f8k0711ex10i_ea3megamedia.htm


    


    BRIDGE
LOAN AND REPRESENTATION AGREEMENT

     

    THIS
AGREEMENT made as of the 14th day of March, 2007.

     

    AMONG:

     

    FIRST CAPITAL INVEST CORP., a
company incorporated under the laws of Switzerland and having its head office
located at Florastrasse 14, Zurich, CH-8008, Switzerland

    (hereinafter
called “FCIC”)

     

    AND:

     

    MEGA MEDIA GROUP, INC., a
company incorporated under the laws of United States of America and having its
head office located at 3rd Floor, 598 Broadway, New York, New York USA
10012

    (hereinafter
called “MMG”)

     

    AND:

     

    ALEKSANDR SHVARTS and ERIC SCHWARTZ,
all of New York, New York, USA

    (hereinafter
called the “Principal
Shareholders”)

     

    WHEREAS:

     

    A.    MMG requires
operating capital.

     

    B.     MMG carries
on the business of:

     

    (1)    Mainstream Entertainment and
Media

     

    Investing
in and developing a broad range of entertainment properties, balancing
acquisitions of existing media properties, such as purchasing existing
recordings and publishing catalogues with an earnings history, with the
development and acquisition of newer media ventures, such as mobile and new
technology media projects, and signing and developing emerging musical artists.
In addition to acquiring and developing both established and emerging media
properties, MMG has also developed a management division to serve the needs of
artists.

     

    (2)    Russian Ethnic
Media

     

    Delivering
media products that are contemporary, entertaining, fun and relevant to the
ethnic Russian community in North America. Working with cutting-edge news
networks and contributing staff in the entertainment and fashion industries both
in the United States and the Former Soviet Union, MMG is able to deliver a
unique blend of content that resonates with the “second generation” Russian
mentality: distinctly American with a European flair.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    -2-

     

    C.    MMG wishes to
go public via a reverse takeover (a “RTO”) of an existing public company
("Pubco") trading on the over-the-counter bulletin board.

     

    D.    FCIC is an
investment firm and wishes to provide corporate finance advice and assist MMG in
going public.

     

    E.    The Principal
Shareholders are the controlling shareholders of MMG and have represented and
warranted that they have agreed to tender their shares pursuant to an RTO with a
Pubco introduced by FCIC, provided that Pubco's share structure on completion of
the RTO approximates the pro forma structure set out in Schedule L attached
hereto.

     

    NOW THEREFORE THIS AGREEMENT
WITNESSES that in consideration of the sum of ONE ($1.00) DOLLAR paid by
each party to the other and of the mutual covenants and agreements hereinafter
contained, the parties hereto agree each with the other as follows:

     

    1.           INTERPRETATION

     

    1.1    Where used
herein or in any amendments or Schedules hereto, the following terms shall have
the following meanings:

     

    
      
        	
                (a)

              	
                “Accountants” means
      Kempisty and Company, a firm of Chartered Accountants or Certified Public
      Accountants, independent of MMG and the Principal Shareholders
      satisfactory to the United States Securities and Exchange
      Commission;

              


      

       

    

    
      
        
          	
                  (b)

                	
                  “Assets” means all of the
      properties, assets, and undertaking of MMG (including technology,
      intellectual property, and goodwill) for the time being, present and
      future, real and personal, legal or equitable, tangible or intangible and
      of whatsoever nature and kind;

                


        

         

      

    

    
      
        
          	
                  (c)

                	
                  “Bridge Loan” means the
      loans in the approximate aggregate amount of TWO HUNDRED AND FIFTY
      THOUSAND (US$250,000) DOLLARS, which may be made to MMG by FCIC or
      arranged by FCIC pursuant to the terms of this
  Agreement;

                


        

        
           

          
            
              
                	
                        (d)

                      	
                        “Business” means the
      business in which MMG is engaged,
namely:

                      


              

               

            

          

        

      

    

    
      
        
          
            
              	
                      (i)

                    	
                      acquiring and
      developing both established and emerging media properties, serving the
      needs of artists, and delivering media products that are contemporary,
      entertaining, fun and relevant to the ethnic Russian community in North
      America, as described in the business plan attached as Schedule A (the
      “Business Plan“); and

                    


            

            
               

              
                
                  
                    
                      
                        	
                                (ii)

                              	
                                any other enterprise
      that is directly related to the
foregoing;

                              


                      

                      
                        
                           

                          
                            
                              
                                	
                                        (e)

                                      	
                                        “Event of Default” means
      any event set forth in section 13;

                                      


                              

                              
                                
                                   

                                  
                                    
                                      
                                        	
                                                (f)

                                              	
                                                “FCIC Shares” means those
      fully paid and non assessable common shares of MMG that may be issued to
      FCIC and/or FCIC’s clients by MMG pursuant to this
    Agreement;

                                              


                                      

                                       

                                    

                                  

                                

                              

                            

                          

                        

                        
                          
                            
                              
                                	
                                        (g)

                                      	
                                        “Intellectual Property”
      means all intellectual property owned by MMG relating to the Business,
      including all patents, patent applications, trade marks, service marks,
      trade dress, trade names, copyrights, registrations or applications to
      register any of the foregoing and any trade
  secrets;

                                      


                              

                               

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    -3-

    
       

      
        
          
            
              	
                      (h)

                    	
                      “Lenders” means lenders
      of the Bridge Loan, including FCIC;

                    


            

             

          

        

      

    

    
      
        
          
            
              
                	
                        (i)

                      	
                        “Maturity Date” means the
      date that is the earlier of six (6) months from the date of any advance
      under the Bridge Loan or the date that MMG  or the Resulting
      Company (as hereinafter defined) from the merger of MMG and Pubco,
      completes an equity financing of not less than US
    $1,500,000;

                      


              

              
                 

                
                  
                    
                      
                        
                          
                            	
                                    (j)

                                  	
                                    “MMG Financial
      Statements” means those audited financial statements of MMG to be
      prepared by the Accountants as at January 31,
  2007;

                                  


                          

                           

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
        
          
            
              
                
                  
                    	
                            (k)

                          	
                            “MMG Shareholders” means
      each of the shareholders of MMG set out in the attached Schedule
      B;

                          


                  

                  
                     

                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            (l)

                                          	
                                            “MMG Shares” means the
      five million two hundred seventy seven thousand four hundred forty six
      (5,277,446) voting common shares US $0.001 par value and the fourteen
      million four hundred and seventeen thousand (14,417,000) preferred shares
      US $0.001 par value in the capital of MMG, held by the MMG Shareholders in
      the amounts set opposite their names in the attached Schedule B, being all
      of the currently issued and outstanding shares of
  MMG;

                                          


                                  

                                  
                                    
                                       

                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      	
                                                              (m)

                                                            	
                                                              “Principal Sum” means the
      sum of TWO HUNDRED AND FIFTY THOUSAND (US$250,000) DOLLARS to be advanced
      in instalments under the Bridge
Loan;

                                                            


                                                    

                                                    
                                                      
                                                         

                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        	
                                                                                (n)

                                                                              	
                                                                                “Promissory Note” means
      the promissory note or notes to be delivered by MMG to FCIC or the Lenders
      in substantially the form attached as Schedule
  C;

                                                                              


                                                                      

                                                                      
                                                                        
                                                                           

                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          	
                                                                                                  (o)

                                                                                                	
                                                                                                  “Property” means all of
      the properties, assets and undertaking of MMG, for the time being, present
      and future, real and personal, legal or equitable, tangible or intangible,
      and of whatsoever nature and kind and wheresoever situate;
    and

                                                                                                


                                                                                        

                                                                                        
                                                                                          
                                                                                             

                                                                                            
                                                                                              
                                                                                                
                                                                                                  
                                                                                                    
                                                                                                      
                                                                                                        
                                                                                                          
                                                                                                            	
                                                                                                                    (p)

                                                                                                                  	
                                                                                                                    "Pubco" means an existing
      public company whose shares are quoted for trading on the U.S.
      over-the-counter bulletin
board;

                                                                                                                  


                                                                                                          

                                                                                                          
                                                                                                            
                                                                                                               

                                                                                                              
                                                                                                                
                                                                                                                  
                                                                                                                    
                                                                                                                      
                                                                                                                        
                                                                                                                          
                                                                                                                            
                                                                                                                              	
                                                                                                                                      (q)

                                                                                                                                    	
                                                                                                                                      "Resulting Company" means
      the company resulting from the merger/acquisition or other business
      combination between MMG and Pubco;
and

                                                                                                                                    


                                                                                                                            

                                                                                                                            
                                                                                                                              
                                                                                                                                 

                                                                                                                                
                                                                                                                                  
                                                                                                                                    
                                                                                                                                      
                                                                                                                                        
                                                                                                                                          
                                                                                                                                            
                                                                                                                                              
                                                                                                                                                	
                                                                                                                                                        (r)

                                                                                                                                                      	
                                                                                                                                                        “RTO” means reverse
      takeover.

                                                                                                                                                      


                                                                                                                                              

                                                                                                                                               

                                                                                                                                            

                                                                                                                                          

                                                                                                                                        

                                                                                                                                      

                                                                                                                                    

                                                                                                                                  

                                                                                                                                

                                                                                                                              

                                                                                                                            

                                                                                                                          

                                                                                                                        

                                                                                                                      

                                                                                                                    

                                                                                                                  

                                                                                                                

                                                                                                              

                                                                                                            

                                                                                                          

                                                                                                        

                                                                                                      

                                                                                                    

                                                                                                  

                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    1.2    Wherever the
singular or the masculine are used herein the same shall be deemed to include
the plural or the feminine or the body politic or corporate where the context or
the parties so require.

     

    1.3    The headings
to the sections, paragraphs, subparagraphs or clauses of this Agreement are
inserted for convenience only and shall not affect the construction
hereof.

     

    1.4    Unless
otherwise stated a reference herein to a numbered or lettered section,
paragraph, subparagraph or clause refers to the section, paragraph, subparagraph
or clause bearing that number or letter in this Agreement. A reference to this
Agreement or herein means this Bridge Loan and Representation Agreement,
including the Schedules hereto, together with any amendments
thereof.

     

    1.5    All dollar
amounts expressed herein refer to lawful currency of the United States of
America.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -4-

      
         

      

    

    1.6    The following
schedules are attached to and form part of this Agreement:

    
    

     

    
      	 	 Schedule A
      –	 The Business
      Plan, including description of subsidiaries
	 	 Schedule B
      –	 MMG Capital
      Structure
	 	 Schedule C
      –	 Management
      Prepared Financial Statements
	 	 Schedule D
      –	 Form of
      Promissory Note
	 	 Schedule E
      –	 Employment,
      Service & Pension Agreements of MMG
	 	 Schedule F
      –	 Real Property
      & Leases of MMG
	 	 Schedule G
      –	 Encumbrances
      on MMG’s Assets
	 	 Schedule H
      –	 MMG
      Litigation
	 	 Schedule I
      –	 Options or
      Rights to Purchase Securities of MMG
	 	 Schedule J
      –	 Registered
      Trademarks, Trade Names & Patents of MMG
	 	 Schedule L
      –	 Resulting
      Company Share Structure


    

     

    2.     
ENGAGEMENT

     

    2.1    MMG hereby
engages FCIC in the capacity of an independent consultant and as its non
exclusive fiscal agent for the services described hereafter and FCIC accepts
such engagement.

     

    2.2    MMG and the
Principal Shareholders agree that MMG shall have until one (1) month from the
date MMG delivers the MMG Financial Statements to FCIC (the “Due Diligence Period”) within
which to complete its due diligence investigations. Upon being fully satisfied
with its due diligence investigations of MMG and of the corporate opportunities
available to MMG, FCIC shall notify MMG in writing of its satisfaction or
non-satisfaction with its due diligence investigations.

     

    2.3    FCIC
acknowledges that MMG requires working capital for its operations and agrees
that it may advance monies to MMG under the terms of the Bridge Loan during and
after the Due Diligence Period. The advances shall be made in United States
(“US”) currency and each
instalment shall be repaid by MMG on the Maturity Date of the advance of each
instalment or as otherwise provided under this Agreement. The advances under the
Bridge Loan shall be subject to and in accordance with the provisions of
paragraphs 12.1 and  hereof.

     

    2.4    MMG and the
Principal Shareholders agree that upon FCIC advancing an aggregate of TWO
HUNDRED FIFTY THOUSAND (US$250,000) to MMG under the Bridge Loan, they shall
cause a nominee of FCIC to be appointed to MMG’s board of
directors.

