Mandalay Media, Inc., a Delaware corporation (“Mandalay”), entered into a Stock Purchase Agreement on October 8, 2008 (the “Original Agreement”), as subsequently amended on October 23, 2008 (the “Agreement”), with Jonathan Cresswell (“Cresswell”), Nathaniel MacLeitch (“MacLeitch,” and together with Cresswell, the “Founding Sellers”) and certain shareholders of AMV Holding Limited, a United Kingdom private limited company (“AMV”) signatories thereto (the “Non-Founding Sellers”). Pursuant to the Agreement, on October 23, 2008, Mandalay consummated the acquisition of 100% of the issued and outstanding share capital of AMV (the “AMV Shares”) and 80% of the issued and outstanding share capital of Fierce (the “Fierce Shares,” and together with the AMV Shares, the “Shares”). The Founding Sellers and the Non-Founding Sellers, together with the holders of options to purchase shares of capital stock of AMV (the “Option Holder Sellers”) who have exercised such options prior to closing and delivered their shares of capital stock of AMV to Mandalay at closing, as provided in the Agreement, are referred to herein as the “Sellers.”

Prior to closing, each outstanding option to purchase shares of capital stock of AMV (an “AMV Option”) was either exercised in full or terminated. Of the Cash Consideration payable to the Sellers, an amount equal to the exercise price of the AMV Options being exercised was paid to AMV for consideration of such Option Holder Seller’s exercise of such AMV Options, and was deducted from the amount of Cash Consideration otherwise payable to such Option Holder Seller. Additionally, of the Cash Consideration, an amount equal to the maximum taxation liability that would be incurred with respect to the payment of the Purchase Price to any Option Holder Sellers under applicable tax laws (the “Tax Withholding”), was delivered to AMV to be held in a separate account. The amount of the Tax Withholding was deducted from the amount of the Cash Consideration otherwise payable to the applicable Option Holder Seller.

The Note matures on January 30, 2010, and bears interest at an initial rate of 5% per annum, subject to adjustment as provided therein. In the event Mandalay completes an equity financing that results in gross proceeds of over $6,000,000, Mandalay will prepay a portion of the Note in an amount equal to one-third of the excess of the gross proceeds of such financing over $6,000,000. In addition, if within nine months of the issuance date of the Note, Mandalay completes a financing that results in gross proceeds of over $15,000,000, then Mandalay shall prepay the entire principal amount then outstanding under the Note, plus accrued interest. If within nine months of the issuance date of the Note, the aggregate principal sum then outstanding under the Note plus accrued interest thereon has not been prepaid, then on and after such date, interest shall accrue on the unpaid principal balance of the Note at a rate of 7% per annum. Additionally, in connection with the Note, AMV granted to the Sellers a security interest in its assets. Such security interest is subordinate to the security interest granted to ValueAct Small Cap Master Fund, L.P. (“ValueAct) under the Senior Secured Note, issued by Twistbox Entertainment, Inc., a wholly-owned subsidiary of Mandalay (“Twistbox”), due January 30, 2010, as amended on February 12, 2008 (the “ValueAct Note”), and as subsequently amended on October 23, 2008. AMV also agreed to guarantee Mandalay’s repayment of the Note to the Sellers.

The Purchase Price has been preliminarily estimated by Mandalay to be $21,487,000, consisting of $9,900,000 attributed to the Stock Consideration issued, $5,375,000 in cash, $5,375,000 under the Note referenced above and $837,000 in transaction costs. Any adjustments required under the “earn-out” and “working capital adjustment” provisions of the Agreement have not yet been determined and therefore have not been included in the preliminary calculation of the purchase price. The shares of the Stock Consideration were valued using the closing stock price at the acquisition date of $2.20 per share. Under the purchase method of accounting, Mandalay allocated the total Purchase Price of $21,487,000 to the net tangible and intangible assets acquired and liabilities assumed based upon their respective estimated fair values as of the acquisition date as follows:

