BEACON EQUITY RESEARCH

Analyst: Victor Sula, Ph.D.

Initial Report
July 28th, 2008

PYBX daily 7/25/2008

1.75

1.50

1.25

1.00

0.75

PlayBOX (U.S.) Inc. 0.50

222 Cray Avenue
Orpington volume
Kent BR5 3PZ 400
U.K.

Thousands
300
Tel. +44 (0)1908 551815
100
www.play-box.com
harry.maloney@play-box.com 0
May June July

Market Data Company Introduction

PlayBOX (U.S.) Inc. (PYBX) is a fast-growing media entertainment dis-
Symbol PYBX
Exchanges OTC BB
tribution company offering a wide variety of distribution channels for
Current Price $0.66 new music artists and small-to-medium-sized record labels. The Com-
Price Target $1.90 pany is aggressively expanding its traditional (retail) and non-tradi-
Rating Speculative Buy tional (digital, online and mobile) distribution networks to enable in-
Outstanding Shares 32.05 Million dependent artists to reach their targeted audience quickly and easily,
Market Cap. $21.15 Million
Average 3-m Volume 29,631
while leveraging emerging industry distribution trends.

Through a series of strategic mergers and acquisitions, PYBX plans to

Source: Yahoo Finance, Analyst estimates become a leader in the distribution and marketing of global entertain-
ment media, while delivering digital media through PCs, television
and mobile phones.

The Company is in the process of acquiring Delta Leisure Group plc.

Delta Leisure, a successful, established record company, owns music
and visual copyrights, and has both online and offline CD and DVD
distribution channels. The Company is also acquiring New Visions Mo-
bile (NVM), a company involved in the mobile social networking mar-
ket and music to mobile platforms.

In addition, PYBX is negotiating to acquire three additional companies

involved in music publishing, IP and copyright exploitation, global dis-
tribution of traditional and digital copyrights, and advertising-funded
downloads.
 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Investment Highlights

Fast-growing market for digital music downloads

Customers around the world are finding new ways to download and distribute music. While overall music sales
were flat in 2007, digital music download sales soared. According to eMarketer, global digital music sales grew
46% in 2007 to approximately $4.2 billion and single track downloads (the most popular digital music format)
grew 53%. Digital sales now account for an estimated 13% of the global music market, up from 9% in 2006 and
zero in 2003. In the United States, online and mobile channels now account for 30% of all music sales.

PYBX is capitalizing on an $8 billion independent entertainment market

PYBX specializes in intellectual property (IP) exploitation, content and copyright ownership, distribution, pro-
motion and creation of entertainment content across many different mediums. Through the pending acquisi-
tions of Delta Leisure and New Visions Mobile, the Company will gain a foothold in online and over-the-air
music sales and the physical distribution of music. Delta Leisure will also provide PYBX with a major music and
DVD catalog that extends the Company’s market reach and enables it to add more IP in the form of music, video
and brands to the Company’s portfolio.

PYBX intends to extend its presence in the $8 billion independent entertainment markets and targets a 3% share
of the independent market within the next two years.

Aggressive acquisition strategy builds visibility and revenue stream

PYBX is achieving critical mass in the global media market by acquiring undervalued entertainment companies.
It is acquiring IP, music and visual copyrights, along with the means for exploiting its assets through online
downloads, mobile music, social networking, advertising-funded downloads and traditional physical distri-
bution. The Company expects to complete the acquisitions of Delta Leisure and New Visions Mobile in 2008.
These acquisitions will make PYBX a leader in the distribution and marketing of entertainment media delivered
through PCs, television and mobile phones. Three additional acquisitions are scheduled to close in the fourth
quarter of 2008.

Extensive distribution channels combining retail, catalog and online distribution

Through Delta Leisure, PYBX will control a network of more than 700 stores in the UK which supply CDs, vid-
eos and DVDs to retail customers. At the same time, the Company is expanding its online presence and becom-
ing both an online and physical distributor of music. The NVM acquisition adds another distribution channel
and leverages PYBX’s IP portfolio.