    


    2.5    MMG and the
Principal Shareholders acknowledge and agree that FCIC has identified a suitable
Pubco and that they will use their best efforts to complete an RTO on the basis
set out in section 14 hereof . MMG and the Principal Shareholders further agree
should MMG fail to complete the RTO, FCIC shall be entitled to terminate its
obligations under this Agreement and in addition to any compensation due to it
hereunder, MMG and the Principal Shareholders will pay a break-up fee calculated
on the basis of one hundred (100%) percent of the amount of the Principal Sum
that has been advanced under the Bridge Loan to such date.

    


    3.     
TERM

    


    3.1    The term of
FCIC’s engagement shall commence effective March 1, 2007 (the “Commencement Date”) and shall
run until the earlier of two (2) years from the Commencement Date and the date
on which MMG becomes a public company, provided however, that in the event FCIC
does not fund the operations of MMG in the amount of at least TWO HUNDRED AND
FIFTY THOUSAND (US$250,000)
DOLLARS within one (1) month of the Commencement Date, then the engagement of
FCIC as the fiscal agent of MMG shall terminate and FCIC shall be entitled to
the repayment or at its sole election, conversion of all or any part of the
Bridge Loan advanced to that date.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -5-

      
         

      

    

    3.2    It is
understood and agreed that upon MMG becoming a public company (the “Resulting Company”), a fresh
agreement will be entered into by the Resulting Company and FCIC and that FCIC
will continue to provide similar services to the Resulting Company as herein
provided.

    


    4.          SERVICES

    


    4.1    FCIC agrees
to provide the following services to MMG:

    
      
         

        
          
            
              
                
                  
                    
                      
                        	
                                (a)

                              	
                                use
      reasonable efforts to arrange financings totalling TWO MILLION
      (US$2,000,000) DOLLARS, on terms reasonably acceptable to MMG, whether
      debt or equity or debt convertible into
  equity;

                              


                      

                      
                        
                           

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	
                                                  (b)

                                                	
                                                  provide
      management advice, including assisting in the selection of
      personnel;

                                                


                                        

                                        
                                          
                                             

                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            	
                                                                    (c)

                                                                  	
                                                                    provide
      cash-flow analysis and recommend strategies for improving
      same;

                                                                  


                                                          

                                                          
                                                            
                                                               

                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              	
                                                                                      (d)

                                                                                    	
                                                                                      provide
      cash-flow analysis and recommend strategies for improving
      same;

                                                                                    


                                                                            

                                                                            
                                                                              
                                                                                 

                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          
                                                                                            
                                                                                              
                                                                                                	
                                                                                                        (e)

                                                                                                      	
                                                                                                        search
      for, identify and perform or direct all necessary due diligence on
      Pubco;

                                                                                                      


                                                                                              

                                                                                              
                                                                                                
                                                                                                   

                                                                                                  
                                                                                                    
                                                                                                      
                                                                                                        
                                                                                                          
                                                                                                            
                                                                                                              
                                                                                                                
                                                                                                                  	
                                                                                                                          (f)

                                                                                                                        	
                                                                                                                          introduce
      MMG to professional advisors, including business valuators and
      auditors;

                                                                                                                        


                                                                                                                

                                                                                                                
                                                                                                                  
                                                                                                                     

                                                                                                                    
                                                                                                                      
                                                                                                                        
                                                                                                                          
                                                                                                                            
                                                                                                                              
                                                                                                                                
                                                                                                                                  
                                                                                                                                    	
                                                                                                                                            (g)

                                                                                                                                          	
                                                                                                                                            assist
      MMG in any valuation issues which may arise in connection with an
      RTO;

                                                                                                                                          


                                                                                                                                  

                                                                                                                                  
                                                                                                                                    
                                                                                                                                       

                                                                                                                                      
                                                                                                                                        
                                                                                                                                          
                                                                                                                                            
                                                                                                                                              
                                                                                                                                                
                                                                                                                                                  
                                                                                                                                                    
                                                                                                                                                      	
                                                                                                                                                              (h)

                                                                                                                                                            	
                                                                                                                                                              introduce
      MMG to a prospective market maker, and use reasonable efforts to assist
      MMG in securing such market
maker;

                                                                                                                                                            


                                                                                                                                                    

                                                                                                                                                    
                                                                                                                                                      
                                                                                                                                                         

                                                                                                                                                        
                                                                                                                                                          
                                                                                                                                                            
                                                                                                                                                              
                                                                                                                                                                
                                                                                                                                                                  
                                                                                                                                                                    
                                                                                                                                                                      
                                                                                                                                                                        	
                                                                                                                                                                                (i)

                                                                                                                                                                              	
                                                                                                                                                                                negotiate
      the transaction terms with Pubco and the financing terms with any
      underwriter, and assist in the “going public” transaction, including
      assisting Pubco’s professional advisors in dealing with the stock exchange
      or bulletin board on which Pubco is listed;
  and

                                                                                                                                                                              


                                                                                                                                                                      

                                                                                                                                                                      
                                                                                                                                                                        
                                                                                                                                                                           

                                                                                                                                                                          
                                                                                                                                                                            
                                                                                                                                                                              
                                                                                                                                                                                
                                                                                                                                                                                  
                                                                                                                                                                                    
                                                                                                                                                                                      
                                                                                                                                                                                        
                                                                                                                                                                                          	
                                                                                                                                                                                                  (j)

                                                                                                                                                                                                	
                                                                                                                                                                                                  use
      reasonable efforts to assist any sponsor in completing a major financing,
      it being understood that the success of such financing is not
      guaranteed.

                                                                                                                                                                                                


                                                                                                                                                                                        

                                                                                                                                                                                         

                                                                                                                                                                                      

                                                                                                                                                                                    

                                                                                                                                                                                  

                                                                                                                                                                                

                                                                                                                                                                              

                                                                                                                                                                            

                                                                                                                                                                          

                                                                                                                                                                        

                                                                                                                                                                      

                                                                                                                                                                    

                                                                                                                                                                  

                                                                                                                                                                

                                                                                                                                                              

                                                                                                                                                            

                                                                                                                                                          

                                                                                                                                                        

                                                                                                                                                      

                                                                                                                                                    

                                                                                                                                                  

                                                                                                                                                

                                                                                                                                              

                                                                                                                                            

                                                                                                                                          

                                                                                                                                        

                                                                                                                                      

                                                                                                                                    

                                                                                                                                  

                                                                                                                                

                                                                                                                              

                                                                                                                            

                                                                                                                          

                                                                                                                        

                                                                                                                      

                                                                                                                    

                                                                                                                  

                                                                                                                

                                                                                                              

                                                                                                            

                                                                                                          

                                                                                                        

                                                                                                      

                                                                                                    

                                                                                                  

                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    5.           COMPENSATION

     

    5.1    As
compensation for services hereunder, MMG agrees that it shall pay FCIC during
the term of this Agreement the sum of TEN THOUSAND (US$10,000) DOLLARS per month
and in the event FCIC arranges any financing during the term of this Agreement,
which closes during or after such term on terms which are substantially the same
as the terms on which such financing was commenced, MMG or the Resulting
Company, as the case may be, shall pay a fee to FCIC in the amount of ten (10%)
percent of the amount or amounts so arranged and issue warrants to FCIC
entitling it to purchase on the same terms and conditions of any financing it
arranges securities equivalent to ten (10%) percent of such securities sold on
the financing. FCIC acknowledges that in the event a financing is arranged
through a public company, the fee shall be the responsibility of such public
company.

    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    -6-

     

    5.2    In addition,
notwithstanding anything to the contrary contained herein, in the event MMG goes
public by any manner including an RTO or initial public offering (“IPO”), MMG shall issue FCIC
such number of common shares without par value in the capital of MMG as fully
paid and non-assessable (the “Finder's Shares”), such that
on completion of the RTO or IPO, FCIC will hold approximately three (3%) percent
of the shares issued by the Resulting Company in exchange for all the issued and
outstanding shares of MMG.

    


    6.           COVENANTS,
REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL SHAREHOLDERS AND
MMG

    


    The
Principal Shareholders and MMG jointly and severally covenant with and represent
and warrant to FCIC as follows, and acknowledge that FCIC is relying upon such
covenants, representations and warranties in connection with the advance of the
Bridge Loan by FCIC and its clients and its retention as MMG’s fiscal agent
that:

     

    6.1    MMG has been
duly incorporated and organized, is validly existing and is in good standing
under the laws of United States of America; it has the corporate power to own or
lease its property and to carry on the Business; it is duly qualified as a
corporation to do business and is in good standing with respect thereto in each
jurisdiction in which the nature of the Business or the property owned or leased
by it makes such qualification necessary; and it has all necessary licenses,
permits, authorizations and consents to operate its Business in accordance with
the terms of its Business Plan.

     

    6.2    The
authorized capital of MMG consists of twenty million (20,000,000) voting common
shares, par value US$0.001 of which five million two hundred seventy seven
thousand four hundred and forty six (5,277,446) voting common shares have been
duly issued and are outstanding as fully paid and non­assessable and seventy
million (70,000,000) preferred shares par value US$0.001 of which fourteen
million four hundred and seventeen thousand (14,417,000) preferred shares have
been duly issued and are outstanding as fully paid and
non-assessable.

     

    6.3    The MMG
Shares owned by the MMG Shareholders are owned by them as the beneficial and
recorded owners with a good and marketable title thereto, free and clear of all
mortgages, liens, charges, security interests, adverse claims, pledges,
encumbrances and demands whatsoever as more particularly set out in Schedule B
hereof.

     

    6.4    No person,
firm or corporation has any agreement or option or any right or privilege
(whether by law, pre-emptive or contractual) capable of becoming an agreement or
option for the purchase from the MMG Shareholders of any of the MMG Shares held
by any of them.

     

    6.5    No person,
firm or corporation has any agreement or option, including convertible
securities, warrants or convertible obligations of any nature, or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement or option for the purchase, subscription, allotment or issuance of any
of the unissued shares in the capital of MMG or of any securities of MMG, except
as set out in Schedule H attached hereto.  MMG and the Principal
Shareholders covenant and agree that the outstanding loans set out in Schedule H
shall be converted into that number of common shares set out opposite each
lender's name in Schedule H prior to the RTO, such that MMG will have issued a
maximum of four million four hundred fifty four thousand one hundred eighty
three (4,454,183) additional common shares in satisfaction of loans in the
aggregate amount of ONE MILLION TWO HUNDRED EIGHTY ONE THOUSAND FOUR HUNDRED
FIFTY FIVE (US$1,281,455) DOLLARS.

     

    6.6    FCIC
understands that approximately $400,000 of convertible loans may still be
outstanding as at the time of the RTO.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -7-

    

     

    6.7    Other than as
disclosed in Schedule A attached hereto, MMG does not have any subsidiaries or
agreements of any nature to acquire any subsidiary or to acquire or lease any
other business operations and will not acquire, or agree to acquire, any
subsidiary or business without the prior written consent of FCIC, which consent
shall not unreasonably be withheld.

     

    6.8    Notwithstanding
anything to the contrary contained herein and any further share, option,
warrant, or rights being issued, the relative percentages as between the
existing shareholders of the Pubco, FCIC and MMG Shareholders at the time of the
RTO shall remain as set out in Schedule L.

     

    6.9    Except as
described in Schedule I and article 6.5 hereof, MMG will not, without the prior
written consent of FCIC, issue any additional shares from and after the date
hereof or create any options, warrants or rights for any person to subscribe for
or acquire any unissued shares in the capital of MMG, without the prior written
consent of FCIC. The failure of MMG to renegotiate the NIR Funding, as described
in Schedule I, prior to the RTO on terms that are acceptable to FCIC, shall be
considered an Event of Default under section 13.1.

     

    6.10   MMG is not a party
to or bound by any agreement or guarantee, warranty, indemnification, assumption
or endorsement or any other like commitment of the obligations, liabilities
(contingent or otherwise) or indebtedness of any other person, firm or
corporation, or of any products related to the Business.

     

    6.11   The books and
records of MMG fairly and correctly set out and disclose in all material
respects, in accordance with generally accepted accounting principles, the
financial position of MMG as at the date hereof, and all material financial
transactions of MMG relating to the Business have been accurately recorded in
such books and records.

     

    6.12   MMG shall
immediately cause the Accountants to commence the preparation of the MMG
Financial Statements and represent that the MMG Financial Statements will
present fairly the assets, liabilities (whether accrued, absolute, contingent or
otherwise) and the financial condition of MMG as at the date thereof and there
will not be any material increase in such liabilities other than in the ordinary
course of Business and the MMG Financial Statements will not show any material
differences from the management prepared and reviewed financial statements (the
“Management Statements”)
attached as Schedule C hereto.

