RISK ~~is a breach of our security resulting in a theft of credit card data;~~FACTORS

•You should ifcarefully ~~there~~consider isthe arisks ~~change~~described inbelow, ~~policy~~together with all of the ~~acquiring~~other ~~banks~~information contained in this Annual Report on Form 10-K in evaluating our business and/ us. If any of the following risks actually occur, our business, financial condition or ~~credit~~results ~~card~~of ~~associations~~operations ~~with~~could ~~respect~~be tomaterially and adversely affected. In that case, the ~~processing~~trading price of ~~credit~~our ~~card~~common ~~charges~~stock ~~for~~could ~~adult-related~~decline, ~~content;~~and you may lose all or part of your investment.

•Risks ~~tightening~~Associated ofWith ~~credit~~Our ~~card~~Business ~~association~~and ~~chargeback~~Operations. ~~regulations in international commerce;~~

•As ~~banks~~a ~~might~~result ~~choose~~of ~~not~~operating tolosses, ~~accept~~the ~~accounts~~opinion ~~with~~of ~~adult-related~~our ~~content~~independent registered public accounting firm expresses substantial doubt, inabout our ability to continue as a ~~similar~~going ~~manner~~concern. toIn ~~one~~each ~~bank~~of the inpast ~~Spain~~three ~~which~~years we ~~previously used.~~

~~American~~16 Express has instituted a policy of not processing credit card charges for online, adult-related content. If other credit card processing companies were to implement a similar policy, this could have a material adverse effect on our business, results of operations and financial condition.

WeTable outsource our production and distribution. We acquire still photography and motion pictures from independent producers/directors and we rely on third-party distributors to deliver our products to end-users through multiple distribution channels, including newsstands, the Internet and broadcasting. Our relationship with such producers/directors and distributors is contractually based. We cannot guarantee that our contracts with directors will be fulfilled or that we will enter into new ones, in which case we may not have adequate content for our magazines and movies. Also, we cannot guarantee that our contracts with distributors will be renewed, in which case we may not be able to sell new products through some or all channels or into some countries. Failure to secure new production contracts, to secure the fulfillment of current contracts or to maintain our current distribution contracts could have a material adverse effect on our business, results of operations and financial condition. Contents

We have ~~are~~experienced ~~dependent~~substantial ~~upon~~net ~~key~~losses ~~employees~~(net losses of EUR 20,510,000 in 2009, EUR 4,335,000 in 2010, and EUR 29,324,000 in 2011). ~~Our~~At ~~future~~December 31, ~~success~~2011, ~~depends~~we had cash and cash equivalents of EUR 179,000 and a working capital deficit of EUR 11,438,000. As a result, our independent registered public accounting firm has concluded that there is substantial doubt as to our ability to continue as a ~~significant~~going ~~degree~~concern, onand has modified its report in the ~~continued~~form ~~services~~of an explanatory paragraph describing the events that have given rise to this uncertainty. Our ability to continue as a going concern is based on our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations. Since December 31, 2011, most of the directors on our ~~executive~~former ~~officers~~Board of Directors have been removed and ~~other~~replaced ~~key~~by ~~personnel~~new directors. In addition, ~~including~~in ~~Berth~~December ~~Milton~~2011 our prior Chief Executive Officer was indefinitely suspended (he was officially terminated in March 2012) and ~~Johan~~our ~~Gillborg~~Chief Financial Officer was terminated on December 15, 2011. WeAs ~~have~~a ~~not~~result, ~~procured~~as ~~key-man~~of ~~life~~early ~~insurance~~in ~~and~~2012 ~~there~~Private Media is nounder ~~guarantee~~new ~~that~~management. weOur ~~will~~new beofficers ~~able~~and directors have attempted to ~~obtain~~address ~~such~~the ~~insurance~~prior innet losses, the ~~future~~large ~~should~~amount weof sooutstanding ~~desire.~~indebtedness, Mrour working capital deficit and our need for additional working capital. ~~Milton~~ isAmong other things, since the ~~founder~~beginning of 2012, new management has repaid EUR 8,000,000 of indebtedness in shares of the Company’s new 6% Series B Convertible Redeemable Preferred Stock, has restructured our ~~principal~~defaulted ~~operating~~EUR ~~division~~1,000,000 bank credit facility, has raised EUR 800,000 of working capital through loans from three non-affiliated lenders, has reduced the ~~Milcap~~Company’s overhead by reducing the number of employees, excluding Game Link and Sureflix, from 45 at December 31, 2011 to 38 as of May 21, 2013 and closing an office (which actions ~~Group~~are collectively expected to provide estimated savings of EUR 741,000 annually), and has ~~taken~~settled ~~part~~the intwo ~~our~~lawsuits ~~management~~that ~~since~~have burdened the ~~acquisition~~Company’s offinancial resources and distracted the ~~trademark~~Company ~~Private~~from inits ~~1990~~operations. WeThese ~~cannot~~actions ~~guarantee~~have ~~that~~improved the weCompany’s ~~will~~balance besheet ~~successful~~and inhave ~~retaining~~reduced ~~his~~the ~~services~~Company’s ongoing operating expenses. In addition, in order to redirect the ~~future.~~Company’s Wefocus doback ~~not~~to ~~presently~~its ~~have~~historic ~~employment~~business ~~agreements~~and ~~with~~geographic ~~many~~market, ofin 2012 new management also divested the ~~our~~Company ~~executive~~of ~~officers~~the orGame ~~key~~Link ~~personnel~~and Sureflix operations that former management acquired in 2009. ~~The~~While ~~loss~~the divestment of the ~~services~~Game ofLink ~~any~~and ofSureflix ~~them~~companies orhas anresulted ~~inability~~in toa ~~continue~~significant todecrease ~~attract,~~in ~~motivate~~new sales and ~~retain~~has ~~highly~~reduced ~~qualified~~the Company’s total assets, new management believes that the distraction caused by these distant operations and ~~talented~~by ~~personnel,~~the ~~including~~different ~~software~~product ~~development~~offerings ~~technical~~(for ~~personnel~~example, ~~could~~the ~~have~~Company ahas not historically engaged in the gay media distribution market that was the focus of ~~material~~Sureflix) ~~adverse~~will ~~effect~~improve onthe ~~our~~Company’s ~~business~~longer term operations and ~~operating~~net ~~results~~profits. No assurance can, however, be given that these and other on-going changes will improve the Company’s future operations or that the Company will not continue to incur significant losses in the future. There can be no assurance that we will ever be able to operate profitably in the future.

WeOur future capital requirements and needs for additional financing are ~~subject~~uncertain. Although we expect that our available cash resources and cash we expect to ~~rapidly~~generate ~~changing~~from ~~technology.~~operations will be Wesufficient ~~are~~to ~~engaged~~meet inour ~~businesses~~presently ~~that~~anticipated ~~have~~working ~~undergone~~capital ~~rapid~~and ~~technological~~capital ~~change~~expenditure ~~over~~requirements for at least the ~~past~~next ~~few~~12 ~~years.~~months ~~Therefore~~based upon our present plan of operation, we ~~face~~believe ~~risks~~that ~~inherent~~we inmay ~~businesses~~need ~~that~~to ~~are~~raise ~~subject~~additional funds to ~~rapid~~(i) repay ~~technological~~some legacy ~~advancement~~liabilities Private Media incurred under prior management, and ~~changes~~(ii) to insupport ~~consumer~~new ~~demands~~management’s modified business and growth plans and any unanticipated capital requirements. ~~This includes~~If we cannot obtain the ~~possibility~~additional financing that awe ~~technology~~have projected that we ~~have~~believe ~~invested~~we inwill ~~may~~need ~~become~~to ~~obsolete,~~support ~~requiring~~our usgrowing operations and to ~~invest~~fully inimplement ~~new~~our ~~technology.~~plan ~~Our~~of operations, our future ~~success~~operations will ~~depend,~~be ~~in part~~hindered, onand our ability to ~~adapt~~grow toand ~~rapidly~~become ~~changing~~profitable ~~technologies~~will be jeopardized. In addition, if adequate funds are not available to ~~enhance~~us, ~~existing services~~we ~~and~~may be unable to develop or enhance our products and ~~introduce~~services, atake ~~variety~~advantage of ~~new~~future ~~services~~opportunities, maintain the scope of our operations or respond to ~~address~~competitive ~~changing~~pressures ~~demands~~or unanticipated requirements, all of which could harm our ~~consumers~~business. We have not identified the sources for the additional financing that we intend to obtain, and we do not have commitments from any third parties to provide this financing. There can be no assurance that sufficient funding will be available to us at acceptable terms or at all. Any additional equity funding that we obtain will reduce the percentage ownership held by our existing security holders.

~~New technological~~Our ~~discoveries~~business ~~may~~is ~~render~~highly ~~our~~competitive, ~~equipment~~and ~~uneconomical~~we orrisk ~~obsolete.~~losing Assignificant ~~technologies~~market ~~change,~~share ~~the~~and ~~equipment~~revenues ~~used~~if inwe ~~our~~are ~~markets~~unable ~~may~~to ~~become obsolete~~effectively compete. AsWe aoperate ~~result,~~in wean ~~subcontract~~extremely ~~and~~competitive ~~intend~~market. toWe ~~continue~~compete towith ~~subcontract~~a ~~capital~~number ~~intensive or~~of ~~technically~~other ~~complex~~ businesses ~~such~~that asoffer ~~editing,~~various ~~DVD~~adult-oriented ~~replication~~publications ~~and~~or ~~other~~media ~~similar~~products, ~~businesses~~including Playboy Enterprises, Inc., ~~However~~Vivid Entertainment, weLarry ~~may~~Flynt Publications, ~~not~~Inc. ~~have~~(Hustler ~~access~~and toNew ~~these~~Frontier), ~~subcontractors~~and ~~when~~Manwin. ~~their~~Many ~~services~~of ~~are~~our ~~required,~~competitors ~~and~~have ~~their~~significantly ~~services~~greater ~~may~~market ~~not~~presence, bename ~~available~~recognition onand ~~favorable~~financial ~~terms.~~ and technical resources

2017

IncreasedTable government regulation in the United States or abroad could limit our ability to deliver content and expand our business. New laws or regulations relating to the Internet, or more aggressive application of existing laws, could decrease the growth of our websites, prevent us from making our content available in various jurisdictions or otherwise have a material adverse effect on our business, financial condition and operating results. These new laws or regulations could relate to liability for information retrieved from or transmitted over the Internet, taxation, user privacy and other matters relating to our products and services. For example, the U.S. government has recently enacted laws regarding website privacy, copyrights and taxation. Moreover, the application to the Internet of other existing laws governing issues such as intellectual property ownership and infringement, pornography, obscenity, libel, employment and personal privacy is uncertain and developing. Contents

~~Cable~~ than ~~system~~we ~~operators~~do. ~~could~~In ~~also~~addition, ~~become~~these ~~subject~~companies tomay ~~new~~develop ~~governmental~~products ~~regulations~~or services that ~~could~~are ~~further~~more ~~restrict~~attractive to our target market than our products or services and/or they may be more successful than us in marketing their ~~ability~~products or services. We believe that the adult entertainment market will continue to ~~broadcast~~ shift towards the use of explicit sexual content, our ~~programming~~principal market, resulting in increased competition in this area of our business. IfIn ~~new~~our internet ~~regulations~~business, ~~make~~we itcompete ~~more~~with ~~difficult~~other ~~for~~adult ~~cable~~media ~~operators~~websites as to ~~broadcast~~the ~~our~~content of their programming and for subscription fees from subscribers and users. In addition, ~~our~~the ~~operating~~growing ~~performance~~availability ~~would~~of befree adult entertainment through free websites has resulted in additional pressure on our business, which has adversely affected revenues and margins.

WeFree ~~face~~content ~~risks~~on ~~relating~~the Internet toand ~~our~~competition ~~proprietary~~from ~~intellectual~~the ~~property~~“tube ~~rights.~~sites” Weis ~~rely~~increasing oncompetition afor ~~combination~~our products and is changing the dynamics of ~~copyright~~the ~~and~~marketplace ~~trademark~~for ~~laws,~~our ~~trade~~products. ~~secrets,~~Demand ~~software~~for ~~security~~Private ~~measures,~~Media’s ~~license~~paid products is being significantly ~~agreements~~impacted by the availability of free adult entertainment available on the Internet in general and ~~non~~at the “YouTube-~~disclosure~~like” ~~agreements~~adult tovideo ~~protect~~sites ~~our~~that ~~proprietary~~are ~~products.~~commonly ~~Despite~~known ~~these~~as ~~precautions,~~“tube itsites.” ~~may~~The be“tube ~~possible~~sites” ~~for~~feature ~~unauthorized~~free ~~third~~adult videos, ~~parties~~some toof ~~copy~~which ~~parts~~consist of unlicensed, or ~~otherwise~~pirated, ~~obtain~~excerpts ~~and~~of ~~use,~~professionally ~~our~~produced ~~products~~adult ~~without~~movies ~~authorization,~~(including orat ~~to substantially~~times ~~use~~pirated ~~our~~versions ~~concepts~~of ~~and~~Private ~~market~~Media’s ~~them,~~proprietary ~~trading~~videos). onThe ~~our~~availability ~~established~~of ~~customer~~these ~~base.~~free ~~Products~~adult ~~sold~~videos ~~over~~has diminished the ~~Internet~~demand ~~are~~for ~~particularly~~Private ~~vulnerable~~Media’s topaid ~~piracy,~~video ~~particularly~~offerings inon ~~some~~our ~~developing~~proprietary ~~countries.~~website Inand ~~addition~~for our other products, weand ~~cannot~~has bediluted ~~certain~~the ~~that~~market ~~others will~~presence ~~not~~of ~~develop~~our ~~substantially~~website. ~~equivalent~~The ortube ~~superseding~~sites ~~products,~~have ~~thereby~~materially ~~reducing~~affected the ~~value~~revenues ofwe generate from our ~~proprietary~~website ~~rights~~and other product offerings. ~~Confidentiality~~It ~~agreements~~is ~~with~~uncertain ~~our~~what ~~employees~~affect orthese ~~license~~tube ~~agreements~~sites ~~with~~and ~~our~~other ~~customers~~free ~~may~~internet ~~not~~adult ~~provide~~websites ~~meaningful~~will ~~protection~~have ~~for~~ on our ~~proprietary~~on-going ~~information~~operations inand ~~the~~our ~~event~~future offinancial ~~any~~results. ~~unauthorized~~No ~~use~~assurance orcan ~~disclosure~~be ofgiven that ~~proprietary~~we ~~information~~will be able to effectively compete against the tube sites and other internet products.

WeThe domarket ~~not believe~~for ~~that~~ our ~~products~~adult ~~infringe~~oriented ~~the~~products ~~proprietary~~is ~~rights~~changing ~~of third parties~~rapidly, and unless we are ~~not~~able ~~currently~~to ~~engaged~~anticipate inthese ~~any~~changes ~~intellectual~~and ~~property~~rapidly ~~litigation~~adapt, orwe ~~proceedings~~will lose market share. ~~Nonetheless,~~The adult entertainment sector is seeing rapid declines in ~~the~~its ~~future~~core webusiness ~~could~~(i.e. ~~become~~DVD ~~the~~and ~~subject~~magazine ofsales) ~~infringement~~as ~~claims~~consumer ~~or legal~~consumption ~~proceedings~~of byadult ~~third~~content has ~~parties~~shifted ~~with~~from ~~respect~~physical media to ~~current~~digital ordistribution. ~~future~~Online ~~products~~usage itself is changing rapidly as technological advancements allow the deployment of more advanced and interactive multimedia services. In addition, wemultiple ~~may~~new ~~initiate~~mobile ~~claims~~smartphone technologies orand ~~litigation~~capabilities ~~against~~are ~~third~~adding ~~parties~~new distribution venues for ~~infringement~~digital ofcontent. ~~our~~As ~~proprietary~~a ~~rights~~result orof tothese ~~establish~~new ~~the~~digital ~~validity~~distribution ofchannels, ~~our~~we ~~proprietary~~have ~~rights. We~~to ~~cannot~~rapidly bedevelop ~~sure~~new ~~that~~business ~~any~~models, ~~lawsuits~~products orand ~~other~~distribution ~~actions~~models ~~brought~~that bywill allow us ~~will~~to otherwise becapitalize ~~successful~~on orour large library of titles that we ~~will~~own. ~~not~~The befree ~~found~~internet toadult ~~infringe~~video offerings and the ~~intellectual~~new ~~property~~mobile ~~rights~~telephony offerings have affected sales of ~~third~~our ~~parties~~print publications and our DVD sales. InUnless ~~addition,~~we are able to effectively modify our business model to compete with the ~~extent~~products weoffered ~~may~~digitally ~~desire,~~on the Internet or ~~are~~elsewhere, ~~required~~our market share, torevenues ~~obtain licenses~~and toprofits ~~patents~~from orour ~~proprietary~~product ~~rights~~offerings ofcould ~~others~~decrease. Although we are currently deploying new mobile phone and smart television products, ~~there~~no assurance can be nogiven ~~guarantee~~ that ~~any~~we ~~such~~will ~~licenses~~remain competitive in the rapidly changing adult entertainment marketplace. Our future success will bedepend, ~~made~~in ~~available~~part, on ~~terms~~our ~~acceptable~~ability to usadapt to rapidly changing technologies, ifto atenhance existing ~~all~~services and to develop and introduce a variety of new services to address changing demands of our consumers.

~~Enforcement~~Our ofbusiness ~~civil~~involves ~~liabilities~~the ~~against~~provision ~~Private~~of ~~Media~~sexually ~~Group~~explicit ~~and~~content ~~its~~which ~~management~~can ~~may~~create benegative ~~difficult~~publicity, lawsuits and boycotts. ~~Presently,~~We ~~most~~are ofengaged ~~our~~in ~~directors~~the ~~and~~business ~~officers~~of ~~reside~~providing ~~outside~~adult-oriented, ~~the~~sexually ~~United~~explicit ~~States~~products worldwide. AsMany apeople ~~result, it~~regard ~~may~~our ~~not~~primary bebusiness ~~possible~~as ~~for~~unwholesome. ~~investors~~Various tonational ~~effect~~and ~~service~~local ofgovernments, ~~process~~along ~~within~~with ~~the~~religious ~~United~~and children’s ~~States~~advocacy ~~upon~~groups, ~~them~~consistently orpropose toand ~~enforce,~~enact inlegislation ~~courts~~to ~~outside~~restrict the ~~United~~provision ~~States~~of, ~~judgments~~access ~~against~~to, ~~these~~and ~~persons~~content ~~obtained~~of insuch Uentertainment.S. ~~courts~~These ~~based~~groups ~~upon~~also ~~the~~often ~~civil~~file ~~liability provisions~~lawsuits against providers of ~~the~~adult ~~U.S.~~entertainment, ~~federal~~encourage boycotts ~~securities~~against ~~laws~~such providers and mount negative publicity campaigns. In ~~addition~~this regard, ~~since~~our amagazines, ~~substantial~~and ~~portion~~some of our ~~assets~~distribution ~~are~~outlets ~~located~~and ~~outside~~advertisers, have from time-to-time been the ~~United~~target ~~States,~~of agroups ~~judgment~~who ~~obtained~~seek into limit the ~~United~~availability ~~States~~of ~~against~~our products usbecause ~~may~~of ~~not~~their becontent. ~~fully~~We ~~collectible~~expect ~~within~~to ~~the~~continue ~~United~~to ~~States~~be subject to these activities.

~~There~~The ~~are~~adult-oriented ~~risks~~content ~~associated~~of ~~with~~ our ~~foreign operations. A large part our operations are conducted outside the~~ ~~United~~websites ~~States.~~may Inalso ~~addition,~~subject ~~our~~us ~~growth strategy contemplates increased services~~ to ~~foreign~~obscenity ~~customers~~or ~~and~~other tolegal ~~domestic~~claims ~~customers~~by ~~distributing~~third ~~programming to international markets~~parties. AsWe amay ~~consequence~~also ~~of the global nature of our business, we will~~ be ~~exposed~~ subject to ~~market~~claims ~~risks~~based ~~from~~upon ~~changes~~the incontent ~~interest rates and foreign currency exchange rates~~ that ~~may~~is ~~adversely~~available ~~affect~~on our ~~results~~websites ofthrough ~~operations~~links ~~and financial condition. By virtue of our significant operations outside the United States, we will be subject~~ to ~~the~~other ~~risks~~sites ~~normally associated with cross-border business transactions~~ and ~~activities,~~in ~~including~~jurisdictions ~~those~~that ~~relating~~we tohave ~~delayed~~not ~~payments~~previously distributed ~~from~~content ~~customers~~ in. ~~some~~Implementing ~~countries~~measures orto ~~difficulties in the collection of receivables generally.~~

In18 addition, we will be exposed to the risk of changes in social, political and economic conditions in the countries where we engage in business. Political and economic instability in these countries could adversely affect our business activities and operations. Unexpected changes in local regulatory requirements, tariffs and other trade barriers and price or exchange controls could limit operations and make the repatriation of profits difficult. In addition, the uncertainty of differing legal environments could limit our ability to effectively enforce our rights in some markets.

WeTable areof subject to risks relating to performers. Our movie, video and photo productions are subject to U.S. and foreign regulations which govern the terms and conditions under which sexually explicit media productions may occur. We have adopted practices and procedures intended to ensure compliance with these regulations. Although these measures are intended to protect us from liability under applicable U.S. and foreign laws governing sexually explicit media productions, we cannot guarantee that we will not be subject to successful legal attacks in the future. Contents

21 reduce our exposure to this liability may require us to take steps that would substantially limit the attractiveness of our websites and/or their availability in various geographic areas, which could negatively impact their ability to generate revenue.

WeIn doaddition, ~~not~~some ~~expect~~investors, toinvestment ~~pay~~banks, ~~dividends~~market onmakers, lenders ~~our~~and ~~common~~others ~~stock~~ in the ~~foreseeable future.~~investment ~~Although~~community ~~our shareholders~~ may ~~receive~~refuse ~~dividends~~to ~~if,~~participate asin ~~and~~the ~~when~~market ~~declared~~for by our ~~board~~common ~~of directors~~stock, wefinancings door ~~not~~other ~~intend~~activities due to ~~pay~~the ~~dividends~~nature onof our ~~common~~primary ~~stock~~business. inThese ~~the~~refusals ~~foreseeable~~may ~~future.~~negatively ~~Therefore,~~impact ~~you~~the ~~should~~value ~~not~~of ~~purchase~~ our common stock ifand ~~you~~our ~~need~~opportunities ~~immediate~~to orattract ~~future~~market ~~income by way of dividends from your investment~~support.

We ~~may~~face ~~issue~~online ~~additional~~security ~~shares~~risks ofin ~~our capital~~connection ~~stock~~with ~~that~~our ~~could~~Internet business. ~~dilute~~Online ~~the~~security ~~value~~breaches ofcould ~~your~~materially ~~shares~~adversely ofaffect ~~common~~our ~~stock~~business. WeAny ~~are~~well-publicized ~~authorized~~compromise ~~to issue 110,000,000 shares~~ of ~~our~~security ~~capital~~could ~~stock,~~deter ~~consisting~~use of ~~100,000,000~~the ~~shares~~Internet ofin ~~our~~general ~~common~~or ~~stock~~use ~~and 10,000,000 shares~~ of ~~our~~the ~~preferred~~Internet ~~stock. At~~to ~~April 8,~~conduct ~~2011,~~transactions ~~20,815,824~~that ~~shares~~involve oftransmitting confidential ~~our~~information ~~common~~or ~~stock~~downloading ~~and~~sensitive nomaterials ~~shares~~in ofparticular. ~~our~~In ~~preferred~~offering ~~stock~~online ~~were~~payment ~~issued~~services, ~~and~~we ~~outstanding.~~rely Inon ~~connection~~technology ~~with~~licensed ~~our~~from ~~acquisition~~third ofparties ~~Game~~to ~~Link,~~provide ~~LLC~~the security and ~~its~~authentication ~~affiliate~~necessary onto ~~January 20,~~effect ~~2009,~~secure ~~2,844,770~~transmission ~~shares~~ of ~~our~~ ~~common~~confidential ~~stock~~information, ~~were~~such ~~issued~~as ~~and~~consumer upcredit tocard ~~1,531,799~~numbers. ~~shares~~Advances ofin ~~our~~computer ~~common~~capabilities, ~~stock~~new ~~are~~discoveries ~~issuable~~ in the ~~future.~~field Inof ~~connection~~data ~~with~~encryption ~~our~~or ~~acquisition~~other ofdevelopments ~~Sureflix~~could ~~Digital~~compromise ~~Distribution~~or ~~and~~breach ~~its~~the ~~affiliates~~methods inand ~~October~~procedures ~~2009~~that we ~~issued~~use ~~securities~~to ~~convertible~~protect ~~into~~our ~~1,300,000~~consumers’ ~~shares~~transaction ofdata. ~~our~~In ~~common~~addition, ~~stock~~unaffiliated ~~and~~programmers/hackers upmay attempt to ~~700,000~~steal ~~shares~~proprietary ofinformation ~~our~~or ~~common~~cause ~~stock~~interruptions ~~are issuable~~ in ~~the~~our ~~future~~services. InTo ~~addition,~~prevent ~~approximately~~such ~~9,668~~developments ~~shares~~we ofmay ~~our~~need ~~common~~to ~~stock~~expend ~~were~~significant ~~issuable~~capital ~~upon~~and ~~the~~other resources ~~exercise~~to ofprotect ~~options~~against orthese ~~warrants~~problems.

~~Should~~Continued weimposition ~~obtain~~of ~~additional~~tighter ~~financing,~~processing werestrictions ~~may~~by ~~issue~~credit ~~authorized~~card associations and ~~unissued~~acquiring ~~shares~~banks would make it more difficult to generate revenues from Internet and mobile telephone transactions. Our ability to accept credit cards as a form of ~~common~~payment ~~stock~~for atour ~~below~~online ~~current~~and ~~market~~mobile ~~prices~~phone orproducts and services ~~preferred~~is ~~stock~~critical ~~that~~to ~~could~~us. ~~dilute~~There ~~the~~are ~~earnings~~ongoing ~~per~~efforts ~~share~~by credit card and ~~book~~other ~~value~~payment ofassociations ~~your~~to ~~shares~~restrict the processing of ~~our~~payments ~~common~~for ~~stock~~online and mobile adult-related content. To protect against such restrictions, we must invest heavily in new technologies to protect against fraud. Unlike a merchant handling a sales transaction in a non-internet environment, e-commerce merchants are fully responsible for all fraud perpetrated against them.

~~There are risks relating to the issuance of additional shares of preferred stock, including deterring attempts by third parties to acquire us.~~ Our ~~board~~ability ~~of directors has the authority~~ to ~~issue~~accept upcredit tocards ~~10,000,000~~as ~~shares~~a ofform ~~preferred stock, none~~ of ~~which are~~payment ~~currently~~for ~~issued and outstanding, and to determine their price, and other rights, preferences, privileges and restrictions without any further vote or action by~~ our ~~stockholders.~~online ~~The~~products ~~rights of the holders of common stock are subject to,~~ and ~~may be~~services adversely affected by, the rights of the holders of any preferred stock, including preferred stock that we may issue in the future. If preferred stock is issued, it may rank senior to our common stock in respect of the right to receive dividends and to participate in distributions or payments in the event of our liquidation, dissolution or winding up. The provisions in our articles of incorporation authorizing preferred stock could ~~delay,~~be ~~defer~~restricted or ~~prevent~~denied afor ~~change of control and could~~many ~~adversely affect the voting and other rights of holders of our common stock~~reasons, including: ~~the loss of voting control to others, which could make it more difficult for a third party to acquire control of us.~~

~~Our~~• ~~Chairman~~Visa ofTier ~~the~~1 ~~Board~~capital ~~owns~~ratio arequirements ~~significant~~for ~~amount~~financial ofinstitutions ~~our common stock, which may enable him to exercise significant influence or control over our business and affairs, and he may~~ have ~~interests~~significantly ~~which~~reduced ~~differ from~~ the ~~other~~total ~~holders~~dollar ofsales ~~our~~volume ~~stock. Berth Milton, our Chairman, President and principal shareholder, owns up to 43.5%~~ of ~~our~~Visa ~~issued~~credit ~~and~~card ~~outstanding~~activity stock. Therefore, he may be able to effectively exercise significant influence or control over all matters requiring approval by our shareholders, including the election of directors and the approval of significant corporate transactions. His interests may differ from the interests of other shareholders and, therefore, result in corporate decisions that ~~may~~any bebank ~~disadvantageous~~can toprocess ~~other shareholders. This concentration of ownership may also have the effect of delaying or preventing a change~~ in ~~control, which~~any ~~could~~given ~~have a material adverse effect on our stock price.~~ month;

~~Future~~• ~~sales~~if ofwe ~~common~~experience ~~stock~~excessive bychargebacks ~~our Chairman or third parties as a result of foreclosures could adversely affect the price our common stock~~ and ~~could in the future result in a change in control of the Company. Our Chairman, Berth Milton, claims direct~~ /or indirect beneficial ownership of 9,059,840 shares of our common stock, or approximately 43.5% of our outstanding common stock. All of these shares have been pledged by Mr. Milton or entities controlled by Mr. Milton or are subject to liens or claims by third parties. Depending on a number of factors, including the status of the various loan obligations for which the shares serve as collateral, and the outcome of legal disputes involving some of these shares, Mr. Milton or his affiliates may experience a foreclosure that could result in the sale of the pledged shares, in the open market or otherwise, or Mr. Milton may otherwise cease to have voting rights with respect to these shares under the terms of loan agreements or applicable law. Unlike Mr. Milton, sales by these persons or entities may not be subject to the volume limitations of Rule 144. Sale of these shares, or the perception of possible future sales, could have a materially adverse effect on the trading price of our common stock or make it more difficult for the Company to raise additional capital through sales of equity securities. credits;

22• if we experience excessive fraud ratios;

In• ~~particular,~~if itthere is our understanding that two of the purported pledgees, claiming rights to 5,600,000 and 1,842,179, pledged shares, respectively, have made various attempts to foreclose on the collateral of the pledged shares, or to exercise voting rights in order to effect a ~~change~~breach of ~~control,~~our ~~and~~security ~~that~~resulting ~~Mr. Milton is currently involved~~ in ~~legal disputes regarding the voting rights for these shares and~~ a ~~possible~~theft ~~foreclosure and sale~~ of ~~these~~credit ~~shares.~~card A sale of these shares, or the successful exercise of voting rights in a manner adverse to Mr. Milton, could result in a change of control of the Company, depending upon the number of shares and the ownership interests of other shareholders. data;

~~There~~• ~~may be adverse consequences to our shareholders and our business~~ if ~~our~~there ~~common~~is ~~stock ceases to be quoted on the NASDAQ Stock Market or~~ a ~~principal~~change ~~stock~~in ~~exchange.~~policy ~~To continue to be listed on the NASDAQ Stock Market, we must maintain certain requirements. If we fail to satisfy one or more~~ of the ~~requirements,~~acquiring ~~our~~banks ~~common stock may be delisted. If our common stock is delisted,~~ and/or ~~does~~credit ~~not~~card ~~become~~associations ~~listed~~with onrespect ~~another stock exchange, then it will be traded, if at all, in the over-the-counter market commonly referred~~ to as the ~~FINRA~~processing ~~OTC~~of ~~Bulletin~~credit ~~Board~~card orcharges ~~the “pink sheets.” If this occurs, it may be more difficult~~ for ~~you~~adult-related ~~to sell our common stock.~~ content;

If• wetightening ~~are delisted from the NASDAQ Stock Market, your ability to sell your shares~~ of ~~our~~credit ~~common~~card ~~stock~~association ~~would~~chargeback ~~also~~regulations be limited by the penny stock restrictions, which could further limit the marketability of your shares. If our common stock is delisted and trades below $5.00 per share, it would come within the definition of “penny stock” under SEC rules. The penny stock rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by the penny stock rules, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, if the penny stock rules were to become applicable, this would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of shareholders to sell their shares in ~~the~~international ~~public market. These additional procedures could also limit our ability to raise additional capital in the future~~ commerce;

~~ITEM~~• ~~1B.~~banks ~~UNRESOLVED~~might ~~STAFF~~choose ~~COMMENTS~~not to accept accounts with adult-related content.

~~Not~~American ~~applicable~~Express has instituted a policy of not processing credit card charges for online, adult-related content. If other credit card processing companies were to implement a similar policy, this could have a material adverse effect on our business, results of operations and financial condition.

23We outsource our production and distribution. We acquire still photography and motion pictures/video content from independent producers/directors, and we rely on third-party distributors to deliver our products to end-users through multiple distribution channels, including newsstands, the Internet and broadcasting. Our relationship with such producers/directors and distributors is contractually based. We cannot guarantee that our

~~ITEM~~19 ~~2. PROPERTIES~~

PrivateTable Media Groupof maintains an office in the United States at 3230 Flamingo Road, Suite 156, Las Vegas, Nevada 89121. Contents

~~Since October 2007,~~ ~~Milcap~~contracts ~~Media~~with ~~Group~~directors ~~leases~~will ~~office~~be ~~space~~fulfilled inor ~~Torre~~that ~~MAPFRE,~~we ~~located~~will atenter ~~Calle~~into denew ~~la Marina 16-18~~ones, ~~08005~~in ~~Barcelona,~~which ~~Spain,~~case ~~for~~we amay ~~term~~not ofhave ~~five~~adequate ~~years.~~content ~~Average~~for ~~monthly base rental expense is approximately $30,000. The office space is currently used primarily by~~ our ~~departments~~magazines ~~providing Internet, marketing~~ and ~~administration services to the group~~movies. ~~In addition~~Also, ~~the~~we ~~office~~cannot ~~space~~guarantee ~~serves~~that asour contracts ~~the~~with ~~European~~distributors ~~headquarters~~will ofbe ~~Private~~renewed, ~~Media~~in ~~Group,~~which ~~Inc.~~case ~~The~~we ~~lease~~may ~~also~~not ~~requires~~be usable to ~~pay~~sell ~~our~~new ~~proportionate~~products ~~share~~through ~~of the~~some ~~building’s~~or ~~real~~all ~~estate~~channels ~~taxes~~or ~~and~~into ~~operating~~some ~~expenses~~countries. InFailure ~~January~~to ~~2008~~secure ~~Milcap~~new ~~Media~~production ~~Group~~contracts, ~~partly~~to ~~renewed~~secure the ~~lease~~fulfillment ~~for~~of ~~office~~current ~~space~~contracts inor ~~the building located at Carretera de Rubi 22, 08173 Sant Cugat del Valles, Barcelona, Spain for a further~~to ~~term~~maintain ofour ~~five~~current ~~years.~~distribution ~~The~~contracts ~~lease~~could ~~can~~have ~~be cancelled prematurely against~~ a ~~penalty~~material ofadverse ~~one~~effect ~~year’s~~on ~~rent.~~our ~~Average monthly base rental expense is approximately $23~~business,~~000.~~ ~~The~~results ~~building~~of isoperations ~~currently used by our operating departments engaged in providing programming~~ and ~~logistic~~financial ~~services for the group~~condition.

