Placing and Admission to AIM by wuyunyi

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									Placing
and











Admission
to
AIM




                    Admission
Document

                     30
December
2010
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about its contents, you should consult
a person authorised under the Financial Services and Markets Act 2000 who specialises in advising on the acquisition of shares and other securities.
The whole of the text of this Document should be read and in particular your attention is drawn to the section entitled “Risk Factors” set out in part 2 of
this Document.
This Document is not an approved prospectus under section 85(1) of FSMA 2000. This Document is exempt from the requirement to issue a prospectus because
                                                                                                                                                                        P
it is not an offer to the public.
PeerTV Plc (“Company”) and the Directors of the Company, whose names appear on page 19 of this Document, accept responsibility for the information
contained in this Document and compliance with the AIM Rules. To the best of the knowledge and belief of such Directors and the Company who have taken all
reasonable care to ensure that such is the case, the information contained in this Document is in accordance with the facts and does not omit anything likely to
affect the import of such information.
No person has been authorised to give any information or make any representations other than those contained in this Document and, if given or made, such
information or representations must not be relied upon as having been so authorised. The information in this Document supersedes the Recent Prospectus (as
described on page 20 of this Document) and no reliance should be placed on the Recent Prospectus. Neither the delivery of this Document nor any subscription
made pursuant to it will, under any circumstances, create any implication that there has been any change in the affairs of the Company since the date of this
Document or that the information in it is correct at any time subsequent to its date.
Application will be made in accordance with the AIM Rules for the Ordinary Shares of the Company already in issue and to be issued to be admitted to trading
on AIM. It is expected that such application to AIM will become effective and that dealings will commence on 30 December 2010.




                                                                      PeerTV Plc
                       (Incorporated in England and Wales under the Companies Act 2006 with registered number 7068350)

                                     PLACING OF 355,557 NEW ORDINARY SHARES OF 0.5p EACH
                                                                      AT 45p PER SHARE
                                                                                  and
                                                            application for admission to AIM

                                                      NOMINATED ADVISER AND BROKER:

                                  Libertas Capital Corporate Finance Limited

                                                         Ordinary Share Capital on Admission

                      Authorised Share Capital                                                               Issued and Fully Paid*
                     50,000,000 Ordinary Shares                                                            14,503,007 Ordinary Shares


*       not including 928,168 Ordinary Shares yet to be issued under or pursuant to the Previous Fundraising and the Libertas Shares.
AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more
established companies. AIM securities are not admitted to the official list of the United Kingdom Listing Authority.
A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration
and, if appropriate, consultation with an independent financial adviser.
Each AIM company is required pursuant to the AIM Rules for Companies to have a nominated adviser. The nominated adviser is required to make a
declaration to the London Stock Exchange on admission in the form set out in Schedule Two to the AIM Rules for Nominated Advisers.
The London Stock Exchange has not itself examined or approved the contents of this document.
Libertas Capital Corporate Finance Limited, which is regulated by the Financial Services Authority, is acting as nominated adviser and broker to the Company in
connection with the proposed admission of the entire issued and to be issued Ordinary Share capital to trading on AIM. Its responsibilities as the Company’s
nominated adviser under the AIM rules are owed solely to the London Stock Exchange plc and are not owed to the Company or to any Director or to any other
person in respect of his decision to acquire shares in the Company in reliance on any part of this Document. No representation or warranty, express or implied, is
made by Libertas Capital Corporate Finance Limited as to any of the contents of this Document (without limiting the statutory rights of any person to whom this
Document is issued). Libertas Capital Corporate Finance Limited will not be offering advice and will not otherwise be responsible for providing customer
protections to recipients of this Document or for advising them on the contents of this Document or any other matter.
Restrictions on distribution
This Document should not be copied or distributed by recipients and, in particular, should not be distributed by any means including electronic transmission, to
persons with addresses in Canada, Australia, Republic of South Africa or Japan their possessions or territories or to any of their citizens, or to any corporation,
partnership or such entity created or organised under their laws. This Document should not be copied or distributed by any means, including electronic
transmission, to persons with addresses in the United States of America (including the States and the District of Columbia), its territories, possessions and other
areas subject to United States jurisdiction, to or for the account or benefit of a US person, unless the Company and the recipient are relying on an exemption under
the Securities Act of 1933, as amended. Any such distribution contrary to the above could result in a violation of the laws of such countries.
This Document should not be copied or distributed by any means including electronic transmission, to persons in Israel, except to certain persons referred to in
section 15A(b)(1) of the Securities Law, 5728-1968, of Israel (“Israeli Securities Law”) and listed in Appendix One of such law (which includes certain mutual,
provident and venture capital funds, banks, insurers, portfolio managers, investment advisers, stock exchange members, underwriters, certain corporations fully-owned
by any of the above and corporations whose equity capital exceeds a certain amount). The Company is not sending, and brokers, dealers, commercial banks, trust
companies and other nominees have been instructed not to forward, this Document to Israel, except to such persons referred to above, and subject to the limitations
set out in the Israeli Securities Law. Should a person or the agent of a person receive this Document in Israel and not be a person referred to above, this Document
does not constitute an offer to him/her to sell, or a solicitation from him/her of an offer to purchase Shares.
Conflicts of interest
CSS has a broad-ranging relationship with the Company, which may create conflicts of interest. CSS has acted as financial adviser to the Company in the structuring
of the Previous Fundraisings. Many of the Company’s Convertible Preference Shares are held by private clients of CSS. Certain principals of CSS and CSS Partners
are partners in CSSCM who holds a position in the Ordinary Share and Deferred Share capital of the Company and are also partners of Libertas Partners LLP, the
parent of the Company’s Nomad and Broker. Furthermore, CSS is the investment manager and operator of CSS Bridge Partners 2006 LP Series D18, a previous
provider of finance to the Company.
                                        TABLE OF CONTENTS

Table of Contents                                                                                       2
Summary                                                                                                 4
Expected timetable of events                                                                            9
Statistics                                                                                              9
Part 1                                                                                                 10
Risk Factors                                                                                           10
        1. Risks specific to the issuer                                                                10
            1.1 Early stage company                                                                    10
            1.2 Industry and macro risks                                                               12
            1.3 Risks relating to the Company’s location in Israel                                     12
            1.4 Intellectual property                                                                  12
            1.5 Legal and regulatory risks                                                             13
            1.6 Financial Risks                                                                        13
            1.7 Influence of principal shareholders                                                    14
            1.8 Forward-looking statements                                                             14
        2. Risks associated with the securities                                                        15
            2.1 AIM and liquidity of the Ordinary Shares                                               15
            2.2 Possible volatility of the price of the Ordinary Shares                                15
            2.3 Impact of further issues of Ordinary Shares on the market price of outstanding
                 Ordinary Shares                                                                       15
Definitions                                                                                            16
Directors, Secretary and Advisers                                                                      19
Part 2                                                                                                 20
Information about the Company                                                                          20
        1. Background to the Group                                                                     20
        2. Recent Prospectus                                                                           20
        3. Group and business overview                                                                 21
        4. Market description                                                                          22
            4.1 The evolution of television broadcasting                                               22
            4.2 TV access to the Internet                                                              22
            4.3 Internet-based TV: Key Applications                                                    23
            4.4 The Internet TV market                                                                 23
            4.5 Video on Demand market                                                                 24
            4.6 The niche narrowcasting market                                                         24
            4.7 Internet TV as an emerging business model                                              26
            4.8 The suppliers of Internet TV programming                                               27
        5. The Group’s platform and its products                                                       27
            5.1 The Products                                                                           27
            5.2 Advantages of the Group’s solution                                                     28
        6. Sales, Marketing and Customers                                                              29
            6.1 Sales and marketing team                                                               29
            6.2 Targeted markets                                                                       29
            6.3 Customers                                                                              30
        7. Competition                                                                                 30
            7.1 Competing business approaches                                                          30
            7.2 Competing companies                                                                    31
            7.3 Projects and industry initiatives                                                      31
        8. Manufacturing                                                                               32
        9. Operating and financial review                                                              32
        10. Financial Position and significant change in the Company’s financial or trading position   33
        11. Capital Resources                                                                          34
        12. Working Capital Statement                                                                  34
        13. Research and development and intellectual property                                         34
            13.1 Research and development                                                              34
            13.2 Intellectual property of the Company                                                  35
            13.3 Intellectual property licensed by the Group                                           35
        14. Significant change in the issuer’s financial or trading position                           35
        15. Dividend Policy                                                                            35

                                                        2
      16.   Administrative management and supervisory bodies and senior management             35
      17.   Corporate governance                                                               36
      18.   Lock-in Arrangements                                                               39
      19.   Key interests                                                                      39
      20.   Reasons for the Placing and Use of Proceeds                                        40
      21.   Dealing Arrangements                                                               40
      22.   CREST                                                                              40
Part 3                                                                                         41
Financial Information                                                                          41
       1. Letter from the Auditors                                                             41
       2. Historical Financial Information for the Financial Periods ended 31 December 2009,
           31 December 2008 and 7 months period ended 31 December 2007                         43
       3. Interim Financial Information for period ending 30 June 2009 and 30 June 2010        56
Part 4                                                                                         62
Additional Information                                                                         62
       1. Share Capital                                                                        62
       2. Articles of association                                                              63
       3. Shareholders                                                                         68
           3.1 Major shareholders                                                              68
           3.2 Directors’ shareholdings                                                        69
       4. Directors’ Remuneration and benefits                                                 69
       5. Directors’ previous and current directorships                                        73
       6. Employees                                                                            73
       7. Share Options                                                                        74
       8. Material contracts                                                                   76
           8.1 PeerTV Plc                                                                      76
           8.2 PTV                                                                             79
       9. Related Party Transactions                                                           81
       10. Legal proceedings                                                                   81
       11. Third party information and statement by experts and declarations of any interest   81
       12. Takeover Rules                                                                      81
       13. Taxation                                                                            82
           13.1 United Kingdom Taxation for UK Investors                                       82
           13.2 Taxation in the US                                                             84
       14. Expenses of the Admission                                                           84
       15. Persons Responsible and Statutory Auditors                                          85
       16. Documents on display                                                                85




                                                     3
                                                          SUMMARY

Your attention is drawn to the following:

1.    this summary should be read as an introduction to the Document;
2.    civil liability attaches to those persons who are responsible for the summary, including any translation of
      the summary, but only if the summary is misleading, inaccurate or inconsistent when read together with the
      other parts of the Document.

Company Background
The Company was incorporated in England and Wales on 6 November 2009. In January 2010 a corporate
                                                                                       .
restructuring was effected, with the Company becoming the parent company of PTV The PTV Acquisition
involved the Company’s acquisition of the entire issued share capital of PTV from PeerTV Inc. PTV is the
operating subsidiary of the Company and was incorporated under the laws of the State of Israel on 13 May 2007.

                PeerTV Inc.1                                                                          Employee Share
                 (8,452,588                                  PeerTV Plc                                 Op on Plan
                                       58.3%                                             10.7%
               Ordinary Shares)                                                                           trustee
                                                                       100%                             (1,547,412
                                                                                                      Ordinary Shares)
                                                             PeerTV Ltd.

                   Others 2                                                                             CSS Related
                   2,753,007           19.0%                                             12.9%            Par es
                                                                                                        (1,750,000
                                                                                                      Ordinary Shares)

1                                                          ,
     PeerTV Inc., the former holding company of PTV currently holds 58.3 per cent. of the Ordinary Shares in the Company. It is
     obliged to vote its shares in accordance with the instructions of its underlying investors, none of whom hold a controlling interest.
     It is anticipated that PeerTV Inc. will distribute the shares to the underlying investors and be dissolved in the foreseeable future.
2    As of 20 December 2010 there was £108,300.60 still to be collected from private investors under the Previous Fundraising.
     Additionally the Company had collected another £116,325.00 but not issued shares and allotted the shares to private investors
     under the Previous Fundraising, nor had it issued the Libertas Shares nor the 104,000 shares due to CSS under the agreement
     further described in section 8.1.2 of Part 4 of this Document. The Company therefore expects to issue another 928,168 shares
     in the coming weeks.

The diagram above does not take into account any Convertible Preference Shares or Deferred Shares, because they
will not be automatically converted to Ordinary Shares on Admission.
As far as the Company and the Directors are aware, the Company is not controlled by any person or any number
of persons acting in concert.
On 21 October 2010 the Company issued the Recent Prospectus for the purposes of offering up to 7,462,686
Ordinary Shares and admitting the whole of the Company’s issued Ordinary Share capital to AIM. The Ordinary
Shares were to be priced at between 62p and 72p each and the prospectus was primarily targeted at institutional
investors. Unfortunately the offer was not successful due to insufficient take up by institutional investors and no
shares were issued pursuant to the Recent Prospectus. The costs incurred during the attempted admission to AIM
are included in the expenses of this Document.
Investors in the Company should note that this Document supersedes the Recent Prospectus and no reliance should
be placed on the Recent Prospectus when making a decision as to whether to invest in the Company.

The Company’s Business
The Company develops and markets proprietary solutions which enable content providers to deliver specific, live,
streamed channels and VOD over the Internet on a cost effective basis for viewing on TV sets. The Company’s
core customers comprise content owners or aggregators looking to deliver specialised content to customers
distributed across the globe. To date, the Company has been particularly successful in servicing providers of
“narrowcasting” content – that is niche content with appeal to specific communities of interest. This market
encompasses the delivery of ethnic or national content to customers outside of their place of origin. The




                                                                   4
Company’s ability to deliver a cost effective solution for the delivery of such content while providing the end
customer with a content rich and high quality viewing experience has been central to its ability to attract business
from such content providers.


The Company’s Technology
While the delivery of TV or video content over the Internet (also known as Over the Top or OTT services) brings
many advantages to content providers (notably cost and reach) there are a number of technical and practical
challenges facing such providers which impact on the quality of service and control over the content. The Group’s
product strategy has been formulated on delivering solutions which meet the needs of content providers and
consumers in that the PeerTV solutions:
•      Are quick and simple to implement;
•      Are cost-effective; and

•      Provide a high quality viewing experience.

In order to meet these needs, the Company’s product set has been developed such that it can be deployed across
the globe over many different internet network environments. As such, it has adopted a number of principles in
developing its product set:

•      A robust platform able to stream live TV channels and VOD at a quality comparable with traditional television;

•      Compatibility with a wide number of video encoding formats and streaming technologies ensuring high
       quality video over the internet;
•      An integrated end-to-end solution, encompassing the MX middleware solution (including content
       management, subscriber management and billing) supplied to the content providers at the head-end and the
       provision of cost-effective set-top boxes to the consumer at home. This end-to-end solution allows content
       owners to set up and deliver services on a timely and cost-effective basis; and

•      The integration of a free-to-air digital terrestrial broadcast receiver and decoder into the PeerStation
       set-top box.


Revenue Generation
PeerTV markets and sells its products to content creators, aggregators, narrowcasters, telecoms operators and internet
service providers who in turn supply services to the consumer. The Company’s customers are primarily new
companies or existing companies entering into a new business environment. They are taking advantage of the lowered
barriers to entry provided by the Internet and are generally extremely cost conscious. The Company’s traditional
revenue model consists of a onetime charge per PeerStation, a base charge per software licence for the MX Software
and a licence fee per subscriber. The company also charges an annual hardware and software maintenance fee. The
Company has also recently entered into a different form of agreement with a new customer in it which provides the
PeerStations at a discount but receives a portion of the recurring subscriber fees.

The Group’s largest customer is a Russian content provider with operations mainly in Europe and North America. It
was responsible for 29 per cent., 66 per cent. and 60 per cent. of revenues in 2008, 2009 and H1 2010, respectively.
One of the strategic goals of the Company is to reduce the proportion of revenues generated from this one customer
and several of its newer clients have the potential to be as large as this customer. However the board believes that it
will take some time before the customer base is broad enough such that individual large customers do not represent
significant sales and profitability risks any more.


The Competition
The Directors believe that Internet TV offers a transformational business model, which will threaten the hegemony
of the satellite and cable pay-TV incumbents and offers market entry for a wide range of technology vendors,
service providers and broadcasters. There are numerous technological solutions that can be regarded as being
competitive with components of the Company’s offering and several companies which service, or are attempting
to service, the same market. The Group expects that this revenue model will be attractive to other customers as
well, as it further lowers their upfront capital investment. While more attractive for the Group in the longer term,
it requires a higher working capital investments compared to the traditional revenue model.




                                                          5
TV Access to the Internet and Key Applications
There are several ways for TVs to access the Internet:

•      Set-top Boxes;

•      Personal computers;

•      Gaming consoles;

•      Blu-ray DVD Players (BD Live technology); and

•      Internet-enabled TVs.

There are currently two key applications of Internet TV: VOD and TV channels delivered over the Internet. In the
coming years the market is expected to develop and to include additional types of applications delivering to TVs
a new level of interactivity and efficiency in content discovery. They are expected to include:

•      The use of network-based resources (user profile, behavioural patterns, demographics, location and
       presence) to target the end-user;

•      Content and application specific merchandising opportunities, driving impulse purchases using
       micro payments;

•      True user interaction with content via the integration of social media sites;

•      Powerful search, recommendation and personalisation engines; and

•      The integration of online metadata with that of free and pay-TV services.


The Internet TV Market
Video over the Internet has experienced dramatic growth as broadband access has become widespread in the
developed world. In July 2009 alone, over 21 billion online videos were viewed in the US (source: comScore
Video Metrix service). The number of devices worldwide supporting Internet video will have increased from
80.5m in 2008 to 376.5m by 2013 (source: iSuppli).
The vast majority of videos over the Internet have been viewed on personal computers. The Company’s proposition
is based on the premise that consumers prefer the TV as their video entertainment viewing device and the Directors
believe that the delivery of live channels and videos over the Internet to the TV is a viable and high growth business
opportunity for a new breed of TV service provider. An estimated 65 million households worldwide had the
capability of viewing Internet video on their television sets at the end of 2008, up 134 per cent. on 2007 according
to a study by IMS Research. The bulk of today’s viewing uses intermediaries such as PCs or game consoles, but it
is predicted that Internet TV functionality will become increasingly available through a digital set-top box.

The Narrowcasting Market
The “narrowcasting” market is defined as the market for niche content that may appeal to specific language or
demographic groups. It also refers to “communities of interest” of people from various backgrounds that come
together in their support of shared topics or ideas, sometimes referred to as “long-tail” content.
Over the top Internet TV technologies, which leverage a broadband Internet connection, are uniquely suited to
address the narrowcasting market. While broadcast technologies, such as cable or satellite, are efficient for
delivering a relatively small selection of content to a large number of simultaneous viewers, their ability to
efficiently deliver a wide variety of narrowcast content is limited by satellite transponder space and cable channel
spectrum. The Group’s solutions are best suited to deliver a very large range of content to small or fragmented
audiences that are geographically dispersed, provided they have broadband internet access.
Discernible markets the Group has identified in this area are:
•      The foreign language market which is directed at first or second generation immigrants wishing to remain
       connected to their home culture and language. This market currently provides the majority of the
       Company’s business;
•      The religious content market which is directed at religious communities desiring more of their content or
       a way to limit TV content which they consider inappropriate; and
•      ISPs who are looking for new revenue models as the provision of basic internet access has become a
       commodity with low margins.

                                                          6
Current Trading and Outlook
The Group has experienced a rapid but steady growth of revenues and gross profit while maintaining a moderate
increase of operating expenses which resulted in decreasing net losses for 2007, 2008 and 2009 and resulted in
profitability in the first half of 2010. In the first 6 months of 2010 the Company delivered approximately 52,000
PeerStations to 10 major customers around the world, compared with approximately 9,000 PeerStations which were
delivered to 2 major customers in first 6 months of 2009. Sales of the Company’s middleware, the MX solution, were
to 6 customers in the first 6 months of 2010, up from sales to 3 customers in 2009. Revenue increased by 517 per cent.
to US$5.08m in the first six months of 2010 from US$0.98m in the first 6 months of 2009 primarily due to a substantial
increase in sales to customers in Europe and North America. Gross profit reached US$1.57m from US$0.35m in 2009.

Selected Financial Information
PeerTV Plc became the ultimate holding company of PeerTV Ltd as of the 18 January 2010 by way of a share for
share transaction. The financial information below has been presented as if PeerTV Plc had always been the
ultimate holding company of the group.
                                     Unaudited Consolidated results            Audited Consolidated results of PeerTV Plc
                                             of PeerTV Plc                                                         7 Months
                                       6 Months           6 Months          Year ended        Year ended               ended
(US$’000)                            to 30/06/10       to 30/06/09            31/12/09          31/12/08            31/12/07
                                     (unaudited)       (unaudited)
Revenues                                   5,081                    982         3,476              2,322                151
Gross Profit                               1,567                    351         1,350                443                 73
EBIT                                         282                   (995)       (1,563)            (2,145)              (769)
Net Profit/(Loss)                            156                   (995)       (1,854)            (2,137)              (766)
Note: No liability to taxation has resulted in the periods above
                                                                                                                   7 Months
                                        6 Months             6 Months       Year ended         Year ended             ended
                                      to 30/06/10          to 30/06/09        31/12/09           31/12/08          31/12/07
Cash Flow from Operations                   (752)                  (268)         (578)            (1,733)              (616)
Cash Flow from Investing                    (702)                  (365)         (722)              (562)              (290)
Cash Flow from Financing                   1,380                    649         1,067              2,323              1,263
                                           As at                 As at           As at              As at             As at
                                        30/06/10              30/06/09        31/12/09           31/12/08          31/12/07
Assets
Non current assets                         1,078                    377           605                512                263
Current assets                             4,841                    808         1,214              1,256                578
Total assets                               5,919                   1,185        1,819              1,768                841

Share capital and reserves                 1,404                     (15)        (576)               683                497

Liabilities
Non current liabilities                      744                      —            ––                 ––                 ––
Current liabilities                        3,771                   1,200        2,395              1,085                344
Total equity and liabilities               5,919                   1,185        1,819              1,768                841


Reasons for the Placing and Admission
The Company recently placed approximately £1 million gross in the Previous Fundraising (of which over
£900,000 has been received) and will raise another £160k through the Placing. Total costs incurred for the process
of Admission, including any broking fees incurred in the Placing will be approximately £438,000, £430,000 of
which are costs associated with Admission and £8,000 is broking fees in respect of the Placing. The net proceeds
of Placing and Previous Fundraising will be used to fund the production financing needs of the Group’s growing
sales including necessary inventory.

The Directors also believe that the profile of the Company will be significantly enhanced as a public company.
The Directors believe that Admission will:
•       enhance the Group’s status;
•       assist the Group in raising additional capital should this be required; and

                                                                    7
•      provide liquidity for investors through the ability to buy and sell Ordinary Shares.


Risk Factors
Early stage company: PTV is still an early stage company and any investment in the Company needs to be
considered in light of the risks, expenses and problems frequently encountered by early stage technology companies.
Management and personnel: The Group is dependent on some of the members of the Board and management to
operate its business. The loss of any senior member of the management would have a material adverse effect on
the business and prospects of the Group.
Technology risks: The Group is working in internet based markets which are rapidly changing and subject to
significant technological development and risk. The Group may develop, use or procure new technologies
ineffectively or fail to adapt to meet customer requirements.
Manufacturing operations and costs: The Group is currently outsourcing the manufacture to third parties and
therefore does not have ultimate control over the manufacturing process. The Group’s manufacturing suppliers
may fail to deliver the products on time, at the required quality levels and at the agreed prices. The costs of
components and assembly could rise above the projected prices.
Supplier risks: The Group’s products are designed and based on single components provided by sole source suppliers.
Product failure: A major product defect could damage the reputation of the Group and its commercial future.

Sales and marketing: There is only a limited universe of potential customers and it may be difficult to identify these.

Dependence on customers: PeerTV’s largest customer was responsible for US$2,294,000, and US$3,045,000 of
revenues in 2009 and H1 2010, representing 66 per cent. and 60 per cent. of revenues, respectively.

Risks relating to PTV’s location in Israel: Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its neighbouring states. A state of hostility, varying in degree
and intensity, has led to security and economic problems for Israel in the past.

Intellectual property: The Group’s products and processes are proprietary and its intellectual property consists
of copyrights and technical know-how, which may be challenged by other companies.

Working capital: In the event of a slippage in its business plan the Company may not have sufficient working
capital to execute its current operating and expansion plan.

Revenue and profitability: The Company cannot guarantee that it will be able to sustain revenue growth and
recurring profitability in the future.

Additional financing requirements: The Company has recently raised funds and is undertaking the Placing to
provide working and development capital to all its lines of business, but may require further external financing in
the future which may not be available to it at that time.

Exchange rate risk: The Group will be exposed to several exchange rate related risks.

Influence of principal shareholders: Upon completion of the Placing, the Group’s management and the Board
will, directly or indirectly, hold approximately 22 per cent. of the Ordinary Share capital of the Company and, as
a result, will be in a position to exert significant influence over the affairs of the Company.

AIM Admission and Trading: An Admission to AIM may not result in the anticipated liquidity of the shares and
therefore result in high volatility of the prices.




                                                          8
                                    EXPECTED TIMETABLE OF EVENTS

Admission to trading on the AIM Market of the London Stock Exchange                               8 a.m. on 30 December 2010

Crediting of CREST accounts                                                                                   30 December 2010

Latest date for posting of share certificates                                                                    13 January 2011



                                                         STATISTICS

Placing Price                                                                                                                   45p

Existing Ordinary Shares                                                                                               13,517,997

Number of Placing Shares                                                                                                   355,557

Number of Ordinary Shares to be issued on Automatic Conversion                                                             629,453

Overall cost of Admission1                                                                                                £438,000

Number of Ordinary Shares in issue on Admission                                                                        14,503,007

Placing Shares as percentage of enlarged share capital on Admission                                                           2.4%

Ordinary Shares expected to be issued after Admission2                                                                     928,168

Market capitalisation of the Company on Admission                                                                     £6.5 million

SEDOL:                                                                                                                   B424FM4

ISIN:                                                                                                           GB00B424FM47

Ticker:                                                                                                                        PTV
Notes:
1      comprising of £430,000 associated with Admission and £8,000 of broking fees in respect of the Placing
2       As of 20 December 2010 there was £108,300.60 still to be collected from private investors under the Previous Fundraising.
        Additionally the Company had collected another £116,325.00 but not issued shares and allotted the shares to private investors
        under the Previous Fundraising, nor had it issued the Libertas Shares, nor the 104,000 shares due to CSS under the agreement
        further described in section 8.1.2 of Part 4 of this Document. The Company therefore expects to issue another 928,168 shares
        in the coming weeks.




                                                                  9
                                                     PART 1

                                               RISK FACTORS

An investment in Ordinary Shares is subject to a number of risks. Potential investors should consider the following
risk factors, as well as the other information in this Document, before investing in Ordinary Shares (including the
New Ordinary Shares). Potential investors should read the whole of this Document and not rely solely on the
information in this section entitled “Risk Factors”. The Group’s business, operating profit and overall financial
condition could be adversely affected if one or more of the following risks were to occur and, as a result, the
trading price of the Ordinary Shares could decline and investors could lose part or all of their investment. The
Directors consider the following risk factors to be significant to potential investors. The risks described below may
not be exhaustive. Additional risks and uncertainties unknown to the Directors at the date of this Document or
which the Directors currently believe are immaterial may also have a material adverse effect on its financial
condition or prospects or the trading price of the Ordinary Shares.


1.    Risks specific to the issuer
1.1   Early stage company
      PTV is still an early stage company and any investment in the Company needs to be considered in light of
      the risks, expenses and problems frequently encountered by early stage technology companies.

      An investment in the Company should be regarded as speculative and should be considered long-term in              PRann I (4),
      nature and as suitable only for sophisticated investors who understand the risks involved including the risk      PRann III
                                                                                                                        (2)
      of a total loss of capital. Any investor in the Company must have no need for any liquidity with respect to
      this investment and must be able to withstand a total loss of his investment.

      Management and personnel
      The Directors believe that the Group’s future success will depend in part on its ability to attract and
      maintain highly skilled management and key personnel. If the Group does not succeed in attracting and
      retaining such management and personnel, it may not be able to grow its business as anticipated.

      The Group is dependent on some of the members of the Board and management to operate its business. The
      loss of any senior member of the management would, in the short term, have a material adverse effect on
      the operations of the business and the prospects for the Group. Depending on the individual lost to the
      Group such adverse effects could involve sales, costs, product development capability and operational
      know how.

      Technology risks
      The business of the Group involves new technologies and new products, and requires the management of
      the risks associated with such enterprises. In particular, the Group is working in internet-based markets
      which are rapidly changing and subject to significant technological development and risk.

      The future success of the Group will depend on its ability to enhance its existing products and services,
      address the changing needs and demands of its customers, and respond to technological advances and
      emerging industry standards and practices on a cost-effective and timely basis. If competitors introduce new
      products or if existing industry and government standards and practices change or new industry and
      government standards and practices change emerge, the Group’s existing products and services may
      become obsolete.

      Developing the Group’s technology and product range entails significant technical and business risks. The
      Group may develop, use or procure new technologies ineffectively or fail to adapt to meet customer
      requirements. If the Group faces material delays in introducing new products, services or enhancements, it
      may be at a significant competitive disadvantage. Any of these events would have a material adverse effect
      on the Group’s business and prospects.

      Manufacturing operations and costs
      The Group’s products are manufactured and assembled from a number of electronic components and
      devices. The Group is currently outsourcing the manufacture to third parties and therefore does not have
      ultimate control over the manufacturing process. The Group’s manufacturing suppliers may fail to deliver
      the products on time, at the required quality levels and at the agreed prices.



                                                         10
Dependence on sole source production or on sources of supply where there are limited available alternatives
subjects the Group to the risks associated with an interruption or loss of supply. In common with many
other producers of electrical and electronic products, the Group’s products are designed and based on single
components provided by sole source suppliers. The Group is exposed to the risk of those components
ceasing to be available either in sufficient quantities or at all as and when required by the Group to satisfy
orders from its customers.

Similarly, the Group’s products incorporate or are designed to integrate with software and hardware
components provided by sole source suppliers although, in some cases, other sources of components
providing similar functions exist. If the supply of current software and hardware components ceases or is
insufficient to meet customer demand, it would be necessary to switch to alternative components which
may require the Group to re-design and/or re-test its products and may result in an increase in production
costs as well as delays in meeting customer orders.

The costs of components and assembly could rise above the projected prices. The Group currently operates
with its subcontractors on a fixed cost/unit base which means that the subcontractors benefit or suffer from
fluctuations in component prices. However, should the prices for components increase too much the
subcontractors may refuse to produce for the agreed prices or may demand a higher price/unit.

Any interruption in the availability of components would be likely to result in increased cost and/or an
inability for the Group to meet customer orders. Any of these risks could have a material adverse effect on
the Group’s business and prospects and its financial performance. There can be no guarantee that the Group
would be able to substitute components in a timely manner or at all or that the Group would be able to
develop alternative products that do not rely on supply constrained or discontinued parts.

The Group works on long lead times for component supply and manufacturing, typical of the industry. This
lead time may at times exceed the lead times of firm orders from customers, in particular as volumes are
expected to increase. This could expose the Group to significant inventory risk if it overestimates the
demand for products. Such misjudgement of future customer demand could have a material adverse effect
on the Group’s cash flows and financial performance.

The Company’s set-top boxes are based on Sigma chip architecture. It is therefore currently dependent for
the manufacturing of its set-top boxes on the ability of the contract manufacturers or itself to procure
sufficient quantities of the Sigma produced chip sets. Sigma has recently experienced difficulties in
supplying its customers in a timely fashion. If the Group were forced to switch to an alternative provider
on short notice at this time, it would require significant time and investment and would impact the Group’s
business and development significantly.