     

    6.13   The entering into
of this Agreement and the consummation of the transactions contemplated hereby
will not:

    
      
         

        
          
            
              
                
                  
                    
                      
                        	
                                (a)

                              	
                                result
      in the violation of any of the terms and provisions of the constating
      documents or bylaws of MMG or of any indenture, instrument or agreement,
      written or oral, to which MMG or the Principal Shareholders may be a
      party; or

                              


                      

                      
                        
                           

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	
                                                  (b)

                                                	
                                                  to
      the best of the knowledge of MMG and the Principal Shareholders, result in
      the violation of any law, regulation, municipal bylaw or
      ordinance.

                                                


                                        

                                         

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    6.14   This agreement has
been duly authorized, validly executed and delivered by MMG and the Principal
Shareholders.

     

    6.15   The Business has
been carried on in the ordinary and normal course by and will be carried on by
MMG in the ordinary and normal course after the date hereof other than by mutual
agreement of MMG and FCIC.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -8-

    

     

    6.16   Except as disclosed
in the Schedules hereto:

    
       

      
        
          
            
              
                
                  
                    
                      	
                              (a)

                            	
                              MMG
      is not a party to any written or oral employment, service or pension
      agreement;

                            


                    

                    
                      
                        
                           

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          	
                                                  (b)

                                                	
                                                  MMG
      does not have outstanding any bonds, debentures, mortgages, notes or other
      indebtedness, and MMG is not under any agreement to create or issue any
      bonds, debentures, mortgages, notes or other
      indebtedness;

                                                


                                        

                                        
                                          
                                            
                                              
                                                 

                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                	
                                                                        (c)

                                                                      	
                                                                        MMG
      is not the owner, lessee or under any agreement to own or lease any real
      property;

                                                                      


                                                              

                                                              
                                                                
                                                                  
                                                                    
                                                                       

                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      	
                                                                                              (d)

                                                                                            	
                                                                                              MMG
      owns, possesses and has good and marketable title to its undertaking,
      property and Assets, and without restricting the generality of the
      foregoing, all those assets described in the balance sheet included in the
      Management Statements, free and clear of any and all mortgages, liens,
      pledges, charges, security interests, encumbrances, actions, claims or
      demands of any nature whatsoever or howsoever
    arising.

                                                                                            


                                                                                    

                                                                                    
                                                                                      
                                                                                        
                                                                                          
                                                                                             

                                                                                            
                                                                                              
                                                                                                
                                                                                                  
                                                                                                    
                                                                                                      
                                                                                                        
                                                                                                          
                                                                                                            	
                                                                                                                    (e)

                                                                                                                  	
                                                                                                                    MMG
      does not have any outstanding material agreements (including employment
      agreements) contracts or commitment, whether written or oral, of any
      nature or kind whatsoever,
except:

                                                                                                                  


                                                                                                          

                                                                                                          
                                                                                                            
                                                                                                               

                                                                                                            

                                                                                                          

                                                                                                        

                                                                                                      

                                                                                                    

                                                                                                  

                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                        
                          
                            
                              
                                
                                  	
                                          (i)

                                        	
                                          agreements,
      contracts and commitments in the ordinary course of
    business;

                                        


                                

                                
                                  
                                    
                                      
                                         

                                      

                                    

                                    
                                      
                                        
                                          
                                            
                                              	
                                                      (ii)

                                                    	
                                                      service contracts on
      office equipment; and

                                                    


                                            

                                            
                                              
                                                
                                                  
                                                    
                                                       

                                                    

                                                  

                                                  
                                                    
                                                      
                                                        
                                                          
                                                            	
                                                                    (iii)

                                                                  	
                                                                    the employment,
      services and pension agreements described in the Schedules
      hereto;

                                                                  


                                                          

                                                          
                                                             

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                (f)

                              	
                                there
      are no actions, suits or proceedings (whether or not purportedly on behalf
      of MMG), pending or threatened against or affecting MMG or affecting the
      Business, at law or in equity, or before or by any federal, provincial,
      state, municipal or other governmental department, commission, board,
      bureau, agency or instrumentality, domestic or foreign and neither MMG nor
      the Principal Shareholders are aware of any existing ground on which any
      such action, suit or proceeding might be commenced with any reasonable
      likelihood of success.

                              


                      

                      
                        
                           

                        

                      

                    

                  

                

              

            

          

        

      

    

    6.17   MMG has its
property insured against loss or damage by all insurable hazards or risks on a
replacement cost basis and such insurance coverage will be continued in full
force and effect; to the best of the knowledge of MMG and the Principal
Shareholders, MMG is not in default with respect to any of the provisions
contained in any such insurance policy and has not failed to give any notice or
present any claim under any such insurance policy in due and timely
fashion.

     

    6.18   MMG is not in
material default or breach of any contracts, agreements, written or oral,
indentures or other instruments to which it is a party and there exists no state
of facts which after notice or lapse of time or both which would constitute such
a default or breach, and all such contracts, agreements, indentures or other
instruments are now in good standing and MMG is entitled to all benefits
thereunder.

     

    6.19   To the best of the
knowledge of MMG and the Principal Shareholders, MMG is conducting and will
conduct the Business in compliance with all applicable laws, rules and
regulations of each jurisdiction in which the Business is or will be carried on,
MMG is not in material breach of any such laws, rules or regulations and is
fully licensed, registered or qualified in each jurisdiction in which MMG owns
or leases property or carries on or proposes to carry on the Business to enable
the Business to be carried on as now conducted and its property and assets to be
owned, leased and operated, and all such licenses, registrations and
qualifications are valid and subsisting and in good standing and that none of
the same
contains or will contain any provision, condition or limitation which has or may
have a materially adverse effect on the operation of the Business.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -9-

    

     

    6.20   All facilities and
equipment owned or used by MMG in connection with the Business are in good
operating condition and are in a state of good repair and
maintenance.

     

    6.21   Except as disclosed
in the Management Statements, MMG has no loans or indebtedness outstanding which
have been made to directors, former directors, officers, shareholders and
employees of MMG or to any person or corporation not dealing at arm’s length
with any of the foregoing.

     

    6.22   MMG has made full
disclosure to FCIC of all aspects of the Business and has made all of its books
and records available to the representatives of FCIC in order to assist FCIC in
the performance of its due diligence searches and no material facts in relation
to the Business have been concealed by MMG or the Principal
Shareholders.

     

    6.23   To the best of
their knowledge, information and belief, all due diligence material provided to
FCIC and its counsel is accurate in all respects.

     

    6.24   There are no
material liabilities of MMG of any kind whatsoever, whether or not accrued and
whether or not determined or determinable, in respect of which MMG or FCIC may
become liable on or after the consummation of the transaction contemplated by
this Agreement, other than liabilities which may be reflected on the MMG
Financial Statements, liabilities disclosed or referred to in this Agreement or
in the Schedules attached hereto, or liabilities incurred in the ordinary course
or business and attributable to the period since the date of the MMG Financial
Statements, none of which has been materially adverse to the nature of the
Business, results of operations, assets, financial condition or manner of
conducting the Business.

     

    6.25   The Articles,
bylaws and other constating documents of MMG in effect with the appropriate
corporate authorities as at the date of this Agreement will remain in full force
and effect without any changes thereto unless such changes are expressly agreed
to by FCIC.

     

    6.26   The directors and
officers of MMG are as follows:

    
       

      
        	 	Name	Position
	 	Aleksandr
      Shvarts	Chief Executive
      Officer
	 	David
    Kokakis	Chief Operating
      Officer
	 	Gennady
      Pomeranets	Chief Financial
      Officer
	 	Eric
    Schwartz	Executive Vice
      President


      

       

    

    6.27   MMG is not a party
to any collective bargaining agreement or other agreement made with a trade
union and there is no union which has been certified as the bargaining agent for
the employees of MMG.

     

    6.28   No claim shall be
made by FCIC against MMG or the Principal Shareholders as a result of any
misrepresentation or as a result of the breach of any covenant or warranty
herein contained unless the aggregate loss or damage to FCIC exceeds FIVE
THOUSAND (US$5,000) DOLLARS.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -10-

    

     

    7.          
REPRESENTATIONS AND WARRANTIES REGARDING MMG’S TECHNOLOGIES/INTELLECTUAL
PROPERTY

     

    7.1    MMG and the
Principal Shareholders hereby represent and warrant to FCIC that:

    
       

      
        
          
            
              
                
                  
                    
                      	
                              (a)

                            	
                              with
      respect to the Intellectual Property referred in Schedule
      A:

                            


                    

                  

                

              

            

          

        

      

    

    
      
        
           

        

      

      
        
          
            
              
                	
                        (i)

                      	
                        MMG is the sole and
      exclusive owner and has the sole and exclusive right to use, license and
      convey the item in the conduct of its
Business;

                      


              

               

                
                  
                    
                      
                        
                          
                            
                               

                            

                          

                          
                            
                              
                                
                                  
                                    	
                                            (ii)

                                          	
                                            to the best of the
      knowledge of MMG and the Principal Shareholders, no proceedings are
      pending or threatened against MMG or against any other persons which
      challenge the validity, enforceability, use or ownership of the item,
      except as described in Schedule H attached
  hereto;

                                          


                                  

                                   

                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                   

                                                

                                              

                                              
                                                
                                                  
                                                    
                                                      
                                                        	
                                                                (iii)

                                                              	
                                                                to the best of the
      knowledge of MMG and the Principal Shareholders (without having made
      independent searches or investigation in connection therewith), the
      Intellectual Property does not infringe upon or otherwise violate the
      intellectual property including, but without restricting the generality
      thereof, patents, trademarks, service marks, or copyrights, domestic or
      foreign, of others and, to the knowledge of MMG and the Principal
      Shareholders, is not being infringed upon by others and is not subject to
      any outstanding order, decree, judgment, stipulation or
      charge;

                                                              


                                                      

                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                       

                                                                    

                                                                  

                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            	
                                                                                    (iv)

                                                                                  	
                                                                                    MMG has not received
      any charge of interference or infringement with respect to any
      item;

                                                                                  


                                                                          

                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                           

                                                                                        

                                                                                      

                                                                                      
                                                                                        
                                                                                          
                                                                                            
                                                                                              
                                                                                                	
                                                                                                        (v)

                                                                                                      	
                                                                                                        to the best of the
      knowledge of MMG and the Principal Shareholders (without having made
      independent searches or investigation in connection therewith), there is
      no invention or application therefor or similar property which infringes
      upon the item;

                                                                                                      


                                                                                              

                                                                                              
                                                                                                
                                                                                                  
                                                                                                    
                                                                                                      
                                                                                                        
                                                                                                          
                                                                                                            
                                                                                                               

                                                                                                            

                                                                                                          

                                                                                                          
                                                                                                            
                                                                                                              
                                                                                                                
                                                                                                                  
                                                                                                                    	
                                                                                                                            (vi)

                                                                                                                          	
                                                                                                                            MMG shall have taken
      all steps reasonable and duly necessary to protect the Intellectual
      Property;

                                                                                                                          


                                                                                                                  

                                                                                                                  
                                                                                                                    
                                                                                                                      
                                                                                                                        
                                                                                                                          
                                                                                                                            
                                                                                                                              
                                                                                                                                
                                                                                                                                   

                                                                                                                                

                                                                                                                              

                                                                                                                              
                                                                                                                                
                                                                                                                                  
                                                                                                                                    
                                                                                                                                      
                                                                                                                                        	
                                                                                                                                                (vii)

                                                                                                                                              	
                                                                                                                                                MMG has supplied (or
      made available to) FCIC true and complete copies of all written
      documentation evidencing its ownership of each item and all licenses and
      other contracts relating thereto, or to which a reference is made in
      Schedule A; and

                                                                                                                                              


                                                                                                                                      

                                                                                                                                      
                                                                                                                                        
                                                                                                                                          
                                                                                                                                            
                                                                                                                                              
                                                                                                                                                
                                                                                                                                                  
                                                                                                                                                    
                                                                                                                                                       

                                                                                                                                                    

                                                                                                                                                  

                                                                                                                                                  
                                                                                                                                                    
                                                                                                                                                      
                                                                                                                                                        
                                                                                                                                                          
                                                                                                                                                            	
                                                                                                                                                                    (viii) 

                                                                                                                                                                  	
                                                                                                                                                                    MMG has the right to
      use all of the registered trade marks, trade names and patents, both
      domestic and foreign, in relation to the Business as set out in the
      Schedules hereto;

                                                                                                                                                                  


                                                                                                                                                          

                                                                                                                                                           

                                                                                                                                                        

                                                                                                                                                      

                                                                                                                                                    

                                                                                                                                                  

                                                                                                                                                

                                                                                                                                              

                                                                                                                                            

                                                                                                                                          

                                                                                                                                        

                                                                                                                                      

                                                                                                                                    

                                                                                                                                  

                                                                                                                                

                                                                                                                              

                                                                                                                            

                                                                                                                          

                                                                                                                        

                                                                                                                      

                                                                                                                    

                                                                                                                  

                                                                                                                

                                                                                                              

                                                                                                            

                                                                                                          

                                                                                                        

                                                                                                      

                                                                                                    

                                                                                                  

                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                (b)

                              	
                                to
      the best of the knowledge of MMG and the Principal Shareholders (without
      having made independent searches or investigation in connection
      therewith), MMG has not infringed, misappropriated or otherwise violated
      any intellectual property rights of any third party, nor will any
      infringement, misappropriation, or violation occur as a result of the
      continued operation of the business by MMG as now
      conducted.