InNew ~~connection~~technological ~~with~~changes ~~the~~may ~~acquisition~~render ofour ~~GameLink~~equipment ~~LLC~~uneconomical byor ~~the~~obsolete. ~~Company~~As technologies change, ~~we entered~~the ~~into~~equipment aused ~~lease~~in ofour ~~anapproximately~~markets 10may become obsolete. As a result,~~000~~ ~~square~~we ~~feet~~subcontract ~~building~~and intend ~~used~~to bycontinue ~~GameLink~~to insubcontract ~~San~~capital ~~Francisco,~~intensive ~~California.~~or ~~The~~technically ~~lease~~complex ~~extends~~businesses ~~through~~such ~~December 31,~~as ~~2011~~editing, ~~has~~DVD areplication ~~base~~and ~~rent~~other ofsimilar ~~$13,620~~businesses. ~~per month~~However, ~~and~~we ~~provides~~may ~~for~~not ~~GameLink~~have access to bethese ~~responsible for~~subcontractors ~~property~~when ~~taxes~~their services are required, and ~~maintenance~~their services ~~expenses~~may ~~during~~not ~~the~~be ~~term~~available ofon ~~the~~favorable ~~lease~~terms.

InIncreased ~~connection~~government ~~with~~regulation in the ~~acquisition~~United ofStates ~~Sureflix~~or byabroad could limit our ability to deliver content and expand our business. New laws or regulations relating to the ~~Company~~Internet, weor ~~entered~~more ~~into~~aggressive aapplication ~~lease~~ of anexisting ~~approximately 5~~laws,~~250~~ ~~square~~could ~~feet~~decrease ~~office~~the ~~space~~growth ~~used~~of byour ~~Sureflix~~websites, prevent us from making our content available in ~~Toronto~~various jurisdictions or otherwise have a material adverse effect on our business, ~~Canada~~financial condition and operating results. ~~The~~These ~~lease~~new ~~extends~~laws ~~through~~or ~~February 28~~regulations could relate to liability for information retrieved from or transmitted over the Internet, ~~2013~~taxation, ~~has~~user aprivacy ~~base~~and ~~rent~~other ofmatters $8relating to our products and services. For example,~~132~~ ~~per~~the ~~month~~U.S. government has recently enacted laws regarding website privacy, copyrights and ~~provides~~taxation. ~~for~~Moreover, ~~Sureflix~~the application to bethe Internet of ~~responsible~~existing ~~for~~laws governing issues such as intellectual property ~~taxes~~ownership and ~~maintenance~~infringement, ~~expenses~~pornography, ~~during~~obscenity, ~~the~~libel, ~~term~~employment ofand ~~the~~personal ~~lease~~privacy is uncertain and developing. In addition, adult content remains prohibited or strictly controlled in many geographic markets. Some markets, such China, are strengthening their anti-pornography stances, providing a major challenge for adult entertainment providers.

WeCable ~~recognize~~system ~~rent~~operators ~~expense~~could onalso ~~a straight-line~~become ~~basis~~subject ~~over~~to ~~the~~new ~~term~~governmental ofregulations ~~the~~that ~~leases.~~could ~~The~~further ~~leases~~restrict ~~also~~their ~~require~~ability us to ~~pay~~broadcast our ~~proportionate~~programming. ~~share~~If ofnew ~~the~~regulations ~~building’s~~make ~~real~~it ~~estate~~more ~~taxes~~difficult ~~and~~for cable operators to broadcast our programming, our operating ~~expenses~~performance would be adversely affected.

24We face risks relating to our proprietary intellectual property rights. We rely on a combination of copyright and trademark laws, trade secrets, software security measures, license agreements and non-disclosure agreements to protect our proprietary products. Despite these precautions, unauthorized third parties copy parts of, or otherwise obtain and use our videos, photographs and other products without our permission. In addition, unauthorized users occasionally use our concepts and products and market them to our established customer base. Products sold over the Internet are particularly vulnerable to piracy, particularly in some developing countries. In addition, we cannot be certain that others will not develop substantially equivalent or superseding products, thereby reducing the value of our proprietary rights. Confidentiality agreements with our employees or license agreements with our customers may not provide meaningful protection for our proprietary information in the event of any unauthorized use or disclosure of that proprietary information.

~~ITEM~~We 3do not believe that our products infringe the proprietary rights of third parties, and we are not currently the subject of any intellectual property litigation or proceedings. ~~LEGAL~~Nonetheless, ~~PROCEEDINGS~~in the future we could become the subject of infringement claims or legal proceedings by third parties with respect to current or future products. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. We cannot be sure that any lawsuits or other actions brought by us will be successful or that we will not be found to infringe the intellectual property rights of third parties. In addition, to the extent we may desire, or are required, to obtain licenses to patents or proprietary rights of others, there can be no guarantee that any such licenses will be made available on terms acceptable to us, if at all.

~~Termination~~Enforcement of ~~Ilan~~ ~~Bunimovitz~~civil asliabilities ~~CEO~~against Private Media and ~~Subsequent~~its ~~Litigation~~management may be difficult. Presently, most of our directors and officers reside outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon them or to enforce, in courts outside the

On20 July 19, 2010, Ilan Bunimovitz was terminated as Chief Executive Officer of Private Media Group, Inc. Mr. Bunimovitz was employed as CEO since 2009 pursuant to a written employment agreement, which agreement was terminated by the Company under provisions allowing it to terminate the agreement for “cause” (as defined in such agreement). Conduct of Mr. Bunimovitz constituting “cause” included breach of fiduciary duty, conflict of interest, material acts of dishonesty and violations of the Company’s Code of Ethics. Mr. Bunimovitz’s termination for cause was unanimously approved by all three independent directors and a majority of the disinterested directors. Mr. Bunimovitz continues to serve as a director of the Company for the remainder of his term, which expires when his successor is duly elected by the shareholders.

ImmediatelyTable following Bunimovitz’s termination, he instituted two legal proceedings against the Company, both of which are believed by the Company to be without merit and are being contested vigorously by the Company. These legal proceedings are described below under “Employment Arbitration and U.S. Department of Labor Claim” and “Nevada State Court Action.” Contents

~~Employment~~ United ~~Arbitration~~States, ~~and~~judgments against these persons obtained in U.S. ~~Department~~courts based upon the civil liability provisions of ~~Labor~~the ~~Claim~~U.S. federal securities laws. In addition, since the disposition of our Game Link operations, virtually all of our assets are now located outside the United States. As a result, a judgment obtained in the United States against us may not be fully collectible within the United States.

OnThere ~~July 23,~~are ~~2010,~~risks ~~Mr. Bunimovitz~~associated ~~filed a Demand for Arbitration and related Statement of Claim against the Company~~ with ~~JAMS~~our ~~(Case~~international Nooperations. ~~1100063395),~~ As a ~~private~~European ~~arbitration~~based ~~service~~enterprise, ~~pursuant to~~a ~~the~~majority ~~dispute resolution provisions~~ of ~~his~~our ~~Employment~~operations are ~~Agreement,~~conducted ~~contesting~~outside ~~his~~the ~~termination~~United ~~as CEO~~States. In ~~the Statement of Claim~~addition, ~~Mr. Bunimovitz~~our ~~alleged~~growth ~~that~~strategy ~~(1) his~~contemplates ~~termination~~increased onservices ~~July 19,~~to ~~2010,~~foreign ~~was~~customers ~~without~~and ~~“cause”~~to ~~under~~domestic ~~his written~~customers ~~Employment~~distributing ~~Agreement;~~programming ~~(2) the~~to ~~termination~~international ~~was~~markets. ~~taken~~As ina ~~retaliation~~consequence ~~for~~of ~~Mr. Bunimovitz~~the ~~demanding~~global annature ~~independent~~of ~~investigation~~our business, ofwe ~~Berth~~will ~~Milton’s~~be ~~alleged~~exposed ~~“self-dealing~~to ~~transactions~~market ~~and~~risks ~~was~~from ~~taken~~changes in aninterest ~~effort~~rates ~~to silence him”;~~ and ~~(3) the~~foreign ~~termination~~currency ofexchange ~~employment~~rates ~~was~~that ~~not~~may ~~properly~~adversely ~~authorized~~affect byour ~~the~~results ~~Board~~ of ~~Directors,~~operations and isfinancial ~~therefore invalid~~condition. ~~Mr. Bunimovitz~~By ~~seeks~~virtue ~~unspecified~~of ~~compensatory~~our ~~and~~significant ~~punitive~~cross-border ~~damages. On August 6~~operations, ~~2010, the Company filed~~we anwill ~~Answer,~~be ~~denying~~subject ~~Mr. Bunimovitz’s~~to ~~allegations~~the inrisks ~~all~~normally ~~material~~associated ~~respects.~~with ~~The~~such ~~Company and GameLink~~activities, aincluding ~~wholly~~those ~~owned~~relating ~~subsidiary, have also filed a Cross-Claim against Mr. Bunimovitz for breach of contract and conversion, based upon his failure~~ to ~~return~~delayed ~~property~~payments ~~belonging~~from tocustomers ~~Private~~in ~~which~~some ~~Bunimovitz~~countries ~~had~~or ~~wrongfully~~difficulties ~~refused~~in ~~to turn over to~~ the ~~Company~~collection ~~at the time~~ of ~~his~~receivables ~~termination~~generally.

In ~~March~~addition, ~~2011~~we ~~Bunimovitz~~will ~~amended~~be ~~his~~exposed ~~Statement~~to the risk of ~~Claim~~changes toin ~~include~~social, ~~two~~political ~~additional~~and ~~allegations:~~economic ~~that~~conditions in the ~~Company~~countries ~~improperly~~where ~~failed~~we toengage ~~allow~~in business. ~~him~~Political toand ~~sell~~economic ~~shares~~instability hein ~~received~~these ~~when~~countries ~~his~~could ~~company~~adversely ~~was~~affect ~~acquired;~~our business activities and ~~that~~ ~~the~~operations. ~~Company~~Unexpected ~~has~~changes ~~failed~~in tolocal ~~deliver~~regulatory ~~the~~requirements, ~~shares~~tariffs toand ~~which~~other hetrade isbarriers ~~entitled~~and toprice ~~receive~~or ~~under~~exchange ~~the~~controls ~~earnout~~could limit ~~provisions~~operations ofand make the ~~acquisition~~repatriation ~~agreement~~of ~~between~~profits difficult. In addition, the ~~Company~~uncertainty ~~and~~of ~~GameLink.~~differing ~~The~~legal ~~Company~~environments ~~has~~could ~~denied~~limit ~~both~~our ofability ~~these~~to ~~additional~~effectively ~~claims~~enforce our rights in some markets.

~~Although~~We ~~Bunimovitz~~are ~~claims~~subject ~~that~~to herisks ~~was~~relating ~~terminated~~to inperformers. ~~retaliation~~Our ~~for demanding an “independent investigation” of self-dealing transactions on June 8~~movie, ~~2010,~~video ~~in fact both Mr. Bunimovitz~~ and ~~his~~photo ~~personal~~productions ~~legal~~are ~~counsel~~subject ~~were aware of the request made by the Chairman~~ to ~~the Board of Directors to terminate Bunimovitz for cause since at least May 5, 2010~~U.S. ~~The~~and foreign ~~alleged~~regulations ~~“self-dealing transactions” of~~ which ~~Mr. Bunimovitz~~govern ~~complains include “payment of rent for~~ the ~~Chairman’s~~terms ~~personal offices, the failure of the Chairman to repay a multi-million dollar loan from the Company~~ and ~~unauthorized~~ ~~cash~~conditions ~~payments~~under ~~that the Chairman be directed to himself,” transactions~~ which ~~were~~sexually ~~under~~explicit ~~review~~media byproductions ~~the~~may ~~independent~~occur. ~~directors~~We ~~since~~have ~~January~~adopted ~~2010~~practices and ~~disclosed~~procedures inthat ~~the~~are ~~Company’s~~intended ~~SEC reports,~~ to ~~the~~ensure ~~extent~~compliance ~~required~~with bythese ~~SEC rules~~regulations. ~~In particular,~~Although ~~Form~~these ~~8-K~~measures ~~filed~~are ~~with~~intended to ~~the~~protect ~~SEC~~us onfrom ~~March 11,~~liability ~~2010,~~under ~~addressed~~applicable ~~in detail payments made to Mr~~U. ~~Milton~~S. ~~in 2009,~~ and ~~their~~foreign ~~approval~~laws bygoverning ~~the~~sexually ~~Board~~explicit ofmedia ~~Directors. In addition~~productions, ~~Item 13~~we incannot ~~the~~guarantee ~~Company’s~~that ~~ANNUAL~~we ~~REPORT~~will onnot ~~Form~~be ~~10-K filed~~subject ~~with~~to ~~the~~successful ~~SEC~~legal onattacks ~~May 25, 2010, addressed~~ in ~~detail~~ the ~~status of the loan transaction~~future. ~~Mr. Bunimovitz~~Any ~~signed~~material ~~this~~violation ~~ANNUAL~~of ~~REPORT on Form 10-K as CEO and director and personally certified~~ the ~~accuracy~~rules and ~~completeness of this filing~~ ~~pursuant~~regulations toconcerning the ~~provisions~~production of ~~the~~sexually ~~Sarbanes-Oxley~~explicit ~~Act~~media ofin ~~2002.~~a Asjurisdiction ~~required~~could bysubject ~~Nasdaq~~us ~~corporate~~to ~~governance~~significant ~~rules,~~financial ~~all~~penalties ~~related party transactions involving directors~~ and ~~officers~~could ~~continue~~limit toour ~~remain~~ability ~~under the ongoing review of the Audit Committee, comprised solely of three independent directors,~~ to ~~ensure~~conduct ~~fairness~~future ofoperations ~~these~~in ~~transactions~~that ~~to the shareholders~~jurisdiction.

25Risks Associated With Our Securities.

OnOur ~~September 24~~principal shareholder holds sufficient number of our common stock to be able to elect our future Board of Directors, ~~2010~~to control our operations, ~~the~~and ~~Company~~to ~~received~~prevent ~~notice~~other shareholders from influencing significant corporate decisions. As of ~~Claims~~December 28, ~~filed~~2012, byConsipio ~~Bunimovitz~~Holding ~~with~~ BV, a corporation organized under the ~~U.S.~~laws ~~Department~~of The Netherlands, acquired 800,000 shares of ~~Labor~~our ~~against~~newly ~~Private~~created ~~(Case~~6% NoSeries B Convertible Redeemable Preferred Stock. The 6% Series ~~9-3290-10-057)~~B ~~alleging~~Convertible ~~that~~Redeemable ~~Bunimovitz~~Preferred ~~was~~Stock ~~terminated~~votes with the shares of our common stock as ~~CEO~~if byit ~~Private~~were inconverted ~~violation~~into shares of ~~Section 806~~our common stock. As of the ~~Sarbanes-Oxley~~date ~~Act~~of inthis ~~retaliation~~Annual ~~for~~Report, ~~Bunimovitz~~the ~~raising~~6% ~~questions~~Series B ~~about~~Convertible Redeemable ~~self-dealing~~Preferred ~~transactions~~Stock ~~involving~~controls ~~the~~approximately ~~Chairman~~59.4% of the ~~Company~~aggregate ~~and~~voting ~~the~~power ~~accuracy~~ of our outstanding common stock. As a result, Consipio has the ~~Company’s~~ability ~~public~~to ~~disclosures~~elect ina ~~light~~majority of ~~these~~our ~~transactions,~~directors and ~~seeking~~the ~~reinstatement~~ability ~~and~~to ~~unspecified~~direct ~~compensatory~~the ~~and~~outcome ~~punitive~~of ~~damages.~~matters ~~The~~presented ~~Company~~to ~~has~~our ~~filed~~shareholders, anincluding ~~Answer~~corporate ~~denying~~actions ~~these~~such ~~claims.~~as:

~~Nevada~~• ~~State~~our ~~Court~~merger ~~Action~~with ~~(the~~or ~~“Nevada~~into ~~Action”)~~another company;

On• ~~August 11, 2010, Mr. Bunimovitz, together with Consipio Holding BV (“Consipio”),~~ a ~~creditor~~sale of ~~the~~substantially ~~Company,~~all ~~and Tisbury Services Inc., filed a Complaint against Private Media Group, Inc. in Nevada County Court, Clark County, Nevada (Case No. A-10-622802-B) alleging mismanagement~~ of ~~the~~our ~~Company’s~~assets; ~~business by the Company’s three independent directors, Johan G. Carlberg, Peter Dixinger~~ and Bo Rodebrandt, and Berth Milton, the Company’s Chairman and CEO, and seeking to have Mr. Bunimovitz and another non-independent director, Eric Johnson, appointed as receivers to run the business and affairs of Private, to the exclusion of the other directors. The Complaint also sought an injunction which, if granted, would prevent Private from issuing any stock, borrowing any money or taking any other action outside the ordinary course of business. The Complaint as originally filed did not name any defendant other than the Company. The matter was set by the Court for a Preliminary Hearing on September 3, 2010, to determine whether the Plaintiffs were entitled to any of the requested relief. On August 25, 2010, the plaintiffs amended the Complaint by adding an additional cause of action as a shareholder derivative suit against Messrs. Carlberg, Dixinger, Rodebrandt, and Milton, as well as the Company’s CFO, Johan Gillborg, and Phil Christmas, the Financial Director of Private’s principal operating subsidiary, alleging gross mismanagement and breach of fiduciary duty, arising out of transactions between the Company and Milton or his affiliates, including the failure of an affiliate of Milton, Slingsby Enterprises Limited, to repay a related party receivable in excess of EUR 7 million, and compensation paid to Milton in 2009 without prior Board approval. On September 3, the Company filed Counterclaims against Bunimovitz and Consipio, alleging that Bunimovitz breached his fiduciary duty as a director and CEO of Private by improperly conspiring with Consipio, a creditor of the Company, to take over control of the Company, and seeking unspecified damages.

On• ~~August 13,~~amendments ~~2010, the Plaintiffs also requested the Court~~ to ~~grant~~our ~~a temporary~~Articles ~~injunction, to remain in effect until the Preliminary Hearing on September 3, which, if granted, would have prohibited the Company from engaging in any transaction outside the ordinary course~~ of ~~business~~Incorporation. The Court denied the Plaintiffs’ requested temporary relief, but issued a temporary order, to remain in effect until the conclusion of a Preliminary Hearing, requiring Private to seek permission of the Court to hold any special Board meeting.

The ~~Preliminary~~decisions ~~Hearing~~of ~~commenced~~Consipio onor ~~September 3,~~its ~~2010~~elected ~~before~~or ~~Presiding~~designated ~~Judge~~directors ~~Elizabeth~~may ~~Gonzalez~~conflict towith ~~determine~~our ~~whether~~interests ~~the~~or ~~Plaintiffs were~~those ~~entitled to appointment~~ of aour ~~receiver or~~ other ~~injunctive relief~~shareholders. OnIn ~~November17~~addition, ~~2010,~~this ~~following~~concentration ~~the conclusion~~ of ~~the~~ownership ~~Preliminary~~may Hearing, the Court denied the Plaintiff’s request for appointment of a receiver, determining that the statutory requirements to appoint a receiver to address alleged mismanagement were not met. The Court also ~~modified~~have ~~its temporary order issued on August 13, 2010. As modified,~~ the ~~preliminary injunction requires Private to seek permission of~~effect ~~the Court to hold any special Board~~ of ~~Directors~~delaying meeting. The preliminary injunction also requires that all transactions outside of the ordinary course of business be approved by a majority of disinterested directors without such directors being unduly influenced by current management or ~~its~~preventing ~~current outside legal counsel. Further, although the Preliminary Injunction contains~~ a ~~specific~~change ~~finding by the Court that it has found no violation of any federal rule or listing requirement regarding the issuance of shares, self-dealing or misappropriation, allegations contained~~ in ~~the Complaint~~control, the Court made a preliminary finding that the failure of Private to demand repayment of related party receivables from Slingsby Enterprises Limited (currently 7.4 million EUR at December 31, 2010), much of which ~~has~~could been outstanding since at least 2002, is a violation by the Company of the provisions of Section 402 of the Sarbanes-Oxley Act, and that the Company has an obligation to bring legal proceedings to enforce repayment of the outstanding amount. This finding appears to be based upon an interpretation by the Court of Section 402 which the Company believes is erroneous. The Court seems to have concluded that because Mr. Milton may have indirectly personally benefited from the extension of indebtedness to his controlled companies arising out of business transactions with the Company, the continued extension of this indebtedness constitutes a ~~“personal~~ ~~loan~~material toadverse oreffect ~~for~~on ~~the~~our ~~benefit~~stock ~~of any director or executive officer” within the meaning of Section 402 of SOX~~price. The Company believes that this preliminary ruling misstates the scope and purpose of Section 402, which was to prohibit personal loans to affiliates, but not to prohibit incurring indebtedness in connection with bona fide business transactions between the Company and an affiliate.

26We do not expect to pay dividends on our common stock in the foreseeable future. Although our shareholders may receive dividends if, as and when declared by our board of directors, we do not intend to pay

~~The~~21 Preliminary Injunction also contains preliminary findings that notwithstanding approval by all three independent directors and a majority of the disinterested directors of a retention bonus of EUR139,000 awarded to Mr. Milton in March 2010, the retention bonus was improper and the bonus should be returned. Specifically, the Court made preliminary findings that this decision was improperly influenced by statements made by Mr. Milton in a Board of Directors meeting that he would resign and sell his position in the Company if he was not adequately compensated, and the advice of the Company’s outside legal counsel that the directors should consider the advisability of granting a retention bonus, a subject that had not been considered by the directors prior to counsel’s advice.

InTable January and March 2011 the Court granted motions filed by defendants Bo Rodebrandt, Peter Dixinger, Johan Carlberg, Johan Gillborg and Philip Christmas dismissing all of the plaintiffs’ claims against each of them, due to lack of jurisdiction over them. Accordingly, there is only one remaining named defendant, Berth Milton, who also filed a motion dismissing him from the action on the grounds that the Nevada court has no jurisdiction of Mr. Milton. This motion was denied by the court on June 2, 2011, but without prejudice of Mr. Milton to raise this objection at a later time during the proceeding. Contents

~~The~~ dividends ~~Company~~on ~~believes~~our ~~that~~common ~~this~~stock ~~litigation~~in ~~is an improper attempt to circumvent valid and lawful actions of~~ the ~~disinterested majority~~foreseeable offuture. ~~the~~In ~~Board~~addition, ofwe ~~Directors,~~are ~~including~~prohibited ~~all~~from ofdeclaring ~~the~~or ~~independent~~paying ~~directors,~~any ~~and~~dividends to ~~instead place control of~~ the ~~Company~~holders ~~in the hands~~ of aour ~~disgruntled~~common ~~former~~stock ~~employee~~until ~~(Bunimovitz),~~we ~~his~~have ~~former~~paid ~~subordinate~~the ~~employee (Eric Johnson) and a creditor~~cumulative ~~(Consipio~~6% ~~Holding~~annual ~~BV)~~dividend ~~with~~to ~~whom~~ the ~~Company~~holders ~~has been in a protracted and heavily litigated dispute reported in SEC filings since 2003. Consipio, in addition to being a creditor, is also an affiliate~~ of aour ~~competitor~~6% ofSeries ~~Private,~~B ~~Beate~~Convertible ~~Uhse,~~Redeemable ~~AG,~~Preferred ~~an adult entertainment company listed on the Frankfurt~~ Stock ~~Exchange~~. ~~For~~Therefore, ~~further~~you ~~information~~should ~~regarding~~not ~~the~~purchase ~~other~~our ~~litigation~~common ~~with~~stock ~~Consipio~~if ~~see~~you ~~“Consipio~~need ~~Holding~~immediate BVor ~~vs.~~future ~~Private~~income ~~Media~~by ~~Group,~~way ~~Inc. and Slingsby Enterprises Limited, New York State Supreme Court, County~~ of ~~New~~dividends ~~York,~~from ~~Case~~your Noinvestment. ~~650462/10,~~ ~~which appears in this Item 3 below.~~

~~The~~We ~~Company~~may ~~also believes~~issue additional shares of our capital stock that could dilute the ~~actions~~value of ~~Mr. Bunimovitz~~your asshares aof ~~director~~common ~~since~~stock. heWe ~~was~~are authorized ~~terminated~~to asissue ~~CEO~~110,000,000 ~~including~~shares ~~pursuing~~of aour ~~lawsuit~~capital ~~with~~stock, aconsisting ~~creditor~~of ~~with~~100,000,000 ~~whom~~shares ~~the~~of ~~Company~~our iscommon instock ~~protracted~~and ~~litigation~~10,000,000 ~~are~~shares aof ~~clear~~our ~~and~~preferred ~~serious~~stock. ~~breach~~At ofMay 21, ~~his~~2013, ~~fiduciary~~approximately ~~duties~~27,806,211 shares of our common stock were issued and outstanding and ~~have~~1,700,000 ~~been~~shares ~~taken~~of inour ~~bad~~preferred ~~faith~~stock towere ~~advance~~authorized ~~the~~and ~~personal~~available ~~interests~~for offuture Mrissuance. ~~Bunimovitz.~~ ~~Accordingly~~Should we obtain additional financing, ~~the~~we ~~Company~~may ~~has~~issue ~~filed~~authorized ~~counterclaims~~and ~~against~~unissued ~~Bunimovitz~~shares inof ~~this~~common ~~proceeding,~~stock ~~discussed~~at ~~above,~~below ~~seeking~~current ~~monetary~~market prices ~~damages~~or preferred stock that could dilute the earnings per share and ~~other~~book ~~appropriate relief~~value of your shares of our common stock.

~~The~~There ~~Company~~are ~~believes~~risks ~~that~~relating to the ~~allegations~~issuance inof ~~the~~additional ~~Complaint~~shares ~~against~~of preferred stock, including deterring attempts by third parties to acquire us. Our board of directors has the ~~Company~~authority to issue up to 1,700,000 additional shares of preferred stock, and to determine their price, and other rights, preferences, privileges and restrictions without any further vote or action by our shareholders. The rights of the ~~single~~holders ~~remaining~~of ~~individual~~common stock ~~defendant~~are subject to, and may be adversely affected by, the ~~findings~~rights of the ~~Court~~holders of any preferred stock, including preferred stock that we may issue in the ~~Preliminary~~future. ~~Injunction~~If ~~are~~preferred ~~without~~stock ~~merit~~is issued, it may rank senior to our common stock in respect of the right to receive dividends and ~~that~~to participate in distributions or payments in the ~~Company~~event of our liquidation, dissolution or winding up. The provisions in our articles of incorporation authorizing preferred stock could delay, defer or prevent a change of control and could adversely affect the ~~individual~~voting ~~defendant~~and ~~will~~other ~~prevail~~rights ~~upon~~of holders of our common stock, including the ~~conclusion~~loss of ~~this~~voting ~~proceeding~~control to others, which could make it more difficult for a third party to acquire control of us.

~~Consipio~~Substantial ~~Holding~~sales BVof vsour common stock by the holder of our 6% Series B Convertible Redeemable Preferred Stock could cause our common stock price to fall. ~~Private~~As ~~Media~~of ~~Group~~December 31, ~~Inc~~2012, there were 27,259,869 outstanding shares of our common stock. ~~and~~However, ~~Slingsby~~the ~~Enterprises~~shares ~~Limited~~of our currently outstanding shares of 6% Series B Convertible Redeemable Preferred Stock are convertible into another 40,000,000 ~~New~~shares ~~York~~of ~~State~~our ~~Supreme~~common ~~Court~~stock. Consipio, ~~County~~the holder of ~~New~~our ~~York~~currently outstanding 6% Series B Convertible Redeemable Preferred Stock will be entitled to start selling the shares of common stock into which the preferred stock is convertible in June 2013 under Rule 144. In addition, ~~Case~~in order to enable us to redeem the 6% Series B Convertible Redeemable Preferred Stock, we intend to register the public resale of all shares underlying the 6% Series B NoConvertible Redeemable Preferred Stock during 2013. ~~650462/10~~ (Therefore, Consipio will be eligible to resell substantial amounts of our common stock during 2013 in the ~~“New~~public ~~York~~market. ~~Action”)~~The sale of a significant number of our shares of common stock by Consipio may adversely affect prevailing market prices for our common stock and could impair our ability to raise capital through the sale of our equity securities.

OnOur ~~May 1,~~stock ~~2009~~may be traded infrequently and in low volumes, ~~Consipio~~so ~~Holding~~you BVmay ~~filed~~be aunable ~~lawsuit~~to ~~against~~ sell your shares at or near the ~~Company~~quoted inbid Uprices if you need to sell your shares.S. ~~federal~~The ~~court~~shares ~~asserting~~of aour ~~claim~~common stock ~~for~~may ~~unspecified~~trade ~~damages~~infrequently ~~under~~and ain ~~Note~~low ~~dated~~volumes ~~December 21~~on the OTCQB tier of the OTC Markets, ~~2001~~meaning inthat the ~~original~~number ~~principal~~of ~~amount~~persons interested in purchasing our common shares at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of $4factors,~~000~~ including the fact that we are a small company,~~000,~~ ~~which~~we ~~was~~are ~~guaranteed~~relatively byunknown, ~~Slingsby~~we ~~Enterprises~~are ~~Limited~~based ~~(“Slingsby”)~~in Barcelona, ~~an affiliate~~Spain, and conduct most of ~~the~~our ~~Company’s~~operations ~~Chairman~~outside ~~and~~of ~~principal~~the ~~shareholder~~U.S., ~~The~~and ~~guarantee~~we ~~was~~are ~~secured~~in bythe adult entertainment business. As a ~~pledge~~result of 1these factors,~~650~~ stock analysts,~~000~~ ~~shares~~stock ofbrokers, institutional investors and others in the ~~Company’s~~investment ~~common~~community ~~stock~~who can generate or influence sales volume, ~~and~~may ~~Slingsby’s~~be ~~agreement~~reluctant to ~~pledge~~follow ana ~~additional~~company ~~3,950,000~~such ~~shares~~as ~~upon~~ours ~~the~~or ~~occurrence~~purchase ofor anrecommend ~~event~~the purchase of ~~default~~our shares. ~~The~~As ~~Company~~a ~~filed~~consequence, ~~its~~there ~~Answer~~may ~~and~~be ~~asserted~~periods of several ~~affirmative~~days ~~defenses.~~or ~~The~~more ~~lawsuit~~when ~~also~~trading ~~included~~activity ain ~~claim~~our ~~against~~shares ~~Slingsby~~is minimal or non-existent, as compared to ~~enforce~~a ~~its~~well-known ~~guaranty~~issuer which has a large and steady volume of ~~the~~trading ~~Note~~activity that will generally support continuous sales without an adverse effect on share price. OnA ~~March 26,~~broader ~~2010~~or more active public trading market for our common shares may not develop or be sustained. Due to these conditions, ~~the~~you ~~Court~~may ~~dismissed~~not ~~the~~be ~~lawsuit,~~able ~~finding~~to ~~that~~sell Uyour shares at or near bid prices or at all if you need money or otherwise desire to liquidate your shares.S. ~~federal~~As ~~courts~~a ~~did~~result, ~~not~~investors ~~have~~could, ~~jurisdiction~~and ~~over~~should ~~the~~be ~~subject~~prepared ~~matter~~to, lose all or part of ~~the~~their ~~lawsuit~~investment.

On22 July 9, 2010, the Company received a notice from Consipio stating that the Company continued to be in default under the Note and requesting Slingsby to deliver an additional 3,950,000 shares of common stock as collateral to Consipio under the terms of the pledge agreement. In addition, pursuant to such notice Consipio purported to exercise the right as pledgee to vote all of the 5,600,000 collateral shares, including the 1,650,000 shares of common stock previously pledged as collateral, so long as an event of default has occurred and is continuing under the Note.

27Table of Contents

OnYou ~~August 12,~~may ~~2010,~~have ~~the~~difficulty ~~Company~~selling ~~received~~our ~~notice~~shares ~~that~~if ~~Consipio~~they ~~had~~are ~~re-filed~~deemed ~~the lawsuit~~“penny ~~against~~stocks.” ~~the~~Since ~~Company~~our ~~and~~common ~~Slingsby~~stock inis ~~New~~not ~~York~~listed ~~State~~on ~~Court~~a inNasdaq ~~May~~Stock ~~2010~~Market toor ~~enforce~~a ~~the~~national ~~Note~~securities ~~and~~exchange, ~~the~~trading ~~related~~in ~~guaranty~~our ~~agreement.~~common Asstock ~~amended,~~will ~~the~~be ~~Complaint~~subject ~~against~~to the ~~Company~~requirements ~~alleged~~of ~~that~~certain ~~the~~rules ~~Company~~promulgated ~~had~~under ~~orally~~the ~~agreed~~Securities ~~with~~Exchange ~~Consipio~~Act, which inrequire ~~2003~~additional todisclosure ~~change~~by ~~the stated~~broker-dealers ~~interest~~in ~~rate~~connection onwith ~~the~~any ~~Note~~trades ~~from~~involving 7%a tostock ~~9.9 %,~~defined ~~and~~as toa ~~denominate~~penny ~~the~~stock ~~principal~~(generally, ~~amount~~any ~~under~~non-national ~~the~~securities ~~Note~~exchange inequity ~~euro~~security ~~instead~~that ofhas ~~U.S. dollars,~~ a ~~position~~market ~~which~~price ~~the~~of ~~Company~~less ~~believes~~than ~~is totally without merit~~$5.00 Onper ~~October 12~~share, ~~2010, Slingsby filed a~~ ~~Motion~~subject to ~~Dismiss~~certain ~~the~~exceptions ~~claims against it under the guaranty agreement based upon the position~~ that ~~Consipio’s~~we ~~claims~~may ~~against~~not ~~Slingsby~~fall ~~were~~within ~~time~~in ~~barred under~~ the ~~statute of limitations~~future). InSuch ~~November~~rules ~~2010~~require the ~~Company~~delivery, ~~filed~~prior anto ~~Answer,~~any ~~and~~penny ~~included affirmative~~stock ~~defenses~~transaction, ~~including claims~~ of ~~substantial~~a ~~offsets~~disclosure toschedule explaining the ~~amounts~~penny ~~due~~stock ~~under~~market and the ~~Note.~~risks Onassociated ~~December 13,~~therewith ~~2010,~~and ~~following~~impose various asales ~~hearing~~practice requirements on ~~November 8,~~broker-dealers ~~2010,~~who ~~the~~sell ~~Court~~penny ~~granted~~stocks ~~Slingsby’s Motion~~ to ~~Dismiss~~persons ~~the~~other ~~Complaint~~than ~~against~~established ~~it,~~ customers and ~~granted~~accredited ~~Consipio~~investors ~~leave~~(generally todefined ~~amend~~as ~~the~~an ~~Complaint~~investor towith ~~plead~~a ~~additional~~net ~~allegations~~worth ~~against~~in ~~Slingsby~~excess ~~which~~of $1,000,000 ifor ~~proven~~annual byincome ~~Consipio~~exceeding $200,000 ~~would~~individually ~~extend~~or ~~the~~$300,000 ~~statute~~together ofwith ~~limitations~~a spouse). OnFor ~~December 21,~~these ~~2010~~types ~~Consipio~~of ~~filed~~transactions, anthe ~~amended~~broker-dealer ~~Complaint~~must ~~which~~make ~~contained substantially~~a ~~similar~~special ~~allegations~~suitability asdetermination ~~against~~for the ~~Company~~purchaser and ~~Slingsby.~~have ~~The~~received ~~amended~~the ~~Complaint~~purchaser’s ~~also~~written ~~named~~consent ~~Berth~~to ~~Milton~~the astransaction prior ato ~~defendant~~the ~~and included additional allegations against Slingsby and Mr~~sale. ~~Milton.~~ ~~Mr. Milton~~The ~~has~~broker-dealer ~~not~~also ~~yet~~must ~~been~~disclose ~~served with~~ the ~~amended~~commissions ~~Complaint.~~payable Into ~~February~~the ~~2011~~broker-dealer, ~~Slingsby~~current ~~filed~~bid aand ~~motion~~offer toquotations ~~dismiss~~for the ~~amended~~penny ~~Complaint~~stock ~~against it~~and, ~~principally~~if on the ~~grounds~~broker-dealer ~~that~~is ~~even if~~ the ~~allegations~~sole inmarket-maker, the ~~amended~~broker-dealer ~~Complaint~~must ~~were~~disclose ~~true,~~this ~~enforcement~~fact and of the ~~guaranty~~broker-dealer’s ~~was~~presumed ~~time barred~~control ~~under~~over the ~~applicable statute of limitations~~market. ~~The~~Such ~~court~~information ~~denied~~must ~~the~~be ~~motion~~provided to ~~dismiss,~~the ~~and~~customer ~~discovery~~orally isor ~~now underway~~ in ~~this~~writing ~~case.~~before ~~Both~~or with the ~~Company~~written ~~and~~confirmation ~~Slingsby~~of ~~intend~~trade tosent ~~continue~~ to ~~vigorously~~the ~~contest~~customer. ~~the~~Monthly ~~allegations~~statements ofmust ~~Consipio,~~be ~~including~~sent disclosing ~~defenses~~recent byprice ~~the~~information ~~Company~~for ofthe ~~substantial~~penny ~~offsets~~stock ~~against~~held in the ~~Note~~account and ~~defenses~~information byon ~~Slingsby based upon~~ the ~~defense~~limited ~~that~~market ~~the~~in ~~statute~~penny ofstocks. ~~limitations~~The ~~bars~~additional ~~enforcement~~burdens ofimposed ~~the~~upon ~~guaranty~~broker-dealers ~~agreement~~by ~~and~~such ~~related~~requirements ~~pledge~~could ~~agreement~~discourage broker-dealers from ~~Slingsby~~effecting transactions ~~which~~in ~~purports~~our ~~to grant~~common astock, ~~pledge~~which incould ~~favor~~severely oflimit ~~Consipio~~the asmarket ~~holder~~liquidity of the ~~Note~~common ~~against~~stock ~~5,600,000~~and ~~shares~~the ability of ~~Private~~holders ~~Common~~of ~~Stock~~the ~~originally~~common ~~registered~~stock into ~~the~~sell ~~name~~their ~~of Slingsby~~shares.

