for personal use only · the past year has also seen considerable progress in the iptv industry...

ReelTime Media Limited ACN 085 462 362

REELTIME MEDIA LIMITED Annual Report 2007

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ReelTime Media Limited Annual Report 2007

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CORPORATE DIRECTORY Directors Solicitors N.J (John) Karantzis Steinepreis Paganin Lawyers Managing Director and Consultants Level 4, Next Building Alistair MacKinlay 16 Milligan Street Executive Director Perth WA 6000 Frank Brown Auditors Non-Executive Director RSM Bird Cameron Partners Level 8, Rialto South Tower Stephen Johnston 525 Collins St, Melbourne 3000 Non-Executive Director Bankers Company Secretary Westpac Todd Richards 447 Bourke Street Melbourne VIC 3000 Registered Office ReelTime Media Ltd Share Registry (ACN 085 462 362) Computer Share Investor Services Pty Ltd Level 1, 232 Clarendon St Level 2, 45 St Georges Terrace South Melbourne VIC 3205 Perth WA 6000 Telephone 03 9946 6600 Telephone 08 9323 2000 Facsimile 03 9946 6699 Facsimile 08 9323 2003 Email [email protected] www.computershare.com www.reeltime.tv Stock Exchange Listing Notice of annual general meeting The company is listed on the Australian The annual general meeting of ReelTime Media Ltd Stock Exchange will be held at: Listed ASX: RMA Quay West Suite 26 Southgate Aveneue Southbank Victoria 3006 Time: 2.30pm Date: 29th November 2007

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CONTENTS

DIRECTORS' LETTER 4

MANAGING DIRECTOR'S REPORT 6

DIRECTORS' REPORT 8

CORPORATE GOVERNANCE STATEMENT 19

FINANCIAL STATEMENTS 24

DIRECTORS' DECLARATION 46

AUDITOR'S INDEPENDENCE DECLARATION 47

INDEPENDENT AUDIT REPORT 48

SHAREHOLDER INFORMATION 50

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DIRECTORS’ LETTER Dear Shareholders, It is our pleasure to present to you the Annual Report for the year ending 30 June 2007. We have come through a challenging 12 months start up period for the Company which has not only been operating as a true start up business but one that has also been breaking new ground in a start up industry. Despite all of the challenges experienced, we are pleased to say that we have also seen a period of significant achievements and progress in regards to the delivery of our Broadband Media Content service to market. The fact that the business was able to deliver a sound, robust, user friendly service within the first twelve months since listing in April 2006 is a great credit to Managing Director John Karantzis and his team. The past year has also seen considerable progress in the IPTV industry with strong revenues in the U.S. market in 2006 (US$110m versus US$10m in 2005) and more than 22% of the Australian households reported as viewing streamed or downloaded video media on their PC’s on a regular basis. (ACMA 2006 report). We are particularly pleased with the announcement made recently regarding our strategic alliance with major DVD retailer Ezy DVD Pty Ltd. This is an excellent opportunity for ReelTime to utilise the industry and retail experience now available to us in order to initiate effective marketing and growth for our business and to take advantage of the fast growing adoption of this type of technology by consumers. We look forward to a long and mutually prosperous relationship together with Ezy DVD. We also welcome Jim Zavos (Managing Director of Ezy DVD) to the ReelTime Board of Directors. In November 2006 ReelTime announced another step forward in terms of the delivery of Broadband Media Content services with an International first Download to Own service. The agreement with Universal Pictures Australasia offers legal downloads of titles for Australian consumers on the same day and date as released with retail stores. Consumers are not only able to download movies to their PC’s but the agreement and technology also allows them to securely burn a copy to DVD in their own homes – a world first. This agreement further strengthens our position as the leading player in Australia in terms of delivery of Broadband TV. This year also saw ReelTime go live with its co-marketing partner Yahoo!7. In an agreement announced in August 2006, Yahoo!7 customers were able to utilise the ReelTime service to download movies and TV content to their PC’s from February of this year and we continue to expand the Yahoo!7 relationship to grow this service by adding in new content, consumer packages and other marketing initiatives. We would like to extend our thanks to those shareholders who have continued to give their support to the Company during the year, particularly in regard to the fund raising that the Company has completed. We would also like to take this opportunity to thank retiring Non Executive Director, John McAlpine for his contribution to the Company in the early period and we wish him well in his personal endeavours. We also congratulate the Managing Director John Karantzis and Executive Director Alistair MacKinlay and the ReelTime team in completing the building of the infrastructure required to deliver this service to our customers. It has been a challenging but constructive period and we can now look forward to a year ahead of implementing our operational plans, including much greater consumer marketing and commercialisation. Yours sincerely

Frank Brown Stephen Johnston Director Director

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MANAGING DIRECTOR’S REPORT Dear Shareholder The last year has been one of many challenges, with the Company performance limited by several key factors, almost all of which have now been resolved. The Company has clear strategy and focus as a white label / wholesale provider of premium content to industry partners, over any IP network, to a variety of devices. The Company is now in a position where it has fully operational systems. Reeltime has also pioneered several innovations as international or Australian firsts. This includes, our download to own DVD service, which is now only recently available as a service from giants such as Amazon.com and Wal-Mart in the US, and our video delivery to the Xbox360 via Vista PC’s. The key issues faced by the Company over the last year have been as follows;

*Several month initial delay in rollout of technology by our major software contractor. *The failure of Mobilesoft Ltd to supply the ReelTime Set Top Box on time and its subsequent insolvency. *Negative cash flow attributable to high staff and advance content costs, while these issues were resolved leading to a funding challenge,

The Company has since developed as a replacement, a fully functional Media Centre from an alternative supplier, Gigabyte of Taiwan which is now fully operative and integrates with the windows systems including Vista, Xbox360 and Windows handheld and mobile devices. Staff and operational costs have been dramatically reduced, and content costs are being re-negotiated to more realistic and affordable levels. Funding issues have been resolved via placement of funds, raisings through a prospectus issue and additional funding from Cornell Capital Partners. The Company is now in a position to move forward on a positive basis, with its key fundamentals now in place. As this goes to print, the Company has just recently announced an agreement with EzyDVD. The EzyDVD agreement is entirely complimentary and consistent with the Company’ strategy, and its readiness to deliver upon the agreement. The highlights of the alliance are:

EzyDVD will retail the ReelTime download products via its online store, which receives some 40,000 visitors per day and is recognised as Australia’s #1 E-commerce site by Independent web tracking agency Hitwise. EzyDVD’s online offer will include Australia’s only download to own (in home DVD burn, 3 copy model) service operated by ReelTime.

EzyDVD will build revenue in ReelTime using their existing retail distribution and marketing resources;

EzyDVD will retail the ReelTime Media Centre and content bundles via its 68 retail stores – providing national sales

and distribution for ReelTime’s 2xHD Tuner, 500Gb PVR, DVD+RW, MS Vista based IPTV Media Centre which incorporates Ice TV’s program guide – which, as, the only “box” with online content available today, will be a real challenger for the download content poor PVR’s and TiVo alike.

EzyDVD and ReelTime will use their joint expertise, market access and joint buying power to source expanded content

offerings for Download to Own and Download to Rent

ReelTime Media will focus on its white label service offerings via ISP’s, Telco’s and other Web portals, and will not compete directly with its retail channels – providing clear definition of ReelTime’s role and focus in the market.

In return, ReelTime will issue ordinary shares up to a maximum of 142 million over next 3 years to EzyDVD. As a minimum, the alliance is worth several million per annum in cost savings to ReelTime, In addition the commitment to revenue build by EzyDVD, as a part of its share consideration makes it a win for ReelTime on both sides of the ledger. Shares will be progressively issued to EzyDVD over a period of up to 3 years as it meets agreed milestones utilizing EzyDVD’s proven strengths in the market. The owner of EzyDVD, who has also invested directly in ReelTime, will join our Board further aligning the two companies.

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The year ahead is promising, with a focus on delivery of product and revenue building, in addition to bringing on new product lines to compliment the existing ones, and leverage our deployed systems and access to content. I would also like to take this opportunity to thank the board of directors of ReelTime for their efforts, assistance and guidance in what has been a challenging year. We are looking forward to the year ahead as being a positive one, with the Company establishing itself in the market as a leader in digital delivery of video and other products. Yours faithfully N.J. (JOHN) KARANTZIS Managing Director A model of the ReelTime service

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DIRECTORS’ REPORT

Your directors submit their report for the year ended 30 June 2007.

Directors

The names and details of the company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire year unless otherwise stated. Stephen Johnston B BUS Non-Executive Director Appointed 10 February 2006 Qualifications, experience and special responsibilities Stephen Johnston is a qualified accountant and MBA graduate from Macquarie University, with 20 years experience in administration and marketing as well as considerable experience in general management roles in the video entertainment sector. For the past 2 years, Mr Johnston was CEO of Video Ezy, one of Australia’s largest video hire franchisors. Prior to that he spent 5 years as Managing Director of Twentieth Century Fox Home Entertainment. Mr Johnston is currently employed as a partner at Korn Ferry International. Mr Johnston is the Chairman of the Audit Committee.

Other Current Directorships of Listed Companies None.

Former Directorships of Listed Companies in last three years

None.

Alistair MacKinlay LLB Executive Director (Acting Chairman) Appointed 10 February 2006 Qualifications, experience and special responsibilities Alistair MacKinlay has been a director of Movies Online for 6 years and advised on its initial establishment and of ReelTime and provides legal direction and executive assistance and will continue to assist with strategic planning, financial and legal advice. Mr MacKinlay is a solicitor with over 33 years experience in commercial law. He is sole principal of boutique commercial law firms MacKinlays Solicitors and Ronson MacKinlay Conveyancing Solicitors. He is past committee member of the Law Society and an accredited mediator. He has considerable experience as a director of public companies, particularly in start-up ventures in areas as diverse as internet technology, media, organic fertiliser, gold mining, and automotive equipment.



