Analyst: Victor Sula, Ph.D.

Initial Report
October 2nd, 2008

WDGC daily 9/19/2008

1.2

1.1

1.0

0.9

0.8

0.7

0.6
MediaG3, Inc.
One Almaden Boulevard, Suite 310, 0.5
San Jose, CA 95113 volume © BigCharts.com
40

Thousands
30
Phone: 408.557.2800
20
Fax: 408.557.8800 10
Web site: www.mediag3.com 0
E-mail: info@mediag3.com Jul Aug Sep

MARKET DATA Company Introduction

MediaG3 Inc. (MDGC) is a data networking solutions company de-
veloping leading-edge patented technology for the deployment of
Symbol MDGC broadband wireless communication,, as well as online applications,
Exchanges OTC PK
and mobile rich media for delivery to fixed and mobile wireless
Current Price $0.71
Price Target $2.30 customers. The Company’s mg3 wireless business provides bi-di-
Rating Speculative Buy rectional, broadband wireless Internet, data and voice services to
Outstanding Shares 19.94 Million customers at speeds of up to 100 Mbps downstream and 80Mbps
Market Cap. $14.15 Million upstream. Mg3 mobile applications, offered for wireless devices,
Average 3-m Volume 1,917 range from intricate networking applications to complex mobile-
user interfaces and are built and tested to function seamlessly with
PDAs, cell phones, smart phones and Blackberries. The Company
Source: Yahoo Finance, Analyst Estimates
is also building an mg3 Web 2.0 network in China, consisting of
branded community platforms that facilitate sharing of informa-
tion, social networking and commerce.

The Company plans to initially deploy its broadband wireless net-

work in underserved regions of China, Asia and Northwest Africa.
MDGC recently signed an agreement with China’s Academy of
Broadcasting Science (ABS), a division of the State Administration
for Radio Film and Television (SARFT), and has been given net-
work certifications for a pilot project involving the implementation
of mg3 wireless broadband Internet and television coverage in ru-
ral areas of China, serving some 900 million residents. In addition,
MDGC was awarded a $600,000 grant from the U.S. Trade and De-
velopment Agency to support its broadband wireless pilot project
in China. MediaG3’s China pilot project is the first step towards
implementation of mg3 wireless broadband applications to serve
over 900 million people in the interior and rural regions of China.
The Company estimates that MediaG3’s systems and equipment
valued at approximately $225,000 will be required to service every
 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

10,000 subscribers. In an initial commercialization phase focusing on 5% of the rural population or around 45 mil-
lion subscribers, systems and equipment valued at over $1 billion will be deployed over time.

MDGC also recently won a $10 million contract from BusinessCorp Services Inc., a large network services provider
based in the Philippines, to support a planned cellular network deployment in Equatorial Guinea and in other parts
of Southeast Asia.

Investment Highlights

Market opportunity

MDGC’s broadband wireless technology will be deployed in underserved areas of China and other developing
countries. Substantial growth in China’s telecom and digital video broadcast markets, paired with the mandate by
China’s central government to bring 21st century technology to the rural population, creates a large, growing mar-
ket for MDGC’s technology services.

With some 600 million users, China is already the world’s largest cell phone market. Though the market is estimated
to be growing 11% annually, a better wireless broadband solution is needed in rural areas because of the vast dis-
tances and difficult terrain which limit the use of fixed lines[1].

China is also a potent breeding ground for 3G multimedia-capable handheld devices and services. The Company
has already earned strong support from the Chinese government, as well as from equipment providers, handset
manufacturers and content providers.

Three products that provide wireless broadband access, content and applications

The Company provides three complementary services. Mg3 wireless is a bi-directional broadband system that can
effectively cover vast areas lacking a fixed or wireless infrastructure. Unlike competitor systems, Mg3 wireless oper-
ates on high radio frequencies, resulting in clearer sound, and broadcasts point-to-multipoint, thus requiring fewer
installations to support the system. It provides 90-degree coverage per sector at speeds of up to 100MB downstream.
Mg3 mobile optimizes delivery and viewing of content sent to subscriber cell phones, smart phones, PDAs and
other mobile devices. Mg3 Web 2.0 consists of a network of branded community platforms in China for information
exchange, social networking, commerce and targeted marketing.

