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Document and Entity Information
9 Months Ended
Dec. 31, 2012
Feb. 08, 2013
Document Information [Line Items]
Document Type 10-Q
Amendment Flag false
Document Period End Date Dec 31, 2012
Document Fiscal Year Focus 2012
Document Fiscal Period Focus Q3
Trading Symbol MNDL
Entity Registrant Name MANDALAY DIGITAL GROUP, INC.
Entity Central Index Key 0000317788
Current Fiscal Year End Date --03-31
Entity Filer Category Smaller Reporting Company
Entity Common Stock, Shares Outstanding 92,160,173
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Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Current assets
Cash and cash equivalents $ 1,641 $ 8,799
Accounts receivable, net of allowances of $108 and $108, respectively 2,079 1,190
Deposits 607
Prepaid expenses and other current assets 258 120
Total current assets 4,585 10,109
Property and equipment, net 201 230
Intangible assets, net 4,976 817
Goodwill 4,537 3,640
TOTAL ASSETS 14,299 14,796
Current liabilities
Accounts payable 3,795 3,051
Accrued license fees 1,000 1,155
Accrued compensation 507 582
Current portion of long term debt, net of discounts of $393 and $0, respectively 2,826 75
Warrant derivative liabilities 452
Other current liabilities 651 705
Total current liabilities 8,779 6,020
Long term debt and convertible debt, net of discounts of $684 and $2,147, respectively 1,750 3,077
Long term contingent liability, less discount of $198 and $0, respectively 802
Total liabilities 11,331 9,097
Stockholders' equity
Preferred stock Series A convertible preferred stock at $0.0001 par value; 200,000 shares authorized, 100,000 issued and outstanding at December 31, 2012, and March 31, 2012 (liquidation preference of $1,000,000) 100 100
Common stock, $0.0001 par value: 200,000,000 shares authorized; 91,206,041 issued and 87,433,042 outstanding at December 31, 2012; 83,506,945 issued and 79,733,946 outstanding at March 31, 2012; 7 7
Additional paid-in capital 141,265 133,300
Treasury Stock (3,772,999 shares at December 31, 2012 and March 31, 2012) (71) (71)
Accumulated other comprehensive loss (148) (194)
Accumulated deficit (138,185) (127,443)
Total stockholders' equity 2,968 5,699
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,299 $ 14,796
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Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2012
Mar. 31, 2012
Accounts receivable, allowances $ 108,000 $ 108,000
Current portion of long term debt, discounts 393,000 0
Long term debt and convertible debt, discounts 684,000 2,147,000
Long term contingent liability, discount 198,000 0
Series A Convertible Preferred Stock, par value $ 0.0001 $ 0.0001
Series A convertible preferred stock, shares authorized 200,000 200,000
Series A convertible preferred stock, shares issued 100,000 100,000
Series A convertible preferred stock, shares outstanding 100,000 100,000
Series A convertible preferred stock, liquidation preference $ 1,000,000 $ 1,000,000
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, issued 91,206,041 83,506,945
Common stock, outstanding 87,433,042 79,733,946
Treasury Stock, shares 3,772,999 3,772,999
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Consolidated Statements Of Operations And Comprehensive (Loss) Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Net revenues $ 2,049 $ 1,957 $ 4,252 $ 5,788
Cost of revenues
License fees 190 733 957 1,885
Other direct cost of revenues 737 57 1,018 172
Total cost of revenues 927 790 1,975 2,057
Gross profit 1,122 1,167 2,277 3,731
Operating expenses
Product development 577 430 1,308 1,578
Sales and marketing 329 204 647 660
General and administrative 3,795 6,648 9,386 8,764
Total operating expenses 4,701 7,282 11,341 11,002
Loss from operations (3,579) (6,115) (9,064) (7,271)
Interest and other income / (expense)
Interest income/ (expense) (536) (1,693) (1,490) (2,438)
Foreign exchange transaction loss (18) (71) (52) (54)
Change in fair value of warrant derivative liabilities loss (49) (22) (76)
Gain / (loss) on settlement of liability (4) 1,082 (4) 1,323
Loss on change on valuation of long term contingent liability (44) (44)
Interest and other expense (602) (731) (1,612) (1,246)
Loss from operations before income taxes (4,181) (6,846) (10,676) (8,516)
Income tax provision (33) (32) (66) (64)
Net loss (4,214) (6,878) (10,742) (8,580)
Other comprehensive (loss) / income:
Foreign currency translation adjustment 49 46 46 93
Comprehensive (loss) / income $ (4,165) $ (6,832) $ (10,696) $ (8,487)
Basic and diluted net income / (loss) per common share $ (0.05) $ (0.16) $ (0.12) $ (0.21)
Weighted average common shares outstanding, basic and diluted 88,987 41,966 86,917 41,808
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Consolidated Statements Of Stockholders' Equity (USD $)
In Thousands, except Share data
Total
Common Stock
Preferred Stock
Treasury Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income/(Loss)
Accumulated Deficit
Balance at Mar. 31, 2012 $ 5,699 $ 7 $ 100 $ (71) $ 133,300 $ (194) $ (127,443)
Balance (in shares) at Mar. 31, 2012 83,506,945 100,000 3,772,999
Net loss (2,753) (2,753)
Foreign currency translation 31 31
Issuance of restricted stock for services (in shares) 733,333
Issuance of restricted stock for services 929 929
Warrants exercised and issued for services rendered (in shares) 365,010
Warrants exercised and issued for services rendered 473 473
Issuance of common stock for cash (Shares) 1,428,571
Issuance of common stock for cash 1,000 1,000
Balance at Jun. 30, 2012 5,379 7 100 (71) 135,702 (163) (130,196)
Balance (in shares) at Jun. 30, 2012 86,033,859 100,000 3,772,999
Net loss (3,775) (3,775)
Foreign currency translation (34) (34)
Issuance of restricted stock for services (in shares) 25,157
Issuance of restricted stock for services 1,356 1,356
Vesting of options issued to employee 23 23
Vesting of shares issued to employee (in shares) 1,500,000
Vesting of shares issued to employee 66 66
Issuance of common stock related to acquisition (shares) 937,500
Issuance of common stock related to acquisition 788 788
Balance at Sep. 30, 2012 3,803 7 100 (71) 137,935 (197) (133,971)
Balance (in shares) at Sep. 30, 2012 88,496,516 100,000 3,772,999
Net loss (4,214) (4,214)
Foreign currency translation 49 49
Issuance of restricted stock for services (in shares) 614,286
Issuance of restricted stock for services 1,317 1,317
Warrants exercised and issued for services rendered 82 82
Vesting of options issued to employee 93 93
Issuance of common stock for cash (Shares) 1,428,571
Vesting of shares issued to employee 305 305
Issuance of common stock for cash 1,000 1,000
Issuance of common stock related to acquisition (shares) 666,668
Issuance of common stock related to acquisition 533 533
Balance at Dec. 31, 2012 $ 2,968 $ 7 $ 100 $ (71) $ 141,265 $ (148) $ (138,185)
Balance (in shares) at Dec. 31, 2012 91,206,041 100,000 3,772,999
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Consolidated Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Cash flows from operating activities
Net loss $ (10,742) $ (8,580)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 237 332
Amortization of debt discount 1,070 686
Interest accrued 335 488
Allowance for doubtful accounts (29)
Fair value of financing costs related to conversion options 1,255
Stock-based compensation 167
Settlement of debt with a supplier (1,079)
Loss on fair value of contingent liability 44
Increase / (decrease) in fair value of derivative liabilities 21 74
(Increase) / decrease in assets, net of effect of disposal of subsidiary:
Accounts receivable (322) 783
Prepaid expenses and other current assets (34) (80)
Increase / (decrease) in liabilities, net of effect of disposal of subsidiary:
Accounts payable (435) 211
Accrued license fees (155) 70
Accrued compensation (75) (215)
Other liabilities and other items 15 (289)
Net cash used in operating activities (5,862) (487)
Cash flows from investing activities
Purchase of property and equipment (10)
Cash used in acquisition of subsidiary (3,416)
Cash acquired with acquisition of subsidiary 59
Net cash used in investing activities (3,357) (10)
Cash flows from financing activities
Proceeds from new convertible debt 7,000
Payment of equipment leases (11)
Issuance of shares for cash 2,000
Net cash provided by financing activities 2,000 6,989
Effect of exchange rate changes on cash and cash equivalents 61 69
Net change in cash and cash equivalents (7,158) 6,561
Cash and cash equivalents, beginning of period 8,799 845
Cash and cash equivalents, end of period 1,641 7,406
Supplemental disclosure of cash flow information:
Taxes paid 28 64
Interest paid 1
Noncash investing and financing activities:
Contingency earn out on acquisition of subsidiary, net of discount 758
Common stock of the Company issued for pending acquisition of an asset 533
Common stock of the Company issued for acquisition of subsidiary 787
Exercise of warrants to purchase common stock of the Company 473
Service provider
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common stock and warrants 133
Services
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common stock and warrants $ 4,012 $ 5,753
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Organization
9 Months Ended
Dec. 31, 2012
Organization
  1. Organization

Mandalay Digital Group, Inc. (“we”, “us”, “our”, the “Company” or “Mandalay Digital”), formerly NeuMedia, Inc. (“NeuMedia”), formerly Mandalay Media, Inc. (“Mandalay Media”) and formerly Mediavest, Inc. (“Mediavest”), was originally incorporated in the state of Delaware on November 6, 1998 under the name eB2B Commerce, Inc. On April 27, 2000, it merged into DynamicWeb Enterprises Inc., a New Jersey corporation, the surviving company, and changed its name to eB2B Commerce, Inc. On April 13, 2005, the Company changed its name to Mediavest, Inc. Through January 26, 2005, the Company and its former subsidiaries were engaged in providing business-to-business transaction management services designed to simplify trading between buyers and suppliers. The Company was inactive from January 26, 2005 until its merger with Twistbox Entertainment, Inc. on February 12, 2008. On September 14, 2007, Mediavest was re-incorporated in the state of Delaware as Mandalay Media, Inc. On May 11, 2010, the Company merged with a wholly-owned, newly formed subsidiary, changing its name to NeuMedia, Inc. On February 6, 2012, the Company merged with a wholly-owned, newly formed subsidiary, changing its name to Mandalay Digital Group, Inc.

Twistbox is a global publisher and distributor of branded entertainment content and services primarily focused on enabling the development, distribution and billing of content across mobile networks. Twistbox publishes and distributes its content in a number of countries. Since operations began in 2003, Twistbox has developed an intellectual property portfolio that includes mobile rights to global brands. Twistbox has built a proprietary mobile publishing platform that includes: tools that automate device management for the distribution and billing of images and video; a mobile games development and distribution platform that automates the porting of mobile games and applications to multiple handsets; and a content standards and ratings system globally adopted by major wireless carriers to assist with the responsible deployment of age-verified content. Twistbox has distribution and service agreements with some of the largest mobile operators in the world.

Twistbox is headquartered in the Los Angeles area and has offices in Europe that provide local support for both mobile operators and third party distribution in their respective regions.

On October 23, 2008, the Company completed an acquisition of 100% of the issued and outstanding share capital of AMV Holding Limited, a United Kingdom private limited company (“AMV”), and 80% of the issued and outstanding share capital of Fierce Media Ltd (“Fierce”).

AMV marketed branded services through a unique Customer Relationship Management platform that drove revenue through mobile internet, print and TV advertising. AMV was headquartered in Marlow, outside of London in the United Kingdom.

On May 10, 2010, an administrator was appointed over AMV Holding Limited in the UK, at the request of the Company’s senior debt holder. As from that date, AMV and its subsidiaries were considered to be a discontinued operation. AMV and its subsidiaries were subsequently disposed.

On May 11, 2010, Mandalay Media merged into its wholly-owned, newly formed subsidiary, NeuMedia Inc. (“NeuMedia”), with NeuMedia as the surviving corporation. NeuMedia issued: (1) one new share of common stock in exchange for each share of Mandalay Media’s outstanding common stock and (2) one new share of preferred stock in exchange for each share of Mandalay Media’s outstanding preferred stock as of May 11, 2010. NeuMedia’s preferred and common stock had the same status and par value as the respective stock of Mandalay Media and NeuMedia acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mandalay Media.

On June 21, 2010, the Company signed and closed an agreement whereby ValueAct and the AMV Founders, acting through a newly formed company, acquired the operating subsidiaries of AMV (the “Assets”) in exchange for the release of $23,231 of secured indebtedness, comprising a release of all amounts due and payable under the AMV Note and all of the amounts due and payable under the ValueAct Note (as defined below) except for $3,500 in principal. The Company retained all assets and liabilities of Twistbox and the Company.

On December 28, 2011, the Company issued 50,000 shares of the Company’s common stock as part of the consideration for in exchange for the assets of Digital Turbine Group, LLC, the developer of Digital Turbine (“DT”), a technology platform that allows media companies, mobile carriers, and their OEM handset partners to take advantage of multiple mobile operating systems across multiple networks, and offers solutions that allow them to maintain their own branding and personalized, one-to-one relationships with each end-user. DT’s cross-platform user interface and multimedia management system for carriers and OEMs can be integrated with different operating systems to provide a more organized and unified experience for end-users of mobile content across search, social media, discovery, billing, and delivery. Other aspects of the platform, such as a smart content discovery toolbar, allows carriers and OEMs to control the data presented to their users while giving the end-user a more efficient way of finding and purchasing desired content.

 

On July 27, 2012, the Company set up a wholly-owned Israeli acquisition/holding company, M.D.G. Logia Holdings LTD (“MDG”).

On August 15, 2012, the Company amended its charter with the state of Delaware to increase its total number of shares of common stock of the Company to 200,000,000 and preferred shares of the Company to 2,000,000.

On September 13, 2012, the Company completed an acquisition of 100% of the issued and outstanding share capital of three operating subsidiaries of Logia Group Ltd (“Sellers”) (Logia Content Development and Management Ltd. (“Logia Content”), Volas Entertainment Ltd. (“Volas”) and Mail Bit Logia (2008) Ltd. (“Mail Bit”), (collectively, the “Targets”)). In addition, the Company, by assignment to the acquisition entity, M.D.G. Logia Holdings Ltd (“MDG”), acquired the assets of LogiaDeck Ltd (an affiliate of the Seller, “LogiaDeck”), comprised of the “LogiaDeck” software, which the Company has rebranded “Ignite”, and certain operator and other contracts related to the business of the Logia companies that were originally entered into by the Sellers. Pursuant to the Logia purchase agreement, Mandalay Digital Group, Inc. purchased 23% of the outstanding shares of the Targets and MDG purchased 77% of such shares. On November 7, 2012, Mandalay Digital Group, Inc. contributed all of its shares of the Targets to MDG pursuant to a Contribution Agreement among Mandalay Digital Group, Inc., Digital Turbine Group, Inc. and MDG. The acquired business of the Targets and Ignite are collectively referred to as “Logia” in this quarterly report.

Logia is a mobile content development and management solutions provider of innovative mobile monetization solutions. It provides solutions for top-tier mobile operators and content providers, including device application management solutions, white label app and media stores, app-based value added services, and mobile social music and TV offerings.

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Liquidity
9 Months Ended
Dec. 31, 2012
Liquidity
  2. Liquidity

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. As reflected in the accompanying consolidated financial statements, the Company has losses from operations and negative cash flows from operations.

Our primary sources of liquidity have historically been issuance of common and preferred stock and borrowings under credit facilities. In fiscal year 2012, the Company raised $9.7 million through issuance of convertible debt and equity financings and through restructuring existing debt to convertible debt. Our current cash resources will not be sufficient to fund our planned operations for the next twelve months. Until we become cash flow positive, we anticipate that our primary sources of liquidity will be cash generated by our operating activities, as well as further borrowings or further capital raises. Because of the uncertainty of these factors, we will need to raise funds to meet our working capital needs. Additional financing may not be available on acceptable terms or at all. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of common stock. If we cannot raise any needed funds, we might be forced to make substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and, ultimately, our viability as a company.

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Acquisitions/Purchase Price Accounting
9 Months Ended
Dec. 31, 2012
Acquisitions/Purchase Price Accounting
  3. Acquisitions/Purchase Price Accounting

On August 14, 2012, the Company, entered into a Share Purchase Agreement (the “Purchase Agreement”) to acquire subsidiaries and certain assets of Logia Group, Ltd. (“Logia”), a leading mobile content development and management solutions provider of innovative mobile monetization solutions. On September 13, 2012, the Company completed the transactions contemplated by the Purchase Agreement. As a part of the transaction, the Company, through an acquisition entity, acquired all of the capital stock of three operating subsidiaries of Logia (Logia Content Development and Management Ltd. (“Logia Content”), Volas Entertainment Ltd. (“Volas”) and Mail Bit Logia (2008) Ltd. (Mail Bit), (collectively, the “Targets”)). In addition, the Company, by assignment to an acquisition entity, acquired from LogiaDeck Ltd. (formerly S.M.B.P. IGLOO Ltd.) (an affiliate of the Seller, “LogiaDeck”) the assets comprising the “LogiaDeck” software, which the Company has rebranded “Ignite”, and certain operator and other contracts related to the business of the Targets that were entered into by Logia.