Product failure
Quality is critical in the Group’s software and hardware products and as a consequence the Group will
continue to focus on product selection, design, testing, quality control and commercial terms and
conditions. A major product defect, due to design mistake or component failure, could impact upon current
and future customer demand and, may lead to adverse press and market commentary. It could damage the
reputation of the Group and require rectification costs which the Group would, wherever possible, seek to
recover from its suppliers. However, there can be no guarantee that the Group would be able to recover such
cost and any loss of reputation could have a material adverse effect on the Group’s business and prospects
and its financial performance.

Sales and marketing
The Group’s sales and marketing channels are mainly trade shows, trade publications, web-based marketing
and word of mouth. There is only a limited universe of potential customers; within the narrow casting
segment it can be very difficult to identify who the potential customers might be. The limited number of
existing and potential clients also increases the risk for damage through loss of reputation.

Dependence on customers
The Group currently has only a limited number of customers. The largest customer is a Russian content
provider with worldwide operations. It was responsible for US$673,000, US$2,294,000, and US$3,045,000
of revenues in 2008, 2009 and H1 2010, representing 29 per cent., 66 per cent. and 60 per cent. of revenues,
respectively. The large proportion of variable costs in the business of PTV means that the loss of this
customer, despite its importance, would be unlikely to threaten the existence of the Company but it would
have an immediate adverse impact in the financial performance of the Group. There have been no



                                                  11
      indications that this customer wishes to or is trying to replace PTV’s products, however this customer has
                                                                 ,
      signalled that it wishes to reduce its dependence on PTV its largest supplier (it has been indicated to the
      Company that it is still supplying >70 per cent. of boxes this customer requires at this time).

      Competition and barriers to entry
      The Group’s products face competition from alternative suppliers and from alternative methods of working
      which might obviate the need for its products. In certain sub-segments of the market, the Group faces
      competition from larger and better capitalised competitors which may be able to offer their services on
      terms that are or would be unprofitable and unsustainable for the Group. There is no assurance that the
      Group will be able to compete successfully with its competitors in acquiring and maintaining new accounts.
      It is also uncertain how long a lead time the Group will have with its innovations and how rapidly
      competition from other suppliers or alternative technologies may develop in those sub-segments of the
      markets in which the Group currently has an advantage. The entry of larger and better capitalised
      competitors willing to enter such markets via predatory pricing could have a material adverse effect on the
      Group’s business and prospects and its financial performance.

      Uncertainty of market acceptance
      There is no certainty that the Group’s products and services will continue to be commercially acceptable
      business offerings or that the Group will have adequate financial and human resources to maintain the rate
      of product development required by the markets in which it operates.

      Companies with innovative technologies can overestimate the speed of market acceptance after initial
      successes. The rate of market penetration by smaller companies dominated by larger suppliers is frequently
      protracted as it is often difficult to achieve market recognition.

1.2   Industry and macro risks                                                                                          PRann I
                                                                                                                        (9.2.3)
      Industry
      The Group’s core business operates in a new, rapidly changing, high growth and competitive international
      industry. The TV over internet industry is still rapidly developing and therefore changing, with no agreed
      technology standards or established business models yet. There can be no guarantee that the Group will
      develop the right technology or a competitive offering as and when the industry matures. A failure to
      identify the industry’s trends in a timely manner and develop competitive products could have a material
      adverse effect on the Group’s business and prospects and its financial performance.

      Current economic conditions
      The western economies are currently experiencing significant economic difficulties, putting in question the
      growth of these economies for the foreseeable future. Currently, the majority of customers of the Group’s
      clients are located in countries effected by this economic uncertainty. This may have a significant impact
      on the Group’s clients ability to sell their services. This could have a material adverse effect on the Group’s
      business and prospects and its financial performance.

1.3   Risks relating to PTV’s location in Israel
      The principal place of business of the Group is in Israel. Accordingly, political, economic and military
      conditions in Israel directly affect the Group’s operations. Since the establishment of the State of Israel in
      1948, a number of armed conflicts have taken place between Israel and its neighbouring states. A state of
      hostility, varying in degree and intensity, has led to security and economic problems for Israel. The past few
      years have seen an increase in the hostilities and tension between Israel and the Palestinian Arabs,
      particularly Hezbollah, and, while this has not impacted on the economy, the situation remains volatile both
      politically and economically. It is unknown to what extent those hostilities and the current volatile climate
      may hinder Israel’s international trade relations and whether they may limit the geographic markets where
      the Group can operate. In addition Iran has recently made very severe threats against Israel and appears to
      be attempting to obtain or produce nuclear weapons. Any resumption of hostilities involving Israel or
      threatening Israel or the interruption or curtailment of trade between Israel and its present trading partners,
      could materially and adversely affect the Group’s operations.

1.4   Intellectual property
      PTV’s intellectual property
      While the Group’s products and processes are proprietary and may, in due course, be protected by patents,
      the Group has, at this time, no patent protection of its intellectual property, and its intellectual property
      consists of copyrights and technical know-how. The Group could face challenges to its intellectual property;
      any such challenge could have a significant effect on the Group’s technology portfolio.

                                                        12
      Potential infringement by the Group
      There is a possibility that third parties could claim that the Group’s current or future technologies or
      processes, or infringe or misappropriate their patents or other proprietary rights. Although the Directors do
      not believe that the Group is currently infringing or misappropriating any proprietary rights of others, legal
      action claiming infringement or misappropriating could be commenced against the Group at any time and
      the Group may not be able to successfully defend such litigation given the complex technical issues and
      inherent uncertainties in such litigation. Any claims, with or without merit, could result in costly litigation
      and operational changes, which could adversely affect the business of the Group, financial condition and
      operating results, and may force the Group to enter into royalty or licensing agreements, which may not be
      available on terms normally acceptable to the Group. Any such claims may result in the Group having to
      indemnify customers or obtain replacement products or functionality for customers, to significantly
      increase development efforts and resources to redesign products as a result of these claims, and to
      discontinue the sale of some or all of the Group’s technologies or products.

      Potential infringement by customers, employees or advisers
      In order to protect the Group’s proprietary technology and processes, the Group relies in part on
      confidentiality agreements and non-competition clauses with its customers, collaborators, employees and
      other advisers. These agreements may not effectively prevent disclosure of confidential information and
      may not provide an adequate remedy in the event of unauthorised disclosure of confidential information.
      In addition, others may independently discover trade secrets and proprietary information, and in such
      cases the Group could not assert any trade secret rights against such party. Costly and time-consuming
      litigation could be necessary to enforce and determine the scope of the proprietary rights and failure to
      obtain or maintain trade secret protection could adversely affect the Group’s competitive business position.

1.5   Legal and regulatory risks
      Enforcement of non-competition clauses
      Non-competition clauses are difficult to enforce in certain jurisdictions in which the Group carries out
      business, especially with respect to employees who are exposed to confidential information but are not,
      however, senior or essential management employees and whose termination of employment may not cause
      destructive and irreparable damage to the Group.

      Third party liability
      In their effort to protect third party property rights, governments may decide to hold providers of
      technology liable for enabling the infringement of such third parties’ rights. Should customers of the Group
      fail to obtain the adequate licences for content they provide to their customers, a court could decide to hold
      the Group liable for such an infringement. This area of law is currently evolving and may evolve separately
      in different jurisdictions and in directions unfavourable to the Group.

1.6   Financial risks
      Revenue and profitability
      The Company cannot guarantee that the Group will be able to sustain revenue growth and sustain recurring
      profitability in the future. If the Group is unable to sustain profitability, the business could be severely
      harmed. The Group’s operating results may fluctuate as a result of a number of factors, many of which are
      beyond its control. These factors include, amongst others, the growth rate of markets into which the Group
      sells its services or products, market acceptance and demand of its services and products and those of its
      customers and unanticipated delays, problems in the introduction of its services or products or insufficient
      bandwidth being made available by ISPs.

      Additional financing requirements
      The Company has recently raised funds and is undertaking the Placing to provide working and development
      capital to all its lines of business and does not currently have any plans to raise further financing. However,
      if the Company continues its strong growth over several years, as is the goal of the board, like all growing
      companies it may require further external financing. The Directors recognise that the Company, should it
      find itself in a situation where it wants or needs further external financing, it may not be able to obtain such
      financing on acceptable terms, or at all. In addition, the terms of any such financing may be dilutive to, or
      otherwise adversely affect, Shareholders. If the Group does not obtain access to such additional capital it
      may be hindered or delayed in its further growth.




                                                         13
      Exchange rate risk
      The Group will be exposed to several exchange rate related risks. The Company raised and is raising funds
      in Sterling pursuant to the Placing. Most of the Group’s R&D and marketing and general administration
      expenses will be incurred in NIS or US$ and the sale of its product will generally be denominated in US$.
      Exchange rate fluctuations could have a material adverse effect on the Group’s profitability or the price
      competitiveness of its product. There can be no guarantee that the Group would be able to compensate or
      hedge against such adverse effects and therefore negative exchange rate effects could have a material
      adverse effect on the Group’s business and prospects and its financial performance.

      Dividends
      There is no certainty that the Group will generate sufficient after tax profits to be able to pay a dividend on
      its Ordinary Shares. The declaration, payment and amount of any future dividends will depend upon,
      amongst other things, the Group’s earnings, financial position, cash requirements and availability of profits
      as well as provisions of relevant laws or generally accepted accounting principles from time to time. There
      can be no guarantee that the Company will be able to pay, or that the Board will recommend paying, any
      dividends in the future. Such lack of dividend payments could have a significant negative impact on the
      attractiveness of the shares of the Company as an investment and therefore its price.

1.7   Influence of principal shareholders
      Upon Admission, the management and the Board will, directly or indirectly, hold approximately 22 per cent.
      of the Ordinary Share capital of the Company and, as a result, will be in a position to exert influence over
      the affairs of the Company, including the appointment of the Board and the approval of significant
      transactions involving a change in control of the Company. In addition, this control may have the effect of
      making certain transactions more difficult and delaying or preventing an acquisition or other change in
      control of the Company.

1.8   Forward-looking statements
      This Document contains certain forward-looking statements that involve risks and uncertainties. All
      statements other than statements of historical facts contained in this Document, including statements
      regarding the Group’s future financial position, business strategy and plans, business model and approach
      and objectives of management for future operations, are forward-looking statements. Generally, the forward-
      looking statements in this Document use words like “anticipate”, “believe”, “could”, “estimate”, “expect”,
      “future”, “intend”, “may”, “opportunity”, “plan”, “potential”, “project”, “seek”, “will” and similar terms.
      These forward-looking statements include, but are not limited to, statements about:

      •      implementation of the Group’s business model and strategic plans for business;

      •      estimates of the Group’s expenses, future revenues and investments;

      •      the Group’s ability to establish and maintain corporate collaborations;

      •      timing of regulatory filings and approvals;

      •      expected products sales; and

      •      the Group’s industry and competing companies and technologies.

      The Group’s actual results could differ significantly from the results discussed in any forward-looking
      statements in this Document. Many factors could cause or contribute to these differences, including the
      factors discussed in the section headed Risk Factors in this Document. Investors are urged to read carefully
      this entire Document before making an investment decision. The forward-looking statements in this
      Document are based on the Directors’ beliefs and assumptions and information only as of the date of this
      Document, and the forward-looking events discussed in this Document might not occur. Therefore,
      investors should not place any reliance on forward-looking statements. Except as required by law, the
      Directors undertake no obligation to publicly update any forward-looking statements, whether as a result of
      new information, future earnings or otherwise. Information in this Document will be updated as required
      by the AIM Rules and the Disclosure and Transparency Rules.




                                                        14
      Conflicts of interest
      CSS has a broad-ranging relationship with the Company, which may create conflicts of interest. CSS has
      acted as financial adviser to the Company in the structuring of the Previous Fundraisings. Many of the
      Company’s Convertible Preference Shares are held by private clients of CSS. Certain principals of CSS and
      CSS Partners are partners in CSSCM, who holds a position in the Ordinary Share and Deferred Share
      capital of the Company and also of Libertas Partners LLP, the parent of the Company’s Nomad and Broker.


2.    Risks associated with the securities
2.1   AIM and liquidity of the Ordinary Shares
      An investment in the Company involves a high degree of risk and may not be suitable for all recipients of
      this Document. It is intended that application will be made for the Ordinary Shares of the Company to be
      admitted to trading on AIM. AIM is not the Main Market and the Ordinary Shares will not be admitted to
      the Main Market of the London Stock Exchange. Admission should not be taken as implying that there will
      be a liquid market for the Ordinary Shares. Any investment in the Ordinary Shares may thus be difficult to
      realise. Investors should be aware that the value of the Ordinary Shares may be volatile and may go down
      as well as up. Investors may, on disposing of Ordinary Shares, realise less than their original investment or
      may lose their entire investment. The Ordinary Shares may, therefore, not be suitable as a short-term
      investment. In addition, the market price of the Ordinary Shares may not reflect the underlying value of the
      Company’s net assets. The price at which the Ordinary Shares will be traded and the price at which investors
      may realise their Ordinary Shares will be influenced by a large number of factors, some specific to the
      Company and its proposed operations, and some which may affect the business sectors in which the Group
      operates. Such factors could also include the performance of the Group’s operations, large purchases or
      sales of the Ordinary Shares, liquidity or the absence of liquidity in the Ordinary Shares, legislative or
      regulatory changes relating to the business of the Group and general economic conditions.

2.2   Possible volatility of the price of the Ordinary Shares
      The market price of the Ordinary Shares could be subject to significant fluctuations due to various factors
      and events, including any regulatory or economic changes affecting the Group’s operations, variations in
      the Group’s operating results, developments in the Group’s business or its competitors, or changes in market
      sentiment towards the Ordinary Shares. The Group’s operating results and prospects from time to time may
      be below the expectations of market analysts and investors. In addition, stock markets from time to time
      suffer significant price and volume fluctuations which affect the market prices for securities and which may
      be unrelated to the Group’s operating performance. Any of these events could result in a decline in the
      market price of the Ordinary Shares.

2.3   Impact of further issues of Ordinary Shares on the market price of outstanding Ordinary Shares
      The Company has no current plans for a subsequent offering of Ordinary Shares or of rights to subscribe
      for its Ordinary Shares. However, it is possible that the Company may decide to offer additional Ordinary
      Shares in the future. In addition, the granting of employee share options in respect of Ordinary Shares is
      intended to become an integral element of the Group’s remuneration policies. An additional offering of
      Ordinary Shares by the Company, significant sales of Ordinary Shares by employees or major
      Shareholders, or the public perception that an offering or sales may occur, could have an adverse effect on
      the market price of Ordinary Shares.




                                                       15
                                      DEFINITIONS

“Acquisition Event”                  1. the unconditional sale, disposal or transfer of all the Shares,
                                        including Deferred Shares (except, if relevant, those that the
                                        purchaser owns immediately prior to a sale); or

                                     2. 90 per cent. acceptances from Shareholders (including holders of
                                        Deferred Shares) pursuant to a written offer to purchase all the
                                        issued and outstanding share capital of the Company

“Admission”                          the admission of the Company’s Existing Ordinary Shares and the
                                     New Ordinary Shares to trading on AIM

“AIM”                                the Alternative Investments Market, a market operated by the
                                     London Stock Exchange

“Articles of Association”            the articles of association of PeerTV Plc, as amended from time to time

“Automatic Conversion”               the automatic conversion of the Convertible Loan in the Company in
                                     accordance with paragraph 8 of Part 4

“Board” or the “Directors”           the board of directors of PeerTV Plc, whose names appear on
                                     page 19 of this Document

“Broker”                             Libertas Capital Corporate Finance Limited

“CA 2006”                            the Companies Act 2006

“City Code”                          the City Code on Takeovers and Mergers

“Codec”                              software capable of coding or decoding a digital data stream or signal

“Combined Code”                      the code of best practice, including the principles of good governance,
                                     as set out in the Combined Code on Corporate Governance published
                                     in June 2008 by the Financial Reporting Council

“Company” or “PeerTV Plc”            PeerTV Plc incorporated on 6 November 2009 in England and Wales
                                     with company number 7068350 and re-registered as a public limited
                                     company on 18 January 2010

“Convertible Loan”                   the convertible loan notes issued by the Company, as described in
                                     paragraph 8 of Part 4 of this Document
“Convertible Preference Shares”      the 4,132,142 eight per cent. convertible preference shares of the
                                     Company repayable on 30 September 2014 if not converted beforehand

“CSS”                                Charles Street Securities Europe LLP, authorised and regulated by
                                     the Financial Services Authority, with registered office at 1 Wilton
                                     Crescent, London SW1X 8RN and registration number OC334478
                                     and where relevant to include references to CSSCM

“CSSCM”                              CSS Capital Managers LLP, with registered office at 1 Wilton Crescent,
                                     London SW1X 8RN and registration number OC310330 a partnership
                                     engaged in the monitoring of investments, affiliated with CSS

“Deferred Shares”                    the 500,000 Deferred Shares having a par value of 0.001 pence each
                                     and, where the context permits, the further 319,444 Deferred Shares
                                     to be issued by the Company in accordance with the bridge loan
                                     described in paragraph 8.1.2 of Part 4

“Directors”                          the executive directors and the non-executive directors whose names
                                     are set out on page 19 of this Document

“Document” or “Admission Document”   this Document




                                               16
“DTH”                        Direct-to-Home satellite and reception – TV transmissions via
                             satellite intended for “direct-to-home” reception in households
                             equipped with parabolic dish antenna

“DVB-T”                      Digital Video Broadcasting – Terrestrial

“Enlarged Share Capital”     the issued share capital of the Company immediately following
                             Admission

“Existing Ordinary Shares”   the 13,517,997 Ordinary Shares in issue prior to the Placing

“Existing Shareholders”      the Shareholders of the Company at the date of this Document

“FSA”                        the Financial Services Authority

“FSMA 2000”                  the Financial Services and Markets Act 2000 (as amended)

“Group”                      the Company and its subsidiary PTV.

“IFA”                        Independent Financial Adviser

“Inc. Options”               1,547,412 Ordinary Shares already in issue, held by the employee
                             trust, as described in paragraph 7 of Part 4 of this Document.

“IPTV”                       Internet Protocol TV

“ISP”                        an internet service provider

“Libertas Shares”            the 325,000 new Ordinary Shares to be issued after Admission
                             pursuant to the Placing Agreement

“London Stock Exchange”      the London Stock Exchange Plc

“New Ordinary Shares”        the 355,557 Placing Shares resulting from the Placing and the
                             629,453 Ordinary Shares created on Automatic Conversion

“NIS”                        New Israel Shekels, the legal currency of the State of Israel

“Non-Executive Directors”    the non-executive directors of the Company

“OCS”                        the Office of the Chief Scientist – a department of the Ministry of
                             Trade in Israel which grants funding to Companies for research
                             and development

“Ordinary Shares”            ordinary shares of 0.5p each in the capital of the Company

“OTT”                        over the top – a method of delivering television over the Internet

“PeerStation”                any one of the Company’s line of PeerStation set top boxes required
                             by subscribers to receive on their TVs the Internet TV services that
                             the Company’s clients’ provide

“PeerTV Inc.”                PeerTV Inc. a company registered in the State of Delaware with
                             company no. 5646778

“Placing”                    the placing of the Placing Shares with qualifying Institutional
                             investors

“Placing Agreement”          the placing agreement between the Company and the Broker in
                             respect of Placing Shares and described in paragraph 8.1.4 of Part 4

“Placing Price”              the price per Placing Share of 45p

“Placing Shares”             the 355,557 Ordinary Shares which are subject to the Placing

“PPV”                        pay per view




                                       17
“PTV Acquisition”                  the acquisition by the Company of all of the assets held by PeerTV
                                                                      ,
                                   Inc., principally the shares in PTV further details of which are set out
                                   in paragraph 8.1 of Part 4 of this Document

“Previous Fundraising”             the offer pursuant to which 2,267,165 Ordinary Shares were placed
                                   pursuant to a private placing memorandum dated 18 November 2010

“PTV”                              PeerTV Ltd, a company registered in Israel with company
                                   no 51-397615-9

“Recent Prospectus”                the prospectus published by the Company on 21 October 2010 and
                                   described in paragraph 2 of Part 2 of this Document

“Recognised Investment Exchange”   investment exchanges as defined in section 285 of FSMA 2000
                                   including AIM

“Shareholders”                     the holders of Shares

“Share Option Scheme”              the share option scheme, under which the Directors may issue options
                                   to purchase Ordinary Shares at a certain price authorised by the Board
                                   to be granted to Directors, employees and service providers, details of
                                   which are set out in paragraph 7 of Part 4 of this Document.

“Shares”                           the Existing Ordinary Shares and the New Ordinary Shares

“VOD”                              video-on-demand

“US$”                              the US dollar

“£” or “Sterling”                  the British pound Sterling




                                             18
                         DIRECTORS, SECRETARY AND ADVISERS                                       PRann III
                                                                                                 (10.1)

Directors                                 Eatamar Drori – Chairman of the Board and CTO
                                          Ronnie Jaegermann – Chief Executive officer
                                          Chaim Bechor – VP production and product marketing
                                          Ofer Barda – Non-Executive Director
                                          Shmuel Zailer – Non-Executive Director
                                          Jim McGeever – Non-Executive Director from Admission

Company Secretary and Registered Office   SLC Corporate Services Limited
                                          Thames House
                                          Portsmouth Road
                                          Esher
                                          Surrey KT10 9AD

Company Principal Office                  15 Abba Even Str.
                                          46725 Herzlyia
                                          Israel

Nomad and Broker                          Libertas Capital Corporate Finance Limited
                                          16 Berkeley Street
                                          London W1J 8DZ

Accountant to PTV                         Aboulafia Avital & Co
                                          15 Canfei Nesharim Str.
                                          95464 Jerusalem
                                          Israel

Auditors and Reporting Accountants        Haysmacintyre                                          PRann I
                                          Fairfax House                                          (2.11,
                                                                                                 5.1.4)
                                          15 Fulwood Place
                                          London WC1V 6AY

Israeli Solicitors to the Company and     Cohen Legal Partners
to the Placing                            Beit Zohar
                                          13 Hasadna St, POB 2647
                                          43000 Ra’anana
                                          Israel

UK Solicitors to the Company              Fladgate LLP
                                          16 Great Queen Street
                                          London WC2B 5DG

UK Solicitors to the Placing              Eversheds LLP
                                          One Wood Street
                                          London EC 2V 7WS

Bankers                                   Bank Leumi L  ’Israel Ltd.
                                          Hatidhar Street.
                                          Ra’anana Industrial Zone
                                          Israel

Registrars                                SLC Registrars
                                          Thames House
                                          Portsmouth Road
                                          Esher
                                          Surrey KT10 9AD

Company’s website                         www.peertv.com




                                          19
                                                             PART 2

                                    INFORMATION ABOUT THE GROUP


1.    Background to the Group
The Company was incorporated in England and Wales on 6 November 2009 under the CA 2006 as a private                                          PRann I
company with the name PeerTV Limited and registration number 7068350. The Company was re-registered as a                                     (5.1.1,
                                                                                                                                             5.1.2, 5.1.3,
public company on 18 January 2010 with the name PeerTV Plc. In January 2010 a corporate restructuring was                                    5.1.4, 5.1.5)
                                                              .
effected, with the Company becoming the parent company of PTV PTV’s former US-domiciled parent, PeerTV
                                                                                        .
Inc, is now in the process of dissolution. The commercial name of the Company is PeerTV The Company’s
telephone number is +972 9 740 7315.

The Company does not hold, and does not currently propose to hold, any other investments other than PTV.                                     PRann I
                                                                                                                                             (5.2.1,
The PTV Acquisition involved the Company’s acquisition of the entire issued share capital of PTV from PeerTV                                 5.2.2, 25)
Inc. and issue of US$353,748 of convertible loan notes (“Convertible Loan”) on 18 January 2010. Further details of
the PTV Acquisition and Convertible Loan are set out in paragraph 8 of Part 4 of this Document. At the time of the
PTV Acquisition all of PeerTV Inc’s contracts that were necessary for the continued business of the Group were
novated from PeerTV Inc. to PTV  .

PTV is the wholly owned operating subsidiary of the Company. PTV is a company incorporated under the laws                                    PRann I
of the State of Israel on 13 May 2007, with registered number 51-397615-9, as a private company limited by shares                            (7.1, 7.2)
                                                                                                                                             PRann I
under the name “PeerTV Ltd”. PTV’s registered address is 15 Abba Even Street, Herzlyia, 46725, Israel. PTV was                               (8.1)
established to develop and market end-to-end Internet-based TV solutions. PTV rents 500 sqm. of offices in a
modern building in Herzlyia, Israel. Details of the lease agreement are set out in Section 8.2.2 of Part 4 of
this Document.

Cash required by PTV, save for grants or other government subsidies, is provided solely by the Company,                                      PRann I
either by way of equity investments or loans. The amounts received as grants or government subsidies are not                                 (5.1.5)
significant in the context of the Group’s funding. The Directors do not intend for PTV to seek funding from
any other source.


               PeerTV Inc.1                                                                          Employee Share
                (8,452,588                                   PeerTV Plc                                Op on Plan
                                       58.3%                                             10.7%
              Ordinary Shares)                                                                           trustee
                                                                    100%                               (1,547,412
                                                                                                     Ordinary Shares)
                                                             PeerTV Ltd.

                   Others 2                                                                            CSS Related
                  2,753,007            19.0%                                             12.9%           Par es
                                                                                                       (1,750,000
                                                                                                     Ordinary Shares)

1                                                          ,
     PeerTV Inc., the former holding company of PTV currently holds 58.3 per cent. of the Ordinary Shares in the Company. It is
     obliged to vote its shares in accordance with the instructions of its underlying investors, none of whom hold a controlling interest.
     It is anticipated that PeerTV Inc. will distribute the shares to the underlying investors and be dissolved in the foreseeable future.
2    As of 20 December 2010 there was £108,300.60 still to be collected from private investors under the Previous Fundraising.
     Additionally the Company had collected another £116,325.00 but not issued shares and allotted the shares to private investors
     under the Previous Fundraising, nor had it issued the Libertas Shares nor the 104,000 shares due to CSS under the agreement
     further described in section 8.1.2 of Part 4 of this Document. The Company therefore expects to issue another 928,168 shares
     in the coming weeks.

The diagram above does not take into account the Convertible Preference Shares and Deferred Shares, because
they will not be automatically converted to Ordinary Shares on Admission.

2.     Recent Prospectus
On 21 October 2010 the Company issued a prospectus for the purposes of offering up to 7,462,686 Ordinary
Shares and admitting the whole of the Company’s issued Ordinary Share capital to AIM. The Ordinary Shares
were to be priced at between 62p and 72p each and the prospectus was primarily targeted at institutional investors.


                                                                  20
Unfortunately the offer was not successful due to insufficient take up by institutional investors and no shares were
issued pursuant to the Recent Prospectus. The costs incurred during the attempted admission to AIM are included
in the expenses of this Document.
Investors in the Company should note that this Document supersedes the Recent Prospectus and no reliance should
be placed on the Recent Prospectus when making a decision as to whether to invest in the Company.

3.     Group and business overview
The Group develops and markets proprietary solutions which enable content providers to deliver specific, live            PRann I
streamed channels and VOD over the Internet on a cost-effective basis for viewing on TV sets. The Group’s core           (7.1, 7.2)
                                                                                                                         PRann I
customers comprise content owners or aggregators looking to deliver specialised content to customers distributed         (8.1)
across the globe. To date, the Group has been particularly successful in servicing providers of “narrowcasting”
content – that is niche content with appeal to specific communities of interest. This market encompasses the
delivery of ethnic or national content to customers outside of their place of origin. The Company’s ability to deliver
a cost-effective solution for the delivery of such content while providing the end customer with a content rich and
high quality viewing experience has been central to its ability to attract business from such content providers.

While the delivery of TV or video content over the Internet (also known as Over the Top or OTT services) brings
many advantages to content providers (notably cost and reach) there are a number of technical and practical
challenges facing such providers which impact on the quality of service and control over the content. The Group’s
product strategy has been formulated on delivering solutions which meet the needs of content providers and
consumers in that the Group’s solutions:

•      Are quick and simple to implement;

•      Are cost-effective; and

•      Provide a high quality viewing experience.

In order to meet these needs, the Group’s product set has been developed in such a way that it can be deployed
across the globe over many different internet network environments. As such, it has adopted a number of principles
in developing its product set:
•      A robust platform able to stream live TV channels and VOD at consistently high quality;
•      Compatibility with a wide number of video encoding formats and streaming technologies ensuring high
       quality video over the internet;
•      An integrated end-to-end solution, encompassing the MX middleware solution (including content
       management, subscriber management and billing) (“MX Software”) supplied to the content providers at the
       head end and the provision of cost-effective set-top boxes to the consumer at home. This end-to-end
       solution allows content owners to set up and deliver services on a timely and cost-effective basis; and
•      The integration of a free-to-air digital terrestrial broadcast receiver and decoder into the set top box.

The Group markets and sells its products to content creators, aggregators, narrowcasters, telecoms operators and
internet service providers who in turn supply services to the consumer. The use of the Internet as a means to deliver
a wide range of video entertainment and content has led to the development of a new breed of TV service
providers. The Group’s mission is to service these entities and to grow and develop with them. The Group’s
customers are primarily new companies or existing companies entering into a new business environment. They are
taking advantage of the lowered barriers to entry provided by the Internet and are generally extremely
cost-conscious.

The Group understands that affordable entry-level systems are crucial to the success of its business. The revenue
model consists of a one time charge per PeerStation, a base charge per software licence for the MX Software and
a licence fee per subscriber. The Group also charges an annual hardware and software maintenance fee.

The Group has traditionally created revenues through the sale of its PeerStations, the sale and installation of its
MX Software and annual maintenance and licence fees for each PeerStation and the MX Software. In a recent
development the Group has entered an agreement with a new customer in which it provides the set top boxes at a
discount but receives a portion of the recurring subscriber fees. The Group expects that this revenue model will
be attractive to other customers as well because it further lowers their upfront capital investment. While more
attractive for the Group in the longer term, it requires a higher working capital investment compared to the
traditional revenue model.


                                                         21
4.    Market description
4.1   The evolution of television broadcasting
      Analogue
      Television was originally distributed as analogue radio signals broadcast from central towers and received
      by “rabbit ear” antennae on home TV sets within range. Many people added outdoor aerial antennae to
      receive TV signals too weak or distant to be received by their interior “rabbit ears”.

      Cable
      In the 1960s, cable services brought analogue TV to homes over wires like those connecting telephones.
      Delivering more channels at higher quality, cable services rapidly replaced antennae in many urban homes,
      particularly in North America.

      Digital
      In the 1990s, digital cable began to replace analogue cable, enabling carriers to offer far more channels at
      still-higher quality. Digital technology had also enabled distribution of TV signals via satellites directly to
      home receiving dishes. These new systems, however, still followed the original broadcast model, sending
      all channels to all subscribers at all times and consuming large amounts of “dormant bandwidth” in the
      process. Internet TV is the first new system to break this mould and achieve far greater flexibility through
      one-to-one, truly variable cost delivery.

      Satellite
      Satellite television is television delivered by means of a communications satellite and received by a
      satellite dish and a set-top box. In many areas of the world it provides a wide range of channels and
      services, often to areas that are not serviced by terrestrial or cable providers. Today, most satellite TV
      customers in developed television markets receive their programming through a direct broadcast satellite
      (DBS) provider, such as DISH TV or DTH platform.