                              


                      

                    

                  

                

              

            

          

        

      

       

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -11-

 

    8.           COVENANTS,
REPRESENTATIONS AND WARRANTIES OF FCIC

     

    8.1    FCIC
covenants with and represents and warrants to MMG and the Principal Shareholders
as follows and acknowledges that they are relying upon such covenants,
representations and warranties in entering into this Agreement:

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (a)

                                	
                                  the
      entering into of this Agreement and the consummation of the transactions
      contemplated hereby will not result in the violation of any of the terms
      and provisions of the constating documents or bylaws of FCIC or of any
      indenture, instrument or agreement, written or oral, to which FCIC may be
      a
party;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (b)

                                	
                                  this
      Agreement has been duly authorized, validly executed and delivered by
      FCIC;
and

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (c)

                                	
                                  no
      claims shall be made by MMG or the Principal Shareholders against FCIC as
      a result of any misrepresentation or as a result of the breach of any
      covenant or warranty herein contained unless the aggregate loss or damage
      to MMG or the Principal Shareholders exceeds FIVE THOUSAND (US$5,000)
      DOLLARS.

                                


                        

                      

                    

                  

                

              

            

          

        

      

    

               

    9.           SURVIVAL

     

    9.1    All
representation, warranties, covenants and agreements made hereunder shall
survive the payment of the Bridge Loan and shall continue in full force and
effect until the repayment or conversion of the Bridge Loan.

     

    10.         SECURITY

     

    10.1   To secure the
repayment of the Bridge Loan and the payment of all other monies due hereunder,
MMG agrees to execute a Promissory Note in the form attached as Schedule C
hereof, evidencing each advance of funds under the Bridge Loan and sign a
general security agreement in the standard form, securing all the Assets in
favour of the Lenders. The Lenders shall file the necessary UCC filings to
register its security interests.

     

    10.2   The Lenders may
grant extensions, take and give up securities, accept compositions, grant
releases and discharges and otherwise deal with MMG and with other parties,
sureties or securities as the Lenders may see fit without prejudice to the
liability of FCIC or the Lenders’ rights under this Agreement or under the
Promissory Note.

     

    10.3   The grant of the
Promissory Note or of any other security in replacement thereof shall not
operate so as to create any merger or discharge of any indebtedness or liability
of MMG hereunder, nor of any assignment, transfer, guarantee, lien, contract,
promissory note, bill of exchange or security of any form held or which may
hereafter be held by the Lenders from MMG or from any other person
whomsoever.

     

    10.4   The Lenders may
waive any breach by MMG of this Agreement or of any default by MMG in the
observance or performance of any covenant or condition under the Promissory
Note. No failure or delay on the part of the Lenders to exercise any right,
power or remedy given herein or by statute or at law or in equity or otherwise
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right preclude any other exercise thereof or the exercise of any other
right, power or remedy, nor shall any waiver by the Lenders be deemed to be a
waiver of any subsequent similar or other event.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -12-

    

     

    11.         TERMS
OF THE BRIDGE LOAN

     

    11.1   MMG shall pay
interest on the monies advanced under the Bridge Loan before and after judgment,
on the amount of the Principal Sum remaining unpaid from time to time interest
at a rate of ten (10%) percent per annum, payable quarterly  on March
31, June 30, September 30, and December 31 of each year.

     

    11.2   At any time prior
to the Maturity Date and provided that MMG has not completed the RTO of Pubco,
the Lenders shall have the right to convert all or any part of the Principal Sum
into common shares without par value in the capital of MMG, at a conversion
price of TWENTY FIVE (US$0.25) CENTS per share.

     

    11.3   The Lenders may
exercise the right of conversion hereby granted by delivering notice in writing
to MMG which notice shall stipulate the amount of the Bridge Loan being
converted to common shares in the capital of MMG. Upon receipt of such notice,
MMG shall forthwith take all necessary action to cause certificates representing
the appropriate number of common shares to be issued and delivered to the
Lenders as the case may be in satisfaction of such amount of the Bridge Loan
which has been so converted.

     

    11.4   In the event
of:

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (a)

                                	
                                  any
      subdivision, consolidation or reclassification of MMG’s issued
      shares;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                         

                      

                    

                  

                

                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            (b)

                                          	
                                            any
      reorganization of the share capital of MMG affecting in any manner its
      issued
shares;

                                          


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

                
                  
                    
                      
                        
                          
                            
                              
                                
                                   

                                

                              

                            

                          

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	
                                                      (c)

                                                    	
                                                      the
      amalgamation , merger or business combination of MMG with any other
      company or companies;
or

                                                    


                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                             

                                          

                                        

                                      

                                    

                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        	
                                                                (d)

                                                              	
                                                                the
      declaration of a stock dividend or other distribution of the assets of MMG
      to the shareholders of MMG, other than a stock dividend of up to but not
      in excess of five (5%) percent of the number of outstanding common shares
      of
MMG,

                                                              


                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                    
                                      
                                        
                                          
                                             

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    the
number of shares which may be but are not yet issued pursuant to the Lender’s
right of conversion at the time when such event occurs shall be adjusted, if
required, so that the Lenders will be in no less favourable position than if
they had received, prior to the date of such event, the shares which it would
otherwise be entitled to receive upon exercise of its right of
conversion.

    


    11.5   MMG may prepay all
or any portion of the Bridge Loan at any time prior to the Maturity Date, but
MMG must give the Lenders notice of its intention to do so at least twenty (20)
days before the date of such prepayment, during which the Lenders may exercise
their rights of conversion in accordance with the terms of this
Agreement.

    


    12.         CONDITIONS
PRECEDENT

    


    12.1   The Lenders’
agreement to advance any funds to MMG shall be subject to the satisfaction of
the following conditions:

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (a)

                                	
                                  the
      representations and warranties of MMG and the Principal Shareholders shall
      be true as of the date hereof and as of the date of each subsequent
      advance;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (b)

                                	
                                  MMG
      shall have complied with all of its obligations
      hereunder;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -13-


      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (c)

                                	
                                  MMG
      shall have caused to be delivered to the Lenders an opinion of MMG’s
      solicitors confirming
that:

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               


                
                  
                    
                      
                        
                          	(i)	
                                  MMG was duly
      incorporated, organized, validly existing and in good standing with
      respect to the filing of annual returns under the laws of United States of
      America;

                                


                        

                        
                          
                            
                              
                                
                                  
                                    
                                      
                                         

                                          
                                            
                                              	(ii)	
                                                      this Agreement has
      been duly authorized, validly executed and delivered by MMG;
      and

                                                    


                                            

                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                             

                                                              
                                                                
                                                                  	(iii)	
                                                                          the General Security
      Agreement and the Promissory Notes delivered by MMG in respect of each
      advance have been duly authorized, validly executed and delivered by
      MMG;

                                                                        


                                                                

                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                 

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (d)

                                	
                                  MMG
      shall provide a budget setting out a use of proceeds, which budget is
      satisfactory to FCIC;
and

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (e)

                                	
                                  other
      than for the Bridge Loan, any further advances or financing under FCIC's
      mandate hereunder shall be subject to MMG delivering the MMG Financial
      Statements, which statements shall not be materially different from the
      Management
Statements.

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (f)

                                	
                                  The
      foregoing conditions precedent are inserted for the benefit of the Lenders
      and may be waived in whole or in part by the Lenders at any time prior to
      the Lenders making advances by delivering to MMG written notice to that
      effect..

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

    

    12.2   The Lenders shall
deliver from time to time or cause to be delivered to MMG funds advanced under
the Bridge Loan in certified cheques, bank drafts or solicitors’ trust
cheques

     

    12.3   On the date of each
advance by FCIC or a Lender, MMG shall deliver to FCIC or the Lender, as the
case may be:

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (a)

                                	
                                  a
      promissory note evidencing the
advance;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (b)

                                	
                                  certified
      resolutions of the directors of MMG approving the transactions
      contemplated hereby and reserving sufficient shares to satisfy MMG’
      obligations under this
Agreement;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (c) 

                                	
                                  the
      opinion of MMG’ solicitors referred to in paragraph
      12.1.

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

    

    13.         EVENTS
OF DEFAULT AND REMEDIES

     

    13.1   Any one or more of
the following events, whether or not any such event shall be voluntary or
involuntary or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body, shall constitute an Event of Default
if:

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (a)

                                	
                                  MMG
      defaults in the payment of any monies due hereunder as and when the same
      is
due;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (b)

                                	
                                  MMG
      defaults in the observance or performance of any other provision
      hereof;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (c)

                                	
                                  an
      order is made or a resolution is passed or a petition is filed for the
      liquidation or winding-up of
MMG;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -14-

    

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (d)

                                	
                                  MMG
      commits an act of bankruptcy or makes a general assignment for the benefit
      of its creditors or otherwise acknowledges its
      insolvency;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                           

                        

                      

                    

                  

                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      	
                                              (e)

                                            	
                                              execution,
      sequestration, extent or other process of any court becomes enforceable
      against MMG or a distress or analogous process is levied upon the Property
      or any part thereof unless the process is in good faith disputed by MMG
      and MMG gives security to pay the full amount claimed to the satisfaction
      of the
Lenders;

                                            


                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                       

                                    

                                  

                                

                              

                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  	
                                                          (f)

                                                        	
                                                          MMG
      permits any sum which is not disputed to be due by MMG and which forms or
      is capable of forming a charge upon any of the Property to remain unpaid
      after proceedings have been taken to enforce the
    same;

                                                        


                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                   

                                                

                                              

                                            

                                          

                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              	
                                                                      (g)

                                                                    	
                                                                      MMG
      ceases or demonstrates an intention to cease to carry on its
      business;

                                                                    


                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                               

                                                            

                                                          

                                                        

                                                      

                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          	
                                                                                  (h)

                                                                                	
                                                                                  a
      receiver or receiver-manager or receiver and manager is appointed for any
      of its
Property;

                                                                                


                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                           

                                                                        

                                                                      

                                                                    

                                                                  

                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      	
                                                                                              (i)

                                                                                            	
                                                                                              MMG
      makes default in the due payment, performance or observance, in whole or
      in part, of any debt, liability or obligation of MMG to the Lenders,
      whether secured hereby or otherwise;
or

                                                                                            


                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            
                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                       

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                      
                                                                                        
                                                                                          
                                                                                            
                                                                                              
                                                                                                
                                                                                                  	
                                                                                                          (j)

                                                                                                        	
                                                                                                          MMG
      makes default in the due payment, performance or observance, in whole or
      in part, of any charge or encumbrance upon the
      Property.

                                                                                                        


                                                                                                

                                                                                              

                                                                                            

                                                                                          

                                                                                        

                                                                                      

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                              
                                                                                
                                                                                  
                                                                                    
                                                                                       

                                                                                    

                                                                                  

                                                                                

                                                                              

                                                                            

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    13.2   Upon the occurrence
of any Event of Default and at any time thereafter, provided that MMG has not by
then remedied such Event of Default, the Lenders may, in their discretion, by
notice to MMG, declare this Agreement to be in default. At any time thereafter,
while MMG shall not have remedied such Event of Default, the Lenders, in their
discretion, may:

    
      
        
          
            
              
                 

              

            

          

        

        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    (a)

                                  	
                                    declare
      the Bridge Loan and other monies owing (the “Debt”) by MMG to the
      Lenders to be immediately due and
  payable;

                                  


                          

                        

                      

                    

                  

                

              

            

          

        

        
          
            
              
                 

              

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (b)

                                	
                                  convert
      the Debt into common shares of MMG as provided in paragraph 11.2
      hereof;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (c)

                                	
                                  convert
      the Debt into any successor company of MMG;
  and

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (d)

                                	
                                  demand
      payment from MMG and exercise any or all of its remedies under this
      Agreement.

