HandHeld Entertainment to Acquire eBaum's World, a Premier Online Entertainment Site

HandHeld Entertainment, Inc. (NASDAQ:ZVUE), a global digital
entertainment company, today announced that it has entered into a
definitive agreement to acquire eBaum's World, Inc., one of the
Internet's premier online entertainment sites, offering user-generated
videos, games, jokes, photos and other content.

Founded in 1998, eBaum's World (www.eBaumsWorld.com) is one of the
oldest and most successful user-generated content (UGC) sites in the
world, generating approximately $5.2 million in revenue and $1.6
million in net income before income taxes in 2006. During the last 12
months, eBaum's World served more than 2.5 billion unique page views
and video streams, with an average time on site per user visit of more
than 10 minutes. As a pioneer of viral video, eBaum's World has helped
shape the UGC market with its loyal following and growing community,
becoming one of the world's largest independent online publishers of
humor-related content. The company has relationships with such leading
media companies as AOL Video, Facebook, FOX Mobile and others.

"Acquiring eBaum's World demonstrates tremendous progress toward
our stated goals of becoming a global leader in digital entertainment,
as well as increasing our revenues and helping us become cash flow
positive," said Jeff Oscodar, president and CEO of HandHeld
Entertainment. "Their content is a perfect fit for the ZVUE network of
humor-based Web sites, and we believe that their addition to our
network will produce synergies with our other sites individually as
well as great scale for our network overall. We also believe the
continued growth in UGC sector ad spend and the integration of our
growing library of commercial content into eBaumsWorld.com will
increase our revenue and user enjoyment. We expect this acquisition to
significantly enhance the company's ability to generate meaningful,
long-term cash flows."

"Through its agreement to acquire eBaum's World, HandHeld
Entertainment has catapulted itself onto the world stage in a big
way," said Michael Inouye, research analyst with In-Stat. "HandHeld
has instantly become one of the leaders in online video and
user-generated content and is now rubbing shoulders with YouTube and
the video networks of such companies as Yahoo!, Microsoft, AOL and
Google. This truly is a terrain-changing event in the UGC and online
video markets."

With this acquisition, the ZVUE Network of Web sites will become
one of the world's leading providers of online video entertainment,
attracting 14 million to 19 million unique visitors per month(1).
Post-acquisition, HandHeld expects to deliver nearly than 3.5 billion
page views and video streams through the ZVUE Network annually.

"The opportunity to become part of HandHeld's ZVUE Network is very
compelling to me personally because of the complementary
organizational fit and similar long-term direction," said Eric Bauman,
founder of eBaum's World. "eBaum's World brings with it strong brand
recognition, with a loyal user-base that will integrate well with
HandHeld's other online assets and help increase traffic across all
its sites. There are also several technology-driven synergies that we
expect to be able to realize across the different Web sites. I'm very
proud to bring eBaum's World into the ZVUE Network and look forward to
many years of combined success and believe that we can reach higher
goals together than either company could have achieved alone."

Summary of Acquisition Terms

Under the terms of the acquisition, which is expected to close
later this year, HandHeld will pay $17.5 million for eBaum's World at
closing, including $15.0 million in cash, $5.0 million in common
stock, which is subject to a $2.5 million one-year hold-back based on
achievement of certain financial targets. In addition, HandHeld may
pay earn-outs of up to $32.5 million ($17.5 million in stock and $15.0
million in cash) over three years to the owners of eBaum's World,
dependent on the achievement of certain financial and operational
milestones of the purchased business.

"Both the initial and earn-out consideration for this acquisition
are based on a 6X pro forma EBITDA multiple, which we believe is a
strong value relative to current market multiples for comparable
companies and is consistent with our commitment to create shareholder
value," Oscodar said.

Terms of Financing

HandHeld has entered into an agreement to sell $24.0 million of
three-year, 7.5% convertible debentures with a fixed conversion price
stock at $1.90 per share subject to adjustment. Of the proceeds, $15.0
million is for the acquisition of eBaum's World and $9.0 million is
for future mergers and acquisitions, working capital and fees. Other
significant terms of the notes include:

-- 3.0 million warrants with an exercise price of $1.90 and 2.7
million warrants with an exercise price of $2.09;

-- Principal and interest on the debentures in either stock or
cash, at HandHeld's option; and

-- Customary registration rights and anti-dilution provisions.

Company insiders are expected to provide $1 million of the $24
million financing.

The acquisition and financing are subject to shareholder approval
and customary closing conditions, and are expected to close within 75
days.

Conference Call

HandHeld has scheduled a conference call to discuss the
acquisition on Thursday, August 2, 2007 at 8:30 a.m. EDT/5:30 a.m.
PDT. The live discussion can be accessed by dialing (800) 218-8862.
Presentation slides and a Webcast of the call can also be accessed at
www.hheld.com or
http://w.on24.com/r.htm?e=89493&s=1&k=A56D36A1090103D6981FC23DE90C3DC9
A replay of the conference call will be available after 10:30 p.m. EDT
on August 2, 2007 through August 16, 2007 by dialing (800) 405-2236
and entering pass code 11094930#. A replay of the conference call and
presentation will also be available at www.hheld.com.

About eBaum's World Inc.

Launched in 1998 and headquartered in Rochester, N.Y., eBaum's
World (www.eBaumsWorld.com) is one of the Internet's premier
entertainment sites and offers content including videos, games, jokes,
photos and more.

About HandHeld Entertainment, Inc.

HandHeld Entertainment (NASDAQ:ZVUE) is a global digital
entertainment company. Its ZVUE Network of Web sites (Putfile.com(TM),
Holylemon.com(TM), UnOriginal.co.uk(TM), YourDailyMedia.com(TM),
Dorks.com(TM), FunMansion.com(TM) and ZVUE.com(TM)) now houses more
than 850,000 user-generated and commercial videos available for
purchase or free viewing, as well as millions of free user-submitted
photos and other media, and is expected to deliver nearly one billion
page views/video streams in 2007. Its ZVUE(TM) personal media players
are mass-market priced and currently available for purchase online and
in more than 2,200 Wal-Mart stores throughout the U.S. For more
information, visit www.hheld.com.

HandHeld Entertainment, ZVUE Network, Putfile.com, Holylemon.com,
UnOriginal.co.uk, YourDailyMedia.com, Dorks.com, FunMansion.com,
ZVUE.com and ZVUE are trademarks of HandHeld Entertainment. All other
trademarks are property of their respective owners.

"Safe Harbor" Statement Under the Private Securities Litigation
Reform Act of 1995

This announcement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, Section 21E of
the Securities Exchange Act of 1934, and within the meaning of the
Private Securities Litigation Reform Act of 1995. Actual results could
differ materially from those projected in the forward-looking
statements as a result of various factors including the ability of the
company to successfully commercialize its new technologies as well as
risk factors set forth from time to time in HandHeld Entertainment's
filings with the United States Securities and Exchange Commission,
including Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB and Current Reports on Form 8-K and other reports filed by the
company with the SEC. The company undertakes no obligation to publicly
release the result of any revisions to these forward-looking
statements, which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
As a result, investors should not place undue reliance on these
forward-looking statements.

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