      Internet TV
      Internet TV offers the scope to replace the diffuse broadcast model with specific, one-to-one compressed
      digital streams from content sources to individual consumers. This uses the same transmission infrastructure
      used in providing Internet connectivity to homes. With no wasted bandwidth, Internet TV can offer a
      virtually unlimited number of channels as well as VOD and PPV options to subscribers anywhere across the
      globe, provided they have a fast enough Internet connection. Internet TV technology can feed high-quality
      video not only to computers, but also to any IP-enabled device, including TV sets and 3G cell phones.
      Internet TV also provides a two-way link to subscribers so they can browse viewing options, make choices
      and purchases, and even communicate with each other while watching.
      Broadband Internet access, already available to over 400 million people around the world, sets the stage for
      substantial potential growth in demand for Internet television.
      Network capacity limits the number of channels traditional cable and satellite systems can deliver because
      these “broadcast” methods send all channels simultaneously to all subscribers no matter who is watching.

4.2   TV access to the Internet
      There are several ways for TVs to access the Internet.

      Set-top Boxes
      The Group’s PeerStation represents one solution which has been designed with a high level of functionality
      to permit a level of service to be provided by the service provider. The Group’s solution is intended for
      narrowcasters seeking to provide a managed service to a community where the service provider seeks to
      provide services and billing to customers.

      Personal computers
      PCs are still used by many to access mainly non service-related content. PCs are not ideal for full TV-like
      service but provide a simple and very widely used tool for access to free web content.

      Gaming consoles
      A video game console is a device for playing video games from a personal computer.




                                                        22
      The three major consoles in the market (the PlayStation 3, Wii, and Xbox 360) offer an Internet games
      distribution service, allowing users to download games for a fee on to a storage device, typically a hard disk
      or flash memory. The console manufacturers are offering Internet distribution with arcade games, television
      shows and film trailers being available.

      Blu-ray Players (BD Live technology)
      A Blu-ray player can play discs that use the Blu-ray technology. The format in these disks enable recording,
      rewriting of data and also the playback of high-definition video. Blu-ray discs can store large amounts of data,
      typically up to five times the storage of a traditional DVD. The new web-based BD-Live technology allows
      Blu-ray disc users to access content updates and additional interactive features via their Internet-connected
      Blu-ray players. Still in an early adopter phase, the BD-Live technology could ultimately change how home
      audiences experience movies, bringing the dynamic interactivity of the Internet to the viewing experience.

      Internet enabled TVs
      These are TV sets that are factory designed to connect directly to the web and display content such as
      YouTube, weather reports and streaming movies or television shows. To use the Internet-enabled functions
      the television must be connected to the Internet, either wirelessly or by a wired ethernet connection. There
      is no charge for basic Internet functionality, but some services, like Netflix movie streaming and Amazon
      Video On Demand, have content charges.

      All of these services perform well as tools to access free web content and also certain (mainly US-based)
      VOD services. When continuous TV channels are the key service element, a robust, low cost set-top box is
      seen as the clearly preferred alternative. The Group’s PeerStation technology for OTT delivery is among the
      few available options in this market. It enables content providers to deliver their content over the free
      Internet to TVs in consumers’ homes using a PeerStation, which is a device consumers have been familiar
      with for the last 20 years.

      When a content provider wishes to operate a service based on paid TV channels, a set-top box that
      integrates with an OTT optimized software solution is a fundamental requirement.

4.3   Internet-based TV: Key Applications
      There are currently two key applications of Internet TV: VOD and TV channels delivered over the Internet.
      In the coming years the market is expected to develop and to include additional types of applications
      delivering to TVs a new level of interactivity and efficiency in content discovery. They are expected to include:

      •      The use of network-based resources (user profile, behavioural patterns, demographics, location
             and presence) to target the end-user;

      •      Content and application specific merchandising opportunities, driving impulse purchases using
             micro payments;

      •      True user interaction with content via the integration of social media sites;

      •      Powerful search, recommendation and personalisation engines; and

      •      The integration of online metadata with that of free and pay-TV services.

4.4   The Internet TV market
      Video over the Internet has experienced dramatic growth as broadband access has become widespread in the
      developed world. In July 2009 alone, over 21 billion online videos were viewed in the US, according to data
      compiled by comScore Video Metrix service. iSuppli predict that the number of devices worldwide
      supporting Internet video will have increased from 80.5m in 2008 to 376.5m by 2013. ABI Research
      forecasts that more than a billion viewers will be accessing video over the Internet by 2013.
      Broadband-connected homes ready for on-demand content totalled 308 million worldwide in 2008, while
      VOD and VOD pay TV-enabled homes reached 106 million and 62 million respectively.

      An estimated 65 million households worldwide had the capability of viewing Internet video on their
      television sets at the end of 2008, up 134 per cent. on 2007, according to a study by IMS Research. While
      the bulk of that viewing used intermediaries such as PCs or game consoles, the study predicts that Internet
      TV functionality will become increasingly available on digital set-top boxes.

      The Group’s proposition is based on the premise that consumers prefer the TV as their video entertainment
      viewing device and the Directors believe that the delivery of live channels and video over the Internet to
      the TV is a viable and high growth business opportunity for a new breed of TV service provider.

                                                         23
       A 2009 study carried out by TDG (The Diffusion Group) found that two thirds of all adult broadband users
       are interested in utilizing OTT services, including such as those provided by the Group’s clients. The same
       study foresees OTT services directly threatening traditional pay TV and TV subscription services as the
       quality of OTT services improve. The study concludes with the finding that a significant proportion of
       consumers are looking for less expensive and more personalised TV services, the provision of which is
       enabled by the Group’s products.

4.5    Video on Demand market
       VOD offers a major opportunity for the Internet television industry. Television VOD systems either
       stream content through a set-top box, allowing viewing in real time, or download it to a device such as
       a computer, digital video recorder, personal video recorder or portable media player for viewing at a
       later time. The majority of cable- and Telco-based television providers offer both VOD streaming (such
       as PPV, whereby a user buys or selects a movie or television programme and it begins to play on the
       television set almost instantaneously) and downloading to a video recorder rented from the provider, for
       viewing in the future.

       The global demand for both on-demand pay-TV and online platforms will remain dominated by North
       America, with the US driving revenues from movies and TV shows. In the pay-TV sector, the upgrade of
       the US cable companies’ networks to enable homes to receive on-demand, combined with migration of
       customers from analogue to digital services is expected to see the transactional VOD market increase in
       value to US$1.8 billion in North America in 2012.

       Europe is now expected to show the greatest increase in revenues of any single region, stimulated by the
       take-up of IPTV services, and upgrades to major cable networks. Asia’s on-demand space, while small
       compared to the other regions, is also maturing, driven by the same two factors.

       Total videos viewed per month went up from 7.2 billion in Jan 2007 to 21.4 billion in July 2009. The
       number of online videos watched per viewer per month went up from 59 in Jan 2007 to 135 in July 2009.
       The number of minutes of video watched per average viewer went up from 151 minutes per month in Jan
       2007 to 500 per month in July 2009 (source: comScore as reported on the VideoNuze website).

4.6    The niche narrowcasting market
       The “narrowcasting” market is defined as the market for niche content that may appeal to specific language
       or demographic groups. It also refers to “communities of interest” of people from various backgrounds that
       come together in their support of shared topics or ideas.

       OTT Internet TV technologies, which utilise a broadband Internet connection, are uniquely suited to
       address the narrowcasting market. While broadcast technologies, such as cable or satellite, are efficient
       for delivering a relatively small selection of content to a large number of simultaneous viewers, their
       ability to efficiently deliver a wide variety of narrowcast content is limited by satellite transponder space
       and cable channel spectrum. The Group’s solutions are best suited to deliver a wide range of content to
       small or fragmented audiences that are geographically dispersed. The required internet access is available
       or already present especially in households in the western markets where broadband penetration is around
       65 per cent. Traditional TV service providers have continued to invest in technologies that help them
       expand the number of available channels or that provide a more interactive environment by leveraging
       Internet Protocol.

       4.6.1 Foreign language market
             Foreign language content is an easily identifiable narrowcasting opportunity. It is appealing to recent
             immigrants and second generation citizens trying to keep a cultural connection to their countries of
             origin, and it can serve an important function for people with limited skills in speaking the languages
             of their adopted countries. Though traditional broadcast TV providers have attempted to provide
             channels of content geared to some groups (e.g., Spanish channels in the US), the demand for many
             language groups is largely unmet.

              According to 2006-2008 US Census data1, 12.5 per cent. of Americans are foreign born. What’s more,
              an astounding 19.6 per cent. of US residents speak a language other than English at home, with
              8.6 per cent. of residents claiming not to be able to speak English “very well”. The largest foreign
              language group in the US is Spanish with 12.2 per cent., or 37.5 million people. Other Indo-European
              languages account for 3.7 per cent. of U.S. residents, or about 11 million people. Asian languages, such


1     US Census Bureau, http://factfinder.census.gov, “GCT0501. Percent of People Who Are Foreign Born”

                                                            24
             as Chinese and Japanese, account for 2.9 per cent., or 9 million people. Like Spanish, about half
             (48.9 per cent.) of the Asian language group do not speak English very well, but only a third
             (32.9 per cent.) of the Indo-European group have limited English skills. Based on this data, a total
             addressable market for foreign-language content in the US of 19.6 per cent. of the 112 million
             U.S. households, or about 22 million, can be deduced. Canada has a similarly large group of
             foreign-language speakers, with 20 per cent. of Canada’s 34 million residents speaking a “mother
             tongue” other than the two official languages of English and French.2 In the UK, 4.9 million
             (8.3 per cent.) of the total population of the UK were born overseas3. Greater Europe also has a high
             rate of foreign born migrants. It is estimated that about 65 million of the 190 million people worldwide
             who live outside of their country of birth reside in Europe4. Germany, France, the UK and Spain have
             the largest numbers, with 27 million of these migrants. If second-generation migrants who retain their
             native tongues are factored in, the total may be closer to 100 million people who hold an ethnic cultural
             identity and language different from their host countries.

             While many Pay TV service providers do have foreign language content available, they often have
             only one or two channels available for specific languages. These channels usually cost an extra
             US$10-15 on top of a “digital starter” package of around US$30-50 per month. The one exception
             to this is Spanish language content in the US market. Most Pay TV operators offer three or four
             Spanish channels in their basic package (e.g. Univision, Telemundo, Telefutura) and a package of
             an extra 10-25 channels depending on the market.

                                                                                                       .
             There also exist dedicated foreign-language satellite services such as Globecast World TV Globecast
             is a direct-to-home provider of free-to-air and encrypted ethnic television and audio channels. In the
             US, WorldTV is the third-largest DTH platform and the leading source of international content. It
             carries over 200 Channels from 40 countries in 30 languages. In mainland Europe (not the UK or
             Ireland), Globecast offers content primarily targeting the Indian and Pakistani communities. The
             downside of World TV and others like it is that it requires a set-top box and satellite dish that
             cost US$180 plus installation, and installers are not available in all markets.

     4.6.2 The market for Christian content
           Christian video content is another attractive potential market. The Group’s solution based on Internet
           TV can be delivered as a supplemental VOD service or as a replacement for more secular Pay TV
           services. For many Protestant denominations, televangelism has long been a major focus, so Internet
           TV is a natural way for them to expand their outreach to believers across the country.

             According to 2008 US Census data, there were 173 million Christians in America5, representing
             76 per cent. of the population. Of these, it was estimated that about 70 million Christians live a
             conservative lifestyle based on their commitment to biblical teachings and attendance at worship
             services. These more conservative Christians are more likely to have a sceptical view of secular
             society, and may even find the larger culture antithetical to their beliefs. They are concerned that the
             influence of secular society is having a detrimental effect on their families and value system. This
             concern was raised in recent Trender Research focus groups, which included conservative Christians.

                                                                         ,
             In addition to established Christian channels on cable TV such as Trinity Broadcasting Network,
                                                                       ,
             Christian Television Network, EWTN, and CatholicTV there is already at least one dedicated
             Internet TV competitor. Sky Angel, which is based on a set-top box and CDN from NeuLion
             providing 80 channels of Christian and family-friendly content, including the above mentioned
             channels as well as sports and educational content. In addition, cable and satellite companies have
             allowed a greater than normal degree of flexibility from the traditional carriage platform business
             model, which limits a programmer’s ability to redistribute content over the Internet. This has allowed
             Sky Angel to provide a richer diversity of niche as well as mainstream Christian channels.

             While Sky Angel has had an early lead, the Directors believe that the Christian TV market is large
             enough for there to be room for competitors.




2   Statistics Canada. “Languages Overview.” http://www41.statcan.gc.ca/2008/50000/ceb50000_000_e.htm
3   UK Office for National Statistics, “People & Migration”,
    http://www.statistics.gov.uk/CCI/nugget.asp?ID=1312&Pos=1&ColRank=2&Rank=480
4   Migration Policy Institute, “European Migration”, http://www.migrationinformation.org/datahub/europe.cfm
5   US Census. Religion. 2008. http://www.census.gov/prod/www/religion.htm

                                                           25
      4.6.3 Internet service providers
            Broadband penetration in the developed world currently stands at approximately 65 per cent., which
            offers a significant opportunity for ISPs, both large and small, to deliver OTT video as an
            added-value service.

             With broadband access having become a commodity business in much of the western world, ISPs
             are searching for new revenue streams. Many ISPs are under pressure to provide full “triple play”
             bundles of voice, video, and Internet access services. While these providers may be unwilling to
             cannibalize their profitable TV services, there is potential to partner with Telco ISPs where cable
             broadband/TV service is not available.

             In regions where only satellite service is available, DSL and fibre-based Internet service providers
             may be attracted to an Internet set-top box as an alternative to expensive TelcoTV/IPTV
             infrastructures. In such cases, the PeerStation and MX Software could provide a way to derive
             incremental revenue streams on top of the basic Internet access service. The Group’s solution can
             also be deployed as a hosted service through partnerships with resellers. This would have the added
             benefit of enabling a low CAPEX service that ISPs could deploy quickly.

             The Group has delivered a few thousand PeerStations to ISPs in Israel, Central America and Eastern
             Europe, mainly for initial trials.

      4.6.4 Other markets
            The Group’s solutions may also be of interest to other markets that require video to be streamed over
            the Internet to a TV screen. The Group’s solutions are currently at initial stages of deployment in
            two applications:

             a.     The E-learning market. The Group is currently delivering a few hundred PeerStations to a
                    software company in the US. The software company is then delivering the PeerStations to
                    High Schools in the US for E-learning projects; and

             b.     Hotel entertainment projects. The Group is delivering an MX Software and PeerStation
                    solution to a hotel in Israel. The purpose of this application is to replace the old analogue
                    hotel entertainment system with a new digital application with very rich content delivered
                    over the Internet.

4.7   Internet TV as an emerging business model
      Internet TV or OTT represents a new way for content service providers to deliver diverse and personalised
      content to home TVs through a broadband Internet connection. This solution offers the opportunity to replace
      or to complement traditional broadcast TV (satellite or cable) with Internet-based delivery of services,
      allowing for a considerable enhancement in the choice of content and flexibility available to viewers.

      The Directors believe that OTT will significantly change the way people obtain information, receive
      entertainment and consume Internet media at home. The improved choice of content and viewing flexibility
      provides operators with the ability to offer a differentiated offering including specialist content, VOD,
      movie downloads, live TV, and more.

      The new TV model, based on streaming video and live feeds, brings to viewers the experience of the
      personal computer with the comfort of full screen television, offering them easy intuitive navigation
      through interactive applications and services. The Directors believe that these new models provide an
      opportunity for advertisers to adopt more targeted advertising models that benefit from unique
      identification of users and the ability to track their preferences, and may be the basis of new types of social
      networks, using the TV as an interaction device.

      Internet TV uses the Internet to deliver entertainment directly to consumers on their televisions. Instead of
      tuning into programmes preset and determined by the present broadcast networks or cable or satellite TV
      providers, viewers would be able to search the Internet and choose from hundreds of thousands of
      programmes sent to them via high-speed connections.

      The rapid emergence of new TV over the Internet content providers is expected to challenge the control of
      the cable, telephone and satellite companies, which seek to dominate the distribution of TV content to the
      home. The easy availability of on-demand content over the Internet is expected to accelerate consumer
      expectations that they will have more control over content, both to watch programmes when they want as
      well as to watch programmes on different types of displays or in different rooms of the home.

                                                        26
      Though still new, Internet TV is already commercially available in limited areas both in the US
      and internationally.

      The advantage of Internet TV is that it can be deployed at lower cost than current cable or satellite television
      systems and can offer consumers features like the ability to record several programmes simultaneously
      without having to add costly additional tuners. (Internet TV can potentially record many streams if
      bandwidth is available.)

4.8   The suppliers of Internet TV programming
      The suppliers of Internet TV content at this time are:
      a.     Distributors of VOD;
      b.     ISPs seeking to broaden their customer proposition are beginning to explore the possibility of
             supplying Internet TV enabled set-top boxes;

      c.     Narrowcasters who cater to niche communities, such as ethnic market services and religious
             broadcasters; and

      d.     The broad world of the Internet where anyone can transmit content today.

      The Group’s target markets are the above, with narrowcasters forming the majority of the Group’s present
      order flow and ISPs beginning to request proposals for substantial potential orders.
                                                                                                                         PRann I
5.    The Group’s platform and its products                                                                              (6.1.1)

5.1   The Products
      The Group’s current product line consists of a software platform offered to operators and content providers
      and a line of set-top boxes that the operators offer to their customers and comprises three main components:

      5.1.1 The Group’s set-top boxes
            The Group’s PeerStation is a set-top box device similar to those used to receive cable and satellite
            services, but connected to the TV at one side and to the Internet at the other side. The PeerStation is
            used to receive video and live TV broadcast in order to deliver it directly to the TV .

             The PeerStation receives VOD and TV broadcast content sent through the Internet by content
             providers, then transforms and decodes the signals received over the Internet so it may be played on
             TV. The Group developed the core technology of the PeerStation and the internet video player over
             a period of more than two years. The result is highly stable video playback, replicating almost
             one-to-one the experience of a cable and satellite set-top box, as expected by their hundreds of
             millions of subscribers.

             The PeerStation has the ability to play a wide number of video encoding formats and streaming
             technologies which enable the efficient delivery of video over the internet. The PeerStation will work
             with any ISP, enabling the Group’s customers to potentially provide services globally to anyone with
             a broadband connection.

             The PeerStations enable viewing of content that is delivered over both the Internet and free-to-air
             digital terrestrial broadcast stations. This is known as a hybrid solution. The PeerStations have the
             ability to serve as a home media device and deliver content from the consumer’s PC to the TV    .

             The current product line comprises:

             •      PeerStation 340 – A low cost, highly efficient set-top box offering OTT functionality,
                    streaming live TV stations and VOD content; and

             •      PeerStation 540 – An advanced set-top box with an advanced processor offering more
                    powerful implementation and opening the way to additional applications such as gaming,
                    in-home PC-to-TV media streaming and reception of free-to-air TV (DVB-T).

             The PeerStations come with a software development kit, enabling the operators and content
             providers to develop their own software to manage the content and the PeerStations.




                                                         27
      5.1.2 The MediaXplorer Application Server and MX Software
            The MediaXplorer application server of the company serves as the backbone for the Group’s Internet
            TV solution. The servers are loaded with the MX software solution described below and function as
            head ends for the distribution to subscribers of the Internet TV services offered by the Group’s clients.

             The Group’s MX Software is a suite of software applications deployed by the Group for use of
             operators and content providers, providing both content and customer management, access to
             Internet video, remote PeerStation management as well as a fully customisable user interface. This
             software package and server enables a content provider to manage and deliver his content to people’s
             homes over the Internet.

             The Group’s implementation of the MX software allows Internet TV providers to match the
             standards of satellite and cable digital TV broadcasters, including such features as menu navigation
             and a multi-level selection tree which allows access to video content, provided that the end-user has
             a fast enough Internet connection.

             The server software management system is based on flexible open software which allows the content
             provider to manage and deliver his content in a simple and user-friendly format. The system also
             includes application programming interfaces (“API”) allowing content providers to interconnect
             with services such as CRM (“customer relationship management”), statistics and billing.

             The Group provides the MX Software at a competitive price point together with its PeerStations.
             This approach is a unique selling tool and a differentiating factor positioning the Group as a
             solutions provider rather than a basic set-top box supplier.
             The MX software specifically provides:

             •      Server software: a platform for rapid implementation of TV broadcast applications that
                    includes a content management system, a subscriber management system, PeerStation
                    management systems, integration with billing and client remote management systems. The
                    foregoing refers to functions carried out by narrowcasters in the transmission of content and
                    the management of their subscribers.

             •      User interface creation: using widget technology and popular web programming methods to
                    develop the interface between the subscriber and the content provider including programming
                    all the features the subscribers see on their TV screens including an EPG (“Electronic
                    Programme Guide”), choosing the content the subscriber wishes to view, paying for a service
                    and other necessary functions.

             •      The MX Software Platform enables a TV or VOD content provider to set up a service
                    providing the following services to its customers:

                    •      Live TV channels;

                    •      VOD service (paid);

                    •      Internet-based free TV services;
                    •      Internet-based free content services (such as YouTube, CNN etc.);

                    •      Free web cams;

                    •      Free to air broadcast terrestrial TV (DVB-T);

                    •      A standard connection to enable the viewing of video and audio content from the
                           subscriber’s PC to his TV;

                    •      Advertising;
                    •      Gaming services; and

                    •      Social networks.

5.2   Advantages of the Group’s solution
      The Directors believe that the integrated solution offered by the Group contains a number of defining
      characteristics and advantages.

                                                        28
      It is one of the first tested and implemented Internet TV solutions. It has been tested and implemented by
      more than 10 customers and now has an installed base of over 100,000 PeerStations deployed by the
      Group’s customers. The Group is one of the first to enable live TV stations over the Internet to be
      transmitted to subscribers’ home TVs.

      The Group’s hardware and software solution assists the Group’s customers to start their Internet TV services
      with a modest investment and a short integration time.

      The Directors believe that the Group’s solution is unique because no other Internet set-top box solution
      combines internet streaming, video downloading and two ways to receive live TV (streaming and via set-top
      box tuners).

      The Directors believe that the Group’s technology meets the needs of the fast-growing narrowcasting niche
      content such as ethnic and foreign language content.

      The Directors are not aware of any other Internet set-top box solution which combines Internet streaming,
      video downloading, and two ways to receive live TV (streaming and via set top box tuners). In addition, few
      other set top box solutions, if any, have integrated server side and client side middleware to properly support
      a robust internet video offering. The Group’s MX middleware is open, flexible, and can be fine-tuned to the
      needs of Internet TV service providers and integrators. The Group’s technology also includes free-to-air digital
      terrestrial TV and native WiFi support, a custom media player optimised for performance, support for the
      majority of different video and media formats, HD video support, progressive download capability, remote
      management of distributed set-top boxes, an easily customisable user interface, a translation engine and
      multi-language support, and pre-integration with key ecosystem partners such as digital rights management.
      The Group’s other advantage is the relatively low cost of its PeerStation and MX Software portfolio.

6.    Sales, Marketing and Customers
6.1   Sales and marketing team
      Direct sales
      The Group’s direct sales and marketing team includes Ronnie Jaegermann (CEO), who leads the marketing
      activities. Chen Landau, VP Global Sales and an independent sales representative in the US. Two dedicated
      sales representatives are assigned to cover several territories. The size of the sales and marketing team is
      expected to grow as the business increases and a portion of the proceeds of the Placing are expected to be
      utilised for this purpose.

      A small team of in-field customer support and project management provides the ongoing installation and
      assistance to operators establishing their first operation.

      Channel sales
      The Group has informally appointed non-exclusive agents that are mainly integrators in the following
      countries: US, Brazil, Argentina, Germany and Spain. These distributors are to provide local integration and
      services and PeerStation distribution logistics. The Group also partners with large and small technology
      partners who serve as part of the ecosystem needed to implement Internet TV systems.

6.2   Targeted markets
      The Group’s products are currently targeted mainly at developed markets where Internet infrastructure is           PRann I
      highly advanced. Canada, Europe and recently the US are the main territories in which the Group’s products         (6.2)
      are marketed and where sales are currently being generated. The Group targets the following
      market segments:

      •      Narrowcasters – specialist content providers offering TV or VOD content to immigrants or religious
             communities. These offers are providing subscribers with the ethnic or religious channels missing
             from local mainstream satellite and cable services – described as the narrowcasting market;

      •      ISPs adding Internet TV to their portfolio in order to create added value to the commoditising
             Internet service.

      •      VOD services bringing videos to mainstream customers as a replacement to DVD rentals; and

      •      Broadcasters (cable or Telcos) wishing to supplement their traditional broadcast service with
             Internet TV.



                                                         29
      The Directors believe that the most promising market segment for the Group at present is the niche
      narrowcasting market. This segment includes suppliers of native-language TV to people living outside their
      country of origin as well as religious content.

6.3   Customers
      The Group’s key customers are located in Germany, Canada, Israel, Russia and the US and the Group has
      reached a total installed base of over 100,000 PeerStations worldwide. In 2009 the Group started selling its
      end-to-end solution based on its MX Software. The Group has currently a number of clients implementing this
      solution. Almost all of the Group’s customers are narrowcasters delivering ethnic and religious niche content.

      Among the Group’s customers in the narrowcasting markets are:

      •       A Russian content provider providing over 80 Russian language TV channels to immigrants in
              Europe and North America countries;

      •       A Canadian company offering Farsi, Kurdish and Afghan live TV channels, radio channels and VOD
              to immigrants around the globe;

      •       A Canadian company offering a mix of Russian and Ukrainian channels to immigrants in Canada;

      •       A Canadian company broadcasting Russian, Ukrainian and Polish content;

      •       A video streaming integrator based in North Carolina that has chosen the Group’s MX Software as
              the platform for customers wishing to provide ethnic channels over the Internet;

      •       An Israeli content provider that is launching live TV and VOD service targeted to the population of
              over 1,000,000 Israeli Arabs;

      •       An Indian content provider offering more than 74 live Indian TV stations to Indian immigrants
              around the world; and

      •       A content provider that intends to stream religious Jewish content (both live channels and VOD) to
              religious Jews in Israel as well as to Jewish communities around the world.

      The largest customer is the Russian content provider mentioned above. It was responsible for US$673,000,
      US$2,294,000, and US$3,045,000 of revenues in 2008, 2009 and H1 2010, representing 29 per cent.,
      66 per cent. and 60 per cent. of revenues, respectively. One of the strategic goals of the Company is to
      reduce the proportion of revenues generated from this one customer. The management believes that several
      of its newer clients have the potential to be as large as its current largest customer but that it will take some
      time before the customer base is broad enough such that individual large customers do not represent
      significant sales and profitability risks any more.


7.      Competition
The Directors believe that Internet TV offers a transforming business model, which will threaten the hegemony of the
satellite and cable pay-TV incumbents and offers market entry for a wide range of technology vendors, service
providers and broadcasters. There are numerous technological solutions that can be regarded as being competitive with
components of the Group’s offering, but no single company, at this time, competes with the Group’s full solution.

7.1   Competing business approaches
      The competition is best defined in terms of the content delivery and control mechanisms described below:

      •       Internet to set-top box (OTT);
      •                                           ,
              Managed network to set-top box (IPTV Cable); and
      •       Internet to PC.

      7.1.1 Internet to set-top box
            Internet to set-top box is the Group’s core offering where it perceives it has its most significant
            competitive advantage. It has direct competition from a number of set-top box manufacturers, such
            as Celrun and NeuLion, as well as from several consumer electronics giants, including Apple with
            its AppleTV and Microsoft with its X-Box Live. The Company is also aware that Amino intends to
            target this market.



                                                         30
             The Directors believe that none of the smaller manufacturers have the range of set-top box
             functionality provided by the PeerStation, while the consumer electronics vendors provide the client
             devices only, not a complete solution, meaning that the operator has no access to a service head end
             and therefore cannot establish his own business model (i.e. AppleTV is tied to iTunes, and cannot be
             used to establish a different service scheme).

             The Directors believe that Group’s technology is the only solution that provides an end-to-end
             solution, including both client and head end technologies and a partner eco-system, that enables
             prospective TV operators to launch full commercial services.

                                                  ,
      7.1.2 Managed network to set-top box (IPTV Cable)
            This is where virtually all current pay-TV operators are active. IPTV and cable set-top box
            manufacturers (such as Amino and Pace) are beginning to supplement their technology with
            browsers and Internet TV features, such as walled garden web access.

      7.1.3 Internet to PC
            This is where the majority of Internet video viewing occurs today on sites such as YouTube, Hulu,
            Daily Motion and many others.

                                                                              ,
             Research indicates that consumers prefer to watch video on the TV rather than the PC, and may
             adopt Internet TV en masse when they are provided with the technology to do so. The Group
             provides that technology.

7.2   Competing companies
      7.2.1 Direct
            •      RockU: A US embedded-software company supplying set-top boxes to Netflix and Amazon.
                   A recently established company that, according to a recent study, has delivered 400,000
                   Internet TV set-top boxes to Netflix, which has also invested in RockU. The RockU set-top
                   box can only deliver VOD services and cannot deliver live channels;

             •     NeuLion: A supplier of ethnic and sports TV in the US. This was a relatively small company
                                                           .
                   that was acquired recently by JumpTV The combination of JumpTV and NeuLion creates a
                   full service delivering ethnic and niche content to subscribers in the US. NeuLion is publicly
                   traded on the Toronto Stock Exchange;

             •     Amino: A UK-based IPTV set-top box manufacturer, operating mainly in the IPTV market.
                   It has recently attempted to penetrate Internet TV as well. Amino is publicly traded on AIM.

             •     Verizmo – A US company offering an Internet TV set-top box.

      7.2.2 Indirect
            •      AppleTV: A set-top box manufactured by Apple delivering closed-garden content solution to
                   consumers, mainly VOD and download services with some Internet content;

             •     MS Media Center: Used by technically-savvy users to connect TV to the Internet. This may
                   replace PeerStation functionality in some cases, but is not considered suitable as a service
                   platform and is expensive; and

             •     NetGear, TviX, Ellion, Sayabas: Manufacture consumer devices connecting PC to TV.
                   Limited Internet media features, not suitable as a service platform.

7.3   Projects and industry initiatives
      7.3.1 BBC – Project Canvas
             On 25 June 2010, the BBC announced its intention to sponsor an on-demand service for television
             sets via an Internet-connected set-top box, to be launched by the UK’s terrestrial broadcasters BBC,
             Channel 4, ITV plc and Five and communications companies BT, Arqivn and TalkTalk. Five did
             announce that it would not be taking part in Project Canvas but it presently appears that they
             remain involved.

             The partners formed a venture to promote the platform to consumers and the content, service and
             developer community. A consumer brand will be created, and licensed to device manufacturers and
             ISP owners who meet the specifications. ‘Canvas compliant’ devices (e.g. set-top boxes), built to a
             common technical standard, would provide seamless access to a range of third-party services
             through a common, simple, user experience.
                                                     31
       7.3.2 Google TV
             On 21 May 2010 Google announced its Google TV initiative. The goal is to merge the internet and
             TV experiences without sacrificing the quality and experience of either. It is based on the Android
             software platform and co-developed by Google, Sony, Intel and Logitech. Google TV is expected to
                                                            .
             allow users to access any website from their TV Part of the Google platform will be a set top box
             manufactured by Logitech and powered by Intel processors.

       The Directors cannot presently assess the implications of these projects and how they will impact upon the
       Group’s core business or market potential, if at all.