None. N.J (John) Karantzis BE MIEE MIE Aust

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Managing Director Appointed 10 February 2006 Qualifications, experience and special responsibilities N.J (John) Karantzis is a chartered engineer, and has been involved with various telecommunications projects, ranging from national DSLAM and fibre rollouts, to secure private networks for government. He has also been active in the technological aspects of “triple play” delivery over IP networks for several years, and has completed high profile projects for national telecommunication carriers in this area.

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Mr Karantzis has experience as a director of public companies, and has served on various boards in the broadcast and telecommunications/internet sector.



Pacific Star Network Ltd (formerly Data & Commerce Ltd) Mr Frank Brown BA Economics/European Languages (Dual Honours) Non Executive Director Appointed 16 October 2006 Qualifications, experience and special responsibilities Frank Brown has a track record of success in media over almost two decades, in almost all key world markets (Including US, UK, Germany, Japan, India, SE Asia, Russia and Australia). Frank was one of the founders of MTV Networks International and of the cable and satellite industry, both in Europe and Asia. Frank has been a former Chairman of the industry body, the Cable and Satellite Broadcasting Association of Asia (CASBAA), and a winner of a prestigious national EBD award in Singapore. He continues to serve on a variety of boards for Singapore Government Ministries in areas such as Tourism, Education, Infocomm Regulation and Development and Media Regulation and Development. Franks offers well-rounded expertise in the international media industry.



None. John McAlpine Non-Executive Director Resigned on 4th May 2007 Qualifications, experience and special responsibilities John McAlpine was Chief Executive Officer of Network Ten's television operations from 1997 to July 2006. He began his television career in 1970 with TVW-7 in Perth, and joined Network Ten in 1974 and was promoted to NSW Sales Manager in 1980. After a decade with Ten, Mr McAlpine became founding partner and joint managing director of Media Sales Network Pty Ltd. He was appointed General Manager of Network Ten Sales in 1989. Following a successful eight years heading Network sales he was appointed Chief Executive Officer in July 1997, having been a member of the Network Ten Executive Management Committee, which played an integral role in the turnaround of the company. He was a director of The Ten Group Pty Ltd (TEN) from 1998. Mr McAlpine is a graduate of the 1996 Stanford University Executive Program. On his retirement he was Chairman of Free TV Australia, having also chaired the peak industry body in 1999/2000. Mr McAlpine was on the audit committee. Other Current Directorships of Listed Companies None.

Former Directorships of Listed Companies in last three years Ten Network Holdings. F

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Company Secretary Todd Richards B.BUS, CPA Appointed 10 February 2006 Qualifications, experience and special responsibilities Todd Richards is a Certified Practising Accountant with more than 15 years experience in statutory corporations and international and ASX listed companies. His experience has been gained in a number of industries including manufacturing, logistics, professional sport, IT and telecommunications. He was appointed as company secretary and chief financial officer on 28 November 2005.

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Interests in the shares and options of the company and related bodies corporate At the date of this report, the interest of the directors in the shares and options of ReelTime Media Limited were:

Director Ordinary Shares Direct Ordinary Shares Indirect Options over Ordinary Shares

Mr. Stephen Johnston - - 3,000,000

Mr. Alistair MacKinlay 147,657 4,516,269 7,600,000

Mr. N.J (John) Karantzis 2,077,000 28,933,553 7,600,000

Mr. Frank Brown 3,500,000 - 4,000,000

Corporate Structure

ReelTime Media Limited is a company limited by shares that is incorporated and domiciled in Australia. ReelTime Media Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year and which are outlined in note 8 of the financial statements. Principal Activities

The principal activity of the economic entity during the financial year was providing Internet Protocol Television (IPTV) content operator, offering traditional media product (television programs and movies) via broadband. Employees

The consolidated entity employed 18 employees as at 30 June 2007 (30 June 2006: 20 employees).

Consolidated Results

The loss for the consolidated entity for the financial year after income tax was $7,815,177 (June 2006: loss of $3,295,038). Dividends No dividends in respect of the current financial year have been paid, declared or recommended for payment. Group Overview ReelTime Media Limited is the 100% holding Company of two operating entities, (ReelTime Infotainment Limited and Xstreem Networks Pty Ltd). The Company re-listed on the ASX in April 2006 and has since listing, developed the technology and infrastructure required to deliver IPTV services via broadband connections throughout Australia and New Zealand. Having developed the technology the Company is now acquiring marketing resources (both internal and external channel partners) to acquire a substantial customer base in order to grow revenues. Operating Overview Please refer to the Managing Director’s Report for details of IPTV activities undertaken during the financial period. Financial Overview

Operating Results for the Year

The loss for the consolidated entity after income tax was $7,815,177 (June 2006: loss of $3,295,038). This result was in line with projections and reflected costs associated with managing the deployment of the IPTV services. F

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Review of Financial Condition

During the period, the Company continued its deployment of the IPTV services as set out in its original prospectus at time of listing dated 27 February 2006. Delivery of the service, customer acquisition and revenue generation is consistent with the plans and timetable implemented and the Company continues to make progress on establishing itself as a leading player in IPTV.

Cash Flows

The cash flows of the Company consist of: in the case of the controlled entity, payments to employees and suppliers for the launch and development of IPTV activities; and the maintenance of the corporate head office which manages existing agreements and costs involved in investigating further business development and marketing opportunities. Capital Raisings / Capital Structure During the year under review, the Company undertook a capital raising exercise via share placement in October 2006 to raise $2.1m at an issue price of 6 cents per share. A second placement was also completed in May 2007 to raise in excess of $600k at an issue price of 5.3 cents per share. The Company has also issued convertible notes to raise an additional $1.5m at an issue price of no lower than 2.5 cents per share. Summary of Shares / Options on Issue – 30 June 2007

At the end of the year under review the Company has 283,031,761 ordinary shares (142,044,253 restricted securities) and 26,200,000 options on issue. The options on issue are as follows:

Significant Changes In The State Of Affairs

There have been no significant changes in the state of affairs during the course of the financial year ending 30 June 2007. Significant Events After The Balance Date

Subsequent to year end the Company has received the proceeds of a $1 million convertible note issued on 29 June 2007.

On 24 September 2007 the Company entered in to a wide ranging strategic marking agreement with Ezy DVD Pty Ltd. This agreement will provide an initial cash investment by Ezy DVD of $150,000 and depending on agreed milestones being met over a period of three years ReelTime will issue up to 142,044,253 to Ezy DVD (these shares will be escrowed for a period of 12 months). The milestones to be reached before shares are issued include matters of cost reduction, meeting revenue targets, facilitating market penetration/customer acquisition and extended content offerings. The agreement and share issue is subject to shareholder approval.

Apart from this, no matter or circumstance has arisen since 30 June 2007 which has significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity, in subsequent financial years. Likely Developments And Expected Results

The Board of Directors intends to continue with the development and growth of the Company as a significant media company as outlined in the prospectus dated 27 February 2006. Further details of the Company’s prospects are included in the Report on Operations, which forms part of the Managing Director’s Report.

As the Company is listed on the Australian Stock Exchange, it is subject to the continuous disclosure requirements of the ASX Listing Rules, which require immediate disclosure to the market of information that is likely to have a material effect on the price or value of ReelTime Media Limited’s securities.

Grant Date Expiry date Number In Escrow Exercise price

5 April 2006 On or before 22 January 2009 9,900,000 9,900,000 until 5 April 2008 $0.20

5 April 2006 On or before 22 January 2009 6,800,000 6,800,000 until 5 April 2008 $0.30

5 April 2006 On or before 22 January 2009 4,500,000 4,500,000 until 5 April 2008 $0.50 28 Nov 2006 On or before 22 January 2009 2,500,000 - $0.20 28 Nov 2006 On or before 22 January 2009 1,250,000 - $0.30 28 Nov 2006 On or before 22 January 2009 1,250,000 - $0.50 Total 26,200,000

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Environmental Regulation

The consolidated entity’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation of Australia. Meetings Of Directors

The number of meetings of the Directors held during the year and the number of meetings attended by each Director were as follows:

Board of Directors

Directors Attended Held

Mr John McAlpine 19 21

Mr Stephen Johnston 25 27

Mr Frank Brown 25 25

Mr Alistair MacKinlay 27 27

Mr N.J (John) Karantzis 27 27 The Board of Directors are conscious of the costs involved in holding regular “in person” meetings given that the Company has Directors based in Melbourne, Sydney and Perth. Over the past year the Company has therefore conducted more regular meetings via telephone conference and conducted in person meetings on a quarterly basis. This has allowed for greater communication between management and the Board as well as reducing travel costs. Committee membership and meetings The Audit and Compliance Committee was established on 17 July 2006. The current members of the Committee are the independent directors, Mr. Stephen Johnston and Mr. Frank Brown.

Two meetings of the Audit and Compliance Committee (Chairman, Stephen Johnston) were held during the financial year.

Remuneration Report Remuneration Philosophy The Board of Directors of ReelTime Media Limited is responsible for determining and reviewing compensation arrangements for the directors, the Managing Director and the executive team. The Board’s remuneration policy is to ensure that the remuneration package properly reflects the person’s duties and responsibilities, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms, including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost to the Company. In general, the objective of the Company’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms with market practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:

• competitiveness and reasonableness • acceptability to shareholders • performance linkage / alignment of executive compensation • transparency • capital management.

In consultation with external remuneration consultants, the Company has structured an executive remuneration framework that is market competitive and complimentary to the reward strategy of the organization. Alignment to shareholders’ interests:

• has economic profit as a core component of plan design • focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value • attracts and retains high calibre executives.

Alignment to program participants’ interests: • rewards capability and experience • reflects competitive reward for contribution to growth in shareholder wealth • provides a clear structure for earning rewards

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• provides recognition for contribution. The framework provides a mix of fixed and variable pay, and a blend of short and long-term incentives. As executives gain seniority with the group, the balance of this mix shifts to a higher proportion of ''at risk'' rewards.

To assist in achieving these objectives, the Board intends to link the nature and amount of executive officers’ emoluments to the Company’s financial and operational performance. All directors and executives will have the opportunity to qualify for Employee Option Plan that will provide incentives where specified performance criteria are met. The plan has been formalised by the Board but as yet has not been implemented.