Multiple revenue streams and capitalizing on online advertising momentum

Through the NVM acquisition, the Company expands into advertising and gains the ability to leverage its brand
by placing ads at multiple online and offline points of presence. NVM generates revenues via online and mobile
advertising sold around each NVM OurTribe™ network; ecommerce merchandising; 14 OurTribe™ networks

PlayBOX Inc. (PYBX) 2

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

sold, with another 23 in the pipeline; and its “Kylie Konnect” site, which has already amassed 11,000 “fan sites”
with more than 20,000 visitors each month. NVM revenues are determined by the number of networks (37 pro-
jected in 2008), traffic and growth of advertising impressions and growing demand for mobile advertising.

Strong forecasted revenues and EBITDA growth

PYBX expects to generate revenues from online, physical and mobile distribution of music, as well as from
advertising and ecommerce merchandising via its social networking Web sites. The Company projects FY 2009
revenues in a $49.5 million range and EBITDA at approximately $9.7 million.

Proven management team

PYBX’s management team has been expanded to include Laurie Adams, who founded Delta Leisure and has
more than 20 years of industry experience. The Company’s chairman, Harry Maloney, has more than 30 years
of industry experience, including experience at BMG and BPI. We expect the management team to continue to
expand as PlayBOX implements its acquisition strategy and adds industry talent from acquired businesses.

Business Model

PYBX owns an online music hosting and downloading application that targets unsigned music acts and small
to medium-sized record labels. Its service enables these customers to establish their own music downloading
or hosting services. The application includes supplemental services such as hosting, streaming, ecommerce and
digital rights management (DRM) using the latest MP3 and Windows Multimedia technology. The Company
bundles these services together to offer its customers a cost-effective, professional platform for selling and pro-
moting music products.

PYBX plans to grow by making acquisitions that extend its product line and distribution channels, and by capi-
talizing on consolidation within the media entertainment market. The Company specializes in IP exploitation
and copyright ownership, as well as the distribution, promotion and creation of entertainment content across all
different mediums.

PlayBOX Inc. (PYBX) 3

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Through the pending acquisitions of Delta Leisure and New Visions Mobile, the Company gains a presence in
the market for online and over the air music sales in addition to the physical distribution of music. Delta Leisure
also gives the Company a music and DVD catalog which significantly enhances PYBX’s reach and adds new IP
(in the form of music, video and brands) to its portfolio.

PYBX is creating critical mass in the global entertainment market by acquiring undervalued entertainment busi-
nesses. Through these initiatives, the Company gains new IP, music and visual copyrights, as well as the means
for monetizing its assets through online downloads, mobile music, social networking, advertising-funded down-
loads and traditional physical distribution.

PYBX software application

To date, PYBX has been involved in commercializing its PlayBOX online music application. PlayBOX consists
of a set of computer software applications that enable artists and content owners to establish their own music
downloading or hosting services and make it accessible to consumers via the Internet. Unsigned music acts and
small to medium-sized record labels are using PlayBOX to cost-effectively promote and sell their music.

The Company’s online music application consists of four dynamic interfaces, namely White Label, Aggregator,
Bespoke and Jukebox, which provide an interface between artists and content owners and their listeners via the
Internet.

The White Label interface allows listeners to download individual songs either directly from the Company’s
Web site or from the artist’s own Web site.

The Aggregator interface provides small to medium-sized record labels with the ability to sell their tracks via an
online downloading store with built-in ecommerce, tracking, reporting and billing functions. The interface can
be operated as a stand-alone Web site or can be integrated into the client’s existing Web site.

For the Bespoke interface, PYBX hires independent Web designers to create specialized interfaces for particular
clients with unique requirements.

The PlayBOX Jukebox interface gives listeners unique tools for listening to their music and managing their music
collections on their personal computer. Listeners can submit their personal ratings of stored music or use the
Jukebox ratings to identify and recommend other music likely to suit their taste.

The Company has completed development of PlayBOX Jukebox and recently commenced commercial sales.

Delta Leisure Group plc

In May 2008, PYBX announced an agreement to purchase 100% of the issued capital of Delta Leisure, an es-
tablished record company which owns an extensive catalog of major music CDs, DVDs and videos across the
UK and Europe.

Delta Leisure was an early mover in the digitization of owned copyrights, having secured sales and distribution

PlayBOX Inc. (PYBX) 4

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

deals with iTunes, Rhapsody, eMusic and more than 60 other e-retailers. In April 2008, Delta Leisure signed a
partnership agreement with X5, a global digital mobile “over the air,” online distribution and marketing com-
pany. The agreement further develops Delta’s digital business by providing access to 2 million copyrights X5
controls.