       The basis for the Directors’ statements regarding the Group’s competitive position in the market is primarily         PRann I
       based on information from a Trender report, supported by the Directors’ knowledge of the market.                      (6.5)



8.     Manufacturing
The Group designs its PeerStations and sets their specifications. The Group subcontracts its manufacturing of
PeerStations to two manufacturers in China. Boxes are shipped directly to the client and the box is authenticated
by connecting to the Group’s website. Software is loaded to the PeerStations after quality assurance and quality
control are completed. The Group customizes its MX software application for its clients, delivers the software to
the client’s server and provides integration services.

There are no framework agreements or minimum quantity requirements with the contract manufacturers and the
Directors believe that the contract manufacturers could be replaced without impacting its business activities. The
Group does not produce its servers and most of its servers are installed at clients.

The Group’s PeerStations are based on Sigma chip architecture. It is therefore currently dependent for the
manufacturing of its set top boxes on the ability of the contract manufacturers or itself to procure sufficient quantities
of the Sigma produced chip sets. Sigma has recently experienced difficulties in supplying its customers in a timely
fashion. If the Group were forced to switch to an alternative provider on short notice at this time, it would require
significant time and investment and would impact the Group’s business and development significantly.
                                                                                                                             PRann I
9.     Operating and financial review                                                                                        (10.2)

The Group has experienced a rapid but steady growth of revenues and gross profit while maintaining a
moderate increase of operating expenses, which resulted in decreasing net losses for 2007, 2008 and 2009, and
resulted in profitability in the first half of 2010. In 2009 the Group delivered approximately 26,000 PeerStations
to 8 major customers around the world, compared with approximately 14,000 PeerStations which were
delivered to 4 major customers in 2008. In the first 6 months of 2010, the Group delivered approximately
52,000 PeerStations to 10 major customers around the world, compared with approximately 9,000 PeerStations
which were delivered to 2 major customers in first 6 months of 2009.

The Group’s middleware, the MX Software, was sold to 3 initial clients in 2009. This expanded to 6 clients in the
first 6 months of 2010. Among the new clients were:

•      An Indian content provider to Indian immigrants around the world;

•      A religious Catholic content provider to African immigrants in Europe;

•      Serbian content provider to Serbian immigrants around the world;

•      A Russian and Ukranian content provider to immigrants in Europe; and

•      An Israeli OTT and DVB-T service.

The 7 months from incorporation of PTV to 31 December 2007 were primarily a start-up period, marked by set-
up and product development. The operational results for this period are therefore not useful as a basis of
comparison for the 2008 and 2009 numbers.

Revenue increased by 50 per cent. to US$3.48 million in 2009, up from US$2.32 million in 2008. This was
primarily due to a dramatic increase of PeerStation sales to customers in Europe. Revenue increased by
417 per cent. to US$5.08 million in the first six months of 2010 from US$0.98 million in first 6 months of 2009
primarily due to a dramatic increase in PeerStation sales to customers in Europe and North America. Of the
revenues, US$900,000 were recorded according to the “charge and held” method for approximately 10,000
Peerstations, which were stored at the manufacturer’s warehouse for a key customer and are to be delivered
subsequently according to the customer's instruction.

                                                           32
Gross margins in 2009 improved to 38.8 per cent. (2008: 19 per cent.) contributing to an increase in gross profit
of 205 per cent. to US$1.35 million compared to US$0.44 million in 2008. The increase of gross margin was
achieved primarily by a decrease of cost production per set-top box as the Group achieved significant economies
of scale. This trend is not expected to continue in the near future as the Group has agreed a fixed price per unit.
Additionally the Directors expect a similar trend to occur in set-top boxes as has occurred in other consumer
electronics where prices, both in terms of production cost and sales, stay relatively stable while functionality of
the product increases. In the first half of 2010 gross margins decreased to 31 per cent. (2009: 36 per cent.) due to
flat production costs and some pricing pressures from customers. Gross profit reached US$1.57 million from
US$0.35 million in 2009.

Operating expenses increased by 12.6 per cent. to US$2.91 million from US$2.59 million in 2008. This relatively
small increase in operating expenses, compared to the comparatively strong revenue increase, is in line with the
Directors’ strategy to achieve significant revenue growth without unduly increasing operating costs. In the first
half of 2010, operating expenses decreased by 5 per cent. to US$1.28 million from US$1.35 million in 2009. This
decrease was mainly due to a decrease in R&D expenses.

Research and development expenses decreased by US$0.025 million to US$1.787 million from US$1.813 million
in 2008, the R&D expenses are stated after a deduction of net capitalisation costs (R&D capitalized costs net of
amortization) of US$0.573 million compared to US$0.465 million in 2008. In the first half of 2010 the expenses
for research and development decreased to US$0.54 million from US$0.94 million in 2009. The Group intends to
continue to invest significant resources into the development of its existing and new products.

Sales and marketing expenses were maintained at the same level of US$0.281 million compared to US$0.31 million
in 2008. Sales and marketing expenses increased to US$0.231 million in H1 2010 compared to US$0.08 million in
H1 2009. An increase in the investment in this part of the business is part of the Group’s business plan as it increases
its marketing presence in selected markets or geographic regions.

General and administrative expenses increased by US$0.378 million to US$0.776 million from US$0.398 million
in 2008. The main reasons for the increase are share based payments of US$0.142 million in 2009 against none
in 2008, and a doubtful debts provision of US$0.150 million in 2009 against none in 2008. As the Group becomes
a public company additional costs will be incurred to pay for corporate governance and other listing related costs.
In H1 2010, general and administrative expenses increased to US$0.552 million from US$0.301 million in 2009.

Operating losses decreased by US$0.582 million to US$1.563, million from US$2.145 million in 2008. In H1 2010
the Group achieved an operating profit of US$0.282 million compared to an operating loss of US$0.995 million in
H1 2009. As of 30 June 2010 head count was 20 employees and 7 consultants. In 2009 the headcount was
20 employees and 4 consultants.

Financial expenses totalled US$0.3 million in 2009 compared to none in 2008, caused primarily by interest
on loans.

Net loss decreased by US$0.283 million to US$1.854 million in 2009, from US$2.137 million in 2008. In H1 2010
the Group achieved a net profit of US$0.156 million compared to a net loss of US$0.995 million in H1 2009.


10     Financial Position and significant change in the Company’s financial or trading position                            PRann I
                                                                                                                           (12.1, 12.2)
At 31 December 2009 the Group’s assets totalled US$1.819 million compared to US$1.768 million at the end of
2008. The trade receivables and other current assets increased at the end of 2009 by 61.7 per cent. compared to
2008 due to a substantial sales increase towards the end of 2009. At 30 June 2010 the Company’s assets totalled
to US$5.919 million compared to US$1.185 million in 2009. The trade receivables and other current assets
increased by 368 per cent. compared to the end of 2009 due to a significant sales increase towards the end of
H1 2010 and longer credit terms resulting from higher order of quantities.

At 31 December 2009 the Group’s liabilities (being, at the time, liabilities of PTV and PTV Inc.) were
US$2.395 million (2008: US$1.085 million). The liabilities were composed of:

•      US$1.115 million accounts payables and other current liabilities (2008: US$1.085 million).

•      US$0.569 million bridge loan (2008: none). The bridge loan was taken by PTV in November 2009 and
       was subject to an interest rate of 1 per cent. per month (equivalent to 19.58 per cent. per year). The bridge
       loan was repaid on 11 April 2010, by way of a cash payment of US$0.26 million and the issue of
       375,000 Ordinary Shares, such shares being valued by an external consultant to be worth £0.079 million
       (US$0.127 million); and


                                                          33
•      US$0.659 million of convertible loan notes issued by PTV Inc, together with US$0.061 million of accrued
       interest. On 18 January 2010 half of the convertible loan notes and their accrued interest (totalling
       US$362,000) were converted into 145,000 Ordinary Shares at a price of US$2.49 per share and the second
       half were transferred to PLC, which issued the Convertible Loan.

On 31 December 2009 the Group’s shareholders’ deficit totalled US$0.576 million, compared to shareholders’
equity of US$0.683 million at the end of 2008. The shareholders’ deficit was composed of US$5.608 million
share capital & share premium (2008: US$5.608 million), US$0.498 million share based compensation
(2008: none), US$0.096 million equity portion of convertible debts (2008: 0.096) reserve arising on consolidation
of $(2.021) million (2008: $(2.118) million) and accumulated deficit of US$4.259 million (2008: US$2.903
million). At 30 June 2010 the Company shareholders’ equity totalled to US$1.404 million compared to a
shareholders’ deficit of US$0.015 million at 31 December 2009.

The above references are to the audited financial information for the years ending 31 December 2007, 2008 and
2009 and the unaudited interim information for the six months interim periods ending 30 June 2009 and 2010.

Following the deferral of admission to AIM (as described in paragraph 2 of this Part 2), and the delayed access
to additional financial resources, the Company made a decision to refocus its business on its major accounts and
on servicing the development needs of these accounts and meeting the associated working capital associated with
these accounts. In November 2010 the Company reduced its overhead and personnel expenses from a monthly
rate of US$260,000 to US$160,000 and the Company will employ a total of 18 people after restructuring planned
for December 2010. The Company will re-expand its team and market focus when access to additional funds
becomes available.


11. Capital Resources
The Group has been financed by several rounds of equity and debt issuance from private investors in Israel and the
UK, as well as from its ongoing operations.

PTV has as NIS 420,000 (approximately 275,000) overdraft limit. As at the date of this Document, the Company is
not using the overdraft facility.

The Company has a Convertible Loan of approximately US$330,000 outstanding and has also issued Convertible                  PRann I
Preference Shares in the amount of £1.65 million. The Convertible Loan will be the subject of Automatic                     (10.1, 10.3)
Conversion. For further details of this agreement see paragraph 8.1.3 of Part 4 of this Document.

The bridge loan to PTV described in paragraph 8.2.4 of Part 4 remains outstanding but the Directors intend to
repay it in the coming weeks out of the proceeds of the Previous Fundraising.


12.    Working Capital Statement
The Directors are of the opinion, having made due and careful enquiry, that, following Admission, the Group will            PRann III
have sufficient working capital for its present requirements, that is, for at least 12 months from the date of Admission.   (3.1)



13.    Research and development and intellectual property
13.1 Research and development                                                                                               PRann I
                                                                                                                            (6.1.2, 11)
     The Group is investing heavily in R&D. Currently 17 of the Group’s 20.5 employees and consultants are engaged
     in developing new intellectual property through various R&D efforts. All the Group’s R&D efforts are conducted
     in house. The majority of the Group’s R&D personnel have advanced degrees in electronic engineering.

       The Group develops annual roadmaps for its R&D efforts for the respective forthcoming financial years.
       These roadmaps are discussed and approved by the Board. These roadmaps are determined by the Group’s
       view of market developments, customer requirements and the Group’s technological and
       financial capabilities.

       The current R&D efforts are aimed at improving existing products and developing new set-top boxes with
       enhanced capabilities. The Group is also involved in further developing its MX software solution in order
       to provide additional features and capabilities.




                                                           34
13.2 Intellectual property of the Company
     The Group’s intellectual property consists of:

       •      Its PeerStation hardware design;                                                                           PRann I
                                                                                                                         (6.4)
       •      The embedded implementation of a high definition internet video player in the basic software layer
              of the PeerStation;

       •      Its MX Software: client and server side implementation codes of the software application needed to
              implement the TV service over the internet,

       •      The MX Software itself, and

       •      The software development kit supplied by the Group to its customers.

       The above are proprietary and protected by copyright. The Group does not hold any patents.

       Additionally, the Group’s know-how consists of its ability to design new set-top box hardware as technology
       progresses; its ability to port various software components to new hardware platforms and turn them into
       high-quality Internet TV platforms and its ability to enhance and extend software applications for Internet
       TV based on market and customers’ input.

13.3 Intellectual property licensed by the Group
     The Group has licensing agreements with Opera and ANT for browser technology and for Codec
     technology from: Microsoft (Windows Media), MPLA (MPEG1, MPEG2 and AVC, 2008 – 2009). Both
     licenses require annual royalty payments.

14. Significant change in the issuer’s financial or trading position                                                     PRann I
                                                                                                                         (9.1, 9.2.1,
There has been no significant change in the financial or trading position of the Group since 30 June 2010, being         20.9)
the end of the last financial period for which unaudited interim financial information has been published.


15.    Dividend Policy
Neither the Company nor PTV have paid any dividends since their incorporation. It is the intention of the                PRann I
Directors for the Group to achieve capital growth. At relevant points in the Group’s development, the Company’s          (20.7)
dividend policy on its Ordinary Shares will be reviewed in the light of the availability of distributable reserves and
the need to retain funds to finance the further growth of the Group.
                                                                                                                         PRann I
16. Administrative management and supervisory bodies and senior management                                               (14.1, 16)

Directors
Eatamar Drori (50) – Chairman of the Board and CTO. Mr. Drori was a co-founder of PTV in 2007 and has
been CTO and Chairman since 2007. Between 2002 and 2007 Mr. Drori co-founded Softier Ltd. serving as its
CTO and VP of R&D. Softier Ltd was a DSP based set-top box software and hardware vendor to the
IPTV Market Between 1996 and 2001 Mr. Drori co-founded Mediagate and has been serving as the Mediagate’s
CTO since its incorporation. Mr. Drori invented and completed the first email-centric architecture for unified
messaging which is now widely endorsed by the industry. Between 1988 and 1996 Mr. Drori co-founded
Rhetorex and served as co-CEO and CTO, a silicon valley based company, to develop the world first multi DSP
open platform for telephony applications while competing successfully with Dialogic. The company was
profitable in 1992 and was acquired by VMX/Octel/Lucent in 1993. After the acquisition Mr. Drori led
Octel/Rhetorex Telephony and DSP activity. Mr. Drori received his B.Sc. in Electrical Engineering cum laude
from the Technion Institute of Technology, Haifa, Israel and his M.Sc in Electrical Engineering from the
University of Santa Clara, CA, USA.
Ronnie Jaegermann (50) – Chief Executive Officer of the Group since May 2009. Between 2003 and 2009
Mr. Jaegermann was the founder and managing director of an Israeli retail chain “Womenonly C Cup & UP” with
25 shops and 100 employees. Between 1995 and 2001 Mr. Jaegermann was the president and CEO of an Israeli high
technology device company Pro-laser Ltd. Mr. Jaegermann turned a start-up company into a multinational public
optical device company with sales of €60 million and 300 employees around the world. During that time Pro-laser
raised a total of €85 million in the public and private equity markets, listing its shares on two European stock
exchanges. During the years 1991-1995 Mr. Jaegermann served as president of Infograph Ltd., an Israeli
corporation engaged in the manufacture, import and distribution of forms, computer stationery and accessories. Mr.
Jaegermann received his BA in Economics and Political Science from the Tel Aviv University in Israel.

                                                         35
Chaim Bechor (53) – VP Product Development and Manufacturing, a co-founder and board member since
2007. Between 2002 and 2007 Mr. Bechor was a co-founder of Softier Ltd – a DSP based set-top box software and
                                                                                             .P.
hardware vendor to the IPTV market, serving as the CEO of the Israeli subsidiary and V Marketing of the
US Corporation. Between 1995 and 2000 Mr. Bechor was the manager of GILAT Satellite Communications –
Internet over Satellite Product Line. Between 1990 and 1995 Mr. Bechor was VP marketing of Unifax Ltd, a
provider of consumer computerized fax solutions. Mr. Bechor received his B.Sc. in Electrical Engineering from the
Technion Institute of Technology, Haifa, Israel.
Shmuel Zailer (53), Non-Executive Director of PeerTV Inc. and subsequently the Company since 2008.
Mr. Zailer is the President and Founder of Raz Lee group (established 1983), a group of companies in Israel, the
US and other countries, engaged in computer security, system operation, performance and encryption software.
The group is distributing its software in over 30 countries, and among its clients are leading banks, insurance
companies etc. During 1999-2000, Mr. Zailer was a co-founder and the Head of Technology in MBI, an Israeli
based international investment boutique which provided seed funding for start-up, equity and mezzanine finance
for small to mid-size companies. Mr. Zailer, who served in the IDF computer department, was the DP manager
and CTO of Galilee Development, a concern owning a group of several tens of companies, and DP manager of
Jerusalem entrance villages, an agricultural co-operative as a senior project leader at ATL, the largest Israeli
software house, he led various projects of computerising leading companies. Mr. Zailer received his B.A. in
Economics and Computer Science from Bar Ilan University.
Ofer Barda (49) – Non-Executive Director January 2010 to present. Mr. Barda has served as CEO of
S.M. Digitek Ltd. From 2002-2007, Mr. Barda was Chief Financial Officer of Jaffa Gold International and acted
as a consultant to various real estate projects in the US. From 1997 to 2002 he was the development and project
manager for Budget Services Ltd, a Maltese development company. From 1989-1991 he was employed as a senior
economist at the Israeli Industry Development Bank. From 1988-1989, Mr. Barda was employed by A. Hefets and
Co. as an economist. From 1991 to 1997 Mr. Barda owned and operated A.S.B Financial Advisors Ltd acting as
a financial and real estate adviser. Mr. Barda has a B.A. in economics from the Tel Aviv University (1987).
The business address for all of the above-named Directors is 15 Abba Even Str., 46725 Herzliya, Israel.
Jim McGeever (57) Non-Executive Director to be appointed upon Admission Mr. McGeever has been involved
with various corporate finance firms since 1995, including Dowgate Capital, HB Corporate and ARM Corporate.
He began his career with the Stock Exchange where he held various positions from 1971 to 1986, culminating in
his position as Executive Officer – Operations from 1984 to 1986. Mr. McGeever is also a former member of the
QCA advisory board.
Management Team
Chen Landau (46) – VP Sales and Marketing since 2007. Between 2005 and 2007 he held the same position at
Softier Ltd. Between 2003 and 2005 Mr. Landau served as VP Sales & Professional Services for BitBand
Technologies, an advanced start-up that provides IPTV VOD solutions to carriers. Between 1998 and 2003
Mr. Landau was Director of Sales at Scopus Network Technologies – a provider of end-to-end MPEG-2 DVB
                                                                    .
system solutions that allow the real-time transmission of digital TV Between 1995 and 1998 Mr. Landau served
as Senior Sales & Business Development Manager-BATM, a provider of Data Communications Networking
Systems. Mr. Landau received his B.Sc. in Physics from Bar Ilan University and M.Sc. in Electrical Engineering
from Tel Aviv University.

Rony Eizenshtein (45) – Chief Financial Officer. An Isreali certified public accountant who also holds an MBA
from Hariot-Watt University, Edinburgh and a BA in Accounting and Economics Ben Gurion University.
Mr Eizenshtein has previously acted as a CFO of a number of companies listed on the Tel Aviv Stock Exchange
including EZ Energy Ltd, Exalenz Bio Science Ltd and also as CFO of McAfee Israel Ltd. (whose parent, McAfee
Inc is listed on NASDAQ). Between 1994 and 1997 he was an audit team manager for BDO Almagor & Co (presently
part of Deloitte & Touche), supervising an audit team who visited portfolio companies including BATM Advanced
Communication Ltd (traded on London Stock Exchange) and Technomatix Technologies Ltd (listed on NASDAQ).


17. Corporate governance
The Combined Code
The Board is committed to the highest standards of corporate governance. As at the date of this Document the        PRann I
Company does not fully comply with the Combined Code. The Company is seeking admission to AIM and will              (16.4)
not be required to fully comply with the Combined Code under AIM Rules. However, the Company will comply
with the Combined Code so far as is practicable and appropriate given the Company’s size and nature. The
following describes where the Company does not comply with the Combined Code and notes where action will
be taken to comply with the full code.

                                                       36
The Board intends to meet at least 4 times a year and may meet at other times at the request of one or more of
the Directors.

The Combined Code recommends that the Company’s Chairman be independent on appointment and that its Chief
Executive Officer should not become Chairman of the Company. The Chairman’s role is to ensure good corporate
governance. His responsibilities include leading the Board, ensuring the effectiveness of the Board in all aspects
of its role, ensuring effective communication with shareholders, setting the Board’s agenda and ensuring that all
Directors are encouraged to participate fully in the activities and decision-making process of the Board. The
current Chairman of the board is Eatamar Drori, an executive director and co-founder of the Company who is
therefore not considered independent.

The Combined Code recommends that at least half of the Board, excluding the Chairman, should be independent
in character and judgement and free from relationships or circumstances which are likely to affect, or could appear
to affect, their judgement. Currently, the Board is composed of five members, consisting of three Executive
Directors and two Non-Executive Directors. The Board considers Ofer Barda and Shmuel Zailer to be
independent. Accordingly, the Board does not currently comply with the Combined Code recommendations
regarding the composition of the Board. In accordance with his service agreement described in Part 4 of this
Document, Jim McGeever will join the Board as independent non-executive director at the time of Admission and
appoint one of the non-executive directors as Chairman.

The Combined Code also recommends that the Board should appoint one of the independent Non-Executive
Directors as Senior Independent Director. The Senior Independent Director serves as an additional contact point
for shareholders if they feel that their concerns are not being addressed through normal channels. No director has
been appointed to fill this role.

In particular, because the Company has not to date been required to comply with the Combined Code, as at the
date of this Document and immediately following Admission, the Company does not and will not comply with the
following Main Principles and Code Provisions of the Combined Code:

Main Principles: A.2 – Chairman and chief executive (an executive director is currently the Chairman);
A.3 – Board balance and independence (in that non-executive directors do not currently make up at least half of
the Board excluding the also independent chairman); A.4 – Nomination Committee; A.6 – Performance
Evaluation; A.7 – Re-election; B.1 – Level and Make up of Remuneration (in so far as currently the largest
proportion the directors’ remuneration is fixed); B.2 – Procedure; C.3 – Audit Committee and Auditors;
D.2 – Constructive use of the AGM.

As the Company has not yet published an annual report, it has not yet had the opportunity to comply with those
elements of the Combined Code which relate to disclosure within the annual report.

The Board has established Remuneration and Audit Committees with formally delegated duties and
responsibilities with written terms of reference. The composition of such committees will be reviewed following
the appointment of additional non-executive directors.

Following Admission becoming effective, the members of each committee will be as follows:
                                                                                  Chairman          Members
Remuneration Committee                                                       Shmuel Zailer          Jim McGeever
Audit Committee                                                              Eatamar Drori          Jim McGeever

From time to time, separate committees, including a nomination committee, may be set up by the Board to
consider specific issues when the need arises.

Nomination Committee
If a nomination committee is established, it will assist the Board in discharging its responsibilities relating to the
composition and makeup of the Board and appointment of senior managers. The Nomination Committee is
responsible for evaluating the balance of skills, knowledge and experience of the Board, the size, structure and
composition of the Board, retirements and appointments of additional and replacement directors and will make
appropriate recommendations to the Board on such matters. The Combined Code provides that a majority of the
members of the Nomination Committee should be independent non-executive directors and that the Chairman or
an independent non-executive director should chair the Nomination Committee.




                                                         37
Remuneration Committee
The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration,       PRann I
including making recommendations to the Board on the Company’s policy on executive remuneration,                    (16.3)
determining the individual remuneration and benefits package of each of the Executive Directors and
recommending and monitoring the remuneration of senior management below Board level.
The Combined Code provides that the Remuneration Committee should consist of at least three members (or, in
the case of a small company, two members) who are all independent non-executive directors and that the chairman
of the Committee must be a non-executive director. In addition, the Chairman of the Company may be a member
(but not chair) of the committee if he was considered independent on appointment as Chairman.
The Company’s Remuneration Committee will comprise Shmuel Zailer and Jim McGeever being chaired by
Shmuel Zailer. The Company Secretary shall act as the secretary of the Remuneration Committee. The Company
does not comply with the Combined Code recommendations regarding the minimum number of members of the
Remuneration Committee.
The quorum for meetings of the Remuneration Committee is two members. The Remuneration Committee may
invite the Chief Executive Officer of the Company or any other person to advise and/or join meetings. However,
no one other than the Chairman of the Remuneration Committee and its members is entitled to attend and vote at
a meeting. No Director or senior manager shall be involved in any decisions as to his or her own remuneration.
The Remuneration Committee will meet formally at once per year and otherwise as required. The Remuneration
Committee is authorised by the Board at the expense of the Company to obtain external professional advice and
to secure the attendance of third parties with relevant experience at meetings when it considers it necessary.

Duties of the Remuneration Committee
The principal duties of the Remuneration Committee include the following:
a)    To agree with the Board a framework and policy for remuneration of the Chief Executive Officer, the
      Executive Directors and the senior management;
b)    To agree with the Board the Company’s policy on the duration of contracts with Executive Directors and
      notice periods and termination payments under such contracts;
c)    To advise on the design of and determine the total individual remuneration package of each of the Executive
      Directors and Senior Managers including bonus, pension and share schemes and other such
      incentive schemes;
d)    To review and note annually the remuneration trends across the Group; and
e)    To oversee any major changes in employee benefits structures throughout the Group and advise on any
      such changes.

Audit Committee
The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting,
external and internal audits and controls, including reviewing the Company’s annual financial statements,
reviewing and monitoring the extent of the non-audit work undertaken by external auditors, advising on the
appointment of external auditors and reviewing the effectiveness of the Company’s internal audit activities,
internal controls and risk management systems. The ultimate responsibility for reviewing and approving the
annual report and accounts and the half yearly reports remains with the Board.

The Combined Code recommends that the Audit Committee should comprise of at least three members (or, in the
case of a small company, two members) who should all be independent non-executive directors, and that at least
one member should have recent and relevant financial experience and that the chairman of the Committee must
be a non-executive director.

The membership of the Company’s Audit Committee will comprise two members: Eatamar Drori and
Jim McGeever. The chairman of the Audit Committee is Eatamar Drori. The Company Secretary shall act as
secretary of the Audit Committee. Accordingly, the Company considers that it will not comply with the Combined
Code regarding the composition of the Audit Committee on Admission.

The quorum for meetings of the Audit Committee will be two members. The Audit Committee may invite the
Chairman and Chief Executive Officer of the Company or any other person to advise and/or join meetings when
required. However, no one other than the Chairman of the Audit Committee and its members will be entitled to be
present or vote at a meeting. There should be at least one meeting, or part of a meeting, each year which the
external auditors attend without management present. The Audit Committee will meet formally at least twice a


                                                      38
year and otherwise as required. The Audit Committee will be authorised by the Board at the expense of the
Company to obtain external professional advice and to secure the attendance of third parties with relevant
experience at meetings when it considers it necessary.

Duties of the Audit Committee
The Audit Committee will have authority to investigate areas of concern as to financial impropriety that arise and
will be able to obtain outside legal or other independent professional advice in connection with those matters. The
principal functions of the Audit Committee will include the following:
a)    monitoring the integrity of all financial statements made by the Company and any formal announcements
      relating to the Company’s financial performance and reviewing significant financial reporting judgements
      contained in them;
b)    reviewing and challenge where necessary accounting policies and practices, decisions requiring a major
      element of judgement, the clarity of disclosures, compliance with accounting standards, and compliance
      with London Stock Exchange and other legal requirements;
c)    reviewing the Company’s internal audit function and ensure it is adequately resourced;
d)    considering the appointment, re-appointment and removal of the external auditor and to recommend the
      remuneration and terms of engagement of the external auditor;
e)    assessing the external auditor’s independence and objectivity; and
f)    reviewing the engagement of the external auditor to ensure the provision of non-audit services by the
      external audit firm does not impair its independence or objectivity.

Model Code
Upon Admission, the Company will adopt a code of securities dealings in relation to the securities of the Company
(including the Shares) which is based on, and is at least as rigorous as, the Model Code as published in the Listing
Rules. The code adopted will apply to the Directors and other relevant employees of the Company.
                                                                                                                       PRann III
18. Lock-in Arrangements                                                                                               (7.3)

In order to try and maintain an orderly market in the Ordinary Shares following Admission, the following
lock-ins apply:
•     The holders of Existing Ordinary Shares (including shares to be issued on Automatic Conversion of the
      Convertible Loan) are restricted, by the Articles of Association, from transferring their shares in the
      Company for a period of six months from Admission. Further details are set out in the summary of the
      Articles of Association, set out in paragraph 2 of Part 4 of this Document;
•     All Ordinary Shares issued pursuant to the PTV Acquisition are locked in for two years from 17 January
      2010. This is a condition of the Israeli tax ruling issued at that time and was by way of lock-in agreements
      between the relevant shareholders and Israeli tax authority; and
•     The Directors have all entered into lock-in agreements with the Company in respect of a period of one year
      following Admission. Further details are set out in paragraph 8 of Part 4 of this Document.
•     CSSCM has entered into a lock-in agreement with the Company in respect of a period of six months
      following Admission. Further details are set out in paragraph 8 of Part 4 of this Document.


19.   Key interests
Investors should be aware of the following potential conflicts of interest:                                            PRann I
                                                                                                                       (14.2)
•     CSS is financial adviser to both the Company and Libertas Capital Finance Limited. Furthermore, it               PRann III
      currently holds 7.4 per cent. of Ordinary Shares and all of the Deferred Shares in the Company and               (7.1, 3.3)
      10 per cent. of the equity interest in Libertas Capital Finance Limited’s parent, Libertas Partners LLP;

•     Gerard Mizrahi is a partner of CSS and CSSCM and a member of Libertas Partners LLP;

•     Ronnie Jaegermann, Chaim Bechor and Eatamar Drori, who are directors of the Company, are also
      directors and office holders of PTV (either in their own capacity or through companies wholly owned by
      them) and Chaim Bechor and Eatamar Drori hold substantial shareholdings in the Company and Ronnie
      Jaegermann holds Inc. Options; and


                                                        39
•      Ronnie Jaegermann also benefits from the finders fee agreement set out in paragraph 4 of Part 5 of this
       Document.

Other than as disclosed above the Company and its Directors are not aware of any other potential or existing
conflicts of interest.


20.    Reasons for the Placing and Admission
The Company recently raised approximately £1 million gross in the Previous Fundraising and will raise another            PRann III
£160,000 through the Placing. Total costs incurred for the process of Admission, including any broking fees              (3.4)
incurred in the Placing will be approximately £438,000, £430,000 of which are costs associated with Admission
and £8,000 is broking fees in respect of the Placing. The net proceeds of Placing and Previous Fundraising will be
used to fund the production financing needs of the Group’s growing sales including necessary inventory.

The Directors also believe that the profile of the Company will be significantly enhanced as a publicly traded UK
public company. The Directors believe that Admission will:

•      Enhance the Company’s status;
•      Assist the Company in raising additional capital should this be required; and
•      Provide liquidity for investors through the ability to buy and sell Ordinary Shares.

The Directors believe that the Company’s Admission to AIM will assist the Company in its development by raising
the Company’s profile within its target corporate and institutional markets, enhancing its ability to attract and
retain new staff and providing Shareholders with a more liquid market for their Ordinary Shares.

21. Dealing Arrangements
Application will be made to the London Stock Exchange for the Existing Ordinary Shares and the New Ordinary
Shares to be admitted to trading on AIM. Admission is expected to become effective and trading in the Ordinary
Shares is expected to commence on 30 December 2010.

It is expected that, subject to the satisfaction of the conditions of the relevant placing letters, the Placing Shares
will be registered in the names of the investors subscribing for them and issued either:

•      In CREST, where the placee so elects and only if the placee is a System-Member in relation to CREST, with
       delivery (to the designated CREST account) of the Placing Shares subscribed for or purchased expected to
       take place on or about 30 December 2010; or

•      Otherwise, in certificated form, with the relevant share certificate expected to be posted by the Registrars
       by 13 January 2011.