OnITEM ~~April 1, 2011, Consipio filed an application with the court seeking a pre-judgment writ of attachment against the Company in the amount of $6~~1B.7 ~~million.~~UNRESOLVED OnSTAFF April 12, 2011, the Company filed an opposition to the application, which has been set for a hearing on June 16, 2011. Consipio had previously filed a similar application for attachment in September 2010, which was summarily denied by the court. COMMENTS

~~For~~Not ~~additional~~applicable information relating to this litigation see Note 10 to the consolidated financial statements under “Other Debt” for additional information regarding the Note obligation. The Company, Slingsby and Berth Milton intend to vigorously defend against these claims.

~~Litigation~~ITEM ~~Regarding~~2. ~~Election Results for 2010 Annual Meeting of Shareholders~~ PROPERTIES

AsPrivate ~~noted~~Media maintains ~~above,~~its onregistered ~~July 9,~~office ~~2010, the Company received a notice from Consipio stating that the Company continued to be~~ in ~~default under~~ the ~~Note~~United ~~and~~States ~~requesting~~at ~~Slingsby~~3230 toFlamingo ~~deliver an additional 3~~Road,~~950,000~~ ~~shares~~Suite ~~of common stock as collateral to Consipio under the terms of the pledge agreement from Slingsby to Consipio. In addition~~156, ~~pursuant~~Las ~~to such notice Consipio purported to exercise the right as pledgee to vote all of the 5~~Vegas,~~600,000 collateral~~ ~~shares~~Nevada ~~pledged under the pledge agreement, including the 1,650,000 shares of common stock previously pledged as collateral, so long as an event of default has occurred and is continuing under the Note~~89121. OnWe ~~September 16,~~do ~~2010, the Company was notified by Consipio that it intended to nominate six directors at the 2010 Annual Meeting, five of whom had~~ not ~~been~~conduct ~~nominated~~any byoperations ~~the~~from ~~Company’s~~our ~~Board~~Las ofVegas ~~Directors. On September 22~~location, ~~2010, Slingsby advised Consipio~~ and ~~the Company~~we ~~that~~have ~~under~~no ~~New~~employees ~~York law all of Consipio’s rights under the pledge agreement and related guarantee agreement~~ in ~~respect~~Las ~~of the 5~~Vegas,~~600,000~~ ~~collateral shares had terminated, including any rights of Consipio to vote these shares, and instructed the Company not to allow Consipio to vote any of the collateral shares~~Nevada.

OnWe ~~October 21,~~currently ~~2010,~~lease ~~Consipio,~~our ~~Ilan Bunimovitz~~headquarters and ~~the~~principal ~~other~~office ~~plaintiffs~~space in the ~~Nevada~~Torre ~~Action~~Mapfre ~~obtained~~building, anlocated ~~Order~~at ~~from~~Calle ~~Judge~~de ~~Gonzalez~~la ~~requiring~~Marina 16-18, 08005 Barcelona, Spain, pursuant to a three-year lease that ~~the~~expires ~~Company~~in ~~recognize~~March ~~the~~2015. ~~right~~Our ofaverage ~~Consipio~~monthly tobase ~~vote~~rental ~~the~~expense 5currently is approximately EUR 12,~~600,~~000. ~~collateral~~The ~~shares~~office ~~under~~space is currently used primarily by our departments providing internet, marketing and administration services to the ~~pledge~~group. ~~agreement~~In ataddition, the ~~2010~~office ~~Annual~~space ~~Meeting~~ serves as the European headquarters of ~~Shareholders~~Private Media. AsThe ~~discussed~~lease ~~below,~~also ~~this~~requires ~~Order~~us ~~has~~to ~~been~~pay ~~appealed~~our byproportionate share of the ~~Company~~building’s real estate taxes and isoperating ~~therefore~~expenses. During ~~under~~2011, ~~the~~we ~~review~~also leased office space at Carretera de Rubi 22, 08173 Sant Cugat del Valles, in Spain near our headquarters. That lease has been terminated, and as of ~~the~~December 31, ~~Nevada~~2012 ~~Supreme~~we ~~Court~~no longer pay rent for that facility.

~~The~~As ~~Company held its 2010 Annual Meeting~~ of ~~Shareholders on November~~December 1831, ~~2010~~2011, inour ~~Barcelona,~~Game ~~Spain.~~Link ~~Two~~LLC ~~proposals~~subsidiary ~~were~~leased ~~presented~~an atapproximately ~~the~~10,000 ~~Meeting~~square ~~for~~feet ~~approval:~~building ~~(1) to~~in ~~elect~~San ~~six~~Francisco, California ~~directors;~~for ~~and (2) to~~its ~~ratify~~use. ~~the~~During ~~appointment~~2011, ofwe ~~BDO~~paid ~~Auditores~~$14,000 ~~S.L.~~of asrent ~~the~~per ~~Company’s~~month ~~independent~~under ~~registered~~this ~~public~~lease ~~accountants~~(plus ~~for~~property ~~the~~taxes ~~fiscal~~and ~~year~~maintenance ~~ended~~expenses). ~~December 31,~~As ~~2010.~~part ~~Following~~of ~~the~~our ~~closing~~disposition of ~~the~~Game ~~polls,~~Link ~~the~~LLC ~~Annual~~in ~~Meeting~~May ~~was~~2012, ~~continued~~Game inLink ~~order to~~LLC ~~allow~~assumed the ~~independent~~obligations ~~Inspector~~under that lease. Accordingly, as of ~~Elections~~May to2012, ~~tabulate~~we ~~the~~no ~~votes~~longer ~~and~~have ~~issue~~any ~~his~~obligations ~~final~~or ~~report~~liabilities ~~certifying~~under the ~~results~~San Francisco lease.

28As of December 31, 2011, we leased an approximately 5,250 square feet office facility in Toronto, Canada for use by our Sureflix subsidiaries. During 2011, we paid rent of $8,132 per month (plus our share of property taxes and maintenance expenses). As part of our disposition of Sureflix in June 2012, Sureflix assumed the obligations under that lease. Accordingly, as of June 2012, we no longer have any obligations or liabilities under the Toronto lease.

On23 December 16, 2010, the Company received the independent Inspector of Election’s Final Report. The results of the voting at the 2010 Annual Meeting, as set forth in the Inspector of Elections Final Report, are as follows:

ProposalTable No. 1 – Election of Six Nominees for Director: Contents

Nominee for Director	Number ofShares Voted for		Number ofSharesWithheld
Eric Johnson		15,893,296		7,507
Jan Jensen		8,095,390		6,256
Bernt Akander		8,094,351		7,295
Peter Dixinger		8,073,491		28,155
Bo Rodebrant		8,072,525		29,121
Berth Milton		8,071,301		30,345
IlanBunimovitz		7,799,157		—
David Dohrmann		7,799,157		—
Alexander V. Matveev		7,509,016		290,141
Charles William Prast		7,509,016		290,141
John S. Wirt		7,509,016		290,141

ITEM 3.

LEGAL PROCEEDINGS

~~Proposal~~Employment ~~No. 2~~Arbitration –and ~~Ratify BDO Auditores,~~ U.S.L. asDepartment ~~Independent~~of ~~Registered~~Labor ~~Accounting~~Claim ~~Firm for the Fiscal Year ending December 31, 2010:~~

Number of SharesVoted for		Number of SharesAgainst		Number of SharesAbstained
16,033,432		998		5,740

On July 23, 2010, Mr. Bunimovitz filed a Demand for Arbitration and related Statement of Claim against the Company with JAMS (Case No. 1100063395), a private arbitration service, pursuant to the dispute resolution provisions of his Employment Agreement, contesting his termination as our Chief Executive Officer. In the Statement of Claim, Mr. Bunimovitz alleged that (1) his termination on July 19, 2010, was without “cause” under his written Employment Agreement; (2) the termination was taken in retaliation for Mr. Bunimovitz demanding an independent investigation of Mr. Milton’s alleged “self-dealing transactions and was taken in an effort to silence him”; and (3) the termination of employment was not properly authorized by the Board of Directors, and is therefore invalid. Mr. Bunimovitz sought unspecified compensatory and punitive damages.

~~Under~~In ~~Nevada~~March ~~law, the~~2011 six nominees who are finally determined to have received the highest number of votes are elected to the Board of Directors and serve as directors until the 2011Annual Meeting and until their successor is elected and qualifiedMr. Bunimovitz ~~However,~~amended ~~following~~his ~~the~~Statement ~~delivery~~ of ~~the~~Claim ~~Inspector~~to ofinclude ~~Election’s~~two ~~Final~~additional ~~Report~~allegations: ~~on December 16, 2010, Consipio contended~~ that ~~3,950,000 of~~ the ~~collateral~~Company ~~shares~~improperly ~~pledged~~failed ~~by Slingsby~~ to ~~Consipio~~allow ~~were~~him ~~not~~to ~~voted~~sell inshares ~~favor~~he ofreceived ~~five~~when ofhis ~~the~~company ~~six Consipio director nominees~~ (~~Messrs.~~Game ~~Bunimovitz,~~Link ~~Dohrmann, Matveev, Prast and Wirt~~LLC), aswas ~~required~~acquired by ~~the~~Private ~~Nevada~~Media; ~~Court’s~~and ~~October 21,~~that ~~2010 Order. Accordingly, in December 2010~~ the ~~Nevada~~Company ~~Court~~has ~~entered~~failed anto ~~Order~~deliver at the ~~request of Consipio, Ilan Bunimovitz and the other~~ ~~plaintiffs~~shares ~~in the Nevada Action,~~ to ~~the~~which ~~effect~~he ~~that~~is ~~the~~entitled ~~Inspector’s Final Report was subject~~ to ~~review~~receive byunder the ~~Court,~~earnout ~~and~~provisions ~~could~~of ~~not~~the beacquisition ~~deemed~~agreement ~~final~~between ~~and effective by~~ the Company ~~until~~and ~~approved~~Game ~~by the Court~~Link.

~~The~~On ~~Inspector’s Final Report was reviewed by the Court at a hearing on January~~September 424, ~~2011~~2010, tothe ~~determine~~Company ~~whether~~received ~~the~~notice ~~Inspector~~ of ~~Election’s~~ ~~Final~~Claims ~~Report~~filed ~~would be approved~~ by ~~the~~Bunimovitz ~~Court.~~with ~~Following~~ the ~~conclusion of the hearing on January 4, 2011, the Court entered a further Order refusing to either modify or confirm the Inspector’s Report~~U. ~~Accordingly, the then current directors (Messrs~~S. ~~Milton,~~Department ~~Rodebrandt, Dixinger, Jensen, Johnson and Bunimovitz) continue to remain in office pending further order~~ of ~~the~~Labor ~~Court~~against ~~approving or modifying~~ the ~~Inspector of Election’s Final Report, or until the~~ Company ~~convenes~~ ~~the~~(Case ~~2011 Annual Meeting of Shareholders~~No. ~~On January~~ ~~28,~~9-3290-10-057) ~~2011,~~alleging ~~the~~that ~~Court~~Bunimovitz ~~ordered~~was terminated ~~that~~as anCEO ~~evidentiary~~by ~~hearing~~Private beMedia ~~held~~ in ~~June~~violation ~~2011 to determine whether there is sufficient evidence to confirm or modify the Final Report~~ of ~~the~~Section 806 ~~Independent Inspector~~ of ~~Elections. As noted above, Consipio contends that~~ the ~~3,950,000~~Sarbanes-Oxley ~~collateral~~Act ~~shares~~in ~~were~~retaliation ~~not~~for ~~voted~~Bunimovitz asraising ~~directed~~questions byabout ~~Consipio,~~self-dealing ~~which~~transactions ~~Consipio~~involving ~~contends is inconsistent with~~ the ~~Court’s~~Chairman ~~Order~~ of ~~October 21, 2010. As discussed below under “Appeal to Nevada Supreme Court,” this Order is currently being challenged by~~ the Company inand the ~~Nevada~~accuracy ~~Supreme Court. In order to comply with Nasdaq listing requirements requiring that a majority~~ of the ~~directors in office be~~ ~~independent, on January 28, 2011, the Court further ordered that the~~ Company’s ~~six~~public ~~member~~disclosures ~~board~~in ~~create~~light aof ~~vacancy~~these ~~for~~transactions, aand ~~seventh~~seeking ~~director~~reinstatement and tounspecified ~~fill~~compensatory ~~the~~and ~~newly~~punitive ~~created vacancy with an independent director, to serve until the earlier of the 2011 Annual Meeting or until the Court is able to confirm the final election results for the November 2010 election~~damages.

29On November 30, 2011 we entered into that certain Settlement Agreement And Release with Mr. Bunimovitz and Game Link LLC to settle all of the foregoing claims made by Mr. Bunimovitz against us. See, “Item 13. Certain Relationships and Related Transactions, and Director Independence.” As a result, the JAMS employment arbitration and the U.S. Department of Labor claim have been settled and dismissed.

OnNevada ~~February 3,~~State 2011, the Board of Directors voted to create a seat for a seventh director and to fill this vacancy by appointing Bernt Akander. His nomination was unanimously approved by all three independent directors and a majority of the six directors in office. Mr. Akander, who was a Company nominee for the Board of Directors at the 2010 Annual Meeting, has accepted the February 3 appointment. Accordingly, as of February 3, 2011, the Company’s Board of Directors was comprised of seven directors, four of whom were determined to be independent directors in accordance with the applicable Nasdaq listing rules. As previously reported, Mr. Akander resigned in May 2011; thus the vacancy created by the Court’s ~~January 28,~~Action ~~2011 court order remains unfilled until a nominee who is an independent director is selected and approved by~~ (the ~~Board~~“Nevada ofAction”) ~~Directors.~~

On ~~April~~August 1411, ~~2011~~2010, ~~pursuant~~Mr. Bunimovitz, totogether awith ~~stipulation entered~~Consipio ~~into~~Holding byBV, a creditor of the Company, and ~~the~~Tisbury ~~plaintiffs~~Services Inc., filed a Complaint against Private Media Group, Inc. in Nevada County Court (the “Nevada Court”), ~~proceeding~~Clark ~~and~~County, ~~approved~~Nevada (Case No. A-10-622802-B) alleging mismanagement of the Company’s business by the ~~Court~~Company’s independent directors and Mr. Milton, ~~the~~who ~~vote~~at ~~regarding~~that time was the Company’s ~~proposal~~Chairman toand ~~ratify~~CEO. ~~the~~The ~~appointment~~complaint ofalso ~~BDO~~sought ~~Auditores~~to have Mr. Bunimovitz and another director, SMr.L. Johnson, appointed as receivers to run the ~~Company’s~~business ~~independent~~and ~~registered~~affairs of this ~~public~~Company. ~~accountants~~In ~~for~~2011, the ~~fiscal~~Nevada ~~year~~Court ~~ended~~dismissed ~~December 31~~the independent directors from action due to lack of jurisdiction over them. Accordingly, ~~2010~~other than the Company, there was ~~approved~~only asone ~~final~~remaining named defendant, Mr. Milton.

IfOn August 25, 2011, the Nevada Court atentered ~~any~~an ~~time~~order appointing Eric Johnson, a current director of the Company, as a receiver for the Company, to serve in such capacity until further order of the ~~future~~Nevada ~~confirms~~Court. ~~either~~As reasons for the appointment of the ~~two~~receiver, ~~director~~the ~~nominee~~Nevada ~~slates~~Court ~~presented~~found that the Company had demonstrated a propensity for disregarding or resisting orders of the Nevada Court, specifically by (i) disobeying the Nevada Court’s October 21, 2010 Order regarding Consipio’s right to vote 5.6 million shares at the ~~November~~Company’s 2010 ~~Annual~~annual ~~Meeting~~meeting of shareholders, ~~then~~(ii) disobeying ator resisting ~~that~~the ~~time~~Nevada Court’s July 1, 2011 Order requiring the Company’s Board of Directors isto ~~expected~~set the record date for a new annual meeting of shareholders, and (iii) failure of the Company’s Board of Directors to beseek collection ~~comprised~~of outstanding loans from the Company to Slingsby Enterprises Limited , an affiliate of ~~six~~Mr. Milton. The Nevada Court further found that the Company’s “directors, ~~four~~most notably Milton, have been guilty of ~~whom~~gross ~~will~~mismanagement in bethe ~~independent~~conduct ~~directors~~of [the Company’s] affairs” and that the Company’s “assets are in danger of waste, sacrifice or loss.” The Nevada Court found that the appointment of a receiver was “necessary to preserve [the Company’s] remaining assets and business and to protect its shareholders.”

~~Appeal~~24 ~~by the Company to the Nevada Supreme Court~~

AsTable discussed above, on October 21, 2010, Consipio, Ilan Bunimovitz and the other plaintiffs in the Nevada Action obtained an Order from Judge Gonzalez requiring that the Company recognize the right of Consipio to vote the 5,600,000 collateral shares under the pledge agreement in favor of Consipio at the 2010 Annual Meeting. On December 3, 2010, the Company filed a Petition for Writ with the Nevada Supreme Court seeking an Order directing Judge Gonzalez to vacate her Order of October 21, 2010, on the basis that she did not have jurisdiction of this issue, and seeking a stay of the Order until the issue can be decided in the New York Action. The October 2010 Order required the Company to recognize the right of Consipio to vote the 5,600,000 collateral shares under the pledge agreement at the 2010 Annual Meeting of Shareholders. Contents

InThe ~~particular,~~Nevada ~~the~~Court’s ~~Company~~order ~~believes~~appointed ~~that Judge Gonzalez exceeded her authority by entering~~ the ~~Order,~~receiver onfor the ~~basis~~purposes ~~that~~of (i) ~~Slingsby~~preserving ~~Enterprises Ltd.,~~ the ~~entity~~Company’s ~~which~~assets ~~pledged~~and ~~the~~business, ~~collateral~~and ~~shares~~(ii) setting tothe ~~Consipio,~~date isfor ~~not~~and aconducting ~~party to~~ the ~~Nevada~~2011 ~~Action,~~annual ~~and~~meeting ~~(ii) the~~of ~~Order~~shareholders. isThe ~~beyond~~annual ~~the~~meeting ~~scope~~ of ~~the~~shareholders ~~Complaint~~was ~~filed~~eventually inheld ~~the~~on ~~Nevada~~January 11, ~~Action~~2012. OnAt the January 711, ~~2011,~~2012 ~~the~~annual meeting ~~Nevada~~of ~~Supreme Court~~shareholders, ~~agreed~~this toCompany’s ~~hear~~shareholders voted against the ~~appeal~~re-election ~~and~~of ~~directed~~Mr. Milton ~~that~~and the ~~interested~~other ~~parties,~~incumbent ~~including~~directors ~~Consipio,~~(other ~~file~~than ~~opposing~~Mr. Bunimovitz ~~papers~~and Mr. Johnson, Inwho ~~February~~was ~~2011~~a ~~Consipio~~director ~~filed~~and ~~its~~the ~~opposition~~court-appointed toreceiver). On April 6, 2012, the ~~Company’s~~Nevada ~~request~~Court ~~for~~entered aan ~~Writ.~~order ~~The~~terminating ~~parties~~the ~~are~~receivership ~~awaiting~~of ~~the~~Mr. Johnson. ~~ruling~~Mr. Johnson remains a director of the ~~Nevada~~ ~~Supreme Court~~Company.

~~Swedish~~On ~~Tax~~May 22, ~~Authority~~2012, ~~Proceedings~~the Nevada Court approved and entered that certain Stipulation And Order For Dismissal that provided that (i) the Nevada Action, together with all claims and counterclaims asserted therein, was dismissed, and (ii) the Company was required to reimburse the two named plaintiffs (Consipio Holding BV and Tisbury Services Inc.) for their attorneys’ fees and costs incurred in the Nevada Action in an amount to be agreed between the plaintiffs and the Company and approved by the Company’s Board of Directors. Accordingly, the Nevada Action has been concluded.

InAs ~~December~~required ~~1999~~by the ~~Company~~Nevada ~~received~~Court, ~~final~~the ~~notification~~Company ~~from~~has ~~the~~reimbursed ~~Swedish~~Consipio ~~Tax~~Holding ~~Authority~~BV ~~assessing~~and ~~its~~Tisbury ~~subsidiary~~Services inInc. ~~Cyprus~~ for the ~~tax years 1995-1998 for a total~~ amount of ~~SEK~~fees ~~42,000,000~~and ~~(approx.~~costs ~~EUR~~that ~~4.5 million)~~it ~~plus~~owed ~~fines amounting~~ to ~~SEK~~them ~~16,800,000~~as ~~(approx.~~a ~~EUR~~result ~~1.8~~of ~~million)~~the ~~plus~~Nevada ~~interest~~Action. The amounts ~~Swedish~~we ~~Tax~~owed ~~Authority~~to ~~has~~Consipio ~~taken~~Holding ~~the~~BV ~~position that the subsidiary carried on business in Sweden from a permanent establishment during the period in question~~ and ~~should~~Tisbury ~~therefore~~Services beInc. ~~taxed~~with onrespect ~~the income attributable~~ to the ~~permanent~~Nevada ~~establishment.~~Action ~~The~~were ~~Company~~determined isby of the ~~view~~parties ~~that~~and ~~no permanent establishment is at hand in Sweden. However,~~ the ~~Administrative~~Company’s ~~Court~~Board of ~~Appeal~~Directors ~~has finally decided that a permanent establishment is at hand. In February 2009, the County Administrative Court reduced the assessment for the tax years 1995-1998~~ to abe ~~total amount of SEK 12~~$2,~~600~~750,000 ~~(approx.~~and ~~EUR~~$450,000, 1respectively.1 ~~million)~~The ~~plus~~Company ~~fines~~paid ~~amounting~~Consipio Holding toBV ~~SEK~~and ~~5,040,000~~Tisbury ~~(approx.~~Services ~~EUR 0~~Inc.5 ~~million) plus interest. In November 2010,~~ the ~~Administrative~~fees ~~Court~~and ofcosts ~~Appeal decided~~ that the ~~County~~Nevada ~~Administrative~~ Court’s ~~decision~~ordered ~~should prevail. However,~~ as afollows: matter of fact, the tax claim on the Company has been extinguished according to Administrative Law. Due to the fact there is no longer any claim at stake, no amounts have been provided in the Company’s financial statements for this dispute.

WeTisbury ~~are~~Services, Inc. ~~from~~As ~~time~~payment in full for all amounts the Company owed Tisbury under the Nevada Action, the Company delivered to ~~time~~Tisbury Services, Inc. (i) 3,000,000 shares of unregistered shares of Common Stock, and (ii) a ~~defendant~~five-year, contingent warrant to purchase up to a total of 4,000,000 shares of Common Stock. The warrant has an exercise price of $0.25 per share and is exercisable in ~~suits~~four ~~for~~tranches ~~defamation~~of 1,000,000 shares of Common Stock each if, and ~~violation~~only if, when, and to the extent that the number of ~~rights~~issued and outstanding shares Common Stock at that time exceeds (i) 45,000,000 shares, (ii) 50,000,000 shares, (iii) 60,000,000 shares, and (iv) 70,000,000 shares (as adjusted to reflect stock splits, stock combinations, stock dividends, and other similar events). In the event that the number of ~~privacy~~issued and outstanding shares during the term of the warrant does not exceed some or all of the foregoing limits, ~~many~~the warrant shall expire with respect to the unexercisable shares. Tisbury has accepted the foregoing 3,000,000 shares of ~~which~~Common ~~allege~~Stock ~~substantial~~and the warrant as payment and satisfaction, in full, of all amounts owed, or ~~unspecified~~that ~~damages~~may be owed, ~~which~~by wePrivate ~~vigorously~~Media ~~defend~~to Tisbury in connection with the Nevada Action. The parties also entered into mutual general releases with the exception of certain individuals.

30Consipio Holding BV. In order to (i) repay the Commerzbank Note, (ii) settle the New York Action and reimburse Consipio for its litigation fees and costs, (iii) repay a EUR 1,752,052 obligation owed by Fraserside Holdings Limited, a wholly-owned subsidiary of Private Media, to Bocca BV, a wholly-owned subsidiary of Consipio, and, as ordered by the Nevada District Court, (iv) reimburse Consipio for all of its fees and costs it incurred in the Nevada Action, on December 28, 2012 Consipio and Private Media entered into a Settlement Agreement and Mutual General Release. Because of its financial condition, in lieu of cash, Private Media issued to Consipio 800,000 shares of the Series B Convertible Preferred Stock as payment in full for the amounts owed to Consipio. Each share of Series B Preferred Stock has a stated value of EUR 10.00 per share. Pursuant to the settlement agreement with Consipio, the parties also agreed to discontinue and withdraw the New York Action with prejudice, and entered into mutual general releases with the exception of certain individuals. See, “Item 13 Certain Relationships and Related Transactions, and Director Independence.”

WeAppeal ~~are~~by ~~presently~~the ~~engaged~~Company ~~in litigation, most of which is generally incidental~~ to the ~~normal conduct~~Nevada ofSupreme ~~our~~Court business and is immaterial in amount. We believe that our reserves are adequate and that no such action will have a material adverse impact on our financial condition. However, there can be no assurance that our ultimate liability will not exceed our reserves.

~~Except~~As asdiscussed ~~disclosed~~ above, ~~neither~~on ~~Private~~October 21, ~~Media~~2010, ~~Group~~Consipio, ~~Inc~~Mr. Bunimovitz ~~nor~~and ~~its~~the ~~subsidiaries~~other isplaintiffs ~~involved~~ in ~~any~~the ~~other~~Nevada ~~litigation~~Action orobtained ~~arbitration~~an ~~proceedings~~Order ~~which~~from ~~could~~Judge ~~have~~Gonzalez arequiring ~~material~~that ~~influence~~the onCompany ~~our~~recognize ~~financial~~the right ~~condition~~of orConsipio ~~results~~to vote the 5,600,000 collateral shares under the pledge agreement in favor of ~~operations.~~Consipio at the 2010 Annual

~~ITEM~~25 ~~4. Not applicable~~

31Table of Contents

~~PART~~ Meeting. IIOn December 3, 2010, the Company filed a Petition for Writ with the Nevada Supreme Court seeking an Order directing Judge Gonzalez to vacate her Order of October 21, 2010, on the basis that she did not have jurisdiction of this issue, and seeking a stay of the Order until the issue can be decided in the New York Action. The October 2010 Order required the Company to recognize the right of Consipio to vote the 5,600,000 collateral shares under the pledge agreement at the 2010 Annual Meeting of Shareholders.

~~ITEM~~On 5.November 2, ~~MARKET FOR THE REGISTRANT’S COMMON EQUITY~~2012, ~~RELATED~~the ~~STOCKHOLDER~~Nevada Supreme ~~MATTERS~~Court ~~AND~~issued ~~ISSUER~~an ~~PURCHASES~~order OFdismissing ~~EQUITY~~the ~~SECURITIES~~appeal.

~~Market~~Consipio ~~for~~Holding BV vs. Private Media Group, Inc. ~~Common~~and ~~Stock~~Slingsby Enterprises Limited, New York State Supreme Court, County of New York, Case No. 650462/10 (the “New York Action”)

~~The~~On ~~common~~May 1, ~~stock~~2009, ofConsipio Holding BV filed a lawsuit against the Company in U.S. federal court asserting a claim for unspecified damages under a $4,000,000 promissory note issued in December 2001 by Private Media ~~Group~~in favor of Commerzbank AG (the “Commerzbank Note”), ~~Inc~~which was guaranteed by Slingsby Enterprises Limited (“Slingsby”), an affiliate of Mr. Milton, ~~has~~the ~~traded~~Company’s onformer Chairman and Chief Executive Officer. The guaranty was secured by a pledge of 1,650,000 shares of the ~~NASDAQ~~Company’s ~~National~~common stock, and ~~Global~~Slingsby’s ~~Markets~~agreement ~~since~~to ~~February~~pledge an additional 3,950,000 shares upon the occurrence of an event of default. The lawsuit also included a claim against Slingsby to enforce its guaranty of the Note. On March 126, ~~1999~~2010, ~~under~~the U.S. federal court dismissed the ~~symbol~~lawsuit ~~“PRVT”~~for lack of jurisdiction. ~~Previously~~However, ~~our~~in ~~common~~May ~~stock~~2010, ~~traded~~Consipio onre-filed the ~~FINRA~~ lawsuit (~~formerly~~titled ~~NASD~~“Consipio Holding BV v. Private Media Group, Inc.), ~~OTC~~Slingsby ~~Bulletin~~Enterprises ~~Board~~Limited, ~~since~~and ~~March 29~~Berth H. Milton, ~~1996~~Jr.”.New ~~The~~York ~~following~~State ~~table~~Supreme ~~sets~~Court, ~~forth~~County of New York, Case No. 650462/10) (the ~~range~~“New ofYork ~~representative~~Action”) ~~high~~against Private Media, Slingsby and ~~low~~Mr. Milton ~~sales~~in ~~prices~~the ~~for~~Supreme Court of the ~~common~~State ~~stock~~of ~~for~~New York (the ~~periods~~“New ~~indicated,~~York asCourt”) ~~reported~~in byorder to enforce the ~~NASDAQ~~payment ~~Stock~~of ~~Market~~the Commerzbank Note and the accompanying guaranty issued by Slingsby. On August 30, 2011 the New ~~Quotations~~York ~~represent~~Court ~~inter-dealer~~issued ~~prices,~~an doOrder ~~not~~of ~~include~~Attachment ~~retail~~pursuant ~~markups,~~to ~~markdowns~~which orNew ~~commissions~~York City and ~~may~~state ~~not~~officials ~~represent~~were ~~actual~~ordered ~~transactions~~to execute the Order of Attachment by levy upon Private Media’s New York assets for the sum of $7,347,925.72.

	High		Low
Fiscal 2010:
First Quarter	$	2.85	$	1.55
Second Quarter	$	3.05	$	1.69
Third Quarter	$	2.19	$	1.33
Fourth Quarter	$	1.91	$	1.00
Fiscal 2009:
First Quarter	$	3.87	$	2.70
Second Quarter	$	4.14	$	1.68
Third Quarter	$	2.76	$	1.80
Fourth Quarter	$	3.60	$	1.75

In order to settle the New York Action and to settle all other claims between Consipio and the Company, including the Commerzbank Note, on December 28, 2012 the parties entered into a settlement agreement pursuant to which, among other things, the Commerzbank Note was extinguished and the New York Action was dismissed. See, “Item 13. Certain Relationships and Related Transactions, and Director Independence.” In accordance with the settlement agreement, on January 4, 2013 the New York Action was dismissed.

OnWe ~~April 8, 2011,~~are ~~the~~from ~~last~~time ~~sales~~to ~~price~~time ~~reported~~a ondefendant ~~the~~in ~~NASDAQ~~suits ~~Stock~~for ~~Market~~defamation ~~was~~and ~~$0.65.~~violation Onof ~~September 23,~~rights ~~2010~~of privacy, ~~there~~many ~~were~~of ~~approximately~~which ~~1,668~~allege ~~beneficial~~substantial ~~owners~~or ofunspecified ~~our~~damages, ~~common~~which ~~stock~~we vigorously defend.

~~Dividend~~We ~~Policy~~are presently engaged in litigation, most of which is generally incidental to the normal conduct of our business and is immaterial in amount. We believe that our reserves are adequate and that no such action will have a material adverse impact on our financial condition. However, there can be no assurance that our ultimate liability will not exceed our reserves.