Proprietary technology strengthens the offering

MDGC holds seven patents (five U.S., one Chinese and one European), which protect its Local Multipoint Distri-
bution System (LMDS) multichannel radio frequency transmission technology. After more than two years of field
testing, the Mg3 wireless technology has earned certification from the Chinese government. It is also the LMDS

1. http://wirelessfederation.com/news/600-million-mobile-users-in-china/
MediaG3, Inc. (OTCBB: MDGC) 2
 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

system chosen by the Philippines government and broadband wireless integrators. In addition, the China Academy
of Broadcast Sciences has selected MDGC technology as the best wireless broadband solution. Approximately $50
million was spent over a nine-year period to develop this technology.

Technology advantages expected to drive rapid adoption

MDGC’s technology offers a low-cost advantage for customer premises equipment (CPE). It also supports greater
bandwidth (100Mbps downstream and 80Mbps up stream) for high-speed Internet to fixed sites and wireless ser-
vices; uses high frequencies which are clearer and better-quality; and provides solid backhaul for WI MAX and other
mobile data systems. Extensive testing has proven the reliability of the technology.

In contrast, competitors’ technologies utilize low frequencies, which are dirty or “noisy.” Also, competitors’ equip-
ment is point-to-point, thus requiring more installations, and their networks are low bandwidth (5 megabytes), and
thus not suitable for the full range of rich media content.

Rather than competing with Siemens, Cisco, Nortel and other major network system providers, MDGC offers prod-
ucts that complement their existing technologies. These industry giants typically focus on either the equipment end
or the customer end of broadband wireless service. MDGC is positioned in the middle, providing services that cover
the last one to three miles before terminating in the customer’s local network.

Strong partnerships facilitate technology deployment

MDGC is partnering with China’s Academy of Broadcasting Science (ABS), a state policymaker under China’s State
Administration of Radio Film and Television (SARFT) for wireless broadband deployments in rural China. The
Company has received network certifications for a pilot project to provide mg3 wireless broadband Internet and
television coverage to rural areas of China. In addition, MDGC has partnerships to provide wireless broadband
services with Beijing Digital Media Corp. and Way2Pay Financial Services Inc.

$600,000 grant for broadband wireless pilot project in China

MDGC was awarded a $600,000 grant from the United States Trade & Development Agency to launch its broadband
wireless pilot project in China which will support Internet and digital TV services in rural areas. The pilot project
will assess MDGC’s fixed wireless equipment and technology as a viable solution for China’s “Direct to Home Rural
Coverage” plan. The USTDA grant will be used to support engineering, planning and implementation of the pilot
project.

MediaG3, Inc. (OTCBB: MDGC) 3

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Obtaining approval of the grant from USTDA and support from China’s SARFT is a vigorous process that involved
a thorough vetting of the Company and its technology. Both USTDA and China’s SARFT have completed indepen-
dent due diligence of the Company to validate Mg3 wireless technology and ensure that MediaG3’s technology and
applications are consistent with China’s overall development plan. The process also entailed verifying the potential
benefits, suitability and viability of mg3 wireless for the China market.

Strong revenue visibility from new contracts

In March 2008, the Company was awarded a $10 million supply contract by BusinessCorp Services, a network ser-
vices provider based in the Philippines. MDGC has been selected as the preferred supplier of fixed wireless equip-
ment and software services for a planned cellular network deployment in Equatorial Guinea. Its wireless equipment
will provide a “last mile” wireless access link that will enable cellular networks to deliver mobile telephone services
in coastal Africa. This contract also allowed the Company to negotiate for additional agreements in Africa and
Southeast Asia. Management estimates the total revenue potential at approximately $100 million.

As a result of this and other contracts, MDGC anticipates 2008 revenues in a $2.7 million range and revenues exceed-
ing $25.5 million by year-end 2011.

Business Model

MDGC provides mg3 wireless access, mg3 mobile applications and mg3 Web 2.0 content.

The Company’s mg3 wireless service is a bi-directional broadband wireless system designed to effectively serve vast
areas of the world where end-to-end fiber or cable is not feasible. MDGC’s system can be customized to operate on
a specific radio frequency between 24 GHz and 43 GHz, and broadcasts point-to-multipoint with 90-degree cover-
age per sector at up to 100MB downstream and 80MB upstream speeds. MDGC’s digital communication solutions
(mg3 mobile and mg3 Web 2.0) enable delivery and viewing of media-rich messages via online or wireless devices.
Typical content including video clips of news, sports highlights, movie trailers, music sound tracks and TV show
promotions, can be delivered to subscriber PDAs, cell phones, smart phones or other mobile devices.