Our Company is a comprehensive mobile content and service provider, and its many technology platforms including Digital Turbine (DT) allow media companies, mobile carriers, and their OEM handset partners to take advantage of multiple mobile operating systems across multiple networks, while maintaining individual branding and personalized, one-to-one relationships with each end-user. The purpose of the Logia acquisition was an effort to not only build on the Company’s current distribution network, but to enhance its mobile content infrastructure with the Ignite solution. The Ignite solution is a complete application management platform for Android devices.

The Company set up an Israeli acquisition/holding company, MDG to acquire the Targets and the LogiaDeck assets, which was capitalized through a combination of intercompany debt and the issuance of equity.

The purchase consideration for the transaction was comprised of cash and common stock of the Company and two tranches of “earn out” payments of cash and stock, as follows:

 

  (1) At closing $3,750 in cash (subject to working capital adjustments) and a number of shares of Company common stock having a value of $750, based on a 30-day volume weighted average price (VWAP) look back from the issuance date or 937,500 shares (the “Closing Shares”) was paid and issued, as applicable, to Logia and LogiaDeck (fair value on the date of grant was $788);

 

  (2) Two tranches, each comprised of a cash payment of $250 and a number of shares of Company common stock valued at $250 (based on a 30 day VWAP look back from the issuance date) (the “Earn Out Shares”), will be paid and issued, as applicable, to Logia upon satisfaction of various milestones, and subject to the terms and conditions, as set forth in the Purchase Agreement, totaling up to a number of shares of common stock having a value of $500 (valued as described) and $500 of cash if all milestones are achieved.

 

The Closing Shares and Earnout Shares are subject to a Registration Rights Agreement that provides for piggy back rights for 3 years and inclusion on the Company’s currently existing registration statement.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition.

 

     Unaudited  

Cash

   $ 59   

Accounts receivable

     567   

Prepaid expenses and other assets

     178   

Customer relationships

     3,454   

Developed technology

     818   

Trade names / Trademarks

     143   

Non-compete agreements

     54   

Goodwill

     1,037   

Current liabilities

     (1,314

Long-term debt

     (35
  

 

 

 

Purchase price

   $ 4,961   
  

 

 

 

In addition to the value assigned to the acquired workforce, the Company recorded the excess of the purchase price over the estimated fair value of the assets acquired as an increase in goodwill. This goodwill arises because the purchase price reflects the strategic fit and resulting synergies that the acquired business brings to the Company’s existing operations. The initial allocation of excess purchase price is the result of a preliminary analysis performed, and is subject to revision upon finalization.

The Company believes with the acquisition of Logia it will be able to enhance existing products and create new industry-leading products, and also benefit from synergy savings through operational consolidation.

Goodwill has been recorded in our Israeli acquisition/holding company, MDG. The Company is in the process of evaluating goodwill that is deductible for tax purposes.

The initial accounting of the Logia acquisition is incomplete and subject to changes, which may result in significant changes to provisional amounts. The Company has recorded provisional amounts based upon management’s best estimate of the value as a result of preliminary analysis. Therefore, actual amounts recorded upon the finalization of the valuation of certain intangible assets may differ materially from the information presented in this Quarterly report on Form 10-Q.

The amortization period for the intangible assets is as follows:

 

     Remaining
Useful Life

Customer relationships

   10 years

Developed technology

   10 years

Trade names / Trademarks

   5 years

Non-compete agreements

   4 years

Goodwill

   Indefinite

The operating results of the Targets are included in the accompanying consolidated statements of operations from the acquisition date. The Targets’ combined operating results from the acquisition date to December 31, 2012 are as follows:

 

     Unaudited  

Revenue

   $ 1,780   

Cost of goods sold

     707   
  

 

 

 

Gross profit

   $ 1,073   

Operating expenses

     675   
  

 

 

 

Income from operations

     398   

Non-operating expenses, net

     178   

Provision for income tax

     33   
  

 

 

 

Net income

   $ 187   
  

 

 

 

 

The pro forma financial information of the Company’s consolidated operations if the acquisition of the Targets had occurred as of April 1, 2011 is presented below.

 

     Unaudited  
     Nine Months Ended December 31,  
     2012     2011  

Revenues

   $ 7,167      $ 14,652   

Cost of goods sold

     3,742        10,537   
  

 

 

   

 

 

 

Gross profit

     3,425        4,115   

Operating expenses

     11,977        11,846   
  

 

 

   

 

 

 

Loss from operations

     (8,552     (7,731

Non-operating expense

     (1,634     (1,492
  

 

 

   

 

 

 

Loss before provision for income taxes

     (10,186     (9,223

Provision for income taxes

     67        63   
  

 

 

   

 

 

 

Net loss

   $ (10,253   $ (9,286
  

 

 

   

 

 

 

Basic and diluted loss per share

   $ (0.12   $ (0.22
  

 

 

   

 

 

 
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Summary of Significant Accounting Policies
9 Months Ended
Dec. 31, 2012
Summary of Significant Accounting Policies
  4. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for annual financial statements. The financial statements, in the opinion of management, include all adjustments necessary for a fair statement of the results of operations, financial position and cash flows for each period presented.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

The Company’s revenues are derived primarily by licensing material and software in the form of products (Image Galleries, Wallpapers, video, WAP Site access, Mobile TV), developing and maintaining carrier platforms, mobile advertising, mobile billing and mobile games. License arrangements with the end user can be on a perpetual or subscription basis.

A perpetual license gives an end user the right to use the product, image or game on the registered handset on a perpetual basis. A subscription license gives an end user the right to use the product, image or game on the registered handset for a limited period of time, ranging from a few days to as long as one month.

The Company distributes products through mobile telecommunications service providers (“carriers”). The carrier markets the product, images or games to end users, but the Company may also participate in the marketing efforts with the carrier and is at times required to do so. License fees for perpetual and subscription licenses are usually billed upon download of the product, image or game by the end user. In the case of subscription licenses, many subscriber agreements provide for automatic renewal until the subscriber opts-out, while others provide for opt-in renewal. In either case, subsequent billings for subscription licenses are generally billed monthly. The Company applies the provisions of FASB ASC 985-605, Software Revenue Recognition, to all transactions.

Revenues are recognized from the Company’s products, images and games when persuasive evidence of an arrangement exists, the product, image or game has been delivered, the fee is fixed or determinable, and the collection of the resulting receivable is probable. For both perpetual and subscription licenses, management considers a license agreement to be evidence of an arrangement with a carrier or aggregator and a “clickwrap” agreement to be evidence of an arrangement with an end user. For these licenses, the Company defines delivery as the download of the product, image or game by the end user.

The Company estimates revenues from carriers in the current period when reasonable estimates of these amounts can be made. Most carriers only provide detailed sales transaction data on a one to two month lag. Estimated revenue is treated as unbilled receivables until the detailed reporting is received and the revenues can be billed. Some carriers provide reliable interim preliminary reporting and others report sales data within a reasonable time frame following the end of each month, both of which allow the Company to make reasonable estimates of revenues and therefore to recognize revenues during the reporting period when the end user licenses the product, image or game. Determination of the appropriate amount of revenue recognized involves judgments and estimates that the Company believes are reasonable, but it is possible that actual results may differ from the Company’s estimates. The Company’s estimates for revenues include consideration of factors such as preliminary sales data, carrier-specific historical sales trends, volume of activity on company monitored sites, seasonality, time elapsed from launch of services or product lines, the age of games and the expected impact of newly launched games, successful introduction of newer and more advanced handsets, promotions during the period and economic trends. When the Company receives the final carrier reports, to the extent not received within a reasonable time frame following the end of each month, the Company records any differences between estimated revenues and actual revenues in the reporting period when the Company determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If the Company is unable to reasonably estimate the amount of revenues to be recognized in the current period, the Company recognizes revenues upon the receipt of a carrier revenue report and when the Company’s portion of licensed revenues are fixed or determinable and collection is probable. To monitor the reliability of the Company’s estimates, management, where possible, reviews the revenues by country, by carrier and by product line on a regular basis to identify unusual trends such as differential adoption rates by carriers or the introduction of new handsets. If the Company deems a carrier not to be creditworthy, the Company defers all revenues from the arrangement until the Company receives payment and all other revenue recognition criteria have been met.

In accordance with FASB ASC 605-45, Reporting Revenue Gross as a Principal Versus Net as an Agent, the Company recognizes as revenues the amount the carrier reports as payable upon the sale of the Company’s products, images or games. The Company has evaluated its carrier agreements and has determined that it is not the principal when selling its products, images or games through carriers. Key indicators that it evaluated to reach this determination include:

 

   

wireless subscribers directly contract with the carriers, which have most of the service interaction and are generally viewed as the primary obligor by the subscribers;

 

   

carriers generally have significant control over the types of content that they offer to their subscribers;

 

   

carriers are directly responsible for billing and collecting fees from their subscribers, including the resolution of billing disputes;

 

   

carriers generally pay the Company a fixed percentage of their revenues or a fixed fee for each game;

 

   

carriers generally must approve the price of the Company’s content in advance of their sale to subscribers, and the Company’s more significant carriers generally have the ability to set the ultimate price charged to their subscribers;

 

   

the Company has limited risks, including no inventory risk and limited credit risk.

For direct to consumer business, revenue is earned by delivering a product or service directly to the end user of that product or service. In those cases, the Company records as revenue the amount billed to that end user and recognizes the revenue when persuasive evidence of an arrangement exists, the product, image or game has been delivered, the fee is fixed or determinable, and the collection of the resulting receivable is probable. Substantially all of our discontinued operations represents direct to consumer business.

Net Loss per Common Share

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period plus dilutive common stock equivalents, using the treasury stock method. Potentially dilutive shares from stock options and warrants and the conversion of the Series A preferred stock that were excluded from the shares used to calculate diluted earnings per share, as their inclusion would be anti-dilutive, were as follows:

 

 

     Three Months
Ended
December 31,
2012
     Three Months
Ended
December 31,
2011
     Nine Months
Ended
December 31,
2012
     Nine Months
Ended
December 31,
2011
 

Potentially dilutive shares

     25,458         41,390         26,591         40,753   

Comprehensive Loss

Comprehensive loss consists of two components, net loss and other comprehensive income. Other comprehensive income refers to gains and losses that under generally accepted accounting principles are recorded as an element of stockholders’ equity, but are excluded from net income. The Company’s other comprehensive income currently includes only foreign currency translation adjustments.

 

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

During the period prior to the acquisition date, one newly acquired company, Logia Content, had factored certain receivables. Those receivables are reflected as unpaid accounts receivable, and the amounts owing to the factor are reflected in other current liabilities.

Deposits

As of December 31, 2012, the Company has deposits of $607. A deposit in the amount of $533 was made pursuant to an asset purchase agreement entered into by the Company on December 6, 2012, whereby the Company delivered stock as a nonrefundable deposit. If the asset purchase is completed, then the deposits will be credited against the purchase price; however, if the asset purchase is not completed, then the deposit will be expensed.

Content Provider Licenses

Content Provider License Fees

The Company’s royalty expenses consist of fees that it pays to branded content owners for the use of their intellectual property in the development of the Company’s games and other content, and other expenses directly incurred in earning revenue. Royalty-based obligations are either, accrued as incurred and subsequently paid, or in the case of content acquisitions, paid in advance and capitalized on our balance sheet as prepaid license fees. These royalty-based obligations are expensed to cost of revenues either at the applicable contractual rate related to that revenue or over the estimated life of the content acquired. Minimum guarantee license payments that are not recoupable against future royalties are capitalized and amortized over the lesser of the estimated life of the branded title or the term of the license agreement.

Content Acquired

Amounts paid to third party content providers as part of an agreement to make content available to the Company for a term or in perpetuity, without a revenue share, have been capitalized and are included in the balance sheet as prepaid expenses. These balances will be expensed over the estimated life of the content acquired.

Software Development Costs

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product.

The Company has adopted the “tested working model” approach to establishing technological feasibility for its products and games. Under this approach, the Company does not consider a product or game in development to have passed the technological feasibility milestone until the Company has completed a model of the product or game that contains essentially all the functionality and features of the final game and has tested the model to ensure that it works as expected. To date, the Company has not incurred significant costs between the establishment of technological feasibility and the release of a product or game for sale; thus, the Company has expensed all software development costs as incurred. The Company considers the following factors in determining whether costs can be capitalized: the emerging nature of the mobile market; the gradual evolution of the wireless carrier platforms and mobile phones for which it develops products and games; the lack of pre-orders or sales history for its products and games; the uncertainty regarding a product’s or game’s revenue-generating potential; its lack of control over the carrier distribution channel resulting in uncertainty as to when, if ever, a product or game will be available for sale; and its historical practice of canceling products and games at any stage of the development process.

Product Development Costs

The Company charges costs related to research, design and development of products to product development expense as incurred. The types of costs included in product development expenses include salaries, contractor fees and allocated facilities costs.

Advertising Expenses

The Company expenses the costs of advertising, including direct response advertising, the first time the advertising takes place. Advertising expense was $143 and $1 in the three months ended periods ended December 31, 2012 and 2011, respectively and $143 and $7 in the nine months ended December 31, 2012 and 2011, respectively.

 

Restructuring

The Company accounts for costs associated with employee terminations and other exit activities in accordance with FASB ASC 420-10, Accounting for Costs Associated with Exit or Disposal Activities. The Company records employee termination benefits as an operating expense when it communicates the benefit arrangement to the employee and it requires no significant future services, other than a minimum retention period, from the employee to earn the termination benefits. For the nine months ended December 31, 2012 there were no restructuring costs.

Presentation

In order to facilitate the comparison of financial information, certain amounts reported in the prior year have been reclassified to conform to the current year presentation.

Fair Value of Financial Instruments

As of December 31, 2012 and March 31, 2012, the carrying value of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued license fees, accrued compensation, derivative liabilities and other current liabilities approximates fair value due to the short-term nature of such instruments.

Derivative Liabilities

The Company applies ASC Topic 815, “Derivatives and Hedging,” which provides a two-step model to determine whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception in ASC 815-10-15-74. Using the criteria in ASC 815, the Company determines which instruments or embedded features require liability accounting and records the fair values as a derivative liability. The changes in the values of the derivative liabilities are shown in the accompanying consolidated statements of operations as “change in fair value of accrued derivative liabilities gain / (loss).”

Foreign Currency Translation

The Company uses the United States dollar for financial reporting purposes. Assets and liabilities of foreign operations are translated using current rates of exchange prevailing at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transaction occurred. Statement of Operations amounts are translated at average rates in effect for the reporting period. The foreign currency translation adjustment gain of $46 in the nine month period ended December 31, 2012 and gain of $93 in the nine month period ended December 31, 2011 have been reported as a component of comprehensive loss in the consolidated statements of stockholders’ equity and comprehensive income.

Concentrations of Credit Risk

Financial instruments which potentially subject us to concentration of credit risk consist principally of cash and cash equivalents, and accounts receivable. We have placed cash and cash equivalents with a single high credit-quality institution. Most of our sales are made directly to large national Mobile Phone Operators in the countries that we operate. We have a significant level of business and resulting significant accounts receivable balance with one operator and therefore have a high concentration of credit risk with that operator. We perform ongoing credit evaluations of our customers and maintain an allowance for potential credit losses. As of December 31, 2012, two major customer represented approximately 35.2% and 16% of our gross accounts receivable outstanding, and 0% of gross accounts receivable outstanding as of March 31, 2012. These customers accounted for 47.8% and 14.4% of our gross revenues during the three month period ended December 31, 2012; and both of these customers accounted for 0% in the period ended December 31, 2011. One other major customer 11.9% and 43% of revenues for the nine month periods ended December 31, 2012 and December 31, 2011, respectively.

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are the lesser of 8 to 10 years or the term of the lease for leasehold improvements and 5 years for other assets.

Goodwill and Indefinite Life Intangible Assets

Goodwill represents the excess of cost over fair value of net assets of businesses acquired. In accordance with FASB ASC 350-20 Goodwill and Other Intangible Assets, the value assigned to goodwill and indefinite lived intangible assets, including trademarks and tradenames, is not amortized to expense, but rather they are evaluated at least on an annual basis to determine if there are potential impairments. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit goodwill is less than the carrying value. If the fair value of an indefinite lived intangible (such as trademarks and trade names) is less than its carrying amount, an impairment loss is recorded. Fair value is determined based on discounted cash flows, market multiples or appraised values, as appropriate. Discounted cash flow analysis requires assumptions about the timing and amount of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these factors can significantly affect the value of the intangible asset. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s judgment. Any changes in key assumptions about the Company’s businesses and their prospects, or changes in market conditions, could result in an impairment charge. Some of the more significant estimates and assumptions inherent in the intangible asset valuation process include: the timing and amount of projected future cash flows; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal or regulatory trends.