Notwithstanding the election by investors as to form of delivery of the Shares, no temporary documents of title
will be issued. All documents or remittances sent by or to investors or as they may direct will be sent through the
post at their risk. Pending despatch of definitive share certificates or crediting of CREST stock accounts (as
applicable), the Registrars will certify any instrument of transfer against the register of members of the Company.
                                                                                                                         PRann III
22. CREST                                                                                                                (6.1)

CREST is a computerised, paperless share transfer and settlement system enabling securities to be evidenced
otherwise than by certificate and transferred otherwise than by written instrument in accordance with the CREST
Regulations. The Ordinary Shares are eligible for settlement in CREST. Accordingly, settlement of transactions in
the Ordinary Shares following Admission may take place within the CREST system if relevant Shareholders so
wish. CREST is a voluntary system and Shareholders who wish to receive and retain share certificates will be able
to do so.




                                                         40
                                                    PART 3

                                     FINANCIAL INFORMATION

1.     Letter from the Auditors
The Directors                                                                                      The Directors
PeerTV Plc                                                            Libertas Capital Corporate Finance Limited
Thames House                                                                                  16 Berkeley Street
Portsmouth Road                                                                                          London
Esher                                                                                                  W1J 8DZ
Surrey
KT10 9AD

30 December 2010

Dear Sirs


PeerTV Plc
We report on the financial information set out below. This financial information has been prepared for inclusion
in the Document dated 30 December 2010 of PeerTV Plc on the basis of the accounting policies set out in note 1.
This report is required by the AIM Rules for Companies and is given for the purpose of complying with these
regulations and no other purpose.


Responsibility
The directors of PeerTV Plc are responsible for preparing the financial information on the basis of preparation set
out in note 1 to the financial information.

It is our responsibility to form an opinion on the financial information as to whether the financial information
gives a true and fair view for the purposes of the Document, and to report our opinion to you.


Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts
and disclosures in the financial information.

It also included an assessment of significant estimates and judgements made by those responsible for the
preparation of the financial information and whether the accounting policies are appropriate to the entity’s
circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial
information is free from material misstatement whether caused by fraud or other irregularity or error.


Opinion
In our opinion the financial information gives for the purpose of the Document dated 30 December 2010 a true
and fair view of the state of affairs of PeerTV Plc as at 31 December 2007, 31 December 2008 and 31 December
2009 and of the consolidated losses, consolidated cashflows and consolidated statement of changes in
Shareholders equity for the periods then ended in accordance with the basis of preparation set out in note 1 to
the financial information.




                                                        41
Declaration
For the purposes of item 1.2 of Annex I and item 1.2 of Annex III of the Prospectus Rules and Schedule 2 of the AIM
Rules we are responsible for this report as part of the Document and declare that we have taken all reasonable care
to ensure that the information contained in this report is, to the best of our knowledge in accordance with the facts
and contains no omission likely to affect its import. This declaration is included in the Document in compliance with
item 1.2 of Annex I and item 1.2 of Annex III of the Prospectus Rules and Schedule 2 of the AIM Rules.

Yours faithfully


haysmacintyre

Chartered Accountants
Registered Auditors

Fairfax House
15 Fulwood Place
London
WC1V 6AY




                                                         42
2.     Historical Financial Information for the Financial Periods ended 31 December 2009, 31 December
       2008 and 7 months period ended 31 December 2007
PeerTV Plc became the ultimate holding company of PeerTV Ltd as of the 18 January 2010 by way of a share for
share transaction. The financial information below has been presented as if PeerTV Plc had always been the
ultimate holding company of the group.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                Year ended       Year ended    7 months ended
                                                              31 December      31 December       31 December
                                                    Notes             2009             2008              2007
                                                                     $’000            $’000             $’000
                                                                  (Audited)        (Audited)        (Audited)
Revenues                                                 2           3,476            2,322              151
Cost of sales                                                       (2,126)          (1,879)             (78)
Gross profit                                                        1,350               443               73
Operating expenses
Research and development                                 3          (1,787)          (1,813)            (570)
Sales and marketing                                                   (281)            (310)             (54)
General and administrative                                            (776)            (398)            (245)
Other (expenses)/income                                                (69)             (67)              27
Total operating expenses                                            (2,913)          (2,588)            (842)
Loss before financing costs and taxation                            (1,563)          (2,145)            (769)
Financing income                                                        —                 8                3
Financing expenses                                                    (291)              —                —
Loss before taxation                                                (1,854)          (2,137)            (766)
Taxation                                                 4              —                —                —
Total comprehensive loss for the period                             (1,854)          (2,137)            (766)




                                                    43
CONSOLIDATED BALANCE SHEET
                                                                As at          As at          As at
                                                         31 December    31 December    31 December
                                                Notes           2009           2008           2007
                                                               $’000          $’000          $’000
                                                            (Audited)      (Audited)      (Audited)
Assets
Non-current assets
Intangible assets                                    5           576            473            138
Fixed assets                                         6            29             39             37
Employee loans                                                    —              —              88
                                                                 605            512            263
Current assets
Trade receivables                                    7           978            599             38
Other current assets                                 8            49             36             47
Inventories                                          9            52            243            123
Cash and cash equivalents                                        112            345            357
Restricted bank deposit                                           23             33             13
                                                               1,214          1,256            578
Total assets                                                   1,819          1,768            841
Equities and liabilities
Share capital and reserves
Share capital and share premium                                5,608          5,608          5,608
Other reserve – equity portion of convertible
debt and preference shares                                        96             96             96
Other reserve – on consolidation                              (2,021)        (2,118)        (4,441)
Retained deficit                                              (4,259)        (2,903)          (766)
Total (deficit)/equity                                          (576)           683            497
Current liabilities
Trade accounts payable                            10             765            272            174
Advances from customers                                           —             385             32
Other current liabilities                         11             350            428            138
Bridge loan                                       12             569             —              —
Convertible loan notes                            13             711             —              —
Total liabilities                                              2,395          1,085            344
Total equity and liabilities                                   1,819          1,768            841




                                                44
CONSOLIDATED CASH FLOW STATEMENT
                                                            Year Ended      Year Ended    7 Months Ended
                                                          31 December     31 December        31 December
                                                                  2009            2008              2007
                                                                 $’000           $’000             $’000
                                                              (Audited)       (Audited)         (Audited)
Cash flow from operating activities
Loss for the period                                             (1,854)         (2,137)             (766)
Adjustments for:
Financing expenses/(income)                                        291              (8)               (3)
Depreciation and amortisation                                      720             301                17
Share based payments                                               498              —                 —
Decrease/(increase) in inventories                                 191            (120)             (123)
Increase in trade and other receivables                           (392)           (551)              (85)
(Decrease)/increase in trade and other payables                    (32)            742               344
Net cash outflow from operating activities                        (578)         (1,773)             (616)
Cashflows from investing activities
Purchase of fixed assets                                            (7)            (18)              (38)
Loans from/(to) employees                                           —               88               (88)
Intangible asset additions                                        (725)           (620)             (154)
Movement in restricted bank deposit                                 10             (20)              (13)
Interest received                                                   —                8                 3
Net cash outflow from investing activities                        (722)           (562)             (290)
Cashflows from financing activities
Receipt of bridge loan                                            408               —                 —
Receipt of convertible loan notes                                 659               —                 —
Issue of preference shares                                         —             2,323             1,263
Net cash generated from financing activities                    1,067            2,323             1,263
(Decrease)/increase in cash and cash equivalents                 (233)             (12)              357
Cash and cash equivalents at beginning of the year                345              357                —
Cash and cash equivalents at end of the year                      112              345               357




                                                     45
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
                                                           Other       Other
                                                        reserve –   reserve –
                              Ordinary        Share        equity          on Accumulated
                                 shares    premium    component consolidation       deficit       Total
                                  $’000       $’000        $’000       $’000        $’000        $’000
                              (Audited)   (Audited)    (Audited)    (Audited)    (Audited)    (Audited)
On incorporation                    69       5,539           96       (4,441)           —        1,263
Net loss for the period             —           —            —            —           (766)       (766)
Balance at 30 June 2009             69       5,539           96       (4,441)         (766)        497
Arising on consolidation            —           —            —         2,323            —        2,323
Net loss for the period             —           —            —            —         (2,137)     (2,137)
Balance at 31 December 2009         69       5,539           96       (2,118)       (2,903)        683
Arising on consolidation            —           —            —            97            —           97
Share based payments                —           —            —            —            498         498
Net loss for the year               —           —            —            —         (1,854)     (1,854)
Balance at 31 December 2009         69       5,539           96       (2,021)       (4,259)       (576)




                                              46
NOTES TO THE FINANCIAL INFORMATION

1.     Accounting policies
The accounting policies, applied on a consistent basis in the preparation of the financial information, are
as follows:

a.    Basis of preparation
      The financial information set out below is based on the audited group financial statements of PeerTV Inc.
      (the group comprising of PeerTV Inc. and its wholly owned trading subsidiary PeerTV Ltd.) for the 7 month
      period ended 31 December 2007 and the two years ended 31 December 2008 and 31 December 2009.

      On 18 January 2010, PeerTV Plc acquired the entire issued share capital of PeerTV Ltd from PeerTV Inc.
      by issuing ordinary shares. The shareholders of PeerTV Plc following this acquisition were the same as the
      shareholders of PeerTV Inc. prior to the transaction.

      The combined and consolidated financial information has been prepared in accordance with the
      requirements of the PD regulation and the AIM rules and in accordance with this basis of preparation. The
      basis of preparation describes how the financial information has been prepared in accordance with
      International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the
      EU) except as described below.

      IFRSs as adopted by the EU, do not provide for the preparation of combined financial information or for
      the specific accounting treatment set out below, and accordingly in preparing the combined financial
      information certain accounting conventions commonly used for the preparation of historical financial
      information for inclusion in investment circulars have been applied as described in the Annexure to SIR
      2000 (Investment Reporting Standard applicable to public reporting engagements on historical financial
      information) issued by the UK Auditing Practices Board. The application of these conventions results in the
      following material departures from IFRS. In the years ended 31 December 2007, 2008 and 2009, PeerTV
      Plc, PeerTV Ltd and PeerTV Inc. were combined and consolidated as though the group had been one
      continuing business. In all other respects, IFRSs have been applied.

b.    Functional and presentation currency
      The subsidiaries functional and reporting currency is US dollars. Transactions denominated in foreign
      currencies other than the US dollar are translated into the functional currency using the prevailing exchange
      rates at the date of the transaction. Gains and losses from the translation of foreign currency transactions
      are recorded in expenses.

c.    Basis of consolidation
      The consolidated financial information includes the results and financial position of PeerTV Plc, PeerTV Inc.
      and PeerTV Ltd as though they were a group throughout the entire period to 31 December 2009. The results
      of the subsidiaries are included from the date of commencement of operations, using the purchase method.

d.    Intangible assets
      Purchased knowledge is presented at cost less accumulated amortisation. Amortisation is calculated based
      on the straight-line method over the estimated useful economic lives of the assets which is estimated to be
      3 years.

      Research expenditure is recognised as an expense as incurred. Costs incurred on development projects
      (relating to the creation of new products or processes or significant improvements to existing products and
      processes) are recognised as intangible assets when it is probable that the project will be a success,
      considering its commercial and technological feasibility, and costs can be measured reliably and the group
      intends to and has sufficient resources to complete the development and to use or sell the asset.

      Development costs recognised as an intangible asset include the cost of the materials, direct labour and
      overhead costs that can be directly attributed to preparation of the asset for its intended use. Other
      development expenditures are recognised as an expense as incurred. Development costs that have a finite
      useful life and that have been capitalised are amortised in relation to future sales from the related products
      once the development stage has been completed.

e.    Revenue recognition
      Revenue from the sale of goods is measured at the fair value of the consideration received or to be received,
      net of returns, trade discounts and volume rebates.

                                                        47
     The transfer of risks and rewards varies depending on the specific terms of the contract of sale. Transfer of
     risks and rewards usually occurs upon delivery of the product to the customer or when the goods reach the
     customers warehouse.

f.   Inventory
     Inventory is measured at the lower of cost or net realisable value. The cost of the inventory includes the
     expenses for acquisition of the inventory and bringing it to its present location and condition. Net realisable
     value is the estimated selling price in the ordinary course of business, less the estimated costs of completion.

     Raw materials – based on acquisition cost using the “first-in, first-out” method.

     Work in progress – including materials, subcontractors, labour and other direct and indirect
     production expenses.

     Finished goods – including materials, subcontractors, labour and other direct and indirect
     production expenses.

g.   Warranty Costs
     PeerTV Ltd generally offers a one year warranty for all of its products. The financial information includes
     an allowance for warranty claims totalling 1.5 per cent. of annual sales at the time turnover is recognised,
     representing estimated material costs during the warranty period.

h.   Depreciation
     Depreciation is recognised in the statement of income on a straight line basis over the estimated useful
     economic life of the assets.

     The rates of depreciation for each class of asset are:-

     Computers                                        33%
     Furniture & office equipment                     6%-15%
     Leasehold improvements                           over the term of the lease

i.   Defined contribution plans
     PeerTV Ltd has defined contribution plans in accordance with Section 14 of the Severance Pay Law,
     whereby the subsidiary makes regular payments therein without it being legally or constructively liable to
     make additional payments even if sufficient amounts are not accumulated in the fund to pay all the benefits
     due to an employee relating to his service in the current and prior periods. Payments made to defined
     contribution plans in respect of severance pay or annuities, are recognised as an expense at the time the
     deposit is due to the plan concurrent with receipt of the services from the employee and no further provision
     is required in the consolidated financial statements.

j.   Stock based compensation
     Benefits granted to employees and professional consultants (hereafter “beneficiaries”), as compensation for
     services provided by them to the group (hereafter “services”), which are paid by the issuance of options to
     purchase shares of the company (hereafter “option”), are measured by the fair value of the options on the
     date granted.

     The fair value of the options is determined by an external evaluator using an economic model called the
     “Binomial Model”.

     The cost of the services is charged to the income statement over a period which commences on the date in
     which the options were granted and ends on the date when the beneficiaries are entitled to the options
     (hereafter “maturity period”).

     The company debits or credits its subsidiary over the length of the maturity period by recording capital fund
     for payments for stock based compensation in the framework of its shareholder’s equity.

     The accumulated cost of the services which will be recognised in every reporting period throughout the
     maturity period reflects the extent of the passage of time of the maturity period and the best assessment
     concerning the number of matured options.




                                                        48
2.    Revenues
                                                                    Year Ended         Year Ended   7 Months Ended
                                                                  31 December        31 December       31 December
                                                                          2009               2008             2007
                                                                         $’000              $’000            $’000
Product sales                                                            3,163             2,224               151
License and software sales                                                 166                —                 —
Maintenance services                                                       147                98                —
Net book value                                                           3,476             2,322               151

The subsidiary has one principal customer. The following table shows the split of turnover attributable to the
group’s key customers:-
                                                                    Year Ended         Year Ended   7 Months Ended
                                                                  31 December        31 December       31 December
                                                                          2009               2008             2007
                                                                            %                  %                %
Customer A                                                                  66                29                —
Customer B                                                                  —                 25                —
Customer C                                                                  —                 18                —
Customer D                                                                  —                 —                 46
Customer E                                                                  —                 —                 13

The table below shows revenues classified by geographic destination based on the customer location:-
                                                                    Year Ended         Year Ended   7 Months Ended
                                                                  31 December        31 December       31 December
                                                                          2009               2008             2007
                                                                            %                  %                %
Europe                                                                      70                29                17
Central America                                                              5                25                —
Israel                                                                       8                20                13
Canada                                                                      16                18                60
Other                                                                        1                 8                10
                                                                           100               100               100


3.    Research and Development Expenses
                                                                    Year Ended         Year Ended   7 Months Ended
                                                                  31 December        31 December       31 December
                                                                          2009               2008             2007
                                                                         $’000              $’000            $’000
Amortisation of development costs                                          756               295                16
Salaries and related expenses                                              462               825               356
Share based payment                                                        156                —                 —
Car expenses                                                                32                51                26
Travel expenses                                                              4                14                 9
Consultants and subcontractors                                             290               393                12
Materials                                                                   25               109                10
Office maintenance                                                          55               106               141
Other                                                                        7                20                —
                                                                         1,787             1,813               570


4.    Taxation
PeerTV Ltd has accumulated losses for tax purposes as of 31 December 2009, in the amount of approximately
$5.7 million which may be carried forward and offset against taxable income in the future for an indefinite period.




                                                        49
5.    Intangible Assets
                                              31 December   31 December    31 December
                                                     2009          2008           2007
                                                    $’000         $’000          $’000
Knowledge
Cost                                                  15             15             15
Accumulated amortisation                              12              7              2
Net book value                                         3              8             13

Development expenditure
Cost
At 1 January/On incorporation                        759            139            —
Additions                                            806            620           139
At 31 December                                     1,565            759           139
Accumulated amortisation
At 1 January/On incorporation                        294             14             —
Charge for the year                                  698            282             14
At 31 December                                       992            294             14
Net book value                                       573            465           125
Total net book value                                 576            473           138


6.    Fixed Assets
                                  Fixtures,
                                 fittings &   Computer &       Leasehold
                                equipment        Software   improvements          Total
                                      $’000         $’000          $’000         $’000
Cost
On incorporation                        —             —              —              —
Additions                               1             36             —              37
At 31 December 2007                       1           36             —              37
Additions                                 7           10              1             18
At 31 December 2008                       8           46             1              55
Additions                                 2            5             —               7
At 31 December 2009                     10            51              1             62

Accumulated depreciation
On incorporation                        —             —              —              —
Charge for the period                   —             —              —              —
At 31 December 2007                     —             —              —              —
Charge for the year                      1            15             —              16
At 31 December 2008                     1             15             —              16
Charge for the year                     —             16              1             17
At 31 December 2009                       1           31              1             33
As at 30 June 2009                        9           20             —              29
As at 30 June 2008                        7           31              1             39
As at 30 June 2007                        1           36             —              37




                                     50
7.    Trade receivables
                                          31 December   31 December   31 December
                                                 2009          2008          2007
                                                $’000         $’000         $’000
Denominated in US dollars                        979            23            —
Denominated in NIS                               149           576            38
                                               1,128           599            38
Less provision for doubtful debts               (150)           —             —
                                                 978           599            38


8.    Other current assets
                                          31 December   31 December   31 December
                                                 2009          2008          2007
                                                $’000         $’000         $’000
Government institutions                           45            26             9
Prepayments                                        4            10            38
                                                  49            36            47


9.    Inventories
                                          31 December   31 December   31 December
                                                 2009          2008          2007
                                                $’000         $’000         $’000
Raw materials                                     27           176            95
Finished goods                                    25            67            28
                                                  52           243           123


10.   Trade accounts payable
                                          31 December   31 December   31 December
                                                 2009          2008          2007
                                                $’000         $’000         $’000
Denominated in US dollars                        301            —             —
Denominated in NIS                               464           272           174
                                                 765           272           174


11.   Other current liabilities
                                          31 December   31 December   31 December
                                                 2009          2008          2007
                                                $’000         $’000         $’000
Employees and related institutions               127           215           108
Accruals                                         126            41            18
Provision for royalties                           15            62             4
Provision for warranty                            82           110             8
                                                 350           428           138




                                     51
12.    Bridge loan
                                                                                                         31 December
                                                                                                                2009
                                                                                                               $’000
Loan capital
Accrued interest                                                                                                  505
Transaction costs                                                                                                  10
                                                                                                                  (73)
                                                                                                                  442
Liability for the allotment of shares in PeerTV Plc                                                               127
                                                                                                                  569

The loan, in the gross amount of £312,000 (“Bridge loan”), was received by the subsidiary from English lenders
(“Lenders”) during November 2009 for financing its ongoing activities.

Accumulated fees amounting to £44,000 (“Fees”) were deducted from the bridge loan before drawdown.

PeerTV Ltd has agreed with the Lenders that in consideration for providing the bridge loan it will ensure that
PeerTV Plc will issue, with no consideration, 375,000 of deferred shares to the lenders; this liability was assessed
by an external consultant in the amount of £79,000.

The fees and the value of the shares to be issued in PeerTV Plc represent transaction costs which totalled
£123,000 (US$208,000).

Transaction costs are deducted from the gross loan and amortised by the effective interest method.

The loan bears nominal interest of 1 per cent. per month and the effective interest rate is 19.58 per cent. per month.

The date of repayment of the loan was extended by the parties to 180 day from the date of receipt of the loan.

The parties agreed that where the minimum amount of the recent financing raised by PeerTV Plc (£750,000) is
reached prior to the date of repayment of the loan, half of the loan is to be converted to ordinary shares of
PeerTV Plc at the price of the 8 per cent. Convertible Preference Share of 0.5p each at 40p per convertible
preference share and the second half will be paid out of the recent financing. Where the aforementioned minimum
is not reached prior to the repayment date of the loan the entire loan is to be repaid at the repayment date in cash.

As security for repayments of the loan the subsidiary registered a fixed and floating charge on all of its assets in
favour of the Lenders.

The minimum of the recent issue of PeerTV Plc was reached on 28 March 2010 and accordingly half of the loan
was converted to £375,000 ordinary shares of PeerTV Plc and the second half was repaid in April 2010 out of the
funds of the recent financing.

The gross loan was split between its capital component in the amount of $5,000 which is presented in the financial
statements as a capital item of financial liabilities under shareholders equity of the group and the liability
component which is presented in current liabilities of the group, based on the opinion of an external consultant.


13.    Convertible loan notes
                                                                                                         31 December
                                                                                                                2009
                                                                                                               $’000
Loan capital                                                                                                      659
Accrued interest                                                                                                   61
Transaction costs                                                                                                  (9)
                                                                                                                  711

In March 2009 PeerTV Inc. issued A3 Convertible loan notes to investors, convertible at a price of $4.0375
per share (“Convertible loan notes”) for a consideration in the amount of approximately $659,000 which was used
to finance the activities of the subsidiary.



                                                         52
The Convertible loan notes were split between the liability component which is presented as a current liability and
its capital liability in the amount of $92,000 which is presented as part of capital of the financial liability under
shareholders’ equity of the company, based on an opinion of an external consultant.

The company’s CEO received a finder’s fee of $33,000 in cash and an option to purchase 8,000 A2 preferred
shares which were evaluated by external evaluator in the amount of $9,000.

The Convertible loan notes are valued in dollars and bear interest at an annual rate of 10 per cent. with an effective
annual interest rate of 45.8 per cent. On 18 January 2010 half of the Convertible loan notes amounting to $362,000
were converted to 145,000 ordinary shares of PeerTV Inc. at a price of $2.49 per share and the second half was
endorsed to PeerTV Plc, which issued new loan notes to investors, convertible to ordinary shares at a price of
40p per share (“PLC loan notes”).

The parties agreed that the PLC loan notes will be repaid at the end of 10 months from the date of their issuance
(“original repayment date”) or at the end of 22 months from the date of their issuance (“extended repayment date”)
or converted, at any time, to PeerTV Plc ordinary shares in the event of the admission of PeerTV Plc shares on a
recognised investment exchange or in the event of a new investment in PeerTV Plc as agreed between the parties.

Interest will be charged at a rate of 10 per cent. up to the original repayment date and for the period from the end
of the original repayment date through the date of the extended repayment date interest will be charged at a rate
of 40 per cent.


14. Operating leases
The subsidiary currently leases office space for a period of one year (including an option to extend the lease period
for additional one year) which is used as the company and subsidiary offices. Under this lease agreement, the
subsidiary will pay approximately $76,000 a year in rent and management fees. In addition, to secure its
obligations under the lease, the subsidiary provided a bank guarantee in the amount of approximately $17,000 in
favour of the lessor. The lease expired on 30 April 2010.
In May 2010 the company signed an agreement with another company to rent offices in Herzeliya for an amount
prescribed in the agreement.

During 2009 the subsidiary signed several motor vehicle operating leases.

The subsidiary is committed to minimum annual payments over the next 3 years as follows:
                                                                                                                $’000
2010                                                                                                               57
2011                                                                                                               57
2012                                                                                                               57
                                                                                                                  171


15. Warrants and share options
In September 2009 the Board of Directors of PeerTV Inc and PeerTV Ltd approved an option plan (“Option Plan”)
to issue with no consideration to directors and employees of the subsidiary up to 600,000 options to purchase
600,000 Company ordinary shares.

The options are exercisable within 10 years from the date of vesting and will lapse after this date or after 90 days
from the date of termination of employer- employee relationship, the earlier of the dates.

Every option may be realised as one company’s ordinary share for consideration of an exercise price of
$0.005 per share.

At the date of the financial statements the PeerTV Inc had granted 509,000 options to subsidiary employees
and directors.

According to the grant notes the options will vest in equal portions during the 13 quarters from the date of grant.




                                                         53
The following table sets out the maturity dates by year according to the grant notes:
                                                                                                             $000’s
2009                                                                                                           321
2010                                                                                                           145
2011                                                                                                            28
2012                                                                                                            14
2013                                                                                                             1
                                                                                                               509

Under the conversion transaction the Company Option Plan was changed in January 2010 whereby the employees
and directors are to receive PeerTV Plc shares instead of PeerTV Inc shares at a ratio of 2.58 shares of PeerTV Plc
and at an exercise price of £0.001 per option.

The total number of PeerTV Plc shares to be issued to subsidiary employees and directors at full realisation
amounts to 1.3 million ordinary shares representing approximately 13 per cent. of the issued share capital
subsequent to the recent financing of PeerTV Plc.

In order to calculate the fair value of the options, the group relied on an opinion from an external evaluator
(hereafter the “opinion”).

The primary assumptions which were used as a basis for the opinion of the external evaluator are as follows:

•      Use of the “Binominal Model” to calculate the fair value of the options.

•      The value of company’s ordinary share is $2.49 in accordance with the price which A3 convertible loan
       notes were converted into the Company’s ordinary shares during January 2010.

•      A variable standard deviation which ranges between 66 per cent. to 70 per cent. in the short term and the
       long term.

•      Rate of risk free interest is 2 per cent.

In accordance with the opinion, the fair value of the options at the allocation date was set at $1.69 and total
benefits were set at approximately $813,000 to be spread over the maturity period of the options.


16. Contingent liabilities
In July 2007 the subsidiary signed employment agreements retaining consulting services, as independent
contractors, from the two founders (hereinafter “the Founders”), serving as executive directors of the subsidiary
with one serving as Chief Technical Officer and the other as VP Production and Product Management.
The contracts are for an unlimited period and may be ended with one month’s advance notice by one of the parties.

The Founders are entitled to monthly consulting fees, car and mobile phone allowance and repayment of expenses
as detailed in the agreements and additionally, payment of an annual bonus as decided and approved by the Board
of Directors of the subsidiary.

In addition, the subsidiary has made a commitment for a postretirement grant representing eight months of
consulting fees if the agreements are terminated without cause in certain circumstances or in the event of a change
of control in the group which results in a termination of the agreements under certain circumstances.

The Founders have committed not to compete with the group’s business for a period of one year from the date of
termination their services as detailed in the agreements.


17. Post balance sheet events
Since the year end, the PeerTV Inc transferred its holding in PeerTV Limited, its wholly owned subsidiary, to
PeerTV Plc, a newly incorporated entity registered in UK. In accordance with the equalisation agreement detailed
under note 12 all of the existing shares will be converted to Plc shares at a rate of 1:2.58.

Since the year end PeerTV Plc has raised a gross amount of £1.6 million from English private investors in
consideration for issuing 4,132,142 8 per cent. convertible preference shares at a price of 40p per share in
accordance with a private placing memorandum issued in February 2010.


                                                        54
In the framework of the above offer the following transactions were carried out:

PeerTV Inc issued 145,000 ordinary shares in consideration for conversion half of the A3 loan notes at a value of
$362,000 at a price of $2.49 per share.

PeerTV Inc issued 822,000 ordinary shares to all preference shareholders under a process of unification of the
company share capital to ordinary shares only.

PeerTV Inc transferred its holdings in the subsidiary at book value and transferred its liabilities to PLC for a
consideration of issuing 8.5 million ordinary shares of PLC to Company shareholders.

PeerTV Inc Option Plan was converted from company’s options to PeerTV Plc options whereby the subsidiary
employees and directors received 2.58 PeerTV Plc options for each option held in the company.

PeerTV Inc resolved to cease its activities and move into voluntary liquidation.

On 21 October 2010 the Company issued a prospectus of offering up to 7,462,686 Ordinary Shares and admitting
the whole of the Company’s issued Ordinary Share capital to AIM. The Ordinary Shares were to be priced at
between 62p and 72p each and the prospectus was primarily targeted at institutional investors. Unfortunately the
prospectus was not successful due to insufficient take up by institutional investors. The costs incurred during the
attempted admission to AIM are included in the post year end trading activities.

On 18 November 2010 the Company agreed to issue 104,000 Ordinary Shares and issued 125,000 Deferred Shares
to CSS Alpha Fund Ltd pursuant to the bridge loan. The Company has committed to issuing a further
319,444 Deferred Shares pursuant to the bridge loan as soon as the Directors have shareholder authority to
increase the authorised Deferred Share capital. The bridge loan received was for a total of $300,000 and covers an
interest charge of one per cent. per month and is repayable 90 days after the draw down. The Company received
the net proceeds from the bridge loan of $290,000 in November 2010.

On 18 November 2010 the Company issued a Private Placing Memorandum pursuant to which it placed 2,267,165
Ordinary Shares of 0.5p each at 45p per Ordinary Share. As at 20 December 2010 the Company had received
proceeds of £911,923.84. As of 20 December 2010 there was £108,300.60 (240,668 shares) placed but still to be
collected from private investors. Of the proceeds the Company had collected, the shares in respect of £116,325.00
(258,500 shares) had not been issued and allotted, nor had it issued the Libertas Shares, nor the 104,000 shares
due to CSS under the agreement further described in section 8.1.2 of Part 4 of this Document. The Company
therefore expects to issue another 928,168 shares in the coming weeks following Admission.




                                                        55
3.     Interim Financial Information for periods ended 30 June 2009 and 30 June 2010
On 18 January 2010, PeerTV Plc acquired the entire issued share capital of PeerTV Ltd from PeerTV Inc. by
issuing ordinary shares. The shareholders of PeerTV Plc following this acquisition were the same as the
shareholders of PeerTV Inc. prior to the transaction.

Under IFRS, the accounting policy to account for business combinations of entities and businesses under common
control is predecessor accounting. The acquired assets and liabilities are stated at historical cost, and are included
in the consolidated financial statements from the beginning of the earliest period presented as if the entities and
businesses acquired had always formed a group. As such the figures for the period ended 30 June 2009 have been
presented to reflect the financial position and results as though PeerTV Plc had always been the parent company
of PeerTV Ltd. The consolidated financial information for the period ended 30 June 2010 reflects the full period
results of both entities despite the acquisition occurring during the period.

The financial information set out below, based on the unaudited interim group accounts of PeerTV Plc for the
6 months period to 30 June 2010, represents the consolidated results for PeerTV Plc as though PeerTV Plc had
always been the parent of PeerTV Ltd. The corresponding financial information for the 6 months to 30 June 2009
has been presented as though PeerTV Plc had always been the parent of PeerTV Ltd.