The Company’s proprietary technologies are protected by five U.S. patents, one European patent, one Chinese pat-
ent, and three critical network certifications for operating in China.

MDGC’s fixed broadband wireless equipment and technology have been approved by China’s State Radio Regula-
tory Commission, which certifies radio frequencies for wireless transmissions; the approval is required for wireless
equipment and system providers wishing to do business in China. The Company has completed a two-year system
trial in China and has been certified by China’s Academy of Broadband Science (ABS), a division of the central
government’s State Administration of Radio, Film and Television, to deploy broadband wireless services in China.
The ABS partnership is part of China’s “Rural Coverage” project, which aims to provide two-way, high-speed In-
ternet and television coverage to rural areas of China, where some 900 million citizens reside. MDGC was awarded
a $600,000 grant by the U.S. Trade and Development Agency to support its broadband wireless pilot project in
China.

MediaG3, Inc. (OTCBB: MDGC) 4

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

MDGC is targeting rural China and other developing countries for initial deployment of its technology because
these areas typically lack broadband access due to a shortage of telecommunications infrastructure over the “last
mile” between the cable or fiber optic backbone of the network operator and the customer.

Oriental Media

The Company’s Oriental Media subsidiary is developing market opportunities for mg3 digital interactive commu-
nication products and services such as digital rich-media e-mail marketing services, Web site design and develop-
ment, electronic magazines and database management. Oriental Media has registered a brand called China Green
Pages and is developing branded Web 2.0 “social networking” sites. The Company has established relationships
with advertisers such as Shanghai Media Group Broadband, China Super Soccer Association, Pan Asia Architectural
Hardware Association, New Era International Exhibition Company, China Trust International Travel Agency, CJD
Furniture Mart, Shanghai Higher Education Investment Corporation, and Chen Xin Forum.

Little Sheep

Another business, Little Sheep, is building an online community and educational platform with entertainment con-
tent for China’s children. A short “movie” will be sent to registered children and help spread the Little Sheep brand.
Online brand awareness will be leveraged through the Company’s network of franchised and directly-owned stores,
which market children’s clothing and related items. At year-end 2007, Little Sheep had 106 stores, of which 13 were
company-owned and 93 were franchised.

MediaG3, Inc. (OTCBB: MDGC) 5

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Business Strategy

The Company plans to establish a leadership position in China’s broadband wireless communication market and
build a presence in other underserved regions of the world where broadband access isn’t currently available. MDGC
plans to accomplish this goal by:

-Executing the China rural coverage pilot project, which will showcase the reliability and efficiency of mg3 technol-
ogy;
- Implementing a commercial roll-out through China telecomm and cable operators;
- Participating in the commercialization of digital information delivery initiatives in China;
- Launching its mg3 Web 2.0 social network;
- Establishing partnerships with content and wireless service providers;
- Solidifying partnerships with hand-held wireless device manufactures;
- Building a top tier regional, national and multinational client list;
- Delivering quality content and improving subscriber’s experience;
- Building the market presence needed to support sales goals;
- Licensing and leasing equipment to small- to mid-size telecomm companies;
- Delivering LMDS broadband wireless systems to BusinessCorp Services, as part of its $10 million supply contract;
and
- Providing a consistently high rate of return for stakeholders.

In addition to developing and marketing product applications for online and wireless marketing communica-
tions, the Company plans to acquire businesses in both the United States and China that offer complementary
technologies and strategic value. MDGC is currently involved in discussions with potential acquisition candi-
dates in the mobile and broadband wireless sectors.

MediaG3, Inc. (OTCBB: MDGC) 6

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Products and Services

The Company has three integrated business divisions: mg3 wireless, mg3 Web 2.0 and mg3 mobile..

Mg3 wireless

The Mg3 wireless business offers broadband fixed wireless products, commonly referred to as 802.16 systems; Lo-
cal Multipoint Distribution Systems (LMDS) between 24 GHz and 43.5 GHz; and broadcasting point-to-multipoint.
LMDS is a wireless, bi-directional broadband technology designed to allow network operators and communication
service providers to cost-effectively deliver a wide range of data-rich services to homes and businesses. LMDS uses
a cellular architecture to send very high frequency signals over short line-of-sight distances.