During the nine month period ended December 31, 2012, the Company determined that there was no impairment of goodwill. In the year ended March 31, 2012, the Company determined that there was an impairment of goodwill amounting to $2,969.

Impairment of Long-Lived Assets and Finite Life Intangibles

Long-lived assets, including, intangible assets subject to amortization primarily consisting of customer lists, license agreements and software that have been acquired, are amortized using the straight-line method over their useful life ranging from five to eight years and are reviewed for impairment in accordance with FASB ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

During the nine month period ended December 31, 2012, the Company determined that there was no impairment of intangible assets. In the year ended March 31, 2012, the Company determined that there was an impairment of intangible assets amounting to $2,319.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740-10, Accounting for Income Taxes (“ASC 740-10”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740-10, the Company determines deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of assets and liabilities along with net operating losses, if it is more likely than not the tax benefits will be realized using the enacted tax rates in effect for the year in which it expects the differences to reverse. To the extent a deferred tax asset cannot be recognized, a valuation allowance is established if necessary.

ASC 740-10 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the “more-likely-than-not” recognition threshold should be measured as the largest amount of the tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. We recognize interest and penalties related to income tax matters as a component of the provision for income taxes. We do not currently anticipate that the total amount of unrecognized tax benefits will significantly change within the next 12 months.

Stock-based Compensation

We have applied FASB ASC 718 Share-Based Payment (“ASC 718”) and accordingly, we record stock-based compensation expense for all of our stock-based awards.

Under ASC 718, we estimate the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The amount of expense recognized represents the expense associated with the stock options we expect to ultimately vest based upon an estimated rate of forfeitures; this rate of forfeitures is updated as necessary and any adjustments needed to recognize the fair value of options that actually vest or are forfeited are recorded.

The Black-Scholes option pricing model, used to estimate the fair value of an award, requires the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend rates and an option’s expected life. As a result, the financial statements include amounts that are based upon our best estimates and judgments relating to the expenses recognized for stock-based compensation.

The Company grants restricted stock subject to market or performance conditions that vest based on the satisfaction of the conditions of the award. Unvested restricted stock entitles the grantees to dividends, if any, with voting rights determined in each agreement. The fair market values of market condition-based awards are determined using the Monte Carlo simulation method. The Monte Carlo simulation method is subject to variability as several factors utilized must be estimated, including the derived service period, which is estimated based on the Company’s judgment of likely future performance and the Company’s stock price volatility. The fair value of performance-based awards is determined using the market closing price on the grant date. Derived service periods and the periods charged with compensation expense for performance-based awards are estimated based on the Company’s judgment of likely future performance and may be adjusted in future periods depending on actual performance.

 

Preferred Stock

The Company applies the guidance enumerated in FASB ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480-10”) when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value in accordance with ASC 480-10. All other issuances of preferred stock are subject to the classification and measurement principles of ASC 480-10. Accordingly, the Company classifies conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ equity.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent asset and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The most significant estimates relate to revenues for periods not yet reported by Carriers, liabilities recorded for future minimum guarantee payments under content licenses, accounts receivable allowances, and stock-based compensation expense.

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued new guidance on the presentation of comprehensive income that will require a company to present components of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. There are no changes to the components that are recognized in net income or other comprehensive income under current GAAP. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011, with early adoption permitted. It is applicable to the Company’s fiscal year beginning April 1, 2012. The Company expects this guidance to have an impact on the disclosures related to comprehensive income.

Recently Issued Accounting Pronouncements

In January 2012, we adopted 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (ASU 2011-05) which requires presentation of the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminates the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. The standard does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income.

Also, in December of 2011, the FASB issued Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). In February 2013, the FASB issued Accounting Standards Update 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure requirements for items reclassified out of accumulated other comprehensive income. This ASU will be effective for the first interim reporting period in 2013. The Company expects this guidance to have an impact on the disclosures related to comprehensive income.

In July 2012, the Financial Accounting Standards Board (“FASB”) issued amendments to the goodwill and indefinite-lived intangible assets impairment guidance which provides an option for companies to not calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (early adoption is permitted). The implementation of this amended accounting guidance is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

Recent authoritative guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to have a material effect on the Company’s consolidated financial statements.

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Fair Value Measurements
9 Months Ended
Dec. 31, 2012
Fair Value Measurements
  5. Fair Value Measurements

The Company applies the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

   

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

   

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

   

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities From Equity” and ASC 815, “Derivatives and Hedging.” Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes model.

 

The Company uses Level 2 inputs for its valuation methodology for the warrant derivatives as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

In May 2012, the derivative warrant liability was exercised. Prior to the exercise, the fair value of the derivative warrant liability was determined to be $473 using the Black-Scholes option pricing model with the following assumptions: 1) expected life 5 years, 2) a risk free interest rate of .40%, 3) a dividend yield of 0% and 4) a volatility of 170%.

The Company identified the following liabilities that are required to be presented on the balance sheet at fair value:

Measured at Fair Value on a Recurring Basis

 

Warrant derivative liabilities                            
(in thousands)    Total      Level 1      Level 2      Level 3  

December 31, 2012

   $      $       $      $   

March 31, 2012

   $ 452       $       $ 452       $   

The warrant derivative liability was exercised in the period ending June 30, 2012, and is discussed further at Note 13.

In September 2012, the Company recorded a contingent liability in connection with the acquisition of Logia. The liability was determined by using a valuation model that measured the probability of the liability to occur and the present value of the consideration at the time it would be paid. The value of the contingent liability as of September 30, 2012 was determined to be $758. At December 31, 2012, the contingent liability was re-measured to be $802. The Company recorded a loss on the fair value of the contingent liability of $44 in interest and other income / (expense) in the three months ended December 31, 2012.

 

Contingent liabilities                            
(in thousands)    Total      Level 1      Level 2      Level 3  

December 31, 2012

   $ 802      $       $       $ 802   

March 31, 2012

   $       $       $       $   

The Company did not identify any other recurring assets and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 825.

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Accounts Receivable
9 Months Ended
Dec. 31, 2012
Accounts Receivable
  6. Accounts Receivable

 

     December 31,
2012
    March 31,
2012
 

Billed

   $ 1,095      $ 709   

Unbilled

     1,092        589   

Less: allowance for doubtful accounts

     (108     (108
  

 

 

   

 

 

 

Net Accounts receivable

   $ 2,079      $ 1,190   
  

 

 

   

 

 

 

The Company had no significant write-offs or recoveries during the periods ended December 31, 2012 and December 31, 2011.

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Property and Equipment
9 Months Ended
Dec. 31, 2012
Property and Equipment
  7. Property and Equipment

 

     December 31,
2012
    March 31,
2012
 

Equipment

   $ 1,333      $ 1,310   

Furniture & fixtures

     506        484   

Leasehold improvements

     183        184   
  

 

 

   

 

 

 
     2,022        1,978   

Accumulated depreciation

     (1,821     (1,748
  

 

 

   

 

 

 

Net Property and Equipment

   $ 201      $ 230   
  

 

 

   

 

 

 

Depreciation expense was $27 and $45 in the three months ended December 31, 2012 and 2011 and $83 and $160 in the nine months ended December 31, 2012 and 2011, respectively.

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Description of Stock Plans
9 Months Ended
Dec. 31, 2012
Description of Stock Plans
  8. Description of Stock Plans

On May 26, 2011, our board of directors adopted the 2011 Equity Incentive Plan of NeuMedia, Inc. and on April 27, 2012, our board of directors amended and restated the plan and the related plan documents to change references to the name of our company from “NeuMedia, Inc.” to “Mandalay Digital Group, Inc.” and further directed that they be submitted to stockholders for their consideration and approval. On May 23, 2012, our stockholders approved and adopted by written consent the Amended and Restated 2011 Equity Incentive Plan of Mandalay Digital Group, Inc. (the “Plan”) and the Mandalay Digital Group, Inc. Amended and Restated 2011 Equity Incentive Plan Notice of Grant and Restricted Stock Agreement and the Mandalay Digital Group, Inc. Amended and Restated 2011 Equity Incentive Plan Notice of Grant and Stock Option Agreement (collectively, the “Related Documents”).

 

The Plan contains a number of provisions that the board believes are consistent with the interests of stockholders and sound corporate governance practices. These include:

 

 

Individual Grant Limits. No participant may be granted in aggregate, in any calendar year, Awards covering more than 500,000 shares.

 

 

No annual “Evergreen” Provision. The Plan provides for a fixed allocation of shares, thereby requiring stockholder approval of any additional allocation of shares.

 

 

No Discount Stock Options. The Plan prohibits the grant of a stock option with an exercise price of less than the fair market value of the closing price of our common stock on the date the stock option is granted.

Summary Description of the Plan

The Plan provides for grants of stock options, stock appreciation rights (“SARs”), restricted stock and restricted stock units (sometimes referred to individually or collectively as “Awards”) to our and our subsidiaries’ officers, employees, non-employee directors and consultants.

On September 10, 2012, the Company increased the Plan shares for issuance from 4,000,000 to 20,000,000.

Stock options may be either “incentive stock options” (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options (“NQSOs”). The Plan reserves 20,000,000 shares for issuance, of which 17,750,000 remain available for issuance as of December 31, 2012. The 20,000,000 shares reserved for issuance will serve as the underlying value for all equity awards under the Plan.

The following table summarizes options granted under the Company’s 2011 Equity Incentive Plan for the periods or as of the dates indicated:

Options

 

     Number of      Weighted Average  
(in thousands)    Shares      Exercise Price  

Outstanding at March 31, 2012

     —        $ —    
  

 

 

    

 

 

 

Granted

     500       $ 0.84   

Canceled

     —        $ —    

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at September 30, 2012

     500       $ 0.84   
  

 

 

    

 

 

 

Granted

     —         $ —     

Canceled

     333      $ 0.84   

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at December 31, 2012

     167       $ 0.84  

The following table summarizes options granted that are not under the Company’s 2011 Equity Incentive Plan for the periods or as of the dates indicated:

Options

 

     Number of      Weighted Average  
(in thousands)    Shares      Exercise Price  

Outstanding at March 31, 2012

     —        $ —    
  

 

 

    

 

 

 

Granted

     1,500       $ 0.84   

Canceled

     —        $ —    

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at September 30, 2012

     1,500       $ 0.84   
  

 

 

    

 

 

 

 

(in thousands)    Number of
Shares
     Weighted Average
Exercise Price
 

Granted

     —        $ —     

Canceled

     1,500       $ 0.84   

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at December 31, 2012

     —        $ —    

There were no exercisable options outstanding at December 31, 2012.

On September 27, 2007, the stockholders of the Company adopted the 2007 Employee, Director and Consultant Stock Plan (“Plan”). Under the Plan, the Company may grant up to 3,000,000 shares or equivalents of common stock of the Company as incentive stock options (ISO), non-qualified options (NQO), stock grants or stock-based awards to employees, directors or consultants, except that ISO’s shall only be issued to employees. Generally, ISO’s and NQO’s shall be issued at prices not less than fair market value at the date of issuance, as defined, and for terms ranging up to ten years, as defined. All other terms of grants shall be determined by the board of directors of the Company, subject to the Plan.

On February 12, 2008, the Company amended the Plan to increase the number of shares of our common stock that may be issued under the Plan to 7,000,000 shares and on March 7, 2008, amended the Plan to increase the maximum number of shares of the Company’s common stock with respect to which stock rights may be granted in any fiscal year to 1,100 shares. All other terms of the plan remain in full force and effect.

The following table summarizes options granted under the Company’s 2007 Employee, Director and Consultant Stock Plan equity compensation plan for the periods or as of the dates indicated:

Option Plans

 

     Number of      Weighted Average  
(in thousands)    Shares      Exercise Price  

Outstanding at March 31, 2012

     4,798       $ 1.80   
  

 

 

    

 

 

 

Granted

     —        $ —    

Canceled

     —        $ —    

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at December 31, 2012

     4,798       $ 1.80   
  

 

 

    

 

 

 

Exercisable at December 31, 2012

     4,798       $ 1.80   
  

 

 

    

 

 

 

The exercise price for options outstanding and options exercisable at December 31, 2012 was as follows:

 

Range of Exercise Price

   Weighted
Average
Remaining
Contractual Life
(Years)
     Number
Outstanding and
Exercisable
December 31, 2012
     Weighted
Average
Exercise
Price
     Aggregate
Intrinsic
Value
 

$0      - $1.00

     3.51         2,698       $ 0.47       $ 807,598   

$2.00 - $3.00

     5.47         1,300       $ 2.75       $ —    

$4.00 - $5.00

     5.12         800       $ 4.75       $ —    
     

 

 

       

 

 

 
     4.31         4,798       $ 1.80       $ 807,598   
     

 

 

       

 

 

 

Stock Plans

The Company’s 2007 Employee, Director and Consultant Stock Plan equity compensation plan did not contain nonvested options as of December 31, 2012 and March 31, 2012.

As of December 31, 2012, under the Company’s 2007 Employee, Director and Consultant Stock Plan equity compensation plan, there was $0 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan.

Total stock compensation expense for the Company’s 2007 Employee, Director and Consultant Stock Plan equity compensation plan and Amended and Restated 2011 Equity Incentive Plan is included in the following statements of operations components:

 

     Nine Months Ended
December 31,
2012
     Nine Months Ended
December 31,
2011
 

Product development

   $ —        $ 69   

Sales and marketing

     —          —    

General and administrative

     630         —    
  

 

 

    

 

 

 
   $ 630       $ 69   
  

 

 

    

 

 

 
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Goodwill
9 Months Ended
Dec. 31, 2012
Goodwill
  9. Goodwill

Goodwill

A reconciliation of the changes to the Company’s carrying amount of goodwill for the periods or as of the dates indicated:

 

Balance at March 31, 2012

   $ 3,640   
  

 

 

 

Goodwill impairment

     —    
  

 

 

 

Balance at June 30, 2012

   $ 3,640   
  

 

 

 

Acquisition unaudited

     897   
  

 

 

 

Balance at September 30, 2012

   $ 4,537   
  

 

 

 

Goodwill impairment

     —     
  

 

 

 

Balance at December 31, 2012

   $ 4,537   
  

 

 

 

Fair value is defined under ASC 820, Fair Value Measurements and Disclosures as, “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. The Company considered the income and market approaches to derive an opinion of value. Under the income approach, the Company utilized the discounted cash flow method, and under the market approach, consideration was given to the guideline public company method, the merger and acquisition method, and the market capitalization method. The initial accounting of the Goodwill of Logia is incomplete and subject to changes, which may result in significant changes to provisional amounts. The Company has recorded provisional amounts based upon management’s best estimate of the value as a result of preliminary analysis.

We complete our annual impairment tests in the fourth quarter of each year unless events or circumstances indicate that an asset may be impaired. There were no indications of impairment present during the period ended December 31, 2012. The Company recorded an impairment charge of $2,969 for the year ended March 31, 2012.

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Intangible Assets
9 Months Ended
Dec. 31, 2012
Intangible Assets
  10. Intangible Assets

The components of intangible assets as at December 31, 2012 and March 31, 2012 were as follows:

 

     Unaudited  
     As of December 31, 2012  
     Cost      Accumulated
Amortization
    Net  

Software

   $ 2,429       $ (1,147   $ 1,282   

Trade name / Trademark

     297         (8   $ 289   

Customer list

     4,675         (1,321   $ 3,354   

License agreements

     498         (447   $ 51   
  

 

 

    

 

 

   

 

 

 
   $ 7,899       $ (2,923   $ 4,976   
  

 

 

    

 

 

   

 

 

 

We complete our annual impairment tests in the fourth quarter of each year unless events or circumstances indicate that an asset may be impaired. There were no indications of impairment present during the period ended December 31, 2012. However, the Company recorded an increase in intangible assets for the acquisition of the Logia companies and LogiaDeck (Ignite) of $4,489. The Company recorded an impairment charge of $2,319 for the year ended March 31, 2012.

 

     As of March 31, 2012  
     Cost      Accumulated
Amortization
    Net  

Software

   $ 1,611       $ (948   $ 663   

Trade name / Trademark

     154         —       $ 154   

Customer list

     1,220         (1,220   $ (0

License agreements

     443         (443   $ (0
  

 

 

    

 

 

   

 

 

 
   $ 3,428       $ (2,611   $ 817   
  

 

 

    

 

 

   

 

 

 

The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenues. During the nine month period ended December 31, 2012 and 2011, the Company recorded amortization expense in the amount of $311 and $173, respectively, in cost of revenues.