Delta Leisure Group plc UK consists of Delta Music Ltd. and two subsidiaries: Delta Home Entertainment Ltd.
and Delta Music Merchandising Ltd. Delta generates revenues in excess of $14 million and EBITDA approaching
$1 million.

Delta Music plc is the holding company that owns all the copyrights and is responsible for all manufacturing
of Delta UK-owned products. It sells to both UK subsidiaries and to Delta Germany. It also markets the Delta
UK video and DVD catalog through a distribution agreement with Pinnacle.

Delta Music began its business with 11,000 tracks for sale on the iTunes digital store. Sales doubled in 2007 with
the addition of 60 more e-retailers, and revenue close to $700,000.

Delta Home Entertainment (DHE) supplies Delta UK- owned products to its customers, either in bulk from
its Orpington warehouse or to traditional retail customers through a distribution agreement with Avarto (A
Bertelsmann company).

Delta Music Merchandising (DMM) controls more than 700 retail stores in the UK and supplies a merchandis-
ing service for CDs, videos and DVDs to retailers who would not normally stock and sell these products. The
service provides retailers with a rack for displaying products, a selection of attractive, low priced CDs, videos
and DVDs, and regular visits by a merchandiser who checks stock and replenishes inventory from the Orping-
ton warehouse.

Delta Revenue and EBITDA, $

2005 2006/07 2007/08

Actual Actual 16 months Budgeted

Revenue 15,862,228 20,963,092 14,150,000

EBITDA 490,134 640,658 1,050,000

Source: PYBX’s SEC filings

Through distribution agreements with Pinnacle and Avarto, traditional music and video/DVD shops are sup-
plied with Delta Leisure products. DHE and DMM also supply product to other blue chip accounts, including
Asda, Tesco, Aldi, Sit-Up TV, TK Maxx, Toys-R-Us, Sainbury’s, Waitrose, Netto, Universal and Matalan. In ad-
dition, DMM supplies merchandising services to Edinburgh Woollen Mills, Marie Curie, Shelter, CBS (part of
GUS) and a large number of Garden Centres.

PlayBOX Inc. (PYBX) 5

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

New Visions Mobile

The NVM acquisition provides PYBX with a foothold in social networking and ad-funded music downloads.
The merger of NVM with Delta Leisure and PlayBOX provides an integrated platform for new media IP exploi-
tation.

NVM creates mobile campaigns for record labels and media owners. It owns and operates the OurTribe™ Net-
work, a collection of user-generated “fan-sites” built around established music brands, bands and artists. NVM
uses social networking and user-generated content to create active communities of like-minded people who con-
nect online and via the mobile Internet.

NVM is the company behind “Kylie Konnect,” the hugely successful social network of pop artist Kylie Minogue.
The network has amassed more than 11,000 fan sites and generated nearly 250,000 visitors since its November
2007 launch. This successful network is just one example of how NVM uses social networking and user-gener-
ated content to create active online communities. NVM generates revenues from:

- Online and mobile advertising sold around each OurTribe™ network;

- ecommerce sales via merchandising;
- 14 OurTribe™ networks sold with 23 in the pipeline; and
- “Kylie Konnect” which launched in April 2008 and has already amassed 11,000 “fan sites” with more
than 20,000 visitors a month.

NVM clients include Parlophone, Atlantic Records, EMI Records, Virgin Records, Harper Collin and others. In
addition NVM works with major full- service agencies on brand campaigns - BBC’s The Mighty Boosh, Calvin
Klein, VW, MBNA and Sony Ericsson, as well as putting the Collins English Dictionary on mobile.

NVM has created more than 2,000 mobile campaigns for record labels, media owners and artists such as Queen,
Lilly Allen, Rihanna and Robbie Williams.

PlayBOX Inc. (PYBX) 6

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Industry Outlook
According to PricewaterhouseCoopers’ “Global Entertainment and Media Outlook: 2006–2010” report, the
global entertainment and media industry is forecast to grow 6.6% annually and reach $1.8 trillion in 2010.