WeExcept ~~did~~as ~~not~~disclosed ~~pay~~above, ~~any~~neither ~~cash~~Private ~~dividends~~Media ~~during~~Group, ~~our~~Inc. ~~last~~nor ~~two fiscal~~its ~~years~~subsidiaries ~~and~~is weinvolved ~~do not contemplate doing so~~ in ~~the~~any ~~near~~other ~~future.~~litigation Weor ~~currently~~arbitration proceedings ~~intend~~which tocould ~~retain~~have ~~all~~a ~~earnings~~material toinfluence ~~finance the development and expansion of our operations, and do not anticipate paying cash dividends~~ on our ~~shares~~financial ofcondition ~~common~~or ~~stock in the foreseeable future. Our future dividend policy will be determined by our Board of Directors on the basis of various factors, including~~ results of operations~~, financial condition, business opportunities and capital requirements~~. ~~The payment of dividends will also be subject to the requirements of Nevada Law, as well as restrictive financial covenants which may be required in credit agreements.~~

~~Transfer~~ITEM ~~Agent~~4. MINE SAFETY DISCLOSURES

~~The~~Not ~~transfer~~applicable ~~agent and registrar for our common stock is InterWest Transfer Co., Inc., 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117.~~

~~ITEM~~26 ~~6. Not applicable~~

32Table of Contents

~~ITEM~~PART 7.II ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~You~~ITEM should read this section together with the consolidated financial statements and the notes and the other financial data in this Report. The matters that we discuss in this section, with the exception of historical information, are forward-looking statements within the meaning of the Private Securities Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties relate to factors such as: (1) the timing of the introduction of new products and services and the extent of their acceptance in the market; (2) our expectations of growth in demand for our products and services; (3) our ability to successfully implement expansion and acquisition plans; (4) the impact of expansion on our revenue, cost basis and margins; (5) our ability to respond to changing technology and market conditions; (6) the effects of regulatory developments and legal proceedings with respect to our business; (7) the impact on the Company and its investors from the outcome of legal proceedings discussed under Item 3 – Legal Proceedings; (8) the impact of exchange rate fluctuations; and (9) our ability to obtain additional financing. ~~The~~MARKET ~~foregoing~~FOR ~~list~~THE ofREGISTRANT’S ~~factors~~COMMON ~~is not exhaustive. For a more complete list of factors that may cause results to differ materially from projections~~EQUITY, ~~please~~RELATED ~~refer~~STOCKHOLDER toMATTERS ~~the~~AND ~~Risk~~ISSUER ~~Factors~~PURCHASES ~~section~~OF ofEQUITY ~~this Form 10-K.~~ SECURITIES

~~Overview~~Market for Private Media Group, Inc. Common Stock

WeThe ~~are~~common ~~an international~~stock ~~provider~~of ~~and~~Private ~~distributor~~Media ofGroup, ~~adult~~Inc. ~~media~~trades ~~content.~~under Wethe ~~acquire~~symbol or“PRVT”. ~~license~~From ~~content~~February 1, ~~from~~1999 ~~independent~~until ~~studios~~November 15, ~~producers~~2011, ~~and~~our ~~directors~~shares ~~and~~were ~~process~~listed ~~these~~on ~~images~~The ~~into~~NASDAQ ~~products~~Stock ~~suitable~~Market. ~~for~~Trading of ~~popular~~our ~~media~~common ~~formats~~stock ~~such~~on asThe ~~digital~~NASDAQ ~~media~~Stock ~~content for~~Market ~~Broadcasting~~was suspended on November 15, ~~Mobile~~2011 and ~~Internet~~has ~~distribution,~~not ~~and~~traded ~~print~~on ~~publications~~NASDAQ ~~and~~since ~~DVDs~~that time. InOur ~~addition~~common tostock ~~media~~was ~~content~~formally de-listed on January 15, we2012. ~~also~~Since ~~generate~~November 15, ~~additional~~2011, ~~sales~~our ~~through~~common stock has traded on the ~~licensing~~OTCQB tier of ~~our~~the ~~Private~~OTC ~~trademark~~Markets tounder ~~third~~the ~~parties~~symbol “PRVT.” The following table sets forth the range of representative high and low sales prices for the common stock for the periods indicated, as reported by the NASDAQ Stock Market and OTCQB. Quotations represent inter-dealer prices, do not include retail markups, markdowns or commissions and may not represent actual transactions.

On January 20, 2009 we expanded our Internet operations through the acquisition of Game Link LLC and its affiliates, companies engaged in digital distribution of adult content over the Internet and eCommerce development. GameLink is a leading US adult entertainment VOD and eCommerce platform through its GameLink.com website. The site’s installed user base represents over one million domestic and international customers and it serves over 100,000 users daily. Including 70,000 video titles, GameLink has one of the largest libraries of digital and physical adult media and novelties in the United States.


Fiscal Year Ended December 31, 2011	High Bid		Low Bid
First Quarter	$	1.11	$	0.67
Second Quarter	$	0.83	$	0.51
Third Quarter	$	0.74	$	0.60
Fourth Quarter	$	0.56	$	0.17

On October 29, 2009 we continued the ongoing expansion of our global digital media platform through the acquisition of Sureflix Digital Distribution and its affiliates, companies engaged in the business of digital distribution of premium gay adult content. Sureflix is a leading global supplier of adult programming. The company operates a vast network of more than 100 pay-per-view VOD websites and has a North American broadcast presence. It represents premium production studios in global television broadcast (cable, satellite), mobile, IPTV and Internet VOD markets. Sureflix has not only in-depth knowledge of adult programming, but also significant VOD technology and marketing expertise.


Fiscal Year Ended December 31, 2010	High Bid		Low Bid
First Quarter	$	2.85	$	1.55
Second Quarter	$	3.05	$	1.69
Third Quarter	$	2.19	$	1.33
Fourth Quarter	$	1.91	$	1.00

WeOn ~~operate in a highly competitive~~May 20, ~~service-oriented~~ ~~market and are subject to changes in business~~2013, economic and competitive conditions. Nearly all of our products compete with other products and services that utilize adult leisure time and disposable income. Although we believe our products are well-established in the ~~adult~~last ~~entertainment~~sales ~~industry,~~price wereported ~~compete~~on ~~with entities selling adult oriented products via any type of distribution network, including~~ the ~~Internet.~~OTBQB ~~Many~~Market ofwas ~~these products are similar to ours~~$0. ~~Over the past few years, the adult entertainment industry has undergone significant change~~15. ~~Traditional~~On ~~producers of softcore content as well as mainstream providers of media content have shifted to producing hardcore content. As a result~~April 15, ~~we face greater competition~~ ~~to distribute hardcore content. This shift has also led to industry consolidation~~2013, ~~creating~~there ~~fewer,~~were ~~more~~224 ~~financially~~holders ~~formidable competitors. Recently, the introduction~~ of arecord ~~large number~~ of ~~free~~our ~~content~~common ~~Internet sites that allow users to access large libraries of content has created an even more challenging environment where both sales volume and margins are decreasing substantially. In addition~~stock, ~~the~~not ~~recent~~including ~~recession~~any ~~has~~persons ~~shown~~who ~~that~~hold ~~the~~their ~~adult~~stock ~~industry~~in is“street ~~not immune to economic cycles~~name.”

33Dividend Policy

~~Despite~~We ~~serious~~did not ~~challenges~~pay inany cash dividends during our last two fiscal years. We currently intend to retain all earnings to finance the ~~market~~development ~~for~~and ~~online~~expansion ~~content~~of our operations, weand ~~expect~~do ~~growth~~not ~~going~~anticipate ~~forward.~~paying cash dividends on our shares of common stock in the ~~There~~foreseeable ~~are~~future. ~~many~~Our ~~reasons~~future todividend policy will be ~~optimistic~~determined ~~about~~by our Board of Directors on the basis of various factors, including results of operations, financial condition, business opportunities and capital requirements. In addition, under the terms of the 6% Series B Convertible Redeemable Preferred Stock, no dividends may be paid with respect to our ~~Internet~~common ~~group~~stock ~~has~~unless all accrued and unpaid dividends on the outstanding shares of Series B Preferred Stock have been ~~working~~paid. The ~~hard~~payment toof ~~position~~dividends ~~itself~~will also be subject to ~~take~~the ~~advantage~~requirements of ~~these~~Nevada ~~opportunities~~Law.

~~The~~Recent ~~primary~~Issuances ~~source~~ of ~~growth~~Unregistered ~~is expected to come from a significant increase in traffic to our online properties coupled with improved conversion and retention rates and a much more sophisticated approach~~Securities to traffic management. We have rebuilt our signature property, private.com, and restructured our affiliate programs in all properties to compete aggressively for affiliate traffic. In addition to our technical systems, we have restructured our departments with resources highly skilled in affiliate traffic development and shifted our emphasis from account management towards sales. We have also developed solutions for critical new markets: gay, international, and mobile. Finally, we have increased our efforts to defend against piracy of our content and the propagation of pirated content. The combination of the breadth of our premium assets and the scope of our market reach give us a unique and very defensible position.

~~During~~We ~~2010,~~did ~~the~~not ~~DVD~~issue ~~market~~any ~~has~~unregistered ~~continued~~securities toduring ~~shrink,~~the ~~with~~three-month ~~sales~~period ~~for~~ended ~~our physical products declining by 18%. However~~December 31, ~~the~~2011 ~~DVD~~that ~~business~~were isnot bypreviously noreported ~~means dead even~~ in ~~this~~a ~~competitive~~Current ~~landscape.~~Report ~~The~~on ~~content~~Form ~~providers that manage to survive the current “clean out” will control the DVD market going forward~~8-K.

~~With~~Repurchase ~~respect~~of toShares broadcasting, Private is a leading adult content provider in Europe and Latin America. Private content is currently continuously broadcasted via 194 platforms in 42 countries. In addition to this we are providing content to leading Pay-TV operators. Our strategic partnerships prove to be solid and strong revenue generators and will continue to perform well.

~~Private’s~~We ~~mobile~~did ~~“on~~not ~~portal”~~repurchase ~~revenues~~any ~~declined~~of ~~again~~our inshares ~~2010.~~during ~~We are still~~ the ~~most~~fourth ~~distributed~~quarter ~~adult~~of ~~brand in~~ the ~~world~~fiscal ~~and~~year ~~will~~covered ~~monetize existing distribution as best as we can~~ by going live with the few outstanding carriers and replacing non-performing content aggregators with new ones. During 2010 we have enabled smart phone users to browse, purchase and consume our library of content on all of our web properties and expect to generate substantial growth from this ~~initiative~~Annual ~~going forward~~Report.

~~Through~~27 the acquisition of Gamelink and Sureflix, Private acquired a team of the most innovative and experienced developers in the adult industry who will lead a product development effort focused on a clear goal: increase qualified traffic to our web properties. There are three key strategies: opening our services to third parties to develop products on top of our platform; developing applications like Smart Phone & TV apps that give our content hooks into emerging markets and devices; and developing widgets that will merge the unique data analytics we have with our vast product offering and enable sites to easily leverage our catalog and transactional capabilities to their customers.

OneTable Movie All Screens: the VOD landscape is an endless field of format proliferation. Consumers are forced to purchase the same movie in a variety of different formats at various price points in order to view it on different devices. Our goal is to provide our customers with the ability to watch any movie in our catalog on any screen available to them. Contents

InTransfer ~~addition~~Agent to our online R&D efforts for traffic generation and improving conversion and retention rates, we will continue to explore the most effective way to enable customers to view our movies on all screens. The primary focus of our online R&D efforts will be on delivering content to the TV and enabling purchase and consumption on Smart Phones.

WeThe ~~generate~~transfer ~~revenues~~agent ~~primarily~~and ~~through:~~registrar for our common stock is InterWest Transfer Co., Inc., 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117.

•ITEM ~~Internet~~6. ~~e-commerce,~~SELECTED ~~subscriptions~~FINANCIAL ~~and licensing;~~DATA

•Not ~~the~~applicable ~~broadcasting~~to ofa ~~movies~~“smaller ~~through~~reporting ~~IPTV~~company” ~~(Internet~~as ~~Protocol~~defined ~~Television~~in Item 10(f),(1) ~~cable,~~of ~~satellite~~SEC ~~and~~Regulation ~~hotel~~S-K. ~~television programming;~~

•ITEM ~~sales~~7. ofMANAGEMENT’S ~~DVDs~~DISCUSSION ~~and~~AND ~~magazines;~~ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•You ~~sales~~should ofread ~~adult~~this ~~mobile~~section ~~content~~together with the consolidated financial statements and the notes and the other financial data in this Report. The matters that we discuss in this section, ~~B2B~~with ~~“on~~the exception of historical information, are forward-~~portal”~~looking statements within the meaning of the Private Securities Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and ~~B2C~~other ~~“off~~factors which could cause our actual results to differ materially from those expressed or implied by such forward-~~portal”~~looking ~~(wireless);~~statements. Potential risks and uncertainties that may cause results to differ materially from our expectations and projections, please refer to the Risk Factors section of this Form 10-K.

•Overview ~~content, brand name and trademark licensing.~~

34We acquire worldwide rights to adult media produced for us by independent producers and then process this content into products suitable for popular physical media formats such as print publications, DVDs, digital media platforms (such as internet websites, mobile telephony and transactional television), and broadcasting (which includes cable, satellite and IPTV). Our branded adult media is available at physical retail locations and through electronic retailers as well as on mobile devices, transaction television platforms and over the Internet. In addition, we provide adult entertainment films to thousands of major hotels around the world. To a lesser extent, in addition to branded adult media products, we also market and distribute branded leisure and novelty products oriented to the adult entertainment lifestyle and generate additional sales through the licensing of our Private trademark to third parties.

~~The~~On ~~following~~January 20, ~~table~~2009 ~~illustrates~~we expanded our ~~net~~internet ~~sales~~operations bythrough ~~product~~the acquisition ~~group~~of ~~for~~Game Link LLC and its affiliates. Game Link is engaged in digital distribution of adult content over the ~~periods~~Internet ~~indicated~~and in eCommerce development, primarily in the United States. On October 29, 2009 we continued the expansion of our digital media platform through the acquisition of Sureflix and its affiliates. These companies, based in Canada, were engaged in the business of digital distribution of premium gay adult content.

	Years ended December 31,
	2008		2009		2010
	EUR		EUR		EUR
	(in thousands)
Net sales by product group
Internet		4,218		13,129		14,766
Broadcasting		5,805		4,491		3,859
DVDs & Magazines		7,687		3,843		3,151
Wireless		1,957		1,597		1,494
Total		19,667		23,061		23,270

As described elsewhere in this Annual Report, after a change in management and as part of new management’s plan to reorganize and recapitalize this Company, we divested ourselves of the Game Link and Sureflix companies in 2012. Although the disposition of Game Link and Sureflix was consummated in 2012, for accounting purposes, the assets and liabilities of Game Link and Sureflix are listed as assets/liabilities “held for shareholder claims” in the consolidated balance sheets included in this Annual Report, and the operating results of Game Link and Sureflix are included in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the fiscal year ended December 31, 2011 as “profit contributed by operations held for settlement of claims.” Accordingly, the net sales, cost of sales, selling, general and administrative expenses and certain other operating information of Game Link and Sureflix are included in the appropriate line items in the consolidated income statement of the Company for the fiscal year ended December 31, 2010. However, the net sales, cost of sales, selling, general and administrative expenses, etc. of the Game Link and Sureflix companies are not included in the consolidated income statement line items for the fiscal year ended December 31, 2011. Instead, the net results of the Game Link and Sureflix companies for the fiscal year ended December 31, 2011 are listed in income statement as “profit contributed by operations held for settlement of claims,” and the results of these two former subsidiaries are shown separately in the footnotes to the financial statements.

~~Over~~28 time, we expect net sales from DVDs & magazines to continue to decline as a percentage of net sales in relation to total net sales from Internet, broadcasting and wireless. We expect net sales from Internet and wireless broadcasting to grow during the coming years.

WeTable recognizeof net sales on delivery (for further information, see Critical Accounting Estimates). Contents

~~Even~~Commencing ~~though~~in weJuly ~~recognize~~2010 ~~net~~and ~~sales~~continuing ~~upon~~through ~~delivery~~2011, weformer ~~generally~~management ~~provide~~was ~~extended~~engaged ~~payment~~in ~~terms~~a number toof ~~our~~lawsuits ~~distributors~~with ofits ~~between~~major 90shareholders and ~~180~~certain ~~days~~creditors. ~~Although~~In ~~our~~addition, ~~extended~~former ~~payment~~management ~~terms~~was ~~increase~~involved ~~our~~in ~~exposure~~a ~~to accounts~~proxy ~~receivable~~contest ~~write-offs,~~involving weboth ~~believe~~the ~~our~~2010 ~~risk~~and is2011 ~~minimized~~annual bymeetings ~~our~~of ~~generally~~shareholders ~~long-term~~(the ~~relationships~~2011 ~~with~~annual ~~our~~meeting ~~distributors.~~was Ineventually ~~addition,~~held wein January ~~view~~2012). ~~our~~The ~~extended~~various ~~payment~~lawsuits ~~terms~~and asshareholder anproceedings ~~investment~~negatively inaffected ~~our~~the ~~distribution~~Company’s ~~channels~~operations ~~which~~and ~~are~~financial ~~important~~condition toin ~~the growth~~2011 ofand ~~our business~~thereafter.

~~Our~~We ~~primary~~operate ~~expenses~~in ~~include:~~a highly competitive market that is subject to numerous new and on-going changes in business, economic and competitive conditions. Although we believe our brand and our products are well-established in the adult entertainment industry, we compete with numerous entities selling adult-oriented products via any type of distribution network, including the Internet. Over the past few years, the adult entertainment industry and the media formats in which adult content is disseminated have undergone significant change. The introduction of a large number of free content internet sites that allow users to access large libraries of content free of charge has created an even more challenging environment where both sales volume and margins have decreased substantially. In addition, the recent recession has shown that the adult industry is not immune to economic cycles.

•We ~~web~~generate ~~page~~revenues ~~development~~primarily ~~costs;~~through:

• ~~acquisition~~internet ~~and~~e-commerce, ~~licensing~~subscriptions ~~of content for our library of photographs~~ and ~~videos~~licensing;

• ~~printing~~the broadcasting of movies through IPTV (Internet Protocol Television), ~~processing~~cable, satellite and ~~duplication~~hotel ~~costs;~~television ~~and~~programming;

• ~~selling,~~sales ~~general~~of DVDs and ~~administrative~~magazines; ~~expenses.~~and

We• ~~released~~sales ~~71,~~of 72adult ~~and~~mobile 87content ~~proprietary video titles during 2010, 2009 and 2008, respectively~~(wireless). ~~The releases include both new and archival material. We plan to release more than 50 proprietary video titles in 2011.~~

Over ~~the years~~time, ~~our~~we ~~cost~~expect ofnet sales ~~has~~from ~~been~~DVDs & ~~fluctuating~~magazines ~~relative~~ to ~~net~~continue ~~sales~~to ~~due~~decline toas ~~our~~a ~~use~~percentage of ~~new~~net ~~mediums~~sales ~~for~~in ~~our products,~~relation ~~such~~to astotal net sales from the Internet, broadcasting and wireless. We ~~also~~expect ~~incur~~net sales ~~significant~~from ~~intangible~~internet ~~expenses in connection with the amortization of our library of photographs~~ and ~~movies~~direct-to-consumer ~~and~~digital ~~capitalized~~sales ~~development~~to ~~costs,~~be ~~which include~~ the ~~Internet.~~principal ~~We amortize~~area ~~these tangible and intangible assets on a straight-line basis for periods~~ of ~~between~~growth ~~three~~during ~~and~~the ~~five~~coming years.

~~Restructuring~~We generally provide extended payment terms to our established distributors of between 90 and 180 days. Although our extended payment terms increase our exposure to accounts receivable write-offs, we believe our risk is minimized by our generally long-term relationships with our distributors.

~~During~~Our ~~2009~~primary ~~and~~expenses 2010 we have faced several organizational challenges as a result of the acquisitions and integration of the online businesses GameLink and Sureflix into the group. Parallel with the integration, we have rebuilt our signature property, private.com, and restructured our affiliate programs in all properties to compete aggressively for affiliate traffic. In addition, we have restructured our departments with resources highly skilled in affiliate traffic development and shifted our emphasis from account management towards sales. We have also developed solutions for critical new marketsinclude: gay, international and mobile. Furthermore, as a response to decreased margins in the adult entertainment industry, we have reviewed, analyzed and continued to restructure the operations of the non-online part of the business in order to become more cost effective. All the aforementioned processes have had impact both in terms of lost sales and additional selling, general and administrative expenses. However, as part of these processes, during 2010 we have reduced our workforce by 34% from 168 to 112 employees and we expect to continue this process as we become more efficient and enjoy economies of scale from the aforementioned acquisitions. During 2011, we expect to benefit from the continued restructuring and reduce costs and increase sales as we implement and launch new initiatives, such as fully combining our Internet assets, outsourcing major parts of our non-online operations and aggressively marketing our new Internet platforms.

35• web page development costs;

~~Critical~~• ~~Accounting~~acquisition ~~Estimates~~and licensing of content for our library of photographs and videos;

~~General~~• printing, processing and duplication costs; and

~~Our~~• ~~discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements~~selling, ~~which~~ ~~have~~general ~~been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates~~ and ~~judgments~~administrative ~~that affect the reported amount of assets and liabilities revenues and~~ expenses. On an ongoing basis, we evaluate our estimates, including those related to impairment of the library of photographs and videos and other long lived assets, allowances for bad debt, income taxes and contingencies and litigation. Accounts receivable and sales related to certain products are, in accordance with industry practice, subject to distributors right of return to unsold items. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Management periodically reviews such estimates. Actual results may differ from these estimates as a result of unexpected changes in trends.

~~We believe~~Over the ~~following~~years, ~~critical~~our ~~accounting~~cost ~~policies~~of ~~are~~sales ~~significantly~~has ~~affected~~fluctuated byrelative ~~judgments~~to net sales due to our use of new mediums for the dissemination of our products, such as the Internet, broadcasting and ~~estimates~~wireless ~~used~~and the different cost structure of those new mediums. We also incur significant web page development expenses annually in connection with the ~~preparation~~amortization of our ~~consolidated~~library ~~financial~~of ~~statements~~photographs and movies and capitalized development costs. We amortize these assets on a straight-line basis for periods of between three and five years.

~~Recognition~~Critical ofAccounting ~~Revenue~~Estimates

~~The~~General ~~Company’s primary sources of revenue are the sale of content delivered via Internet, broadcasting, DVD & magazines and mobile phones.~~

~~Internet~~Our ~~video~~discussion ~~on-demand offerings are sold directly via the Company’s online retail websites~~ and ~~are~~analysis ~~paid~~of ~~for~~our ~~almost~~financial ~~exclusively~~condition ~~by credit card. The Company recognizes revenue from video-on-demand when the service is rendered~~ and ~~collectability~~results ~~is reasonably assured, specifically, when the customer’s credit card is charged, which is, in most cases, simultaneous with delivery~~ of ~~the~~operations ~~on-demand~~are ~~video.~~based ~~Credit~~upon ~~card~~our ~~payments~~consolidated ~~accelerate~~financial ~~cash flow and reduce the Company’s collection risk~~statements, ~~subject to the merchant bank’s~~ ~~right~~which tohave ~~hold~~been ~~back~~prepared ~~cash pending settlement of the transactions. The Company also offers a prepaid video-on-demand service~~ in ~~which~~accordance awith ~~customer~~accounting ~~purchases~~principles agenerally number of minutes of on-demand video at a set rate per minute based on the number of minutes purchased. The rate per minute decreases as the number of prepaid minutes increases. The Company records revenue from pre-pay customers as deferred revenue prior to commencement of services and recognizes revenue as the services are rendered. Prepaid minutes purchased under this program do not expire.

~~The~~29 Company also offers a customer loyalty program under which each member’s purchase of video on-demand, DVDs, movie downloads, books, novelties or other items earns the member one point for each dollar spent. After accumulating 150 points, a customer may redeem the points for a $5 purchase. Points increase in value as they are accumulated and redeemed, with a maximum accumulation of 2,000 points, which may be redeemed for a $200 purchase. All of a customer’s points expire after 180 days of no purchase activity. Because the value of the award points is not significant in relation to the value of the services or products purchased by the customer, the Company records a liability for the estimated cost of the discounted services or products to be provided in the future.

RevenuesTable from the sale of subscriptions to the Company’s Internet website are deferred and recognized ratably over the subscription period. Contents

36 accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to impairment of the library of photographs and videos and other long lived assets, allowances for doubtful debts, income taxes and contingencies and litigation. Accounts receivable and sales related to certain products are, in accordance with industry practice, subject to distributors’ right of return to unsold items. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Management periodically reviews such estimates. Actual results may differ from these estimates as a result of unexpected changes in trends.

~~IPTV~~We ~~(Internet~~believe ~~Protocol Television), satellite & cable broadcasting revenues are recognized upon delivery when~~ the following ~~conditions~~critical ~~have~~accounting ~~been~~policies ~~met~~are ~~(i) license~~significantly ~~period~~affected of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale (ii) the arrangement fee is fixed or determinable and (iii) collection of the arrangement fee is reasonably assured. Such revenues may be generated by ~~either~~judgments ~~a fixed license fee or as an agreed percentage of sales, based on sales reported each month by the Company’s IPTV, cable~~ and ~~satellite affiliates.~~estimates ~~The~~used ~~affiliates~~in ~~do not report actual monthly sales for each of their systems to~~ the ~~Company~~preparation ~~until approximately 60 - 90 days after the month~~ of ~~service~~our ~~ends.~~consolidated ~~This~~financial ~~practice requires management to make monthly revenue estimates based on historical experience for each affiliated system~~statements. ~~Revenue is subsequently adjusted to reflect the actual amount earned upon receipt. Adjustments made to adjust revenue from estimated to actual have historically been immaterial.~~

~~DVDs &~~Recognition Magazines (physical products) are sold both to wholesalers, on firm sale basis, and via national newsstand distributors, with the right to return. Our physical products are generally multi-lingual and the principal market is in Europe. Revenues from the sale of ~~physical~~Revenue products where distributors are not granted rights-of-return are recognized upon transfer of title, which generally occurs upon delivery. Revenues from the sale of physical products under consignment agreements with distributors are recognized based upon reported sales by the Company’s distributors. Revenues from the sale of physical products under agreements that grant distributors rights-of-return are recognized upon transfer of title, which generally occurs on delivery, net of an allowance for returned product. Distributors with the right to return are primarily national newsstand distributors. Most of our products are bi-monthly (six issues per year) and remain on sale at a newsstand for a period of two months. Normally, all unsolds are reported to us within a period of four to six months from delivery. There are normally two to four national newsstand distributors for all newspapers and periodicals operating in each country. A majority of our national newsstand distributors are members of Distripress, the international organization for publishers and distributors, and carry out the distribution of the largest national and international newspapers and periodicals, including: Financial Times, Herald Tribune, Time, Newsweek, Vogue, etc. The Company uses specific return percentages per title and distributor based on estimates and historical data. The percentages vary from 50-80%. Percentages are reviewed on an on-going basis. Magazines have an approximate retail price of EUR 11.50 (USD 15.95) per copy and are printed on glossy high-quality paper at a cost of EUR 1.25 (USD 1.75). They are often shrink-wrapped in order to comply with local regulation or guidance for the sale of adult publications. In view of the high retail price, the margin and the physical quality of the magazines and the fact that the content has a very long “shelf-life” since it is not particularly linked to time, trends, fashion or current events, the Company has always collected the returns from newsstands in order to make them available for sale again. The Company operates scheduled re-distribution of returned magazines, via national newsstand distributors, together with DVDs as Magazine/DVD packs as a way of increasing DVD distribution. Since the national newsstand distributors have the right to return, the DVD packs are returned in order to be sold via an additional scheduled re-distribution. The retail price for products sold via re-distribution vary between EUR 14.95-19.95 (USD 20.75-27.70). Magazine returns not re-distributed as per above are sold on a firm sale basis to wholesalers as back numbers at a lower price than new issues. The Company has historically sold all returned copies at an average price higher than, or equal, to cost.

~~Revenues from mobile content (wireless) sales are recognized based on sales reported each month by mobile operators via aggregators.~~ The ~~aggregators~~ ~~do not report actual monthly sales for each of their operators to the~~ Company’s ~~until~~primary ~~approximately~~sources ~~60 - 90 days after the month~~ of ~~service ends. This practice requires management to make monthly~~ revenue ~~estimates based on historical~~are ~~experience~~the ~~for~~sale ~~each~~of ~~affiliated~~content ~~system.~~delivered ~~Revenue~~via ~~is subsequently adjusted to reflect~~ the ~~actual~~Internet, ~~amount~~broadcasting, ~~earned~~DVD ~~upon~~and ~~receipt.~~magazines ~~Adjustments~~and ~~made~~mobile ~~to adjust revenue from estimated to actual have historically been immaterial~~phones.

~~Accounts~~Internet ~~receivable~~video-on-demand offerings are sold directly via the Company’s websites and are paid for almost exclusively by credit card. The Company recognizes revenue from video-on-demand when the service is rendered and collectability is reasonably assured, specifically, when the customer’s credit card is charged, which is, in most cases, simultaneous with delivery of the on-demand video. Credit card payments accelerate cash flow and reduce the Company’s collection risk, subject to the merchant bank’s right to hold back cash pending settlement of the transactions.

WeRevenues ~~are~~from ~~required to estimate~~ the ~~collectability~~sale of ~~our~~subscriptions ~~trade~~to ~~receivables and notes receivable. A considerable amount of judgment is required in assessing~~ the ~~ultimate realization of these receivables~~Company’s ~~including~~internet ~~the~~website ~~current~~are ~~credit-worthiness~~deferred ~~of each customer. Significant changes in required reserves have been recorded in the past~~ and ~~may~~recognized ~~occur~~rateably inover the ~~future~~subscription ~~due to the current market environment~~period.

~~Management~~IPTV ~~reviews~~and satellite and cable broadcasting revenues are recognized upon delivery when the ~~allowance~~following ~~for~~conditions ~~doubtful~~have ~~accounts~~been onmet at(i) license ~~least~~period aof ~~quarterly~~the ~~basis~~arrangement has begun and ~~adjusts~~the customer can begin its exploitation, exhibition, or sale (ii) the ~~balance~~arrangement ~~based~~fee onis ~~their~~fixed ~~estimate~~or determinable and (iii) collection of the ~~collectability~~arrangement offee ~~specific~~is ~~accounts~~reasonably asassured. ~~well~~Such asrevenues amay ~~reserve~~be ~~for~~generated by either a ~~portion~~fixed license fee or as an agreed percentage of ~~other~~sales, ~~accounts~~based ~~which~~on ~~have~~sales ~~been~~reported ~~outstanding~~each month by the Company’s IPTV, cable and satellite affiliates. The affiliates do not report actual monthly sales for ~~more~~each ~~than~~of ~~180~~their systems to the Company until approximately 60—90 days after the month of service ends. This ~~estimate~~practice isrequires management to make monthly revenue estimates based on historical ~~losses~~experience ~~and~~for ~~information~~each ~~about~~affiliated ~~specific customers~~system. ~~After~~Revenue ~~collection attempts~~is ~~have~~subsequently ~~failed,~~adjusted ~~the~~to ~~Company~~reflect ~~writes~~the ~~off~~actual ~~the~~amount ~~specific~~earned ~~account~~upon receipt. Adjustments made to adjust revenue from estimated to actual have historically been immaterial.

37DVDs and magazines (physical products) are sold both to wholesalers, on firm sale basis, and via national newsstand distributors, with the right to return. Our physical products are generally produced in multiple languages and the principal market is in Europe. Revenues from the sale of physical products where distributors are not granted rights-of-return are recognized upon transfer of title, which generally occurs upon delivery. Revenues from the sale of physical products under consignment agreements with distributors are recognized based upon reported sales by the Company’s distributors. Revenues from the sale of physical products under agreements that grant distributors rights-of-return are recognized upon transfer of title, which generally occurs on delivery, net of an allowance for returned product. Distributors with the right to return are primarily national newsstand distributors. Most of our products are bi-monthly (six issues per year) and remain on sale at a newsstand for a period of two months. Normally, all unsolds are reported to us within a period of four to six months from delivery. There are normally two to four national newsstand distributors for all newspapers and periodicals operating in each country. The Company uses specific return percentages per title and distributor

~~Goodwill~~30 ~~and Other Intangible Assets~~

GoodwillTable represents the excess of the purchase price paid over the fair value of the net assets of businesses acquired. Contents

~~Other~~ based ~~Intangible~~on ~~Assets~~estimates ~~represents~~and ~~the~~historical ~~value~~data. ~~attributable~~The ~~to:~~percentages a)vary ~~Customer~~from ~~base,~~50-80%. ~~which~~Percentages ~~was~~are ~~acquired~~reviewed ~~from~~on ~~two~~an on-going basis. In view of the ~~Company’s~~high ~~former distributors~~retail inprice, the ~~U.S.~~margin and inthe ~~Canada~~physical inquality ~~2001~~of the magazines and ~~2003~~the fact that the content has a very long “shelf-life” since it is not particularly linked to time, ~~respectively~~trends, ~~(see~~fashion ~~Note~~or ~~8).~~current ~~The~~events, ~~amortization~~the ~~expense~~Company ishistorically ~~calculated~~has oncollected athe ~~straight-line~~returns ~~basis~~from ~~over~~newsstands, 10repackaged ~~years~~them, and them made them available for ~~each~~sale ~~acquisition,~~again. b)The ~~Broadcasting~~Company ~~asset~~operates scheduled re-distribution of returned magazines, ~~which~~via ~~was~~national ~~acquired~~newsstand ~~from~~distributors, ~~International Film~~together ~~Production~~with ~~and~~DVDs ~~Distribution~~as ~~Limited~~magazine/DVD inpacks ~~2003~~as ~~(see~~a ~~Note~~way 8)of increasing DVD distribution. AtSince the national ~~time~~newsstand ofdistributors ~~acquisition~~have the right to return, the ~~asset~~DVD ~~was~~packs ~~deemed~~are returned in order to ~~have~~be sold via an ~~indefinite~~additional ~~life~~scheduled ~~and~~re-distribution. isMagazine returns not ~~subject~~re-distributed toas ~~amortization,~~per ~~and~~above c)are ~~Trade~~sold ~~and~~on ~~Domain~~a ~~names,~~firm ~~which~~sale ~~were~~basis ~~acquired~~to ~~from~~wholesalers ~~GameLink and~~as ~~Sureflix~~back ~~(see~~issues ~~Note~~at ~~8).~~a Atlower ~~the~~price ~~time~~than ofnew ~~acquisition,~~issues. ~~the~~The ~~assets~~Company ~~were~~has ~~deemed~~historically tosold ~~have~~all returned copies at an ~~indefinite~~average ~~life~~price ~~and~~higher ~~are~~than, ~~not~~or ~~subject~~equal, to ~~amortization~~cost.

~~Goodwill~~Revenues ~~and~~from ~~indefinite~~mobile ~~lived~~content ~~intangible~~(wireless) ~~assets~~sales are ~~reviewed~~recognized ~~annually~~based ~~for~~on ~~impairment~~sales ~~(or~~reported ~~more~~each ~~frequently~~month ifby ~~indicators~~mobile operators via aggregators. The aggregators do not report actual monthly sales for each of ~~impairment~~their operators ~~arise),~~to ~~see~~the ~~Note~~Company 8until approximately 60—90 days after the month of service ends. ~~Further~~This ~~separable~~practice ~~intangible~~requires ~~assets~~management ~~that~~to ~~are~~make ~~not~~monthly revenue estimates based on historical experience for each affiliated system. Revenue is subsequently ~~deemed~~adjusted to ~~have~~reflect anthe ~~indefinite~~actual ~~life~~amount ~~are~~earned ~~amortized~~upon ~~over~~receipt. ~~their~~Adjustments ~~expected~~made ~~useful~~to ~~lives~~adjust revenue from estimated to actual have historically been immaterial.

~~During~~Accounts ~~2008,~~receivable ~~2009 and 2010, the we had impairment charges of EUR 293 thousand, EUR 884 thousand and EUR 1,562 thousand, respectively, and going forward additional impairment charges may occur, see Note 8.~~

~~Impairment~~We are required to estimate the collectability of ~~Long~~our trade receivables and notes receivable. A considerable amount of judgment is required in assessing the ultimate realizable value of these receivables including the current credit-~~Lived~~worthiness ~~Assets~~of each customer. Significant changes in required reserves have been recorded in the past and may occur in the future due to the current market environment.

~~The~~Management ~~Company~~reviews ~~evaluates~~ the allowance ~~carrying~~for ~~value~~doubtful ofaccounts ~~its~~on ~~long-lived~~at ~~assets~~least ~~when~~a ~~events~~quarterly orbasis ~~circumstances~~and ~~indicate~~adjusts the ~~carrying~~balance ~~value~~based ~~may~~on ~~not~~their beestimate ~~recoverable~~of ~~through~~ the ~~estimated~~collectability ~~undiscounted cash flows from the use~~ of ~~the~~specific ~~asset.~~accounts Anas ~~impairment~~well ~~loss~~as isa ~~then~~reserve ~~measured~~for asa ~~the~~portion ~~amount~~of byother accounts which ~~the~~have ~~carrying~~been ~~value~~outstanding offor ~~the~~more ~~asset~~than 180 ~~exceeds~~days. ~~its~~This ~~estimated~~estimate ~~fair~~is ~~value.~~based Inon ~~2010,~~historical ~~the~~losses ~~Company~~and ~~had~~information anabout ~~impairment~~specific ~~charge~~customers. ofAfter ~~EUR~~collection ~~548 thousand~~attempts ~~relating~~have ~~developed website technology~~failed, ~~see~~ ~~Note~~the 6.Company ~~Going~~writes ~~forward~~off ~~additional~~the ~~impairment~~specific ~~charges may occur~~account.