 

Based on the amortizable intangible assets as of December 31, 2012, we estimate future amortization expense to be as follows:

 

Year Ending December 31,

   Amortization
Expense
 
     (in thousands)  

2013

   $ 701   

2014

     701   

2015

     493   

2016

     466   

2017

     442   

Future

     2,021   
  

 

 

 
   $ 4,824   
  

 

 

 

The initial accounting of the Intangibles of Logia is incomplete and subject to changes, which may result in significant changes to provisional amounts. The Company has recorded provisional amounts based upon management’s best estimate of the value as a result of preliminary analysis.

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Debt
9 Months Ended
Dec. 31, 2012
Debt
  11. Debt

 

                         
     December 31,
2012
     March 31,
2012
 

Short Term Debt

     

Equipment Leases

     20         2   

Senior secured convertible note, including PIK interest, net of discount of $393 and $0, respectively

   $ 2,509       $ —    

Senior secured note, short term accrued interest

     297         73   
  

 

 

    

 

 

 
   $ 2,826       $ 75   
  

 

 

    

 

 

 

 

                         
     December 31,
2012
     March 31,
2012
 

Long Term Debt

     

Senior secured convertible note, including PIK interest, net of discount, of $0 and $1,020, respectively

     —          1,881   

Convertible note, including accrued interest, net of discount, of $684 and $1,127, respectively

     529         60   

Secured note, including PIK interest and accrued interest

     1,221        1,136   
  

 

 

    

 

 

 
   $ 1,750       $ 3,077   
  

 

 

    

 

 

 

 

                             
     December 31,
2012
     March 31,
2012
 

Contingent Liabilities

     

Contingent liability, net of discount of $198 and $0, respectively

   $ 802       $ —    

Convertible Debt

ValueAct Note

In connection with the disposal of AMV on June 21, 2010, all amounts due and payable under the AMV Note were released, and the ValueAct Note was amended and restated in its entirety and reduced to $3,500 of principal (the “Amended ValueAct Note”).

 

On December 16, 2011, the ValueAct Note was purchased in its entirety by Taja LLC (“Taja”) and was amended to remove certain negative covenants from the Note (the “Amended Taja Note”). The Purchase of the ValueAct Note was independent of the Company, and the Company did not receive or pay out any cash related to this transaction.

On December 29, 2011, the Company and Taja entered into a binding term sheet for convertible note financing (“Taja Convertible Note”) and effectively a third amendment to the Second Amended Note (“Third Amended Note”). The Taja Convertible Note became effective on February 27, 2012. The Third Amended Note (1) changed the maturity date of the note from June 21, 2013 to June 21, 2015, (2) extended the payment in kind (“PIK”) election to the note through the revised term, and (3) stripped out $3,000 of principal to create the Taja Convertible Note, leaving a principal balance of $500 plus accrued interest of $562 for a total of $1,062. As consideration for amending the note, Taja also received a warrant (“Incentive Warrant”) to purchase 2,000 shares of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. Taja also received 25% warrant coverage (“Coverage Warrant”) determined by dividing the principal amount of the Taja Convertible Note by the conversion price multiplied by 25%. The Incentive Warrant and the Coverage Warrant each have a five year term and vest one year from issue date. The Coverage Warrant was initially recorded as a derivative liability upon issuance. As discussed in Note 13, the Company received a waiver from the Senior Secured Convertible note holders on March 26, 2012 which allowed the Company to reclassify the Convertible Note Warrant from a derivative liability to additional paid-in capital. The Company assessed the debt modification for the Third Amended Note and determined that it met the requirements for extinguishment accounting per FASB ASC 470 and accordingly, recorded a loss on extinguishment of debt of $1,459 for the year ended March 31, 2012.

On March 1, 2012, the Company and Taja entered into a second binding term sheet (“Amended Taja Convertible Note”) to amend certain provisions of the December 29, 2011 binding term sheet, (1) the maturity date was revised to March 1, 2014, (2) the conversion price was amended to $0.70 share, (3) conversion of the note must not cause the holder to exceed 4.9% ownership, except that on the maturity date the entire remaining amount of principle and interest shall automatically convert into shares of common stock of the Company, (4) the Amended Taja Convertible Note becomes accelerated and immediately due and payable upon the consummation by the Company of one or more equity sales from and after March 1, 2012 resulting in aggregate net proceeds of at least $10,000, (5) the conversion date was to occur the earlier of (x) the date that the long-form documents are executed and delivered to all parties, and (y) March 19, 2012, (6) the 2,000 Incentive Warrants issued as consideration for the Third Amended Note were amended to vest and be exercisable one year from March 1, 2012, (7) the exercise date of the Coverage Warrants was amended to one year following the conversion date, and (8) the term sheet was binding on the parties and their respective successors and assigns regardless of whether the parties execute long form agreements, as opposed to the previous term sheet that contemplated going to long form agreements.

The Company determined that the Amended Taja Convertible Note has an embedded conversion feature that is required to be bifurcated and measured at fair value at each reporting. At the date of issuance, the fair value of the embedded conversion feature was $2,250 using the Black-Scholes option pricing model with the following assumptions:

 

   

Expected life of 1 years

 

   

Risk free interest rate of .17%

 

   

Dividend yield of 0%

 

   

Volatility of 175%.

The Company determined the fair value of the Coverage Warrant and the Incentive Warrant to be $750 and $1,459, respectively, using the Black-Scholes option pricing model with the following assumptions:

 

   

Expected life of 5 years

 

   

Risk free interest rate of .84%

 

   

Dividend yield of 0%

 

   

Volatility of 175%.

The combined total discount pertaining to the conversion factor of the Taja Convertible Note and the Coverage Warrant was originally limited to the face value of the Taja Convertible Note of $3,000 and is being amortized over the term, with the $837 fair value of the embedded conversion feature that exceeded the face value being charged to operations as interest expense during the year ended March 31, 2012.

On March 19, 2012, the Company issued 2,600 shares of its common stock to Taja for the conversion of $1,820 of the Amended Taja Convertible Note. The Company expensed to interest expense the debt discount on a pro rata basis of the amount converted to the original debt amount to reflect the conversion of the $1,820. Through the nine month period ended December 31, 2012, the Company recorded interest expense of $443 related to the amortization of the debt discount. The remaining discount of $684 will be amortized over the period ending March 1, 2014. The Company assessed the conversion of $1,820 and determined that it met the requirements for extinguishment accounting per FASB ASC 470 and accordingly, recorded a gain on extinguishment of debt of $1,346 for the year ended March 31, 2012.

 

As of December 31, 2012, the outstanding principal and accrued interest of $1,213 is convertible into approximately 1,733,376 shares of common stock at a conversion price of $0.70. At December 31, 2012, the if-converted value exceeds the principal and accrued interest by approximately $86.

Senior Secured Convertible Notes

On June 21, 2010, for purposes of capitalizing the Company, the Company sold and issued $2,500 of Senior Secured Convertible Notes due June 21, 2013 (the “New Senior Secured Notes”) to certain of the Company’s significant stockholders. The New Senior Secured Notes have a three year term and bear interest at a rate of 10% per annum payable in arrears semi-annually. The entire principal balance is due in one lump sum payment on June 21, 2013. Notwithstanding the foregoing, at any time on or prior to the 18th month following the original issue date of the New Senior Secured Notes, the Company may, at its option, in lieu of making any cash payment of interest, elect that the amount of any interest due and payable on any interest payment date on or prior to the 18th month following the original issue date of the New Senior Secured Notes be added to the principal due under the New Senior Secured Notes. The accrued and unpaid principal and interest due on the New Senior Secured Notes are convertible at any time at the election of the holder into shares of common stock of the Company at a conversion price of $0.15 per share, subject to adjustment. The New Senior Secured Notes are secured by a first lien on substantially all of the assets of the Company and its subsidiaries pursuant to the terms of that certain Guarantee and Security Agreement, dated as of June 21, 2010, among Twistbox, the Company, each of the subsidiaries thereof party thereto, the investors party thereto and Trinad Management. The Amended ValueAct Note is subordinated to the New Senior Secured Notes pursuant to the terms of that certain Subordination Agreement, dated as of June 21, 2010, by and between Trinad Capital Master Fund, and ValueAct, and each of the Company and Twistbox.

Each purchaser of a New Senior Secured Note also received a warrant (“Warrant”) to purchase shares of common stock of the Company at an exercise price of $0.25 per share, subject to adjustment. For each $1 of New Senior Secured Notes purchased, the purchaser received a Warrant to purchase 3.33 shares of common stock of the Company. Each Warrant has a five year term.

The Warrants granted to the New Senior Secured Note holders on June 21, 2010 and conversion feature in the New Senior Secured Notes are not considered derivative instruments since the Warrants and the New Senior Secured Notes have a set conversion price and all of the requirements for equity classification were met. The Company determined the fair value of the detachable warrants issued in connection with the New Senior Secured Notes to be $1,678, using the Black-Scholes option pricing model and the following assumptions: expected life of 5 years, a risk free interest rate of 2.05%, a dividend yield of 0% and volatility of 54.62%. In addition, the Company determined the value of the beneficial conversion feature to be $5,833. The combined total discount for the New Senior Secured Notes is limited to the face value of the New Senior Secured Notes of $2,500 and is being amortized over the term of the New Senior Secured Notes. For the nine months ended December 31, 2012, the Company amortized $627 of the aforesaid discounts as interest and financing costs in the accompanying consolidated statements of operations. The remaining discount of $393 will be amortized over the period ending June 21, 2013.

As per the Senior Secured Convertible Note, interest accrued through and including December 31, 2011 may be added to the principal.

As of December 31, 2012, the outstanding principal and accrued interest of $2,902 is convertible into approximately 19,344,792 shares of common stock at a conversion price of $0.15. At December 31, 2012, the if-converted value exceeds the principal and accrued interest by approximately $11,607. Interest accrued through December 31, 2012 that is not convertible, and may not be added to the principal is $297. “On December 1, 2012 the Senior Secured Convertible Note debt holders extended the due date of the interest payment until December 27, 2012.” On February 8, 2013 the Senior Secured Convertible Note debt holders extended the due date of the payment of such interest until February 15, 2013.

Contingent Liabilities

In addition to the Closing Share Purchase Agreement (the “Purchase Agreement”) to acquire subsidiaries and certain assets of Logia Group, Ltd. (“Sellers”), the Sellers are entitled to receive certain contingent purchase consideration upon achieving certain milestones. Should all milestones be achieved, the total consideration would be $1,000 payable in cash and shares of stock of the Company. The Company has recorded the fair value of the contingent liability in Long Term Debt, net of a discount of $198.

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Related Party Transactions
9 Months Ended
Dec. 31, 2012
Related Party Transactions
  12. Related Party Transactions

The Company engages in various business relationships with shareholders and officers and their related entities. The significant relationships are disclosed below.

On September 14, 2006, the Company entered into a five year management agreement (“Agreement”) with Trinad Management, the manager of Trinad Capital Master Fund, which is one of our principal stockholders. In addition, Robert Ellin, our director, is the managing director of and portfolio manager for Trinad Management. Pursuant to the terms of the Agreement, Trinad Management provided certain management services, including, without limitation, relating to the sourcing, structuring and negotiation of a potential business combination transaction involving the Company in exchange for a fee of $90 per quarter, plus reimbursements of all related expenses reasonably incurred. The Agreement expired on September 14, 2011, but was extended to December 31, 2011. During the nine month periods ended December 31, 2012 and December 31, 2011, the Company incurred management fees under the agreement of $0 and $180, respectively. At December 31, 2012 and March 31, 2012, the accrued payable to Trinad Management was $0 and $135, respectively.

 

On December 28, 2011, we entered into an executive chairman agreement with Robert Ellin that provides for a one-year term and an annual fee of $450, half of which was deferred until certain debt and/or equity financings were consummated. Such financings were consummated, and Mr. Ellin has received his full fee since April 1, 2012 and received a lump sum payment for the portion of his fee that was deferred from December 28, 2011 to March 31, 2012 on April 6, 2012. Mr. Ellin is entitled to be paid an annual incentive bonus in cash in an amount of up to one hundred percent (100%) of the annual fee based upon satisfaction of performance-related milestones to be agreed upon between Mr. Ellin and the other members of our board of directors.

Mr. Ellin is also reimbursed for the annual fee of a personal assistant of up to $80 during the term of this executive chairman agreement.

Mr. Ellin also received three grants totaling 8,000,000 shares of our restricted common stock that vest as follows:

 

   

The first grant of 3,400,000 was granted under the executive chairman agreement and vests as follows: (i) one third vested upon the completion our most recent equity financing; (ii) one third shall vest if on any date during the term or within 12 months following the term, our total enterprise value equals or exceeds $100,000; and (iii) one third shall vest immediately if on any date during the term or within 12 months following the term our total enterprise value equals or exceeds $200,000; provided, however, that all unvested shares of restricted common stock shall vest immediately change of control. These shares may not be transferred for a period of one year from the vesting date.

 

   

The second grant of 3,600,000 shares was granted on December 28, 2011 and vested fully on the date of the grant. These shares may not be transferred for a period of two years from the date of grant.

 

   

The third grant of 1,000,000 shares was granted on December 28, 2011 and vest one year from the date of grant. These shares may not be transferred for a period of one year from the vesting date.

Mr. Ellin is also entitled to receive additional performance bonuses, in cash or shares of common stock at Mr. Ellin’s election, upon our achievement of certain higher total enterprise values.

During the nine month period ended December 31, 2012, we did not grant Mr. Ellin any additional stock options or warrants.

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Capital Stock Transactions
9 Months Ended
Dec. 31, 2012
Capital Stock Transactions
  13. Capital Stock Transactions

Preferred Stock

There are 100 shares of Series A Convertible Preferred Stock (“Series A”) authorized, issued and outstanding. The Series A has a par value of $0.0001 per share. The Series A holders are entitled to: (1) vote on an equal per share basis as common stock, (2) dividends paid to the common stock holders on an as if-converted basis and (3) a liquidation preference equal to the greater of $10 per share of Series A (subject to adjustment) or such amount that would have been paid to the common stock holders on an as if-converted basis.

 

Common Stock

 

In December 2012, the Company sold 1,428,571 shares of common stock of the Company to an investor for $0.70 per share. In connection with this sale of common stock, the Company issued warrants to purchase 357,142 shares of common stock of the Company at an exercise price of $0.70 per share with a term of 5 years. The fair value of the warrants on the date of issuance were determined to be $251.

In December 2012, the Company issued 150,000 shares of common stock of the Company to a vendor. The shares were issued as settlement for services. The overall value was determined to be $113, of which $113 was recorded through the period ended December 31, 2012.

In December 2012, the Company issued 464,286 shares of common stock of the Company to a vendor. The shares were issued as settlement for services. The overall value was determined to be $348, of which $348 was recorded through the period ended December 31, 2012. In connection with this issuance of common stock, the Company issued warrants to purchase 116,071 shares of common stock of the Company at an exercise price of $0.70 per share with a term of 5 years. The fair value of the warrants on the date of issuance were determined to be $82.

In December 2012, the Company issued 666,668 shares of common stock of the Company as a non-refundable deposit for a pending acquisition. The shares were valued at the closing market price on that date of $0.80 per share. The overall value was determined to be $533 and was recorded to deposits as of December 31, 2012.

Derivative liabilities

As of March 31, 2012, the Company determined that certain warrants were considered derivatives because they did not meet the scope exception in ASC 815-10-15-74. In May 2012, the warrants were exercised. Prior to exercise the Company recorded a loss on the fair value of the warrant of $21. The fair market value of the shares at the time of exercise was $473. The holder forfeited 134,990 shares as a part of a cashless exercise, and the Company issued 365,010 shares of common stock of the Company to the holder. The fair value of these warrants was $0 and $452 at December 31, 2012 and March 31, 2012, respectively.

On March 26, 2012, the Senior Secured Convertible Note holders issued a waiver to the Company stating that they would not convert their notes until the Company has notified them in writing that the Company has increased its authorized capital sufficiently so that the conversion, exchange or exercise of all convertible securities can be effectuated without the Company exceeding its authorized capital.

On June 6, 2012, the Taja Convertible Note holder issued a waiver to the Company stating that they would not convert their notes until the Company has notified them in writing that the Company has increased its authorized capital sufficiently so that the conversion, exchange or exercise of all convertible securities can be effectuated without the Company exceeding its authorized capital.

On June 7, 2012, a holder of a warrant to purchase 2.5 million shares of common stock of the Company issued a waiver to the Company stating that they would not exercise their warrants until the Company has notified them in writing that the Company has increased its authorized capital sufficiently so that the exercise of all convertible securities can be effectuated without the Company exceeding its authorized capital.