Mg3 wireless is a point-to-multipoint communications system that provides two-way wideband signal transmis-
sion into service areas where it is prohibitively expensive to lay fiber or build cell towers. This system supports
increased bandwidth (100Mbps downstream and 80Mbps upstream) for high-speed Internet to fixed sites and wire-
less locations.

The mg3 wireless system consists of the following components

1. Base Station – includes a Radio Frequency Unit (RFU) and an Air Interface Unit (AIU).
2. Customer Premise Equipment (CPE) – consists of Antenna Transceiver Units (ATU) and Network Interface Units
(NIU).
3. Network Management System – provides the ability to remotely monitor and configure system elements.

Mg3 wireless system

WAN
Network Interfase is OC-3/STM1
Base Station CPE
- Each sector covers 90 - Each NIU provides 2
degrees Ethernet ports.
- Two sectors serviced by - Downstream bandwidth
per NIU limited to 25-Mbps.
one AIU.
- Upstream bandwidth per
- Two AIUs service one 4
NIU limited to 5-Mbps. Wireless
sector 360-degree base
Local LAN
station.

RFU #2
RFU #1 Local LAN
AIU NIU
Internet ATU

Wireless
ATM OC-3 Local LAN

Router or
PSTN ATM Switch Local LAN

10/100 Base T ATU NIU

Internet

Network Causeway2
Management LMDS Network
System

Source: SEC filings.

MediaG3, Inc. (OTCBB: MDGC) 7

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Mg3 mobile

Mg3 mobile is a content application that optimizes the delivery and management of complex personalized rich-
media (voice, sound, dynamic graphics and streaming video) to mg3 mobile subscriber wireless devices. Through a
proprietary subscriber database, as well as compression and streaming technologies, content delivery is optimized
to yield a high quality viewing experience.

Content managed using mg3 mobile is fully viewable on both fixed and wireless platforms including laptops, cell
phones, smart phones, PDAs and other devices. By maintaining crucial gateway server and client (player) systems,
mg3 mobile solutions transfer rich data into a format understood by each protocol for rapid, seamless transmission.
Delivered content typically includes video news clips, sports highlights, movie trailers, television shows and mul-
timedia e-mail.

Mg3 Web 2.0

Mg3 Web 2.0 is a network of branded community platforms for information exchange, social networking, commerce
and targeted marketing in China. This network facilitates effective online digital marketing via eMagazines and
permission-based media campaigns.

MDCG branded its community platforms under the China Green PagesTM label and launched them in December
2007. To the Chinese, green represents prosperity, health, safety, the promise of the future, renewal, environmental
conscience, and other positive aspects of humanity. A typical example of how China Green PagesTM works in-
volves restaurant customers recommending and sharing dining experiences. Restaurants can attract customers by
advertising their businesses and cuisine specialties on this forum and establishing real-time communications with
potential diners. Related services such as gourmet food stores, beverage companies, flower shops, bakeries and
transportation businesses can also advertise their products and services in the dining forum. China Green PagesTM
generates revenues from advertising on its forums.

Industry Outlook

MDGC plans to deploy its broadband wireless technology in China and other developing countries. Substantial
growth in China’s telecom and digital video broadcast markets and the mandate by China’s central government to
bring 21st century technology and services to the rural population create a large market opportunity for MDGC’s
technology and services.

Internet usage

Growth in the number of Internet users is also expanding the customer base for IP-based services. The number
of Internet users worldwide already exceeded 1 billion. As of June 30, 2008, there were 1.46 billion Internet users
worldwide, according to Internet World Stats.

MediaG3, Inc. (OTCBB: MDGC) 8

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Internet Usage
Population, Mn % Pop. Internet Users, Penetration % Usage User Growth
( 2008 Est. ) of World Latest Data, Mn (% Population) of World ( 2000-2008 )
Europe 800.4 11.9 % 384.6 48.1 % 26.3 % 266.0 %
North America 337.2 5.0 % 248.2 73.6 % 17.0 % 129.6 %
China 1,330.1 19.9% 253.0 19.0% 17.3% 1,024.4%
World’s total 6,676.1 100.0 % 1,463.6 21.9 % 100.0 % 305.5

Source: www.internetworldstats.com/stats.htm

here are an estimated 253 million Internet users in China, up 56% since 2007. The number of Internet users in
China expanded by 91 million last year, surpassing the United States, which has 248 million users. In the first six
months of 2008, Internet penetration rates in China increased to 19.1%[2]. This rate is slightly below the world-
wide average rate of 21.1%.