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
               

            

          

        

      

    

    13.3   No remedy conferred
on the Lenders hereby is intended to be exclusive. Each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or otherwise. The
exercise or commencement of exercise by the Lenders of any one or more of such
remedies shall not preclude the simultaneous or later exercise by the Lenders of
any or all other such remedies.

    


    14.         PROPOSED
RTO TRANSACTION

    


    14.1   MMG and the
Principal Shareholders acknowledge that FCIC has identified a suitable Pubco and
subject to completing standard acquisition agreements, the Principal
Shareholders have agreed to sell all their shares in MMG and cause the MMG
Shareholders to sell all their shares in MMG to Pubco in consideration of being
issued collectively a maximum of sixty eight and a half (681⁄2%) percent of the
Resulting Company. It is specifically acknowledged and agreed that three (3%)
percent of the Resulting Company's
shares will be issued to FCIC in exchange for the Finders Shares issued to FCIC
under section 5.2 or
directly by the Resulting Company as the case may be.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -15-

    

     

    14.2   The parties
acknowledge that one of the principal reasons for completing the RTO is to
facilitate future financing of MMG’s business and that they will jointly
endeavour to raise additional financing once the RTO completes, to finance MMG’s
Business Plan.

    


    14.3   In the event for
whatever reason MMG or the Principal Shareholders determine not to proceed with
the RTO, then the provisions of paragraph 2.5 shall apply and in addition, the
Lenders may treat such as an Event of Default and be entitled to the remedies
set out in section 13 hereof.

    


    15.         CONFIDENTIALITY
AND NON DISCLOSURE

    


    15.1   FCIC acknowledges
that its employees, representatives or agents will, during the course of its due
diligence be provided with certain confidential information relating to the
Business. FCIC agrees to use such confidential information only for its due
diligence purposes, and undertakes not to disclose, or permit to be disclosed
any part of such confidential information to any other person other than as set
out in paragraph 15.2 hereof.

     

    15.2   It is understood
and agreed that the confidentiality provisions set out above do not apply in the
event FCIC can demonstrate that:

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (a)

                                	
                                  at
      the time of disclosure by MMG to FCIC, the information was in the public
      domain through no breach of this
  Agreement;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                         

                      

                    

                  

                

                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            (b)

                                          	
                                            after
      the time of disclosure to FCIC by MMG the confidential information was
      generally available to third parties by publication or
      otherwise;

                                          


                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

                
                  
                    
                      
                        
                          
                            
                              
                                
                                   

                                

                              

                            

                          

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	
                                                      (c)

                                                    	
                                                      by
      written records, FCIC was lawfully in possession of confidential
      information prior to such disclosure;
or

                                                    


                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                             

                                          

                                        

                                      

                                    

                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        	
                                                                (d)

                                                              	
                                                                the
      confidential information was required to be disclosed by lawful
      authority.

                                                              


                                                      

                                                       

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    16.         MISCELLANEOUS

     

    16.1   Any notice required
or permitted to be given under this Agreement shall be in writing and may be
given by delivering same or mailing same by registered mail or sending same by
telegram, telex, telecopier or other similar form of communication to the
following addresses:

     

    FCIC:

     

        First Capital
Invest Corp.

        Florastrasse
14

        Zurich,
CH-8008

        Switzerland

     

        Attention :
Kurt Dalmata

     

        Telephone
No.: 4 1-44-202-0080

        Fax No.: 4
1-44-202-0082

        email:
kurt@dalmata.ch

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -16-

    

     

        With a copy
to:

     

            Boughton Law
Corp.

     

            Attention: Rory S.
Godinho

     

            Telephone No.: 604
647-5525

            Fax No.: 604
683-5317

            email:
rgodinho@boughton.ca

     

    MMG:

     

        Mega Media
Group, Inc.

        3rd Floor,
598 Broadway

        New York, NY
10012

     

        Attention:
Alex Shvarts

     

        Telephone
No.: 718 947-1100

        Fax No.: 646
417-5109

        Email :
alex.s@megamediagroup.com

     

    Any
notice so given shall:

    
      
        
          
            
               

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  (a)

                                	
                                  if
      delivered, be deemed to have been given at the time of
      delivery;

                                


                        

                      

                    

                  

                

              

            

          

        

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                   

                                

                              

                            

                          

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              	
                                                      (b)

                                                    	
                                                      if
      mailed by registered mail, be deemed to have been given on the fourth
      business day after and excluding the day on which it was so mailed, but
      should there be, at the time of mailing or between the time of mailing and
      the deemed receipt of the notice, a mail strike, slowdown or other labour
      dispute which might affect the delivery of such notice by the mails, then
      such notice shall be only effective if actually delivered;
      and

                                                    


                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                       

                                                    

                                                  

                                                

                                              

                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  	
                                                                          (c) 

                                                                        	
                                                                          if
      sent by email, telecopier or other similar form of communication, be
      deemed to have been given or made on the first business day following the
      day on which it was
sent.

                                                                        


                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                 

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    Any party
may give written notice of a change of address in the aforesaid manner, in which
event such notice shall thereafter be given to such party as above provided at
such changed address.

     

    16.2   Neither this
Agreement nor any provision hereof may be amended, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the amendment, waiver, discharge or termination is
sought.

     

    16.3   This Agreement
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and undertakings, whether oral or written,
pertaining to the subject matter hereof.

     

    16.4   If the date upon
which any act or payment hereunder is required to be done or made falls on a day
which is not a business day, then such act or payment shall be performed or made
on the first business day next following.

     

    16.5   The taking of a
judgment on any covenant contained herein or on any covenant set forth in any
other security for payment of any indebtedness hereunder or performance of the
obligations hereby secured shall not operate as a merger of any such covenant or
affect the Lenders’ right to interest at the rate and times provided in this
Agreement on any money owing to the Lenders under any covenant herein or therein
set forth and such judgment shall provide that interest thereon shall be
calculated at the same rate and in the same manner as herein provided until such
judgment is fully paid and satisfied.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -17-

    

     

    16.6   If any one or more
of the provisions of this Agreement should be invalid, illegal or unenforceable
in any respect in any jurisdiction, the validity, legality or enforceability of
such provision shall not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.

     

    16.7   Each party shall be
responsible for the payment of its own legal fees, and MMG shall be solely
responsible for the payment of all fees relating to the obtaining of all
required securities regulatory approvals.

     

    16.8   This Agreement
shall enure to the benefit of and be binding upon all parties hereto and their
respective heirs, personal representatives, successors and assigns, as the case
may be.

     

    16.9   This Agreement
shall be governed by and be construed in accordance with the laws of British
Columbia and the parties hereto agree to submit to the exclusive jurisdiction of
the courts of British Columbia with respect to any legal proceedings arising
herefrom.

     

    16.10   Time is of the
essence of this Agreement.

     

    IN
WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first written above.

     

    
    

     

    
      	 	
               )

            	 
	
              THE
      CORPORATE SEAL OF MEGA
      MEDIA GROUP, INC. was hereunto affixed in the presence
      of:

            	
               )

               )

               )

            	 
	 	 )	
              C/S

            
	
              Authorized
      Signatory

            	 )	 
	 	 )	 
	
              THE
      CORPORATE SEAL OF FIRST
      CAPITAL INVEST CORP. was hereunto affixed in the presence
      of:

            	
               )

               )

               )

            	 
	 	 )	
              C/S

            
	
              Authorized
      Signatory

            	 )	 
	 	 )	 
	
              SIGNED,
      SEALED and DELIVERED by ALEKSANDR SHVARTS in the
      presence of:

            	
               )

               )

            	 
	 	 )	
               

            
	
              Signature

            	 )	 
	 	 )	 
	
              Print
      Name

            	 )	
              ALEKSANDR
      SHVARTS

            
	 	 )	 
	
              Address

            	 )	 
	 	 )	 
	 	 )	 
	Occupation	 )	 
	 	 	 


    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      
         

        -18-

      

       

      
        	
                SIGNED,
      SEALED and DELIVERED by ERIC SCHWARTZ in
      the presence of:

              	
                 )

                 )

              	 
	 	 )	
                 

              
	
                Signature

              	 )	 
	 	 )	 
	
                Print
      Name

              	 )	
                ERIC
      SCHWARTZ

              
	 	 )	 
	
                Address

              	 )	 
	 	 )	 
	 	 )	 
	Occupation	 )	 
	 	 	 


      

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
A

    The
Business, including Subsidiaries

    
    

     

    
      	 	  

              MEGA
      MEDIA GROUP, INC.

               

              Mega
      Media Group, Inc. ("MMG" or the “Company”) is a multi-media holding
      company based in Brooklyn, New York, with six wholly-owned subsidiaries:
      Mega Media Records
      dba Skeleton Key Entertainment, Mega Media Film, Mega Media Sports
      Entertainment, Mega Media Studios, Echo Broadcasting Group, and VSE
      Magazine. MMG’s focus is in two primary areas: (1) Mainstream
      Entertainment and Media, and (2) Russian Ethnic
  Media.

            


    

     

    Mainstream
Entertainment and Media

     

    MMG's
mission is to invest in and develop a broad range of entertainment properties,
balancing acquisitions of existing media properties, such as purchasing existing
recordings and publishing catalogs with an earnings history, with the
development and acquisition of newer media ventures, such as mobile and new
technology media projects, and signing and developing emerging musical
artists.  In addition to acquiring and developing both established and
emerging media properties, MMG will also develop a management division to serve
the needs of artists.

     

    Russian
Ethnic Media

     

    MMG's
subsidiaries, Echo Broadcasting Group and VSE Magazine, are Russian-American
media companies that deliver media products that are contemporary, entertaining,
fun and relevant to the ethnic Russian community in North
America.  Working with cutting-edge news networks and contributing
staff in the entertainment and fashion industries both in the United States and
the Former Soviet Union, MMG is able to deliver a unique blend of content that
resonates with the "second generation" Russian mentality: distinctly American
with a European flair.

     

    Echo was
acquired by MMG in October 2005. Un-audited sales figures for Echo formerly know
as New Life Radio were as follows.

     

    
      
        	 	  

                Mega
      Media Records, Inc. dba Skeleton Key Entertainment

                 

                Mega
      Media Records is comprised of several divisions, publishing, talent
      management, new media ventures and recorded
  music.

              


      

       

    

    Recorded
Music

     

    The
record label division provides a "one-stop shopping" forum for artists, because
all services of a major record label are provided in-house at MMG, including
promotions, marketing, artist development and access to music recording and
video facilities.  MMG will also be able to provide co-publishing and
management services to artists signed to MMG's record label division, enabling
MMG to act as a true partner to a recording artist by actively participating in
all facets of the artist's
career.  Mega Media Records already has an impressive roster of talent
that includes rap legends Junior Mafia, platinum hip-hop producer Minnesota,
R&B sensation Kenny Wray.  MMG's state-of-the­art recording
and editing studios in Brooklyn, and its satellite studios in mid-town
Manhattan, provide a comfortable and functional setting for all MMG artists to
create and record their art.  MMG's goal is to acquire both
established and new recording artists, balancing risk by tapping into the
existing fan base of established artists while investing in unknown artists who
management believes have the potential to be the superstars of
tomorrow.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -2-

    

    New
Media

     

    The new
media division will invest in small new media companies, such as independent
ring tone and real tone aggregators. This division, engaging in perhaps the most
speculative area of the music business, will focus is on identifying and
investing in newly-formed music companies that are introducing important
services and technologies to an industry that is rapidly
changing.  The traditional record industry model of delivering
physical product via retail outlets such as record shops is quickly becoming a
thing of the past, while digital delivery via the Internet and mobile devices
will likely grow exponentially over the next few years.  Neither MMG
nor Mega Media Records has invested in or developed any new media technologies
and there can be no assurance that it will do so.

     

    Publishing
Division

     

    The
publishing division will focus on acquiring various music publishing
properties.  Initially, we will attempt to acquire small music
publishing catalogs with a demonstrated earnings history. MMG will also purchase
publishing interests in recently-released and soon-to-be released individual
musical compositions that show earnings potential.  Finally, MMG will
attempt to sign promising producer-writers and artist-writers to exclusive
co-publishing agreements pursuant to which MMG will co-own all compositions
written during the respective terms of such agreements and act as the exclusive
administrator of the compositions subject to such agreements. The publishing
division has not yet acquired any properties and there can be no assurance that
it will be able to do so on terms acceptable to it or at all.