Employment Agreements are entered into with Executive Directors and Executives. The current employment contract with the Managing Director runs until its termination date of 31 March 2009, unless terminated by the Managing Director who may give 6 months notice. The employment contract with the Executive Director runs until its termination date of 30 September 2008, unless terminated by the Executive Director who may give 6 months notice. The Specified Executives have a contract which provides for 3 months notice. Contracts do not provide for any additional termination benefits.

Remuneration Committee The Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors and executives. Given the size of the Company the Board have determined that at present it is not necessary to establish a separate Remuneration Committee although this will be reviewed on a regular basis and a Committee established when deemed necessary.

Remuneration Structure In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. Non-Executive Director Remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure The Company’s Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was in the Constitution adopted on 10 February 2006 and amended at the AGM on 28th November 2006, which approved an aggregate remuneration of $400,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process.

Each director receives a fee for being a director of the Company. Directors who are called upon to perform extra services beyond the director’s ordinary duties may be paid additional fees for those services.

Non-executive directors have long been encouraged by the Board to hold shares in the Company. It is considered good governance for directors to have a stake in the company on whose board he or she sits.

The remuneration of non-executive directors for the period ending 30 June 2007 is detailed in Note 20 of this report. Senior Executive Remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to:

• Reward executives for Company, business unit and individual performance against targets set by reference to appropriate benchmarks;

• Align the interests of executives with those of shareholders; • Link reward with the strategic goals and performance of the Company; and • Ensure total remuneration is competitive by market standards.

Structure In determining the level and make-up of executive remuneration, the Board obtained independent advice from external consultants on market levels of remuneration for comparable executive roles. It is the Board’s policy that employment contracts are entered into with the all senior executives. Variable Remuneration – Long Term Incentives Objective The objectives of long-term incentives are to: • Recognise the ability and efforts of the employees of the Company who have contributed to the success of the Company and to

provide them with rewards where deemed appropriate;

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• Provide an incentive to the employees to achieve the long term objectives of the Company and improve the performance of the Company; and

• Attract persons of experience and ability to employment with the Company and foster and promote loyalty between the Company and its employees.

Structure Long term incentives granted to senior executives will be delivered in the form of options in accordance with the Employee Share Option Plan approved by shareholders at the general meeting held on 10 February 2006. At the commencement of each financial year, the Company and each senior executive will agree upon a set of financial and non-financial objectives related to the senior executive’s job responsibilities. The objectives will vary but all will be targeted to relate directly to the Company’s business and financial performance and thus to shareholder value.

Employment Contracts Mr. N.J. (John) Karantzis

By an employment agreement dated 1 April 2006, the Company and Mr Karantzis have agreed the terms of his employment including inter alia:

Mr Karantzis is engaged to provide services in the capacity of Managing Director commencing on 1 April 2006 for a period of 3 years, renewable automatically for a further period of 3 years unless either party to the agreement gives notice 6 months prior to the expiration of the initial term at an annual salary of $273,600 inclusive of statutory superannuation with annual increases based upon a review by the Board.

A restraint on Mr Karantzis undertaking employment in the business of acquisition of digital content and the distribution of such content by the Internet for a period of 12 months after termination.

An obligation on Mr Karantzis to maintain confidentiality in respect of proprietary information obtained during employment.

The grant of 7,600,000 options to Mr Karantzis:

a) 3,450,000 options exercisable at $0.20 b) 2,650,000 options exercisable at $0.30 c) 1,500,000 options exercisable at $0.50

The options are not transferable and may be exercised at any time during employment and for 60 days after cessation of employment, after which they lapse. They will not be quoted.

Mr Karantzis will be entitled to a bonus of 3% of the Consolidated EBIT (if positive) of ReelTime Media Ltd and its wholly owned subsidiaries at the end of each financial year.

The Company will consider further bonuses based on the contribution of Mr Karantzis to Company milestones and the circumstances of the Company.

Mr. Alistair MacKinlay

By an employment agreement dated 10 February 2006, the Company and Mr MacKinlay have agreed the terms of his employment including inter alia:

Mr MacKinlay is engaged to provide legal services to ReelTime Media Ltd in the capacity of Executive Director for a term ending on 30 September 2008, renewable by mutual agreement prior to expiry of the agreement, for a further period of 3 years at an annual salary of $130,800 with annual review.

An obligation on Mr MacKinlay to maintain confidentiality in respect of proprietary information obtained during employment.

The grant of 7,600,000 options to Mr MacKinlay:

a) 3,450,000 options exercisable at $0.20 b) 2,650,000 options exercisable at $0.30 c) 1,500,000 options exercisable at $0.50

The options are not transferable and may be exercised at any time during employment and for 60 days after cessation of employment, after which they lapse. They will not be quoted.

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Remuneration of Directors and Executives

Year ended 30 June 2007 Year Short Term Post

Employment

Fixed Remuneration

Share Based Payment

At risk Total Share Based Payment Options

Salary & Fees Super Percent Options

Expensed 30 June 2007

Percent To be expensed in future periods

$ $ $ $ $

Directors

Mr John McAlpine (a) 2007 41,660 - 32% 88,350 68% 130,010 88350

2006 19,491 - 48% 20,816 52% 40,307 155,976 Mr Stephen Johnston (c) 2007 45,872 4,128 51% 48,769 49% 98,769 44,175

2006 17,584 1,582 65% 10,408 35% 29,574 77,988 Mr N.J (John) Karantzis (c) 2007 251,009 22,591 62% 167,988 38% 441,588 168,010

2006 108,552 5,648 74% 39,581 26% 153,781 296,417 Mr Alistair MacKinlay (b) 2007 130,800 - 44% 167,988 56% 298,788 168,010

2006 54,500 - 58% 39,581 42% 94,081 296,417 Mr. Frank Brown (e)

2007 35,484 - 66% 18,375 34% 53,859 -

2006 - - - - - -

Executives Mr Todd Richards (CFO) (d) 2007 180,000 16,200 100% - 0% 196,200 -

2006 75,000 6,750 100% - 0% 81,750 -

(a) Directors fees were paid to Memwane Pty Ltd, a company that is controlled by Mr John McAlpine from 10 February 2006. Mr McAlpine resigned from the position of non-executive director on 4 May 2007.

(b) Directors fees were paid to Uberrimae Ltd, a company which is controlled by Mr Alistair MacKinlay from 10 February 2006.

(c) Commenced employment on 1 April 2006.

(d) Commenced employment on 28 November 2005.

(e) Commenced on 16 October 2006

Options over ordinary shares granted as part of remuneration Directors Grant Date Grant Number Value per Option at

Grant Date Exercised Number

Lapsed Number

J. McAlpine 5 April 2006 2,000,000 $0.20 - -

5 April 2006 1,000,000 $0.30 - -

5 April 2006 1,000,000 $0.50 - -

S. Johnston 5 April 2006 1,000,000 $0.20 - -

5 April 2006 500,000 $0.30 - -

5 April 2006 500,000 $0.50 - -

28 Nov 2006 500,000 $0.20 - -

28 Nov 2006 250,000 $0.30 - -

28 Nov 2006 250,000 $0.50 - -

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N.J. Karantzis 5 April 2006 3,450,000 $0.20 - -

5 April 2006 2,650,000 $0.30 - -

5 April 2006 1,500,000 $0.50 - -

A. MacKinlay 5 April 2006 3.450,000 $0.20 - -

5 April 2006 2,650,000 $0.30 - -

5 April 2006 1,500,000 $0.50 - -

Frank Brown 28 Nov 2006 2,000,000 $0.20 - -

28 Nov 2006 1,000,000 $0.30 - -

28 Nov 2006 1,000,000 $0.50 - -

(a) Options granted as part of the directors remuneration have been valued using a Black-Scholes option pricing model, which takes account of factors including the option exercise price, the current level and volatility of the underlying share price, the risk free interest rate, current market price of the underlying share and the expected life of the option. All options were outstanding at the date of this report. All options expire on or before 22 January 2009. Indemnification And Insurance Of Directors And Officers The Company has entered into Deeds of Indemnity with the Directors and the Company Secretary, indemnifying them against certain liabilities and costs to the extent permitted by law. The Company has also agreed to pay a premium in respect of a contract insuring the Directors and Officers of the Company. Full details of the cover and premium are not disclosed as the insurance policy prohibits the disclosure.

Corporate Governance In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of ReelTime Media Limited adhere to strict principles of corporate governance. The Company’s corporate governance statement is described on page 19 of this Annual Report. Auditor Independence And Non-Audit Services The lead Auditor’s Independence Declaration for the year ended 30 June 2007 has been received and can be found on page 47. Non-Audit Services Non audit services were provided by the entity's auditor however as at 30 June 2007 there were no fees paid or payable. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to such proceedings during the year. This report has been made in accordance with a resolution of the Directors.