Internet users in China, millions

300
253
250

200
162
150 137
94 103
100 69
59
50 23 34

0
2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: www.internetworldstats.com/asia/cn.htm

China’s Internet users are relatively young, male, urban, and are disproportionately comprised of students. Just
over 70% of the user population is under age 30, and almost 60% are men[3]. The number of rural Internet users
is estimated at around 53 million. Penetration rates in urban areas at about 20% far exceed rural penetration rates
of only about 3%. One of the issues China must address to improve rural Internet penetration rates is low owner-
ship of computers. At year-end 2006, penetration rates were 2.7 computers for every 100 households in rural areas,
which is far behind urban penetration rates of 47.2 computers per 100 households. Almost two-thirds of the 1.33
billion Chinese citizens who are not online cite lack of computer skills and lack of Internet access as the main
reasons why. Only 8% of rural Chinese say they have “no need” to go online[4].

2. www.cnnic.net.cn/download/2008/CNNIC22threport-en.pdf
3. www. internetworldstats.com/asia/cn.htm
4. http://arstechnica.com/news.ars/post/20070715-china-set-to-overtake-the-us-in-number-of-internet-users.html

MediaG3, Inc. (OTCBB: MDGC) 9

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Total revenues for China’s Internet companies soared to 40.5 billion RMB ($5.9 billion) in 2007, up 48.6% from the
previous year, according to research firm Analysys International. Internet revenues are projected to grow 30% an-
nually and reach 137.5 billion RMB by 2010[5].

Broadband usage

Broadband is often called high-speed Internet because of its high rate of data transmission. The number of broad-
band connections is expanding rapidly as users demand higher speeds for peer-to-peer (P2P) files sharing systems,
music and game downloads, video on demand and voice-over-Internet telephony.

In 2007, the number of broadband subscribers worldwide was close to 300 million. Over the past year, the number
of broadband subscribers in the OECD, which counts 30 countries, has increased 24% to 221 million[6]. This means
that 18.8 inhabitants in every 100 now have a broadband subscription. The strongest per capita subscriber growth
rates were in Ireland, Germany, Sweden, Australia, Norway, Denmark and Luxembourg. Each of these countries
added more than five subscribers per 100 inhabitants. Asia’s share of the global broadband subscriber base stood
at 37% at year-end-2007, with 128 million broadband subscribers. DSL is the dominant fixed broadband technology
and represents about 66% of the market[7].

Broadband Internet connections have already reached 92% of the cities in China, which has about 122 million broad-
band users. The price of a broadband connection is well within the reach of mainland China’s middle class. Accord-
ing to the latest statistics from the Ministry of Information and Industry, the number of wireless subscribers in China
rose to 443 million in September, 2006, an increase of almost 50 million in the first nine months of that year, or 5.5
million new users per month[8]. Wireless and mobile phone Internet access have developed rapidly: already 73.05
million citizens, or 28.9% of China’s Internet users, are also mobile phone users[9]. Internet companies anticipate
another growth spurt as Chinese mobile phone carriers prepare to roll out third-generation (3G) technology that can
support Web-surfing and other services. No rollout date has been announced yet, but with more than 600 million
mobile accounts, China has a vast pool of potential wireless Internet users.

China mobile communications

With some 600 million mobile users, China has become the world’s largest cell phone market. According to the Min-
istry of Information and Industry, China recorded 53.5 million new cell phone users in the first six months of 2008.
The number of mobile phone users increased to 601 million at the end of June, up by 8.6 million from the end of May.
China’s mobile phone subscriber base is forecast to grow 11% annually through 2010.