~~Inventories~~Goodwill and Other Intangible Assets

~~Inventories~~Goodwill ~~are~~represents ~~valued at~~ the ~~lower~~excess of ~~cost~~the orpurchase ~~market,~~price ~~with~~paid ~~cost~~over ~~principally~~the ~~determined~~fair onvalue ~~an average basis. Inventories principally consist~~ of ~~DVD’s and magazines held for sale or resale. The inventory is written down to~~ the ~~estimated~~net ~~market~~assets ~~value~~of ~~based~~businesses ~~upon assumptions about future demand and market conditions~~acquired. ~~If actual market conditions are less favorable than those projected by management, write-downs may be required.~~

~~Results~~Other Intangible Assets represents the value attributable to: a) Customer base, which was acquired from two of ~~Operations~~the Company’s former distributors in the U.S. and in Canada in 2001 and 2003, respectively, for which the amortization expense is calculated on a straight-line basis over 10 years for each acquisition; b) Broadcasting asset, which was acquired in 2003 and which, at the time of acquisition, was deemed to have an indefinite life and therefore not subject to amortization; and c) Trade and Domain names which, at the time of acquisition, were deemed to have an indefinite life and therefore not subject to amortization (see, Note 8 of the financial statements included in this Annual Report).

~~2010~~Goodwill ~~compared~~and indefinite lived intangible assets are reviewed annually for impairment (or more frequently if indicators of impairment arise). See Note 8 of the financial statements. Further separable intangible assets that are not deemed to ~~2009~~have an indefinite life are amortized over their expected useful lives.

~~Net~~During ~~sales.~~2010 ~~For~~and 2011 the ~~twelve~~Company ~~months ended December 31, 2010, we~~ had ~~net~~impairment ~~sales~~charges of EUR ~~23.3 million compared to net sales of EUR 23.~~1 ~~million for the twelve months ended December 31~~, ~~2009~~562,000 anand ~~increase of~~ EUR ~~0.2 million~~13,327,000 ~~or 1%. The increase was the result of increased Internet sales offset by decreases in sales of DVD & Magazines~~respectively, ~~broadcasting~~see ~~and~~Note ~~wireless. Internet sales increased EUR 1.6 million to EUR 14.~~8 ~~million,~~ ~~which represents an increase~~ of ~~12% compared to~~ the ~~same~~financial statements ~~period~~included ~~last year. The increase~~ in ~~Internet~~this ~~sales~~Annual ~~was~~Report. ~~the~~Subsequent ~~result~~to ~~of our acquisitions last~~ year. ~~Discounting~~end, ~~EUR~~as ~~3.4 million~~described in ~~impact~~Note ~~from~~20 ~~acquisitions, Internet Sales decreased EUR 1.8 million as a result~~ of the ~~rebuilding~~financial ofstatements ~~our~~included ~~website~~in ~~private.com.~~this ~~Broadcasting~~Annual ~~sales decreased EUR 0.6 million~~Report, ~~or 14%, to EUR 3.9 million. Wireless sales in~~ the ~~period~~Company ~~decreased~~divested ~~EUR~~itself ~~0.1 million, or 6%, to EUR 1.5 million as a result~~ of aGame ~~reduced~~Link ~~share~~and inSureflix ~~the~~for ~~consumer~~nil ~~spend~~consideration ~~provided to aggregators~~ and ~~content~~accordingly ~~providers~~the remaining byrelated ~~telecom~~goodwill ~~operators~~was inprovided ~~general~~against in ~~this~~full ~~business.~~as ~~DVD &~~at ~~Magazine sales decreased EUR 0.7~~December ~~million~~31, ~~or 18%, to EUR 3~~2011.~~2 million.~~ ~~The reduction in DVD & Magazine sales was primarily attributable to an industry wide decrease in DVD sales (see discussion under Outlook below).~~

~~Net~~31 sales in general were affected by changes in exchange rates. The annual average U.S. dollar exchange rate for the fiscal year 2010 compared to 2009 increased 4.2% which increased all our sales, cost and expenses denominated in U.S. dollars by the same percentage. Fluctuations in exchange rates between the euro and the dollar can affect the comparability of our results from year to year. We translate our consolidated subsidiaries whose functional currency is not the euro into the euro for reporting purposes. Income statement amounts are translated into euro using the average exchange rate for the fiscal year. The balance sheet is translated at the year-end exchange rate.

38Table of Contents

~~Overall,~~Impairment ~~net sales and margins were affected by the impact~~ of ~~free~~Long-Lived ~~adult~~Assets ~~content on the Internet. Going forward, we expect Internet, wireless and Broadcasting sales to increase (see discussion under Outlook below).~~

~~Cost~~The ofCompany ~~Sales.~~evaluates ~~Our cost of sales was EUR 16.8 million for~~ the ~~twelve~~carrying ~~months~~value ~~ended~~of ~~December 31,~~its ~~2010~~long-lived ~~compared~~assets towhen ~~EUR~~events ~~16.9 million~~or ~~for~~circumstances indicate the ~~twelve~~carrying ~~months~~value ~~ended~~may ~~December 31,~~not ~~2009, a~~be ~~decrease~~recoverable ofthrough ~~EUR~~the ~~0.1~~estimated ~~million.~~undiscounted ~~Included~~cash inflows ~~cost~~from ofthe ~~sales~~use ~~is Internet, broadcasting and wireless. printing, processing and duplication and amortization~~ of ~~library. Internet cost was EUR 9.6 million for~~ the ~~twelve months ended December 31, 2010 compared to EUR 7~~asset.~~3 million~~ ~~for~~An ~~the~~impairment ~~twelve~~loss ~~months~~is ~~ended~~then ~~December 31,~~measured ~~2009. Internet cost~~ as ~~a percentage of related sales in~~ the ~~period~~amount ~~was~~by ~~65%~~which ~~compared to 55% in~~ the ~~same~~carrying ~~period~~value ~~last year. The increase~~ of ~~EUR 2.4 million was primarily~~ the ~~result~~asset ofexceeds ~~the~~its ~~acquisition~~estimated offair ~~our acquisitions last year which contributed EUR 2~~value.6 ~~million.~~ In ~~addition, we rebuilt our private.com membership site and as a result of this we incurred accelerated amortization of EUR 0.4 million of the old site which was decommissioned in May~~ 2010. ~~Finally, developed website technology was charged with impairment of EUR 0.5 million. Discounting~~ the ~~effects~~Company ofhad ~~acquisitions, accelerated amortization and~~ impairment~~, Internet cost would have~~ ~~decreased~~charges byof EUR ~~1.1 million. Broadcasting and wireless cost was EUR 0.3 million for the twelve months ended December 31~~548,000 ~~2010~~relating ~~compared~~ to ~~EUR~~developed ~~0.6 million~~website ~~for~~technology ~~the twelve months ended December 31, 2009. Broadcasting~~ and ~~wireless cost as a percentage of related sales~~ in ~~the~~2011 ~~period was 6% compared to 10% in~~ the ~~same~~Company ~~period~~had ~~last~~impairment ~~year.~~charges ~~Printing,~~of ~~processing and duplication cost was~~ EUR 1~~.8 million for the twelve months ended December 31~~,089,000 ~~2010~~related ~~compared~~ to ~~EUR 3.1 million for~~ the ~~twelve~~divestment ~~months ended December 31, 2009, a decrease~~ of ~~EUR~~Game ~~1.3 million,~~Link ~~or 43%. The decrease was a reflection of the decrease in sales~~ and ~~the absence of write-down of magazine inventory which took place in 2009. Printing~~Sureflix, ~~processing~~see ~~and~~Note ~~duplication~~20 ~~cost as a percentage~~ of ~~DVD & Magazine sales was 57% for~~ the ~~twelve~~financial ~~months~~statements ~~ended~~included ~~December 31, 2010 compared to 81%~~ in ~~the~~this ~~same period last year. Amortization of library was EUR 5.1 million for~~Annual ~~the twelve months ended December 31, 2010 compared to EUR 5~~Report.~~8 million~~ ~~for~~Going ~~the~~forward ~~twelve~~additional ~~months~~impairment ~~ended~~charges ~~December 31,~~may ~~2009~~occur, ~~which~~see ~~represents~~Note a6 ~~decrease~~ of ~~EUR 0.7 million. Amortization of library does not vary with sales since it reflects~~ the ~~amortization~~financial ofstatements ~~our~~included ~~investments~~ in ~~content~~this ~~which~~Annual ~~has been available for sale for a period of three to five years~~Report.

~~Gross~~Inventories Profit. In the twelve months ended December 31, 2010, we realized a gross profit of EUR 6.4 million, or 28% of net sales compared to EUR 6.2 million, or 27% of net sales for the twelve months ended December 31, 2009.

~~Selling, general~~Inventories ~~and~~are ~~administrative~~valued ~~expenses.~~at ~~Our selling, general and administrative expenses were EUR 13.1 million for~~ the ~~twelve~~lower ~~months~~of ~~ended~~cost ~~December 31,~~or ~~2010 compared to EUR 23.9 million for the twelve months ended December 31~~market, with ~~2009,~~cost aprincipally ~~decrease~~determined ofon ~~EUR~~an ~~10.8 million,~~average ~~or 45%~~basis. ~~Adjusting~~Inventories ~~the~~principally ~~difference~~consist ~~for indemnification expense~~ of ~~EUR 0.5 million, impact from last year~~DVD’s ~~acquisitions~~and ofmagazines ~~EUR~~held ~~1.8 million~~for ~~offset~~sale byor ~~the absence of EUR 9~~resale.~~5 million~~ ~~of non-recurring~~The ~~expenses~~inventory inis ~~2009~~written ~~made~~down upto ~~of:~~the ~~provision~~estimated ~~against~~market ~~related~~value ~~party~~based ~~receivable~~upon ofassumptions ~~EUR~~about ~~7.3 million,~~future ~~investment~~demand ~~write-off of EUR 1.0 million, expense related to closing down subsidiary of EUR 0.6 million~~ and ~~acquisition related~~market ~~expenses~~conditions. ofIf ~~EUR~~actual ~~0.6 million,~~market weconditions ~~reduced~~are ~~selling,~~less ~~general~~favorable ~~and~~than ~~administrative~~those ~~expenses~~anticipated by ~~EUR 3.6 million as a result of our restructuring program~~management, ~~see~~write-downs ~~Restructuring~~may ~~above~~be ~~for additional discussion~~required.

~~Considering~~Results ~~indications during the three month period ending December 31, 2010, we expect to continue to reduce our selling, general~~of ~~and~~Operations ~~administrative expenses in 2011, significantly.~~

~~Impairment~~Fiscal ofYear ~~goodwill~~Ended ~~and other intangible assets. During the twelve month period ended~~ December 31, ~~2010,~~2011 ~~we recorded impairment charges of EUR 1.6 million~~ compared to ~~EUR~~Fiscal ~~0.9 million~~Year ~~for~~Ended ~~the twelve months ended~~ December 31, ~~2009. Impairment charges in~~ 2010 ~~consisted of EUR~~ 1.5 million and EUR 0.1 million related to our newly acquired eCommerce business in USA and our video distribution company in the Benelux countries, respectively. Impairment charge in 2009 related to our video distribution company in the Benelux countries,

~~Change~~As described more fully elsewhere in ~~fair~~this ~~value~~Annual Report, we have divested ourselves of ~~contingent~~the ~~consideration~~Game ~~payable~~Link and Sureflix subsidiaries. ~~During~~For accounting purposes, the ~~twelve~~net ~~month~~sales, ~~period~~cost ~~ended~~of sales, selling, general and administrative expenses, etc. of Game Link and Sureflix are included in the consolidated net sales, cost of sales, selling, general and administrative expenses, etc., line items in the income statement for the fiscal year ended December 31, 2010. However, wefor ~~recorded~~the afiscal ~~EUR~~year ~~4.2~~ended December ~~million~~31, ~~gain~~2011, ~~from~~the ~~change~~net sales, cost of sales, selling, general and administrative expenses, etc. of Game Link and Sureflix are not listed in ~~fair~~the ~~value~~income statement line items. Instead, the net results of ~~contingent~~Game ~~consideration~~Link ~~payable~~and Sureflix for the fiscal year ended December 31, 2011 contained in income statement as “profit acontributed ~~result~~by operations held for settlement of claims,” and the ~~performance~~net sales, cost of ~~GameLink~~sales, selling, general and ~~Sureflix~~administrative expenses, etc. ~~The~~of these two ~~recently~~former ~~acquired~~subsidiaries ~~companies~~are ~~have~~shown ~~not~~separately ~~reached~~in the ~~earnout~~footnotes to the financial ~~targets~~statements. ~~set~~As ~~for~~of ~~2009~~December 31, ~~and~~2011 ~~2010~~Game Link and Sureflix did not qualify for discontinued operations presentation. As a result, certain of the ~~fair~~results ~~value~~of ~~was~~operations ~~adjusted~~for ~~accordingly~~the fiscal year ended December 31, 2011 cannot be directly compared to the results of the operations of the Company for the fiscal year ended December 31, 2010.

39Net sales. Net sales for the fiscal year ended December 31, 2011 (“fiscal 2011”) decreased from net sales in the fiscal year ended December 31, 2010 (“fiscal 2010”) by EUR 15,341,000, or 65.9%. The decrease in net sales is attributable to both (a) the exclusion of EUR 11,423,000 of net sales Game Link and Sureflix in 2011, which net sales were excluded from net sales in fiscal 2011 because of the divestiture of those two subsidiaries, and (b) an overall decrease in net sales in our core “Private” branded operations. Since our divestment of Game Link and Sureflix, we have continued to operate the historical “Private” brand. The decrease in our core “Private” operations in 2011 was due in part to (i) decisions made by prior management, (ii) the disruption caused by shareholder and creditor lawsuits and the disputed proxy contests in both 2010 and 2011 (the 2011 annual meeting of shareholders was eventually held in January 2012), and (iii) industry in the adult entertainment industry in general (such as the proliferation of free adult content provided over the Internet, which has reduced our internet sales, and the continuing decline of printed magazine sales). In addition, on August 25, 2011 the Nevada State Court appointed a receiver for the Company for the purposes of preserving Private Media’s assets and business. While the receiver was successful in preserving the Company’s assets and business, prior management’s resistance to the receiver’s involvement and supervision further impeded the Company’s operations and business during the last four months of 2011. In 2011 (excluding Game Link and Sureflix), broadcasting represented 36% of our net sales, internet represented 26% of net sales, DVDs and magazine sales represented 25% of net sales, and wireless represented 13%. Prior management’s relations with certain of the Company’s primary creditors and customers negatively affected net sales in 2011.

~~Operating~~32 loss. We reported an operating loss of EUR 4.1 million for the twelve months ended December 31, 2010 compared to an operating loss of EUR 18.6 million for the twelve months ended December 31, 2009. The decrease of EUR 14.5 million in operating loss was the result of the increase in gross profit, the reduction in selling, general and administrative expenses and gain from change in fair value of contingent consideration payable offset by impairment charges.

InterestTable expense. We reported interest expense of EUR 0.3 million for the twelve months ended December 31, 2010, compared to EUR 0.4 million for the twelve months ended December 31, 2009. Contents

~~Income~~Cost ~~tax~~of ~~expense/benefit~~Sales. WeOur ~~reported~~cost anof ~~income~~sales ~~tax~~was ~~expense~~EUR of6,649,000 in fiscal 2011 compared to EUR 16,848,000 0in fiscal 2010.~~1 million~~ ~~for~~Included in cost of sales is cost of operating our internet, broadcasting and wireless businesses, the cost of printing, processing and duplication, and the amortization of library. The decrease in fiscal 2011 is due in ~~twelve~~large ~~months~~part ~~ended~~to ~~December 31~~the exclusion of EUR 6,882,000 ~~2010~~of cost of sales incurred by Game Link and Sureflix. However, cost of sales at our core “Private” operations did not decrease in fiscal 2011 as much as our net sales decreased in fiscal 2011 compared to an2010 ~~income~~in ~~tax~~large ~~expense~~part because of ~~EUR~~the ~~1.7 million~~increase ~~for~~in the ~~twelve~~amortization ~~months~~of ~~ended~~our ~~December 31,~~library ~~2009~~of photographs and videos. ~~The~~As ~~income~~a ~~tax~~result, ~~expense/benefit~~our ~~recorded~~cost ~~for~~of ~~both~~sales ~~2010~~as ~~and~~a ~~2009~~percentage ~~were~~of ~~deferred~~net sales increased to 84% in fiscal 2011 from 72% in fiscal 2010.

~~Net~~Gross ~~loss~~Profit. WeIn ~~reported a loss of EUR 4.3 million for~~ the twelve months ended December 31, 2010, ~~compared~~we torealized ~~EUR 20.5 million~~a ~~for~~gross ~~the~~profit ~~twelve~~of ~~months~~EUR ~~ended December 31~~6,422,000, ~~2009.~~or ~~The~~28% ~~decrease~~ of ~~EUR~~net ~~16.2 million~~sales compared ~~was~~to ~~primarily~~EUR ~~the~~1,280,000, ~~result~~or 16% of ~~decreased~~net ~~operating~~sales ~~loss~~for ~~and~~the ~~deferred~~twelve ~~tax~~months ended December 31, 2011.

~~2009~~Selling, ~~compared~~general and administrative expenses. Our selling, general and administrative expenses for fiscal 2011 decreased to ~~2008~~EUR 7,362,000 from EUR 12,599,000 in fiscal 2010. In 2011, Game Link and Sureflix had selling, general and administrative expenses of EUR 3,976,000 which amounts have been excluded from the fiscal 2011 calculations. The selling, general and administrative expenses in fiscal 2010 included the costs of a larger workforce that we reduced by 34% from 168 to 112 employees during 2010—the effects of which were not fully realized until 2011. These reductions are partially offset in fiscal 2011 by significant litigation expenses related to prior management’s dispute with the Company’s shareholders and creditors.

~~Net~~Impairment ~~sales. For the twelve months ended December 31, 2009, we had net sales~~ of ~~EUR~~goodwill ~~23.1 million~~and ~~compared~~other tointangible ~~net sales of EUR 19~~assets.~~7 million~~ ~~for~~During the twelve ~~months~~month period ended December 31, ~~2008,~~ ~~an increase of EUR 3.4 million~~2010, orwe recorded ~~17%.~~impairment ~~The~~charges ~~increase was the result~~ of ~~increased Internet sales offset by decreases in sales of DVD & Magazines, broadcasting and wireless. Internet sales increased~~ EUR ~~8.9 million to EUR 13.~~1 ~~million~~,562,000, which ~~represents~~impairment anrelated ~~increase~~to ofprimarily ~~211% compared~~ to the ~~same period last year. The increase in Internet sales was the result of the~~ acquisition of ~~GameLink~~Game Link and Sureflix ~~which contributed EUR 10~~.~~2 million~~ ~~and~~In ~~was~~fiscal ~~offset~~2011, bywe ~~a decrease~~recorded ofimpairment ~~EUR~~charges ~~1.3 million in our prior Internet business. The decrease in the prior Internet business was the result~~ of ~~a complete reorganization of this business as a result of the rebuilding of the Private websites. Broadcasting sales decreased~~ EUR ~~1.3 million~~13, ~~or 23%~~368,000 ~~to EUR 4.5 million primarily~~ as aall ~~result~~remaining ofgoodwill ~~a decrease in cabin royalties~~ and ~~title~~related ~~sales,~~intangible assets ~~offset~~of byGame ~~increases~~Link ~~in TV-channel~~ and ~~video~~Sureflix onwere ~~demand~~written ~~sales~~off ~~via~~because ~~IPTV~~of ~~and cable. Wireless sales in~~ the ~~period decreased~~divestment ~~EUR 0.4 million, or 18%, to EUR 1.6 million as a result of a reduced share~~ in ~~the~~2012 ~~consumer spend provided to aggregators~~ and ~~content~~which ~~providers~~also byincludes ~~the~~an ~~telcos~~impairment incharge ~~general~~for inassets ~~this~~relating ~~business. DVD & Magazine sales decreased EUR 3.8 million, or 50%,~~ to ~~EUR~~the ~~3.8~~Company’s ~~million.~~video ~~The~~distribution ~~reduction~~company in ~~DVD &~~the ~~Magazine~~Benelux ~~sales was primarily attributable to an industry wide decrease in DVD sales (see discussion under Outlook below)~~countries.

~~Net~~Provision ~~sales~~for inshareholders’ ~~general~~and ~~were~~creditor ~~affected by changes in exchange rates~~claims. ~~The~~In ~~annual~~fiscal ~~average~~2011, ~~dollar~~we ~~exchange~~established ~~rate~~a ~~for~~provision ~~the~~of ~~fiscal~~EUR ~~year~~5,830,000 ~~2009~~for ~~compared~~shareholders’ toand ~~2008~~creditor ~~increased~~claims. 6%This ~~which~~provision ~~increased~~includes ~~all~~an ~~our~~increase ~~sales, cost and expenses~~ in ~~dollar by~~ the ~~same~~amount ~~percentage.~~due ~~Fluctuations~~under inthe ~~exchange~~Commerzbank ~~rates~~Note, ~~between~~ the ~~euro~~legal fees and ~~the~~costs ~~dollar~~that ~~can affect~~ the ~~comparability~~Nevada ofState ~~our~~Court ~~results~~ordered ~~from~~the ~~year~~Company to ~~year.~~pay ~~We translate~~to ~~our~~the ~~consolidated~~plaintiffs, ~~subsidiaries~~the ~~whose~~legal ~~functional~~fees ~~currency~~and iscosts ~~not~~we were ~~the~~required ~~euro~~to ~~into~~pay ~~the~~Consipio ~~euro~~because ~~for~~of ~~reporting~~the ~~purposes.~~New ~~Income~~York ~~statement~~lawsuit, and amounts ~~are~~that ~~translated~~we ~~into~~originally ~~euro~~owed ~~using~~third ~~the~~parties, ~~average~~which ~~exchange~~obligations ~~rate~~were ~~for~~acquired ~~the~~by ~~fiscal year~~Consipio. ~~The~~No ~~balance~~such ~~sheet~~provision ~~is translated~~was atestablished ~~the~~in ~~year-end~~fiscal ~~exchange rate~~2010.

~~Overall,~~Change ~~net~~in ~~sales~~fair ~~and~~value ~~margins~~of ~~were~~contingent ~~affected~~consideration bypayable. During the ~~current~~twelve-month ~~state~~period ofended ~~world~~December 31, ~~economy~~2010, we recorded ~~and~~a EUR 4,189,000 gain from change in fair value of contingent consideration payable as a result of the ~~impact~~performance of ~~free~~Game ~~adult~~Link ~~content~~and onSureflix. The fair values of the ~~Internet~~amounts owed for the Game Link and Sureflix purchases were adjusted because prior management concluded that those companies had not reached the earnout targets set for 2009 and 2010. ~~Going~~The ~~forward~~EUR 184,000 webenefit ~~expect~~in ~~Internet,~~fiscal ~~wireless~~2011 ~~and~~reflects ~~Broadcasting~~an ~~sales~~adjustment to ~~increase~~the ~~(see~~final ~~discussion~~settlement ~~under~~made ~~Outlook~~in ~~below).~~2012

40Operating loss. Our operating loss in fiscal 2011 increased by EUR 20,998,000 to EUR 25,407,000 primarily because of the EUR 13,368,000 impairment of goodwill and intangible assets (mostly related to the divestment of Game Link and Sureflix) and the EUR 5,830,000 provision for shareholders’ and creditor claims. Even if the two foregoing adjustments are excluded, the Company would have incurred an operating loss in 2011 because of the decrease in net sales, the decrease in gross margins, and the high selling, general and administrative expenses. Since the end of fiscal 2011, new management has initiated steps to stabilize the decrease in net sales, to reduce cost of sales, and to reduce selling, general and administrative expenses.

~~Cost~~Interest ~~of Sales~~expense. ~~Our~~Interest ~~cost~~expense of sales was EUR 16.9 million for the twelve months ended December 31, 2009 compared to EUR 13.5 million for the twelve months ended December 31, 2008, an increase of EUR 3.4 million, or 25%.Included in ~~cost~~fiscal of2011 ~~sales~~remained isrelatively ~~Internet,~~unchanged ~~broadcasting~~from ~~and~~fiscal wireless. printing, processing and duplication and amortization of library. Internet cost was EUR 7.3 million for the twelve months ended December 31, 2009 compared to EUR 1.2 million for the twelve months ended December 31, 2008. Internet cost as a percentage of related sales in the period was 55% compared to 28% in the same period last year. The increase of EUR 6.1 million was primarily the result of the acquisition of GameLink and Sureflix which contributed EUR 5.4 million. In addition, we are rebuilding our private.com membership site and as a result of this we have incurred increased costs, including accelerated amortization of EUR 0.2 million of the old site which is being decommissioned in May 2010. ~~Broadcasting~~Subsequent ~~and wireless cost was EUR 0.6 million for the twelve months ended December 31, 2009 compared~~ to ~~EUR 0.6 million for~~ the ~~twelve~~fiscal ~~months ended December 31~~2011, ~~2008. Broadcasting and wireless cost as a percentage of related sales in the period was 10%~~ ~~compared~~current tomanagement 8%has inconverted the ~~same~~Commerzbank ~~period~~Note ~~last~~into ~~year.~~Series ~~Printing,~~B ~~processing~~Preferred and duplication cost was EUR 3.1 million for the twelve months ended December 31, 2009 compared to EUR 5.4 million for the twelve months ended December 31, 2008, a decrease of EUR 2.3 million, or 42%. The decrease was primarily a reflection of the decrease in sales offset by the write-down of our magazine inventory by 50%. Printing, processing and duplication cost as a percentage of DVD & Magazine sales was 81% for the twelve months ended December 31, 2009 compared to 70% in the same period last year. Amortization of library was EUR 5.8 million for the twelve months ended December 31, 2009 compared to EUR 6.3 million for the twelve months ended December 31, 2008, which represents a decrease of EUR 0.5 million. Amortization of library does not vary with sales since it reflects the amortization of our investments in content which has been available for sale for a period of three to five years.

~~Gross~~33 Profit. In the twelve months ended December 31, 2009, we realized a gross profit of EUR 6.2 million, or 27% of net sales compared to EUR 6.2 million, or 31% of net sales for the twelve months ended December 31, 2008. GameLink and Sureflix contributed EUR 4.8 million which was offset by EUR 4.8 million in reduced gross profit from our other lines of business.

Selling,Table general and administrative expenses. Our selling, general and administrative expenses were EUR 24.8 million for the twelve months ended December 31, 2009 compared to EUR 13.1 million for the twelve months ended December 31, 2008, an increase of EUR 11.8 million, or 90%. The increase was primarily the result of the non-recurring expense of EUR 7.3 million associated with the full provision against related party receivable, see Note 13 to the consolidated financial statements, and the acquisition of GameLink and Sureflix which added EUR 5.2 million. The total of EUR 12.5 million was offset by EUR 0.7 million net in reduced selling, general and administrative expenses in all other areas. The net EUR 0.7 million consisted of a reduction in payroll and general expenses of EUR 1.1 million and EUR 2.0 million, respectively, offset by an increase of EUR 0.3 million in bad debt provision, EUR 0.2 million in depreciation and other non-recurring expenses of EUR 1.9 million, including investment write-off, expense related to closing down subsidiary and acquisition expenses. Contents

~~Discounting~~ Stock ~~the~~and ~~effect~~has restructured its EUR 1,000,000 institutional line of ~~newly~~credit. ~~acquired~~These ~~companies~~actions ~~and~~are ~~non-recurring~~expected ~~expenses~~to reduce the Company’s future interest payment obligations. However, since the ~~company~~end ~~reduced~~of fiscal ~~selling~~2011, ~~general~~the ~~and~~Company ~~administrative~~has ~~expenses~~also byobtained loans in the amount of EUR 2800,000 that bear interest at a rate of 9.69% per ~~million~~annum.

~~Overall,~~Income ~~selling,~~tax ~~general~~expense/benefit. ~~and~~We ~~administrative~~reported ~~expenses~~an ~~included~~income tax benefit of EUR ~~9.5~~92,000 for the twelve months ended December ~~million~~31, of2010 ~~non-recurring~~because ~~expenses~~of ~~made~~the uputilization of: ~~provision~~a tax loss carryforward. In fiscal 2011, ~~against~~we ~~related~~recorded ~~party~~an ~~receivable~~income tax expense of EUR ~~7.3 million~~4,454,000 ~~investment~~to reflect the write-off of EUR ~~1.0~~4,454,000 of the EUR 5,014,000 deferred income tax asset on the balance sheet as at December ~~million~~31, ~~expense~~2010. Because much of the EUR 4,454,000 income tax benefit related to ~~closing~~U.S. ~~down~~taxes, ~~subsidiary~~these ofbenefits ~~EUR~~were 0dependent upon future income to be generated in the United States.~~6 million~~ Since we disposed of Game Link and ~~acquisition~~Sureflix, ~~related~~we ~~expenses~~would ofno ~~EUR~~longer 0be generating sufficient taxable income in the United States that could benefit from the income tax asset.6 ~~million~~As a result, EUR 4,454,000 of our income tax asset was written off in fiscal 2011.

~~Operating~~ Net loss. WeOur ~~reported~~net ~~an operating~~ loss of EUR ~~18.6 million~~29,324,000 for ~~the~~fiscal ~~twelve~~2011 ~~months ended December 31, 2009~~ compared to anthe ~~operating~~net loss of EUR ~~6.9 million~~4,335,000 ~~for~~in fiscal 2010 reflects the ~~twelve~~large ~~months~~provisions ~~ended~~and ~~December 31,~~write ~~2008.~~offs ~~The~~taken ~~increase~~in offiscal ~~EUR~~2011 ~~11.7 million~~due into ~~operating~~the ~~loss~~divestment ~~was~~of Game Link and Sureflix, the ~~result~~settlement of certain shareholder and creditor claims and the ~~increase~~deterioration in ~~selling,~~the ~~general~~Company’s operations in 2011 under prior management and ~~administrative~~the ~~expenses~~supervision of the court-appointed receiver.

~~Interest~~Liquidity ~~expense.~~and WeCapital ~~reported~~Resources ~~interest expense of EUR 0.4 million for the twelve months ended December 31, 2009, compared to EUR 0.3 million for the twelve months ended December 31, 2008.~~

~~Income~~Historically, ~~tax~~we ~~expense/benefit.~~have Wefunded our liquidity ~~reported~~and ancapital ~~income~~resources ~~tax~~from ~~expense~~cash ofgenerated ~~EUR~~by ~~1.7 million~~our ~~for~~operating ~~the~~activities ~~twelve~~and ~~months~~from ~~ended~~borrowings from third parties. As of December 31, ~~2009~~2011, ~~compared~~we tohad ana ~~income~~working ~~tax~~capital ~~benefit~~deficit of EUR 111,438,000.~~8 million~~ ~~for~~As ~~the~~described ~~twelve~~elsewhere ~~months~~in ~~ended~~this ~~December 31~~Annual Report, ~~2008.~~since ~~The~~2011 we ~~income~~have ~~tax~~converted ~~expense/benefit recorded~~short-term ~~for~~debt ~~both~~and ~~2009~~other ~~and~~accrued ~~2008~~liabilities ~~were~~into ~~deferred~~shares of our newly issued Series B Preferred Stock.

~~Net~~Operating ~~loss.~~Activities We reported a loss of EUR 20.5 million for the twelve months ended December 31, 2009, compared to EUR 5.2 million for the twelve months ended December 31, 2008. The increase of EUR 15.3 million was primarily the result of increased selling, general and administrative expenses, including EUR 9.5 million of non-recurring expenses and a difference in deferred tax of EUR 3.5 million.

41Despite having a net loss of EUR 29,324,000, in fiscal 2011 we generated EUR 2,715,000 of net cash from our operating activities. The principal non-cash adjustments that enabled us to have positive net cash flow from operations included (1) impairment of goodwill and other intangible assets of EUR 12,279,000, (2) provision for shareholders’ and creditor claims of EUR 5,830,000, (3) deferred income taxes EUR 4,432,000, (4) provision for doubtful accounts of EUR 1,072,000, (5) impairment of long-lived assets of EUR 1,089,000, (6) amortization of web pages of EUR 1,681,000, (7) amortization of photographs and videos of EUR 3,887,000, and (8) depreciation of EUR 1,047,000. These adjustments were partially offset by increases in trade accounts payable (EUR 1,149,000) and income taxes payable (EUR 267,000).

~~Liquidity~~Investing ~~and~~Activities ~~Capital Resources~~

WeNet ~~generate~~ cash ~~from~~used ~~our~~in ~~operating~~investing activities ~~and~~for ~~borrowings~~the ~~from~~fiscal year ~~third~~ended ~~parties~~December 31, 2011 was EUR 1,802,000. ~~Our~~The ~~principal~~investing ~~uses~~activities were investment in other assets of ~~cash~~approximately ~~include~~EUR ~~website~~1,380,000, which is principally investment in web page development for our websites, and investment in library of photographs and ~~building~~videos ~~our~~of only EUR 422,000, reflecting the significant decrease in the release of video titles in fiscal 2011 by prior management (investment in library of photographs and ~~movies~~videos in 2010 and 2009 was EUR 1,834,000 and EUR 2,335,000, respectively).

WeFinancing ~~reported~~Activities a working capital deficit of EUR 1.1 million at December 31, 2010, a decrease of EUR 2.4 million compared to the year ended December 31, 2009. The reduction in working capital is attributable to a decrease in current assets and an increase in current liabilities.

~~Operating~~Net ~~Activities~~cash used in financing activities for the fiscal year ended December 31, 2011 was EUR 415,000, as repayments of borrowings exceeded new amounts borrowed during the year.

~~Net~~Liquidity cash provided by our operating activities was EUR 4.7 million for 2010 compared to EUR 3.3 million for 2009, and was primarily the result of net loss, as adjusted for non-cash transactions. We adjusted our net loss of EUR 4.3 million to reconcile it to net cash flows from operating activities. Adjustments included (1) deferred income taxes EUR 0.3 million, (2) depreciation of EUR 0.7 million, (3) gain from change in fair value of contingent consideration payable of EUR 4.2 million, (4) bad debt provision of EUR 0.7 million, (5) impairment of goodwill and other intangible assets of EUR 1.6 million, (6) amortization of other intangible assets of EUR 0.1 million, (7) amortization of web pages of EUR 3.4 million and (8) amortization of photographs and videos of EUR 5.1 million, providing a total of EUR 11.6 million which was offset by deferred income taxes EUR 0.3 million and gain from change in fair value of contingent consideration payable of EUR 4.2 million, which resulted in an adjusted income of EUR 2.8 million. Changes in operating assets and liabilities added EUR 1.9 million net through trade accounts receivable, inventories, prepaid expenses and other current assets, income taxes payable and accrued other liabilities totaling EUR 2.0 million, offset by EUR 0.1 million from accounts payable trade. The increase in cash provided by operating activities for 2010 compared to 2009 is primarily the result of net loss, as adjusted for non-cash transactions.