Cash and cash equivalents	$	3,020,000
Accounts receivable, net of allowances		9,087,000
Prepaid expenses and other current assets		16,000
Property and equipment, net		406,000
Accounts payable		(10,391,000	)
Bank overdrafts		(1,902,000	)
Other current liabilities		(1,262,000	)
Other long term liabilities		(223,000	)
Minority interests		95,000
Identified intangibles		1,721,000
Acquisition related restructuring reserves		(585,000	)
Goodwill		21,505,000
	$	21,487,000

Goodwill recognized in the above transaction is preliminarily estimated at $21,505,000. Goodwill in relation to the acquisition of AMV is not expected to be deductible for income tax purposes. The preliminary purchase price allocation, including the allocation of goodwill, will be updated as additional information becomes available. Acquisition related restructuring reserves include reserves for employee severance and for office relocation.

The following pro forma consolidated amounts give effect to the acquisition of AMV by Mandalay accounted for by the purchase method of accounting as at September 30, 2008 and as if it had occurred as at the beginning of each period presented. The pro forma consolidated results are not necessarily indicative of the operating results that would have been achieved had the transaction been in effect as of the beginning of the period presented and should not be construed as being representative of future operating results.

	Mandalay			AMV							Mandalay
	Media, Inc.			Holding Ltd							Media, Inc.
	September 30,			September 30,				Pro Forma			September 30,
	2008			2008				Adjustments
	(Unaudited)			(Unaudited)							(Unaudited)
ASSETS

Current Assets
Cash and cash equivalents	$	7,122		$	3,020		(a) $		(875	)	$	9,267
Accounts receivable, net of allowances		6,203		$	9,087				-		$	15,290
Prepaid expenses and other current assets		648		$	16				-		$	664
Total current assets		13,973			12,123				(875	)	$	25,221
Property and equipment, net		993			406				-			1,399
Other long-term assets		206			-				-			206
Intangible assets, net		19,303			-		(b)		1,721			21,024
Goodwill		61,436			6,116		(c)		15,390			82,942
TOTAL ASSETS	$	95,911		$	18,645			$	16,236			130,792

LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities
Accounts payable		4,325			10,391				-			14,716
Bank overdrafts		-			1,902				-			1,902
Accrued license fees		2,813			-				-			2,813
Accrued compensation		746			-				-			746
Current portion of long term debt		254			-				-			254
Other current liabilities		2,001			1,262		(d)		1,422			4,685
Total currrent liabilities		10,139			13,555				1,422			25,116
Accrued license fees, long term portion		668			-				-			668
Other long term liabilities		-			223				-			223
Long term debt, net of current portion		16,483			-		(e)		5,375			21,858
Minority interests		-			(95	)			-			(95	)
Total liabilities	$	27,290			13,683			$	6,797		$	47,770

Stockholders equity
Preferred stock		100			-				-			100
Common stock		3			-				-			3
Additional paid-in capital		78,220			4,962				9,439			92,621
Accumulated other comprehensive income/(loss)		(55	)		-				-			(55	)
Accumulated deficit		(9,647	)		-				-			(9,647	)
Total stockholders' equity		68,621			4,962				9,439			83,022

TOTAL LIABILITIES AND STOCKHOLDERS EQUITY	$	95,911		$	18,645			$	16,236		$	130,792

Notes to Pro Forma Adjustments:

(a)	Represents cash paid as part of purchase consideration - $5,375; and cash received from the issue of 1,685,394 shares at $2.67, amounting to $4,500

(b)	Represents estimated value of intangible assets to be recognized on the acquisition

(c)	Represents estimated value of goodwill to be recognized on the acquisition and the elimination of AMV Holding Ltd goodwill

(d)	Represents accruals for acquisition costs and restructuring reserves to be recognized in relation to the acquisition

(e)	Represents secured prommissory note issued as part of the purchase consideration

										Mandalay
	Mandalay			AMV						Media, Inc.
	Media, Inc.			Holding Ltd						Pro Forma
	Six Months Ended			Six Months Ended						Six Months Ended
	September 30,			September 30,						September 30,
	2008			2008				Adjustments		2008
	(Unaudited)			(Unaudited)				(Unaudited)		(Unaudited)