N.J (JOHN) KARANTZIS ALISTAIR MACKINLAY Director Director Melbourne 28 September 2007

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Corporate Governance Statement Corporate Governance As a listed company with Australian Stock Exchange Limited (ASX), ReelTime Media Limited must comply with the ASX Listing Rules, which were amended on 1 January 2003 to enhance compliance by listed companies with corporate governance best practice. These provisions require listed companies to report on their main corporate governance practices by reference to the essential corporate governance principles (Principles) and best practice recommendations (Recommendations) of the ASX Corporate Governance Council (the Council), and require a company to highlight those areas of departure from the Recommendations of the Council and explain that departure. Principle 1 Lay solid foundations for management and oversight Recommendation 1.1 – Formalise and disclose the functions reserved to the Board and those delegated to management. The Board of Directors has been charged by members to oversee the affairs of the Company to ensure that they are conducted appropriately and in the interest of all members. The Board defines the strategic goals and objectives of the Company, as well as broad issues of policy, and establishes an appropriate framework of corporate governance within which Board members and management must operate. The Board is proactively involved with management in key matters of strategic direction. The Board has adopted a Board Charter, which is posted on the Company’s website at www.reeltime.tv The Board has delegated to the Managing Director responsibility for the formulation of strategy and management of the day-to-day operations and administration of the Company consistent with the objectives and policies set down by the Board. The Managing Director is directly accountable to the Board for the performance of the management team. Principle 2 Structure the Board to add value Recommendation 2.1 – A majority of the Board should be independent directors. Recommendation 2.2 – The chairperson should be an independent director. Recommendation 2.3 – The roles of chairperson and chief executive officer should not be exercised by the same individual. Recommendation 2.4 – The Board should establish a Nomination Committee. The skills, experience and expertise relevant to the position of director held by each director in office at the dates of the annual report is included in the Director’s Report under the section headed “Directors”. Directors of ReelTime Media Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with the exercise of their independent judgement. In the context of director independence, to be considered independent, a non-executive director may not have a direct or indirect material relationship with the Company. The Board has determined that a material relationship is one which has, or has the potential to, impair or inhibit a director’s exercise of judgement on behalf of the Company and its shareholders. In accordance with the definition of independence above, the following directors of ReelTime Media Limited are considered to be independent: Name Position John McAlpine Non-Executive Director (resigned 4 May 2007) Stephen Johnston Non-Executive Director Frank Brown Non-Executive Director Where a vacancy arises or it is considered appropriate to increase the size of the Board, the Chairman proposes nominations at the first instance. All such nominations are reviewed and, if suitable, are ratified by the full Board. It is not a current intention of the Board to establish a Nomination Committee. The Directors’ terms of appointment are governed by the Constitution of the Company. A Director appointed to fill a casual vacancy, or as an addition to the Board, only holds office until the next general meeting of members and must then retire. After providing for

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the foregoing, one-third of the remaining Directors (excluding the Managing Director and any other executive Director) must retire at each annual general meeting of members. The term of office held by each director in office at the date of this Annual Report is set out in the Directors Reports. All Directors of the Company have direct access to the management of the Company and, where necessary, to external advisers. Each Director has the right to request independent professional advice at the expense of the Company, which request is not to be unreasonably withheld. Principle 3 Promote ethical and responsible decision-making Recommendation 3.1 – Establish a code of conduct to guide the directors, the Managing Director and any other key executives as to: 3.1.1 the practices necessary to maintain confidence in the Company’s integrity; and 3.1.2 the responsibility and accountability of individuals of reporting and investing reports of unethical practices. The Board has adopted a Code of Conduct, which is posted on the Company’s website www.reeltime.tv. Recommendation 3.2 – Disclose the policy concerning trading in Company securities by directors, officers and employees. The Board has adopted a Securities Trading Policy, which is posted on the Company’s website www.reeltime.tv. . Principle 4 Safeguard integrity in financial reporting Recommendation 4.1 – Require the Managing Director and the Chief Financial Officer to state in writing to the Board that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. For the financial year ending 30 June 2007, the Managing Director and the Chief Financial Officer have provided a statement to the Board that, in their view, the Company’s financial statements present a true and fair view of the Company’s financial position at that date, and are based on a sound system of internal control. Recommendation 4.2 – The Board should establish an Audit Committee. It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability for the establishment and maintenance of a framework of internal control and ethical standards for the management of the consolidated entity to the Audit & Compliance Committee. The Audit & Compliance Committee also provided the Board with additional assurance regarding the reliability of financial information for inclusion in the financial statements. The external auditor will attend the Annual General Meeting and will be available to answer shareholder questions about the conduct of the audit and the preparation and content of the Audit Report. Recommendation 4.3 – Structure the Audit Committee so that it consists of:

• Only non-executive directors • A majority of independent directors • An independent chairperson, who is not chairperson of the Board, and • At least three members.

The Audit & Compliance Committee comprises Stephen Johnston (Chairman of the Committee and independent non-executive director) and John McAlpine (non-executive director), supported where necessary by appropriate external consultants and advisors. Recommendation 4.4 – The Audit Committee should have a formal charter. The Board has adopted an Audit & Compliance Committee Charter, which is posted on the Company’s website at www.reeltime.tv.

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Principle 5 Make timely and balanced disclosure Recommendation 5.1 – Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. The Board has adopted an ASX Disclosure Compliance Policy, which is posted on the Company’s website at www.reeltime.tv. Principle 6 Respect the rights of shareholders Recommendation 6.1 – Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participate at general meetings. Information is communicated to the members through compliance with SX Listing Rules and the Corporations Act 2001, by way of the Annual Report, Half-Yearly Report, Appendix 4C quarterly reports, the Annual General Meeting and other meetings that may be called to obtain approval for Board recommendations. The Company also maintains a website – www.reeltime.tv where all the Company’s ASX announcements and media releases can be viewed at any time. Recommendation 6.2 – Request the external auditor to attend the Annual General Meeting and be available to answer shareholders questions about the conduct of the audit and the preparation and content of the auditor’s report. This will be done by way of letter from the Company to the external auditor. Principle 7 Recognise and manage risk Recommendation 7.1 – The Board or relevant Board Committee should establish policies on risk oversight and management. The Directors continually monitor areas of significant business risk, recognising that there are inherent risks associated with exploration for, development and mining of mineral deposits. Specifically, in relation to risk oversight the Board is conscious of its responsibilities to: ensure compliance in legal, statutory and ethical matters; monitor the business environment; identify business opportunities; and monitor the systems established to ensure proper and appropriate responses to member complaints and enquires. The Board has delegated the responsibility for the establishment and maintenance of a framework for risk oversight and the management of risk for the consolidated entity to the Audit & Compliance Committee. The Charter of that Committee, which is posted on the Company’s website at www.reeltime.tv details those responsibilities of that Committee and how they are to be met. Recommendation 7.2 – The Managing Director and the Chief Financial Officer should state to the Board in writing that: 7.2.1 the statement given in accordance with best practice Recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies of the Board; and 7.2.2 the Company’s risk management and internal compliance and control system is operating efficiently and effectively in all materials respects. Principle 8 Encourage enhanced performance Recommendation 8.1 – Disclose the process for the performance evaluation of the Board, its Committees and individual directors, and key executives. Such a performance evaluation for the Board and its members and key executives has not taken place in the reporting period. Principle 9 Remunerate fairly and responsibly Recommendation 9.1 – Provide disclosure in relation to the Company’s remunerations policies to enable investors to understand (i) the costs and benefits of those policies and (ii) the link between remuneration paid to the directors and key executives and corporate performance. A full discussion of the Company’s remuneration philosophy and framework and the remuneration received by directors and

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executives in the current financial year is included in the Remuneration Report, which is contained within the Directors’ Report (page 9). Details of the Company’s remuneration policy and the total remuneration, including monetary and non-monetary components, payable to each Director and specified executive is included in Note 20 of the Financial Statements. Recommendation 9.2 – The Board should establish a Remuneration Committee. The Board has agreed that due to the size of the Company a Remuneration Committee is not required at this time and that all matters relating to remuneration are currently dealt with by the Board. Recommendation 9.3 – Clearly distinguish the structure of Non-Executive Director’s remuneration from that of executives The Constitution of the Company provides that the aggregate remuneration of Non-Executive Directors, in their capacity as Directors, must not exceed $150,000 per annum, or such other sum as the Company in general meeting may approve. This amount is to be apportioned amongst them in such manner as the Directors agree and, in default of agreement, equally. Non-Executive Directors who chair any of the Board committees do not receive additional remuneration for such duties. There are no arrangements currently in place for payment of retirement benefits to Non-Executive, other than statutory superannuation contributions. Principle 10 Recognise the legitimate interests of stakeholders Recommendation 10.1 – Establish and disclose a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders. The Board has adopted a Code of Conduct, which is posted on the Company’s website at www.reeltime.tv.

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ASX Corporate Governance Principles Best Practise Compliance Checklist

Recommendation Number

Compliant Yes/No

If No – Status and / or Reason for Non-Compliance

1.1 Yes 2.1 No A Board of 2 Independent Directors and 2 Executive Directors was appropriate to

the present needs of the Company for the Year.

2.2 Yes 2.3 Yes 2.4 No The full Board undertakes the responsibilities of a Nomination Committee.

3.1 Yes 3.2 Yes 4.1 Yes 4.2 Yes 4.3 Partly No The Audit & Compliance Committee has only 2 members, being both of the Non-

Executive Directors.

4.4 Yes 5.1 Yes 6.1 Yes 6.2 Yes 7.1 Yes 7.2 Yes 8.1 No A performance evaluation for the Board and its members and key executives has

not taken place in the reporting period. 9.1 Yes

9.2 No The full Board undertakes the responsibilities of a Remuneration Committee.

9.3 Yes 10.1 Yes

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FINANCIAL STATEMENTS

The accompanying notes form part of these financial statements .