5. www.nydailynews.com/news/us_world/2008/07/25/2008-07-25_china_online_country_says_it_has_most_in.html
6. http://cordis.europa.eu/search/index.cfm?fuseaction=news.simpledocument&N_RCN=28639
7. www.budde.com.au/buddereports/4566/Regional_-_Broadband_Market_-_Asia_Pacific_-_2008.aspx?r=51
8. www.internetworldstats.com/asia/cn.htm
9. http://en.wikipedia.org/wiki/Internet_in_the_People’s_Republic_of_China

MediaG3, Inc. (OTCBB: MDGC) 10

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Chinese mobile subscribers, millions

700
600
600 540
500 460
393
400
335
270
300

200

100

0
2003 2004 2005 2006 2007 Jun-2008

Source: www.ptc08.org/ptc08/participants/speakers/papers/LiangFinalSlides.pdf

Worldwide commercial deployments of 3G technology began in 2005, and are expected to grow to 118.13 million
subscribers by 2008, according to USA Today. However, China has yet to issue any 3G licenses. Two leading Chi-
nese mobile operators are working hard to expedite the development of 2G and 2.5G mobile value-added services
and build a market for 3G services. As 3G is deployed in China, demand for network bandwidth to support mobile
games and music downloads will likely accelerate. The bar chart below forecasts growth rates for China’s 3G sub-
scribers. By year five or six, the percentage of 3G subscribers is projected to exceed 40% of all subscribers.

Forecast of China’s 3G subscribers, millions

300

250 243.6

200 174.7

150
114.1
100 65.4
50
24.3
8.6
0
1st year 2nd year 3rd year 4th year 5th year 6th year

Source: www.ptc08.org/ptc08/participants/speakers/papers/LiangFinalSlides.pdf

MediaG3, Inc. (OTCBB: MDGC) 11

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Children’s development market

A new baby is born in China every 1.8 seconds, equivalent to 20 million new babies every year. China has about 314
million children who are less than 14 years old, including 100 million in cities and towns and 200 million in rural
areas.

China’s children are continuously bombarded with media messages from billboards, posters, home television, TV in
taxis, cinemas, magazines, food packaging, lunch boxes, clothing, text messages, Web sites, store shelves, radios and
other sources. Spending on advertising targeting China’s children exceeds billions of RMB each year.

In Shanghai, China’s largest commercial city, there are 13.5 million residents plus 5 million visitors or temporary
residents at any given time. Shanghai has about 5 million households. According to a 2006 census report, each fam-
ily in China spends on average 300 RMB ($35) per month on children, not including education. This equates to total
spending on children of 1.5 billion RMB, or approximately $190 million in Shanghai alone. Nationally, expenditure
for children is estimated to exceed 18.75 billion RMB ($2.5 billion) and is increasing 26.5% annually in cities and 8%
annually in rural areas[10].

Outlook and Valuation

Outlook

The Company plans to offer wireless broadband solutions through major wireless service providers in China.
MDGC’s initial focus is underserved rural areas where some 900 million Chinese reside.

MDGC expects to offer wireless service subscriptions for a monthly fee ranging from $3.95 to $6.95. The cost of wire-
less bandwidth will be a small percentage of the subscription fees, usually less than 10%.

Mg3 mobileTM services will be offered through partnerships with content providers such as TV networks, movie
studios, music label companies and sports clubs. Pricing will be based on the size and length of content, the number
of subscribers to whom the content is sent and the number of video clips streamed. MDGC also plans to establish
partnership with wireless service providers through which their customers will be able to receive video and other
media-rich content on their wireless devices for a monthly fee. The mg3 mobile sales strategy also focuses on part-
nerships with hand-held wireless device manufactures which will designate certain models as “preferred” mobile
phones. When customers sign up for mg3 services, they will be able to purchase one of the preferred mobile phones
at a discounted price.

While initial deployments will focus on Asia and Africa, over the longer-term, the Company plans to rollout its ser-
vices in areas of North America and Europe lacking an existing telecomm infrastructure. MDGC anticipates generat-
ing 2008 revenues in a $2.7 million range and revenues rising to exceed $25.5 million by year-end 2011.

In addition to organic growth, MDGC is also exploring strategic acquisitions to accelerate its growth and market
penetration.