~~Net~~In ~~cash~~each ~~provided~~of ~~by our operating activities was EUR 3.3 million for 2009 compared to EUR 5.2 million for 2008, and was primarily~~ the ~~result~~past ofthree ~~net~~years ~~loss,~~we ashave ~~adjusted~~experienced ~~for~~losses ~~non-cash transactions. We adjusted our net loss of EUR 20.5 million to reconcile it to net cash flows~~ from ~~operating activities~~operations. ~~Adjustments~~At ~~included (1)~~December ~~deferred income taxes EUR 1.7 million~~31, ~~(2) depreciation of EUR 1.0 million~~2011, ~~(3) bad~~we ~~debt provision~~had ofcash ~~EUR~~and ~~7.8 million,~~cash ~~(4) write-down~~equivalents of ~~magazine inventory of EUR 0.8 million, (5) amortization of other intangible assets of EUR 0.1 million, (6) impairment of goodwill of EUR 0.9 million,~~ ~~(7) write-off of investment of~~ EUR ~~1.0 million~~179,000 ~~(8) amortization of web pages of EUR 2.1 million~~ and ~~(9) amortization~~a ofworking ~~photographs~~capital ~~and~~deficit ~~videos~~ of EUR ~~5.8 million~~11, ~~which resulted in an adjusted income of EUR 0.8 million. Changes in operating assets and liabilities added EUR 2.6 million net through trade accounts receivable~~438, ~~inventories, prepaid expenses and other current assets and accounts payable trade totaling EUR 3~~000.~~2 million,~~ ~~offset~~As bya ~~EUR 0.7 million from, income taxes payable, related party receivable, and accrued other liabilities. The decrease in cash provided by operating activities for 2009 compared to 2008 is primarily the~~ result ~~of net loss~~, asour ~~adjusted for non-cash transactions, offset by changes in operating assets and liabilities.~~

~~Net~~34 cash provided by our operating activities was EUR 5.2 million for 2008 compared to EUR 7.6 million for 2007, and was primarily the result of net loss, as adjusted for non-cash transactions and uses of cash related to changes in operating assets and liabilities. We adjusted our net loss of EUR 5.2 million to reconcile it to net cash flows from operating activities. Adjustments included (1) depreciation of EUR 1.0 million, (2) bad debt provision of EUR 0.3 million, (3) amortization of other intangible assets of EUR 0.4 million and (4) amortization of photographs and videos of EUR 6.3 million which was offset by EUR 1.9 million from deferred income taxes, which resulted in an adjusted income of EUR 1.1 million. Changes in operating assets and liabilities added EUR 4.1 million net through trade accounts receivable, inventories, prepaid expenses and other current assets and income taxes payable totaling EUR 5.7 million, offset by EUR 1.6 million from, related party receivable, accounts payable trade and accrued other liabilities. The decrease in cash provided by operating activities for 2008 compared to 2007 is primarily the result of net loss, as adjusted for non-cash transactions, offset by changes in operating assets and liabilities.

42Table of Contents

~~Investing~~ independent ~~Activities~~registered public accounting firm has concluded that there is substantial doubt as to our ability to continue as a going concern, and has modified its report in the form of an explanatory paragraph describing the events that have given rise to this uncertainty. Our ability to continue as a going concern is based on our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations.

~~Net~~Since ~~cash~~2011, ~~used~~our inmanagement ~~investing~~has ~~activities for the fiscal year ended December 31~~changed, ~~2010~~and ~~was~~new ~~EUR~~management ~~3.5~~has ~~million.~~implemented ~~The~~a ~~investing~~number ~~activities~~of ~~were~~steps ~~investment~~to inimprove ~~library~~our ofcash ~~photographs~~flow, ~~and~~reduce ~~videos~~our ofworking ~~EUR~~capital ~~1.8 million~~deficit, ~~which were carried out in order to maintain the 2010~~ and ~~2011 release schedules for videos and capital expenditure of EUR 1.8 million. Capital expenditures is primarily related~~ to ~~investment~~increase in our ~~websites~~liquidity. ~~The~~These ~~decrease~~steps ofinclude ~~EUR 0.4 million over~~ the ~~comparable~~following: ~~twelve-month 2009 period is principally due to decreased investment in library of photographs and videos, offset by increased investment in our websites.~~

~~Net~~• ~~cash~~As ~~used~~part inof ~~investing~~a ~~activities~~larger ~~for~~settlement ~~the~~with ~~fiscal~~Consipio, ~~year~~in ~~ended~~ December 31 2012, ~~2009~~we ~~was~~issued 800,000 shares of our newly created Series B Preferred Stock (at EUR 310.900 ~~million.~~per ~~The~~share) ~~investing activities~~to ~~were~~Consipio ~~investment~~as payment in ~~library~~full offor ~~photographs~~liabilities ~~and~~in ~~videos~~excess of EUR ~~2.3 million~~8,000,000. ~~which~~The liabilities that were ~~carried~~repaid ~~out~~by inmeans ~~order~~of tothis ~~maintain~~equity issuance included the ~~2009~~entire ~~and~~outstanding ~~2010~~balance ~~release~~of ~~schedules~~the ~~for~~Commerzbank ~~videos~~Note, ~~and~~the ~~capital~~legal ~~expenditure~~fees ofand ~~EUR~~costs ~~1.6~~that ~~million.~~the ~~Capital~~Nevada ~~expenditures~~State ~~is primarily~~Court ~~related~~ordered us to ~~investment~~pay, inthe ~~our~~legal ~~websites.~~fees ~~The~~and ~~decrease~~costs ~~over~~we were required to pay Consipio because of the ~~comparable~~New ~~twelve-month~~York ~~2008~~lawsuit, ~~period~~and isamounts ~~principally~~that ~~due~~we owed to ~~decreased~~third ~~investment~~parties, inwhich ~~library~~obligations were acquired by Consipio. The ~~decrease~~foregoing insettlement ~~investment~~both inreduced ~~library~~the isamount of our cash obligations and ended the ~~result~~litigation (which resulted in significant savings of ~~our~~future ~~restructuring~~legal ~~plans,~~and ~~see above~~other ~~under~~fees ~~Restructuring.~~related to the litigation);

~~Net~~• ~~cash~~We ~~used~~settled ~~in investing activities for the fiscal year ended December 31~~$450,000 ~~2008 was EUR 5.4 million. The investing activities were investment in library~~ of ~~photographs~~attorneys’ fees and ~~videos~~costs ofthat ~~EUR~~the ~~4.3 million,~~Nevada ~~which~~Court ~~were carried out in~~ order us to ~~maintain~~pay ~~the 2008 and 2009 release schedules for magazines, DVDs. In addition~~ to ~~investment~~Tisbury in ~~library~~ ofconnection ~~photographs~~with ~~and videos, EUR 1.1 million was invested in capital expenditures. The decrease over~~ the ~~comparable~~Nevada ~~twelve-month~~Action ~~2007~~by ~~period~~issuing ~~is principally due~~ to ~~decreased~~Tisbury ~~investment~~3,000,000 inunregistered ~~both~~shares ~~library and capital expenditures. The decrease in investment in library is the result~~ of ~~our~~Common ~~restructuring plans~~Stock, ~~see~~and ~~above~~a ~~under~~five-year, ~~Restructuring.~~contingent warrant;

~~Financing Activities~~• We restructured a EUR 1,073,500 debt that one of our subsidiaries owed to a European bank under a defaulted loan that we had guaranteed. Under the new terms, the loan now bears interest at a rate of 3% per annum, with interest payments due annually at the end of each calendar year. The repayment dates for the unpaid principal balance have been extended, so that the outstanding principal amount must be repaid as follows: (i) EUR 350,000 is due on January 1, 2016, (ii) EUR 350,000 is due on January 1, 2017, and the balance, (iii) EUR 373,500 is due on January 1, 2018. As a result, our current cash payment obligations have been substantially reduced;

~~Net~~• ~~cash~~We ~~used~~have insettled ~~financing~~and ~~activities~~paid ~~for~~certain ~~the~~outstanding ~~fiscal~~professional ~~year~~fees ~~ended~~(principally ~~December 31,~~legal ~~2010~~fees) ~~was~~that ~~EUR 0.2 million,~~were ~~represented~~incurred ~~primarily~~ by ~~net~~prior ~~reductions~~management inat ~~borrowings,~~a ~~see Note 10. Borrowings, in the consolidated financial statements for further information.~~ discount;

~~Net~~• ~~cash~~In ~~provided~~February by2013, ~~financing~~in ~~activities~~order ~~for~~to settle some of the ~~fiscal~~liabilities ~~year~~prior ~~ended~~management ~~December 31~~accrued (including the foregoing legal fees), ~~2009~~we ~~was~~borrowed a total of EUR ~~0.1 million~~800,000 ~~represented~~from ~~primarily~~three byunaffiliated ~~net~~foreign ~~additions~~lenders. toThe ~~long-term~~loans ~~borrowings~~bear interest at a rate of ~~EUR~~9.9% 1per annum and are due and payable on December 31, 2014.~~6 million offset~~ byInterest ~~EUR~~is 1payable quarterly in arrears.~~5 million~~ Our obligations under the loans are secured by a lien on certain motion pictures in ~~net~~our ~~reduction~~film library. These loans enabled us to repay many of ~~short-term~~prior ~~borrowings,~~management’s ~~see~~debts ~~Note~~at ~~10.~~a ~~Borrowings~~discount, inthereby ~~the~~reducing ~~consolidated~~our ~~financial~~trade ~~statements~~accounts ~~for~~payable ~~further~~and ~~information.~~other short-term obligations; and

~~Net~~• ~~cash~~We ~~provided~~have byreduced ~~financing~~our ~~activities~~on-going ~~for~~selling, general and administrative expenses by reducing the ~~fiscal~~amount ~~year~~of ~~ended~~office ~~December 31,~~space ~~2008~~we ~~was~~use ~~EUR~~in 0our current headquarters and by closing our satellite office in Spain.~~1 million~~ In addition, ~~represented~~we ~~primarily~~have bysubstantially ~~additions~~reduced the Company’s headcount from 45, not including 48 employees of Game Link and Sureflix, in 2011 to ~~short-term~~38 ~~borrowings~~employees as of ~~EUR~~May 021, 2013.~~4 million offset~~ byThe ~~EUR~~foregoing ~~0.3 million~~reduction in ~~repayments~~headcount onand ~~short~~the ~~and~~reduction ~~long-term~~in ~~borrowings.~~rental expenses are expected to save the Company an estimated EUR 741,000 annually.

~~Liquidity~~As a result of the foregoing actions, and based on our internal forecasts of cash expected to be generated from our current operations, as of the date of this Annual Report, we currently expect that our available cash resources and cash generated from operations will be sufficient to meet our presently anticipated working capital and capital expenditure requirements for at least the next 12 months. Nevertheless, we may raise additional funds to support more rapid growth, to repay more of the legacy liabilities accrued by prior management, or to respond to unanticipated capital requirements. No assurance can be given that we will be able to raise additional funding, or that such funding will be on terms favorable to our current shareholders.

In35 each of the past three years we have experienced losses from operations. At December 31, 2010, we had cash and cash equivalents of EUR 370,000 and a working capital deficit of EUR 1,102,000. As a result, our independent registered public accounting firm has concluded that there is substantial doubt as to our ability to continue as a going concern, and has modified its report in the form of an explanatory paragraph describing the events that have given rise to this uncertainty. Our ability to continue as a going concern is based on our ability to generate or obtain sufficient cash to meet our obligations on a timely basis and ultimately to attain profitable operations. We currently expect future growth and to return to profitability provided we are successful with the following objectives:

•Table the continued rollout and successful marketing of our Internet platforms, including: a) our newly built signature property and membership platform private.com, b) our cutting edge mobile platforms for Smart Phones and c) our multinational eCommerce VOD platform;Contents

•We ~~the~~currently ~~successful~~have ~~marketing~~no additional availability under our existing credit facilities. The existence of a going concern exception by our ~~affiliate~~auditors ~~programs~~may ~~for~~make ~~all~~it more difficult to obtain additional bank financing if and when required. If additional funds are raised through the issuance of equity securities, our ~~properties~~shareholders’ percentage ownership will be reduced, they may experience additional dilution, or these newly issued equity securities may have rights, preferences, or privileges senior to ~~compete~~those ~~aggressively~~of ~~for~~the current holders of our common stock. Additional financing may not be available when needed on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, we may be unable to develop or enhance our products and ~~attract~~services, ~~affiliate~~take ~~traffic;~~advantage of future opportunities, maintain the scope of our operations or respond to competitive pressures or unanticipated requirements, which could harm our business.

•ITEM ~~continuing~~7A. ~~the~~QUANTITATIVE ~~rollout~~AND ofQUALITATIVE ~~our~~DISCLOSURES ~~content~~ABOUT onMARKET ~~cable and IPTV video-on demand platforms;~~RISK

•Not ~~completing~~applicable. ~~the integration of businesses acquired in 2009;~~

•ITEM ~~consolidating~~8. ~~and~~FINANCIAL ~~restructuring~~STATEMENTS ~~our~~AND ~~operations~~SUPPLEMENTARY ~~into an efficient new media business;~~DATA

•Our ~~outsourcing~~audited ofconsolidated ~~non-cost~~financial ~~effective~~statements ~~parts~~and related notes appear at the end of ~~our~~this ~~operations;~~Report. ~~and~~

•ITEM ~~identifying~~9. ~~and~~CHANGES ~~exploring~~IN ~~new~~AND ~~online~~DISAGREEMENTS ~~business~~WITH ~~opportunities~~ACCOUNTANTS ~~which~~ON ~~are~~ACCOUNTING ~~less~~AND ~~dependent~~FINANCIAL ~~on content.~~DISCLOSURE

43Not applicable.

IfITEM we are not successful in implementing the above objectives, or if we otherwise do not successfully respond to changing conditions in the adult entertainment industry, we may continue to incur significant losses9A. ~~There~~ ~~can~~CONTROLS beAND ~~no assurance that we will be able to operate profitably in the future.~~ PROCEDURES

~~Although~~Evaluation ~~we expect that our available cash resources and cash generated from operations will be sufficient to meet our presently~~of ~~anticipated~~Disclosure ~~working~~Controls ~~capital~~ and ~~capital~~Procedures expenditure requirements for at least the next 12 months, we may need to raise additional funds to support more rapid growth or respond to unanticipated requirements. In this regard, we are presently engaged in litigation in New York state court with a third party lender regarding our obligations under a promissory note. An adverse outcome in this dispute would likely have a material impact upon our liquidity if we are unable to obtain additional debt or equity financing to satisfy any resulting liability. In addition, this lender has recently filed an application with the New York court seeking an order attaching assets of the Company as security for the promissory note, which if granted may make it more difficult to obtain bank financing. For additional information regarding this litigation, see Item 3 – “Legal Proceedings.” Also see Note 10 to the consolidated financial statements under “Other Debt” for additional information regarding this obligation.

WeThe Company currently ~~have~~maintains nodisclosure ~~additional~~controls ~~availability~~and ~~under~~procedures ~~our~~designed ~~existing~~to ~~credit~~ensure ~~facilities.~~that ~~The~~information ~~existence~~required ofto abe ~~going~~disclosed ~~concern~~in ~~exception~~reports byfiled ~~our~~under ~~auditors~~the ~~may~~Securities ~~make~~Exchange itAct ~~more~~of ~~difficult~~1934, toas ~~obtain~~amended, ~~additional~~is ~~bank~~recorded, ~~financing~~processed, ifsummarized and ~~when~~reported ~~required~~within the specified time periods. IfDisclosure ~~additional~~controls ~~funds~~and ~~are~~procedures ~~raised~~include, ~~through~~without limitation, ~~the~~controls ~~issuance~~and ofprocedures ~~equity~~designed ~~securities,~~to ~~our shareholders’~~ensure ~~percentage~~that ~~ownership~~information ~~will~~required to be ~~reduced,~~disclosed ~~they~~by ~~may~~the ~~experience~~Company ~~additional~~in ~~dilution,~~the reports that it files or ~~these~~submits ~~newly~~under ~~issued~~the ~~equity~~Securities ~~securities~~Exchange ~~may~~Act ~~have~~of ~~rights,~~1934 ~~preferences,~~is oraccumulated ~~privileges~~and ~~senior~~communicated to ~~those~~its ofmanagement, including ~~our~~its ~~current~~principal ~~shareholders.~~executive ~~Additional~~and ~~financing may~~principal ~~not~~financial beofficers, ~~available~~or ~~when~~persons ~~needed~~performing onsimilar ~~terms~~functions, ~~favorable~~as appropriate to ~~us,~~allow ortimely atdecisions ~~all~~regarding required disclosure. InAs discussed elsewhere in this ~~regard~~Annual Report, inthis ~~the~~Company’s President ~~past~~and ~~most~~Chief ofExecutive ~~our~~Officer ~~bank~~was ~~financing~~indefinitely ~~has~~suspended ~~included~~on ~~the~~December 15, ~~guaranty~~2011 ofand ~~affiliated~~was ~~companies~~thereafter offormally ~~our~~terminated ~~Chairman~~in ~~and~~March ~~principal~~2012. ~~shareholder,~~In ~~Berth~~addition ~~Milton,~~our Chief Financial Officer and aCorporate ~~pledge~~Secretary ~~of shares~~was ofterminated ~~common~~on ~~stock~~December 15, 2011, ~~owned~~and bymost ~~him~~of orthis ~~his~~Company’s ~~affiliated~~directors ~~companies.~~were Weremoved ~~cannot~~from ~~assure~~office ~~you~~and ~~that~~replaced Mrin January 2012. ~~Milton~~ orFollowing ~~his~~the ~~affiliated~~departure ~~companies~~of ~~will~~prior ~~guaranty~~management, ~~future~~our ~~debt~~new ~~financings~~officers orfound that ~~such~~many ~~guaranties~~of ~~will~~the beCompany’s ~~sufficient~~financial torecords ~~obtain~~were ~~future~~in ~~debt~~disarray ~~financings~~or missing. IfAccordingly, ~~adequate~~our ~~funds~~new ~~are~~Chief ~~not~~Executive ~~available~~Officer orand ~~are~~interim ~~not~~Chief ~~available~~Financial onOfficer ~~acceptable~~determined ~~terms,~~that wethe ~~may~~Company’s bedisclosure ~~unable~~controls toand ~~develop~~procedures orwere ~~enhance~~not ~~our~~effective ~~products~~in ~~and~~2011 ~~services,~~while ~~take~~the ~~advantage~~Company ofwas ~~future~~under ~~opportunities, maintain~~ the ~~scope~~control of ~~our~~prior ~~operations~~management. orUnder ~~respond~~new management, tothe ~~competitive pressures~~Company orhas ~~unanticipated~~implemented ~~requirements,~~some ~~which~~new ~~could~~and/or ~~harm~~revised ~~our~~disclosure ~~business~~controls and procedures.

~~Outlook~~Inherent Limitations on Effectiveness of Controls

~~During~~The ~~2009~~Company ~~and~~does ~~2010,~~not Weexpect ~~have~~that ~~developed~~its ~~Internet~~disclosure ~~solutions~~controls ~~for~~and ~~critical~~procedures ~~new~~or ~~markets:~~its ~~gay,~~internal ~~international~~control ~~and~~over ~~mobile.~~financial reporting ~~Furthermore,~~will asprevent ~~a response~~all toerror ~~decreased~~and ~~margins~~all infraud. ~~the~~A ~~adult~~control ~~entertainment industry~~procedure, weno ~~have~~matter ~~reviewed,~~how ~~analyzed~~well conceived and ~~continued~~operated, tocan ~~restructure~~provide ~~the~~only ~~operations~~reasonable, ofand ~~the~~not ~~non-online~~absolute, ~~part~~assurance ofthat the ~~business~~objectives inof ~~order~~the tocontrol ~~become~~procedure ~~more~~are ~~cost effective~~met. ~~Last~~Because ~~year’s~~of ~~acquisitions~~the ofinherent ~~GameLink~~limitations ~~and~~in ~~Sureflix~~all ~~have~~control ~~also~~procedures, ~~presented~~no aevaluation ~~challenge in terms~~ of ~~integration.~~controls ~~All~~can ~~the~~provide ~~aforementioned~~absolute ~~processes~~assurance ~~have~~that ~~had~~all ~~impact~~control ~~both~~issues inand ~~terms~~instances of ~~lost sales and additional selling~~fraud, ~~general~~if ~~and administrative expenses. However~~any, aswithin ~~part~~the ofCompany ~~these processes,~~have ~~during~~been ~~2010~~detected. weThese ~~have~~inherent ~~reduced~~limitations ~~our~~include ~~workforce~~the byrealities ~~34%~~that judgments ~~from~~in ~~168~~decision-making tocan ~~112~~be ~~employees~~faulty, and wethat ~~expect~~breakdowns tocan ~~continue~~occur ~~this~~because ~~process as we become more efficient and enjoy economies~~ of ~~scale~~simple ~~from~~error ~~the~~or ~~aforementioned acquisitions~~mistake. ~~During 2011~~Additionally, wecontrols ~~will~~can ~~start benefiting~~be ~~from~~circumvented by the ~~restructuring~~individual ~~and~~acts ~~reduce costs while increasing sales as we implement, launch and market new initiatives.~~

As36 part of our digital strategy, we have established that the combination of Private with major online retailers and accomplished platform developers is the approach to achieving our goals in the rapidly changing business landscape. The combined content assets of Private and core competencies of GameLink and Sureflix offer a compelling new business model. We will be expanding our joint Internet strategies globally with additional formats and applications to be launched in 2011. Currently we are reformatting and migrating all content on the GameLink VOD platform to a Content Delivery Network (CDN) and we expect this to enhance the user experience substantially and therefore improve both conversion and retention rates in general, but particularly in eastern North America and in Europe. This is a paramount initiative which is expected to increase sales significantly and also make it possible to expand our cooperation with affiliates worldwide. In addition, this initiative is crucial for the development and distribution of apps which will enable consumer access from the growing market of SMART TVs. The completion of the CDN initiative is expected to take place in the second half of 2011. In addition, during 2011 we will continue to aggressively market our recently launched cutting-edge Internet assets discussed below.

44Table of Contents

In of ~~May~~some ~~2010~~persons, weby ~~launched~~collusion ~~our~~of ~~new~~two ~~private.com~~or ~~membership~~more ~~platform~~people, ~~which we~~or ~~have~~by ~~been~~management ~~building~~override ~~since~~of ~~mid~~the ~~2009~~control. The ~~new~~design ~~platform features a number~~ of ~~proprietary~~any ~~sites~~control ~~and~~procedure italso is ~~also~~based ~~available~~in aspart aupon ~~white~~certain ~~label5~~assumptions ~~version,~~about ~~which~~the likelihood weof ~~expect~~future ~~will~~events, ~~attract~~and ~~adult~~there ~~content~~can ~~providers~~be ~~and~~no ~~affiliates~~assurance ~~worldwide.~~that Inany ~~addition,~~design ~~the~~will ~~new~~succeed ~~platform has~~in ~~been~~achieving ~~built~~its tostated begoals ~~substantially~~under ~~less~~all ~~labor~~potential ~~intensive~~future toconditions; ~~operate~~over ~~compared~~time, tocontrols ~~the~~may ~~previous~~become ~~one.~~inadequate ~~The~~because ~~new~~of ~~platform~~changes ~~has~~in ~~already~~conditions, ~~proved~~or tothe ~~have~~degree ~~improved~~of compliance ~~conversion~~with ~~rates~~the ~~and~~policies ~~during~~or ~~the~~procedures ~~second~~may ~~half~~deteriorate. Because of ~~2010~~ the ~~new~~inherent ~~membership~~limitations ~~pay-site~~in ~~attracted~~a ~~73%~~cost-effective ~~more unique~~control ~~visitors~~procedure, ~~compared~~misstatements due to ~~the~~error ~~previous~~or ~~one~~fraud inmay ~~the~~occur ~~same~~and ~~period~~not inbe ~~2009~~detected.

In April 2010, GameLink, launched a proprietary mobile solution enabling users to instantly stream over 15,000 movies. The platform is available to Smart Phones at the url: www.gamelink.com. The mobile Internet platform allows consumers to purchase and consume content instantly. All content is available for future viewing in the customerManagement’s ~~virtual~~Annual ~~media~~Report center, stored in the company’s “cloud”. The platform has been optimized to work with Apple devices including the iPhone, iPod, the iPad as well as Android devices. Furthermore, in 2010, Apple’s OS upgrade to iOS4.3 for iPhones, iPads and iPod touches made it possible to watch GameLink’s mobile library on ~~Apple~~Internal TVControl byOver ~~allowing~~Financial ~~users~~Reporting to redirect content streaming from those devices to their Apple TV. In addition to streaming, consumers can choose to download their movies or purchase DVDs and novelties from the globally accessible platform. A white label version of the mobile platform is available and is being marketed to adult studios and affiliates worldwide. Our objective is to become the main provider of an off-portal mobile platform solution to all major content providers in our industry. In contrast to Private’s existing mobile content business, which is based on an on-portal model going through content aggregators and carriers, this new business is off-portal and provides substantially improved margins as content is sold directly by ourselves to the consumer. Our weekly sales for the GameLink VOD mobile solution has been steadily increasing since its launch and current weekly sales represents a USD 1.0 million twelve-month run rate. In August 2010, Sureflix introduced mobile VOD on its existing platform for its Maleflixxx network of hundreds of sites. The new mobile platform, Maleflixxx Mobile, allows consumers to view gay content on all mobile devices, including the iPad, iPod Touch, iPhone and Android handsets. Furthermore, in Q4, 2010, we released a number of Smart Phone apps with an end to increase traffic to our mobile assets. With the Smart Phone market growing rapidly6, we expect to generate substantial growth from our mobile VOD initiatives going forward.

~~With~~The ~~respect~~Company’s tomanagement ~~broadcasting, Private content~~ is ~~currently~~responsible ~~broadcasted~~for ~~via~~establishing ~~194~~and ~~platforms~~maintaining inadequate 42internal ~~countries.~~control Weover ~~are~~financial ~~continuing~~reporting toas defined ~~implement~~in ~~our~~Rule ~~media~~13a-15(f) ~~growth~~of ~~strategy~~the ~~across~~Securities ~~all~~Exchange ~~delivery~~Act ~~systems,~~of ~~including: DTT,~~1934. ~~satellite,~~The ~~cable~~Company’s ~~and~~internal ~~IPTV.~~control ~~While~~over ~~European~~financial ~~broadband~~reporting ~~users~~is ~~are~~a ~~signing~~process updesigned ~~for~~to ~~IPTV~~provide ~~services~~reasonable inassurance regarding the ~~hundreds~~reliability of ~~thousands~~financial ~~each~~reporting ~~month,~~and ~~making Europe~~ the ~~biggest~~preparation of ~~and~~financial ~~fastest~~statements ~~growing~~for ~~IPTV~~external ~~region~~purposes in ~~the~~accordance ~~world,~~with weUnited ~~have~~States ~~successfully~~generally ~~implemented~~accepted ~~part~~accounting ~~of our~~principles. ~~new~~Internal ~~media~~control ~~strategy~~over ~~and~~financial ~~contracted~~reporting ~~for~~includes ~~supplying~~policies ~~content~~and ~~for~~procedures ~~TVOD7~~that ~~services~~(i) pertain to athe ~~total~~maintenance of 26records that, ~~major platform operators~~ in 18reasonable ~~countries~~detail, inaccurately ~~the~~and ~~region.~~fairly ~~During~~reflect ~~2010~~ the ~~European~~transactions ~~IPTV market grew by 25% to 20.7 million IPTV subscribers8~~ and bydispositions ~~the end~~ of the ~~year~~assets weof ~~had more than 75% market coverage. France remains~~ the ~~“world~~Company; ~~champion” IPTV country with 10.3~~(ii) ~~million~~provide ~~subscribers~~reasonable ~~and~~assurance wethat ~~cover~~transactions ~~100%~~are ofrecorded ~~this~~as ~~market.~~necessary ~~In relation~~ to ~~Private~~permit ~~branded~~preparation TVof ~~channels~~financial statements ~~carrying our content~~ in ~~Europe~~accordance ~~and~~with ~~Latin~~United ~~America,~~States ~~our~~generally ~~partners~~accepted ~~Playboy~~accounting TVprinciples, ~~International~~ and ~~Playboy~~that TVreceipts ~~Latin~~and ~~America~~expenditures ~~continue~~of ~~to improve~~the ~~distribution.~~Company Inare ~~2010,~~being ~~the~~made ~~Private~~only ~~Spice~~in ~~agreement~~accordance with ~~Playboy~~authorizations ~~TV International was renewed for another five years. The channel is receivable in all~~ of ~~Europe~~management and itdirectors ~~currently~~of ~~has~~the ~~distribution~~Company; inand (iii) provide 22reasonable ~~countries~~assurance ~~via~~regarding ~~101~~prevention ~~cable,~~or ~~satellite,~~timely ~~DTT and~~detection ~~IPTV~~of ~~platforms.~~unauthorized ~~During the past twelve months~~acquisitions, ~~Playboy~~use TVor ~~Latin~~disposition ~~America continued to increase the distribution~~ of the ~~Private~~Company’s ~~Channel.~~assets ~~The~~that ~~channel~~could ishave ~~receivable~~a inmaterial ~~all~~effect ofon ~~Latin~~the ~~America~~financial ~~and it currently has distribution in 19 countries via 63 cable, satellite and IPTV platforms and reaches 38 million platform subscribers~~statements.

5As Adescribed ~~white~~in ~~label~~“Evaluation ~~product~~of orDisclosure ~~service~~Controls isand aProcedures,” ~~product~~above, following the departure of prior management, many of this Company’s financial records for 2011 were either in disarray or ~~service~~missing. ~~produced~~Based on the records that were available, our new executive officers assessed the effectiveness of the Company’s internal control over financial reporting that were in effect in 2011. In making this assessment, management used the criteria set forth by ~~one~~the ~~company~~Committee (of Sponsoring Organizations of the ~~producer~~Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on this assessment, and on those criteria, current management concluded that the Company’s internal control over financial reporting were not effective as of December 31, 2011 because, among other ~~companies~~things, (the ~~marketers)~~prior ~~rebrand~~Chief toExecutive ~~make~~Officer itexerted ~~appear~~undue influence asover ifthe ~~they~~Company’s ~~made~~financial itpersonnel and because of a lack of segregation of duties. New management has implemented new internal controls over financial reporting.

6This ~~According~~Annual toReport ~~Parks~~does ~~Associates~~not include an attestation report of ~~March,~~the ~~2010,~~Company’s ~~“Smart~~registered ~~Phone:~~public ~~King~~accounting offirm ~~Convergence”:~~regarding ~~the~~internal control ~~number~~over offinancial ~~Smart~~reporting. ~~Phone~~Management’s ~~users~~report iswas ~~expected~~not subject to ~~quadruple,~~attestation ~~exceeding~~by 1the ~~billion~~Company’s ~~worldwide~~registered bypublic ~~2014~~accounting firm.

7Changes ~~True~~in ~~Video~~Internal OnControl ~~Demand~~Over -Financial ~~(TVOD)~~Reporting - TVOD is the ideal VOD service where individual users get immediate responses when interacting with the VOD system. With TVOD, the user can not only get instant access to the program online and watch it on TV, but also be able to do any VCR or DVD-like commands on the VOD system with the same quick response time as it is when working a VCR or DVD.

8In ~~According~~August 2011, the Nevada Court appointed a receiver to ~~Point~~preserve ~~Topic~~the Company’s ~~report~~assets. ofThe ~~March~~receiver implemented numerous changes to the Company’s internal controls over financial reporting during the Company’s fiscal quarter ended December 31, 2011 that have materially affected, ~~“IPTV~~or Q4are ~~2010~~reasonably ~~Short~~likely ~~Report”~~to materially affect, the Company’s internal control over financial reporting.

45ITEM 9B. OTHER INFORMATION

~~Private’s mobile “on portal” revenues declined again in 2010~~None. We are still the most distributed adult brand in the world and will monetize existing distribution as best as we can by going live with the few outstanding carriers and replacing non-performing content aggregators with new ones. During 2010, the distribution of Private content continued to increase and by the end of the year it was available to 1.5 billion handsets via 114 mobile network operators in 37 countries. The markets of Asia and the Americas are still underexploited by us and therefore represent a significant growth potential. Furthermore, Mobile TV, increased penetration of Smart Phones and the implementation of age verification systems offer additional growth potential with both current and future operators in 2011 and beyond9.

~~During~~37 2010, the DVD market has continued to shrink, with sales for our physical products declining by 18%. However, the DVD business is by no means dead even in this competitive landscape. The content providers that manage to survive the current “clean out” will control the DVD market going forward.

ITEMTable 7A.of QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKContents

~~Not~~PART ~~applicable.~~III

ITEM 810. ~~FINANCIAL~~DIRECTORS ~~STATEMENTS~~AND EXECUTIVE OFFICERS AND ~~SUPPLEMENTARY~~CORPORATE ~~DATA~~GOVERNANCE

~~Our~~Identification ~~audited~~of ~~consolidated~~Directors, ~~financial~~Executive ~~statements~~Officers and ~~related~~Key ~~notes~~Employees ~~appear at the end of this Report.~~

~~ITEM~~The following 9table sets forth all of the current directors, executive officers and key employees of Private Media Group, Inc., ~~CHANGES~~their INage ~~AND~~and ~~DISAGREEMENTS~~the ~~WITH~~office ~~ACCOUNTANTS~~they ONhold ~~ACCOUNTING~~with ~~AND~~Private ~~FINANCIAL~~Media ~~DISCLOSURE~~Group, Inc. or a subsidiary. Executive officers and employees serve at the discretion of the Board of Directors. Directors are elected for a period of one year and thereafter serve until the next annual meeting at which their successors are duly elected by the shareholders. Officers and other employees serve at the will of the board of directors.

Not applicable.


Name	Age	Position
Eric Johnson	51	Chairman of the Board and Director
Charles Prast	46	Chief Executive Officer, President, Interim Chief Financial Officer, and Director
Anna Maksimova(1)	31	Director
Michael Martinez(1)(2)	46	Director
John Wirt(2)	49	Director
Michael Kotov(1)(2)	35	Director

~~ITEM~~(1) ~~9A.~~Member ~~CONTROLS~~of ~~AND~~our ~~PROCEDURES~~Compensation Committee

~~Evaluation~~(2) Member of ~~Disclosure~~ ~~Controls~~our ~~and~~Audit ~~Procedures~~ Committee

The ~~Company~~following ~~maintains~~sets ~~disclosure~~forth ~~controls~~certain ~~and procedures designed to ensure that~~ information ~~required~~with torespect be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ~~ensure that information required to be disclosed by~~ the ~~Company~~persons inwho ~~the~~are ~~reports~~members ~~that~~of ~~it files or submits under~~ the ~~Securities~~Board ~~Exchange Act~~ of ~~1934 is accumulated and communicated to its management~~Directors, ~~including~~ ~~its principal~~ executive ~~and principal financial~~ officers, or ~~persons~~key ~~performing~~employees ~~similar functions, as appropriate to allow timely decisions regarding required disclosure. As~~ of ~~the~~Private ~~end~~Media ~~of the period covered by this report~~Group, the Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and proceduresInc.: ~~Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2010.~~

~~Changes~~Charles inPrast ~~Internal~~was ~~Control~~elected ~~Over~~as a Director at the annual meeting of shareholders held on January 11, 2012. Mr. Prast was appointed as our President, Chief Executive Officer and Interim Chief Financial ~~Reporting~~Officer on March 28, 2012. From June 2005 until late 2008, Mr. Prast served as a Director and CEO of NASDAQ listed Interactive Television Networks, Inc., an IPTV provider. Since 2008, Mr. Prast has been focused on providing adult media, interactive entertainment, intellectual property and debt obligation advisory services to various companies. From March 2008 to April 2009, he served as a Senior VP of NASDAQ listed New Frontier Media, Inc., the largest U.S. adult broadcaster. Mr. Prast also served as President and CEO of Private Media Group, Inc. from May 2002 until November 2003. Prior to May 2002 Mr. Prast served as a senior investment banker in Europe with a number of large multinational firms, including Drexel Burnham, Furman Selz and Commerzbank. Mr. Prast received a Bachelor of Arts Degree from Bates College in 1987. Mr. Prast’s knowledge of the adult entertainment and interactive media industries, experience in capital markets, and experience with intellectual property rights issues has led to the conclusion that he should serve as a director of the Company.