Income Statements For the year ended 30 June 2007

Consolidated Company

Notes 2007 2006 2007 2006

$ $ $ $

Revenue 2 242,434 75,925 18,663 13,216

Material Cost (247,152) (14,767) - -

Studio Costs (1,629,824) (401,657) - -

Marketing Expense (171,093) (37,097) - -

Executive Share Option Expense 20(b) (491,469) (110,386) - -

Other Employment related costs (2,927,441) (1,449,554) - -

Depreciation and amortization expense (831,279) (134,262) - -

Finance Cost (35,304) (10,503) (1,113) -

Office expenses (705,015) (456,645) - (439)

Travel related expenses (219,546) (255,021) - (719)

Legal/Audit/Advisor expenses (230,154) (223,805) (2,574) (70,295)

Share registry/ASX (60,170) (57,675) (60,170) (57,675)

Other expenses (509,164) (219,591) (950) (1,275)

Total expenses 2 (8,057,611) (3,370,963) (64,807) (130,403)

Loss before income tax expense (7,815,177) (3,295,038) (46,144) (117,187)

Income tax expense 3 - - - -

Loss for the year (7,815,177) (3,295,038) (46,144) (117,187)

Loss attributable to members of ReelTime Media Limited

(7,815,177) (3,295,038) (46,144) (117,187)

Basic earnings per Share (cents per share) 4 (2.95) (1.91) (0.02) (0.05)

Diluted earnings per Share (cents per share) 4 (2.95) (1.91) (0.02) (0.05)

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Balance Sheets As at 30 June 2007


30 June 30 June 30 June 30 June

Notes 2007 2006 2007 2006

$ $ $ $

Current Assets

Cash and cash equivalents 16(b) 8,572 1,461,120 3,074 -

Trade and other receivables 5 525,889 580,787 10,951,564 7,220,269

Convertible notes receivables 1,000,000 - 1,000,000 -

Prepayments 6 1,385,826 898,789 - -

Total Current Assets 2,920,287 2,940,696 11,954,639 7,220,269

Non-Current Assets

Plant and equipment 7 1,453,365 2,078,557 - -

Investment 8 - - 9,232,878 9,232,876

Goodwill 9 399,998 399,998 - -

Other Intangible assets 10 245,178 297,918 - -

Total Non-Current Assets 2,098,541 2,776,473 9,232,878 9,232,876

Total Assets 5,018,828 5,717,169 21,187,517 16,453,145

Current Liabilities

Trade and other payables 11 3,266,543 735,546 2 -

Borrowings 12 348,671 383,539 - -

Total Current Liabilities 3,615,214 1,119,085 2 -

Non-Current Liabilities

Borrowings 12 1,167,411 159,807 1,167,411 -

Total Non-Current Liability 1,167,411 159,807 1,167,411 -

Total Liabilities 4,782,625 1,278,892 1,167,413 -

Net Assets 236,203 4,438,277 20,020,103 16,453,145

Equity

Contributed equity 13 10,421,114 7,627,069 20,037,200 17,243,154

Reserves 14 929,444 110,386 929,444 110,386

Accumulated losses 15 (11,114,355) (3,299,178) (946,540) (900,396)

Total Equity 236,203 4,438,277 20,020,103 16,453,145

The accompanying notes form part of these financial statements.

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Consolidated Statement of Changes in Equity For the Year Ended 30 June 2007

Issued Capital

Accumulated Loss

Other Reserve

Total Equity

$ $ $ $

At 1 July 2005 2 (4,140) - (4,140)

Issue of share capital 5,000,000 - - 5,000,000

Cost of share issues (300,375) - - (300,375)

Purchase consideration for reverse acquisition 2,927,442 - - 2,927,442

Loss for the period - (3,295,038) - (3,295,038)

Share-based payment expense - - 110,386 110,386

At 30 June 2006 7,627,069 (3,299,178) 110,386 4,438,277

Issue of share capital 2,947,407 - - 2,947,407

Cost of share issues (153,362) - - (153,362)

Loss for the period - (7,815,177) - (7,815,177)

Share-based payment expense - - 491,469 491,469

Equity component of convertible notes - - 327,589 327,589

At 30 June 2007 10,421,114 (11,114,355) 929,444 236,203

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Cash Flow Statement For the year ended 30 June 2007



Notes 2007 2006 2007 2006

$ $ $ $

Cash Flows From Operating Activities

Payments to suppliers and employees (Inclusive GST) (4,438,733) (3,164,944) (998) (581,845)

Cash provided to subsidiary - - (1,817,354) (7,181,711)

Interest received 23,194 54,343 12,064 13,216

Net Cash (Outflow) From Operating Activities 16(a) (4,415,539) (3,110,601) (1,806,288) (7,750,340)

Cash Flows From Investing Activities

Purchase of plant and equipment (67,347) (1,263,367) - -

Purchase of other assets (84,155) (320,486) - -

Cash acquired on acquisition of subsidiary - 1,917,867 - -

Net Cash (Outflow) From Investing Activities (151,502) 334,014 - -

Cash Flows From Financing Activities

Proceeds from issue of ordinary shares 2,937,407 5,000,000 1,912,897 8,400,000

Proceeds from issue of convertible notes 495,000 - 25,000 -

Payment of share issue costs (158,106) (300,735) (128,535) (649,660)

Repayment of finance lease (159,807) (461,560) - -

Net Cash Inflow From Financing Activities 3,114,494 4,237,705 1,809,362 7,750,340

Net Increase (Decrease) in cash and cash equivalents

(1,452,548) 1,461,118 3,074 -

Cash and cash equivalents at the beginning of the financial period

1,461,120 2 0 -

Cash and cash equivalents at the end of the financial year

16(b)

8,572 1,461,120 3,074 -


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Notes to the Financial Statements for the financial period ended 30 June 2007 Note 1. Summary of Significant Accounting Policies Statement of Compliance The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, and Australian Accounting Standards, Urgent Issues Group Interpretations, and other authorative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for acquisition cost, which have been measured at fair value. Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial statements and notes of ReelTime Media Limited comply with International Financial Reporting Standards (IFRS). The parent entity financial statements and notes also comply with IFRS. The financial report was authorised for issue in accordance with a resolution of the directors on 28 September 2007. The financial report is presented in Australian dollars. The following significant accounting policies have been adopted in the preparation and presentation of the financial report: (a) Principles of Consolidation The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 Consolidated and Separate Financial Statements. The name of the subsidiaries appear in note 8 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. The subsidiaries are 100% held by the parent company, therefore no interest of minority shareholders is stated as of 30 June 2007. The consolidated financial statements include the information and results of the subsidiaries from the date on which the company obtains control and until such time as the company ceases to control such entity. In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full. The parent entity recognises investments in subsidiaries at cost. (b) Significant accounting estimates and assumptions The preparation of financial statement in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or area where assumptions and estimates are significant to the financial statements, are disclosed in the notes. The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are described in (i)-(iii) below.

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(i) Goodwill The goodwill represents the excess of the cost of an acquisition over the fair value of the parent’s share of net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. (ii) Option valuation Options issued during the reporting period were independently valued at grant date in accordance with AASB2 share-based payments, using the Black-Scholes pricing methodology and expensed on a pro-rata basis from grant date to vesting date. (iii) Convertible Notes As at 30 June 2007, $1,495,000 of convertible notes was issued. Liability component of notes issued is calculated by applying the effective discount rate of 28.75%. (c) Income Tax The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit and loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefit brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. (d) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except:

• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Balance Sheet. Cash flows are included in the Balance Sheet on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (e) Foreign currency transactions All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. (f) Cash and Cash Equivalents Cash on hand and in banks are stated at nominal value. For the purposes of the Cash Flow Statement, cash includes cash on hand and in banks, and money market investments readily converted to cash, net of outstanding bank overdrafts.

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(g) Business Combination The purchase method of accounting is used to account for all acquisition of assets (including business combinations) and cost is measured as the fair value of the assets given, or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. (h) Impairment of Assets At the end of reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. Goodwill and intangible assets with indefinite useful lives, and intangible assets not yet available for use, are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairment losses on goodwill cannot be reversed. (i) Plant and Equipment, and Depreciation Items of plant and equipment are initially recorded at cost and depreciated as outlined below. Plant and equipment are depreciated on a straight-line basis at rates based upon the expected useful lives of these assets. The expected useful lives of these assets are 3-5 years. (j) Leases Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating Leases The minimum lease payments of operating leases, where the lesser effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis even within the free-rental periods. Contingent rentals are recognised as an expense in the financial year in which they are incurred. Finance Leases Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the group are capitalised at the lower of the fair value of the leased property at inception and the present value of the minimum lease payments and disclosed as plant and equipment under lease. A lease liability of equal value is also recognised. (k) Payables Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services. These amounts usually have 30 days settlement. (l) Contributed Equity Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in the share proceeds received. Contributed equity of the group reflects the impact of the reverse acquisition, refer to Note 13(b) for further details. (m) Employee Benefits Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

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Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Provisions made in respect of employee benefits which are not expected to be settled within 12 months, are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date. (n) Earnings per Share (“EPS”) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to members, adjusted for the after-tax effect of any preference dividends on preference shares classified as equity, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus elements in ordinary shares during the year. The weighted average number of issued shares outstanding during the financial year does not include shares issued as part of any Employee Share Loan Plan that are treated as in-substance options. Diluted earnings per share Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by the after-tax effect of dividends and interest associated with dilutive potential ordinary shares. The weighted average number of shares used is adjusted for the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (o) Revenue Recognition Sale of Goods Revenue from the sale of goods is recognised when the consolidated entity has transferred to the buyer the significant risks and rewards of ownership of the goods. Interest Revenue Interest revenue is recognised on the basis that takes into account the effective yield on bank deposit. (p) Going Concern The going concern basis has been adopted in the preparation of the financial report for the year ended 30 June 2007, which contemplates the Company being able to continue as a going concern and therefore realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the financial report. Future capital raisings will be required in order to meet its expenditure commitments and to continue its operations. The Company’s ability to continue as a going concern is reliant upon the Company successfully raising additional equity or loan capital at amounts sufficient to meet necessary future expenditure commitments. Should the Company not be successful in raising sufficient funds then there would exist some doubts as to the ability of the Company to continue as going concern. The company has previously announced that it has secured a $4m draw down facility with U.S. based investment fund Cornell Capital Partners, LP. These funds are available for progressive draw down commencing in July 2007. Subsequent to year end the Company has also received the proceeds of a $1 million convertible note issued on 29 June 2007 and has a Prospectus open to general investors to raise up to $1 million at an issue price of $0.025. The Prospectus will close on Friday 28 September 2007 (at least $150,000 will be subscribed by Ezy DVD Pty Ltd under the terms of the agreement completed on 24 September 2007). (q) Segment Reporting The consolidated entity operates in one geographical segment during the year, being in Australia, and one business segment being the provision of Internet Protocol Television (IPTV) content operator, offering traditional media product (television programs and movies) via broadband. (r) New standards and interpretations issued but not yet effective At the date of this financial report AASB 7, AASB 2005-10, AASB 101, AASB 123, AASB 2007-6, AASB 2007-4, AASB 2007-7, AASB 2007-5, Interpretation 12 and AASB 2007-2 which may impact the entity in the period of initial application, have been issued but are not yet effective. These new standards and interpretations have not been applied in the preparation of this financial report. Other than charges to disclosure formats, it is not expected that the initial application of these new standards and interpretations in the future will have any material impact.