On August 15, 2012, the Company amended its charter with the State of Delaware to increase its total number of shares of common stock of the Company to 200,000,000 and preferred shares of the Company to 2,000,000. With this amendment, the waivers obtained are no longer in force, since the Company has increased its authorized shares sufficiently so that the conversion, exchange or exercise of all convertible securities can be effectuated without the Company exceeding its authorized capital.

 

Restricted Stock Agreements

During the period December 1, 2011 through December 31, 2012, the Company entered into restrictive stock agreements (“RSAs”) with certain employees and consultants. The RSAs have performance conditions, market conditions, time conditions or a combination. Once the stock vests, the individual is restricted from selling the shares of stock for a certain defined period from three months to two years depending on the RSA. Certain RSA recipients are granted voting rights while other RSA recipients are not granted voting rights.

Performance and Market Condition RSAs

On December 28, 2011, the Company issued 15,850 restricted shares with vesting criteria based on both performance and market conditions. The vesting is as follows: (i) one third (1/3) shall vest immediately upon the completion of one or more debt or equity financings during the period ending two (2) years from the date hereof (the “Measurement Period”) in favor of the Company of gross proceeds of at least $5 million; (ii) one third (1/3) shall vest immediately if on any date during the Measurement Period the Company’s total enterprise value (computed by multiplying the number of outstanding shares of Common Stock on a fully diluted (taking into account only those stock options that are in-the-money on such date), as-converted basis by the average daily trading price for Common Stock for the thirty (30) trading day period immediately preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any date during the Measurement Period the Company’s total enterprise value (calculated as set forth in clause (ii) above) equals or exceeds $200 million; provided, however, that all unvested shares of restricted common stock shall vest immediately upon the sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a series of related transactions.

Each share is restricted from the individual selling the stock for a period of one year from the date of vesting.

On December 28, 2011, one third of the restricted shares vested due to the $7,000 financing agreement entered into by the Company. The Company valued the 5,283 vested RSAs at $3,223 using the Company’s ending share price at December 28, 2011 of $0.61.

For accounting purposes, the one third unvested shares related to the $100,000 enterprise value and the one third unvested shares related to the $200,000 enterprise value are considered to have a market condition. The effect of the market condition is reflected in the grant date fair value of the award and, thus compensation expense is recognized on this type of award provided that the requisite service is rendered (regardless of whether the market condition is achieved). The Company estimated the grant date fair value to be $0.279 per share and $0.206 per share for the $100,000 enterprise value and $200,000 enterprise value, respectively, using a Monte Carlo simulation that uses the following assumptions:

 

   

Volatility - 100%

 

   

Restricted stock discount - 36.1%

 

   

Risk free interest rate of 0.1%

 

   

Dividend yield of 0%

The Company has expensed $4,515 through the period ended December 31, 2012 related to the 15,850 RSAs issued on December 28, 2011 and will expense the remaining $1,270 over the periods ended December 28, 2013.

Performance Condition RSAs

On January 3, 2012, the Company issued 2,375 restricted shares with vesting criteria based on both time and performance conditions. At January 3, 2012, 1,025 restricted shares vested immediately and the remaining 1,350 unvested shares had to meet certain performance criteria. In September 2012, 425 shares vested in connection with a significant acquisition by the Company. In December 2012, 250 shares vested in connection with the termination of employment of an employee. The remaining 675 which has either not been defined by the Board of Directors or the Company has determined that the probability of meeting the performance criteria is 0%.

Each share is restricted from the individual selling the stock for a period from one year up to two years from the date of vesting.

All restricted shares, vested and unvested, have been included in the outstanding shares as of December 31, 2012.

For accounting purposes, the Company determined the grant date fair value to be $0.65 per share which is the closing price of the Company’s stock price on January 3, 2012. The Company expensed $1,229, related to the 2,375 RSAs issued on January 3, 2012. No further expense will be taken until the Board of Directors details the performance criteria, or already defined performance criteria has been met.

 

Time Condition RSAs

On various dates during the periods ended December 31, 2012 and March 31, 2012, the Company issued 2,083 and 7,100 restricted shares with vesting criteria based on time conditions, respectively. As of December 31, 2012, 7,079 restricted shares were vested with each share being restricted from the individual selling the stock for a period from three months up to two years from the date of vesting.

The following table summarizes the RSA activity:

 

           Weighted
Average
 
(in thousands, except grant date fair value)    Number of
Shares
    Grant Date
Fair Value
 

Unvested at March 31, 2011

     —       $     
  

 

 

   

 

 

 

Unvested at March 31, 2012

     15,367      $ 0.360   
  

 

 

   

 

 

 

Granted

     583        1.000   

Canceled

     —         —    

Vested

     (38     0.900   
  

 

 

   

 

 

 

Unvested at June 30, 2012

     15,912      $ 0.387   
  

 

 

   

 

 

 

Granted

     1,500        0.800   

Canceled

     —         —    

Vested

     (696     0.782   
  

 

 

   

 

 

 

Unvested at September 30, 2012

     16,716      $ 0.411   
  

 

 

   

 

 

 

Granted

     0        0.800   

Canceled

     —         —    

Vested

     (3,413     0.641   
  

 

 

   

 

 

 

Unvested at December 31, 2012

     13,303      $ 0.352   
  

 

 

   

 

 

 

During a review of equity compensation arrangements, the Company determined that certain valuation reports used in connection with approximately 22 million shares of restricted stock issued between December 2011 and May 2012 utilized certain assumptions that may or may not be consistent with applicable tax requirements for such valuations. The Company is evaluating the impact, if any, related to this matter on its financial statements. The Company is considering procuring new valuation reports that it believes will be consistent with applicable tax requirements. To the extent such new valuation reports implied a materially different value than reports originally relied upon by the Company and the recipient, based on certain assumptions as to valuation methods, it is likely that the Company and the recipient would agree to rescind such grants based on mutual mistake of material fact related to such tax valuation methods. Although the Company is still reviewing the matter and is unable at this time to definitively state what, if any, impact there could be, a rescission of the share grants at issue could impact the Company. However, such impacts may be offset by separate new grants of equivalent equity that may, or may not, accompany a rescission.

As a result, the Company believes that the amount of any impact related to this matter cannot be reasonably estimated at this time. Because the Company believes that a potential loss is not probable or estimable, it has not recorded any liabilities nor contingencies related to this matter. In the event that the Company’s assumptions used to evaluate this matter as neither probable, nor estimable change in future periods, it may be required to record a liability for a material outcome.

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Employee Benefit Plans
9 Months Ended
Dec. 31, 2012
Employee Benefit Plans
  14. Employee Benefit Plans

The Company has an employee 401(k) savings plan covering full-time eligible employees. These employees may contribute eligible compensation up to the annual IRS limit. The Company does not make matching contributions.

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Income Taxes
9 Months Ended
Dec. 31, 2012
Income Taxes
  15. Income Taxes

The income tax provision for the quarter represents foreign withholding taxes related to continuing operations paid in jurisdictions outside of the US.

Management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements as of December 31, 2012.

 

ASC 740 requires the consideration of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. The Company adopted the provisions of ASC 740 on January 1, 2008 and there was no difference between the amounts of unrecognized tax benefits recognized in the balance sheet prior to the adoption of ASC 740 and those after the adoption of ASC 740. There were no unrecognized tax benefits not subject to valuation allowance as of December 31, 2012 and March 31, 2012. The Company recognized no interest and penalties on income taxes in its statement of operations for the periods ended December 31, 2012 and 2011.

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Segment and Geographic information
9 Months Ended
Dec. 31, 2012
Segment and Geographic information
  16. Segment and Geographic information

The Company operates in one reportable segment in which it is a developer and publisher of branded entertainment content for mobile phones. Revenues are attributed to geographic areas based on the country in which the carrier’s principal operations are located. The Company attributes its long-lived assets, which primarily consist of property and equipment, to a country primarily based on the physical location of the assets. Goodwill and intangibles are not included in this allocation. The following information sets forth geographic information on our sales for the periods ended December 31, 2012 and 2011, and net property and equipment for the periods ended December 31, 2012 and March 31, 2012:

 

     North
America
     Europe      Other
Regions
     Consolidated  

Nine Months ended December 31, 2012

           

Net sales to unaffiliated customers

     41         2,630         1,581       $ 4,252   

Nine Months ended December 31, 2011

           

Net sales to unaffiliated customers

     138         4,087         1,562       $ 5,788   

Property and equipment, net at December 31, 2012

     134         17         50       $ 201   

Property and equipment, net at March 31, 2012

     177         52         1       $ 230   
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Commitments and Contingencies
9 Months Ended
Dec. 31, 2012
Commitments and Contingencies
  17. Commitments and Contingencies

Operating Lease Obligations

The Company leases office facilities under non-cancelable operating leases expiring in various years through 2013. The future minimum payments under initial terms of leases at December 31, 2012 is $64.

This amount does not reflect future fluctuations for real estate taxes and building operating expenses. Rental expense amounted to $155 and $133, respectively, for the nine months ended December 31, 2012 and 2011.

Other Obligations

As of December 31, 2012, the Company was obligated for payments under various distribution agreements, equipment lease agreements, employment contracts and consulting agreements with initial terms of one year or greater at December 31, 2012. Future payments for these obligations as of December 31, 2012 are as follows:

 

Year Ending December 31,       

2013

   $ 350   

2014

     350   

2015

     204   
  

 

 

 

Total payments

   $ 904   
  

 

 

 

Litigation

On May 4, 2012, the Company received notice of a judgment in the amount of £23 pertaining to a dispute with a previous employee. The Company has recorded the full amount in Accrued Compensation on the consolidated balance sheet.

Mandalay Digital’s wholly owned subsidiary, Twistbox Entertainment, Inc. (“Twistbox”) and Sirocco Mobile Ltd (“Sirocco”) are parties to a wireless game development agreement dated February 27, 2009, whereby Sirocco were engaged to complete certain services and deliver products to Twistbox for mobile distribution. On or about September 6, 2012, Sirocco filed a complaint in California Superior Court, County of Los Angeles seeking relief for breach of written contract. On or about November 6, 2012, Sirocco proposed a reduction of its claim, which expired on November 12, 2012. Principals of both parties continue to communicate to find a mutually acceptable resolution.

 

Twistbox’s wholly owned subsidiary, Waat Media Corp (“Waat”) and GS Wise Limited (“GS Wise”) are parties to an advertising and content licensing agreement dated July 1, 2011, whereby Waat purchased advertising impressions and licensed content for mobile distribution. On or about September 10, 2012, GS Wise Limited and Bridco Trading Limited (“Bridco”) filed a complaint in California Superior Court, County of Los Angeles seeking relief for breach of written contract. However on January 23, 2013, the parties were able to agree to a settlement in the amount of 240,569 shares of the Company’s common stock.

The Company is subject to various claims and legal proceedings arising in the normal course of business. Management believes that the ultimate liability, if any in the aggregate of other claims will not be material to the financial position or results of operations of the Company for any future period; and no liability has been accrued.

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Subsequent Events
9 Months Ended
Dec. 31, 2012
Subsequent Events
18. Subsequent Events

On February 8, interest payable to the Senior Secured Note on December 27, 2012 was extended through February 15, 2012.

The Employment Agreement, dated December 28, 2011, with the Company’s Chief Executive Officer Peter Adderton, and the Executive Chairman Agreement, dated December 28, 2011, with Mr. Robert Ellin, each provided for a one year term and therefore expired naturally on December 28, 2012 in accordance with their respective terms. Mr. Adderton and Mr. Ellin continue to serve the Company in the same offices and capacities, and for the same cash compensation and benefits as they were receiving under their respective agreements.

On January 28, 2013 and February 4, 2013, the Company entered into two Equity Financing Binding Term Sheets, dated as of January 20, 2013 and January 25, 2013, respectively (the “Equity Agreements”), with accredited investors, pursuant to which the Company agreed to issue an aggregate of 785,714 shares of its common stock and warrants to purchase 196,429 shares of its common stock (subject to adjustment), for an aggregate purchase price of $550,000. The warrants have an exercise price of $0.70 per share (subject to adjustment) and a five year term. The closing of the transactions contemplated by the Equity Agreement occurred on January 28, 2013 and February 4, 2013, respectively.

Management evaluated subsequent events after the balance sheet date of December 31, 2012 through the date these unaudited financial statements were issued and concluded that no other material subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.

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Summary of Significant Accounting Policies (Policies)
9 Months Ended
Dec. 31, 2012
Basis of Presentation

Basis of Presentation

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for annual financial statements. The financial statements, in the opinion of management, include all adjustments necessary for a fair statement of the results of operations, financial position and cash flows for each period presented.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

Revenue Recognition

The Company’s revenues are derived primarily by licensing material and software in the form of products (Image Galleries, Wallpapers, video, WAP Site access, Mobile TV), developing and maintaining carrier platforms, mobile advertising, mobile billing and mobile games. License arrangements with the end user can be on a perpetual or subscription basis.

A perpetual license gives an end user the right to use the product, image or game on the registered handset on a perpetual basis. A subscription license gives an end user the right to use the product, image or game on the registered handset for a limited period of time, ranging from a few days to as long as one month.

The Company distributes products through mobile telecommunications service providers (“carriers”). The carrier markets the product, images or games to end users, but the Company may also participate in the marketing efforts with the carrier and is at times required to do so. License fees for perpetual and subscription licenses are usually billed upon download of the product, image or game by the end user. In the case of subscription licenses, many subscriber agreements provide for automatic renewal until the subscriber opts-out, while others provide for opt-in renewal. In either case, subsequent billings for subscription licenses are generally billed monthly. The Company applies the provisions of FASB ASC 985-605, Software Revenue Recognition, to all transactions.

Revenues are recognized from the Company’s products, images and games when persuasive evidence of an arrangement exists, the product, image or game has been delivered, the fee is fixed or determinable, and the collection of the resulting receivable is probable. For both perpetual and subscription licenses, management considers a license agreement to be evidence of an arrangement with a carrier or aggregator and a “clickwrap” agreement to be evidence of an arrangement with an end user. For these licenses, the Company defines delivery as the download of the product, image or game by the end user.

The Company estimates revenues from carriers in the current period when reasonable estimates of these amounts can be made. Most carriers only provide detailed sales transaction data on a one to two month lag. Estimated revenue is treated as unbilled receivables until the detailed reporting is received and the revenues can be billed. Some carriers provide reliable interim preliminary reporting and others report sales data within a reasonable time frame following the end of each month, both of which allow the Company to make reasonable estimates of revenues and therefore to recognize revenues during the reporting period when the end user licenses the product, image or game. Determination of the appropriate amount of revenue recognized involves judgments and estimates that the Company believes are reasonable, but it is possible that actual results may differ from the Company’s estimates. The Company’s estimates for revenues include consideration of factors such as preliminary sales data, carrier-specific historical sales trends, volume of activity on company monitored sites, seasonality, time elapsed from launch of services or product lines, the age of games and the expected impact of newly launched games, successful introduction of newer and more advanced handsets, promotions during the period and economic trends. When the Company receives the final carrier reports, to the extent not received within a reasonable time frame following the end of each month, the Company records any differences between estimated revenues and actual revenues in the reporting period when the Company determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If the Company is unable to reasonably estimate the amount of revenues to be recognized in the current period, the Company recognizes revenues upon the receipt of a carrier revenue report and when the Company’s portion of licensed revenues are fixed or determinable and collection is probable. To monitor the reliability of the Company’s estimates, management, where possible, reviews the revenues by country, by carrier and by product line on a regular basis to identify unusual trends such as differential adoption rates by carriers or the introduction of new handsets. If the Company deems a carrier not to be creditworthy, the Company defers all revenues from the arrangement until the Company receives payment and all other revenue recognition criteria have been met.

In accordance with FASB ASC 605-45, Reporting Revenue Gross as a Principal Versus Net as an Agent, the Company recognizes as revenues the amount the carrier reports as payable upon the sale of the Company’s products, images or games. The Company has evaluated its carrier agreements and has determined that it is not the principal when selling its products, images or games through carriers. Key indicators that it evaluated to reach this determination include:

 

   

wireless subscribers directly contract with the carriers, which have most of the service interaction and are generally viewed as the primary obligor by the subscribers;

 

   

carriers generally have significant control over the types of content that they offer to their subscribers;

 

   

carriers are directly responsible for billing and collecting fees from their subscribers, including the resolution of billing disputes;

 

   

carriers generally pay the Company a fixed percentage of their revenues or a fixed fee for each game;

 

   

carriers generally must approve the price of the Company’s content in advance of their sale to subscribers, and the Company’s more significant carriers generally have the ability to set the ultimate price charged to their subscribers;

 

   

the Company has limited risks, including no inventory risk and limited credit risk.