     

    Talent
Management

     

    The
management division will provide entertainment management services to writers,
producers and recording artists, in addition to acting as consultants to
industry executives.  MMG will manage the artists signed to the record
label division of MMG, as well as manage artists signed to third-party record
companies.  MMG will allocate most of its resources to established
writers, producers and artists, but will also manage promising talent on a
speculative basis. This division is still in its early stage of
development.

     

    
      
        	 	  

                Mega
      Media Film

                Mega
      Media Film is a full-service film studio with a virtual 3D chromatic room
      and a 4A virtual studio. This studio is utilized to produce music videos
      for recording artists and multimedia projects. In addition to being used
      for music-based projects, MMG produces TV commercials, infomercials, and
      other video-related products. MMG has a talented staff of animators,
      visual effect designers, and editors who work in MMG's offices on a daily
      basis. MMG will also film

                and
      produce independent films and various DVD
  projects.

              


      

       

    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -3-

    

     

    The
virtual 3D studio allows MMG to produce video products at a fraction of the cost
of traditional films. Most of the video products filmed today require the use of
large, physical sets.  This is costly and time-consuming, since actual
physical labor is required along with permits, adequate space on-site, and
extensive personnel. MMG's graphic designers can create life-like virtual sets
by using this new technology without the hassles of traditional filming. This
allows for faster production time, which ultimately translates into dollars
saved.  For a demonstration, please go to the following links: www.for­a.com/movies/digistorm.wmv and
www.fora.com/movies/digiwarpex2.wmv.

     

    
       

      
        		Mega
      Media Studios 

                 

                Mega
      Media Studios is a multi-room, state-of-the-art, 7000 sq. foot facility
      located in the heart of Brooklyn, just minutes outside of Manhattan.

                 

                

              


      

       

    

    Studio A
features a 96 channel Euphonix console, custom Dynaudio Munro monitors, and a
large isolation booth for the ultimate accommodations in live
recording.  MMG's studio personnel are experienced, professional and
helpful. The studios are fully-equipped to handle projects from commencement to
conclusion, and provide the perfect environment for artists signed to MMR to
create their product. Having everything handled in-house enables MMG to control
recording costs, watch budgets and closely monitor the development of its
artists.  In addition, the studios will be made available for
third-party projects in an effort to maximize the income-earning potential of
the studios.  MMG will actively market its facilities to independent
and major record labels.

     

    
    

     

    
      	 	  

              Mega
      Media Sports Entertainment

               

              MMG
      has a sports division that specializes in the creation of instructional
      sports videos, taking today’s popular athletes and sports figures and
      producing modern, exciting and informative instructional/fitness videos.
      Currently, the instructional video market is filled with products that
      range from $14.99 to $129.99, featuring star athletes that have retired
      some time ago. MMG currently has two projects in the final production
      stages, discussed below, and is also in


            


    

    negotiations
with members of the NBA, NHL and NFL. There can be no assurance, however, that
MMG will be
able to enter into any agreements with any other athletes on terms acceptable to
MMG or at all.

     

    
       

      
        	 	Echo
      Broadcasting Group, Inc. 

                 

                Echo Broadcasting,
      Inc. is a Russian-American entertainment and media company. Driven from
      within by its consumer brand – Evolution
      of Entertainment – Echo structures its Radio, Interactive and
      Publishing

              


      

       

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -4-

    

     

    
    

     

    
      	 	 


    

     

    divisions
to be contemporary, entertaining,
fun and relevant to the Ethnic Russian consumers in North America. Working with
cutting-edge news networks and contributing staff in the entertainment and
fashion industries both in the United States and the Former Soviet Union, Echo
is able to deliver a unique blend of content that resonates with the Second
Generation mentality – distinctly American with a European
flair.  Echo is a media partner in many major Russian events and
concerts in the New York Metropolitan Area.  As the market grows, Echo
intends to offer interactive television to complete the line of cutting edge
entertainment and news outlets. All of Echo's media is structured to provide the
advertisers with every viable marketing tool available, including traditional
advertising, contextual advertising, product placement, viral marketing and
BTL.

     

    
      
        	 	Interactive
      Division 

                 

                www.VSERU.com
      

                 

                Launched
      in the summer of 2005, VSERU.com is a single in-language source of
      information
      on leisure, nightlife and entertainment for the ethnic Russians in
      New
      York. VSERU makes mainstream entertainment accessible to the
      Russian-speaking 

              


      

    

    audience,
with a wide variety of features, comprehensive and searchable listings and
events calendars.

     

    
       

      
        	 	  

                Publishing
      Division

                 

                Radio
      Division

                 

                Radio
      VSE – 87.7FM

              


      

       

    

    Debuting
in 2003 on 620AM, Radio VSE has become the largest independent,
commercial Russian language radio station in the New York Tri State Area. Radio
VSE rapidly developed an estimated audience of 800,000 loyal listeners and has
become a primary source of information for Russian-speaking New Yorkers. The
current format of Radio VSE is divided into three categories – talk radio, music
programming and the news, including national and international headlines,
lifestyle and entertainment.  Another staple of the programming is
live broadcasting from Russia, Ukraine, Germany and Israel. The guest list of
the talk shows ranges from politicians and governmental officials to Russian
celebrities on tour in the United States. All broadcasting on Radio VSE is live,
with listener participation and call-in segments. Radio VSE's portable studio
and road crew are on the road daily on the streets of Little Odessa, interacting
with the audience and producing entertaining live segments from NYC's
hotspots.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
B

    MMG
Capital Structure

     

    
      	Shareholder	 	 	Common	 	 	Percentage	 	 	Preferred	 	 	Percentage	 
	
              Aleksandr
      Shvarts

            	 
      	 	 	275,000	 	 	 	5.21	%	 	 	4,080,000	 	 	 	28.30	%
	
              Alex
      Puzaitzer

            	 
      	 	 	200,000	 	 	 	3.79	%	 	 	 	 	 	 	0.00	%
	
              Andrew
      Tavel

            	 
      	 	 	 	 	 	 	0.00	%	 	 	50,000	 	 	 	0.35	%
	
              Boris
      Motovich

            	 
      	 	 	537,189	 	 	 	10.18	%	 	 	200,000	 	 	 	1.39	%
	
              Boris
      Tantsky

            	 
      	 	 	80,000	 	 	 	1.52	%	 	 	-	 	 	 	0.00	%
	
              Charles
      Suitt

            	 
      	 	 	 	 	 	 	0.00	%	 	 	50,000	 	 	 	0.35	%
	
              Danny
      Vinokur

            	 
      	 	 	100,000	 	 	 	1.89	%	 	 	 	 	 	 	0.00	%
	
              David
      Kokakis

            	 
      	 	 	 	 	 	 	0.00	%	 	 	1,750,000	 	 	 	12.14	%
	
              Lev
      Paukman

            	 
      	 	 	1,046,807	 	 	 	19.84	%	 	 	2,075,000	 	 	 	14.39	%
	
              Elan
      Kaufman

            	 
      	 	 	1,298,450	 	 	 	24.60	%	 	 	2,575,000	 	 	 	17.86	%
	
              Eric
      Schwartz

            	 
      	 	 	275,000	 	 	 	5.21	%	 	 	2,320,000	 	 	 	16.09	%
	
              FD
      Import

            	 
      	 	 	300,000	 	 	 	5.68	%	 	 	-	 	 	 	0.00	%
	
              Galina
      Goldberg

            	 
      	 	 	 	 	 	 	0.00	%	 	 	10,000	 	 	 	0.07	%
	
              Gennady
      Pomeranets

            	 
      	 	 	80,000	 	 	 	1.52	%	 	 	500,000	 	 	 	3.47	%
	
              Karo
      Osipov

            	 
      	 	 	220,000	 	 	 	4.17	%	 	 	150,000	 	 	 	1.04	%
	
              Kiril
      Zadov

            	 
      	 	 	 	 	 	 	0.00	%	 	 	10,000	 	 	 	0.07	%
	
              Matrix
      Alliance

            	 
      	 	 	384,000	 	 	 	7.28	%	 	 	200,000	 	 	 	1.39	%
	
              Michael
      Koblenz

            	 
      	 	 	 	 	 	 	0.00	%	 	 	50,000	 	 	 	0.35	%
	
              Michael
      Koifman

            	 
      	 	 	106,000	 	 	 	2.01	%	 	 	-	 	 	 	0.00	%
	
              Michael
      Novakhov

            	 
      	 	 	 	 	 	 	0.00	%	 	 	10,000	 	 	 	0.07	%
	
              Mikhail
      Buzukashvilli

            	 
      	 	 	 	 	 	 	0.00	%	 	 	5,000	 	 	 	0.03	%
	
              Nicole
      Caracappa

            	 
      	 	 	 	 	 	 	0.00	%	 	 	10,000	 	 	 	0.07	%
	
              Richard
      Larson

            	 
      	 	 	125,000	 	 	 	2.37	%	 	 	-	 	 	 	0.00	%
	
              Julia
      Milne

            	 
      	 	 	250,000	 	 	 	4.74	%	 	 	100,000	 	 	 	0.69	%
	
              Viktor
      Lushin

            	 
      	 	 	 	 	 	 	0.00	%	 	 	10,000	 	 	 	0.07	%
	
              Vladimir
      Grjonko

            	 
      	 	 	 	 	 	 	0.00	%	 	 	10,000	 	 	 	0.07	%
	
              Yevgeny
      Morgovsky

            	 
      	 	 	 	 	 	 	0.00	%	 	 	150,000	 	 	 	1.04	%
	
              Yuri
      Pirag

            	 
      	 	 	 	 	 	 	0.00	%	 	 	100,000	 	 	 	0.69	%
	
              Yuriy
      Avezov

            	 
      	 	 	 	 	 	 	0.00	%	 	 	2,000	 	 	 	0.01	%
	 
      	
              TOTALS

            	 	 	5,277,446	 	 	 	100.00	%	 	 	14,417,000	 	 	 	100.00	%


    

    
    

    


    **All
preferred Shares will be converted into common shares at the time of the RTO
with PUBCO on a two (2) common shares to one (1) preferred share basis, and all
the then issued and outstanding shares of MMG shall be exchanged for shares
representing approximately 68.5% of the Resulting Company.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      SCHEDULE
C

      Management
Prepared Financial Statements

       

      SEE
FOLLOWING PAGES

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      
        MEGA
MEDIA GROUP, INC. AND SUBSIDIARIES 

        CONSOLIDATED
BALANCE SHEETS 

        UNAUDITED

      

       

      
        	 	 	
                January
      31,

              	 
	
                ASSETS

                 

              	 	
                2007(unaudited)

              	 	 	
                2006

              	 
	    Current
      Assets	 	 	 	 	 	 
	
                Cash

              	 	$	37,444	 	 	$	12,418	 
	
                Accounts
      receivable,
      net

              	 	 	68,636	 	 	 	152,763	 
	
                Prepaid
      Expenses

              	 	 	168,203	 	 	 	 -	 
	
                Total
      Current Assets

              	 	 	274,283	 	 	 	165,181	 
	 	 	 	 	 	 	 	 	 
	
                Fixed
      assets, net

              	 	 	559,097	 	 	 	465,590	 
	
                Master
      records, net

              	 	 	306,676	 	 	 	128,621	 
	
                Advances

              	 	 	20,000	 	 	 	-	 
	
                Note
      Receivable-Gladiator

              	 	 	 -	 	 	 	 -	 
	
                Deposits

              	 	 	225,486	 	 	 	183,486	 
	
                Other

              	 	 	16,010	 	 	 	16,010	 
	 	 	 	 	 	 	 	 	 
	
                TOTAL
      ASSETS

              	 	$	1,401,553	 	 	$	 958,88	 
	 	 	 	 	 	 	 	 	 
	
                LIABILITIES
      AND STOCKHOLDERS' DEFICIT

              	 	 	 	 	 	 	 	 
	
                    Current
      Liabilities

              	 	 	 	 	 	 	 	 
	
                Accounts payable

              	 	$	34,458	 	 	$	291,642	 
	
                Sale
      tax payable

              	 	 	892	 	 	 	892	 
	
                Payroll
      taxes payable

              	 	 	284,731	 	 	 	26,291	 
	
                Accrued
      Offices' Compensation

              	 	 	379,829	 	 	 	 	 
	
                Equipment loan -
      current portion

              	 	 	14,924	 	 	 	14,924	 
	
                
                  Equipment lease -
      current portion

                