Global Entertainment and Media Industry - 2010

Grow at a 6.6% Compound Annual Growth Rate (CAGR) to $1.8 Trillion

0 5 10 15 20%
Video Games
Market Size 2010
Recorded Music CAGR – Top Axis
Internet Advertising
Filmed Entertainment
Casino Games
Internet Access
Television Networks
Television Distribution
$ Billions 0 50 100 150 200 250

Source: PricewaterhouseCoopers

Global spending via online and wireless channels was estimated at $19 billion in 2005 and is expected to reach
$67 billion by 2010. These channels include online rental subscriptions and digital streaming in filmed enter-
tainment, licensed digital downloads and mobile music, online and wireless video games, electronic books and
online casino gaming.

The number of people with a wireless telephone subscription will rise to 2.8 billion by 2010, adding 1 billion
potential new customers for mobile content over the next five years. Global advertising spending will grow at
a 6.2% annual rate to $521 billion by 2010 and the Internet will continue to be the fastest-growing advertising
medium, with spending increasing 18.1% annually to $52 billion within two years. By 2010, the Internet will
account for nearly 10% of global advertising spending versus 3% in 2002.

Other 2010 projections for the entertainment market include the following:

- Global Internet advertising will grow 18.1% annually to $51.6 billion and Internet access revenues will
expand 11.9% annually to $214 billion;
- The television distribution market will grow 8.3% annually to $230.3 billion. The introduction of IPTV
will help fuel subscriber growth, and the migration of subscribers to higher-priced digital services will
increase revenues per subscriber;
- The television networks (broadcast and cable) market will grow 6.6% annually to $227 billion; and
- Recorded music spending will rise 5.2% annually to $47.9 billion. Spending in the United States will
reach $14.7 billion by 2010.

PlayBOX Inc. (PYBX) 7

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Music industry

The traditional music industry remains strong. Global revenues were $32 billion in 2007, of which 75% were
controlled by four major companies: Universal Music, EMI, SonyBMG and Warner Music. The remaining 25%
($8 billion) is controlled by independent companies. PYBX intends to build on its existing foothold and targets a
3% share of the independent market within two years. Traditional physical distribution of music still accounts
for 85% of global revenues.

Global music industry revenues by segment, $ million

2006 2007 2008 2009 2010

Total Music Revenues 31,416 31,937 32,576 33,227 34,058

Total Digital Music Revenues 2,832 4,152 6,515 9,968 11,920
Mobile Music Revenues 1,274 2,076 3,909 6,479 7,748

Source: eMarketer

While overall music sales were flat in 2007, digital music download sales soared. According to eMarketer,
global digital music sales grew 46% in 2007 to approximately $4.2 billion and single track downloads (the most
popular digital music format) grew 53%. Digital sales now account for an estimated 13% of the global music
market, up from 9% in 2006 and zero in 2003. In the United States, online and mobile sales now account for 30%
of all music revenues 1.

Analysts project that digital music will account for 35% of total music sales and sales will exceed $12 billion by
2010. Revenues from mobile music are forecast to exceed $7 billion.

Nielsen SoundScan reported more than 840 million digital tracks were purchased during 2007. Digital album
sales rose to 50 million in 2007, up 53% from the previous year, accounting for 10% of total album sales com-
pared to 5.5% in 2006. Last year, nine digital song tracks were downloaded more than 2 million times. More
than 390,000 different recording albums sold at least one copy over the Internet during 2007 and Internet album
sales set a new record with sales of 30.1 million units 2.

Forrester Research projects that half of all music sold in the United States will be digital by 2011 and sales of
digitally downloaded music will surpass physical CD sales by 2012. Digital music sales are forecast to grow
23% annually over the next five years.

Drivers of digital music sales growth include:

- MP3 player adoption. The average MP3 player is only 57% full, suggesting that the devices are under-
utilized. In addition, most of the devices are being purchased by households that already have more than one
MP3 player.

1 http://www.reuters.com/article/technologyNews/idUSL2336020420080124?feedType=RSS&feedName=technologyNews&rpc=69&pageNumber=2&virtualBrandChannel=10001
2 http://www.itfacts.biz/840-mln-digital-tracks-purchased-in-the-us-in-2007/9368

PlayBOX Inc. (PYBX) 8

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

- DRM-free music. With the four big music labels now committed to eliminating digital rights manage-
ment (DRM), the distribution of DRM-free music will extend beyond pioneer Amazon.com to Apple iTunes and
other major online music sites.