For direct to consumer business, revenue is earned by delivering a product or service directly to the end user of that product or service. In those cases, the Company records as revenue the amount billed to that end user and recognizes the revenue when persuasive evidence of an arrangement exists, the product, image or game has been delivered, the fee is fixed or determinable, and the collection of the resulting receivable is probable. Substantially all of our discontinued operations represents direct to consumer business.

Net Loss per Common Share

Net Loss per Common Share

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period plus dilutive common stock equivalents, using the treasury stock method. Potentially dilutive shares from stock options and warrants and the conversion of the Series A preferred stock that were excluded from the shares used to calculate diluted earnings per share, as their inclusion would be anti-dilutive, were as follows:

 

 

     Three Months
Ended
December 31,
2012
     Three Months
Ended
December 31,
2011
     Nine Months
Ended
December 31,
2012
     Nine Months
Ended
December 31,
2011
 

Potentially dilutive shares

     25,458         41,390         26,591         40,753   
Comprehensive Loss

Comprehensive Loss

Comprehensive loss consists of two components, net loss and other comprehensive income. Other comprehensive income refers to gains and losses that under generally accepted accounting principles are recorded as an element of stockholders’ equity, but are excluded from net income. The Company’s other comprehensive income currently includes only foreign currency translation adjustments.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

During the period prior to the acquisition date, one newly acquired company, Logia Content, had factored certain receivables. Those receivables are reflected as unpaid accounts receivable, and the amounts owing to the factor are reflected in other current liabilities.

Deposits

Deposits

As of December 31, 2012, the Company has deposits of $607. A deposit in the amount of $533 was made pursuant to an asset purchase agreement entered into by the Company on December 6, 2012, whereby the Company delivered stock as a nonrefundable deposit. If the asset purchase is completed, then the deposits will be credited against the purchase price; however, if the asset purchase is not completed, then the deposit will be expensed.

Content Provider Licenses

Content Provider Licenses

Content Provider License Fees

The Company’s royalty expenses consist of fees that it pays to branded content owners for the use of their intellectual property in the development of the Company’s games and other content, and other expenses directly incurred in earning revenue. Royalty-based obligations are either, accrued as incurred and subsequently paid, or in the case of content acquisitions, paid in advance and capitalized on our balance sheet as prepaid license fees. These royalty-based obligations are expensed to cost of revenues either at the applicable contractual rate related to that revenue or over the estimated life of the content acquired. Minimum guarantee license payments that are not recoupable against future royalties are capitalized and amortized over the lesser of the estimated life of the branded title or the term of the license agreement.

Content Acquired

Amounts paid to third party content providers as part of an agreement to make content available to the Company for a term or in perpetuity, without a revenue share, have been capitalized and are included in the balance sheet as prepaid expenses. These balances will be expensed over the estimated life of the content acquired.

Software Development Costs

Software Development Costs

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized cost or net realizable value of the related product.

The Company has adopted the “tested working model” approach to establishing technological feasibility for its products and games. Under this approach, the Company does not consider a product or game in development to have passed the technological feasibility milestone until the Company has completed a model of the product or game that contains essentially all the functionality and features of the final game and has tested the model to ensure that it works as expected. To date, the Company has not incurred significant costs between the establishment of technological feasibility and the release of a product or game for sale; thus, the Company has expensed all software development costs as incurred. The Company considers the following factors in determining whether costs can be capitalized: the emerging nature of the mobile market; the gradual evolution of the wireless carrier platforms and mobile phones for which it develops products and games; the lack of pre-orders or sales history for its products and games; the uncertainty regarding a product’s or game’s revenue-generating potential; its lack of control over the carrier distribution channel resulting in uncertainty as to when, if ever, a product or game will be available for sale; and its historical practice of canceling products and games at any stage of the development process.

Product Development Costs

Product Development Costs

The Company charges costs related to research, design and development of products to product development expense as incurred. The types of costs included in product development expenses include salaries, contractor fees and allocated facilities costs.

Advertising Expenses

Advertising Expenses

The Company expenses the costs of advertising, including direct response advertising, the first time the advertising takes place. Advertising expense was $143 and $1 in the three months ended periods ended December 31, 2012 and 2011, respectively and $143 and $7 in the nine months ended December 31, 2012 and 2011, respectively.

Restructuring

Restructuring

The Company accounts for costs associated with employee terminations and other exit activities in accordance with FASB ASC 420-10, Accounting for Costs Associated with Exit or Disposal Activities. The Company records employee termination benefits as an operating expense when it communicates the benefit arrangement to the employee and it requires no significant future services, other than a minimum retention period, from the employee to earn the termination benefits. For the nine months ended December 31, 2012 there were no restructuring costs.

Presentation

Presentation

In order to facilitate the comparison of financial information, certain amounts reported in the prior year have been reclassified to conform to the current year presentation.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

As of December 31, 2012 and March 31, 2012, the carrying value of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued license fees, accrued compensation, derivative liabilities and other current liabilities approximates fair value due to the short-term nature of such instruments.

Derivative Liabilities

Derivative Liabilities

The Company applies ASC Topic 815, “Derivatives and Hedging,” which provides a two-step model to determine whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the scope exception in ASC 815-10-15-74. Using the criteria in ASC 815, the Company determines which instruments or embedded features require liability accounting and records the fair values as a derivative liability. The changes in the values of the derivative liabilities are shown in the accompanying consolidated statements of operations as “change in fair value of accrued derivative liabilities gain / (loss).”

Foreign Currency Translation

Foreign Currency Translation

The Company uses the United States dollar for financial reporting purposes. Assets and liabilities of foreign operations are translated using current rates of exchange prevailing at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transaction occurred. Statement of Operations amounts are translated at average rates in effect for the reporting period. The foreign currency translation adjustment gain of $46 in the nine month period ended December 31, 2012 and gain of $93 in the nine month period ended December 31, 2011 have been reported as a component of comprehensive loss in the consolidated statements of stockholders’ equity and comprehensive income.

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments which potentially subject us to concentration of credit risk consist principally of cash and cash equivalents, and accounts receivable. We have placed cash and cash equivalents with a single high credit-quality institution. Most of our sales are made directly to large national Mobile Phone Operators in the countries that we operate. We have a significant level of business and resulting significant accounts receivable balance with one operator and therefore have a high concentration of credit risk with that operator. We perform ongoing credit evaluations of our customers and maintain an allowance for potential credit losses. As of December 31, 2012, two major customer represented approximately 35.2% and 16% of our gross accounts receivable outstanding, and 0% of gross accounts receivable outstanding as of March 31, 2012. These customers accounted for 47.8% and 14.4% of our gross revenues during the three month period ended December 31, 2012; and both of these customers accounted for 0% in the period ended December 31, 2011. One other major customer 11.9% and 43% of revenues for the nine month periods ended December 31, 2012 and December 31, 2011, respectively.

Property and Equipment

Property and Equipment

Property and equipment is stated at cost. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are the lesser of 8 to 10 years or the term of the lease for leasehold improvements and 5 years for other assets.

Goodwill and Indefinite Life Intangible Assets

Goodwill and Indefinite Life Intangible Assets

Goodwill represents the excess of cost over fair value of net assets of businesses acquired. In accordance with FASB ASC 350-20 Goodwill and Other Intangible Assets, the value assigned to goodwill and indefinite lived intangible assets, including trademarks and tradenames, is not amortized to expense, but rather they are evaluated at least on an annual basis to determine if there are potential impairments. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit goodwill is less than the carrying value. If the fair value of an indefinite lived intangible (such as trademarks and trade names) is less than its carrying amount, an impairment loss is recorded. Fair value is determined based on discounted cash flows, market multiples or appraised values, as appropriate. Discounted cash flow analysis requires assumptions about the timing and amount of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these factors can significantly affect the value of the intangible asset. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s judgment. Any changes in key assumptions about the Company’s businesses and their prospects, or changes in market conditions, could result in an impairment charge. Some of the more significant estimates and assumptions inherent in the intangible asset valuation process include: the timing and amount of projected future cash flows; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal or regulatory trends.

During the nine month period ended December 31, 2012, the Company determined that there was no impairment of goodwill. In the year ended March 31, 2012, the Company determined that there was an impairment of goodwill amounting to $2,969.

Impairment of Long-Lived Assets and Finite Life Intangibles

Impairment of Long-Lived Assets and Finite Life Intangibles

Long-lived assets, including, intangible assets subject to amortization primarily consisting of customer lists, license agreements and software that have been acquired, are amortized using the straight-line method over their useful life ranging from five to eight years and are reviewed for impairment in accordance with FASB ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

During the nine month period ended December 31, 2012, the Company determined that there was no impairment of intangible assets. In the year ended March 31, 2012, the Company determined that there was an impairment of intangible assets amounting to $2,319.

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740-10, Accounting for Income Taxes (“ASC 740-10”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740-10, the Company determines deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of assets and liabilities along with net operating losses, if it is more likely than not the tax benefits will be realized using the enacted tax rates in effect for the year in which it expects the differences to reverse. To the extent a deferred tax asset cannot be recognized, a valuation allowance is established if necessary.

ASC 740-10 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the “more-likely-than-not” recognition threshold should be measured as the largest amount of the tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. We recognize interest and penalties related to income tax matters as a component of the provision for income taxes. We do not currently anticipate that the total amount of unrecognized tax benefits will significantly change within the next 12 months.

Stock-based Compensation

Stock-based Compensation

We have applied FASB ASC 718 Share-Based Payment (“ASC 718”) and accordingly, we record stock-based compensation expense for all of our stock-based awards.

Under ASC 718, we estimate the fair value of stock options granted using the Black-Scholes option pricing model. The fair value for awards that are expected to vest is then amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The amount of expense recognized represents the expense associated with the stock options we expect to ultimately vest based upon an estimated rate of forfeitures; this rate of forfeitures is updated as necessary and any adjustments needed to recognize the fair value of options that actually vest or are forfeited are recorded.

The Black-Scholes option pricing model, used to estimate the fair value of an award, requires the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend rates and an option’s expected life. As a result, the financial statements include amounts that are based upon our best estimates and judgments relating to the expenses recognized for stock-based compensation.

The Company grants restricted stock subject to market or performance conditions that vest based on the satisfaction of the conditions of the award. Unvested restricted stock entitles the grantees to dividends, if any, with voting rights determined in each agreement. The fair market values of market condition-based awards are determined using the Monte Carlo simulation method. The Monte Carlo simulation method is subject to variability as several factors utilized must be estimated, including the derived service period, which is estimated based on the Company’s judgment of likely future performance and the Company’s stock price volatility. The fair value of performance-based awards is determined using the market closing price on the grant date. Derived service periods and the periods charged with compensation expense for performance-based awards are estimated based on the Company’s judgment of likely future performance and may be adjusted in future periods depending on actual performance.

Preferred Stock

Preferred Stock

The Company applies the guidance enumerated in FASB ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480-10”) when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value in accordance with ASC 480-10. All other issuances of preferred stock are subject to the classification and measurement principles of ASC 480-10. Accordingly, the Company classifies conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its preferred shares in stockholders’ equity.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent asset and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The most significant estimates relate to revenues for periods not yet reported by Carriers, liabilities recorded for future minimum guarantee payments under content licenses, accounts receivable allowances, and stock-based compensation expense.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued new guidance on the presentation of comprehensive income that will require a company to present components of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. There are no changes to the components that are recognized in net income or other comprehensive income under current GAAP. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011, with early adoption permitted. It is applicable to the Company’s fiscal year beginning April 1, 2012. The Company expects this guidance to have an impact on the disclosures related to comprehensive income.

Recently Issued Accounting Pronouncements

In January 2012, we adopted 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (ASU 2011-05) which requires presentation of the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements and eliminates the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. The standard does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income.

Also, in December of 2011, the FASB issued Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). In February 2013, the FASB issued Accounting Standards Update 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure requirements for items reclassified out of accumulated other comprehensive income. This ASU will be effective for the first interim reporting period in 2013. The Company expects this guidance to have an impact on the disclosures related to comprehensive income.

In July 2012, the Financial Accounting Standards Board (“FASB”) issued amendments to the goodwill and indefinite-lived intangible assets impairment guidance which provides an option for companies to not calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 (early adoption is permitted). The implementation of this amended accounting guidance is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

Recent authoritative guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to have a material effect on the Company’s consolidated financial statements.

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Acquisitions/Purchase Price Accounting (Tables)
9 Months Ended
Dec. 31, 2012
Summary of Preliminary Fair Values of Assets Acquired and Liabilities Assumed

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition.

 

     Unaudited  

Cash

   $ 59   

Accounts receivable

     567   

Prepaid expenses and other assets

     178   

Customer relationships

     3,454   

Developed technology

     818   

Trade names / Trademarks

     143   

Non-compete agreements

     54   

Goodwill

     1,037   

Current liabilities

     (1,314

Long-term debt

     (35
  

 

 

 

Purchase price

   $ 4,961   
  

 

 

 
Amortization Period for Intangible Assets

The amortization period for the intangible assets is as follows:

 

     Remaining
Useful Life

Customer relationships

   10 years

Developed technology

   10 years

Trade names / Trademarks

   5 years

Non-compete agreements

   4 years

Goodwill

   Indefinite
Targets Combined Operating Results

The Targets’ combined operating results from the acquisition date to December 31, 2012 are as follows:

 

     Unaudited  

Revenue

   $ 1,780   

Cost of goods sold

     707   
  

 

 

 

Gross profit

   $ 1,073   

Operating expenses

     675   
  

 

 

 

Income from operations

     398   

Non-operating expenses, net

     178   

Provision for income tax

     33   
  

 

 

 

Net income

   $ 187   
  

 

 

 
Pro Forma Financial Information

The pro forma financial information of the Company’s consolidated operations if the acquisition of the Targets had occurred as of April 1, 2011 is presented below.

 

     Unaudited  
     Nine Months Ended December 31,  
     2012     2011  

Revenues

   $ 7,167      $ 14,652   

Cost of goods sold

     3,742        10,537   
  

 

 

   

 

 

 

Gross profit

     3,425        4,115   

Operating expenses

     11,977        11,846   
  

 

 

   

 

 

 

Loss from operations

     (8,552     (7,731

Non-operating expense

     (1,634     (1,492
  

 

 

   

 

 

 

Loss before provision for income taxes

     (10,186     (9,223

Provision for income taxes

     67        63   
  

 

 

   

 

 

 

Net loss

   $ (10,253   $ (9,286
  

 

 

   

 

 

 

Basic and diluted loss per share

   $ (0.12   $ (0.22
  

 

 

   

 

 

 
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Summary of Significant Accounting Policies (Tables)
9 Months Ended
Dec. 31, 2012
Potentially Dilutive Shares

Potentially dilutive shares from stock options and warrants and the conversion of the Series A preferred stock that were excluded from the shares used to calculate diluted earnings per share, as their inclusion would be anti-dilutive, were as follows:

 

 

     Three Months
Ended
December 31,
2012
     Three Months
Ended
December 31,
2011
     Nine Months
Ended
December 31,
2012
     Nine Months
Ended
December 31,
2011
 

Potentially dilutive shares

     25,458         41,390         26,591         40,753   
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Fair Value Measurements (Tables)
9 Months Ended
Dec. 31, 2012
Warrant
Assets and Liabilities that are Required to be Presented on Balance Sheet at Fair Value

Measured at Fair Value on a Recurring Basis

 

Warrant derivative liabilities                            
(in thousands)    Total      Level 1      Level 2      Level 3  

December 31, 2012

   $      $       $      $   

March 31, 2012

   $ 452       $       $ 452       $   
Contingent Liabilities
Assets and Liabilities that are Required to be Presented on Balance Sheet at Fair Value

 

Contingent liabilities                            
(in thousands)    Total      Level 1      Level 2      Level 3  

December 31, 2012

   $ 802      $       $       $ 802   

March 31, 2012

   $       $       $       $   
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Accounts Receivable (Tables)
9 Months Ended
Dec. 31, 2012
Accounts Receivable
     December 31,
2012
    March 31,
2012
 

Billed

   $ 1,095      $ 709   

Unbilled

     1,092        589   

Less: allowance for doubtful accounts

     (108     (108
  

 

 

   

 

 

 

Net Accounts receivable

   $ 2,079      $ 1,190   
  

 

 

   

 

 

 
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Property and Equipment (Tables)
9 Months Ended
Dec. 31, 2012
Property and Equipment
     December 31,
2012
    March 31,
2012
 

Equipment

   $ 1,333      $ 1,310   

Furniture & fixtures

     506        484   

Leasehold improvements

     183        184   
  

 

 

   

 

 

 
     2,022        1,978   

Accumulated depreciation

     (1,821     (1,748
  

 