              	 	 	19,440	 	 	 	 -	 
	
                Loans payable

              	 	 	852,900	 	 	 	440,000	 
	
                Due
      to related party

              	 	 	444,455	 	 	 	 -	 
	
                Deferred
      revenues

              	 	 	252,399	 	 	 	 -	 
	
                Accrued
      interest

              	 	 	2,400	 	 	 	-	 
	
                Payable
      to shareholders

              	 	 	715,118	 	 	 	355,186	 
	
                Total
      Current Liabilities

              	 	 	3,301,546	 	 	 	1,128,935	 
	 	 	 	 	 	 	 	 	 
	
                Equipment Loan
      Payable

              	 	 	46,961	 	 	 	65,449	 
	
                
                  Equipment Lease
      Payable

                

              	 	 	50,220	 	 	 	 -	 
	
                TOTAL
      LIABILITIES

              	 	 	3,398,727	 	 	 	1,194,384	 
	 	 	 	 	 	 	 	 	 
	
                Commitments
      and contingencies

              	 	 	 -	 	 	 	 -	 
	 	 	 	 	 	 	 	 	 
	
                    Stockholders'
      Deficit

              	 	 	 	 	 	 	 	 
	
                Preferred
      stock, $.001 par value,
      20,000,000 shares authorized, 14,492,000 shares issued and
      outstanding

              	 	 	14,492	 	 	 	2,500	 
	
                Common stock, $.001 par value,
      70,000,000 shares authorized, 5,077,446 shares issued and outstanding as
      of 10/31/06 and 3,175,000 shares issued and outstanding as of
      10/31/05

              	 	 	5,277	 	 	 	3,175	 
	
                Additional
      paid-in capital

              	 	 	4,067,546	 	 	 	2,679,378	 
	
                Deferred
      compensation

              	 	 	(1,392	)	 	 	 	 
	
                Accumulated
      Deficit

              	 	 	(6,083,097	)	 	 	(2,870,499	)
	
                Total
      Stockholders' Deficit

              	 	 	(1,997,174	)	 	 	(235,496	)
	 
      	 	 	 	 	 	 	 	 
	
                TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

              	 	$	 1,401,553	 	 	$	 958,888	 


      

       

      
        The
accompanying notes are an integral part of these financial
statements.

         

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        MEGA
MEDIA GROUP, INC. AND SUBSIDIARIES 

        CONSOLIDATED
STATEMENTS OF OPERATIONS 

        UNAUDITED

      

       

      
        
          	 	 	
                  Year
      Ended January

                	 
	 	 	
                   2007

                	 	 	
                  2006

                	 
	 	 	
                  (unaudited)

                	 	 	 	 
	 	 	 	 	 	 	 
	
                  Revenues:

                	 	 	 	 	 	 
	
                    Advertising
      revenues

                	 	$	3,240,069	 	 	$	2,598,148	 
	
                    Other
      revenues

                	 	 	217,023	 	 	 	150,620	 
	 	 	 	 	 	 	 	 	 
	
                      Total
      Revenues

                	 	 	3,457,091	 	 	 	2,748,768	 
	 	 	 	 	 	 	 	 	 
	
                    Operating
      Expenses

                	 	 	3,007,7[0	 	 	 	2,429,830	 
	
                    Selling, general
      and administrative

                	 	 	3,316,438	 	 	 	1,917,703	 
	
                    Depreciation and
      amortization

                	 	 	287,204	 	 	 	631,796	 
	 	 	 	 	 	 	 	 	 
	 
      	 	 	6,611,352	 	 	 	4,979,329	 
	 	 	 	 	 	 	 	 	 
	
                    Net loss from
      operations

                	 	 	(3,154,261	)	 	 	(2,230,561	)
	 	 	 	 	 	 	 	 	 
	
                  Other
      Expenses:

                	 	 	 	 	 	 	 	 
	  Loss on detivatives
      	 	 	 -	 	 	 	 -	 
	
                    Interest

                	 	 	58,338	 	 	 	40,413	 
	 	 	 	 	 	 	 	 	 
	
                    Net loss before tax
      benefit

                	 	 	(3,212,598	)	 	 	(2,270,974	)
	 	 	 	 	 	 	 	 	 
	
                    Tax
      benefit

                	 	 	 	 	 	 	 -	 
	 	 	 	 	 	 	 	 	 
	
                    Net
      loss

                	 	$	(3,212,598	)	 	$	(2,270,974	)
	 
      	 	 	 	 	 	 	 	 


        

      

       

      
        The
accompanying notes are an integral part of these financial
statements.

         

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

     

    MEGA
MEDIA GROUP, INC. AND SUBSIDIARIES

    CONSOLIDATED
STATEMENTS OF CASH FLOWS

    UNAUDITED

     

    
      	 	 	 	Year
      Ended January 31, 	 
	 	 	 	
              2007 

            	 	 	 	
              2006 

            	 
	 	 	 	
              (unaudited) 

            	 	 	 	 	 
	
              CASH
      FLOWS FROM OPERATING ACTIVITIES:

            	 	 	 	 	 	 	 	 
	
              Net
      loss

            	 	$	(3,212,598	)
      	 	$	(2,270,974	)
	
              Adjustments
      to reconcile net loss to net cash

            	 	 	 	 	 	 	 	 
	
                 
      used by operating activities:

            	 	 	 	 	 	 	 	 
	
              Depreciation
      and amortization

            	 	 	287,204	 	 	 	631,796	 
	
              Allowance
      for doubtful accounts

            	 	 	-	 	 	 	13,000	 
	
              Preferred
      stock issued

            	 	 	11,992	 	 	 	-	 
	
              Deffered
      stock compensation

            	 	 	(1,392	)	 	 	 	 
	
              Changes
      in operating assets and liabilities:

            	 	 	 	 	 	 	 	 
	
                  (Increase) in
      accounts receivable

            	 	 	84,127	 	 	 	(90,078	)
	
                  (Increase)
      decrease in advances

            	 	 	(20,000	)	 	 	17,650	 
	
                  (Increase)
      decrease in prepaid expenses

            	 	 	(168,203	)	 	 	 	 
	
                  (Increase)
      decrease in other current assets

            	 	 	 	 	 	 	 	 
	
                  (Increase) in
      other

            	 	 	-	 	 	 	(14,660	)
	
                  Increase
      (decrease) in bank overdraft

            	 	 	-	 	 	 	(12,660	)
	
                  Increase in
      accounts payable

            	 	 	42,816	 	 	 	273,185	 
	
                  Increase in
      sales tax payable

            	 	 	-	 	 	 	34	 
	
                  Increase in
      lease payable

            	 	 	69,660	 	 	 	-	 
	
                  Increase in
      accrued officers' compensation

            	 	 	379,829	 	 	 	-	 
	
                  Increase in
      accrued expenses

            	 	 	2,400	 	 	 	 	 
	
                  Increase in
      deferred revenue

            	 	 	252,399	 	 	 	 	 
	
                  Increase in
      payroll liabilities

            	 	 	258,440	 	 	 	10,269	 
	
                      Total
      adjustments

            	 	 	1,199,270	 	 	 	828,536	 
	
              NET
      CASH USED BY OPERATING ACTIVITIES

            	 	 	(2,013,328	)	 	 	(1,442,438	)
	 	 	 	 	 	 	 	 	 
	
              CASH
      FLOWS FROM INVESTING ACTIVITIES:

            	 	 	 	 	 	 	 	 
	
                  Master
      records

            	 	 	(306,676	)	 	 	(298,539	)
	
                  Fixed
      assets

            	 	 	(252,089	)	 	 	(335,571	)
	
                  Investment in
      Gladiator

            	 	 	-	 	 	 	(260,000	)
	
                  Deposits

            	 	 	(42,000	)	 	 	(172,486	)
	
              CASH
      USED BY INVESTING ACTIVITIES

            	 	 	(600,765	)	 	 	(1,066,596	)
	 	 	 	 	 	 	 	 	 
	
              CASH
      FLOWS FROM FINANCING ACTIVITIES:

            	 	 	 	 	 	 	 	 
	
                  Loan
      proceeds, net of repayments

            	 	 	(8,988	)	 	 	1,135,559	 
	
                  Proceeds from
      issuance of debenture

            	 	 	403,400	 	 	 	-	 
	
              Loans
      from shareholders

            	 	 	99,932	 	 	 	710,673	 
	
              Loans
      from related parties

            	 	 	444,455	 	 	 	 	 
	
                  Sale of
      common stock

            	 	 	1,700,321	 	 	 	675,000	 
	
              CASH
      PROVIDED BY FINANCING ACTIVITIES

            	 	 	2,639,120	 	 	 	2,521,232	 
	 	 	 	 	 	 	 	 	 
	
              NET
      INCREASE IN CASH

            	 	 	25,026	 	 	 	12,198	 
	 	 	 	 	 	 	 	 	 
	
              CASH:
      Beginning of period

            	 	 	12,418	 	 	 	220	 
	
               End
      of period

            	 	$	37,444	 	 	$	12,418	 
	 	 	 	 	 	 	 	 	 
	Supplemental
      disclosure of noncash financing and investing activities:	 	 	 	 	 	 	 	 
	    Cash
      paid during the period for income taxes	 	$	2,275	 	 	$	-	 
	    ­Cash paid
      during the period for interest	 	$	55,937	 	 	$	-	 
	Non
      Cash Investing Activities:	 	 	 	 	 	 	 	 
	    Equipment
      contributed for common stock	 	$	 	 	 	$	37,877	 
	    Stock
      issued for Echo Broadcasting	 	$
      	 	 	 	$	3,666	 


    

     

    The
accompanying notes are an integral part of these financial
statements.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    MEGA
MEDIA GROUP, INC. AND SUBSIDIARIES

    STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

    FOR
THE YEARS ENDED JANUARY 31, 2006 AND 2005 AND THE UNAUDITED NINE MONTHS ENDED
OCTOBER 31, 2006

    UNAUDITED

     

    
      
        	 
      	 
      	
                Preferred
      Stock

                ($.001
      par value)

              	 
      	
                Common
      Stock

                ($.001
      par value)

              	 
      	
                Additional
      Paid-In Capital

              	 
      	
                Deferred
      Capital

              	 
      	
                Accumulated
      Deficit

              	 
      	
                Total
      Stockholders’ Equity

                (Deficit)

              
	 
      	 
      	
                Shares

              	 
      	
                Amount

              	 
      	
                Shares

              	 
      	
                Amount

              	 
      	 
      	 
      	 
      
	
                Balance
      February 3, 2004

              	 
      	
                -

              	
                $

              	
                -

              	 
      	
                -

              	
                $

              	
                -

              	
                $

              	
                -

              	
                $

              	
                -

              	 
      	
                -

              	
                $

              	
                - 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Capital
      contribution

              	 
      	
                -

              	 
      	
                -

              	 
      	
                666,665

              	 
      	
                667

              	 
      	
                1,207,120

              	 
      	 
      	 
      	
                -

              	 
      	
                1,207,787 

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Loss
      for year ended

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      January 31, 2005

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                (599,525

              	) 
      	
                (599,525)

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Balance
      January 31, 2005

              	 
      	
                -

              	 
      	
                -

              	 
      	
                666,665

              	 
      	
                667

              	 
      	
                1,207,120

              	 
      	 
      	 
      	
                (599,525

              	) 
      	
                608,262 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Shares
      issued to purchase

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                 
      

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      Echo Broadcasting Group, Inc.