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Note 2. Revenue and Expenses



2007 2006 2007 2006

$ $ $ $

(a) Revenue

Revenue from continuing operations consisted of:

Revenue from the sale of goods 171,542 16,478 - -

Revenue from the rendering of services 47,699 5,103 6,599 -

219,241 21,581 6,599 -

Other revenue:

Interest 23,194 54,343 12,064 13,216

Total Revenue 242,434 75,925 18,663 13,216

(b) Loss before income tax

Loss before income tax has been arrived at after charging the following expenses:

Depreciation of plant and equipment 705,068 108,505 - -

Amortisation of intangibles 126,211 25,757 - -

Operating lease charges 154,715 117,500 - -

Interest and finance charges 35,304 10,503 - -

Defined contribution of superannuation 174,595 63,899 - -

Note 3. Income Tax

(a) Income tax expense

Current tax expense - - - -

Deferred tax expense - - - -

Total tax expense - - - -

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Profit from operations before income tax expense (7,815,175) (3,295,038) (46,144) (117,187)

Tax at the Australian tax rate of 30% (2006 – 30%) (2,344,552) (988,511) (13,843) (35,156)

Tax effect of amounts which are not deductible (taxable) in calculating taxable income

Share options expensed 147,441 33,116 - -

Capital raising costs - (38,980) - -

Sundry items (36,889) - - -

Adjustment to unused tax losses of prior periods 623,490 - (18,442) -

Unused tax losses not recognised as deferred tax assets 1,610,510 994,375 32,285 35,156

Total tax expense/(benefit) - - - -

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Note 3. Income Tax (Cont)



2007 2006 2007 2006

(c) Tax losses

Unused tax losses for which no deferred tax asset has been recognised 8,799,933 3,314,583 224,803 117,187

Potential tax benefit @ 30% 2,639,980 994,375 67,441 35,156

(d) Franking Account

Franking credits available to the Company - - - -

Note 4. Earnings per Share

The following reflects the income and share data used in calculating basic and diluted earning per share:

Loss for the year (7,815,177) (3,295,038) (46,144) (117,187)

Basic and diluted earnings per share (cents per share) (2.95) (1.91) (0.02) (0.05)

Weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share

265,321,426 172,229,588 265,321,426 172,229,588

(The options are non dilutive as they are ‘out of the money’)

Note 5. Trade and other receivables - Current

Trade debtors 157,429 22,579 - -

GST receivable (net) 112,857 409,072 2,744 38,557

Receivables from controlled entity - - 10,948,820 7,181,711

Other receivables 255,603 149,136 - -

525,889 580,787 10,951,564 7,220,269

Note 6. Prepayments -Current

Prepayments – Studios 643,064 126,513 - -

Prepayments – IP suppliers 742,762 772,277 - -

1,385,826 898,789 - -

Note 7. Plant and Equipment

Plant & Equipment, &

Leasehold improvement

Computer Equipment

Finance Lease Computer Equipment

Total

Year ended 30 June 2006

At 1 July 2006, net of accumulated depreciation - - - -

Additions 600,342 663,026 923,695 2,187,062

Depreciation Expense (37,476) (45,370) (25,658) (108,505)

At 30 June 2006, net of accumulated depreciation 562,866 617,656 898,037 2,078,557

Year ended 30 June 2007 $ $ $ $

At 1 July 2006, net of accumulated depreciation 562,865 617,656 898,037 2,078,557

Additions 9,354 71,144 - 80,498

Disposals - (622) - (622)

Depreciation expense 157,298 239,872 307,898 705,068

At 30 June 2007, net of accumulated depreciation 414,922 448,305 590,138 1,453,365

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Note 9. Goodwill

Goodwill is allocated to the Company’s cash-generating unit (CGU) identified according to business operation. The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period.



2007 2006 2007 2006 Goodwill 399,998 399,998 - -

Note 10. Other Intangible Assets



2007 2006 2007 2006

$ $ $ $

Computer Software 397,146 323,676 - -

Less accumulated amortisation (151,968) (25,757) - -

245,178 297,918 - -

Note 11. Trade and other payables - Current

Trade payables 2,423,307 385,506 - -

Other payables and accrued expenses 843,236 350,040 2 -

3,266,543 735,546 2 -

Note 8. Investment

Investments in subsidiary companies

(i) Details of Investments in 100% owned subsidiaries:

Country of Incorporation Class of Shares

Fair Value ($)

ReelTime Infotainment Ltd Australia Ordinary 9,232,876

Xstreem Networks Pty Australia Ordinary 2

9,232,878

(ii) ReelTime Infotainment Ltd is an Australian unlisted public company which acquired ReelTime Media Ltd through "reverse take-over" on 10 February, 2006. The proportion of ownership interest is equal to the proportion of voting power held.

Xstreem Nteworks Pty is an Australian proprietary company acquired by Reeltime Media on 16 November 2006.

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Note 12. Borrowings

(a) Borrowings -Secured Consolidated

Company

30 June

2007 30 June

2006 30 June

2007 30 June

2006

Lease liability – Current 348,671 383,539 - -

Lease liability – Non current - 159,807 - -

348,671 543,346 - -

These liabilities are secured by the computer equipment held under finance lease refer Note 7.

(b) Borrowings –Unsecured

Convertible notes 1,167,411 - 1,167,411 -

The parent entity issued the following convertible note of $1,495,000 as at 30/06/07. The notes are convertible into ordinary shares of the parent entity repayable on agreed conversion date

Consolidated

Company


Conversion Date Face value ($) 2007 2006 2007 2006

Convertible notes (A) issued on 20/02/07

28/02/08 395,000 306,796 - 306,796 -

Convertible notes (B) issued on 27/06/07

28/02/08 100,000 83,916 - 83,916 -

Convertible notes (C) issued on 29/06/07

30/06/08 1,000,000 776,699 - 776,699 -

Total 1,495,000 1,167,411 - 1,167,411 -

The numbers of ordinary shares to be issued for convertible note (A) & (B) will be determined by dividing the subscription amount by the lesser of 5.3 cents or the lowest issue price of any ordinary fully paid shares, or shares that are proposed to be issued prior to the date of conversion.

The numbers of ordinary shares to be issued for convertible note (C) will be determined by dividing the subscription amount by a discount of 20% on volume weighted average share price of the ordinary share of the issued on the ASX in the five trading days prior to the date of conversion.

The liability component of notes issued is calculated by applying the effective discount rate of 28.75%

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Note 13. Contributed Equity



2007 2006 2007 2006

$ $ $ $

(a) Issued and paid up capital

Ordinary shares fully paid 10,421,114 7,627,069 20,037,200 17,243,154

(b) Movements in shares on issue in Company

Year ended

30 June 2007

Details for Company Issue Price

(cents) Number of

Shares Issued Issued Capital

$

Beginning of the financial year 233,063,163 17,243,154

Movements during the year:

24 August 2006: unmarketable share swap - 9,321

27 September 2006 share placement 6 34,833,334 2,090,000

18 October 2006 Share purchase 6.6 3,442,182 227,186

15 December 2006: share issued to Windson Palace 6 166,667 10,000

3 March 2007 Share placement 5.3 11,526,415 610,901

Less share issue costs - (153,362)

283,031,761 20,037,200

Details for Group The number of shares for the Group is as shown above for the Company. The dollar amounts for issued capital of the Group is as follows:

30 June 30 June

2007 2006

Beginning of the financial year 7,627,069 2

Purchase consideration for reverse acquisition - 2,927,442

24 August 2006 unmarketable share swap 9,321 -

27 September 2006 Share placement /20 April 2006 Issue by prospectus 2,090,000 5,000,000

18 October 2006 Share purchase 227,186 -

15 December 2006 Shares issued to Windson Palace 10,000 -

3 March 2007 Share placement 610,901 -

Less share issue costs (153,362) (300,375)

10,421,114 7,627,069

At 30 June 2007 there were 283,031,761 ordinary shares called to 2.4 cents which have no par value

Ordinary shareholders are entitled to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. This is subject to the prior entitlements of the cumulative redeemable preference shares that are classified as liabilities. Every ordinary shareholder present at a meeting in person or by proxy is entitled to one vote on a show of hands or by poll.

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Note 14. Reserve



2007 2006 2007 2006

Share Option Reserve $601,855 110,386 $601,855 110,386

Options over Ordinary Shares

The option reserve records items recognized as expenses on valuation of employee share options.

At the end of the financial year, the following options were outstanding:

Expiry

date/Duration

Number

In Escrow

Exercise price

Total cost $

Expensed Amount till 30 June 07

$

Unlisted Options Granted on 5 April 2006

22-Jan-09 9,900,000 5 April 2007 till 4 April 2008

$0.20 610,820 377,370



$0.30 255,330 157,745



$0.50 70,850 43,772

Unlisted Options Granted on 28 November 2006

22-Jan-09 2,500,000 None $0.20 17,500

17,500


22-Jan-09 1,250,000 None $0.30 4,375 4,375


22-Jan-09 1,250,000 None $0.50 1,094 1,094

TOTAL 26,200,000 959,969 601,855



2007 2006 2007 2006

Convertible Notes Reserves $327,589 - $327,589 -

The parent entity issued the following convertible notes for $1,495,000 as at 30/06/07. See the details on note 12. The following is the equity component of convertible notes:

Consolidated

Company


Conversion Date Face value ($) 2007 2006 2007 2006

Convertible notes (A) issued on 20/02/07 28/02/08 395,000 88,204 - 88,204 -

Convertible notes (B) issued on 27/06/07 28/02/08 100,000 16,084 - 16,084 -

Convertible notes (C) issued on 29/06/07 30/06/08 1,000,000 223,301 - 223,301 -

Total 1,495,000 327,589 - 327,589 - For

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Note 15. Accumulated Losses



2007

$ 2006

$ 2007

$ 2006

$

(a) Accumulated Losses

Accumulated losses at the beginning of the financial year (3,299,178) (4,140) (900,396) (783,208)

Loss for the year attributable to members of ReelTime Media Limited

(7,815,177) (3,295,038) (46,144) (117,188)

Accumulated losses at the end of the financial year (11,114,355) (3,299,178) (946,540) (900,396)

Note 16. Cash and cash equivalents

(a) Reconciliation of loss for the year to net cash flows from operations

Net loss for the year (7,815,177) (3,295,038) (46,144) (117,187)

Non cash flows in operating result

Depreciation of property, plant and equipment 705,068 108,505 - -

Amortization of intangible assets 126,211 25,757 - -

Share based payments - - - -

Accruals 96,777 95,424 - -

Expensing Share Options 491,469 110,386 - -

Changes in assets and liabilities

Decrease/(Increase) in receivables (750,115) (649,386) (1,807,642) (7,109,880)

Increase/(Decrease) in payables 2,729,606 492,751 - -

Other 622 1,000 47,498 (523,273)

Net cash used in operating activities (4,415,539) (3,110,601) (1,806,288) (7,750,340)

(b) Reconciliation of cash

Cash at bank 8,572 1,461,120 3,074 -

8,572 1,461,120 3,074 -

(c) Financing Facility

The group has no available finance facilities at balance date.