- Social networking. DRM-free music allows every MySpace.com or Facebook.com profile page to imme-
diately become a music store where friends can distribute their favorite tracks to friends. Up to 70% of young
Americans aged 9 - 14 download music in a given month. Almost one-half, or 49%, use iTunes, while another
26% use Limewire. MySpace has a 16% market share and was listed as the third most popular site for sharing
music.

Portable MP3 player market

to grow. It is estimated that 18% of Americans have listened to an audio podcast this year, up from 13% in 2007,
and 9% of Americans have listened to an audio podcast within the past month (an estimated 23 million listen-
ers).

According to Edison Media research, nearly four in 10 households (37%) own an iPod or portable MP3 player,
up from 30% in 2007 and more than twice the number in 2005 (14%). Nearly 73% of American teenagers own a
digital audio player.

Music lovers who regularly listen to online radio are more likely to have profiles on social networking sites. More
than 40% of all weekly online radio listeners have a profile on a social networking site compared to 24% of the
general population. More than one-third of American teenagers (37%) visit social networking sites nearly every
day.

How digital music gets on users’ phones

Source of digital music on the phone France Germany Italy Spain UK US

Transferred from PC 85.8% 88.7% 86.9% 87.3% 83.6% 75.2%
Direct to phone - transferred from friends/family 12.5% 8.8% 9.8% 7.1% 12.5% 8.1%
Direct to phone – downloaded from music service 8.3% 7.6% 4.7% 8.6% 10.0% 18.3%
Direct to phone – other 8.8% 2.9% 4.3% 7.0% 6.4% 3.7%

Source: http://www.itfacts.biz/how-digital-music-gets-on-the-users-phones/10103

Transition to Internet

According to Edison Media research, the Internet is gaining share from radio as the chosen medium for learning
about new music. In 2002, 63% of consumers identified the radio as the best medium for new music and only 9%
of consumers identified the Internet as a superior medium. By 2008, about 49% of consumers were citing radio
as the medium they turn to for new music while 25% identified the Internet as the best medium for new music.

PlayBOX Inc. (PYBX) 9

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Global Internet penetration rates exceed 18.9% and the global Internet subscriber base is expected to grow 7.8%
annually between 2006 and 2011. The number of Internet users already exceeds 1.2 billion worldwide, according
to Internet World Stats, and the 2 billion user milestone will likely be reached by 2011.

Internet penetration rates in the United States exceed 70.2% and further increases are anticipated due to the
large-scale rollout of WiFi, mobile broadband (WiMAX) and broadband services.

Internet usage, 2007

Population, Mn % Pop. Internet Users, Penetration % Usage User Growth

( 2007 Est. ) of World Latest Data, Mn (% Population) of World ( 2000-2007 )

Europe 809.9 12.3 % 337.9 41.7 % 27.2 % 221.5 %

North America 334.5 5.1 % 232.6 69.5 % 19.8 % 115.2 %
World’s total 6,574.6 100.0 % 1,244.4 18.9 % 100.0 % 244.7

Source: www.internetworldstats.com/stats.htm

Social network advertising

Some 37% of U.S. adult Internet users and 70% of online teens visit social networking sites every month, and
the numbers continue to grow. It is estimated that 12 million more U.S. adults will become social-network users
in 2008, increasing the total to 69.0 million users. eMarketer projects that, by 2011, one-half of online adults and
84% of online teens in the United States will participate in social networking. That adds up to about 17.7 million
teens.

According to eMarketer, global online social network ad spending will grow from $1.2 billion in 2007 to $2.2 bil-
lion in 2008. Worldwide spending is forecast to reach $4 billion in 20113 . According to the report, Social Network
Marketing: Ad Spending and Usage, U.S. advertisers are expected to spend nearly $1.6 billion in 2008, up 69%
from the $920 million spent in 2007. Within four years, U.S. ad spending on social networking sites is expected
to reach $2.7 billion.