              	 
      	
                1,833,335

              	 
      	
                1,833

              	 
      	
                1,833,335

              	 
      	
                1,833

              	 
      	
                -

              	 
      	 
      	 
      	
                -

              	 
      	
                3,666 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Capital
      contribution

              	 
      	
                666,665

              	 
      	
                667

              	 
      	
                -

              	 
      	
                -

              	 
      	
                747,883

              	 
      	 
      	 
      	
                -

              	 
      	
                748,550 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Sale
      of common stock

              	 
      	
                -

              	 
      	
                -

              	 
      	
                675,000

              	 
      	
                675

              	 
      	
                674,325

              	 
      	 
      	 
      	
                -

              	 
      	
                675,000 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Loss
      for year ended

              	 
      	 
      	 
      	
                 
      

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      January 31, 2006

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                (2,270,974

              	) 
      	
                (2,270,974)

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Balance
      January 31, 2006

              	 
      	
                2,500,000

              	 
      	
                2,500

              	 
      	
                3,175,000

              	 
      	
                3,175

              	 
      	
                2,629,328

              	 
      	 
      	 
      	
                (2,870,499

              	) 
      	
                (235,496)

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Sale
      of common stock

              	 
      	
                -

              	 
      	
                -

              	 
      	
                620,000

              	 
      	
                620

              	 
      	
                349,380

              	 
      	 
      	 
      	 
      	 
      	
                350,000 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Stock
      issued to pay for

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      lender’s fees

              	 
      	 
      	 
      	 
      	 
      	
                100,000

              	 
      	
                100

              	 
      	
                9,900

              	 
      	 
      	 
      	 
      	 
      	
                10,000 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Stock
      issued for conversion of

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      loans to shareholders

              	 
      	 
      	 
      	 
      	 
      	
                1,045,257

              	 
      	
                1,045

              	 
      	
                842,086

              	 
      	 
      	 
      	 
      	 
      	
                843,131 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Stock
      issued in exchange for

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      lease commitments

              	 
      	 
      	 
      	 
      	 
      	
                337,189

              	 
      	
                337

              	 
      	
                236,852

              	 
      	 
      	 
      	 
      	 
      	
                237,189 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Restricted
      stock award

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      to officers and shareholders

              	 
      	
                10,600,000

              	 
      	
                10,600

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	 
      	 
      	 
      	 
      	
                10,600 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Restricted
      stock award

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                 
      

              
	
                   
      to employees

              	 
      	
                1,392,000

              	 
      	
                1,392

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                1,392 
      

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Deferred
      stock based compensation

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                (1,392

              	)
      	 
      	 
      	
                (1,392)

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Loss
      for year ended

              	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                   
      January 31, 2006

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                -

              	 
      	
                (3,212,598

              	) 
      	
                (3,212,598)

              
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                Balance
      October 31, 2006

              	 
      	
                14,492,000

              	
                $

              	
                14,492

              	 
      	
                5,277,446

              	
                $

              	
                5,277

              	
                $

              	
                4,067,546

              	
                $

              	
                (1,392

              	) 
      	
                (6,083,097

              	
                ) 
      $

              	
                (1,997,174)

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      


      

    

     

    The
accompanying notes are an integral part of these financial
statements.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
D

    Form
of Promissory Note

     

    
    

     

    
      	US$u	
               ON
      DEMAND

            


    

     

    Dated:                    

     

    FOR VALUE
RECEIVED, Mega Media Group, Inc. (the “Borrower”), incorporated under
the laws of United States of America, and having its head office located at
3rd
Floor, ,598 Broadway, New York, New York 10012, promises to pay ON DEMAND
to the order of First Capital Invest Corp. (the “Lender”), of Florastrasse 14,
Zurich, CH-8008, Switzerland, the principal sum as stated above of lawful money
of the United States of America. The principal sum will be secured and will bear
interest at the rate of ten (10%) percent per annum calculated and payable
quarterly on March 31, June 30, September 30, and December 31 of each year, both
before and after maturity, default and judgement.

     

    Presentment,
protest, notice of protest and notice of dishonour are hereby
waived.

     

    The
Borrower may from time to time repay all or any part of the principal and any
accrued and unpaid interest that remains unpaid to the date of payment without
notice, penalty or bonus.

     

    MEGA
MEDIA GROUP, INC.

     

    Per:

                            

    Authorized
Signatory

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
E

    Employment,
Service & Pension Agreements of MMG

     

    1.    David Kokakis

     

          
Contract dated January 1, 2006. The term runs from January 1, 2006 to January 31
of 2008. Base compensation: $150,000.

     

    2.    Gennady
Pomeranets

     

          
Contract dated January 1, 2006. The term runs from January 1, 2006 to January 31
of 2008. Base compensation: $60,000.

     

    3.    Alex Shvarts

     

          
Contract dated January 1, 2006. The term runs from January 1, 2006 to January 31
of 2008. Base compensation: $180,000.

     

    4.    Eric Schwartz

     

          
Contract dated January 1, 2006. The term runs from January 1, 2006 to January 31
of 2008. Base compensation: $180,000.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
F

    Real
Property & Leases of MMG

     

    1.           The
company leases office space for its production, studios, and radio broadcasting
facilities:

     

                Location:    Suites 205,
206 and 210

                           1122 Coney Island
Avenue

                           Brooklyn, NY
11230

     

                Size:        7,000 square
feet

     

          There are two (2)
leases:

     

                Lease
#1:

     

                Term:                         expires June
2007

                Monthly Fee:       $5,941.04

                Option to Renew:    for an
additional three (3) years (to June 2010).

     

                Lease
#2:

     

                Term:              expires February 28, 2009

                Monthly Fee:     $6,009.98

     

    2.           The
company leases office space:

     

                Location:    3rd
Floor

                           598 Broadway

                           New York, NY
10012

     

                Size:       5,500 square
feet

     

          There is one (1)
lease:

     

                Lease
#1:

     

                Term:                        expires April 18,
2016

                Monthly Fee:      $15,000

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
G

    Encumbrances
on MMG’s Assets

     

    Contractual
Obligations

     

    We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash
flows.

     

    The
following table summarizes our contractual obligations as of October 31, 2006,
and the effect these obligations are expected to have on our liquidity and cash
flows in future periods.

     

    1.  

      
        	 
      	
                Total

              	
                1yr

              	
                1-3yrs

              	
                3-5yrs

              
	
                Capital
      Leases

              	
                $74,520

              	
                $19,440

              	
                $55,080

              	 
      
	
                Operating
      Leases

              	
                $11,473,898

              	
                $2,417,690

              	
                $7,779,247

              	
                $1,276,961

              
	
                Equipment
      Loans

              	
                $64,745

              	
                $14,924

              	
                $49,821

              	 
      
	 
      	
                $11,613,163

              	
                $2,452,055

              	
                $7,884,146

              	
                $1,276,961

              


      

      
      

    

     

    2.    On
October 4, 2006 the Company has entered into a new lease agreement for various
computer and office equipment, which expires on September 2010.

    
       

      
        	3.	
                Operating leases
      consist of various premises leases for our two offices and airtime lease
      with Island Broadcasting. The Company has an agreement (the "Agreement")
      with Island Broadcasting Company (the "Licensee") for airtime. Pursuant to
      the Agreement the Company has purchased airtime for the period November 1,
      2005 to July 1, 2010. However, after July 1, 2006 the Licensee may
      terminate the Agreement upon 90 days' notice to the Company. Per the
      Agreement, the airtime is paid monthly. Airtime lease expense for 2006 was
      $2,072,929.

              


      

       

    

    4.    The
company has two equipment loans that carry 6.75% interest rate and mature in
2010 and 2011.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    SCHEDULE
H

    MMG
Litigation

     

    There is
no pending or threatened litigation.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
I

    Options
or Rights to Purchase Securities of MMG

     

    
      	
              Date

            	
              Party

            	
              Loan
      Amount

            	
              Conversion
      Price

            	
              Loan
      Amount

            
	
              7/21/2006

            	
              Danny
      Vinokur

            	
              $150,000.00

            	
              $0.30

            	
              $45,000.00

            
	
              8/1/2006

            	
              Anna
      Paukman

            	
              $50,000.00

            	
              $0.30

            	
              $15,000.00

            
	
              10/10/2006

            	
              Andrey
      Anikeyev

            	
              $100,000.00

            	
              $0.30

            	
              $30,000.00

            
	
              10/20/2006

            	
              David
      Kokakis

            	
              $444,455.00

            	
              $0.30

            	
              $133,336.50

            
	
              10/24/2006

            	
              Elan
      Kaufman

            	
              $56,000.00

            	
              $0.30

            	
              $16,800.00

            
	
              10/31/2006

            	
              Michael
      Koifman

            	
              $40,000.00

            	
              $0.30

            	
              $12,000.00

            
	
              10/31/2006

            	
              Lev
      Paukman

            	
              $50,000.00

            	
              $0.30

            	
              $15,000.00

            
	
              11/16/2006

            	
              Elan
      Kaufman

            	
              $30,000.00

            	
              $0.30

            	
              $9,000.00

            
	
              1/11/2007

            	
              Andrey
      Anikeyev

            	
              $100,000.00

            	
              $0.25

            	
              $25,000.00

            
	
              1/11/2007

            	
              Elan
      Kaufman

            	
              $40,000.00

            	
              $0.25

            	
              $10,000.00

            
	
              1/16/2007

            	
              Anna
      Paukman

            	
              $60,000.00

            	
              $0.25

            	
              $15,000.00

            
	
              2/21/2007

            	
              Anna
      Paukman

            	
              $57,000.00

            	
              $0.25

            	
              $14,250.00

            
	
              2/22/2007

            	
              Elan
      Kaufman

            	
              $34,000.00

            	
              $0.25

            	
              $8,500.00

            
	
              3/2/2007

            	
              Alex
      Puzaitzer

            	
              $100,000.00

            	
              $0.25

            	
              $25,000.00

            
	 
      	
              Total

            	
              $1,311,455.00

            	 
      	
              $373,886.50

            


    

     

    NIR
Funding

     

    On August
18, 2006, we entered into a Securities Purchase Agreement for a total
subscription amount of $1,500,000 that included Stock Purchase Warrants and
Callable Secured Convertible Notes with:

     

        AJW Capital
Partners, LLC,

        AJW Offshore,
Ltd.,

        AJW Qualified
Partners, LLC, and

        New
Millennium Capital Partners II, LLC

     

    (collectively,
the “Investors”).

     

    There was
an initial funding of $200,000 (completed August 21, 2006) and second tranche of
$200,000 (completed November 28, 2006), of which we received net proceeds of
$400,000. On each closing date, the following parties issued callable secured
convertible notes as follows:

     

        AJW Capital
Partners, LLC invested $19,400;

        AJW Offshore,
Ltd. invested $118,000;

        AJW Qualified
Partners, LLC invested $60,000; and

        New
Millennium Capital Partners II, LLC invested $2,600.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      -2-

    

     

    The
callable secured convertible notes are convertible into shares of our common
stock at a variable conversion price based upon the applicable percentage of the
average of the lowest three (3) trading prices for the Common Stock during the
twenty (20) trading day period prior to conversion. The “Applicable Percentage”
means 50%; provided, however, that the Applicable Percentage shall be increased
to:

    


        (i)           55%
in the event that a Registration Statement is filed within thirty days of the
closing; and

    


        (ii)          60%
in the event that the Registration Statement becomes effective within one
hundred and twenty (120) days from the Closing.

    


    Under the
terms of the callable secured convertible note and the related warrants, the
callable secured convertible note and the warrants are exercisable by any holder
only to the extent that the number of shares of common stock issuable pursuant
to such securities, together with the number of shares of common stock owned by
such holder and its affiliates (but not including shares of common stock
underlying unconverted shares of callable secured convertible notes or
unexercised portions of the warrants) would not exceed 4.99% of the then
outstanding common stock as determined in accordance with Section 13(d) of the
Exchange
Act.

     

    The
Investors received the following seven (7) year warrants to purchase shares of
our common stock, exercisable at $.01 per share:

    
       

      
        	 	AJW Capital
      Partners, LLC	4,850,000
      warrants;
	 	AJW Offshore,
      Ltd.	29,500,000
      warrants;
	 	AJW Qualified
      Partners, LLC	15,000,000 warrants;
      and
	 	New Millennium
      Capital Partners II, LLC	650,000
      warrants


      

       

    

    (the
“Warrants”).

     

    The
Warrants are not subject to registration rights.

     

    SOME
NOTES. This deal is being renegotiated as it was structured for the previous
public company that we are rescinding. The terms will change including the
amount of the warrants. These warrants were to be adjusted for a 1500 to 1
reverse. Also the funding will be going up to $2,000,000. The deal was with The
Public Vehicle and was structured based on 1.5 billion shares outstanding. We
are going to pick up the deal as Mega Media and as the new PUBCO but on
different terms.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
J

    Registered
Trademarks, Trade Names & Patents of MMG

    


    1.    Mega Media
Group, Inc.

    


    2.    Mega Media
Records, Inc. dba Skeleton Key Entertainment

    


    3.    Mega Media
Film

    


    4.    Mega Media
Studios

    


    5.    Mega Media
Sports Entertainment

    


    6.    Echo
Broadcasting Group, Inc.

    


    7.    www.VSЁRU.com

    


    8.    Radio
VSE

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    SCHEDULE
K

    Resulting
Company Share Structure

     

    
      	
              Existing
      Pubco Shareholders

            	
              (approximately28.5%)

            	
              21,090,000

            
	
              First
      Capital Invest Corp.

            	
              (3%)

            	
              2,220,000

            
	
              Former
      MMG Shareholders

            	
              (approximately68.5%)

            	
              50,690,000

            
	
              (post-conversion
      of all preferred and loan

            	 
      	 
      
	
              conversion
      shares)

            	 
      	 
      
	 
      	
              Approximately

            	
              74,000,000