(d) Non-Cash Financing and Investing Activities

ReelTime Infotainment entered the financial lease agreement during the year. See Note 7 Plant and Equipment, Note 12 Borrowings, and Note 17 Commitments

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Note 17. Expenditure Commitments


. 30 June 30 June 30 June 30 June

2007 2006 2007 2006

$ $ $ $

Finance Lease Commitments

Payable minimum lease commitments

Within one year 348,671 383,539 - -

One to two years

- 159,807 - -

Present value of minimum lease payments 348,671 543,346 - -

Operating Lease Commitments

Non-cancelable operating leases contracted for but not reported in the financial statements:

Payable minimum lease payments:

– Within one year 197,368 117,089 - -

- Between one and five years 564,797 686,697 - -

762,165 803,786 - -

Lease liability -

- Current 348,671 383,539 - -

- Non current 159,807 - -

348,671 543,346 - -

Note 18. Subsequent Events

Subsequent to year-end, the Company has received the proceeds of a $1 million convertible note issued on 29 June 2007. Apart from this matter, no matters or circumstances have arisen since the end of the financial year that have significantly affected or may have a significant effect on the financial operations of the consolidated entity, the financial performance of those operations or the financial position of the consolidated entity in the subsequent financial year.

Note 19. Superannuation

The consolidated entity contributes to a defined contribution fund in accordance with the Government Superannuation Guarantee legislation.

Note 20. Key Management Personnel Disclosures

(a) Directors

The directors of ReelTime Media Limited during the year were:

Stephen Johnston Director (non-executive)

N.J (John) Karantzis Managing Director (executive)

Alistair MacKinlay Legal Director (executive)

Frank Brown Director (non-executive, appointed on 16 Oct 2006)

John McAlpine Director (non-executive resigned on 4 May 2007)

The other key management personnel of ReelTime Media Limited during the year were:

Todd Richards Company Secretary/Chief Financial Officer

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(b) Compensation of Key Management Personnel

(i) Compensation Policy

The Board of Directors of ReelTime Media Limited is responsible for determining and reviewing compensation arrangements for the directors and executives. The Board’s remuneration policy is to ensure that the remuneration package properly reflects the person’s duties and responsibilities, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executives. Such officers will be given the opportunity to receive their base emolument in a variety of forms, including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost to the company. To assist in achieving these objectives, the Board links the nature and amount of executive officers’ emoluments to the company’s financial and operational performance. All directors and executives will have the opportunity to qualify for Employee Option Plan which will provide incentives where specified performance criteria are met. The plan has been formalized by the Board and has been implemented in July 2007. Employment Agreements were entered into with Executive Directors and other Executives. The current employment contract with the Managing Director runs until its termination date of 31 March 2009, unless terminated by the Managing Director who may give six months’ notice. The employment contract with the Executive Director runs until its termination date of 9 February 2009, unless terminated by the Executive Director who may give six months’ notice. The other Executives have contracts that provides for three months’ notice. Contracts do not provide for any additional termination benefits.

Remuneration Committee The Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors and executives. Given the size of the Company the Board have determined that at present it is not necessary to establish a separate Remuneration Committee although this will be reviewed on a regular basis and a Committee established when deemed necessary. Remuneration Structure In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct. Non-Executive Director Remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest caliber, whilst incurring a cost which is acceptable to shareholders. Structure The Company’s Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was in the Constitution adopted on 10 February 2006 and amended at the AGM in November 2006, which approved an aggregate remuneration of $400,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the Company. Directors who are called upon to perform extra services beyond the director’s ordinary duties may be paid additional fees for those services. Non-executive directors have long been encouraged by the Board to hold shares in the Company. It is considered good governance for directors to have a stake in the company on whose board he or she sits. The remuneration of non-executive directors for the year ending 30 June 2007 is detailed on page 14 of this report.

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(ii) Compensation of Key Management Personnel

Year ended 30 June 2007 Short Term Post Employment

Share Based Payment

Total Commence Date

Salary & Fees Superannuation Options

$ $ $ $

Directors

John McAlpine 41,660 - 88,350 130,010 10/02/06

Stephen Johnston 45,872 4,128 48,769 98,769 10/02/06

John Karantzis 251,009 22,591 167,988 441,588 01/04/06

Alistair MacKinlay 130,800 - 167,988 298,788 10/02/06

Frank Brown 35,485 18,374 53,859 16/10/06

Executives

Todd Richards 180,000 16,200 - 196,200 28/11/05

684,826 42,919 491,469 1,219,214

* Directors’ fees were paid to Uberrimae Pty Ltd, which is controlled by Alistair MacKinlay, and to Memwane Pty Limited which is controlled by John McAlpine.

(c) Remuneration Options: Granted and vested during the period

5 million options were granted to directors during the period.

(d) Share issued on exercise of remuneration options

No shares were issued on the exercise of remuneration options during the reporting period.

(e) Option holdings of Directors and Executives.

Unlisted options held by Directors and Executives.

30-Jun-07 Opening Balance

Granted as remuneration

Options Exercised

Net Change other

Closing Balance Vested at

1-Jul-06 30-Jun-07 30-Jun-07

John McAlpine 4,000,000 - - - 4,000,000 4,000,000

Stephen Johnston 2,000,000 1,000,000 - - 3,000,000 3,000,000

N.J. (John) Karantzis

7,600,000 - - - 7,600,000 7,600,000

Alistair MacKinlay 7,600,000 - - - 7,600,000 7,600,000

Frank Brown - 4,000,000 - - 4,000,000 4,000,000

Total 21,200,000 5,000,000 - - 26,200,000 26,200,000

Those options granted on 28 Nobember 2006 had been evaluated using Black-Scholes pricing methodology at $22,969, which has been expensed at 30 June 2007.

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Fair Value of Option

Grant Date Options Excise Price Fair value per option Total Fair Value

$ $ $

John McAlpine

Option X 05/04/06 2,000,000 0.20 0.0617 123,400

Option Y 05/04/06 1,000,000 0.30 0.03755 37,550

Option Z 05/04/06 1,000,000 0.50 0.01575 15,750

4,000,000 176,700

Stephen Johnston

Option X 05/04/06 1,000,000 0.20 0.0617 61,700

Option Y 05/04/06 500,000 0.30 0.03755 18,775

Option Z 05/04/06 500,000 0.50 0.01575 7,875

Option X 28/11/06 500,000 0.20 0.007 3,500

Option Y 28/11/06 250,000 0.30 0.0035 875

Option Z 28/11/06 250,000 0.50 0.000875 219

3,000,000 92,944

N.J. (John) Karantzis

Option X 05/04/06 3,450,000 0.20 0.0617 212,865

Option Y 05/04/06 2,650,000 0.30 0.03755 99,508

Option Z 05/04/06 1,500,000 0.50 0.01575 23,625

7,600,000 335,998

Alistair MacKinlay

Option X 05/04/06 3,450,000 0.20 0.0617 212,865

Option Y 05/04/06 2,650,000 0.30 0.03755 99,508

Option Z 05/04/06 1,500,000 0.50 0.01575 23,625

7,600,000 335,998

Frank Brown

Option X 28/11/06 2,000,000 0.20 0.007 14,000

Option Y 28/11/06 1,000,000 0.30 0.0035 3,500

Option Z 28/11/06 1,000,000 0.50 0.000875 875

4,000,000 18,375

Total 26,200,000 960,014

Shares held by Directors at balance date

Opening Balance Direct Shares Indirect Shares Closing Balance

1 July 2006 30 June 2007

N.J. (John) Karantzis 74,500 direct shares 428,357 - 502,857 direct shares

158,431 indirect shares in the name of Southern Ocean Pty Ltd

- - 158,431 indirect shares in the name of Southern Ocean Pty Ltd

8,120 indirect shares via 20% ownership of Movies Online Ltd

- 358,151

366,271 indirect paid ordinary shares via 20% ownership of Movies Online Ltd

28,408,851 indirect restricted shares via 20% ownership of Movies Online Ltd

- - 28,408,851 indirect restricted shares via 20% ownership of Movies Online Ltd

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Alistair MacKinlay 50,000 direct shares 97,657 - 147,657 direct shares

40,600 indirect shares via 3% ownership of Movies Online Ltd

- 14,341 54,941 indirect shares via 3% ownership of Movies Online Ltd

4,261,328 indirect restricted shares via 3% ownership of Movies Online

- - 4,261,328 indirect restricted shares via 3% ownership of Movies Online

- -

200,000 indirect shares via Fidei Corporation Pty ltd ATF Fidei Corporation Directors Superannuation Fund of which Mr. MacKinlay is a director

200,000 indirect shares via Fidei Corporation Pty ltd ATF Fidei Corporation Directors Superannuation Fund of which Mr. MacKinlay is a director

John McAlpine Nil - - Nil

Stephen Johnston Nil - - Nil

(g) Other transactions and balances with Key Management Personnel

As described in Note 20(b)(ii), directors’ fees payable to Alistair MacKinlay are paid to Uberrimae and directors fees payable to John McAlpine were paid to Memwane Pty Limited.