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                                       Period ended      Period ended    PRann I
                                                                                            30 June           30 June    (3.2, 20.6.1)
                                                                           Notes               2010              2009    PRann III
                                                                                              $’000             $’000    (3.2)
                                                                                        (Unaudited)       (Unaudited)
Revenues                                                                       2              5,081               982
Cost of sales                                                                                (3,514)             (631)
Gross profit                                                                                  1,567               351
Operating expenses
Research and development                                                       3               (538)             (940)
Sales and marketing                                                                            (231)              (84)
General and administrative                                                                     (552)             (301)
Other income/(expenses)                                                                          36               (21)
Total operating expenses                                                                     (1,285)           (1,346)
Profit/(loss) before financing costs and taxation                                               282              (995)
Financing expenses                                                                             (126)               —
Profit/(loss) before taxation                                                                   156              (995)
Taxation                                                                                         —                 —
Total comprehensive profit/(loss) for the period                                                156              (995)




                                                         56
CONSOLIDATED BALANCE SHEET
                                                                                   As at 30 June   As at 30 June
                                                                           Notes            2010            2009
                                                                                           $’000           $’000
                                                                                    (Unaudited)     (Unaudited)
Assets
Non-current assets
Intangible assets                                                             4           1,029             343
Fixed assets                                                                                 49              34
                                                                                          1,078             377
Current assets
Trade receivables                                                                         4,581              52
Other current assets                                                                        140              45
Inventories                                                                                  26             318
Restricted cash deposit                                                                      56              32
Cash and cash equivalents                                                                    38             361
                                                                                          4,841             808
Total assets                                                                              5,919           1,185
Equities and liabilities
Share capital and reserves
Share capital and share premium                                               5           5,918           5,608
Other reserve – equity portion of convertible debt and preference shares                    513              96
Other reserve – share based payments                                                      1,248             497
Other reserve – on consolidation under predecessor accounting                            (1,818)         (2,319)
Retained deficit                                                                         (4,457)         (3,897)
Total equity/(deficit)                                                                    1,404             (15)
Non current liabilities
Convertible preference shares                                                               744              —
Current liabilities
Trade accounts payable                                                                    2,734             227
Other current liabilities                                                                   659             610
Convertible loan notes                                                                      378             363
Total liabilities                                                                         4,515           1,200
Total equity and liabilities                                                              5,919           1,185




                                                       57
CONSOLIDATED CASH FLOW STATEMENT
                                                              Period Ended   Period Ended
                                                                   30 June        30 June
                                                                      2010           2009
                                                                     $’000          $’000
                                                               (Unaudited)    (Unaudited)
Cash flow from operating activities
Profit/(Loss) for the period                                          156           (995)
Adjustments for:
Financing expenses                                                    126             —
Depreciation and amortisation                                         156            500
Share based payments                                                  175             —
Increase/(decrease) in inventories                                     26            (75)
(Decrease)/increase in trade and other receivables                 (3,656)           538
Increase/(decrease) in trade and other payables                     2,265           (236)
Net cash outflow from operating activities                           (752)          (268)
Cashflows from investing activities
Purchase of fixed assets                                              (30)            (4)
Intangible asset additions                                           (599)          (362)
Investment in restricted bank deposit                                 (33)             1
Interest paid                                                         (40)            —
Net cash outflow from investing activities                           (702)          (365)
Cashflows from financing activities
Repayment of bridge loan                                             (260)            —
Receipt of convertible loan notes                                      —             649
Issue of convertible preference shares (net of issue costs)         1,640             —
Net cash generated from financing activities                        1,380            649
(Decrease)/Increase in cash and cash equivalents                      (74)            16
Cash and cash equivalents at beginning of the period                  112            345
Cash and cash equivalents at end of the period                         38            361




                                                        58
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
                                                                           Other
                                                                        reserve –        Share        Other
                                          Ordinary          Share          equity        based reserve – on Accumulated
                                             shares      premium      component       payments consolidation     deficit      Total
                                              $’000         $’000          $’000         $’000        $’000      $’000       $’000
                                        (Unaudited)   (Unaudited)    (Unaudited)    (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Balance at
1 January 2009                                  69         5,539              96          497        (2,319)     (2,902)       980
Net loss for the period                         —             —               —            —             —         (995)      (995)
Balance at 30 June 2009                         69         5,539              96          497        (2,319)     (3,897)       (15)
Net loss for the period                         —             —               —            —             —         (716)      (716)
Balance at 31 December 2009                     69         5,539              96          497        (2,319)     (4,613)      (731)

Share issues                                    14           245              ––           ––           ––           ––        259
Reallocation of equity component
on convertible loans following
conversion                                      ––            51            (51)           ––           ––          ––          ––
Equity component of preference shares           ––            ––            468            ––           ––          ––         468
Share based payments                            ––            ––             ––           751           ––          ––         751
Movement in intercompany balance                ––            ––             ––            ––          501          ––         501
Net profit for the year                         ––            ––             ––            ––           ––         156         156
Balance at 30 June 2010                         83         5,835             513         1,248       (1,818)     (4,457)      1,404




                                                                    59
1.    Accounting policies
The accounting policies, applied on a consistent basis in the preparation of the financial information, are as
follows:
a.    Basis of preparation
      The financial information is prepared on the historical cost basis and in accordance with International
      Financial Reporting Standards and IFRIC interpretations issued and effective at the time of preparing the
      financial information (August 2010).

b.    Functional and presentation currency
      The company and its subsidiary’s functional and reporting currency is US dollars. Transactions
      denominated in foreign currencies other than the US dollar are translated into the functional currency using
      the prevailing exchange rates at the date of the transaction. Gains and losses from the translation of foreign
      currency transactions are recorded in expenses.

c.    Basis of consolidation
      On 18 January 2010, PeerTV Plc acquired the entire issued share capital of PeerTV Ltd from PeerTV Inc.
      by issuing ordinary shares. The shareholders of PeerTV Plc following this acquisition were the same as the
      shareholders of PeerTV Inc. prior to the transaction.

      Under IFRS, the accounting policy to account for business combinations of entities and businesses under
      common control is predecessor accounting. The acquired assets and liabilities are stated at historical cost,
      and are included in the consolidated financial statements from the beginning of the earliest period presented
      as if the entities and businesses acquired had always formed a group. As such the figures for the period
      ended 30 June 2009 have been presented to reflect the financial position and results as though PeerTV Plc
      had always been the parent company of PeerTV Ltd. The consolidated financial information for the period
      ended 30 June 2010 reflects the full period results of both entities despite the acquisition occurring during
      the period.


2.    Revenues
The group has one principal customer, sales to which in the reporting period to 30 June 2010 accounted for
60 per cent. total income.

3.    Research and Development Expenses
                                                                                     Period Ended      Period Ended
                                                                                     30 June 2010      30 June 2009
                                                                                            $’000             $’000
Amortisation and depreciation                                                                 149               490
Salaries and related expenses                                                                 146               393
Share based payment                                                                            28                —
Travel expenses                                                                                45                 2
Consultants and subcontractors                                                                135                —
Materials                                                                                      33                11
Other                                                                                           2                44
                                                                                              538               940




                                                        60
4.    Intangible assets
                                                                                     30 June 2010      30 June 2009
                                                                                            $’000             $’000
Knowledge
Cost                                                                                           15                15
Accumulated amortisation                                                                       15                 9
Net book value                                                                                 ––                 6
Development expenditure
Cost
At 1 January                                                                                1,565               759
Additions                                                                                     599               362
At 31 December                                                                              2,164             1,121
Accumulated amortisation
At 1 January                                                                                  992               294
Charge for the year                                                                           143               490
At 31 December                                                                              1,135               784
Net book value                                                                              1,029               337
Total net book value                                                                        1,029               343

5.    Share capital
On 18 January 2010, PeerTV Plc issued 8,453,000 0.5p Ordinary Shares to acquire PeerTV Ltd.

During the period, the company issued 1,000,000 Ordinary Shares to CSS Capital Managers LLP and 375,000
Ordinary Shares to CSS Bridge Partners 2006 LP Series D16 as part of the consideration for providing a bridge
loan to PeerTV Ltd. In March 2010, a further 375,000 Ordinary Shares were issued at 40p each in settlement of
half of the group’s bridge loan.
On 18 January 2010, the company also issued 375,000 Deferred Shares to CSS Capital Managers LLP.

During the period 3,996,213 eight per cent. Convertible Preference Shares were issued at 40p per share in accordance
with a document published to the public in February 2010. Gross proceeds raised were US$2.4 million.


6.     Post Balance Sheet Events
Since the period end a further 135,934 eight per cent. Convertible Preference Shares were issued 40p per shares
in accordance with the aforementioned document.

On 21 October 2010 the Company issued a prospectus of offering up to 7,462,686 Ordinary Shares and admitting
the whole of the Company’s issued Ordinary Share capital to AIM. The Ordinary Shares were to be priced at
between 62p and 72p each and the prospectus was primarily targeted at institutional investors. Unfortunately the
prospectus was not successful due to insufficient take up by institutional investors. The costs incurred during the
attempted admission to AIM are included in the post year end trading activities.

On 18 November 2010 the Company issued 104,000 Ordinary Shares and 125,000 Deferred Shares to CSS Alpha
Fund Ltd pursuant to the bridge loan. The Company has committed to issuing a further 319,444 Deferred Shares
pursuant to the bridge loan as soon as the Directors have shareholder authority to increase the authorised Deferred
Share capital. The bridge loan received was for a total of $300,000 and covers an interest charge of one per cent.
per month and is repayable 90 days after the draw down. The Company received the net proceeds from the bridge
loan of $290,000 in November 2010.

On 18 November 2010 the Company issued a Private Placing Memorandum pursuant to which it placed 2,267,165
Ordinary Shares of 0.5p each at 45p per Ordinary Share. As at 20 December 2010 the Company had received
proceeds of £911,923.84. As of 20 December 2010 there was £108,300.60 (240,668 shares) placed but still to be
collected from private investors. Of the proceeds the Company had collected, the shares in respect of £116,325.00
(258,500 shares) had not been issued and allotted, nor had it issued the Libertas Shares, nor the 104,000 shares
due to CSS under the agreement further described in section 8.1.2 of Part 4 of this Document. The Company
therefore expects to issue another 928,168 shares in the coming weeks following Admission.


                                                        61
                                                   PART 4

                                  ADDITIONAL INFORMATION


1.    Share Capital
(a)   The Company’s original authorised share capital was £100 divided into 100 ordinary shares of £1 each. On         PRann I
      18 January 2010, the original subscriber share was transferred to Ronnie Jaegerman.                              (21.1.7)

(b)   On 18 January 2010, the Company’s authorised share capital was divided and increased to £162,505,
      comprising of 25,000,000 Ordinary Shares of 0.5p each, 7,500,000 Convertible Preference Shares of 0.5p
      each and 500,000 Deferred Shares of 0.001p each.

(c)   On 18 January 2010, the original 200 Ordinary Shares were transferred and the Company issued a further
      9,999,800 Ordinary Shares pursuant to the PTV Acquisition.

(d)   On 18 January 2010, the Company issued 1,000,000 Ordinary Shares and 375,000 Deferred Shares to CSS
      pursuant to the agreement with CSS which is described in paragraph 8 of this Part 4.

(e)   On 18 January 2010, the Company issued the 375,000 Ordinary Shares to CSS Bridge Partners LP 2006
      Series D16.

(f)   On 11 April 2010, the Company issued 375,000 Ordinary Shares to CSS Bridge Partners LP 2006 Series
      D16 in part repayment of a bridge loan described in paragraph 8 of this Part 4.
(g)   Between 17 March and 31 August 2010 the Company issued 4,132,142 Convertible Preference Shares.

(h)   On 24 August 2010, the Company’s authorised share capital was increased to £270,665.71, conditional
      upon Admission taking place.

(i)   On 18 November 2010 the Company issued 125,000 Deferred Shares to CSS Alpha Fund Ltd pursuant to the
      CSS agreement and bridge loan described in paragraph 8.2.4 of Part 4. The Company has committed to issuing
      a further 319,444 Deferred Shares pursuant to the Bridge Loan as soon as the Directors have shareholder
      authority to increase the authorised Deferred share capital.

(j)   On 18 November 2010 the Company entered into the CSS engagement letter further described in
      section 8.1.2 of this Part 4 and agreed to issue 104,000 Ordinary Shares to CSSCM. As of 20 December
      2010 the Company had placed 2,267,165 Ordinary Shares pursuant to the Previous Fundraising, of which
      499,168 have not yet been issued, nor had it issued the Libertas Shares, nor the 104,000 shares due to CSS.
      The Company therefore expects to issue another 928,168 shares in the coming weeks.

(k)   Assuming Admission on 30 December 2010, the Convertible Loan will automatically convert into 629,453
      Ordinary Shares. Details of the Automatic Conversion can be found in paragraph 8 of this Part 4.

(l)   The authorised and issued share capital of the Company on Admission will be as follows:                          PRann I
                                                                                                                       (21.1.1)
                                                    Number of Ordinary Shares of 0.5p each
                                                 Authorised                                Issued and fully paid
                                        £            Shares        Par value                   £             Shares
      Current                   £250,000        50,000,000             £0.005        £67,589.99         13,517,997
      Following Admission       £250,000        50,000,000             £0.005        £72,515.04         14,503,0071
                                              Number of Convertible Preference Shares of 0.5p each
                                                Authorised                                  Issued and fully paid
                                        £           Shares          Par value                   £             Shares
      Current                 £20,660.71         4,132,142             £0.005        £20,660.71          4,132,142
      Following Admission     £20,660.71         4,132,142             £0.005        £20,660.71          4,132,142
                                                   Number of Deferred Shares of 0.001p each
                                                 Authorised                               Issued and fully paid
                                        £            Shares        Par value                  £             Shares
      Current                         £5           500,000          £0.00001                  £5           500,000
      Following Admission             £5           500,000          £0.00001                  £5           500,0002



                                                      62
      1     As of 20 December 2010 there was £108,300.60 still to be collected from private investors under the Previous
            Fundraising. Additionally the Company had collected another £116,325.00 but not issued shares and allotted the shares
            to private investors under the Previous Fundraising, nor had it issued the Libertas Shares, nor the 104,000 shares due to
            CSS under the agreement further described in section 8.1.2 of Part 4 of this Document. The Company therefore expects
            to issue another 928,168 shares in the coming weeks.
      2     Subject to the commitment described in paragraph 1(i) above to issue a further 319,444 Deferred Shares.
(m)   The Ordinary Shares, convertible Preference Shares and Deferred Shares have been created pursuant to
      CA 2006 and the Company’s Articles of Association. Pursuant to the Company’s Articles of Association:
      i.      the Directors, in accordance with section 551 of CA 2006, are generally and unconditionally                               PRann III
              authorised to allot relevant securities up to an amount of £270,665.71, such authority, unless                            (5.3.3, 4.6,
                                                                                                                                        5.1.10)
              previously revoked or varied by the Company in general meeting, to expire on the earlier of
              24 August 2015 and the Company’s next AGM, except that the directors may allot relevant securities
              pursuant to an offer or agreement made before the expiry of the authority; and
      ii.     the Directors are authorised pursuant to section 570 of CA 2006 to allot equity securities, as defined
              in section 560 of CA 2006, as if section 561(1) of CA 2006 did not apply to such allotment but
              limited to 5 per cent. of the Existing Ordinary Shares.

(n)   Other than as disclosed in this Document, the Company does not have in issue any securities not                                   PRann I
      representing share capital and there are no outstanding convertible securities issued by the Company. All of                      (21.1.2,
                                                                                                                                        21.1.4,
      the Shares in issue have been fully paid.                                                                                         21.1.6)
(o)   Of the Company’s authorised share capital, assuming no conversion of Convertible Preference Shares or
      Deferred Shares, 14,503,007 Ordinary Shares, 4,132,142 Convertible Preference Shares and 500,000
      Deferred Shares will be issued fully paid or credited as fully paid. Of the balance of the authorised but
      unissued share capital of the Company, 35,496,993 Ordinary Shares will remain available to the Directors to
      issue either free of pre-emption rights or pursuant to the Share Option Scheme.
(p)   On the basis that Existing Shareholders including any shares still to be issued under the Previous                                PRann III
      Fundraising, will not participate in the Placing or the Automatic conversion, Existing Shareholders will                          (9.2)
      suffer a dilution of 6.6 per cent. in their interests in the Company although they will continue to hold
      93.4 per cent. of the Ordinary Shares.
(q)   Except as disclosed in this Part 4, since the date of incorporation of the Company: (i) there has been no
      change in the amount of the issued share or loan capital of the Company and no material change in the
      amount of the issued share or loan capital of any of its subsidiaries other than intra-Company issues by
      wholly owned subsidiaries and pro rata issues by partly owned subsidiaries; and (ii) no commissions,
      discounts, brokerages or other special terms have been granted by the Company or any of its subsidiaries
      in connection with the issue or sale of any share capital of the Company or any of its subsidiaries.
(r)   As far as the Company and the Directors are aware, the Company is not controlled by any person or any
      number of persons acting in concert.
(s)   Except as disclosed in this Document, no share of the Company or any subsidiary is under option or has
      been agreed conditionally or unconditionally to be put under option.
(t)   Following Admission, the Ordinary Shares may be held in either certificated form or under the CREST                               PRann III
      System. Further information regarding the CREST System can be found at paragraph 20 of Part 2.                                    (4.3)

(u)   Other than the share options over the Company’s Ordinary Shares described in paragraph 7 of this Part 4,
      there are no acquisition rights or obligations over unissued share capital or any undertakings to increase the
      issued share capital of any member of the Group and no share or loan capital of the Group is under option
      or has been agreed, conditionally or unconditionally, to be put under option. There is no present intention
      to issue any of the unissued share capital of the Company.
The Placing Shares will be issued and allotted under English law and their currency will be in pounds sterling.                         PRann III
The expected date of issue of the Placing Shares is 30 December 2010.                                                                   (4.4, 4.7)



2.    Articles of association
The Articles of Association contain, amongst others, the following provisions:                                                          PRann I
                                                                                                                                        (21.2.1)
(a)   Objects and purposes
      In accordance with the provisions of CA 2006, the Articles of Association does not contain an objects clause.


                                                                63
(b)   Votes of members
      i.     On a show of hands every member who being an individual is present in person or, being a
             corporation, is present by a duly authorised representative, has one vote, and on a poll every member
             has one vote for every Share of which he is the holder. In the case of equality of votes, the chairman
             of the meeting shall have a casting vote.

      ii.    The Convertible Preference Shares shall entitle their holder to receive notice of and to attend
             meetings of the Company and to vote at such meetings. On a poll, a Shareholder will be entitled to
             one vote for each Convertible Preference Share held by them.

      iii.   Unless the Directors determine otherwise, a member of the Company is not entitled in respect of any
             shares held by him to vote at any general meeting or to exercise any privilege as member of the Company
             either in person or by proxy if any amounts payable by him in respect of those shares have not been paid.

(c)   Allotment of Shares
      Subject to the provisions of CA 2006 and without prejudice to any rights for the time being conferred on
      the holders of any shares or class of shares, any share in the Company may be allotted with such preferred,
      deferred or other rights, or such restrictions, whether in regard to dividend, return of capital, voting or
      otherwise, as the Company may from time to time by ordinary resolution determine or, if no such
      determination be made, as the Directors determine. The quorum at any such meeting is two or more persons
      entitled to vote, either present in person or by proxy.

(d)   Variation of class rights                                                                                          PRann I
                                                                                                                         (21.2.4)
      The rights or privileges attached to any class of shares may (unless otherwise provided by the terms of the
      issue of the shares of that class) be varied or abrogated with the sanction of a special resolution passed at
      a separate general meeting of the holders of the shares of that class provided at least two persons holding
      at least one third of such class are present in person or proxy, but not otherwise. These conditions are not
      more significant than is required by law.

(e)   Convertible Preference Shares
      Income                                                                                                             PRann I
                                                                                                                         (21.1.4,
      The Convertible Preference Shares confer on the holders a right to a fixed cumulative preferential dividend        21.1.5)
      at the rate of 8 per cent. per annum yearly in arrears payable half yearly on 31 March and 30 September,
      except that the first dividend will be payable on 30 September 2010. In the event that any fixed cumulative
      preferential dividend has accrued and has not been paid, the Company must allocate its available profits to
      first pay off the accruals on the Convertible Preference Shares and then towards redeeming the Convertible
      Preference Shares.

      The Convertible Preference Shares confer on the holders a right to receive on a winding up in priority to
      any payment to the holders of any other class of shares, an amount equal to 40p plus any accruals of the
      cumulative dividend, but no further right to participate in any surplus capital of the Company.

      Conversion
      Convertible Preference Shares will automatically be converted upon the occurrence of an acquisition event
      or a listing event provided such an exit event occurs prior to 31 December 2010 and raising not less than
      70p per Ordinary Share. If an exit event occurs after that date but before 30 September 2014, the
      Convertible Preference Shares may be converted at any time at the option of the holder. The fixed
      cumulative preferential dividend on the Convertible Preference Shares will cease to accrue as from the date
      for payment of the last dividend preceding the relevant conversion date. If, whilst any Convertible
      Preference Share remains capable of conversion, any offer or invitation is made to the holders of the
      Ordinary Shares of the Company, it will make or, so far as it is able, procure that there is made, a like offer
      or invitation at the same time to each holder of the Convertible Preference Shares.

      i.     A holder of Convertible Preference Shares will be entitled at any time before 30 September 2014 to
             convert a Convertible Preference Share into an Ordinary Share (on a one to one conversion basis)
             automatically by serving notice on the Company that it wishes to do so.

      ii.    A share may not be issued or converted at less than par value.

      iii.   If an exit event raises less than 70p per Ordinary Share there will be no automatic right by the
             Company to convert the Convertible Preference Shares.



                                                        64
      Redemption
      To the extent that any Convertible Preference Shares have not been converted prior to 30 September 2014
      (“Redemption Date”), the Company will be required, subject to the provisions of CA 2006 and the Articles of
      Association, to give between 7 and 28 days’ notice to redeem the Convertible Preference Shares, such notice to
      be given no later than 3 October 2014. There will be paid on each Convertible Preference Share 40p plus all
      accrued but unpaid cumulative dividends. Redemption will take place no later than 31 October 2014.

      Antidilution
      If prior to the Redemption Date or an exit event, the Company raises equity finance by an issue of equity
      at an issue price less than 40p per share, the holders of the Convertible Preference Shares will be entitled
      to receive from the Company a bonus issue of such number of new Convertible Preference Shares as if the
      Convertible Preference Shareholder had paid a subscription price for all of the Convertible Preference
      Shares (at the rate those shares are priced in the new issue) equal to the total subscription the member had
      paid for his shares, subject to a minimum of not less than the par value of each Convertible Preference
      Share. The antidilution rights expire on an Exit Event or on redemption or once a further £3,000,000 has
      been raised by way of a subsequent financing.

(f)   Alteration of share capital
      The Company in general meeting may from time to time by ordinary resolution:

      i.     increase its share capital by such sum to be divided into shares of such amount as the resolution
             prescribes;

      ii.    consolidate and divide all or any of its share capital into shares of larger nominal value than its
             existing shares;

      iii.   cancel any shares which at the date of the passing of the resolution have not been taken or agreed to
             be taken by any person, and diminish the amount of its share capital by the amount of the shares so
             cancelled;

      iv.    subject to the provisions of the statutes, subdivide its shares or any of them into shares of smaller
             nominal value, and may, by such resolution, determine that, as between the shares resulting from
             such subdivision, one or more of the shares may, as compared with the others, have any such
             preferred or other special rights over or may have such deferred rights or be subject to any such
             restrictions as the Company has power to attach to unissued or new shares; or

      v.     subject to statute, the articles of association and any rights attached to shares, the Company may
             purchase any of its own shares of any class;

      subject to statute and any rights attached to shares, the Company may, by special resolution, reduce its share
      capital, capital redemption reserve fund or share premium account in any way.

(g)   Transfers of Shares
      i.     Subject to the provisions of the articles relating to uncertificated shares all transfers of shares will    PRann III
             be effected in the manner authorised by the Stock Transfer Act 1963 and must be signed by or on             (4.8)
             behalf of the transferor and, in the case of a partly paid share, by or on behalf of the transferee. The
             transferor is deemed to remain the holder of the share until the name of the transferee is entered in
             the register of members in respect of it.

      ii.    The Directors may, in their absolute discretion and without assigning any reason, refuse to register
             the transfer of a share in certificated form if it is not fully paid, or if the Company has a lien on it,
             or if it is not duly stamped, or if it is by a member who has failed to comply with a section 793 CA
             2006 notice. In exceptional circumstances approved by the London Stock Exchange, the Directors
             may refuse to register any such transfer, provided that their refusal does not disturb the market.

      iii.   Subject to paragraph iv below, the Articles of Association contain no restrictions on the free
             transferability of fully paid ordinary shares provided that the transfers are in favour of not more than
             four transferees, the transfers are in respect of only one class of share and the provisions in the
             articles of association, if any, relating to registration have been complied with.




                                                        65
      iv.    Any person holding Existing Ordinary Shares at the time of Admission will be prohibited from
             selling, transferring or otherwise disposing of their Existing Ordinary Shares for a period of six
             months following Admission. Exceptions to such prohibition are a disposal by order of the court,
             following the death of the relevant Shareholder or on a Sale of the Company.

(h)   Payment of dividends
      Subject to the provisions of CA 2006 and to any special rights attaching to any shares, the Shareholders are         PRann III
      to distribute amongst themselves the profits of the Company according to the amounts paid up on the shares           (4.5)
      held by them, provided that no dividend will be declared in excess of the amount recommended by the
      Directors. A member will not be entitled to receive any dividend if he has failed to comply with a
      section 793 CA 2006 notice. Interim dividends may be paid if profits are available for distribution and if
      the Directors so resolve. The Company or its directors may fix a date as the record date for a dividend
      provided that the record date is not later than the date on which the dividend is paid or made.

      Dividends will not be paid on shares other than Convertible Preference Shares while any Convertible
      Preference Shares remain in issue.

(i)   Unclaimed dividends
      Any dividend unclaimed after a period of one year from the date of its declaration may be invested by the
      Company until claimed. The Company is not a trustee in respect of them. No dividend will bear interest
      against the Company. Any dividend which remains unclaimed for a period of 12 years will be forfeited and
      will belong to the Company absolutely.

(j)   Untraceable Shareholders
      The Company may sell any share if, during a period of 12 years, at least three dividends in respect of such
      shares have been paid, no cheque or warrant in respect of any such dividend has been cashed and no
      communication has been received by the Company from the relevant member. The Company must advertise
      its intention to sell any such share in both a national daily newspaper and a newspaper circulating in the
      area of the last known address to which cheques or warrants were sent. Notice of the intention to sell must
      also be given to the London Stock Exchange.

(k)   Return of capital                                                                                                    PRann III
                                                                                                                           (4.5)
      On a winding-up of the Company, the balance of the assets available for distribution will, subject to any
      sanction required by CA 2006, be divided amongst the members.

(l)   Borrowing powers
      The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its
      undertaking, property and uncalled capital, or any part of it, and subject to the provisions of CA 2006, to
      issue debentures and other securities whether outright or as collateral security for any debt, liability or
      obligation of the company or of any third party.

      Notwithstanding the aforesaid, the Directors are not entitled to authorise the Company and its subsidiaries
      (exercising all voting or other rights or powers of control over the subsidiaries) to borrow any money,
      without first obtaining authority by an ordinary resolution, if the Company’s borrowings are or will become
      greater than the aggregate of two times the nominal amount of the issued share capital of the Company and
      the amounts standing to the credit of the Company’s consolidated reserves with reference to the last audited
      balance sheets of the Company and its subsidiaries with appropriate adjustments as to time.

(m)   Directors                                                                                                            PRann I
                                                                                                                           (21.2.2)
      i.     No shareholding qualification is required by a Director.

      ii.    The Directors are entitled to fees at the rate decided by them, subject to an aggregate limit of
             US$150,000 per annum or such additional sums as the Company may by ordinary resolution
             determine. The Company may by ordinary resolution also vote extra fees to the Directors, which,
             unless otherwise directed by the resolution by which it is voted, will be divided amongst the Directors
             as they agree, or, failing agreement, equally. The Directors are also entitled to be repaid all travelling,
             hotel and other expenses incurred by them in connection with the business of the Company.

      iii.   Each Director shall retire from office at the third annual general meeting following the annual
             general meeting at which he was appointed or last reappointed. A retiring Director is eligible for
             re-appointment.



                                                         66
      iv.    The Directors may from time to time appoint one or more of their body to be the holder of an
             executive office on such terms as they think fit.

      v.     If any question arises at any meeting as to the materiality of a Director’s interest or as to the
             entitlement of any Director to vote and such question is not resolved by him voluntarily agreeing to
             abstain from voting, such question must be referred to the chairman of the meeting and his ruling in
             relation to any other Director will be final and conclusive except in a case where the nature or extent
             of the interest of such Director has not been fully disclosed. If the question concerns the chairman,
             it must be referred to such other Director present at the meeting, other than the chairman, as the
             Directors present appoint.

      vi.    The Directors may provide or pay pensions, annuities, gratuities and superannuation or other
             allowances or benefits to any Director, ex-Director, employee or ex-employee of the Company or
             any of its subsidiaries or any wife, widow, children and other relatives and dependents of any such
             Director, ex-Director, employee or ex-employee.

(n)   Drag-along rights
      If, at any time prior to the Ordinary Shares being admitted to trading on a Recognised Investment Exchange         PRann I
      or a market regulated by a Recognised Investment Exchange, any Shareholder or Shareholders holding in              (21.2.8)
      aggregate 75 per cent. or more of the issued Ordinary Shares in the Company wish to transfer, pursuant to
      a bona fide offer on arm’s length, their interest in all of their Ordinary Shares, whether by takeover offer,
      private treaty or otherwise to a third party, such Shareholders may require all other Shareholders to offer
      the Ordinary Shares held by them to the third party on the same terms. In the event that following that event
      some of the Convertible Preference Shares are converted, such conversion into Ordinary Shares will be
      counted in the 75 per cent. calculation.

(o)   General meetings
      i.     Subject to the provisions of CA 2006, the annual general meeting will be held at such time and place        PRann I
             or places as the Directors may determine. All general meetings other than annual general meetings           (21.2.5)
             are called extraordinary general meetings. The Directors may call an extraordinary general meeting
             whenever they think fit, and must do so when required by CA 2006, and extraordinary general
             meetings must also be convened on such requisition, or in default may be convened by such
             requisitions, as provided by CA 2006.

      ii.    Subject to the provisions of CA 2006, an annual general meeting and an extraordinary general
             meeting for the passing of a special resolution must be called by at least 21 days’ notice, and all other
             general meetings must be called by at least 14 days’ notice. The notice is exclusive of the day on
             which it is served, or deemed to be served, and of the day for which it is given.

      iii.   Notices must be given in the manner stated in the articles to all the members and to the auditors.

      iv.    No business may be transacted at any general meeting unless a quorum is present, which will be
             constituted by two persons entitled to vote at the meeting, each being a member or a proxy for a
             member or a representative of a corporation which is a member, duly appointed as such in
             accordance with CA 2006. If within half an hour from the time appointed for the meeting a quorum
             is not present, the meeting, if convened on the requisition of, or by, members, will be dissolved.

      v.     At a general meeting a resolution put to the vote will be decided on a show of hands unless, before or
             on the declaration of the result of the show of hands, a poll is demanded by the chairman or by at least
             five members present in person or by proxy and entitled to vote or by a member or members entitled
             to vote and holding or representing by proxy at least one tenth of the total voting rights of all the
             members having the right to vote at the meeting. Unless a poll is demanded as above, a declaration by
             the chairman that a resolution has been carried, or carried unanimously or by a particular majority, or
             lost, or not carried by a particular majority, and an entry to that effect in the book containing the
             minutes of the proceedings of general meetings of the Company is conclusive evidence of the fact
             without proof of the number or proportion of the votes recorded in favour of or against such resolution.

      vi.    No member shall be entitled to vote at any general meeting either personally or by proxy, or to
             exercise any privilege as a member, unless all calls or other sums presently payable by him in respect
             of shares in the Company have been paid.