~~There~~Eric ~~were~~Johnson nowas ~~changes~~appointed to the Board of Directors in December 2009 pursuant to his Employment Agreement with Private Media entered into in ~~the~~October ~~Company’s~~2009 ~~internal~~in ~~control~~connection ~~over~~with ~~financial~~the ~~reporting~~acquisition ~~that~~of ~~occurred~~Sureflix, ~~during~~a company engaged in the ~~Company’s~~business ~~fiscal~~of ~~quarter~~digital ~~ended~~distribution ~~December~~of premium gay adult content. Mr. ~~31,~~Johnson ~~2010~~serves ~~that~~as ~~have~~the ~~materially~~President ~~affected~~and CEO of Entruphema, orInc., ~~are~~a ~~reasonably~~subsidiary ~~likely~~of toPrivate ~~materially~~which ~~affect~~operates the business of the Sureflix companies. Mr. Johnson has served as President, CEO and CFO for the ~~Company~~Sureflix group of companies since 2003. Mr. Johnson holds the designations of Chartered Accountant in Canada and Certified Public Accountant in the United States and is a graduate of the University of Toronto where he earned his Bachelor of Commerce Degree. Mr. Johnson’s extensive experience in planning and managing ~~internal~~on-line ~~control~~adult ~~over~~content ~~financial~~is ~~reporting~~a valuable asset to the Board in matters involving strategic planning. His accounting experience also allows him to contribute to addressing accounting issues.

~~Inherent~~Anna ~~Limitations~~Maksimova was elected to as a Director at the annual meeting of shareholders held on ~~Effectiveness~~January 11, 2012. Ms. Maksimova has served as CEO of ~~Controls~~Comte Des Cierges Ltd., one of the leading Russian concierge and

~~The~~38 Company does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

9Table Juniperof Research estimates in its 2010 study ‘Mobile Adult Strategies: Downloads, Video Chat, Apps & Messaging 2010-2015.’ that global revenues from all mobile adult services will rise from $1.7 billion in 2009 to $2.8 billion by 2015.Contents

46 family office services companies, providing services to private banking clients as well as arranging new private banking projects and programs covering a broad range of sectors since March 2008. Prior to joining Comte Des Cierges Ltd., Ms. Maksimova was employed in both investment and private banking in several capacities at leading European investment banks, including from 2006 to 2008 when she served as Equity Sales Manager of ZAO Aton Broker-Unicredit Bank. Ms. Maksimova is a graduate of the Ural Federal University (2003) and Russian Diplomatic Academy (2006) where she received degrees in International Relations and Economies. Ms. Maksimova’s extensive experience in various aspects of banking services has led to the conclusion that she should serve as a director of the Company.

Michael Martinez was elected to as a Director at the annual meeting of shareholders held on January 11, 2012. Mr. Martinez currently is the Founder of Shorebreak Energy Developers, a full service provider of solar design and construction, energy management solutions. From July 2009 until August 2010, Mr. Martinez was the Chairman of the Board of FMP Partners, Inc., a holding company of two solar installation and wireless infrastructure construction companies. From 2005 to 2008, Mr. Martinez also served as founder and President of NASDAQ-listed Interactive Television Networks, Inc. where he pioneered IPTV distribution deals with such major content providers as Major League Baseball, Starz Encore, and Universal. From 2008 to 2009, he served as a Management Committee member for the international sales and digital media project development group of New Frontier Media, Inc., a U.S. adult transactional television group. Since 2009, Mr. Martinez has been involved as an investor and operator in procuring several large solar energy projects. Mr. Martinez’s ~~Annual~~extensive ~~Report~~sales onand ~~Internal~~operational ~~Control~~experience ~~Over~~has ~~Financial~~led ~~Reporting~~to the conclusion that he should serve as a director of the Company.

~~The~~John ~~Company’s~~Wirt ~~management~~was isappointed ~~responsible~~to ~~for~~our ~~establishing~~Board ~~and~~of ~~maintaining~~Directors ~~adequate~~on ~~internal~~March 28, ~~control over financial reporting as~~2012. ~~defined~~Since in2008, ~~Rule~~Mr. Wirt ~~13a-15(f)~~has ofbeen the ~~Securities~~Chief ~~Exchange~~Executive ~~Act~~Officer ofand ~~1934.~~General ~~The~~Counsel ~~Company’s~~of ~~internal~~Square ~~control~~Ring, ~~over~~Inc., ~~financial reporting is~~ a ~~process~~boxing ~~designed~~and toMMA ~~provide~~promotional ~~reasonable~~company. Mr. Wirt ~~assurance~~currently ~~regarding~~also ~~the~~is ~~reliability~~a ofpartner ~~financial~~in ~~reporting~~the ~~and~~law ~~the~~firm ~~preparation~~ of ~~financial~~Wirt & ~~statements~~Wirt. From ~~for~~1996 until ~~external~~2008, ~~purposes~~Mr. Wirt inwas ~~accordance~~the ~~with~~Assistant ~~United~~General ~~States~~Counsel ~~generally~~of ~~accepted~~Don ~~accounting~~King ~~principles~~Productions, Inc. Before ~~Internal~~joining ~~control~~Don ~~over~~King ~~financial~~Productions, ~~reporting~~Inc., ~~includes~~Mr. Wirt ~~policies~~was ~~and~~employed ~~procedures~~in ~~that~~private ~~(i) pertain~~practice toas ~~the~~an ~~maintenance~~attorney ~~of records that,~~ in ~~reasonable detail~~Chicago, ~~accurately~~Illinois ~~and~~from ~~fairly~~1989 ~~reflect~~to ~~the~~1993 ~~transactions~~with ~~and dispositions of~~ the law ~~assets~~firm of ~~the Company; (ii)~~Jenner ~~provide~~& ~~reasonable~~Block ~~assurance~~and ~~that~~from ~~transactions~~1993 ~~are~~to ~~recorded~~1996 aswith ~~necessary~~the tolaw ~~permit~~firm ~~preparation~~ of ~~financial statements~~Sidley & inAustin. ~~accordance~~Mr. Wirt ~~with~~received ~~United~~his ~~States~~Bachelor ~~generally~~of ~~accepted~~Arts ~~accounting~~in ~~principles~~Philosophy, ~~and~~Politics ~~that receipts~~ and ~~expenditures~~Economics offrom ~~the~~Knox ~~Company~~College, ~~are~~Galesburg, ~~being~~Illinois, ~~made only in accordance with authorizations of management~~ and ~~directors~~his ofJuris ~~the Company; and~~Doctor ~~(iii) provide~~degree ~~reasonable~~from ~~assurance~~the ~~regarding~~University ~~prevention or timely detection~~ of ~~unauthorized~~Illinois, ~~acquisitions~~Champaign, ~~use~~in or1989. ~~disposition~~Mr. Wirt ofis ~~the~~also ~~Company’s assets that could have~~ a ~~material~~Certified ~~effect~~Public ~~on the financial statements~~Accountant.

~~Management~~Michael Kotov ~~assessed~~was ~~the~~appointed ~~effectiveness~~to our Board of ~~the~~Directors ~~Company’s~~on ~~internal~~March 28, ~~control~~2012. ~~over~~Mr. Kotov has ~~financial~~extensive ~~reporting~~experience asin ofinvestment ~~December 31~~banking. Since September 2008, ~~2010~~Mr. Kotov ~~In making~~has ~~this~~been ~~assessment~~a Senior Vice President—Sales/Trading at Alfa Bank, ~~management~~in Moscow, ~~used~~Russia. ~~the~~From ~~criteria~~December ~~set~~2005 ~~forth~~until byhe joined Alfa Bank, he was the ~~Committee~~Executive Director, Head of ~~Sponsoring~~Electronic & ~~Organizations~~Program ofTrading ~~the~~at ~~Treadway~~UniCredit ~~Commission~~Securities (~~“COSO”~~ex. Aton Capital) in ~~Internal~~Moscow. ~~Control-Integrated~~Prior ~~Framework~~thereto, Mr. Kotov ~~Based~~was oninvolved ~~this~~in ~~assessment~~equity capital markets (ECM), as well as in marketing and onsales ~~those~~of ~~criteria~~equity products for various investment banks in the Netherlands, France, Russia, and Cyprus. Mr. Kotov is a graduate of DePaul University in Chicago, where he earned his Bachelor ~~management~~of ~~concluded~~Science ~~that~~in Finance degree in 2001. Mr. Kotov also holds a certificate of derivatives trading manager at the ~~Company~~pan-European Euronext exchange and is accredited with both CySEC (Cyprus Securities and Exchange Commission) and FSA (Financial Services Authority) in the UK. Mr. Kotov’s ~~internal~~considerable ~~control~~experience ~~over~~in ~~financial~~securities ~~reporting~~industry ~~was~~and ~~effective~~corporate finance led to the conclusion that Mr. Kotov should serve as a director of ~~December 31,~~the ~~2010~~Company.

~~This~~Committees ~~annual report does not include an attestation report~~ of the ~~Company’s~~Board ~~registered~~of ~~public~~Directors ~~accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm.~~

~~ITEM~~Our 9BBoard of Directors has an Audit Committee and a Compensation Committee. ~~OTHER~~Our ~~INFORMATION~~Board of Directors does not have a formal nominating committee. Therefore, all decisions regarding director nominations are addressed by the entire Board of Directors, subject to the approval of a majority of the independent directors. All of the members of the Audit Committee are independent under applicable SEC and Nasdaq listing rules.

47Audit Committee. We maintain an Audit Committee in accordance with applicable SEC and Nasdaq rules. The Audit Committee is currently comprised of John Wirt, Michael Martinez and Michael Kotov. All of the members of the Audit Committee are “independent” as defined in applicable Nasdaq listing requirements and

~~PART~~39 ~~III~~

ITEMTable 10.of DIRECTORS AND EXECUTIVE OFFICERSContents

~~Identification~~ SEC regulations, and each of ~~Directors~~them is able to read and understand fundamental financial statements. The Board has determined that John Wirt is an “audit committee financial expert” as defined under applicable SEC regulations. The Audit Committee reviews and recommends to the Board, ~~Executive~~as ~~Officers~~it deems necessary, the internal accounting and ~~Key~~financial ~~Employees~~controls for the Company and the accounting principles and auditing practices and procedures to be employed in preparation and review of financial statements of the Company. The Audit Committee makes recommendations to the Board concerning the engagement of independent public accountants and the scope of the audit to be undertaken by such accountants. The Audit Committee has adopted a written Audit Committee Charter.

Compensation Committee. The ~~following~~Compensation ~~table~~Committee ~~sets~~is ~~forth~~responsible ~~all~~for the compensation of ~~the~~our ~~current~~executives and directors,; ~~executive~~reviews ~~officers~~ and ~~key~~approves ~~employees~~any ofreports ~~Private~~required ~~Media~~by ~~Group,~~the ~~Inc.,~~SEC ~~their~~for ~~age~~inclusion ~~and~~in the ~~office~~annual ~~they~~report ~~hold~~and ~~with~~proxy ~~Private~~statement; ~~Media~~provides ~~Group~~general oroversight ~~a subsidiary.~~of ~~Executive~~our ~~officers~~compensation structure; and, ~~employees~~if ~~serve~~deemed atnecessary, retains and approves the ~~discretion~~terms of the ~~Board~~retention of ~~Directors.~~compensation ~~All~~consultants ~~directors~~and ~~hold~~other ~~office~~compensation ~~until~~experts. ~~the~~Other ~~earlier~~specific ofduties ~~(1) the~~and ~~confirmation~~responsibilities of the ~~Final~~Compensation ~~Report~~Committee ofinclude reviewing ~~the~~senior ~~Inspector~~management ofselection ~~Elections~~and ~~for~~overseeing ~~the~~succession ~~2010~~planning; ~~Annual~~reviewing ~~Meeting~~and ~~of Shareholders,~~approving orobjectives ~~(2) 2011Annual~~relevant ~~Meeting~~to ofexecutive ~~Shareholders.~~officer ~~For~~compensation, ~~information~~evaluating ~~regarding~~performance and determining the ~~status~~compensation of ~~the~~executive ~~Final~~officers ~~Report~~in ofaccordance ~~the~~with those ~~Inspector~~objectives; ofapproving ~~Elections~~severance arrangements and other applicable agreements for ~~the~~executive ~~2010~~officers; ~~Annual~~overseeing ~~Meeting~~our ofequity-based ~~Shareholders,~~and ~~see~~incentive ~~“Litigation~~compensation; ~~Regarding~~and ~~Election~~establishing ~~Results~~compensation policies and practices for service on the Board and its ~~2010~~committees ~~Annual~~and ~~Meeting~~for the Chairman of ~~Shareholders”~~the ~~appearing~~Board. inAs ~~Item 3~~of the date of this ~~report~~Annual Report, Michael Kotov, Michael Martinez, and Anna Maksimova constitute the members of the Compensation Committee.

Name	Age		Position With the Company or Subsidiary
Directors
Berth H. Milton		55	Chairman of the Board, Chief Executive Officer, and President
Bo Rodebrant		58	Director
Peter Dixinger		43	Director
Jan Jensen		57	Director
Ilan Bunimovitz		55	Director
Eric Johnson		45 0	Director; President and CEO of Entruphema, Inc.
Other Executive Officers and Key Employees
Johan Gillborg		44 9	Secretary and Chief Financial Officer, Private Media Group, Inc.; Administrator, Milcap Media Group

Code of Ethics

~~The~~We ~~following~~have ~~sets~~adopted ~~forth~~a ~~certain~~code ~~information~~of ~~with~~ethics ~~respect~~that applies to ~~the~~our principal executive officer, principal financial officer, principal accounting officer and persons ~~who~~performing ~~are~~similar ~~members~~functions. Our code of ethics is filed as Exhibit 14.1 to this Annual Report on Form 10-K. We intend to satisfy the ~~Board~~disclosure requirements under Item 10 of ~~Directors~~Form 8-K, ~~executive~~regarding ~~officers~~an amendment to or ~~key~~ ~~employees~~waiver offrom ~~Private~~our ~~Media~~code ~~Group~~of ethics, ~~Inc~~by posting the required information on our corporate internet website at www.:prvt.com or as otherwise permitted under applicable law.

~~Berth H. Milton was appointed to the Board of Directors of the Company in February 1998 and was the Corporate Secretary from June 1998 until February 1999. In February 1999 Mr.~~Section Milton was appointed Chairman of the Board and Chief Executive Officer of Private, and served as Chief Executive Officer until May 2002. In November 2003 Mr. Milton was reappointed President and Chief Executive Officer of the Company and remained as Chief Executive Officer until April 2009. Mr. Milton was reappointed as Chief Executive Officer in July 2010. Mr. Milton was Administrator of Milcap Media Group from its inception until June 2000 and has been acting as an advisor to the Milcap Group since 1991. Mr. Milton is also active in several international industry and real estate projects and developments. Mr. Milton brings to the Board the highest level of business knowledge and experience in the adult entertainment industry in general, and the Company’s operations in particular. This extensive knowledge and experience makes Mr. Milton an extremely valuable experience, both as 16(a) ~~visionary~~Beneficial inOwnership ~~the~~Reporting ~~adult~~Compliance ~~entertainment market generally, and in pursuing commercial ventures which are complementary to the Company’s core businesses.~~

BoBased ~~Rodebrant~~solely ~~was~~upon ~~appointed as~~ a ~~Director~~review of ~~Private~~Forms ~~Media Group~~3, ~~Inc.~~4 inand ~~August~~5 ~~1998.~~furnished ~~Mr. Rodebrant~~to ~~has~~Private ~~operated~~Media ~~his~~covering ~~own~~its ~~accountancy~~2011 ~~and~~fiscal ~~management~~year ~~consulting~~filed ~~services,~~under ~~R&S~~Section 16(a) ~~Ekonomiservice, since~~of ~~1986.~~the ~~Prior~~Securities toExchange ~~that~~Act ~~time~~of he1934, ~~co-founded~~each anof ~~ice~~Private ~~cream~~Media’s officers ~~business,~~and ~~Hemglass,~~directors ~~which~~complied ~~was~~with the ~~largest~~reporting ofrequirements ~~its~~under ~~kind~~Section 16(a) infor ~~Stockholm,~~the ~~Sweden.~~2010 ~~The~~fiscal ~~business~~year, ~~was~~except ~~sold~~as byfollows: ~~Mr. Rodebrant~~Neither inBernt ~~1986.~~Akander, ~~Mr. Rodebrant~~Lars ~~holds~~Ryd aor ~~degree~~Stefan inGunnarsson ~~construction~~filed ~~engineering which~~a heForm ~~received~~3 inupon ~~1974.~~being ~~Mr. Rodebrandt~~appointed ~~brings~~ to the Board aof ~~strong~~Directors of ~~background~~Private ~~and~~Media ~~experience~~ in ~~both accounting and management consulting~~2011. ~~This~~None ~~background~~of ~~and experience has made him a valuable resource in evaluating business opportunities and addressing accounting issues~~Messrs. ~~Also~~Akander, ~~his~~Ryd ~~many~~or ~~years~~Gunnarsson ofis ~~experience~~currently on the Company’s Board asof ~~an outside director provide a unique perspective to the Board~~Directors.

48ITEM 11. EXECUTIVE COMPENSATION

~~Peter~~The ~~Dixinger~~following ~~was~~table ~~appointed~~summarizes toall ~~the~~compensation ~~Board~~paid ofto ~~Directors~~(i) our intwo ~~June~~Chief ~~2010.~~Executive ~~Mr. Dixinger~~Officers ~~operated~~serving ~~his own~~during ~~company,~~in ~~Finanshuset,~~such incapacity ~~Sweden~~during any ~~from~~part ~~2002~~of to2011, ~~2010~~and ~~until~~(ii) any ~~its~~other ~~sale~~most tohighly acompensated ~~third~~executive ~~party.~~officer ~~Mr. Dixinger~~who ~~has~~was ~~continued~~serving as an ~~employee~~executive officer at the end of ~~Finanshuset~~2011 ~~following~~who ~~its~~earned ~~sale.~~compensation ~~The~~in ~~company~~excess ~~acts~~of as$100,000 ain ~~licensed~~2011, ~~independent~~in ~~financial~~each ~~advisor~~case tofor ~~companies,~~services rendered in all ~~trusts~~capacities ~~and~~to ~~high~~Private ~~net-worth~~Media ~~individuals.~~for ~~Prior~~the totwo ~~2002,~~fiscal ~~Mr. Dixinger~~years ~~was~~ended aDecember 31, ~~CEO~~2010, and ~~Board~~December 31, ~~member~~2011. inThe ~~the~~two ~~same~~principal ~~field~~executive officers of ~~business.~~Private Media during 2011 were Mr. ~~Dixinger~~Milton, ~~holds~~our aPresident ~~Bachelor’s~~and ~~Degree~~Chief inExecutive ~~Finance~~Officer, ~~from~~and Johan ~~the~~Gillborg, ~~University~~our ofChief ~~Stockholm~~Financial Officer. Mr. ~~Dixinger~~Milton ~~has extensive~~was ~~background~~indefinitely suspended from all duties and ~~experience~~powers incommensurate ~~the~~with ~~areas~~those ofoffices ~~investment~~on ~~advice~~December 15, 2011, and ~~asset~~Mr. Gillborg’s ~~management~~employment with Private Media was terminated on December 15, 2011. ~~These~~Accordingly, ~~attributes~~neither ~~allow~~Mr. Milton nor Mr. ~~Dixinger~~Gillborg toserved ~~contribute~~in totheir ~~the~~executive ~~Board~~positions as of ~~Directors~~December 31, 2011. Mr. Johnson, a ~~solid~~receiver ~~understanding~~appointed by the Nevada State Court in ~~business~~August 2011, carried out the responsibilities of the Company’s principal executive officer and the Company’s chief financial ~~strategy.~~officer after the foregoing

~~Jan~~40 Jensen was appointed as a Director of Private in November 2010. Mr. Jensen has operated his own construction and real estate consultancy business, Jenbo AB, in Sweden, since 2008. Prior to this time, Mr. Jensen operated his own agency and retail business, Respira AB, in the fashion industry in Scandinavia for more than 20 years. His business represented several well-known brands such as: Geox, Benetton and Sisley, Jean Franco Ferré, Jean Paul Gaultier Junior and Katherine Hamnett. As the exclusive representative for Benetton and Sisley in Sweden and Finland, Mr. Jensen launched 90 Benetton shops during the period 1985 to 1989. Mr. Jensen was also an active board member and shareholder in Hard Rock Café, Sweden, between 1985 and 1995, and has been a shareholder and board member in several other companies, industry associations and societies. Mr. Jensen’s strong understanding of retail and marketing allows him to offer valuable insight to our Board on operational matters and strategic planning. His experience as a director of other companies also contributes to the Board’s ability to address corporate governance matters.

IlanTable Bunimovitz was appointed to the Board of Directors in March 2009 pursuant to his Employment Agreement with Private entered into in January 2009 in connection with the acquisition of Game Link LLC and its affiliate, companies engaged in the business of digital distribution of adult content over the Internet and online eCommerce development. Mr. Bunimovitz was appointed as Executive Vice President of the Company’s Online Media Division in January 2009. In April 2009, he was also appointed as Chief Executive Officer of the Company. In July 2010 Mr. Bunimovitz was terminated as CEO of Private. Mr. Bunimovitz was the founder, chief executive officer and co-owner of Game Link LLC prior to its acquisition by the Company, which he operated since its founding in 1993. Since 2011 Mr. Bunimovitz has been an Investment Banker with Ackrell Capital, Inc., a member of FINRA. Mr. Bunimovitz holds a Bachelor’s Degree in Psychology from Bar-Ilan University, Israel. Contents

~~Eric Johnson was appointed to the Board of Directors in December 2009 pursuant to his Employment Agreement with Private entered into in October~~ ~~2009~~suspension ~~in connection with the acquisition of Sureflix Digital Distribution Inc.~~ and ~~Sureflix Digital Logistics Inc~~termination., ~~companies engaged in the business of digital distribution of premium gay adult content.~~ Mr. Johnson ~~serves~~did ~~as the President and CEO of Entruphema~~not, ~~Inc.~~however, aformally ~~subsidiary~~assume ~~of Private which operates~~ the ~~business~~offices of ~~the~~principal ~~Sureflix~~executive ~~companies.~~officer ~~Mr. Johnson~~or ~~has~~principal ~~served~~financial ~~as President, CEO and CFO for the Sureflix group of companies since 2003~~officer. Mr. Johnson ~~holds~~received ~~the~~a ~~designations~~total of ~~Chartered~~$99,000 ~~Accountant in~~for ~~Canada~~his ~~and~~services ~~C.P.A. in~~as ~~the United States and is~~ a ~~graduate~~court-appointed ofreceiver ~~the~~during ~~University of Toronto where he earned his Bachelor of Commerce Degree~~2011. Mr. ~~Johnson’s~~Prast ~~extensive~~currently ~~experience~~is inour ~~planning~~Chief ~~and~~Executive ~~managing~~Officer ~~on-line adult~~and ~~content~~interim isChief aFinancial ~~valuable~~Officer, ~~asset~~positions tothat ~~the~~he ~~Board~~accepted in ~~matters involving strategic planning~~2012. ~~His accounting experience also allows him to contribute to addressing accounting issues.~~

~~Johan~~2011 ~~Gillborg~~Summary ~~was~~Compensation ~~appointed~~Table as Chief Financial Officer of Private Media Group, Inc. in August 1998 and has been the Chairman and Managing Director of Milcap Publishing Group AB from 1994 until January 2000. Mr. Gillborg joined the group in 1992 as Marketing Consultant. From 1991 to 1992 he operated his own business which acted as sub-contracting sales force for Securitas Direct of Sweden. From 1988 to 1990, Mr. Gillborg served as a general manager in the hotel business in the United Kingdom and Portugal. Mr. Gillborg holds a Bachelor’s Degree in Business Administration from Schiller International University in London.


Name and Principal Position During Fiscal 2011	Fiscal Year		Salary ($)(1)		All Other Compensation ($)(1)			Total ($)(1)
Berth H. Milton, President, CEO,		2011		384,000		257,000	(4)		641,000
Director and Chairman of the Board (2)(3)		2010		415,000		26,000	(4)		441,000
Johan Gillborg (5)		2011		148,000		48,000			196,000
Chief Financial Officer and Secretary, Private Media Group, Inc.		2010		197,000		—			197,000

~~Certain~~(1) ~~Relationships~~Salary amounts received in non-US currency have been converted into dollars using the average exchange rate for the applicable year.

~~Effective~~(2) ~~March 1, 2009, the Company appointed Ilan Bunimovitz as a director to fill the newly created vacancy on the Board.~~ Mr. ~~Bunimovitz~~ ~~was~~Milton ~~appointed~~served as aPresident ~~director~~of ~~pursuant~~Private toMedia ~~his~~during ~~Employment Agreement~~all ~~with~~of ~~the~~2010 ~~Company~~ and ~~Game~~until ~~Link~~his ~~LLC,~~suspension aon ~~subsidiary~~December ~~of the Company~~15, ~~entered into on January 20, 2009~~2011.~~Under~~ ~~the terms of the Employment Agreement the Company agreed to appoint~~ Mr. ~~Bunimovitz~~ toMilton ~~its~~was ~~Board~~reappointed ~~by March 1, 2009, and to nominate him to continue to serve~~ as aCEO ~~director~~ in ~~2009,~~July 2010 ~~and 2011 until such time as he ceases to be employed by the Company~~. The ~~Employment~~Table ~~Agreement~~includes ~~was~~compensation ~~entered~~received ~~into in connection with the acquisition of Game Link LLC and its affiliate~~ by ~~the Company on January 20, 2009, companies engaged in the business of digital distribution of adult content over the Internet and online eCommerce development~~Mr. ~~Under a separate agreement entered into in connection with the acquisition of Game Link, Berth~~ Milton ~~agreed to vote Private shares beneficially owned by him~~ in ~~favor~~all ofcapacities ~~Mr. Bunimovitz’s election to the Board of Directors~~ in ~~2009,~~ 2010 and 2011~~, so long as he continues to be employed by the Company~~. Effective July 2010 Mr. Bunimovitz ceased to be employed by the Company. Accordingly, Mr. Bunimovitz was not nominated by the Company to serve as a director in connection with the 2010 Annual Meeting of Shareholders held on November 18, 2010.

~~Effective~~(3) ~~December 17,~~Salary ~~2009,~~received ~~the~~in ~~Company~~non-US ~~appointed~~currency: ~~Eric~~EUR ~~Johnson as a director pursuant to his Employment Agreement with the Company and Entruphema Inc.~~311,000 ~~a subsidiary of the Company, entered into on October 29, 2009. The Employment Agreement was entered into~~ in ~~connection~~2010 ~~with the acquisition of Entruphema~~ and ~~its~~EUR ~~affiliate~~297,000 ~~Sureflix Digital Distribution Inc. on October 29, 2009. Under a separate agreement entered into~~ in ~~connection with the acquisition of Game Link, Berth Milton has agreed to vote Private shares beneficially owned by him in favor of Mr. Johnson’s election to the Board of Directors in 2010,~~ 2011 ~~and 2012, so long as he continues to be employed by the Company~~.

No(4) ~~other~~Comprises ~~director~~amounts orpaid ~~executive officer~~by ~~serves~~the ~~pursuant~~Company for security and local transportation, legal expenses relating to ~~any~~a ~~arrangement~~tax orproceeding ~~understanding~~in ~~between~~Sweden ~~him~~(which ormay ~~her~~be deemed to be “Other Compensation” under applicable SEC rules), personal use of Company facilities and ~~any~~personnel ~~other~~and ~~person~~a retention bonus for which the court-appointed receiver demanded repayment but was not repaid. ~~There~~The ~~are~~Company nofurnished security and local transportation for Mr. Milton and his immediate family ~~relationships~~in ~~between~~2010, ~~any~~in the amounts of ~~our~~$8,000. ~~directors~~The oramounts ~~executive~~in ~~officers~~the table for security and local transportation represent the non-business portion of such benefits, valued at the incremental cost to the Company. The Company also paid approximately $18,000 in legal fees for Mr. Milton’s account in 2010. The amount of the un-repaid retention bonus is EUR 139,000.

~~Audit~~(5) ~~Committee~~Salary received in non-US currency, EUR 148,000 in 2010 and EUR 115,000 in 2011.

WeNo ~~maintain~~bonuses anor ~~Audit~~stock ~~Committee~~awards inwere ~~accordance~~granted ~~with applicable~~to ~~SEC~~any ~~and Nasdaq rules. The Audit Committee is currently comprised~~ of ~~Peter Dixinger, Bo Rodebrandt and Jan Jensen. All of~~ the ~~members~~named ofexecutive ~~the~~officers ~~Audit Committee are “independent” as defined~~ in ~~applicable~~2010 ~~Nasdaq~~or ~~listing requirements and SEC regulations, and each of them is able to read and understand fundamental financial statements~~2011. The Board has determined that Peter Dixinger is an “audit committee financial expert” as defined under applicable SEC regulations. The Audit Committee reviews and recommends to the Board, as it deems necessary, the internal accounting and financial controls for the Company and the accounting principles and auditing practices and procedures to be employed in preparation and review of financial statements of the Company. The Audit Committee makes recommendations to the Board concerning the engagement of independent public accountants and the scope of the audit to be undertaken by such accountants. The Audit Committee has adopted a written Audit Committee Charter.

~~Code~~Compensatory ofArrangements ~~Ethics~~for Charles Prast

WeOn ~~have~~July 1, ~~adopted~~2012, athe ~~code~~Company ofentered ~~ethics~~into ~~that~~an ~~applies~~Employment toAgreement ~~our~~with ~~principal~~Charles ~~executive~~Prast ~~officer,~~pursuant ~~principal~~to ~~financial~~which ~~officer,~~Mr. Prast ~~principal~~will ~~accounting~~continue ~~officer~~to ~~and~~serve ~~persons~~on ~~performing~~a ~~similar~~full-time ~~functions.~~basis ~~Our~~as ~~code~~the ofCompany’s ~~ethics~~President isand ~~filed~~Chief asExecutive ~~Exhibit 14~~Officer.1 toIn ~~this~~addition, ~~Annual~~until ~~Report~~the onCompany ~~Form~~hires 10a full-Ktime Chief Financial Officer, Mr. Prast Wehas ~~intend~~also agreed to ~~satisfy~~serve as the ~~disclosure~~interim ~~requirements~~Chief ~~under~~Financial ~~Item 10~~Officer of ~~Form~~the ~~8-K,~~Company. ~~regarding~~Mr. Prast anhas ~~amendment~~been toserving oras ~~waiver~~the ~~from~~Company’s Chief ~~our~~Executive ~~code~~Officer ofand ~~ethics~~interim Chief Financial Officer since March 28, by2012. ~~posting~~Under the ~~required~~Employment ~~information~~Agreement, onthe ~~our corporate~~Company ~~Internet~~also ~~website~~agreed atthat ~~www~~it will nominate Mr.~~prvt.com~~ Prast to continue to serve as a director at each annual meeting of shareholders held in 2012, 2013 and 2014, or until such time as ~~otherwise~~Mr. Prast ~~permitted~~shall ~~under~~cease ~~applicable~~to ~~law~~be employed by the Company.

~~Section~~Under the Employment Agreement, Mr. ~~16(~~Prast shall receive an annual salary of EUR 120,000. The Company will not provide Mr. Prast with health insurance. Instead, the Company is required to reimburse him for all of his health insurance payments, not to exceed EUR 7,200 per annum. In addition to his base salary, Mr. Prast will be entitled to an annual cash performance bonus equal to a percentage of the Company’s annual Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”). ~~Beneficial~~The ~~Ownership~~bonus will be payable within six months after the end of each calendar year commencing with calendar ~~Reporting~~2012. ~~Compliance~~EBITDA will be calculated by BDO Auditores, S.L., the Company’s independent registered public accountants, or any other independent accounting firm approved by both Mr. Prast and the Company, based on the audited financial statements of the Company for fiscal years ended December 31, provided that the Employment Agreement is still in effect on the applicable fiscal year-end date. If

~~Based~~41 solely upon a review of Forms 3, 4 and 5 furnished to Private covering its 2010 fiscal year filed under Section 16(a) of the Securities Exchange Act of 1934, each of Private’s officers and directors complied with the reporting requirements under Section 16(a) for the 2010 fiscal year, except as follows: Jan Jensen and Peter Dixinger failed to file a single Form 3 upon being appointed a director of Private in 2010; Eric Johnson failed to file two Form 4’s reporting the acquisition of an aggregate of 120,000 shares of common stock.

50Table of Contents

~~ITEM~~ the 11Company’s annual EBITDA is below EUR 3,000,000, Mr. Prast’s ~~EXECUTIVE~~bonus ~~COMPENSATION~~will be equal to 5% of the EBITDA. If the annual EBITDA is equal to or greater than EUR 3,000,000, Mr. Prast will also receive 7.5% of the amount over EUR 3,000,000.

The ~~following~~term ~~table~~of ~~summarizes~~Employment ~~all~~Agreement ~~compensation~~will ~~paid~~continue ~~to (i)~~until June ~~our~~30, ~~two~~2015, ~~Chief~~unless ~~Executive~~terminated ~~Officers~~earlier ~~serving during~~ in ~~such~~accordance ~~capacity~~with ~~during any part of 2010, and (ii)~~ the ~~other~~agreement. ~~most~~Absent ~~highly~~a ~~compensated~~written ~~executive~~notice ~~officer~~from ~~who~~the ~~was~~Company ~~serving~~or asMr. Prast anto ~~executive officer at~~ the ~~end of 2010 who earned compensation in excess of $100~~contrary,~~000~~ inand ~~2010,~~until ineither ~~each~~party ~~case~~elects ~~for services rendered in all capacities~~ to ~~Private~~terminate ~~Media Group for~~ the ~~two fiscal years ended December 31~~agreement, ~~2009,~~after ~~and December~~June 3130, ~~2010.~~2015 Nothe Employment ~~other~~Agreement ~~executive~~will ~~officer~~automatically ~~earned~~extend ~~compensation~~ in ~~excess~~one ofmonth ~~$100,000 in 2010~~increments.

~~2010~~If ~~Summary~~the ~~Compensation~~Company ~~Table~~terminates Mr. Prast’s employment prior to June 30, 2015 for any reason other than for “Cause” (as defined in the Employment Agreement”), or if Mr. Prast terminates his employment with the Company for “Good Reason” (as defined in the Employment Agreement”), the Company will pay Mr. Prast (a) his accrued salary and reimbursable expenses, which amount will be payable on the date of his termination, and (b) his monthly base salary in accordance with the Company’s normal procedures until June 30, 2015.