10. the Company’s SEC filings

MediaG3, Inc. (OTCBB: MDGC) 12

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Revenue forecast, $
2006 2007 2008 2009 2010 2011
Actual Unaudited Estimated Estimated Estimated Estimated
Sales 298,995 628,749 2,729,588 11,119,130 17,051,429 25,460,857
Cost of Goods Sold -267,982 -282,004 -805,840 -4,428,000 -7,011,000 -10,516,500
Gross Profit 31,013 346,745 1,923,748 6,691,130 10,040,429 14,944,357
Operating Expenses -894,797 -1,947,070 -2,719,584 -4,757,376 -6,923,664 -10,130,616
Net Income (loss) -863,784 -1,600,325 -795,836 1,933,754 3,116,765 4,813,741

Source: Analyst estimates

Peer comparisons

For peer comparisons, we looked at other companies providing online and wireless products and services to con-
sumers and businesses in China. These companies trade at relatively high 10 to 40 times forward Price/Earnings
multiples and 1 to 6 times forward Price/Sales multiples.

Comparative analysis
Company Name Ticker Price per Mrkt. Cap. P/E P/S
23-Sep-08 Symbol Share, $ $ Mn 2008 2009 2008 2009

Kongzhong Corp. KONG 3.97 141 99.25 39.70 1.52 1.34

Sina Corp. SINA 36.23 2,020 22.36 17.50 5.56 4.50
Netease.com Inc. NTES 23.5 2,850 14.78 13.20 6.64 5.96
Sohu.com Inc. SOHU 62.2 2,390 17.13 13.88 5.72 4.60
China Unicom Ltd. CHU 14.73 20,100 17.75 15.03 1.34 1.20
China Mobile Ltd. CHL 51.28 190,900 12.12 10.22 3.15 2.60
Peers Median 17.44 14.46 4.36 3.55

Source: Reuters

We think MDGC warrants a valuation at the high end of the peer group range because of the advantages of its pro-
prietary technology, its relationships with China’s regulatory agencies and its $10 million contract with a Philippine
company to provide services in Equatorial Guinea.

Applying a 5 times forward Price/Sales multiple to our $11 million 2009 revenue estimate, we derive a $55 million
market capitalization target for MDGC. We assume 20% dilution resulting from equity sales to finance MDGC’s
growth. Our share price target is $2.30.

Innovative technology, a proven management team, strong partnerships and increasing revenue visibility are all
factors contributing to our Speculative Buy rating and $2.30 price target for MDGC. However, we strongly advise
investors to consider the risk factors discussed in the next section as the Company must overcome many hurdles to
commercially deploy its technology and services on a large scale.

MediaG3, Inc. (OTCBB: MDGC) 13

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Risks

Development-stage business has minimal revenues and financial resources

To date, MDGC’s operating activities have been limited to research and development, and initial deployment of its
technology in rural areas of China for demonstration and testing purposes. The Company has minimal revenues,
negative cash flow and an accumulated deficit. A limited operating history makes forecasting future revenues dif-
ficult.

Can’t predict market acceptance of technology

The Company’s revenue model is new and evolving, and there is no certainty that it will be successful. MDGC’s
ability to generate revenue will depend on its success in providing effective online and wireless rich-media services
to customers. Its technology is being prepared for large-scale deployment, but there is no assurance that this tech-
nology it will be widely embraced.

Lack of cash for implementing the business plan

The Company’s management team has indicated that significant additional external funding will be needed to sup-
port MDGC’s technology rollout, as well and corresponding marketing effort. The Company estimates it will need
at least $3 million for the above-mentioned activities. If MDGC fails to raise the needed capital, the implementation
of the business plan could be delayed, affecting our valuation case.

Intense competition

The online rich-media industry is intensely competitive. Most of MDGC competitors are small players offering
template-based e-mail tools. Competitors include JangoMail, VerticalResponse, ResultsMail and DynamicsDirect.
However, the industry’s strong growth may attract large telecom players with greater financial and marketing re-
sources. Increased competition could adversely affect MDGC’s ability to attract funding or achieve its revenue and
profitability goals. However, MDGC’s rich-media delivery business has significant advantages over competitors in
that it is able to bundle its rich-media delivery service with its broadband wireless deployment and content platform
to provide a more complete product and services package and capture recurring revenue streams.

MediaG3, Inc. (OTCBB: MDGC) 14

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Management Team

William Yuan Mr. Yuan has more than 20 years experience in software applications, high tech information and market-
ing, including 15 years as CEO for both public and start-up companies. Mr. Yuan has served as the CEO of
Chairman and CEO MediaG3 Inc. since March 2001. From 1999 to 2001, he served as chairman, president and CEO of inChorus,
a publicly held company. His expertise was instrumental in transforming inChorus from a developer of
consumer software into a leading rich-media e-mail marketing service provider. Mr. Yuan orchestrated the
merger of inChorus with publicly-traded ClickAction Inc. in 2001. Prior to inChorus, he served as COO for
NetUSA, a public company operating in the e-commerce market.