                                                        67
      vii.      The instrument appointing a proxy may be in any common form, or such other form as may be
                approved by the Directors, and will be signed by the appointor or, if the appointor is a corporation,
                under the hand of a duly authorised officer of the corporation. The Directors may, but will not be
                bound to, require evidence of authority of such officer or agent.

      viii.     The proxy will be deemed to include the right to demand or join in demanding a poll and generally
                to act at the meeting for the member giving the proxy.

      ix.       The Directors may direct that members or proxies wishing to attend any general meeting must
                submit to such searches or other security arrangements or restrictions as the Directors consider
                appropriate in the circumstances and may, in their absolute discretion, refuse entry to, or eject from,
                such general meeting any member or proxy who fails to submit to such searches or otherwise to
                comply with such security arrangements or restrictions.

(p)   Conversion rights of Deferred Shares
      The Deferred Shares entitle the holder, for a period of five years from the date of their issue, to convert their
      Deferred Shares into Ordinary Shares provided that 10 days’ notice is given to the Company beforehand.

      Until conversion of the Deferred Shares, the Deferred Shares have no rights attaching to them whatsoever.                       PRann III
      At any time before the date falling five years from the date of their issue, at the option of the holders of the                (4.5)
      Deferred Shares, the Deferred Shares may be converted into Ordinary Shares. To effect the conversion,
      holders of the Deferred Shares must pay the difference between the par value of each Deferred Share and
      the Ordinary Share that they are acquiring.

(q)   Uncertificated shareholding
      The Directors may implement such arrangements as they think fit in order for any class of shares to be held
      in uncertificated form and for title to those shares to be transferred by means of a system such as CREST
      in accordance with the Uncertificated Securities Regulations 2001, and the Company will not be required
      to issue a certificate to any person holding such shares in uncertificated form.

(r)   Takeover provisions
      Any person who acquires securities representing 30 per cent. or more of the Company’s voting rights must                        PRann I
      make a cash offer to acquire all of the Ordinary Shares in the Company at the highest price paid by that                        (21.2.6)
      person in the preceding 12 months. Any person holding securities representing between 30 per cent. and
      50 per cent. of the Company’s voting rights and who acquires additional securities representing one per cent.
      or more of the Company’s voting rights must make such a mandatory offer. The shareholdings of
      Shareholders who act in concert are looked at both individually and collectively in determining whether the
      30 per cent. barrier has been breached or whether a shareholding between 30 per cent. and 50 per cent. has
      been increased.

3.    Shareholders
3.1   Major shareholders                                                                                                              PRann I
                                                                                                                                      (18.1, 18.2,
      Except for the interests of the Directors of the Company, which are set out in this Part 4, the following                       18.3)
      persons are at the date of this Document interested directly or indirectly in 3 per cent. or more of the issued
      share capital of the Company and their percentage holdings following Admission, assuming no Convertible
      Preference Shares or Deferred Shares are converted into Ordinary Shares:
                                                                            Percentage of                           Percentage of
                                                             Existing            Existing            Ordinary           Ordinary
                                                            Ordinary            Ordinary            Shares on          Shares on
      Name                                                    Shares              Shares            Admission          Admission
      Employee trust                                      1,547,412                  10.9          1,547,412                 10.7
      CSSCM                                               1,075,000                   7.6          1,075,000                 7.41
      Chaim Chizik* +                                       648,122                   4.6            648,122                  4.5
      Hadas Ran*                                            555,482                   3.9            555,482                  3.8
      Moshe Mano*                                           538,360                   3.8            538,360                  3.7
      *       These Shareholders all hold an indirect interest in the Company, through PeerTV Inc. PeerTV Inc. holds 58.3 per cent.
              of the Ordinary Shares in the Company, however, does not control the Company because it is obliged to vote its shares
              in accordance with the instructions of its underlying investors, none of whom hold a controlling interest.
      +       Chaim Chizik also holds 300,000 Convertible Preference Shares.



                                                                68
        Other than those persons set out above and the interests of the Directors of the Company set out in
        paragraph 3.2 below, the Directors are not aware of any person who, directly or indirectly, is interested in
        3 per cent. or more of the issued ordinary share capital of the Company.

        Other than as set out in Part 4 of this Document, no major holder of Ordinary Shares, either as listed above,
        or as set out in paragraph 3.2 of this Part 4, has voting rights different from other holders of Ordinary Shares.

3.2     Directors’ shareholdings
        The following Directors hold the following shares in the Company:
                                                                          Percentage of                            Percentage of     PRann I
                                                           Existing            Existing             Ordinary           Ordinary      (17.2)
                                                          Ordinary            Ordinary             Shares on          Shares on
        Name                                                Shares              Shares             Admission          Admission
        Chaim Bechor*                                   1,355,730                    9.6          1,355,730                   9.3
        Eatamar Drori*                                  1,355,730                    9.6          1,355,730                   9.3
        Shmuel Zeiler*                                    488,483                    3.5            488,483                   3.4
        *   These people all hold an indirect interest in the Company, through PeerTV Inc. PeerTV Inc. holds 58.3 per cent. of the
            Ordinary Shares in the Company however does not control the Company because it is obliged to vote its shares in
            accordance with the instructions of its underlying investors, none of whom hold a controlling interest.

        Except as disclosed above, none of the Directors, nor any member of their respective immediate families,
        nor any person connected with them within the meaning of sections 252 to 255 CA 2006, is interested in
        the share capital of the Company, or any financial product referenced to them.

4.      Directors’ Remuneration and benefits
The aggregate remuneration paid and benefits in kind granted by the Company or its predecessor, PeerTV Inc., to                      PRann I
the Directors between incorporation of the PeerTV Inc. and the date of this Document are set out below. The                          (15.1, 16,
                                                                                                                                     16.1, 16.2)
Directors estimate that the aggregate remuneration payable to the Directors by the Company will be in accordance
with the arrangements in force at the date of this Document.
Annual compensation in US$                                                         2007                 2008                2009
Chaim Bechor            Salaries                                                 70,806             160,612             146,835
                        Liabilities for post-retirement benefits                  9,844               1,155                 722
                                                                               170,650              161,768             147,557
Eatamar Drori           Salaries                                                70,806              160,612             146,835
                        Liabilities for post-retirement benefits                99,844                1,155                 722
                                                                               170,650              161,768             147,557
Ronnie Jaegermann Salaries                                                          —                                    65,268
                  Option Compensation recorded in the P&L                                                                42,613
                  issuance fees A3                                                                                       33,000
                  Option Compensation A3                                                                                 15,000
                                                                                                                        155,881
Shmuel Zeiler           Option Compensation recorded in the P&L                       —                    —             25,567
Total                                                                          341,301              323,535             476,562

Except as set out above, there are no liquidated damages or other compensation payable by the Company upon
early termination of the Directors’ contracts or in respect of any members of the administrative, management or
supervisory bodies of the Company. Except as set out above, none of the Directors has any commission or profit
sharing arrangements with the Company.
The total emoluments of the Directors will not be varied as a result of the Placing or Admission.
Independent Consulting Agreement between PTV and Ronnie Jaegermann (“Ronnie”) dated 21 April 2009
(amended by board resolution on 9 March 2010)
Scope – Ronnie agreed to provide PTV management consulting services as CEO of PTV.
Term and Termination – The contractual relationship commenced on 20 April 2009. Each party may terminate the
agreement upon a 120 day prior notice, subject to PTV’s right to immediately terminate the agreement for “cause”
or “disability” as defined in the agreement.


                                                              69
Monthly fee – PTV pays Ronnie a gross monthly fee of NIS 48,000 for his services.
Cellular Phone – PTV made available to Ronnie a cellular phone, and bears the expenses relating thereto up to
NIS 700 per month.
Company car – PTV provides Ronnie a company car, with all maintenance and usage expenses paid by PTV The   .
leasing cost of the car is deducted from Ronnie’s compensation. Ronnie is liable for any income tax applicable to
the use of the car.

Expense reimbursement – PTV will reimburse Ronnie for business expenses in connection with performance
of duties.

                                                                                ,
Bonuses – Subject to the adoption of an executive bonus plan by the Board of PTV Ronnie shall be entitled to
such bonus at such times as shall be determined by the Board.

Proprietary rights – all intellectual property rights developed in connection with the provision of the services shall
be the sole property of PTV.

                                                                                                         ,
Confidentiality – Ronnie undertook to maintain the confidentiality of any confidential information of PTV as
defined in the agreement. This undertaking survives the termination of the agreement.

Non-compete – Ronnie agreed not to compete with PTV’s business for a period of one year following termination
of the agreement.

Non-solicitation – Ronnie agreed, for a period of 6 months following termination of the agreement, not to engage
or contact employees of PTV for the purpose of hiring them.
Independent contactor – Ronnie shall not be entitled to receive severance pay or other payments deriving from
employer-employee relationship.

Letter of appointment between the Company and Ronnie Jaegermann dated 18 January 2010
On 18 January 2010, the Company and Ronnie entered into an executive letter of appointment whereby Ronnie
agreed to being the Company’s chief executive officer. The agreement is for an initial term of 12 months from the
Closing Date but may be terminated at any time on three months’ notice by either party. The appointment will
automatically terminate if, amongst other things, Ronnie’s consultancy agreement with PTV is terminated for any
reason, Ronnie is not re-elected following retirement by rotation at the Company’s AGM or if Ronnie becomes unable
to continue acting as a director according to law or the Articles of Association. Ronnie will be entitled to a director’s
fee of NIS 72,000 per annum, payable monthly in arrears, together with all reasonable expenses incurred in carrying
out his duties. For a period of two years following termination of the appointment, Ronnie will be prohibited from,
amongst other things, establishing or being engaged in the carrying on the business of internet-based TV solutions,
soliciting the Company’s customers, soliciting the Company’s employees. The Company has agreed to take out
directors and officers’ liability insurance and that, in conjunction with his duties, any director may take independent
professional advice at the Company’s expense (subject to limitations imposed by the Board from time to time).

Independent Consulting Agreement between PTV and ExpertLink Ltd. (“Consultant”) dated 1 September 2007
(as amended by board resolution of 9 March 2010)
Scope – The Consultant agreed to provide PTV management consulting services by Chaim Bechor as Acting Chief
                                                        ,
Executive Officer of PTV and of its former parent PeerTV Inc.

Term and Termination – The contractual relationship commenced on 1 July 2007. Each party may terminate the
agreement upon a 30 day prior notice, subject to PTV’s right to immediately terminate the agreement for “cause”
or “death or disability” as defined in the agreement. In the event PTV terminates the agreement without cause
                                                                                        ,
prior to a corporate transaction (merger, sale of substantially all of the assets of PTV change of control event) or
a termination by the consultant within 60 days following the Corporate Transaction in certain circumstances, PTV
shall continue to pay the Consultant the compensation on a monthly basis for eight months following termination
and pay a pro rata share of earned bonus payment.

Monthly fee – PTV pays the Consultant a gross monthly fee of NIS 48,000 + VAT for his services.

Annual Bonus – Subject to the discretion of the Board, the Consultant shall be entitled to an annual bonus.

Expenses – PTV shall reimburse the Consultant for reasonable expenses.

Proprietary Rights – all intellectual property rights developed in connection with the provision of the services shall
be the sole property of PTV.


                                                           70
Confidentiality – The Consultant and Chaim Bechor undertook to maintain the confidentiality of any confidential
information of PTV, as defined in the agreement. This undertaking survives the termination of the agreement.

Non-Compete – The Consultant and Chaim Bechor agreed not to compete with PTV’s business for a period of one
year following termination of the agreement.

Independent contactor – Chaim Bechor shall not be entitled to receive severance pay or other payments deriving
from employer-employee relationship.

Letter of appointment between the Company and Chaim Bechor dated 18 January 2010
On 18 January 2010, the Company and Chaim Bechor entered into an executive letter of appointment whereby
Chaim Bechor agreed to being the Company’s VP for production and product marketing. The agreement is for an
initial term of 12 months from 17 March 2010 but may be terminated at any time on three months’ notice by either
party. The appointment will automatically terminate if, amongst other things, Expertlink Limited’s consultancy
agreement with PTV is terminated for any reason, Chaim Bechor is not re-elected following retirement by rotation
at the Company’s AGM or if Chaim Bechor becomes unable to continue acting as a director according to law or
the Articles of Association. He is entitled to a director’s fee of NIS 72,000 per year, payable monthly in arrears
together with all reasonable expenses incurred in carrying out his duties. For a period of two years following
termination of the appointment, Chaim Bechor will be prohibited from, amongst other things, establishing or
being engaged in the carrying on the business of internet-based TV solutions, soliciting the Company’s customers
or soliciting the Company’s employees. The Company has agreed to take out directors and officers’ liability
insurance and that, in conjunction with his duties, any director may take independent professional advice at the
Company’s expense (subject to limitations imposed by the Board from time to time).

Independent Consulting Agreement between PTV and Eatamar Drori (“Eatamar”) dated 1 September 2007
(as amended by board resolution on 9 March 2010)
Scope – Eatamar agreed to provide PTV management consulting services as Chief Technology Officer of PTV
and the parent company of PTV, PeerTV Inc.

Term and Termination – The contractual relationship commenced on 1 July 2007. Each party may terminate the
agreement upon a 30 day prior notice, subject to the Company’s right to immediately terminate the agreement for
“cause” or “death or disability” as defined in the agreement.

In the event PTV terminates the agreement without cause prior to a Corporate Transaction (merger, sale of
substantially all of the assets of the Company, change of control event) or a termination by Consultant within
60 days following the Corporate Transaction in certain circumstances, PTV shall continue to pay the Consultant
the compensation on a monthly basis for 8 months following termination and pay a pro rata share of earned
bonus payment.

Monthly fee – PTV pays the Consultant a gross monthly fee of NIS 48,000 + VAT for his services.

Annual Bonus – Subject to the discretion of the Board, the Consultant shall be entitled to an annual bonus.

Expenses – PTV shall reimburse the Consultant for reasonable expenses.

Proprietary Rights – all intellectual property rights developed in connection with the provision of the services shall
be the sole property of PTV.

Confidentiality – Eatamar undertook to maintain the confidentiality of any confidential information of PTV, as
defined in the agreement. This undertaking survives the termination of the agreement.

Non-Compete – Eatamar agreed not to compete with PTV’s business for a period of one year following
termination of the agreement.

Independent contactor – Eatamar shall not be entitled to receive severance pay or other payments deriving from
employer-employee relationship.

Letter of appointment between the Company and Eatamar Drori dated 18 January 2010
On 18 January 2010, the Company and Eatamar entered into an executive letter of appointment whereby Eatamar
agreed to being the Company’s chairman of the Board and chief technology officer. The agreement is for an initial
term of 12 months from 17 March but may be terminated at any time on 3 months’ notice by either party. The
appointment will automatically terminate if, amongst other things, Eatamar’s consultancy agreement with PTV is
terminated for any reason, Eatamar is not re-elected following retirement by rotation at the Company’s AGM or if


                                                         71
Eatamar becomes unable to continue acting as a director according to law or the Articles of Association. Eatamar
is entitled to a director’s fee of NIS 72,000 per year, payable monthly in arrears, together with all reasonable
expenses incurred in carrying out his duties. For a period of two years following termination of the appointment,
Eatamar will be prohibited from, amongst other things, establishing or being engaged in the carrying on the
business of internet-based TV solutions, soliciting the Company’s customers or soliciting the Company’s
employees. The Company has agreed to take out directors and officers’ liability insurance and that, in conjunction
with his duties, any director may take independent professional advice at the Company’s expense (subject to
limitations imposed by the Board from time to time).

Letter of appointment between the Company and Ofer Barda (“Ofer”) dated 18 January 2010
On 18 January 2010, the Company and Ofer entered into a non-executive letter of appointment whereby Ofer
agreed to undertake a non-executive director’s role. The agreement is for an initial term of 12 months from
17 March but may be terminated at any time on 3 months’ notice by either party. The appointment will
automatically terminate if, amongst other things, Ofer is not re-elected following retirement by rotation at the
Company’s AGM or if Ofer becomes unable to continue acting as a director according to law or the Articles of
Association. Ofer will be entitled to an annual fee of NIS 72,000 and for all reasonable expenses incurred in
carrying out his duties.

For a period of 2 years following termination of the appointment, Ofer will be prohibited from, amongst other
things, establishing or being engaged in the carrying on the business of internet-based TV solutions, soliciting the
Company’s customers or soliciting the Company’s employees.

The Company has agreed to take out directors and officers’ liability insurance and that, in conjunction with his
duties, any director may take independent professional advice at the Company’s expense (subject to limitations
imposed by the Board from time to time).

Letter of appointment between the Company and Shmuel Zailer (“Shmuel”) dated 18 January 2010
On 18 January 2010, the Company and Shmuel entered into a non-executive letter of appointment whereby
Shmuel agreed to undertake a non-executive director’s role. The agreement is for an initial term of 12 months from
7 March but may be terminated at any time on 3 months’ notice by either party. The appointment will
automatically terminate if, amongst other things, Shmuel is not re-elected following retirement by rotation at the
Company’s AGM or if Shmuel becomes unable to continue acting as a director according to law or the Articles of
Association. Shmuel will be entitled to an annual fee of NIS 72,000 and for all reasonable expenses incurred in
carrying out his duties. For a period of two years following termination of the appointment, Shmuel will be
prohibited from, amongst other things, establishing or being engaged in the carrying on the business of internet-
based TV solutions, soliciting the Company’s customers, soliciting the Company’s employees. The Company has
agreed to take out directors and officers’ liability insurance and that, in conjunction with his duties, any director
may take independent professional advice at the Company’s expense (subject to limitations imposed by the Board
from time to time).

Letter of appointment between the Company and Jim McGeever (“Jim”)
On 11 October 2010, the Company and Jim entered into a letter of appointment whereby Jim agreed to being the
a non-executive director on the Board. The agreement is for an initial term of 12 months from the date of
Admission but may be terminated at any time on 3 months’ notice by either party. The appointment will
automatically terminate if, amongst other things, Jim is not re-elected following retirement by rotation at the
Company’s AGM or if Jim becomes unable to continue acting as a director according to law or the Articles of
Association. Jim is entitled to a director’s fee of £18,000 per year, payable monthly in arrears, together with all
reasonable expenses incurred in carrying out his duties. For a period of two years following termination of the
appointment, Jim will be prohibited from, amongst other things, establishing or being engaged in the carrying on
the business of internet-based TV solutions, soliciting the Company’s customers, soliciting the Company’s
employees. The Company has agreed to take out directors and officers’ liability insurance and that, in conjunction
with his duties, any director may take independent professional advice at the Company’s expense (subject to
limitations imposed by the Board from time to time).

Other than as set out in the descriptions above, the Directors of the Company are not entitled to remuneration on
termination of their engagement with the Company during their contracted notice period.




                                                         72
5.        Directors’ previous and current directorships
In addition to their directorships of the Company, the Directors are or have been, members of the administrative,
management or supervisory bodies or partners of the following companies or partnerships (which unless
otherwise stated are incorporated in Israel) within the 5 years prior to the publication of this Document:
                                   Current                                         Past
Ronnie Jaegermann                  Yeor Investments Ltd.                           Rosenthal Intimates Ltd
                                   Barrococo Ltd.
Chaim Bechor                       Expertlink Ltd                                  None
Eatamar Drori                      None                                            None
Ofer Barda                         Digitek Holdings Ltd.,                          Budget Services Limited
                                   SM Digitek Ltd.
Shmuel Zailer                      Raz-Lee Security (2001) Limited                 None
                                   Raz-Lee Security Inc (US)
                                   Raz-Lee Limited
                                   Raz-Lee Marketing (1986) Limited
                                   Raz-Lee Export Limited
Jim McGeever                       None                                            Dowgate Capital Advisers Limited

Other than as disclosed above no Director has:

i)        any convictions in relation to fraudulent offences or convictions in relation to indictable offences;

ii)       had a bankruptcy order made against him or entered into an individual voluntary arrangement;
iii)      been a director of any company or been a member of the administrative, management or supervisory body
          of an issuer or a senior manager of an issuer which has been placed in receivership, compulsory liquidation,
          creditors’ voluntary liquidation, administration, company voluntary arrangement or which entered into any
          composition or arrangement with its creditors generally or any class of its creditors whilst he was acting in
          that capacity for that company or within the 12 months after he ceased to be so acting;

iv)       been a partner in any partnership placed into compulsory liquidation, administration or partnership
          voluntary arrangement where such director was a partner at the time of or within the 12 months preceding
          such event;

v)        been subject to the receivership of any asset of such director or of a partnership of which the Director was
          a partner at the time of or within 12 months preceding such event; or

vi)       been subject to any official public incrimination and/or sanctions by any statutory or regulatory authority
          (including designated professional bodies) nor has he been disqualified by a court from acting as a director
          of a company or from acting as a member of the administrative, management or supervisory bodies of an
          issuer or from acting in the management or conduct of the affairs of any issuer.

Other than as set out in this Document, no Director has been interested in any transaction with the Company,
which was unusual in its nature or conditions or significant to the business of the Company during the current
financial year, which remains outstanding or unperformed.

Other than as set out in this Document, the Directors do not have roles as directors of companies other than the
Company, and, although there are no current conflicts of interest, it is possible that the fiduciary duties owed by
those Directors to companies of which they are directors from time to time may give rise to conflicts of interest
with the duties owed to the Company. Except as mentioned above, there are no potential conflicts of interest
between the duties owed by the Directors to the Company and their duties to third parties.

Except for the Directors, the Board does not believe that there are any other senior managers who are relevant in
establishing that the Company has the appropriate expertise and experience for the management of the
Company’s business.


6.   Employees
PeerTV Plc does not have any employees.

During the past 3 financial years PTV has employed, on average, the following numbers of employees:                       PRann I
                                                                                                                          (17.1)
2007                2008           2009
     15               23             18

                                                            73
As at the date of this Document and as a consequence of the restructuring described at paragraph 9 of Part 2 of this
Document, PTV employs 20.5 full time equivalent employees, 17 in R&D, 1.25 in sales and marketing and 2.25 in
management and administration. Most of PTV’s employees have advanced degrees and most have 10-15 years of
experience in relevant fields as well as years of prior work experience with the founding team in previous start-ups.
Recent achievements of the team include: the world’s first implementation of Linux OS on a Digital Signal
Processor (2004); the most complete implementation of Open Source Media Player in an embedded, SoC (system
on a chip) environment and the world’s first multi-service media gateway optimized for Internet video (2008).


7.   Share Options
Employee Share Option Scheme
On 11 October 2010 the Company created an Employee Share Option Scheme (Scheme) giving the Board                        PRann I
authority to issue directors and employees of the Company or its subsidiaries non-transferable options to purchase      (17.2, 17.3)
Ordinary Shares of the Company. The Scheme was approved by members on 24 August 2010. The exercise price
of the options shall be determined by a committee of the Board (Committee) but will not be less than the market
value on the date a particular option is issued. The options are exercisable for a period of 10 years from their date
of grant. The options granted under this plan vest in installments to be determined by the Committee at the time
the options were granted.

Good leavers (including those persons whose employment ceases as a result of injury, ill-health, death, redundancy
or retirement at 65) may exercise their options within 6 months of their employment ceasing. Options will also
become exercisable within 6 months following a Sale Event, provided that all other conditions have been complied
with. Bad leavers’ options will lapse immediately.

All 1,545,584 existing options granted under the Scheme are options that were originally granted by PeerTV Inc.
but were adopted by the Company as a consequence of it entering into the PTV Acquisition (“Inc. Options”).
1,547,412 Ordinary Shares had been issued to PeerTV Inc. at the PTV Acquisition for the purpose of exercising
the Inc. Options. Such Inc. Options are currently held by the employee share trust, details of which are set out in
paragraph 8.1.10 of Part 4. Since 1,547,412 Ordinary Shares have already been issued, exercise of the first
1,547,412 options will not cause a dilution of investors’ interests in the Company.

As at the date of this Document, the following number of options were held by Directors and members of the
management team:

Ronnie Jaegermann (CEO) – 505,066

Chen Landau (VP Sales) – 77,371

Shmuel Zailer (BOD member) – 41,264

The Inc. Options are exercisable at a price of US$0.05 each and most will expire before 2020.

Israeli Employee Share Option Plan                                                                                      PRann I
                                                                                                                        (17.2, 17.3)
General
A sub plan to the Scheme, which was adopted on 18 January 2010. Eligible employees and consultants of the
Company or any of its affiliates and subsidiaries and members of its board of directors may be granted options to
purchase Ordinary Shares. Options granted under the Israeli Share Option Plan may qualify for special tax
treatment under Section 102 of the Israeli Income Tax Ordinance (New Version) 1961 (the “Ordinance”), which
is subsequently referred to as the Section 102 Options. Options that do not qualify for special tax treatment under
Section 102 of the Ordinance are referred to as Section 3(i) Options. Only employees and board members, in each
case who are not controlling shareholders, may be granted Section 102 Options. Consultants and controlling
shareholders may be granted only 3(i) Options under the Israeli Share Option Plan.

Administration
The Board administers the Israeli Share Option Plan, and may in turn delegate authority to administer the plans
to a committee.

Share option provisions generally
Options under the Israeli Share Option Plan are granted pursuant to option agreements. Israeli Share Option Plan
options vest, and become exercisable, at the rate specified in the option agreement or notice of grant. The exercise
price of the ordinary shares subject to an Israeli Share Option Plan option is determined by the administrator of
the Israeli Share Option Plan in its sole and absolute discretion in accordance with applicable law and subject to
any guidelines as may be determined by the Board.

                                                         74
In general, the term of options granted under the Israeli Share Option Plan may not exceed 10 years. If a
participant’s service relationship with the Company or with any of its subsidiaries terminates for any reason other
than death, disability or cause (as this term is defined in the Israeli Share Option Plan), the participant may
exercise any options vested as of the termination date up to three months from the date of termination. In general,
if a participant’s service relationship with the Company or with any of its subsidiaries ceases due to death or
disability, the participant (or his or her successor) may exercise any options vested as of the termination date up
to 12 months from the date of termination in the event of death and 12 months from the date of termination in the
event of disability. If a participant’s service relationship with the Company or any of its subsidiaries is terminated
for cause, all options granted to such participant will immediately expire. In no event may an option be exercised
after its expiration date.

Acceptable forms of consideration for the exercise of options granted under the Israeli Share Option Plan are
determined by the administrator of the Israeli Share Option Plan, which include but are not limited to cash or cheque.

In general, a participant may not transfer his or her option other than by will or the laws of descent and
distribution. Prior to the effective date of this offering, a participant may not transfer any ordinary shares issued
pursuant to the exercise of options granted under the Israeli Share Option Plan or any interest in such shares for a
six-month period beginning on the date of issuance.

Section 102 Option and shares holding period
Section 102 Options, any ordinary shares issued upon the exercise of Section 102 Options, and any other ordinary
shares that are received subsequently with respect to these options or ordinary shares, including bonus shares,
must be issued to a trustee that is nominated by the administrator of the Israeli Share Option Plan to serve as a
trustee in accordance with Section 102 of the Ordinance. These 102 Options and ordinary shares must be held by
the trustee for the benefit of the participants for at least two years from the date of grant of the Section 102
Options, and the participant may not sell or otherwise transfer any of the shares held by the trustee until the
holding period has lapsed.

Effect of certain corporate transactions upon options
Under the Israeli Share Option Plan, in the event the Company merges with or into another corporation or in the
event that the Company sells all or substantially all of its assets or ordinary shares, and the surviving entity elects
not to assume or substitute for unvested options outstanding under the Israeli Share Option Plan, the vesting of the
options held by participants whose service with or its affiliates has not already terminated will accelerate in full
prior to such corporate transaction.

Plan amendments
Under the Israeli Share Option Plan, the administrator of the Israeli Share Option Plan has the authority to amend
or terminate the Israeli Share Option Plan. However, no amendment or termination of the applicable Israeli Share
Option Plan may adversely affect any vested rights under awards already granted to a participant unless agreed to
by the affected participant.

Compliance of the Israeli Share Option Plan with ABI Rules
The Israeli Share Option Plan does not comply with the ABI guidelines in a number of areas due to market practice
in Israel. The points of material non-compliance are as follows:

•      The vesting period can be less than three years.

•      The options are grantable to Non-Executive Directors.

•      Commitments to issue new shares under Israeli Share Option Plan may exceed 10 per cent. of the issued
       ordinary share capital in any rolling ten year period.

•      Although, pursuant to the Israeli Share Option Plan, options can be granted at a discount to prevailing
       market price, the Directors will only issue options after consultation with the remuneration committee,
       which will give due regard to the ABI guidelines which state that options must be granted at the prevailing
       market price and, therefore, the Company will not grant options with an exercise price below market value.




                                                          75
8.    Material contracts
The following contracts, other than contracts entered into in the Group’s ordinary course of business or which
expose the Group to a liability of less than £10,000, have been entered into by the Group in the two years
preceding the date of this Document and are or may be material:

8.1   PeerTV Plc
      8.1.1 Share Sale Agreement between PeerTV Inc. and PeerTV Plc
            On 18 January 2010 the Company purchased the entire issued share capital of PTV from PeerTV Inc.

             The consideration for the sale of PTV was by way of an allotment and issue of 10 million Ordinary
             Shares (“Consideration Shares”) in the Company to PeerTV Inc. Immediately after completion of
             the sale, PeerTV Inc. entered into a type D reorganisation following which the Consideration Shares
             (as defined above) were allocated to PeerTV Inc.’s shareholders.

             Standard warranties as to title were given to the Company by PeerTV Inc. PeerTV Inc’s liability
             under the warranties was limited to £4 million, being the aggregate valuation of the Consideration
             Shares and all warranty claims must be made within 18 months of completion. There is no limit of
             liability in respect of warranties given with respect to tax or carried out pursuant to an obligation of
             PTV’s committed to prior to completion.

             Pursuant to the agreement, PeerTV Inc. entered into various novation agreements with the Company and
             PTV in order to ensure that the PeerTV business would remain uninterrupted. The contracts novated
             were those in the ordinary course of business so have not been summarised in this paragraph 8.

      8.1.2 CSS engagement letter
             On 11 November 2010 PTV entered into an engagement letter with CSS whereby CSS was
             appointed as the Company’s financial adviser in respect of the Previous Fundraising. Under the
             agreement CSS was paid the following fees in respect of the Previous Fundraising:
             •      A corporate finance fee of £15,000 plus VAT for financial advice in connection with the
                    Previous Fundraising; and
             •      A commission of 10 per cent. of the funds raised in respect of each subscription for Ordinary
                    Shares of up to £100,000 and 8 per cent. in respect of each subscription for Ordinary Shares in
                    excess of £100,000. The Company also reimbursed CSS for all marketing costs, direct mailing
                    costs and costs incurred in connection with the Previous Fundraising. The total commission
                    payable to CSS by the Company was £83,618 with reimbursements of expenses incurred.
             The agreement also gives CSS an entitlement to subscribe for 444,444 Deferred Shares at par, of
             which 125,000 have already been issued.
             CSS is entitled to the following further fees and commissions:
             •      an ongoing financial adviser fee of £2,500 per quarter for the period between 17 March 2010
                    (being the first closing of the Previous Fundraising) between the date of raising the Minimum
                    Amount and the date on which a commercial exit is negotiated for the shareholders in the
                    Company who were sourced by CSS; and
             •      a commission of 2 per cent. of aggregate consideration if the Company negotiates a sale of
                    all or part of its issued share capital, such commission to rise to five per cent. if the
                    transaction is originated by CSS.
             CSS was also granted a first right of refusal to act as the Company’s financial adviser in respect of
             the fundraising following the Previous Fundraising.
             The Company agreed to indemnify CSS and its directors, employees, associates, partners, agents,
             controlling persons and affiliates against losses arising as a result of such persons acting as financial
             adviser and/or placing agents to the Company, with the exception of any acts caused by the gross
             negligence, fraud or wilful misconduct on the part of the indemnified parties.
      8.1.3 Convertible Loan Notes issued by the Company
             As part of the transfer of PTV’s business from PeerTV Inc. to the Company, it had been necessary
             for the Company to adopt convertible loan notes which had been issued by PeerTV Inc. on 31 March
             2009 (Original Issue Date). The purpose of the loan notes had been to allow PeerTV Inc. to provide
             extra funding to PTV.