 

   

 

 

 

Net Property and Equipment

   $ 201      $ 230   
  

 

 

   

 

 

 
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Description of Stock Plans (Tables)
9 Months Ended
Dec. 31, 2012
Stock Compensation Expense

Total stock compensation expense for the Company’s 2007 Employee, Director and Consultant Stock Plan equity compensation plan and Amended and Restated 2011 Equity Incentive Plan is included in the following statements of operations components:

 

     Nine Months Ended
December 31,
2012
     Nine Months Ended
December 31,
2011
 

Product development

   $ —        $ 69   

Sales and marketing

     —          —    

General and administrative

     630         —    
  

 

 

    

 

 

 
   $ 630       $ 69   
  

 

 

    

 

 

 
Other Incentive Programs
Summary of Options Granted

The following table summarizes options granted that are not under the Company’s 2011 Equity Incentive Plan for the periods or as of the dates indicated:

Options

 

     Number of      Weighted Average  
(in thousands)    Shares      Exercise Price  

Outstanding at March 31, 2012

     —        $ —    
  

 

 

    

 

 

 

Granted

     1,500       $ 0.84   

Canceled

     —        $ —    

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at September 30, 2012

     1,500       $ 0.84   
  

 

 

    

 

 

 

 

(in thousands)    Number of
Shares
     Weighted Average
Exercise Price
 

Granted

     —        $ —     

Canceled

     1,500       $ 0.84   

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at December 31, 2012

     —        $ —    
2007 Employee, Director and Consultant Stock Plan equity compensation plan
Summary of Options Granted

The following table summarizes options granted under the Company’s 2007 Employee, Director and Consultant Stock Plan equity compensation plan for the periods or as of the dates indicated:

Option Plans

 

     Number of      Weighted Average  
(in thousands)    Shares      Exercise Price  

Outstanding at March 31, 2012

     4,798       $ 1.80   
  

 

 

    

 

 

 

Granted

     —        $ —    

Canceled

     —        $ —    

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at December 31, 2012

     4,798       $ 1.80   
  

 

 

    

 

 

 

Exercisable at December 31, 2012

     4,798       $ 1.80   
  

 

 

    

 

 

 
Exercise Price for Options Outstanding and Options Exercisable

The exercise price for options outstanding and options exercisable at December 31, 2012 was as follows:

 

Range of Exercise Price

   Weighted
Average
Remaining
Contractual Life
(Years)
     Number
Outstanding and
Exercisable
December 31, 2012
     Weighted
Average
Exercise
Price
     Aggregate
Intrinsic
Value
 

$0      - $1.00

     3.51         2,698       $ 0.47       $ 807,598   

$2.00 - $3.00

     5.47         1,300       $ 2.75       $ —    

$4.00 - $5.00

     5.12         800       $ 4.75       $ —    
     

 

 

       

 

 

 
     4.31         4,798       $ 1.80       $ 807,598   
     

 

 

       

 

 

 
2011 Equity Incentive Plan
Summary of Options Granted

The following table summarizes options granted under the Company’s 2011 Equity Incentive Plan for the periods or as of the dates indicated:

Options

 

     Number of      Weighted Average  
(in thousands)    Shares      Exercise Price  

Outstanding at March 31, 2012

     —        $ —    
  

 

 

    

 

 

 

Granted

     500       $ 0.84   

Canceled

     —        $ —    

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at September 30, 2012

     500       $ 0.84   
  

 

 

    

 

 

 

Granted

     —         $ —     

Canceled

     333      $ 0.84   

Forfeited

     —        $ —    

Exercised

     —        $ —    
  

 

 

    

 

 

 

Outstanding at December 31, 2012

     167       $ 0.84  
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Goodwill (Tables)
9 Months Ended
Dec. 31, 2012
Goodwill

A reconciliation of the changes to the Company’s carrying amount of goodwill for the periods or as of the dates indicated:

 

Balance at March 31, 2012

   $ 3,640   
  

 

 

 

Goodwill impairment

     —    
  

 

 

 

Balance at June 30, 2012

   $ 3,640   
  

 

 

 

Acquisition unaudited

     897   
  

 

 

 

Balance at September 30, 2012

   $ 4,537   
  

 

 

 

Goodwill impairment

     —     
  

 

 

 

Balance at December 31, 2012

   $ 4,537   
  

 

 

 
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Intangible Assets (Tables)
9 Months Ended
Dec. 31, 2012
Components of Intangible Assets

The components of intangible assets as at December 31, 2012 and March 31, 2012 were as follows:

 

     Unaudited  
     As of December 31, 2012  
     Cost      Accumulated
Amortization
    Net  

Software

   $ 2,429       $ (1,147   $ 1,282   

Trade name / Trademark

     297         (8   $ 289   

Customer list

     4,675         (1,321   $ 3,354   

License agreements

     498         (447   $ 51   
  

 

 

    

 

 

   

 

 

 
   $ 7,899       $ (2,923   $ 4,976   
  

 

 

    

 

 

   

 

 

 

We complete our annual impairment tests in the fourth quarter of each year unless events or circumstances indicate that an asset may be impaired. There were no indications of impairment present during the period ended December 31, 2012. However, the Company recorded an increase in intangible assets for the acquisition of the Logia companies and LogiaDeck (Ignite) of $4,489. The Company recorded an impairment charge of $2,319 for the year ended March 31, 2012.

 

     As of March 31, 2012  
     Cost      Accumulated
Amortization
    Net  

Software

   $ 1,611       $ (948   $ 663   

Trade name / Trademark

     154         —       $ 154   

Customer list

     1,220         (1,220   $ (0

License agreements

     443         (443   $ (0
  

 

 

    

 

 

   

 

 

 
   $ 3,428       $ (2,611   $ 817   
  

 

 

    

 

 

   

 

 

 
Estimate Future Amortization Expense

Based on the amortizable intangible assets as of December 31, 2012, we estimate future amortization expense to be as follows:

 

Year Ending December 31,

   Amortization
Expense
 
     (in thousands)  

2013

   $ 701   

2014

     701   

2015

     493   

2016

     466   

2017

     442   

Future

     2,021   
  

 

 

 
   $ 4,824   
  

 

 

 
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Debt (Tables)
9 Months Ended
Dec. 31, 2012
Short Term Debt
                         
     December 31,
2012
     March 31,
2012
 

Short Term Debt

     

Equipment Leases

     20         2   

Senior secured convertible note, including PIK interest, net of discount of $393 and $0, respectively

   $ 2,509       $ —    

Senior secured note, short term accrued interest

     297         73   
  

 

 

    

 

 

 
   $ 2,826       $ 75   
  

 

 

    

 

 

 
Long Term Debt
                         
     December 31,
2012
     March 31,
2012
 

Long Term Debt

     

Senior secured convertible note, including PIK interest, net of discount, of $0 and $1,020, respectively

     —          1,881   

Convertible note, including accrued interest, net of discount, of $684 and $1,127, respectively

     529         60   

Secured note, including PIK interest and accrued interest

     1,221        1,136   
  

 

 

    

 

 

 
   $ 1,750       $ 3,077   
  

 

 

    

 

 

 
Contingent Liabilities
                             
     December 31,
2012
     March 31,
2012
 

Contingent Liabilities

     

Contingent liability, net of discount of $198 and $0, respectively

   $ 802       $ —    
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Capital Stock Transactions (Tables)
9 Months Ended
Dec. 31, 2012
Summarizes of RSA Activity

The following table summarizes the RSA activity:

 

           Weighted
Average
 
(in thousands, except grant date fair value)    Number of
Shares
    Grant Date
Fair Value
 

Unvested at March 31, 2011

     —       $     
  

 

 

   

 

 

 

Unvested at March 31, 2012

     15,367      $ 0.360   
  

 

 

   

 

 

 

Granted

     583        1.000   

Canceled

     —         —    

Vested

     (38     0.900   
  

 

 

   

 

 

 

Unvested at June 30, 2012

     15,912      $ 0.387   
  

 

 

   

 

 

 

Granted

     1,500        0.800   

Canceled

     —         —    

Vested

     (696     0.782   
  

 

 

   

 

 

 

Unvested at September 30, 2012

     16,716      $ 0.411   
  

 

 

   

 

 

 

Granted

     0        0.800   

Canceled

     —         —    

Vested

     (3,413     0.641   
  

 

 

   

 

 

 

Unvested at December 31, 2012

     13,303      $ 0.352   
  

 

 

   

 

 

 
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Segment and Geographic information (Tables)
9 Months Ended
Dec. 31, 2012
Segment Geographic Information on Sales and Net Property and Equipment

The following information sets forth geographic information on our sales for the periods ended December 31, 2012 and 2011, and net property and equipment for the periods ended December 31, 2012 and March 31, 2012:

 

     North
America
     Europe      Other
Regions
     Consolidated  

Nine Months ended December 31, 2012

           

Net sales to unaffiliated customers

     41         2,630         1,581       $ 4,252   

Nine Months ended December 31, 2011

           

Net sales to unaffiliated customers

     138         4,087         1,562       $ 5,788   

Property and equipment, net at December 31, 2012

     134         17         50       $ 201   

Property and equipment, net at March 31, 2012

     177         52         1       $ 230   
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Commitments and Contingencies (Tables)
9 Months Ended
Dec. 31, 2012
Future Payments for Other Obligations

Future payments for these obligations as of December 31, 2012 are as follows:

 

Year Ending December 31,       

2013

   $ 350   

2014

     350   

2015

     204   
  

 

 

 

Total payments

   $ 904   
  

 

 