3 www.marketingpilgrim.com/2008/01/advertisers-banking-on-social-networking-in-2008.html

PlayBOX Inc. (PYBX) 10

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Valuation and Summary

With the acquisitions of Delta Leisure and NVM, PYBX becomes an important player in the global independent
entertainment market. Over the next three months, PYBX plans to:

- Finalize the acquisition of Delta Leisure Group and New Visions Mobile;
- Appoint new members to the Company management team, adding additional depth in the areas
of corporate financial control and mobile, and appoint an advisor team of independent directors;
- Sign distribution partnerships for digital media under license in the UK and mainland Europe;
- Begin identifying and approaching additional potential acquisition targets in the UK, United States
and European entertainment markets;
- Develop strategic partnerships with operators in the digital entertainment world;
- Identify and negotiate with four target companies in complementary businesses who can help
PYBX generate cash flow and profits from social networking and advertising-funded downloads;
- Expand the Company’s reach in North America and Asia by signing deals with United States,
Canadian and Japanese-based digital service providers; and
- Commence fund raising for future acquisitions.

By year-end 2008, PYBX expects to:

- Consolidate its acquired businesses and brands;

- Update and distribute marketing material reflecting its new product offerings;
- Secure an additional $20 million to $25 million in financing for future mergers and acquisitions;
- Increase its visibility in the worldwide digital marketing market;
- Launch a branded multimedia content Web site offering services to third parties; and
- Identify additional acquisition targets. The Company is already negotiating with three acquisition
candidates.

As a result of these developments and the Delta and NVM acquisitions, we expect PYBX to report FY 2008 and
FY 2009 revenues and EBITDA as follows:

Revenue and EBITDA forecast, $ Million

FY 2008E FY 2009E FY 2010E

Revenue 21.2 49.5 136.3

EBITDA 1.6 9.7 33.9

Source: Analyst estimates

The Company anticipates it will need up to $25 million in additional funding to complete the acquisition of
Delta Leisure, New Vision Mobile, Delta Germany and the other three target companies. In addition, PYBX
plans to establish operations in Asia and expand its presence in mainland Europe and the United States. We
think it likely that the Company will issue equity to raise funds. As a result, we expect the number of shares
outstanding to increase from 32.05 million currently to 60 million in FY 2009.

PlayBOX Inc. (PYBX) 11

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

A strong growth outlook for PYBX is supported by the fact that digital music and mobile music downloads are
growing faster than the overall music market. The shift from bricks-and-mortar retailing to online ordering is
already a well-established trend in other markets such as DVD rentals and CD sales. PYBX is pursuing new
online channels for cost-effectively distributing digital music.

Comparative valuation analysis

PYBX competes with record label, digital music distribution, ecommerce solutions and social networking com-
panies and other Internet entertainment providers.

Peer valuation

Company Name Ticker Mrkt. Cap. P/E P/S

Price, $
24-Jul-2008 Symbol $ Mn
2008 2009 2008 2009
RealNetworks Inc. RNWK 7.13 1,014 n/a 118.83 1.59 1.45
The Orchard Enterprises Inc. ORCD 4.84 30 n/a n/a n/a n/a
Navarre Corp. NAVR 1.67 61 7.95 5.57 0.09 0.09
Trans World Entertainment TWMC 2.93 91 n/a n/a 0.08 0.10
Digital River Inc. DRIV 39.44 1,460 20.76 17.45 3.64 3.24
Napster Inc. NAPS 1.42 68 n/m n/m 0.52 0.48
Apple Inc. AAPL 161.29 142,130 30.96 26.48 4.35 3.52
Yahoo! Inc. YHOO 20.56 27,860 43.74 34.85 4.90 4.36
Google Inc. GOOG 485.52 152,270 24.63 20.07 9.40 7.45

Median 24.63 23.28 2.62 2.34

Source: Yahoo Finance

The median forward Price/Sales multiple for the peer group is 2.34 times sales. We believe PYBX warrants a
similar valuation because of its strong growth prospects and significant acquisition pipeline.

We multiply our $49.5 million FY 2009 revenue estimate by a 2.34 times forward Price/Sales multiple to obtain a
$115 million market capitalization target and a $1.90 price target. As a result, we are initiating coverage of Play-
BOX (U.S.) Inc. with a Speculative Buy rating and a $1.90 price target. However, we strongly advise investors
to consider the Company’s early development-stage status, lack of revenues and need for additional financing
as significant risk factors.