There were no other transactions with key management personnel.

* The options have expiry date of 22 January 2009.

Fair value of options granted

The Fair value at grant date was determined by an independent valuator using a Black-Scholes option pricing model that takes into account the share price at grant date, exercise price, expected volatility, option life, expected dividends, the risk free rate, vesting and performance criteria, the impact of dilution, the fact that the options are not tradable. The inputs used for the Black-Scholes option pricing model for options granted during the year ended 30 June 2007 were as follows:

- grant date: 28 November 2006

- share price at grant date: $0.093

- exercise price: Option X: $0.20:Option Y: $0.30, Option Z: $0.50

- expected dividend yield: 0.00%

- risk free rate: 5.26%

Expected volatility was determined based on the historic volatility (based on the remaining life of the option), adjusted for any expected changes to future volatility based on publicly available information.

No options were exercised during the reporting year.

Note 21. Auditors’ Remuneration



2007 2006 2007 2006

$ $ $ $

Amounts received or due and receivable by RSM Bird Cameron for:

45,500 - - -

Audit or review of the financial statements of the entity and any other entity in the economic entity by non RSM Bird Cameron

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Note 22. Related Party Disclosures

(a) The Directors during the financial year were:

John McAlpine

Stephen Johnston

John Karantzis

Alistair MacKinlay

Frank Brown

(b) Information on remuneration and retirement benefits of Directors is disclosed in Note 20.

(c) Directors' shareholding

At period end, the current Directors held direct and indirect 34,100,336 shares and 26.2 million options in the Company.

(d) Loans from related parties



2007 2006 2007 2006

Loans to Subsidiaries

Beginning of the year - - 7,181,711 -

Loans advanced - - 3,874,484 7,615,364

Loan repayments received - - (107,375) (433,653)

Interest charged - - - -

Interest received - - - -

End of the year - - 10,948,820 7,181,711

Loans from Directors

Beginning of the year - - - -

Loans advanced 155,000 - - -

Loan repayments received - - - -

Interest charged - - - -

Interest received - - - -

End of the year 155,000 - - -

Terms and conditions

All other transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the repayment of loans between the parties.

The loans from Directors are expected to be converted into equity on 30th September 2007

There were no related party transactions other than those described in Note 20.

(e) Ultimate Parent:

ReelTime Media Limited is the ultimate Australian parent company.

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Note 23. Financial Instruments

(a) Fair Values

The carrying values of all financial assets and liabilities at reporting date approximate their fair value.

(b) Interest Rate Risk

The consolidated entity’s exposure to interest risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

Fixed Interest

Weighted Average Interest Rate

Floating Interest Rate Within Year

$ 1 to 5 Years

$

Non Interest Bearing

Total

2007 Financial Assets:

Cash and cash equivalents

6.5% 8,572 - - - 8,572

Receivables - - - - 525,889 525,889

8,572 - - 525,889 534,461

Financial Liabilities:

Payables - - - - 3,266,543 3,266,543

Lease liability 6% - 348,671 - - 348,671

- 348,671 - 3,266,543 3,615,214

2006 Financial Assets:

Cash 5% 1,461,120 - - - 1,461,120

Receivables - - - - 580,787 580,787

1,461,120 - - 580,787 2,041,907

Financial Liabilities:

Payables - - - 735,546 5,106

Lease liability 6% - 383,539 159,807 - 543,346

- 383,539 159,807 735,546 548,452

Note 24. Segment Reporting

The consolidated entity operates in one geographical segment during the year, being in Australia, and one business segment being the provision of Internet Protocol Television (IPTV) content operator, offering traditional media product (television programs and movies) via broadband.

Note 25. Contingent Liabilities and Contingent Assets

No contingent liabilities or contingent assets existed at the reporting date.

Note 26. Risk Management Policies and Objectives

Activities undertaken by ReelTime Media Limited and its subsidiaries may expose the Group to market risk and liquidity risk. The Groups' risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the Group where such impacts may be material. The Group has a central treasury function which implements the risk management policies approved by the board of directors. Market risk Market risk essentially comprises the start up nature of the business activities. Liquidity risk Liquidity risk is the risk that the Group may encounter difficulties in raising funds to meet its expenditure commitments and future requirements.

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Directors’ Declaration In accordance with a resolution of the Directors of ReelTime Media Limited, we state that: • In the opinion of the directors:

a) The financial statements, comprising the balance sheet, income statement, cash flow statement, statement of change in equity and the accompanying notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

(i) Giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their performance for the year ended on that date; and

(ii) Complying with Accounting Standards and the Corporations Regulations 2001.

b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and

payable. • This declaration has been made after receiving the declarations by the chief executive officer and chief financial officer required

by section 295A of the Corporations Act 2001 for the financial year ended 30 June 2007. This declaration is made in accordance with a resolution of the Board of

N.J. (John) Karantzis Alistair MacKinlay Director Director Date: 28 September 2007 Date: 28 September 2007 Melbourne

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Level 8 Rialto South Tower

525 Collins Street Melbourne VIC 3000

PO Box 248 Collins Street West VIC 8007

T +61 3 9286 1800 F +61 3 9286 1999

www.rsmi.com.au

47 Liability limited by a scheme approved under Professional Standards Legislation

Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036

RSM Bird Cameron Partners is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms.

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of ReelTime Media Limited and Controlled Entities for the year ended 30 June 2007, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

(ii) any applicable code of professional conduct in relation to the review.

RSM BIRD CAMERON PARTNERS Chartered Accountants

J S CROALL Partner 28 September, 2007 Melbourne

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Level 8 Rialto South Tower

525 Collins Street Melbourne VIC 3000

PO Box 248 Collins Street West VIC 8007

T +61 3 9286 1800 F +61 3 9286 1999

www.rsmi.com.au

48 Liability limited by a scheme approved under Professional Standards Legislation

Major Offices in: Perth, Sydney, Melbourne, Adelaide and Canberra ABN 36 965 185 036

RSM Bird Cameron Partners is an independent member firm of RSM International, an affiliation of independent accounting and consulting firms.

INDEPENDENT AUDIT REPORT

TO THE MEMBERS OF

ReelTime Media Limited and Controlled Entities

SCOPE

We have audited the accompanying financial report of ReelTime Media Limited and Controlled Entities (“the Consolidated Entity”), which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations

Act 2001.

Audit Opinion

In our opinion, the financial report of the Consolidated Entity is in accordance with: (a) the Corporations Act 2001, including:

(i) giving a true and fair view of the company's and consolidated entity’s financial position as at 30 June 2007 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian

Accounting Interpretations) and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as

disclosed in Note 1(a). Material Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 1(p) in the financial report which indicates that the the Consolidated Entity incurred a net loss of $7,815,177 during the year ended 30 June 2007. This condition, along with other matters as set forth in Note 1(p) indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern.

RSM BIRD CAMERON PARTNERS

Chartered Accountants

J S CROALL

Partner 28 September, 2007 Melbourne F

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Shareholder information as at 1 September 2007 Fully paid Ordinary Shares (a) Number of Shareholders 969 (b) Total Shares Issued 283,031,760 (c) Percentage of Shareholding by or on behalf

of 20 largest Shareholders 77.33% (d) Shareholders with less than a marketable

parcel 498

Size of Holding No. of Holders No. of Shares

1 – 1000 168 39,256 1001 - 5000 86 259,923 5001 – 10,000 132 1,104,473 10,001 – 100,000 418 18,589,304 100,001 - 9999999999 165 263,038,804 Total Holders 969 283,031,760 (e) Voting rights: Every member present personally or by proxy or attorney etc shall, on a show of hands, have one vote and on a poll shall have one vote for every Share held. Twenty largest holders of Fully Paid Ordinary Shares as at 30 June 2007 Name Number of fully paid

ordinary shares held % of issued capital

1 Movies Online Ltd 142,044,253 50.19% 2 Pacific Development Capital Ltd 9,744,330 3.44% 3 ANZ Nominees Limited 9,517,775 3.36% 4 TM Consulting Pty Ltd 8,347,084 2.95% 5 Bannaby Investments Pty Ltd 5,437,084 1.92% 6 Mr Alan Myall 4,785,898 1.69% 7 Mr John Catherwood Young & Mrs

Corinne Girard Young 4,595,757 1.62% 8 Yarandi Investments Pty 4,441,757 1.57% 9 Tisia Nominees Pty Ltd 4,369,500 1.54% 10 Mr Andrew Willshire 3,850,000 1.36% 11 Goman Holdings (VBI) Ltd 3,500,000 1.24% 12 Chifley Investor Group Pty 3,275,000 1.16% 13 Marble Hill Investments Ltd 2,700,000 0.95% 14 Cartesia Pty Ltd 2,242,424 0.79% 15 Appwam Pty Ltd 2,000,000 0.71% 16 Dr Joseph David Ross 2,000,000 0.71% 17 Movie Online Ltd C/-Mr Alistair Mackinlay 1,831,353 0.65% 18 Mr Erik Adriaanse 1,500,000 0.53% 19 Mr Alan Leslie Johnson 1,431,600 0.51% 20 Comsec Nominees Pty 1,242,468 0.44% Total 218,856,283 77.33% Share on issue as at 30 June 2007 283,031,760 100% Restricted securities subject to escrow period 142,044,253 restricted ordinary shares were issued to Movies Online Ltd with escrow period for 24 months.

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Unlisted options on issue As at 30th June 2007, a total of 26,200,000 options, which are not listed on the Australian Stock Exchange, remain outstanding as follows:

• 12,400,000 options exercisable on or before 5th April 2008 at an exercise price of $0.20 • 8,050,000 options exercisable on or before 5th April 2008 at an exercise price of $0.30 • 5,750,000 options exercisable on or before 5th April 2008 at an exercise price of $0.50

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for personal use only · the past year has also seen considerable progress in the iptv industry...

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