Name and Principal Position During Fiscal 2010	FiscalYear		Salary($)(1)		All OtherCompensation($)(1)			Total($)(1)
Berth H. Milton, President, CEO,(2)(3)		2010		415,000		26,000	(4)		441,000
Director and Chairman of the Board		2009		625,000		58,000	(4)		683,000
Ilan Bunimovitz, CEO, Director, (5)		2010		196,000		22,000	(6)		218,000
Executive Vice President Online Media Division,		2009		279,000		30,000	(6)		309,000
Private Media Group, Inc.; President, GameLink LLC;
President, eLine LLC
Johan Gillborg (7)		2010		197,000		—			197,000
Chief Financial Officer and Secretary, Private Media		2009		206,000		—			206,000
Group, Inc.;

Compensation Committee Interlocks and Insider Participation

~~(1)~~There ~~Salary~~are ~~amounts~~no ~~received~~“interlocks,” inas ~~non-US~~defined ~~currency~~by ~~have~~the ~~been~~SEC, ~~converted~~with ~~into~~respect ~~dollars~~to ~~using~~any member of the ~~average~~Compensation ~~exchange~~Committee. ~~rate~~The ~~for~~Company ~~the~~did ~~applicable~~not have ~~year~~a formal Compensation Committee during 2011. Our Compensation Committee currently consists of Anna Maksimova, Michael Kotov and Michael Martinez.

~~(2)~~Grants ~~Mr.~~of ~~Milton~~Plan-Based ~~served~~Awards ~~as CEO until April 2009, at which time he was appointed as President. Mr. Milton was reappointed as CEO~~ in ~~July~~the ~~2010.~~Last ~~The~~Fiscal ~~Table~~Year ~~includes compensation received by Mr. Milton in all capacities in 2009 and 2010.~~

~~(3)~~There ~~Salary~~were ~~received in non~~no plan-USbased ~~currency,~~awards ~~311,000~~granted ~~euro in 2010 and 450,000 euro in 2009. As the salary paid~~ to ~~Mr. Milton for 2009 was not approved by~~ the ~~other~~individuals ~~directors~~named in ~~2009, in January 2010~~ the ~~Board~~Summary ~~of Directors directed that three independent directors, acting as the~~ Compensation ~~Committee,~~Table ~~determine~~above ~~and recommend to the Board of Directors an appropriate level of compensation~~ for ~~Mr. Milton for 2009 and 2010.In March 2010~~ the ~~Board~~year ofended Directors reduced Mr. Milton’s 2009 salary to $432,000 (311,000 euro).The Board determined that the remaining $193,000 (139,000 euro) received by Mr. Milton as salary in 2009 would be retained by Mr. Milton as a retention bonus provided he remains with the Company through December 31, 2011. ~~For additional information, see “Compensatory Arrangements for Berth H. Milton” below.~~

~~(4)~~Outstanding ~~Comprises~~Equity ~~amounts~~Awards ~~paid~~at by2011 ~~the~~Fiscal Company for security, local transportation and legal expenses relating to a tax proceeding in Sweden, which may be deemed to be “Other Compensation” under applicable SEC rules. The Company furnished security and local transportation for Mr. Milton and his immediate family in 2010 and 2009, in the amounts of $8,000 and $25,000, respectively. The amounts in the Table for security and local transportation represent the nonYear-~~business~~End portion of such benefits, valued at the incremental cost to the Company. The Company also paid approximately $18,000 and $33,000 in legal fees for Mr. Milton’s account in 2010 and 2009, respectively.

~~(5)~~No ~~Mr.~~stock ~~Bunimovitz~~options, ~~was~~stock ~~appointed~~awards asor ~~Executive~~equity ~~Vice~~incentive ~~President~~plan ofawards ~~the~~were ~~Company’s~~issued ~~Online~~in ~~Media~~2011 ~~Division~~or onwere ~~January~~outstanding ~~20,~~at ~~2009.~~the Inend ~~April~~of ~~2009~~2011 hefor ~~was also appointed as Chief Executive Officer of~~ the ~~Company.~~individuals ~~Mr.~~named ~~Bunimovitz was terminated as an officer~~ in ~~July~~the ~~2010.~~Summary ~~Table~~Compensation ~~includes compensation received by Mr~~Table. ~~Bunimovitz in all capacities in 2009 and 2010.~~

~~(6)~~Option ~~Under~~Exercises Mr. Bunimovitz’s employment agreement he received a $1,500 per month non-accountable car allowance during the time he served as an officer. He also received health insurance coverage at an amount of $16,000 in 2009 and ~~$12,000~~Stock inVesting ~~2010~~During ~~under~~2011 an executive plan which is available generally to Company employees. The Company also provided 401(k) matching at an amount of $2,400 and $4,000 in 2010 and 2009. The amount in the table represents the non-business portion of the car allowance and the dollar amount of premiums paid by the Company for Mr. Bunimovitz’s health insurance.

~~(7)~~No ~~Salary~~stock ~~received~~options inwere ~~non-US~~exercised ~~currency,~~during ~~148,000~~2011 ~~euro~~by the individuals named in ~~2010~~the ~~and~~Summary ~~148,000~~Compensation ~~euro~~Table. inNo ~~2009~~stock awards were issued or outstanding during fiscal 2011.

51Employment Contracts, Termination of Employment Contracts and Change in Control Arrangements

NoWe ~~bonuses~~generally ordo ~~stock~~not ~~awards~~enter ~~were~~into ~~granted~~long-term toemployment ~~any~~agreements ofwith ~~the~~our ~~named~~ executive officers. inWe ~~2009~~generally ~~or 2010~~do ~~other~~not ~~than~~enter ~~the~~into ~~retention~~severance agreements ~~bonus~~or ~~for~~similar ~~Mr. Milton~~agreements ~~described~~providing infor ~~Note~~payments 3upon ~~above~~termination ~~and~~of employment or change-in-control. ~~the~~Such ~~section~~agreements, ~~below~~when ~~entitled~~entered ~~“Compensatory~~into, ~~Arrangements~~are ~~for~~negotiated ~~Berth~~on Ha case-by-case basis. ~~Milton~~The only employment agreement or severance agreement with any of our current executive officers that is currently in effect is our agreement with Mr.” Prast.

~~Compensatory~~Under ~~Arrangements~~the Employment Agreement that we entered into with Mr. Prast on July 1, 2012, we are obligated to pay him (a) his accrued salary and reimbursable expenses, and (b) his monthly base salary in accordance with our normal procedures until June 30, 2015 if we terminate Mr. Prast’s employment prior to June 30, 2015 for ~~Berth~~any Hreason other than for “Cause” (as defined in the Employment Agreement”), or if he terminates his employment with us for “Good Reason” (as defined in the Employment Agreement”). ~~Milton~~We are not obligated to make any payments to Mr. Prast upon any change-in-control events.

~~During~~42 the fiscal year ended December 31, 2009, Berth H. Milton received cash compensation totaling EUR 450,000 for services rendered to the Company during 2009 as Chairman, President and Chief Executive Officer (In 2009 Mr. Milton served as CEO of the Company until April 2009). As the amounts paid to Mr. Milton as compensation for 2009 were not approved by the other directors in 2009, in January 2010 the Board of Directors directed that three independent directors, acting as the Compensation Committee, determine and recommend to the Board of Directors an appropriate level of compensation for Mr. Milton for 2009 and 2010.

InTable March 2010, based in part upon information provided by Mercer Consulting S.L., a large independent international compensation consultancy firm retained by the Compensation Committee, the Compensation Committee recommended a compensation proposal for Berth Milton for 2009 and 2010, which was approved by the Board of Directors on March 5, 2010. Following is a description of the compensation proposal for Mr. Milton for 2009 and 2010, approved by the Board of Directors. Contents

~~2009~~ Director Compensation –During Mr. Milton was entitled to a salary of EUR 311,000 for 2009. The remaining EUR 139,000 received by Mr. Milton in 2009 would be retained by Mr. Milton as a retention bonus (“Retention Bonus”). Mr. Milton is required to return the EUR 139,000 Retention Bonus to the Company if he does not remain with the Company through December 31, 2011.

~~2010~~The ~~Compensation~~following –table ~~Mr. Milton~~summarizes ~~was~~all ~~entitled~~compensation topaid ~~receive a salary of EUR 311,000, and was entitled~~ to aall ~~performance~~persons ~~bonus~~who ofserved upas toour ~~50%~~non-employee/executive ofdirectors ~~his~~during ~~2010 base salary (EUR 155,500) as follows:~~2011.

•2011 ~~Mr.~~DIRECTOR ~~Milton~~COMPENSATION ~~was~~TABLE eligible to receive a bonus of up to 32.5% of his 2010 base salary, if the share price of the Company’s Common Stock at the end of 2010 was greater than $3.00, pro rata based upon the amount increase of the share price over $3.00, with the maximum amount (32.5%) earned if the share price equals or exceeds $6.00.

• Mr. Milton was eligible to receive a bonus of up to 17.5% of his 2010 base salary based upon certain corporate projects completed by Mr. Milton in 2010.


Name	Fees Earned or Paid in Cash ($)(1)		Stock Awards ($)		Option Awards ($) (2)		Non-Equity Incentive Plan Compensation ($)		All Other Compensation ($)		Total ($)(1)
Bo Rodebrant (3)		5,160		—		—		—		—		5,160
Stefan Gunnarsson		—		—		—		—		—		—
Lars Ryd(4)		—		—		—		—		—		—
Peter Dixinger (5)		1,290		—		—		—		—		1,290
Bernt Akander		—		—		—		—		—		—
Jan Jensen		1,290		—		—		—		—		1,290

No(1) ~~portion~~Fees ofearned ~~the~~in ~~performance~~non-US ~~bonus~~currency ~~was~~have ~~earned~~been converted into dollars using the average exchange rate for ~~2010.~~the applicable year.

~~Compensation~~(2) ~~Committee~~Reflects ~~Interlocks~~the ~~and~~fair ~~Insider~~market ~~Participation~~value amount at the date of grant using the assumptions set forth in Note 18 to the financial statements included elsewhere in this Annual Report.

~~During~~(3) ~~the~~The ~~last~~director ~~fiscal~~received ~~year~~EUR ~~Bo Rodebrandt~~4,000 ~~Daniel~~in ~~Sánchez~~non-US ~~and~~currency ~~Johan Carlberg~~and, ~~none~~as of ~~whom~~December ~~are officers~~31, ~~former officers or employees of the Company~~2011, ~~acted as~~ the ~~Compensation~~director ~~Committee.~~had ~~During~~no ~~the last~~options fiscal year, none of our executive officers served on our Board of Directors or Compensation Committee of any other entity whose officers served either on our Board of Directors or Compensation Committeeoutstanding.

~~Grants~~(4) ofThe ~~Plan-Based~~director ~~Awards~~received EUR 1,000 in non-US currency and, as of December 31, 2011, the ~~Last~~director ~~Fiscal~~had ~~Year~~no options outstanding.

~~There~~(5) ~~were~~The nodirector ~~plan-based~~received ~~awards~~EUR ~~granted~~1,000 toin ~~the~~non-US ~~individuals~~currency ~~named~~and, inas ~~the~~of ~~Summary~~December ~~Compensation~~31, ~~Table~~2011, ~~above for~~ the ~~year~~director ~~ended~~had ~~December 31,~~no ~~2010.~~options outstanding.

~~Outstanding~~In ~~Equity~~2012, ~~Awards~~our atBoard ~~2010~~of ~~Fiscal~~Directors ~~Year~~adopted a new compensation plan under which all independent directors receive an annual fee of $20,000 in cash for attending board and committee meetings. In addition, the Company reimburses the directors for reasonable out-~~End~~of-pocket expenses incurred in connection with attending such meetings. In addition to the foregoing, commencing in 2013 our Board of Directors intends to grant stock options to its directors as additional compensation. The number of shares subject to any such stock option grant has not been established.

NoITEM ~~stock~~12. ~~options,~~SECURITY ~~stock~~OWNERSHIP ~~awards~~OF orCERTAIN ~~equity~~BENEFICIAL ~~incentive~~OWNERS ~~plan~~AND ~~awards~~MANAGEMENT ~~were~~AND ~~issued~~RELATED inSTOCKHOLDER ~~2010 or were outstanding at the end of 2010 for the individuals named in the Summary Compensation Table.~~ MATTERS

52The following table presents certain information as of May 21, 2013 regarding the beneficial ownership of our common stock by:

~~Option~~• ~~Exercises~~each ~~and~~of ~~Stock~~our ~~Vesting During 2010~~ directors

No• ~~stock~~each ~~options~~of ~~were exercised during 2010 by~~ the ~~individuals~~executive officers named in the 2011 Summary Compensation Table., ~~No stock awards were issued or outstanding during fiscal 2010.~~ above,

~~Employment~~• ~~Contracts,~~all ~~Termination~~persons known by us to be beneficial owners of ~~Employment~~five ~~Contracts~~percent ~~and~~or ~~Change~~more inof ~~Control~~our ~~Arrangements~~ common stock or our Series B Preferred Stock, and

We• ~~generally~~all doof ~~not~~our ~~enter~~directors ~~into~~and ~~long-term employment agreements with our~~ executive officers. Weas ~~generally do not enter into severance agreements or similar agreements providing for payments upon termination of employment or change-in-control. Such agreements, when entered into, are negotiated on~~ a ~~case-by-case basis~~group.~~We have not entered into any employment agreements or severance agreements with the named executive officers other than Ilan Bunimovitz.~~

~~Ilan Bunimovitz~~As ~~was appointed as a director in March 2009 pursuant to his Employment Agreement with the Company and Game Link LLC, a subsidiary~~ of ~~the Company~~May 21, ~~entered into on January 20~~2013, ~~2009.~~a ~~The~~total ~~Employment Agreement was entered into in connection with the acquisition~~ of ~~Game Link LLC and eLine LLC by the Company on January 20~~27, ~~2009~~806,211 ~~companies~~shares ~~engaged in the business~~ of ~~digital~~common ~~distribution~~stock ofwere ~~adult content over the Internet and online eCommerce development. Mr. Bunimovitz was the founder and chief operating officer of Game Link LLC and an indirect co-owner of Game Link LLC and eLine~~outstanding, ~~LLC. The Employment Agreement provided for Mr. Bunimovitz to serve as Executive Vice President of the consolidated Internet~~ and ~~Internet-related business conducted by the Company and its subsidiaries for~~ a ~~period~~total of ~~three years~~800,000 ~~subject~~shares ~~to earlier termination by either party under specified circumstances. Under the terms~~ of ~~the Employment Agreement the Company agreed to appoint Mr. Bunimovitz to its Board by~~ ~~March 1,~~Series ~~2009,~~B ~~and~~Preferred toStock ~~nominate~~were ~~him to continue to serve as a director in 2009, 2010 and 2011 until such time as he ceased to be employed by the Company~~outstanding. ~~The~~Each ~~Employment~~share ~~Agreement provided for Mr. Bunimovitz to receive an annual base salary~~ of ~~$281,828,~~Series ~~$271,070~~B ~~and~~Preferred ~~$302,648~~Stock inis ~~the~~convertible ~~first,~~into ~~second~~50 ~~and~~shares ~~third years~~ of ~~the~~common ~~employment term. He was also entitled to receive~~ stock ~~options~~and onhas the ~~same~~right ~~terms as stock options granted~~ to ~~Berth~~vote ~~Milton,~~on ~~the Company’s Chairman, President and principal shareholder, during the term of the Employment Agreement, in~~ an amount proportionate to the relative stock ownership as between Mr. Bunimovitz and Mr. Milton. If the Company terminated Mr. Bunimovitz’s employment during the term of the Employment Agreement other than for “cause,” or if Mr. Bunimovitz terminated his employment with the Company for “good reason,” then Mr. Bunimovitz would be entitled to continue to receive his monthly base salary for the remaining period of the three year term. In April 2009 Mr. Bunimovitz was also appointed as the Company’s Chief Executive Officer, and his Employment Agreement was modified to provide for an annual base salary in each of the three years of his employment term of $295,000 per year. Mr. Bunimovitz’s Employment Agreement also provided for a non-accountable monthly car allowance of $1,500 per month and health insurance benefits equivalent to benefits afforded to other executive officers of the Company. On July 19, 2010, Ilan Bunimovitz was terminated as Chief Executive Officer for “causeconverted” ~~(as~~basis ~~defined~~along ~~in the Employment Agreement). Mr. Bunimovitz is contesting his termination~~with ~~for “cause” in a private arbitration proceeding pursuant to the terms of his Employment Agreement.~~

5343

DirectorTable Compensationof During 2010 Contents

~~The~~ the ~~following~~common ~~table~~stock. ~~summarizes~~Unless ~~all~~otherwise ~~compensation~~indicated ~~paid~~in the footnotes below, based upon information known to ~~our~~the ~~non-employee~~Company, ~~directors~~the ~~during~~persons ~~2010~~and entities named in the table have sole voting and investment power as to all shares beneficially owned.

2010 DIRECTOR COMPENSATION TABLE


	Common Stock						Series B Preferred Stock
Name and Address of Beneficial Owner(1)	Number of Shares			Percent of Class			Number of Shares			Percent of Class			Percent of Votes Of All Classes of Capital Stock(2)
Consipio Holding BV Walsoordensestraat 70 NL-4588 KD Walsoorden Netherlands		2,196,342	(3)		7.9	%		8,000,000	(3)		100	%		62.2	%

Berth H. Milton Suite 23, Portland House Glacis Road, Gibraltar		9,059,840	(4)		32.6	%		0			0	%		13.4	%

Tisbury Services Inc. c/o Abacus (Nominees) Limited, Elenion Building, 2nd Floor, 5 Themistocles Dervis Street, CY-1066, Nicosia, Cyprus		5,777,329	(6)		20.8	%		0			0			8.5	%

Abacus (Nominees) Limited Elenion Building, 2nd Floor, 5 Themistocles Dervis Street, CY-1066, Nicosia, Cyprus		5,777,329	(6)		20.8	%		0			0			8.5	%

RS Platou Markets ASPost Office Box 1474 Vika, Oslo, Norway N-0116		2,929,672	(5)		10.5	%		0			0	%		4.3	%

Ilan Bunimovitz 515 Arkansas Street, San Francisco, California 94107		2,262,061	(7)		8.1	%		0			0			3.3	%

Eric Johnson		200,000			*	%		0			0			*	%

Charles Prast					*			0			0			*

Michael Martinez					*			0			0			*

John Wirt					*			0			0			*

Michael Kotov					*			0			0			*

Anna Maksimova					*			0			0			*

All directors and executive officers as a group (6 persons)		200,000			*			0			0			*

Name	FeesEarnedor Paidin Cash($)(1)		StockAwards($)		OptionAwards($) (2)		Non-EquityIncentive PlanCompensation($)		All OtherCompensation($)		Total($)(1)
Bo Rodebrant		29,333		—		—		—		—		29,333
Lluis Torralba		—		—		—		—		—		—
Johan G. Carlberg (3)		17,333		—		—		—		—		17,333
Daniel Sánchez (4)		29,333		—		—		—		—		29,333
Peter Dixinger (5)		5,333		—		—		—		—		5,333
Jan Jensen		—		—		—		—		—		—

*	Less than 1%.

(1) ~~Fee~~Except ~~earned~~as inotherwise ~~non-US~~indicated, ~~currency~~the ~~have~~address ~~been~~of ~~converted~~each ~~into~~shareholder ~~dollars~~is ~~using~~c/o the ~~average~~Company ~~exchange~~at ~~rate~~c/o ~~for~~Milcap ~~the~~Media ~~applicable~~Group ~~year~~SLU, Calle de la Marina 16-18 Floor 18 Suite D, 08005 Barcelona, Spain.

(2) ~~Reflects~~Based ~~the~~on ~~fair~~27,806,211 ~~market~~votes ~~value~~entitled ~~amount~~to atbe cast by the ~~date~~holders of ~~grant using~~ the ~~assumptions~~outstanding ~~set~~Common ~~forth~~Stock inand ~~Note~~40,000,000 18votes entitled to be cast by the ~~financial~~holder ~~statements~~of ~~included~~the ~~elsewhere~~800,000 inshares ~~this~~of ~~Annual~~outstanding ~~Report~~Series B Preferred Stock.

(3) ~~The~~Of ~~director~~these ~~earned~~shares, 131,650,000 ~~euro~~shares inare ~~non-US~~registered ~~currency~~in ~~and,~~the asname of ~~December~~Slingsby ~~31,~~Enterprises ~~2010~~Limited, but are currently held by Consipio in connection with a prejudgment attachment order issued by a court in the ~~director~~Netherlands ~~had~~in ~~3,000~~favor ~~options~~of ~~outstanding~~Consipio and against Mr. Milton and Slingsby Enterprises Limited. Slingsby is controlled by Mr. Milton. Mr. Milton has previously claimed beneficial ownership and sole voting and

~~(4)~~44 ~~The director earned 22,000 euro in non-US currency and, as of December 31, 2010, the director had 6,668 options outstanding.~~

(5)Table The director earned 4,000 euro in non-US currency [and, as of December 31, 2010, the director had no options outstanding.Contents

~~Our~~investment ~~Board~~power of ~~Directors~~these ~~may~~1,650,000 atshares. ~~its~~The ~~discretion~~8,000,000 ~~compensate~~shares ~~directors~~of ~~for~~Series ~~attending~~B ~~board~~Preferred ~~and~~Stock ~~committee~~entitle ~~meetings~~Consipio ~~and~~to ~~reimburse~~vote the ~~directors~~ ~~for~~40,000,000 ~~out-~~shares of~~-pocket~~ ~~expenses~~Common ~~incurred~~Stock inthat ~~connection~~are ~~with~~issuable ~~attending~~upon ~~such~~the ~~meetings.~~conversion of the shares of Series B Preferred Stock owned by Consipio.

We(4) Of these shares, 1,842,179 shares have ~~agreed~~been topledged ~~pay~~by ~~our independent~~Mr. ~~directors~~Milton aor ~~fee~~entities controlled by Mr. Milton and are held in Mr. Milton’s margin brokerage account with RS Platou Markets. As disclosed in Note 5, RS Platou also claims beneficial ownership and sole voting and investment power of ~~EUR~~these 1,~~000~~842,179 ~~for~~shares ~~each~~under ~~board~~the ~~and~~terms ~~committee~~of ~~meeting~~pledge ~~attended~~agreements entered into between RS Platou and Mr. ~~With~~Milton. ~~respect~~As todisclosed Boin ~~Rodebrant~~Note 3, weConsipio ~~have~~currently ~~agreed~~holds 1,650,000 shares pursuant to ~~pay~~a prejudgment attachment order issued by a ~~fee~~court ofin ~~EUR~~the ~~1,000,~~Netherlands ~~for~~in ~~each~~connection ~~committee~~with ~~meeting~~a ~~attended~~lawsuit by Consipio against Mr. Milton and Slingsby Enterprises Limited.

54(5) Based upon information reported by RS Platou Markets AS on Schedule 13G filed with the SEC on February 16, 2010. Includes 1,842,179 shares held in Mr. Milton’s margin brokerage account with, RS Platou Markets. Mr. Milton also claims beneficial ownership and sole voting and investment power of these 1,842,179 shares.

~~ITEM~~(6) 12Tisbury Services Inc. ~~SECURITY~~(“Tisbury”) ~~OWNERSHIP~~is OFwholly ~~CERTAIN~~owned ~~BENEFICIAL~~by ~~OWNERS~~Golden ~~AND~~Lake ~~MANAGEMENT~~Trust, a discretionary and revocable trust organized under the laws of Cyprus (“Golden Lake”). Abacus (Nominees) Limited (“Abacus”) is the sole trustee of Golden Lake and, as such, directs the voting and investment of Golden Lake’s portfolio securities. These investment and voting decisions are made by the 16 member board of directors of Abacus. Tisbury and Golden Lake are private investment and financing vehicles. Abacus is in the business of providing business services, including trustee services, to international clients. The mailing address of these filers is c/o Abacus (Nominees) Limited, Elenion Building, 2nd Floor, 5 Themistocles Dervis Street, CY-1066, Nicosia, Cyprus. Abacus (Nominees) Limited disclaims beneficial ownership of these shares.

~~The~~(7) ~~following~~Based ~~table~~upon ~~presents certain~~ information asreported ofby ~~April 8,~~Mr. ~~2011,~~Bunimovitz ~~regarding~~on ~~the~~Schedule ~~beneficial~~13D/A ~~ownership~~filed ofwith ~~our~~the ~~common~~SEC ~~stock~~on ~~by:~~January 10, 2013.

•Equity ~~each~~Compensation ofPlan ~~our~~Information ~~directors and executive officers individually,~~

•We ~~all~~have ~~persons~~an ~~known~~expired byEmployee Stock Option Plan (“the 1999 Plan”) and a new Equity Incentive Plan (the “2009 EIP”) available. The 1999 Plan was in effect until its expiration on March 1, 2009. The 1999 Plan authorized us to begrant ~~beneficial~~stock ~~owners~~options exercisable for up to an aggregate of ~~five~~2,400,000 ~~percent~~shares orof ~~more~~common stock. No stock options may be granted under the 1999 Plan, following its expiration. At December 31, 2011, options for 4,334 shares were outstanding under the 1999 Plan. The 2009 EIP was shareholder approved and came into effect on December 16, 2009. The Company may issue up to 2,066,667 shares of ~~our~~its common stock pursuant to awards granted. Shares issuable pursuant to options or other awards that have expired or are forfeited will be returned to the 2009 EIP. At December 31, 2011, Awards for 2,065,667 shares were available for future grant under the 2009 EIP and Awards for 1,000 shares were outstanding.

•45 ~~all of our directors and executive officers as a group.~~

UnlessTable otherwiseof indicated in the footnotes below, based upon information known to the Company, the persons and entities named in the table have sole voting and investment power as to all shares beneficially owned. Contents

Name and Address	Number of SharesBeneficially Owned (1)			PercentBeneficiallyOwned (1)
Berth H. Milton (2)		9,059,840	(3)		43.5	%
Consipio Holding BV		5,600,000	(4)		26.9	%
RS Platou Markets AS		2,929,672	(5)		14.1	%
Tisbury Services Inc.		2,781,029	(6)		13.4	%
Abacus (Nominees) Limited		2,781,029	(6)		13.4	%
Ilan Bunimovitz (7)		1,875,951			9.0	%
Eric Johnson (2)		130,000			*
Johan Gillborg (2)		35,000			*
Bo Rodebrant (2)		—			—
Peter Dixinger (2)		—			—
Jan Jensen (2)		21,281			*
All Executive Officers and Directors as a group (7 people)		11,102,072			53.43	%

The following table summarizes, as of December 31, 2011, (i) the number of shares of our common stock that are issuable under our equity compensation plans upon the exercise of outstanding options, warrants and other rights, (ii) the weighted-average exercise price of such options, warrants and rights, and (iii) the number of securities remaining available for future issuance under our equity compensation plans.

* Denotes less than 1%

Plan Category

Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights

Weighted-average exercise
price of outstanding
options, warrants and
rights

Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))

(a)

(b)

(c)

Equity compensation plans approved by shareholders (1)

5,334

3.28

2,065,667

Equity compensation plans not approved by shareholders

Total

(1) ~~Beneficial~~Consists ~~ownership~~of isoptions ~~determined~~granted inunder ~~accordance with rules of~~ the ~~U.S.~~1999 ~~Securities and Exchange Commission~~Plan. The ~~calculation~~1999 ofPlan ~~the~~has ~~percentage of beneficial ownership is based upon 20~~expired,~~815,824~~ ~~shares of common stock outstanding on April 8, 2011. In computing the number of shares beneficially owned by any shareholder~~ and ~~the~~no ~~percentage~~additional ~~ownership of such shareholder, shares of common stock which may be acquired by such shareholder upon exercise or conversion of warrants or~~ options ~~which~~can ~~are currently exercisable or exercisable within 60 days of April 8, 2011, are deemed to~~ be ~~exercised~~granted under ~~and~~this ~~outstanding~~plan. ~~Such shares~~Accordingly, ~~however,~~all ~~are not deemed outstanding for computing the beneficial ownership percentage of any other person. Except as indicated by footnote~~2, ~~to our knowledge~~065,667 ~~the~~shares ~~persons~~remaining ~~named~~available infor ~~the~~issuance ~~table~~represent ~~above~~shares ~~have~~under the ~~sole~~2019 ~~voting and investment power with respect to all shares of common stock shown as beneficially owned by them~~EIP.

~~(2)~~ITEM ~~His~~13. ~~mailing~~CERTAIN ~~address~~RELATIONSHIPS isAND ~~c/o~~RELATED ~~Milcap Media Group SLU~~TRANSACTIONS, ~~Calle~~AND deDIRECTOR ~~la Marina 16-18 Floor 18 Suite D, 08005 Barcelona, Spain.~~INDEPENDENCE

~~(3)~~Related ~~All~~Transactions of these shares have been pledged by Mr. Milton or entities controlled by Mr. Milton or are subject to liens or claims by third parties. Accordingly, Mr. Milton may be deemed to share voting and investment power with respect to these shares. Includes 1,842,179 shares held in Mr. Milton’s margin brokerage account with RS Platou Markets. As disclosed in Note 5, RS Platou also claims beneficial ownership and sole voting and investment power of these 1,842,179 shares under the terms of pledge agreements entered into between RS Platou and Mr. Milton. As disclosed in Note 4, Consipio Holding BV also claims sole voting and investment power over the 5,600,000 shares beneficially owned by Mr. Milton based upon a pledge agreement with Slingsby Enterprises Limited.

55Transaction Between the Company and Mr. Milton, our Former President, Chief Executive Officer and Chairman, and Mr. Milton’s Affiliates.

~~(4)~~Mr. Milton ~~Based~~served ~~upon~~as ~~information~~the ~~reported~~Company’s byPresident ~~Consipio~~and ~~Holding~~Chief BVExecutive onOfficer ~~Schedule~~until ~~13D filed with the SEC on August 11~~December 15, ~~2010. The 5~~2011,~~600,000~~ ~~shares~~at ~~of Common Stock as to~~ which ~~beneficial~~time ~~ownership~~he iswas indefinitely ~~claimed~~suspended. byMr. Milton’s ~~Consipio~~positions ~~are the subject of a pledge agreement executed in favor of Consipio (~~as ~~successor in interest to Commerzbank AG) by Slingsby Enterprises Limited to secure certain indebtedness of~~ the Company’s toPresident ~~Consipio.~~and ~~Slingsby~~Chief isExecutive ~~controlled~~Officer bywere ~~Berth~~formally H.terminated ~~Milton.~~on ~~In July 2010 Consipio delivered a written demand for payment and notice of default to the Company~~March 28, ~~Slingsby,~~2012. Mr. Milton ~~and~~was ~~each~~also ~~member of~~ the ~~board~~Company’s ofChairman ~~directors~~ of the ~~Company.~~Board ~~The~~until ~~demand~~the January 11, ~~for~~2012 ~~payment~~annual ~~included~~meeting ~~a demand for delivery~~ of ~~the~~shareholders. ~~pledged shares and formal notice to Slingsby, the Company and~~ Mr. Milton ~~that~~was ~~Consipio~~not ~~claims~~re-elected ~~voting~~at ~~power over~~ the 5January 11,~~600,00~~ ~~shares~~2012 ~~under~~annual ~~the~~meeting. ~~pledge~~The ~~agreement.~~following ~~Berth~~describes ~~Milton~~transactions ~~also~~or ~~claims~~relationships ~~beneficial~~between ~~ownership~~Mr. Milton, ~~and~~his ~~sole~~affiliated ~~voting~~entities, and ~~investment~~the Company ~~power~~involving ~~of these 5~~$120,~~600,~~000 ~~shares.~~or ~~The~~more ~~business~~that ~~address~~have ofoccurred ~~Consipio~~or iswere ~~Walsoordensestraat~~in ~~70,~~effect ~~NL-4588~~on ~~KD,~~or ~~Walsoorden~~after January 1, ~~The Netherlands~~2010.

Guaranty of Commerzbank Note In December 2001, Private Media borrowed $ 4.0 million from Commerzbank AG pursuant to a 7% Note Due 2002 (5the “Commerzbank Note”) ~~Based~~originally ~~upon~~due ~~information~~on ~~reported~~December 20, by2002. RSThe ~~Platou~~Commerzbank ~~Markets~~Note ASbore oninterest ~~Schedule~~at ~~13G~~an annual ~~filed~~rate of 7%, payable quarterly, with the ~~SEC~~entire principal amount and accrued interest originally due on ~~February~~December 20, 162002. The Commerzbank Note was guaranteed by Slingsby Enterprises Limited (“Slingsby”), ~~2010~~an affiliate of Mr. Milton, ~~Includes~~who at that time was Private Media’s Chairman and President and a principal shareholder. The guaranty was secured by a pledge of 1,~~842~~650,~~179~~000 shares ~~held~~of inPrivate MrMedia common stock owned by Slingsby. ~~Milton’s~~In ~~margin~~December ~~brokerage~~2002 ~~account~~Commerzbank ~~with,~~AG agreed RSto ~~Platou~~extend ~~Markets~~the maturity date of the Commerzbank Note to March 20, 2003. ~~Berth~~In ~~Milton~~April ~~also~~2003 ~~claims~~the ~~beneficial~~Commerzbank ~~ownership~~Note ~~and~~was ~~sole~~acquired ~~voting~~by Consipio Holding BV (“Consipio”) from Commerzbank AG, and ~~investment~~Consipio ~~power~~and Private Media reached an agreement-in-principle with Consipio to extend the maturity of ~~these~~the 1Note until April 2008. However,~~842~~ Consipio and Private were unable to reach final agreement on other terms and conditions relating to the restructured Commerzbank Note. The Company continued to make regular payments on the Note,~~179~~ ~~shares~~including principal and accrued interest, through February 2008. ~~Its~~In ~~mailing~~April ~~address~~2008 isConsipio ~~Post~~requested ~~Office~~that ~~Box~~Private ~~1474~~Media ~~Vika~~pay the remaining balance of the Commerzbank Note. Consipio demanded payment of $3,194,000 ~~Oslo~~as settlement in full of the Commerzbank Note, ~~Norway~~which ~~N-0116~~amount was based on an interest rate of 9.9%. However, Private Media claimed that

~~(6)~~46 Based upon information reported by Abacus (Nominees) Limited (“Abacus”) and Tisbury Services Inc. (“Tisbury”) on Schedule 13D jointly filed by them with the SEC on August 12, 2010, relating to 2,781,029 shares directly owned by Tisbury. Tisbury is wholly owned by Golden Lake Trust, a discretionary and revocable trust organized under the laws of Cyprus (“Golden Lake”). Abacus is the sole trustee of Golden Lake and, as such, directs the voting and investment of Golden Lake’s portfolio securities. These investment and voting decisions are made by the 16 member board of directors of Abacus. Tisbury and Golden Lake are private investment and financing vehicles. Abacus is in the business of providing business services, including trustee services, to international clients. The mailing address of these filers is c/o Abacus (Nominees) Limited, Elenion Building, 2nd Floor, 5 Themistocles Dervis Street, CY-1066, Nicosia, Cyprus. Abacus (Nominees) Limited disclaims beneficial ownership of these shares.

(7)Table Basedof upon information reported by Ilan Bunimovitz on Schedule 13D/A filed with the SEC on September 2, 2010. His mailing address is 515 Arkansas Street, San Francisco CA 94107, USA.Contents

~~Changes~~ the interest rate on the Commerzbank Note had not been increased to 9.9% and was still 7% per annum. Therefore, Private Media claimed that a lesser amount was payable under the Commerzbank Note. Consipio also claimed that the amount due under the Commerzbank Note should be repaid in ~~Control~~Euros and not U.S. dollars.

AsIn May ~~described~~2010, ~~under~~Consipio ~~Item 3~~filed –a ~~Legal~~lawsuit ~~Proceedings~~against ~~and~~Private ~~Item 13~~Media, -Slingsby ~~Certain Relationships~~ and ~~Related~~Mr. Milton ~~Transactions and Director Independence, appearing elsewhere~~ in

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