PlayBOX Inc. (PYBX) 12

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Risk Factors

Inherent business risks

PYBX is pursuing an aggressive growth strategy in the Internet entertainment and digital music markets. While
the Company has provided estimates for FY 2008-2009 revenues and shared its goals for future growth, there
is no guarantee that the Company will achieve these growth targets and/or become profitable. The Company’s
expansion opportunities will be limited if PYBX cannot generate positive cash flow and profits.
Intense competition
Competition in the Internet entertainment and digital music markets is intense and PYBX competes with sev-
eral nationally-known competitors who have much larger marketing budgets and superior access to capital.
Competition may result in pricing pressures, reduced profit margins or loss of market share, any of which could
adversely affect the Company’s business and financial performance.
Our valuation case is contingent on the acquisitions of Delta and NVM
Historical financial data is not indicative of PYBX’s future performance. As a result, we based our valuation
case on the combined results of PYBX, Delta and NVM. Should these acquisitions fail to close, PYBX will not
be able to implement its business plan successfully.

Management

Harry Maloney Harry Maloney has been active in the UK music industry for more than 30 years in execu-
Chairman tive positions. As chairman of a multi-national music company (Apex Entertainment Group),
he closed numerous entertainment industry mergers and acquisitions. Mr. Maloney served as
commercial director for BMG Records, where he delivered five new business areas and 40% of
company profits, including catalog exploitations of acts such as Annie Lennox, Take That and
Elvis Presley. BMG’s Commercial Division grew under Mr. Maloney’s guidance to a $28 million
business. More recently, he served as director of BPI (the British Record Industry’s Trade As-
sociation). Mr. Maloney has been an advisor to a number of independent UK record companies,
developing their businesses and digital strategies. Mr. Maloney is also an architect and holds a
diploma in architecture from Oxford.

Laurie Adams Laurie Adams started Delta Music in 1984 as Target Records. She established a close working
CEO CFO: Group Man- relationship with Delta Music GMBH in Germany, which led to its agreement to purchase a
aging Director of Delta 75% interest in Target Records in 1993. In the process, Target Records changed its name to Delta
Music Music. Delta Music has moved from being a distributor to a record company, and Ms. Adams
has guided its development into a multi-million dollar company. Ms. Adams organized a man-
agement buyout from the German parent company in 2006 and now holds 100% of Delta, which
is in the process of changing its name to Delta Leisure plc.

Robert Burden Robert Burden was appointed head of PlayBOX in 2004. From November 2002 until he joined
Director of PlayBOX UK in May 2004, he served as an account manager for Interactive Prospect Targeting
PlayBOX (U.S.) Inc. Ltd., a UK-based IT company specialising in data capture and online direct marketing. From
1999 to 2001, Mr. Burden was a sales manager at CHA Media Sales Ltd., a UK-based publisher of
B2B technical periodicals. He holds a marketing management diploma from Damelin Business
College in Durban, South Africa.

PlayBOX Inc. (PYBX) 13

 Analyst: Victor Sula, Ph.D.
Initial Report
July 28th, 2008

Disclaimer
Beacon Equity Research (otherwise known as BER) is an independent research firm specializing in small and micro capitalization companies.
BER has no investment banking or consultation conflicts thereby minimizing the inherent conflicts of interest between the research analysts and
the companies they cover. BER is not a registered investment advisor or broker dealer. No information in this report should be construed as an
endorsement to either buy or sell any securities mentioned in this report. The analyst(s) who prepared this report rely on publicly avail¬able
information which neither the analyst, nor BER, can guarantee to be error-free or factually accurate. All conclusions in this report are deemed
reasonable and appropriate by the author. The Private Securities Litigation Reform Act of 1995 provides investors a “safe harbor” in regard
to forward-looking statements. To fully comply with the requirements of this law, BER cautions all investors that such forward-looking state-
ments in this report are not guarantees of future performance. Unknown risk, uncertainties, as well as other uncontrollable or unknown factors
may cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-look¬ing
statements. Investors should exercise good judgment and perform adequate due-diligence prior to making any investment. BER and its affili-
ates have been compensated sixty thousand dollars from Pine Mountain Ventures for enrollment of PYBX in its research program and other
services. Ratings and price targets in this report should not be construed as recommendations or stock price predictors. Readers of this report
are urged to use due-diligence in any purchase of security listed herein. Readers should consult the Company’s SEC filings as well as our initial
report on the firm to better understand the inherent risks associated with this security. There may be many uncontrollable or unknown factors
which may cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-looking
statements. Investors should exercise good judgment and perform adequate due-diligence prior to making any investment.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the
content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been
either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or se-
curities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst

Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula
held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS
sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is
also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s
degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

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