Between 1990 and 1997, Mr. Yuan founded two software companies operating in the communication and
security markets; these were acquired in 1994 and 1997, respectively. Mr. Yuan’s expertise was also essen-
tial in establishing a joint venture software development company in China.

Mr. Yuan has a degree in computer science from the University of California and an MBA with highest
honors from National University in San Jose, California.

Dean Peterson Dr. Peterson has more than 30 years experience in design, development and manufacture of microwave
and millimeter-wave systems for both commercial and military applications. He was a leading technolo-
Ph.D., Chief Technology gist at Wytec, Micro Device Technologies and Steinbrecher Corporation. Dr. Peterson developed the first
Officer space-qualified, solid-state power amplifiers operating at 38 GHz. He also developed high power, solid-
state ground-based transmitters for the U.S. Army’s MILSTAR communications program at 44 GHz, and
compact radar operating at 94 GHz.

Over the past 35 years, Dr. Peterson has held various senior technical positions. He was president and
co-founder of Ohana Wireless Inc., a development-stage company specializing in LMDS technology and
equipment. He served as president of Wytec Inc.’s Radio Design Division, managing the design and devel-
opment of low-cost, point-to-multipoint radio equipment in the LMDS bands from 25 GHz to 43 GHz. Dr.
Peterson also served as vice president and chief scientific officer for Steinbrecher Corp. with engineering
responsibility for the development of two key wireless products.

Dr. Peterson received a Ph.D. in electrical engineering from Massachusetts Institute of Technology. He
holds several technology patents and has published 10 research papers in the IEEE Journal.

Mr. Anzalone is a finance and technology executive with more than 20 years experience advising, financ-
Joseph Anzalone ing and operating early-stage technology companies. In 2003, Mr. Anzalone co-founded and served as
Sr. VP of Operations CEO of Ohana Wireless Inc., a development-stage company specializing in fixed wireless technology and
equipment. During his tenure as CEO, Mr. Anzalone developed key relationships with channel partners
in China and the Philippines, successfully guiding the company through network approvals in China for
Ohana Wireless fixed wireless equipment. Ohana Wireless’ parent company, ADML Holdings, Ltd., was
acquired by MediaG3 in February 2007.

For 15 years prior to Ohana Wireless, Mr. Anzalone served in various management positions at Silicon
Valley Bank, overseeing the award of more than $1 billion in structured financing solutions to early and
later stage technology companies. Mr. Anzalone held positions as commercial finance division manager
and national sales manager. He is presently the managing partner of Allegiant Ventures LLC, a technology
venture fund in Silicon Valley. Mr. Anzalone also serves as an advisor to the board of directors of T1 Go
Inc., a software services company providing online curriculum-approved educational games to China’s
school-age children.

Mr. Anzalone holds a Bachelor of Science from Santa Clara University in California.

MediaG3, Inc. (OTCBB: MDGC) 15

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

Mr. Keating has more than 30 years of experience as a financial expert and CFO of public companies, in-
Steve Keating cluding Tegler McHenry and Euro American.
Director and Audit
Committee Chair

Dr. McNamara has more than 25 years of technology and executive management, including positions as
Robert McNamara CEO and CTO in public and private companies. Dr. McNamara has been involved in a wide variety of
Ph.D., Director and scientific and engineering programs. He is the founder and CEO of C8 MediSensors Inc.
Technology Advisor

Ms. Gawne has more than 25 years of practice in security corporate law. She was a partner at Silicon Valley
Cathryn Gawne, J.D. Law Group and is now a partner at Hopkins & Carley. Ms. Gawne received a Bachelor of Art from Stanford
Director and Legal Counsel University and her Juris Doctor from the UCLA School of Law.

MediaG3, Inc. (OTCBB: MDGC) 16

 Analyst: Victor Sula, Ph.D.
Initial Report
October 2nd, 2008

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this report.

Victor Sula, Ph.D. - Senior Analyst

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

MediaG3, Inc. (OTCBB: MDGC)