                                                        76
      Therefore, on 18 January 2010, the Company entered into a convertible loan note agreement in
      favour of various individual lenders. The principal amount of the new loan notes was US$329,419
      repayable either 10 months from the date of the agreement (Initial Repayment Date) or 22 months
      from the date of the agreement (Extended Repayment Date).

      Interest of 10 per cent. pa accruing on the principal since the Original Issue Date is payable on the
      Initial Repayment Date (whether or not the principal is to be repaid on the initial Repayment Date
      or the Extended Repayment Date) and shall be paid by way of an issue of Ordinary Shares at 40p
      per Ordinary Share. If repayment is delayed until the Extended Repayment Date, the interest accrued
      between the Initial Repayment Date and the Extended Repayment Date will be 40 per cent. pa, also
      payable by way of an issue of Ordinary Shares at 40p per Ordinary Share. The Company may repay
      any part of the loan notes at any time.

      In the event of:

      •      A new investment into the Company in excess of US$4 million before the loan notes are
             repaid in full;

      •      A transaction involving the sale of all or substantially all of the Company’s assets or issued
             share capital (unless part of a reorganisation where the Shareholders at the time retain at least
             50 per cent. of the aggregate interest in a new entity);

      •      A single person or entity, either in one transaction or through a series of transactions acquires
             at least 50 per cent. of the issued share capital of the Company;
      •      The transfer or grant of an exclusive license to all or substantially all of the Company’s
             intellectual property not in the ordinary course of business; or

      •      The admission of the Company’s shares on a Recognized Investment Exchange (including AIM),

      all outstanding loan notes will be converted into Ordinary Shares at a rate of 40p per Ordinary Share.
      Furthermore, any outstanding loan notes may be converted in to Ordinary Shares at the same rate at
      the option of a holder of such loan notes.

8.1.4 Placing Agreement
      On 23 December the Company entered into the Placing Agreement with Libertas and the Directors
      pursuant to which Libertas has agreed to use its reasonable endeavours to procure subscribers for the
      Placing Shares at the Placing Price. The Placing Agreement is conditional, inter alia, on the issued
      and to be issued Ordinary Shares being admitted to AIM by no later than 31 January 2011.

      In consideration of its services in connection with Admission under the Placing, the Company has
      paid Libertas a corporate finance fee of £25,000 and will issue 325,000 Ordinary Shares to Libertas,
      together with a commission of 5 per cent. on the aggregate subscription price of the Placing Shares
      at the Placing Price.

      The Placing Agreement contains warranties given by the Company and the Directors as to the accuracy
      of the information contained in this Document and other matters relating to the Company and its
      business. The liability of the Directors under these warranties is limited in time and amount. In
      addition, the Company has given indemnities to Libertas in respect of certain matters. Libertas is
      entitled to terminate the Placing Agreement prior to Admission, principally in the event of a breach of
      the Placing Agreement or of any of the warranties contained in it or if an event of force majeure arises.

8.1.5 Nominated Adviser and Broker Agreement
      On 23 December 2010 the Company entered into an agreement with Libertas, pursuant to which the
      Company appointed Libertas to act as nominated adviser and broker to the Company for a fixed
      period of two years from the date of the agreement and thereafter subject to termination on the
      giving of 3 months’ notice by either party. In consideration of its services, the Company will pay
      Libertas an annual retainer of £50,000.

8.1.6 Directors’ Insurance Policy
      The Company has in place a director’s and officer’s liability insurance policy from AIG Israel Insurance
      Company Ltd. The insurance liability has a limit of US$2,500,000 for total aggregate loss arising out of
      all claims valid until 31 March 2011. The Company pays an annual premium of US$5,900.


                                                 77
8.1.7 Directors’ and CSSCM Lock-in Agreements
       On 18 October 2010, each of the Directors of the Company and CSSCM entered into Lock-in
       agreements whereby they agreed that:

       •      For a period of 12 months (6 months for CSSCM) following Admission he would not dispose              PRann III
              of (a disposal being a sale, transfer, charge, pledge, encumbrance, or grant of any option, or       (7.3)
              an agreement to do any of the aforesaid) any shares held by him, either on the date of
              Admission or acquired after Admission (Lock-in Period); and

       •      For a further 12 months (6 months for CSSCM) following the Lock-in Period, he would not
              dispose of shares without the prior written consent of the Company and the Company’s
              Nomad and Broker, such consent not to be unreasonably withheld or delayed, and then only
              through the Broker.

       The Lock-in Agreements had a long-stop date for Admission of 30 November 2010, however all the
       directors have re-executed their agreements on 23 December and CSS has agreed and undertaken to
       re-execute its agreement at the earliest possible time.

       The above restriction will not prevent a Director or CSSCM (or any assignee of CSSCM) from
       making a disposal in the case of:

       •      An intervening court order;

       •      A sale of the Company’s entire issued share capital (other than any shares held by the
              purchase or persons acting in concern for the purposes of the City Code;
       •      The death of the relevant Director; or

       •      An action permitted by the AIM Rules.
8.1.8 Non-Exclusive Finders Fee Agreement between the Company and Eitan Yanuv (“Finder”) dated
       3 February 2010
       In consideration for the Finder arranging the PTV Acquisition, the Finder is entitled to a finder’s fee.
       The Finder’s fee will be an option to acquire 250,000 options over Ordinary Shares, exercisable for
       a period of (i) 42 months from the Transaction closing or (ii) until the sale of all or substantially all
       of the Company’s shares or asset; or (iii) until the listing of the Company on a Recognised
       Investment Exchange, whichever is earlier, for an exercise price of £0.40 per Ordinary Share.

8.1.9 Non-Exclusive Finders Fee Agreement between the Company and Ronnie Jaegermann (“Finder”)
      dated August 2008
      In consideration for the Finder arranging an investment in the Company, the Finder shall be entitled
      to a Finder’s fee. The Finder shall be entitled to receive 5 per cent. of any consideration actually
      received by the Company under the Realization of a Business transaction (as defined under the
      agreement). Such fees shall be paid to the Finder in Cash within 7 days from the receipt of any Gross
      Proceeds (as defined under the agreement) installments under the Business Transaction, to the
      Company’s bank account. And, an option to purchase up to 5 per cent. of the number of shares actually
      purchased by the Gross Proceeds in the Business Transaction, exercisable for a period of (i) 42 months
      from the Business Transaction closing or (ii) until the sale of all or substantially all of the Company’s
      shares or assets; or (iii) until the closing of an IPO of the Company whichever is earlier, for an
      exercise prices reflecting the price per share and type of share paid under the Business Transaction.

8.1.10 Share Trust Agreement between the Company and David Cohen & Co. Trust Company Ltd.
       On 11 October 2010 the Company and David Cohen & Co. Trust Company Ltd. entered into a share
       trust deed whereby David Cohen & Co. Trust Company Ltd. agreed to hold the 1,547,412 Ordinary
       Shares previously issued to PeerTV Inc. for the purpose of exercising options granted by the
       Company, in accordance with the Company’s instructions. The Company agreed that on exercise of
       any options and whilst David Cohen & Co. Trust Company Ltd. continues to hold any Ordinary
       Shares, it would instruct David Cohen & Co. Trust Company Ltd. to transfer such number of
       Ordinary Shares as is necessary to effect the exercise of the option. All sums received from option
       holders on exercise of their options will be paid immediately to the Company. Furthermore, David
       Cohen & Co. Trust Company Ltd. has waived any entitlement to receive dividends or distributions
       and will not vote any Ordinary Shares for the time such Ordinary Shares are held by David Cohen
       & Co. Trust Company Ltd. The Company has agreed to indemnify David Cohen & Co. Trust

                                                  78
            Company Ltd. against any actions, claims, costs, demands, expenses and all other liabilities arising
            out of David Cohen & Co. Trust Company Ltd.’s role as trustee unless such a claim is attributable to
            David Cohen & Co. Trust Company Ltd.’s fraud, misconduct or negligence.

8.2   PTV
      8.2.1 Electronic Products and Services Error or Omissions, and Product Liability Insurance Policy 2010
            PTV issued an electronic products and services error or omissions, and product liability insurance
            policy at Phoenix Insurance Company Ltd. The insurance liability has a limit of US$1 million per
            claim and for total aggregate loss arising out of all claims, valid until 31 December 2010, PTV pays
            an annual premium of US$6,000.

      8.2.2 Lease Agreement between PTV and Dirom Assets Ltd. (“Dirom”) dated 27 April 2010.                        PRann I
                                                                                                                    (8.1)
            PTV leases a 500 sqm area in a building located at 15 Aba Even St., Hertzlia Pituach including
            19 parking spaces. The rent is NIS 22,000 per month + VAT, plus NIS 5,500 + VAT in respect of the
            parking spaces – a total monthly fee of NIS 27,500. These amounts are linked to the Consumer Price
            Index. Management and Maintenance Fees are NIS 6,000 per month + VAT to be paid to the
            management company operating the building.

            The lease agreement shall terminate on 1 May 2012. PTV has the option to extend the lease term for
            a further two years and until 30 April 2014 by providing Dirom with 3 months prior written notice.
            PTV issued a bank guarantee to Dirom in the amount of NIS 118,320.

      8.2.3 Addendum to Lease Agreement between PTV and Dirom Assets Ltd. (“Dirom”) dated 30 May 2010.
            Pursuant to the Lease Agreement signed between the parties on 27 April 2010 (“Lease Agreement”),
            Dirom also agreed to lease to PTV a storage facility, the area of 40 sqm, situated in the basement
            floor of the building located at 15 Aba Even St. Hertzlia Pituach (“Storage”). The Lease Agreement
            was amended to include the Storage in the premises description. The rent stated in clause 5 of the
            Lease Agreement was increased by NIS 800 per month + VAT in consideration for the Storage.

      8.2.4 Bridge Loan Agreement between PTV and CSS Alpha Fund Ltd (“Lender”) dated 18 November 2010.
            The Lender provided PTV with a bridge loan of US$300,000 (“Bridge Loan”).
            The following fees were deducted from the Bridge Loan before drawdown:
            •      An arrangement fee of US$5,000 plus VAT; and
            •      The Lender’s legal fees and expenses in connection with the Bridge Loan, of US$4,000.
            In consideration for providing the Bridge Loan, the Company issued 104,000 Ordinary Shares to
            the Lender.
            The Bridge Loan shall become due and payable upon the lapse of 90 days from the date of the
            drawdown of the Loan at which point the Company will be required to repay the Lender US$350,000.
            If the Bridge Loan is outstanding for more than 90 days, interest will be charged on the loan amount
            at one per cent. per month.
            The Bridge Loan, is secured by a debenture described in paragraph 8.2.5 below.
      8.2.5 Debenture in favour of the Lender
            On 18 November 2010 PTV granted a debenture in favour of the Lender as security for the
            Company’s obligations pursuant to the Bridge Loan. The debenture will be released on discharge of
            the Company’s Bridge Loan obligations.

      8.2.6 Anti-dilution agreements between Eatamar Drori and Chaim Bechor and the Company
            On 18 January 2010 the Company entered into anti-dilution agreements with each of Eatamar Drori
            and Chaim Bechor (“Beneficiaries”) in order to secure their participation in the PTV Acquisition. If
            the Company issues Ordinary Shares or Convertible Preference Shares after the closing of the
            Previous Fundraising for a price below £0.40 each then the Company will issue further Ordinary
            Shares to the Beneficiaries at par value in order to ensure that their percentage shareholding in the
            Company remains unaffected.




                                                      79
      The agreement does not apply:

      •      If each Beneficiary’s interest in the issued share capital of the Company is greater than
             ten per cent;

      •      On conversion of Convertible Preference Shares, Deferred Shares or Convertible Loan Notes
             into Ordinary Shares; or

      •      On exercise of any options over Ordinary Shares.

8.2.7 Letter of Intent from Anatoly Fradis and John Peter Vulich of Aurora CineStreem Corporation
      (“ACC”) to PTV dated 14 June 2010.
      Scope – agreement in principle to form a joint venture company organized under the laws of a
      jurisdiction to be agreed upon, the form of which to be agreed upon, under the name Aurora
      CineStreem Design and Manufacturing (“JV Company”). The Parties expressly contemplate the
      creation and execution of other formal documentation, including customary “boilerplate” business
      and legal terms and such other additional provisions as the parties may agree, by no later than
      1 September 2010 (extended to 1 November 2010 by mutual agreement), pending which the Letter
      of Intent shall be binding and fully enforceable.

                                                                           ,
      Joint Venture Parties – The JV Company will be owned equally by PTV as to 50 per cent., and by
      one or more companies to be designated by ACC as to the other 50 per cent.

      Exclusivity – The JV Company will supply to:

      •      The motion picture industry (worldwide) – for use in the presentation of submitted films for
             the multiple nominations and awards, as well as work in motion picture production and post-
             production. ACC Believes the potential customer base to be over 300,000 units; and

      •      All other markets in the nations formerly comprising the Union of Soviet Socialist Republics,
             including the Baltic republics of Estonia, Latvia and Lithuania, and any other geographic
             areas to which the parties may expressly agree in writing (“Geographic Territory”).

      Financing – ACC will seek financing from private investors (including venture capitalists) and/or
      financial markets, ACC may advance sums from the financing to the JV Company. If ACC is unable
      to raise the necessary financing within 12 months from the date of this letter of intent, at the election
      of the owners of the JV Company, the joint venture will terminate and the JV Company shall be
      dissolved. PTV shall receive a sum equal to 5 per cent. of the capital to be raised by ACC, up to a
      maximum of US$250,000, in consideration of PTV’s sharing its technology and platform, and PTV’s
      private labelling and customization of the Aurora set-top boxes and remote control units.

      Warranty – PTV will provide warranty for a period of one year.

      Intellectual Property – ACC will own all intellectual property rights in and to the customized Aurora
      Set-Top Box.

      Sales and Ordering – Orders will be placed in multiples of 1,000 units, with a minimum order of
      1,000 units. The parties anticipate an annual purchase volume of not less than 25,000 units for the
      first year.

      Royalty Payments – In the event ACC monetises the service in any manner, including but not limited
      to advertisement placement, subscription fees, or any other form of monetisation, ACC will pay PTV
      5 per cent. of the net revenue derived by ACC. The payments will accumulate every month and be
      paid to PTV within 30 days of the month following each current month.

      Confidentiality – The parties will maintain the confidentiality of their arrangements as will be
      provided in a separate confidentiality and non-disclosure agreement. In addition, the fact and
      content of this Letter of Intent will remain confidential.

      Governing Law and Choice of Forum – The interpretation and enforcement of the Letter of Intent
      will be governed by the laws of the State of California, US, without regard to conflicts of law
      provisions, which shall apply in all respects, including statutes of limitations. Disputes, claims or
      controversy shall be determined by arbitration in Los Angels County, California, USA, before one
      arbitrator. The Arbitration shall be administered by JAMS pursuant to its International Arbitration
      Rules. Judgment on award may be entered in any court having jurisdiction.

                                                 80
9.     Related Party Transactions
Save as disclosed below, there were no related party transactions for the period from the incorporation of PeerTV Ltd.   PRann I
to the date of this Document.                                                                                            (19)

•      The conflict of interest regarding CSS, as described in the risk factors in Part 2 of this Document;

•      Ronnie Jaegermann’s finder’s fee agreement with the Company, as described in paragraph 8.1.10 of Part 4;

•      Ronnie Jaegermann’s brother-in-law has been engaged with the PTV’s pre- and post-sale customer support
       team. This appointment was made without regard to the employee’s relationship with Mr Jaegermann and
       Mr Jaegermann was not involved in the decision to employ; and

•      Eatamar Drori’s daughter is employed as a part-time quality assurance controller. This appointment was
       made without regard to the employee’s relationship with Mr Drori and Mr Drori was not involved in the
       decision to employ.


10. Legal Proceedings                                                                                                    PRann I
                                                                                                                         (20.8)
There has been no governmental, legal or arbitration proceedings (including any such proceedings which are
pending or threatened of which the Company is aware) which may have or have had during the 12 months prior
to the date of this Document, a significant effect on the financial position or profitability of the Group.


11.    Third party information and statement by experts and declarations of any interest
The Company confirms that where information in this Document has been sourced from a third party, it has been            PRann 1
accurately reproduced and that, as far as the Company is aware and is able to ascertain from information published       (23.2)
                                                                                                                         PRann II1
by that third party, no facts have been omitted which would render the reproduced information inaccurate or              (10.4)
misleading. Where third party information has been used, the identity of the third party is set out by such
information.

12.    Takeover Rules
The Ordinary Shares of the Company are not, by virtue of the location of the Company’s place of central                  PRann III
management, subject to the provisions of the City Code and, as such, the rules regarding mandatory takeover offers       (4.9)
set out in the City Code do not apply to the Company. Although the Company’s central place of management is
not within the UK, the Channel Islands or the Isle of Man, and it is therefore not a company to which the
City Code applies, the Directors have resolved that the Company will take account of the rules set out in the
City Code so far as is possible and practicable, and adhere to the general principles contained in the City Code.
Notwithstanding this fact, the Takeover Panel will have no jurisdiction for so long as the Company is not a
company to which the City Code applies. While the Company will seek to comply with the provisions of the
City Code, third parties will not be obliged, and the Company will not be able to compel them, to comply with the
City Code. Investors should note, in particular, the paragraph below on Rule 9 of the City Code.

Rule 9 of the City Code normally requires any person (or group of persons acting in concert) who acquires an
interest in shares which, taken together with shares in which such persons are already interested, carry 30 per cent.
or more of the voting rights of a company to offer to acquire the balance of the equity share capital. Rule 9 of the
City Code also normally requires any person who, together with persons acting in concert with him, is interested
in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company but does not
hold shares carrying more than 50 per cent. of such voting rights and such person, or any person acting in concert
with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights
in which he is interested to make such a mandatory offer to acquire the balance of the equity share capital.

The articles of association of the Company contain provisions that are similar to Rule 9 of the City Code. Further       PRann 1
details are set out in paragraph 2 of this Part 4.                                                                       (21.2.6)

As the Company is not a company to which the City Code currently applies, Investors should be aware that if the
articles are amended Shareholders will be entitled to increase their interest in Shares to 30 per cent. or more of
the voting rights of the Company without incurring any obligation to make a mandatory offer under the City Code
as would normally arise were the Company subject to the provisions of the City Code.




                                                         81
If circumstances change, including if changes to the Board are made, the Company will consult with the Takeover
Panel to ascertain whether this will affect the place of central management and control of the Company. If the
Takeover Panel determines that as the result of such changes, the place of the central management and control of
the Company is located in the UK, the Channel Islands or the Isle of Man such that the City Code then becomes
applicable to the Company, an announcement will be made.

The Shares in the Company are subject to the compulsory acquisition procedures set out in sections 974 to 989
(inclusive) of CA 2006. Under section 979 of CA 2006, where an offeror makes a takeover offer (as defined in
section 974 of CA 2006) and receives valid acceptances in respect of, or acquires, more than nine-tenths in value
of the shares to which the offer relates, that offeror is entitled to acquire compulsorily those shares which have not
been acquired or contracted to be acquired.


13.    Taxation                                                                                                           RPann III
                                                                                                                          (4.11)
13.1 United Kingdom Taxation for UK Investors
     13.1.1 Introduction
            The information in this section is based on the Directors’ understanding of current UK tax law and
            HM Revenue & Customs practice as at the date of this Document, both of which are subject to
            change at any time. It should be regarded as a summary of the tax treatment likely to be afforded
            UK resident investors holding their Ordinary Shares in the Company as investments. It does not
            constitute legal or tax advice and potential investors are, therefore, strongly recommended to consult
            a professional adviser regarding their own tax position and the consequences of making an
            investment in the Company.

       13.1.2 Tax residence of the Company
              The Company is considered to be dual resident for tax purposes in both Israel and the UK. This dual
              residence results as the Company is UK tax resident by virtue of its incorporation in the UK (under
              UK tax residency rules) and also tax resident in Israel as it is controlled and managed by its Board
              in Israel (under corresponding Israeli tax residency rules). Notwithstanding the fact that the
              Company is dual resident by operation of “local” rules, it is considered that the taxation agreement
              entered into between the UK and Israel will operate so as to treat the Company as solely tax resident
              in Israel (this under the relevant residency “tie breaker” provisions provided for in the agreement
              which attributes tax residency to the state in which “effective management” is located). Accordingly,
              the information provided in this section reflects the taxation treatment appropriate to an investment
              in a non UK tax resident company.

       13.1.3 Taxation of dividends
              The taxation of dividends paid by the Company and received by an investor resident for tax purposes
              in the UK is summarised below.

              Individuals
              A UK resident individual shareholder in receipt of dividends is treated as receiving income of an
              amount equal to the sum of the dividend and its associated tax credit. The tax credit currently equates
              to 10 per cent. of the gross dividend, being the combined amount of the dividend and the tax credit
              (the tax credit therefore representing one-ninth of the net dividend).

              The gross dividend is subject to income tax as the top slice of the individual’s income and is taxed
              at the individual’s marginal rate of income tax. The tax credit is available to set against the resulting
              liability (if any) to income tax.

              An individual liable to income tax at the basic rate will be liable to tax on the gross dividend at a
              rate of 10 per cent. (“the dividend ordinary rate” which is a special rate of tax set for basic rate
              taxpayers in receipt of dividend income). Accordingly, the tax credit will satisfy the income tax
              liability of such an individual. Similarly, individuals liable at the starting rate for savers, currently
              set at 10 per cent., will have no further liability as a result of the available tax credit.

              An individual liable to income tax at the higher rate will pay tax on the gross dividend at a rate of
              32.5 per cent. (“the dividend upper rate” which is a special rate of tax set for higher rate taxpayers
              in receipt of dividend income). After taking into account the tax credit of 10 per cent. a higher rate
              taxpayer will be liable to additional income tax of 22.5 per cent. of the gross dividend, which equates
              to 25 per cent. of the actual or net dividend.


                                                         82
       An individual liable to income tax at the additional rate will pay tax on the gross dividend at a rate
       of 42.5 per cent. (“the dividend additional rate” which is a special rate of tax set for additional rate
       taxpayers in receipt of dividend income). After taking into account the tax credit of 10 per cent., an
       additional rate taxpayer will be liable to additional income tax of 32.5 per cent. of the gross dividend,
       which equates to 36.11 per cent. of the actual or net dividend.

       Trustees
       UK resident trustees of a discretionary trust in receipt of dividends are liable to income tax at a rate
       of 42.5 per cent. (“the dividend trust rate”) of the gross dividend. After giving effect to the tax credit
       of 10 per cent. the trustees will be liable to additional income tax of 32.5 per cent. of the gross
       dividend, which equates to 36.11 per cent. of the actual or net dividend.

       Companies
       Although a UK resident corporate shareholder is potentially liable to corporation tax on its dividend
       income, it is anticipated that the general exemption for dividends will be available to exempt from
       corporation tax corporate Investors in receipt of dividends from the Company.

13.1.4 Withholding tax in Israel
       As the Company is considered to be tax resident in Israel (see 13.1.2 above) it is liable to account for
       dividend withholding tax in Israel on any dividend payments made to its UK resident shareholders. In
       accordance with the tax treaty between the State of Israel and the UK, a withholding tax of 15 per cent.
       of the dividend paid by the Company is required to be withheld by the Company where the dividend
       is paid to a shareholder resident in the UK. The tax withheld is not refundable but may be offset and
       thereby reduce the tax payable by the relevant UK resident shareholder: that is individuals liable at
       the higher and additional rate. Individuals taxable at the basic rate and corporate shareholders have
       no further UK tax liability with respect to the dividend received such that the withholding tax
       represents an actual tax charge.

13.1.5 Taxation of Chargeable Gains
       A sale or other disposal of the Ordinary Shares may, subject to any available reliefs and exemptions,
       give rise to a chargeable gain (or allowable loss) for the purposes of UK taxation of chargeable gains.

       Individuals and Trustees
       Chargeable gains realised on a disposal of Ordinary Shares by an individual or trustee resident and
       ordinarily resident in the UK will be subject to capital gains tax which, following the Budget
       announcements of 22 June 2010, is to be charged at a rate of 28 per cent. for those individuals whose
       total income and gains exceed the income tax basic rate limit, and at a rate of 18 per cent. where
       total income and gains fall below the basic rate limit. A flat rate of 28 per cent. applies for trustees
       and personal representatives. The Budget announcements were effective from 23 June 2010.

       An individual shareholder who disposes of Ordinary Shares while only temporarily not resident in
       the UK for tax purposes, may, under anti-avoidance legislation, still be liable to UK tax on his or her
       return to the UK. A period of non residence of less than 5 whole tax years prior to the year in which
       the shareholder returns to the UK will be treated as a temporary period for these purposes.

       Shares of the same class acquired by the same person and in the same capacity are “pooled” and
       treated as a single asset growing or diminishing as shares of the same class are acquired or disposed.
       Accordingly on a part disposal of the relevant shareholding the gain (or loss) will be computed by
       reference to that proportionate part of the aggregate cost of the holding attributable to the
       shares disposed.

       With effect from 6 April 2008 indexation relief is not available to individuals and trustees in
       computing any gain subject to capital gains tax.

       Companies
       UK resident corporate shareholders are subject to corporation tax on their chargeable gains. Gains
       realised by such companies, as reduced by available indexation relief, are subject to corporation tax
       at the company’s relevant rate. The full rate of corporation tax is currently 28 per cent.. Indexation
       relief is deductible in computing any gain arising on a disposal of, or out of, the holding and is
       computed by reference to the movement in the Retail Price Index over the period of ownership
       applied to the cost of the holding, or that part of the holding, disposed. As for individuals and
       trustees, shares of the same class held by a corporate shareholder are “pooled”.

                                                   83
             Non residents
             Shareholders who are not resident or ordinarily resident in the UK and who are not affected by the
             rules relating to temporary non residence will, save in limited circumstances, not be liable to UK
             taxation on chargeable gains realised on the disposal of their Ordinary Shares. Such shareholders
             may be subject to foreign taxation on any gain realised under the local law of their country of
             residence and should consult their own tax adviser concerning their tax liabilities on such gains.

      13.1.6 Inheritance Tax
             The Ordinary Shares are considered, potentially, to qualify for business property relief for the
             purposes of inheritance tax. Shares in an unquoted company (other than an investment company or
             one which carries on a business consisting wholly or mainly of dealing in securities, stocks, shares,
             land and buildings) potentially attract full relief (as business property) from inheritance tax where
             the shares have been held for 2 years prior to the chargeable transfer for inheritance tax purposes.

      13.1.7 No relief under the Enterprise Investment Scheme
             The shares issued pursuant to this offer will not be eligible for relief under the Enterprise Investment
             Scheme (“the Scheme”) as the Company is not considered to constitute a Qualifying Company for
             the purposes of the Scheme.

      13.1.8 Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)
             Transfers of Ordinary Shares may give rise to liabilities to stamp duty or SDRT. The paragraphs
             below summarise the current position and are intended as a general guide only to stamp duty and
             SDRT. Special rules apply to agreements made by brokers, dealers and market makers in the
             ordinary course of their business and to certain categories of person (such as depositaries and
             clearance services) who may be liable to stamp duty or SDRT at a higher rate.

             No liability to stamp duty or SDRT will generally arise on the allotment and issue of new Ordinary
             Shares by the Company.

             Transfers outside CREST
             An instrument (generally a stock transfer form) transferring Ordinary Shares outside CREST will
             be liable to ad valorem stamp duty broadly at a rate of 0.5 per cent. of the actual consideration paid.
             Stamp duty is normally paid by the purchaser. An unconditional agreement to transfer such shares,
             if not completed by a duly stamped stock transfer form, within 2 months of the day on which the
             agreement is made or becomes unconditional, will be subject to SDRT (payable by the purchaser
             and generally at a rate of 0.5 per cent. of the consideration paid). If within 6 years of the date of the
             agreement an instrument of transfer is executed pursuant to the agreement and stamp duty is paid
             on the instrument any liability to SDRT will be cancelled or repaid.

             Transfers within CREST
             Paperless transfers of Ordinary Shares within CREST will be charged to SDRT (rather than stamp
             duty) at a rate of 0.5 per cent. of the consideration paid. SDRT is payable by the purchaser. CREST
             is obliged to collect SDRT on relevant transactions settled within the system.

13.2 Taxation in the US
     As a result of the PTV Acquisition, the Company is required to file US tax returns and there is a risk,
     therefore, that the Company’s profits could be subject to tax in the US. However such double taxation risk
     will have no effect whilst corporation tax rates in the US are lower than those in the UK.


14.   Expenses of the Admission
The net expenses of the Admission will be approximately £438,000 exclusive of VAT, of which £430,000 are                 PRann III
expenses associated with Admission and £8,000 as broking fees in respect of the Placing. The expenses are                (8.1)
payable by the Company.

The net proceeds of the Placing will be approximately £152,000.




                                                        84
15.   Persons Responsible, Statutory Auditors and Consents
(a)   The Company and the Directors, whose names and functions are set out on page 20 of this Document,               PRann I
      accept responsibility for all the information contained in this Document. To the best of the knowledge and      (1.1, 1.2)
                                                                                                                      PRann III
      belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case),   (1.1, 1.2)
      the information contained in this Document is in accordance with the facts and contains no omission likely
      to affect the import of such information.

(b)   Haysmacintyre accepts responsibility for its reports on the financial information of the Company set out in     PRann I
      Part 3 of this Document. To the best of the knowledge and belief of Haysmacintyre (which has taken all          (23.1)
      reasonable care to ensure that such is the case), the information contained in such reports is in accordance
      with the facts and does not omit anything likely to affect the import of such information.

(c)   Haysmacintyre of 2 Fairfax House, 15 Fulwood Place, London WC1V 6AY and who is a member of the
      Institute of Chartered Accountants of England and Wales has given and not withdrawn its written consent
      to the inclusion in this document of references to its name in the form and context in which they appear and
      to the inclusion of its reports regarding the historic financial information and the pro-forma financial
      information in Part 3 of this document and has authorised the content of its reports for the purposes of
      item 1.2 of Annex I and item 1.2 of Annex III of the Prospectus Rules and Schedule 2 of the AIM Rules.
(d)   Libertas has given and not withdrawn its consent to the issue of this Document with inclusion herein of
      references to its name in the form and context in which appear.

16. Documents on display                                                                                              PRann I
                                                                                                                      (24)
Copies of this Document, the Articles of Association and annual reports will be available, free of charge, at the
offices of Libertas Capital Corporate Finance Limited, 16 Berkeley Street, London W1J 8DZ from the date of this
Document during normal business of any weekday, Saturdays and public holidays excepted, for one month from
the date of Admission.
This Document, Articles of Association and other public documents can also be found on the Company’s website
at www.peertv.com.

30 December 2010




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Park Communications   65600

								
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