Revenues	$	10,349		$	20,478					$	30,827
Cost of revenues	$	4,138			7,504		(a)		44		11,686
Gross profit	$	6,211			12,974						19,141
Operating expenses net of interest
income and other expense	$	12,441			10,574		(b)		112		23,127

Income tax expense	$	148			321						469
Minority interest in consolidated subsidiaries	$	-			(99	)					(99	)

Net Profit/(Loss)	$	(6,378	)	$	2,178					$	(4,356	)
Basic and diluted net loss per common share	$	(0.20	)							$	(0.12	)

Weighted average common shares outstanding,
basic and diluted		32,377					(c)		4,500		36,877

(a)	Represents amortization of the estimated value of intangible assets recognized on the acquisition allocated to cost of revenues

(b)	Represents amortization of the estimated value of intangible assets recognized on the acquisition allocated to general and administrative costs

(c)	Represents shares in Mandalay Media Inc. issued as part of the consideration for the acquisition

									Mandalay
	Mandalay			AMV					Media, Inc.
	Media, Inc.			Holding Ltd					Pro Forma
	Three Months Ended			Three Months Ended					Three Months Ended
	March 31,			March 31,			Pro Forma		March 31,
	2008			2008			Adjustments		2008
	(Unaudited)			(Unaudited)			(Unaudited)		(Unaudited)

Revenues	$	3,208		$	9,293				$	12,501
Cost of revenues		(153	)		2,192	(a)		22		2,061
Gross profit		3,361			7,101					10,440
Operating expenses net of interest
income and other expense		3,643			6,559	(b)		56		10,258
										-
Income tax expense		16			123					139
Minority interest in consolidated subsidiaries		-			-					-
Net Profit/(Loss)	$	(298	)	$	419				$	43
Basic and diluted net loss per common share	$	(0.01	)						$	0.00

Weighted average common shares outstanding,
basic and diluted		21,628				(c)		4,500		26,128

Notes to Pro Forma Adjustments:

The results of operations for Mandalay Media Inc. in the Three Months Ended March 31, 2008 include the results of Twistbox Entertainment Inc. as from the acquisition of that entity in February, 2008

(a)	Represents amortization of the estimated value of intangible assets recognized on the acquisition allocated to cost of revenues

(b)	Represents amortization of the estimated value of intangible assets recognized on the acquisition allocated to general and administrative costs

(c)	Represents shares in Mandalay Media Inc. issued as part of the consideration for the acquisition

									Mandalay
	Mandalay			AMV					Media, Inc.
	Media, Inc.			Holding Ltd					Pro Forma
	Year Ended			Year Ended					Year Ended
	December 31,			December 31,			Pro Forma		December 31,
	2007			2007			Adjustments		2007
							(Unaudited)		(Unaudited)

Revenues	$	-		$	29,497				$	29,497
Cost of revenues		-			11,144	(a)		87		11,231
Gross profit		-			18,353					18,266
Operating expenses net of interest
income and other expense		2,204			14,109	(b)		224		16,537
										-
Income tax expense		-			1,310					1,310
Minority interest in consolidated subsidiaries		-			-					-
Net Profit/(Loss)	$	(2,204	)	$	2,934				$	419
Basic and diluted net loss per common share	$	(0.12	)						$	0.02

Weighted average common shares outstanding,
basic and diluted		18,997				(c)		4,500		23,497

Notes to Pro Forma Adjustments:

The results of operations for Mandalay Media Inc. in the Year Ended December 31, 2007 do not include the results of Twistbox Entertainment Inc. since that entity was acquired in February, 2008. Mandalay Media Inc. operated as a "shell" company with no significant operations

(a)	Represents amortization of the estimated value of intangible assets recognized on the acquisition allocated to cost of revenues

(b)	Represents amortization of the estimated value of intangible assets recognized on the acquisition allocated to general and administrative costs

(c)	Represents shares in Mandalay Media Inc. issued as part of the consideration for the acquisition