 
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Organization - Additional Information (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
1 Months Ended 1 Months Ended
Sep. 13, 2012
Dec. 31, 2012
Aug. 15, 2012
Mar. 31, 2012
Jun. 21, 2010
Amended ValueAct Note
Dec. 28, 2011
Digital Turbine Group, LLC
Sep. 13, 2012
Logia Content Development And Management Ltd
Sep. 13, 2012
Logia Content Development And Management Ltd
Targets
Sep. 13, 2012
Logia Content Development And Management Ltd
M.D.G Logia Holdings Ltd
Sep. 13, 2012
Volas Entertainment Ltd
Sep. 13, 2012
Volas Entertainment Ltd
Targets
Sep. 13, 2012
Volas Entertainment Ltd
M.D.G Logia Holdings Ltd
Sep. 13, 2012
Mail Bit Logia (2008) Ltd
Sep. 13, 2012
Mail Bit Logia (2008) Ltd
Targets
Sep. 13, 2012
Mail Bit Logia (2008) Ltd
M.D.G Logia Holdings Ltd
Oct. 23, 2008
AMV Holding Limited
Oct. 23, 2008
Fierce Media Ltd
Business Acquisition [Line Items]
Percentage of issued and outstanding share capital acquired 100.00% 77.00% 100.00% 77.00% 100.00% 77.00% 100.00% 80.00%
Secured indebtedness, released $ 23,231
Principal amount of note $ 3,500
Shares common stock issued as part of consideration for acquisition 937,500 50,000
Common stock, shares authorized 200,000,000 200,000,000 200,000,000
Series A convertible preferred stock, shares authorized 200,000 2,000,000 200,000
Percentage of issued and outstanding share capital acquired by minority interest holders 23.00% 23.00% 23.00%
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Liquidity - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Short-term Debt [Line Items]
Proceeds from issuance of convertible debt and equity financing $ 2,000 $ 6,989 $ 9,700
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Acquisitions/Purchase Price Accounting - Additional Information (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
1 Months Ended
Sep. 13, 2012
Tranche
Business Acquisition [Line Items]
Business acquisition, cash $ 3,750
Business acquisition, stock issued 750
Business acquisition, stock issued (in shares) 937,500
Fair value on date of grant 788
Number of tranches 2
Tranche 1
Business Acquisition [Line Items]
Business acquisition, cash 250
Business acquisition, stock issued 250
Tranche 2
Business Acquisition [Line Items]
Business acquisition, cash 250
Business acquisition, stock issued 250
Two tranches
Business Acquisition [Line Items]
Business acquisition, cash 500
Business acquisition, stock issued $ 500
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Summary of Preliminary Fair Values of Assets Acquired and Liabilities Assumed (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 13, 2012
Business Acquisition [Line Items]
Cash $ 59
Accounts receivable 567
Prepaid expenses and other assets 178
Goodwill 1,037
Current liabilities (1,314)
Long-term debt (35)
Purchase price 4,961
Customer relationships
Business Acquisition [Line Items]
Amortizable intangible assets 3,454
Developed technology
Business Acquisition [Line Items]
Amortizable intangible assets 818
Trade names / Trademarks
Business Acquisition [Line Items]
Amortizable intangible assets 143
Non-compete agreements
Business Acquisition [Line Items]
Amortizable intangible assets $ 54
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Amortization Period for Intangible Assets (Detail)
9 Months Ended
Dec. 31, 2012
Customer relationships
Business Acquisition [Line Items]
Remaining useful life 10 years
Developed technology
Business Acquisition [Line Items]
Remaining useful life 10 years
Trade names / Trademarks
Business Acquisition [Line Items]
Remaining useful life 5 years
Non-compete agreements
Business Acquisition [Line Items]
Remaining useful life 4 years
Goodwill
Business Acquisition [Line Items]
Useful life Indefinite
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Targets Combined Operating Results (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Business Acquisition [Line Items]
Revenue $ 2,049 $ 1,957 $ 4,252 $ 5,788
Gross profit 1,122 1,167 2,277 3,731
Operating expenses 4,701 7,282 11,341 11,002
Income from operations (3,579) (6,115) (9,064) (7,271)
Non-operating expenses, net (602) (731) (1,612) (1,246)
Provision for income tax 33 32 66 64
Net income (4,214) (3,775) (2,753) (6,878) (10,742) (8,580)
Targets
Business Acquisition [Line Items]
Revenue 1,780
Cost of goods sold 707
Gross profit 1,073
Operating expenses 675
Income from operations 398
Non-operating expenses, net 178
Provision for income tax 33
Net income $ 187
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Pro Forma Financial Information (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Revenues $ 7,167 $ 14,652
Cost of goods sold 3,742 10,537
Gross profit 3,425 4,115
Operating expenses 11,977 11,846
Loss from operations (8,552) (7,731)
Non-operating expense (1,634) (1,492)
Loss before provision for income taxes (10,186) (9,223)
Provision for income taxes 67 63
Net loss $ (10,253) $ (9,286)
Basic and diluted loss per share $ (0.12) $ (0.22)
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Potentially Dilutive Shares (Detail)
3 Months Ended 9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Earnings Per Share [Line Items]
Potentially dilutive shares 25,458 41,390 26,591 40,753
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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 3 Months Ended 3 Months Ended 9 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Dec. 31, 2012
Leasehold Improvements
Dec. 31, 2012
Other assets
Dec. 31, 2012
Customer A
Dec. 31, 2011
Customer A
Mar. 31, 2012
Customer A
Dec. 31, 2012
Customer B
Dec. 31, 2011
Customer B
Mar. 31, 2012
Customer B
Dec. 31, 2012
Customer C
Dec. 31, 2011
Customer C
Dec. 31, 2012
Minimum
Dec. 31, 2012
Maximum
Dec. 06, 2012
Asset Purchase Agreement
Financing Receivable, Impaired [Line Items]
Deposits $ 607 $ 607 $ 533
Advertising expense for continuing operations 143 1 143 7
Restructuring costs 0
Other comprehensive income (loss) foreign currency translation adjustment net of tax 49 (34) 31 46 93
Account receivable major customer percentage 35.20% 0.00% 16.00% 0.00%
Revenue major customer percentage 47.80% 0.00% 14.40% 0.00%
Revenue from other major customers, percentage 11.90% 43.00%
Property and equipment, estimated useful lives Lesser of 8 to 10 years or the term
Property and equipment, estimated useful lives 5 years
Impairment of goodwill          2,969
Intangible assets acquired, useful life 5 years 8 years
Impairment of intangible assets    $ 2,319
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Fair Value Measurements - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 3 Months Ended 1 Months Ended
Dec. 31, 2012
Dec. 31, 2012
Dec. 31, 2012
Contingent Liabilities
Sep. 30, 2012
Contingent Liabilities
May 31, 2012
Warrant
Dec. 31, 2012
Warrant
Mar. 31, 2012
Warrant
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Fair value of derivative liability $ 473 $ 0 $ 452
Expected Life 5 years
Risk free interest rate 0.40%
Dividend yield 0.00%
Volatility 170.00%
Contingent liability 802 802 802 758
Loss on fair value of contingent liability $ 44 $ 44 $ 44
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Assets and Liabilities that are Required to be Presented on Balance Sheet at Fair Value (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2012
Contingent Liabilities
Sep. 30, 2012
Contingent Liabilities
Dec. 31, 2012
Warrant
May 31, 2012
Warrant
Mar. 31, 2012
Warrant
Mar. 31, 2012
Fair Value, Inputs, Level 2
Warrant
Dec. 31, 2012
Fair Value, Inputs, Level 3
Contingent Liabilities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrant derivative liabilities $ 0 $ 473 $ 452 $ 452
Contingent Liabilities $ 802 $ 802 $ 758 $ 802
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Accounts Receivable (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Billed $ 1,095 $ 709
Unbilled 1,092 589
Less: allowance for doubtful accounts (108) (108)
Net Accounts receivable $ 2,079 $ 1,190
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Property Plant And Equipment (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Property, Plant and Equipment [Line Items]
Equipment $ 1,333 $ 1,310
Furniture & fixtures 506 484
Leasehold improvements 183 184
Property, Plant and Equipment, Gross, Total 2,022 1,978
Accumulated depreciation (1,821) (1,748)
Net Property and Equipment $ 201 $ 230
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Property and Equipment - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Depreciation expense $ 27 $ 45 $ 83 $ 160
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Description of Stock Plans - Additional Information (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended 1 Months Ended
Dec. 31, 2012
Sep. 10, 2012
Before Amendment
Sep. 10, 2012
After Amendment
Dec. 31, 2012
2007 Employee, Director and Consultant Stock Plan equity compensation plan
Feb. 12, 2008
2007 Employee, Director and Consultant Stock Plan equity compensation plan
Sep. 27, 2007
2007 Employee, Director and Consultant Stock Plan equity compensation plan
Mar. 07, 2008
2007 Employee, Director and Consultant Stock Plan equity compensation plan
Any fiscal year
Sep. 27, 2007
2007 Employee, Director and Consultant Stock Plan equity compensation plan
Maximum
Dec. 31, 2012
Stock Option Plan 2011
May 23, 2012
Stock Option Plan 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Individual grant limits 500,000
Maximum number of shares or equivalents of common stock that may be granted 4,000,000 20,000,000 7,000,000 3,000,000 1,100
Shares reserved for future issuance 20,000,000
Number of shares available for issuance 17,750,000
Share Options Exercisable 0 4,798,000
Option plan, term 10 years
Total unrecognized compensation cost related to nonvested share based compensation $ 0
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Summary of Options Granted (Detail) (USD $)
Dec. 31, 2012
Dec. 31, 2012
2011 Equity Incentive Plan
Sep. 30, 2012
2011 Equity Incentive Plan
Dec. 31, 2012
Other Incentive Programs
Sep. 30, 2012
Other Incentive Programs
Dec. 31, 2012
2007 Employee, Director and Consultant Stock Plan equity compensation plan
Number of Shares
Beginning Balance 500,000 1,500,000 4,798,000
Granted 500,000 1,500,000
Canceled 333,000 1,500,000
Forfeited               
Exercised               
Ending Balance 167,000 500,000 1,500,000 4,798,000
Exercisable at end of period 0 4,798,000
Forfeited               
Exercised               
Ending Balance 167,000 500,000 1,500,000 4,798,000
Weighted average exercise price
Beginning Balance $ 0.84 $ 0.84 $ 1.8
Granted $ 0.84 $ 0.84
Canceled $ 0.84 $ 0.84
Forfeited               
Exercised               
Ending Balance $ 0.84 $ 0.84 $ 0.84 $ 1.8
Exercisable at end of period $ 1.8
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Exercise Price for Options Outstanding and Options Exercisable (Detail) (2007 Employee, Director and Consultant Stock Plan equity compensation plan, USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended
Dec. 31, 2012
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Weighted Average Remaining Contractual Life (Years) 4 years 3 months 22 days
Number Outstanding and exercisable at end of period 4,798
Weighted Average Exercise Price $ 1.8
Aggregate Intrinsic Value $ 807,598
Exercise Price Range 1
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Price, lower limit $ 0
Range of Exercise Price, upper limit $ 1
Weighted Average Remaining Contractual Life (Years) 3 years 6 months 4 days
Number Outstanding and exercisable at end of period 2,698
Weighted Average Exercise Price $ 0.47
Aggregate Intrinsic Value $ 807,598
Exercise Price Range 2
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Price, lower limit $ 2
Range of Exercise Price, upper limit $ 3
Weighted Average Remaining Contractual Life (Years) 5 years 5 months 19 days
Number Outstanding and exercisable at end of period 1,300
Weighted Average Exercise Price $ 2.75
Exercise Price Range 3
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Price, lower limit $ 4
Range of Exercise Price, upper limit $ 5
Weighted Average Remaining Contractual Life (Years) 5 years 1 month 13 days
Number Outstanding and exercisable at end of period 800
Weighted Average Exercise Price $ 4.75
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Stock Compensation Expense (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Allocated Stock compensation expense $ 630 $ 69
Product development
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Allocated Stock compensation expense 69
General and administrative
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]
Allocated Stock compensation expense $ 630
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Goodwill (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Dec. 31, 2012
Sep. 30, 2012
Jun. 30, 2012
Dec. 31, 2012
Mar. 31, 2012
Goodwill [Line Items]
Goodwill Beginning Balance $ 4,537 $ 3,640 $ 3,640 $ 3,640
Acquisition unaudited 897
Goodwill impairment          2,969
Goodwill Ending Balance $ 4,537 $ 4,537 $ 3,640 $ 4,537 $ 3,640
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Goodwill - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended 12 Months Ended
Dec. 31, 2012
Jun. 30, 2012
Dec. 31, 2012
Mar. 31, 2012
Goodwill [Line Items]
Goodwill impairment          $ 2,969
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Components of Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Cost $ 7,899 $ 3,428
Accumulated Amortization (2,923) (2,611)
Net 4,976 817
Software
Finite-Lived Intangible Assets [Line Items]
Cost 2,429 1,611
Accumulated Amortization (1,147) (948)
Net 1,282 663
Trade name / Trademark
Finite-Lived Intangible Assets [Line Items]
Cost 297 154
Accumulated Amortization (8)
Net 289 154
Customer Lists
Finite-Lived Intangible Assets [Line Items]
Cost 4,675 1,220
Accumulated Amortization (1,321) (1,220)
Net 3,354 0
License Agreement
Finite-Lived Intangible Assets [Line Items]
Cost 498 443
Accumulated Amortization (447) (443)
Net $ 51 $ 0
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Intangible Assets - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Increase In Intangible Assets $ 4,489
Unamortizable Intangible Assets, Impairment of intangibles 2,319
Amortization expense for continuing operations, in cost of revenues $ 311 $ 173
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Estimate Amortization Expense for Next Three Years (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
2013 $ 701
2014 701
2015 493
2016 466
2017 442
Future 2,021
Finite-Lived Intangible Assets, Net, Total $ 4,824
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Short Term Debt (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Short Term Debt
Short Term Debt $ 2,826 $ 75
Equipment Leases
Short Term Debt
Short Term Debt 20 2
Senior Secured Convertible Notes due June 21, 2013
Short Term Debt
Short Term Debt 2,509
Secured Note
Short Term Debt
Short Term Debt $ 297 $ 73
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Short Term Debt (Parenthetical) (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Short-term Debt [Line Items]
Short term debt, discount $ 393 $ 0
Senior Secured Convertible Notes due June 21, 2013
Short-term Debt [Line Items]
Short term debt, discount $ 393 $ 0
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Long Term Debt (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Long Term Debt
Long Term Debt $ 1,750 $ 3,077
Senior Secured Convertible Notes due June 21, 2013
Long Term Debt
Long Term Debt 1,881
Convertible Note
Long Term Debt
Long Term Debt 529 60
Secured Note
Long Term Debt
Long Term Debt $ 1,221 $ 1,136
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Long Term Debt (Parenthetical) (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Long Term Debt Maturities Repayments Of Principal [Line Items]
Long term debt, discount $ 198 $ 0
Senior Secured Convertible Notes due June 21, 2013
Long Term Debt Maturities Repayments Of Principal [Line Items]
Long term debt, discount 0 1,020
Convertible Note
Long Term Debt Maturities Repayments Of Principal [Line Items]
Long term debt, discount $ 684 $ 1,127
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Contingent Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Contingent Liabilities
Contingent liability, net of discount of $198 and $0, respectively $ 802
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Contingent Liabilities (Parenthetical) (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Mar. 31, 2012
Business Acquisition, Contingent Consideration [Line Items]
Contingent liability, net of discount $ 198 $ 0
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Convertible Notes - Additional Information (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
9 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended 9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Jun. 21, 2010
Amended ValueAct Note
Dec. 29, 2011
Taja Convertible Note
Mar. 31, 2012
Taja Convertible Note
Mar. 19, 2012
Amended Taja Convertible Note
Dec. 31, 2012
Amended Taja Convertible Note
Mar. 31, 2012
Amended Taja Convertible Note
Mar. 01, 2012
Amended Taja Convertible Note
Mar. 01, 2012
Amended Taja Convertible Note
Maximum
Mar. 01, 2012
Amended Taja Convertible Note
Minimum
Dec. 31, 2012
Coverage Warrant
Dec. 31, 2012
Incentive Warrant
Dec. 31, 2012
Conversion Warrants
Non Cash Convertible Debt Related Expense [Line Items]
Principal amount of note $ 3,500 $ 500 $ 1,213 $ 3,000
Principal amount of note, stripped out 3,000
Accrued interest 562
Total amount of debt 1,062
Warrant issued as consideration for amending the note 2,000
Warrant, exercise price per share 0.7 0.25
Percentage of warrant coverage 25.00%
Warrant Term 5 years
Warrant vesting period from issue date 1 year
Gain (loss) on extinguishment of debt 1,079 1,459 1,346
Conversion price $ 0.7 $ 0.7
Conversion of the note, ownership percentage by holder 4.90%
Net proceeds 7,000 10,000
Fair value of embedded conversion feature of convertible note 2,250
Expected Life 1 year 5 years
Risk free interest rate 0.17% 0.84%
Dividend yield 0.00% 0.00%
Volatility 175.00% 175.00%
Fair value of convertible note warrant 750 1,459
Excess face value charge as interest expense 837
Shares of common stock issued up on conversion 2,600
Convertible note, amount converted 1,820
Interest expense of related to the amortization of the debt discount 1,070 686 443
Discount on notes 198 0 684
Shares of common stock, issuable up on conversion 1,733,376
Amount by which if-converted value exceeds the principal $ 86
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Debt - Additional Information (Detail) (USD $)
1 Months Ended 9 Months Ended
Jun. 21, 2010
Dec. 31, 2012
Mar. 31, 2012
Debt Instrument [Line Items]
Warrant, exercise price per share 0.7
Discount on notes $ 198,000 $ 0
Short term debt, discount 393,000 0
Total consideration payable in cash and shares of stock, gross 1,000,000
Senior Secured Convertible Notes due June 21, 2013
Debt Instrument [Line Items]
Principal amount of note 2,500,000 2,902,000
Debt Instrument Maturity Period 3 years
Interest rate of senior secured note 10.00%
Conversion price $ 0.15 $ 0.15
Warrant, exercise price per share 0.25
Debt conversion description For each $1 of New Senior Secured Notes purchased, the purchaser received a Warrant to purchase 3.33 shares of common stock of the Company
Warrant term 5 years
Convertible Senior Secured Notes purchased 1
Warrant issued to purchase common stock 3.33
Fair value of convertible note warrant 1,678,000
Expected Life 5 years
Risk Free Interest Rate 2.05%
Dividend Yield 0.00%
Volatility Rate 54.62%
Value of the beneficial conversion feature 5,833,000
Conversion Value Of Notes 2,500,000
Discount on notes 0 1,020,000
Discount amortized as interest and financing costs 627,000
Short term debt, discount 393,000 0
Shares of common stock, issuable up on conversion 19,344,792
Amount by which if-converted value exceeds the principal 11,607,000
Accrued interest 297,000
Senior Secured Convertible Notes due June 21, 2013 | Maximum
Debt Instrument [Line Items]
Discount on notes $ 2,500,000
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Related Party Transactions - Additional Information (Detail) (USD $)
1 Months Ended 9 Months Ended
Dec. 28, 2011
Sep. 14, 2006
Dec. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Related Party Transaction [Line Items]
Description of shares vesting (i) one third vested upon the completion our most recent equity financing; (ii) one third shall vest if on any date during the term or within 12 months following the term, our total enterprise value equals or exceeds $100,000; and (iii) one third shall vest immediately if on any date during the term or within 12 months following the term our total enterprise value equals or exceeds $200,000;
Related Party
Related Party Transaction [Line Items]
Agreement period 5 years
Service fee per quarter $ 450,000 $ 90,000
Management fees incurred 0 180,000
Accrued payables to related party 0 135,000
Agreement term 1 year
Annual fee reimbursed $ 80,000
Related Party | First Grant
Related Party Transaction [Line Items]
Number of shares granted 3,400,000
Related Party | Second Grant
Related Party Transaction [Line Items]
Number of shares granted 3,600,000
Related Party | Share Awarded For Service Third Grant
Related Party Transaction [Line Items]
Number of shares granted 1,000,000
Vesting period 1 year
Related Party | Restricted Stock Awards
Related Party Transaction [Line Items]
Number of shares granted 8,000,000
Related Party | Maximum
Related Party Transaction [Line Items]
Percent of annual fees paid 100.00%
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Capital Stock Transactions - Additional Information (Detail) (USD $)
1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended
Dec. 31, 2012
Dec. 31, 2012
Sep. 30, 2012
Dec. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Aug. 15, 2012
Jun. 07, 2012
Holder issued waiver
Dec. 28, 2013
Scenario, Forecast
Dec. 28, 2011
Performance and Market Condition RSAs
Dec. 31, 2012
Performance and Market Condition RSAs
Dec. 31, 2012
Performance and Market Condition RSAs
Group One
Dec. 31, 2012
Performance and Market Condition RSAs
Group Two
Sep. 30, 2012
Time and Performance Condition RSAs
Jan. 03, 2012
Time and Performance Condition RSAs
Dec. 31, 2012
Time and Performance Condition RSAs
Dec. 31, 2012
Time and Performance Condition RSAs
Minimum
Dec. 31, 2012
Time and Performance Condition RSAs
Maximum
Dec. 31, 2012
Restricted Stock
Sep. 30, 2012
Restricted Stock
Jun. 30, 2012
Restricted Stock
May 31, 2012
Restricted Stock
Mar. 31, 2012
Restricted Stock
Mar. 31, 2011
Restricted Stock
Dec. 31, 2012
Restricted Stock
Minimum
Dec. 31, 2012
Restricted Stock
Maximum
Dec. 31, 2012
Time Condition RSAs
Mar. 31, 2012
Time Condition RSAs
Dec. 31, 2012
Time Condition RSAs
Minimum
Dec. 31, 2012
Time Condition RSAs
Maximum
Dec. 31, 2012
Warrant
May 31, 2012
Warrant
Mar. 31, 2012
Warrant
Dec. 31, 2012
Vendor One
Dec. 31, 2012
Vendor One
Dec. 31, 2012
Vendor Two
Dec. 31, 2012
Vendor Two
Class of Stock [Line Items]
Series A Convertible Preferred Stock, authorized 200,000 200,000 200,000 200,000 2,000,000
Series A Convertible Preferred Stock, issued 100,000 100,000 100,000 100,000
Series A Convertible Preferred Stock, outstanding 100,000 100,000 100,000 100,000
Series A Convertible Preferred Stock, par value $ 0.0001 $ 0.0001 $ 0.0001 $ 0.0001
Liquidation preference, per shares $ 10 $ 10 $ 10
Series A Convertible Preferred Stock, liquidation preference The Series A holders are entitled to (1) vote on an equal per share basis as common stock, (2) dividends paid to the common stock holders on an as if-converted basis and (3) a liquidation preference equal to the greater of $10 per share of Series A (subject to adjustment) or such amount that would have been paid to the common stock holders on an as if-converted basis.
Common stock shares issued for services 1,428,571
Price per share $ 0.7
Warrants issued 357,142 116,071
Warrants, exercise price per share 0.7 0.7 0.7 0.7 0.7
Warrants term 5 years 5 years 5 years 5 years 5 years
Fair value of Warrants $ 251,000 $ 251,000 $ 251,000 $ 82,000 $ 82,000
Common stock shares issued, shares 150,000 464,286
Common stock shares issued 113,000 113,000 348,000 348,000
Common stock shares issued in connection with acquisition, shares 666,668
Business acquisition share price $ 0.8 $ 0.8 $ 0.8
Common stock shares issued in connection with acquisition 533,000 533,000 788,000
Loss on Fair Value of Warrants (1,255,000) 21,000
Fair market value of Shares 473,000
Forfeited 134,990         
Shares issued upon exercise of warrant 365,010
Warrant derivative liabilities, fair value 0 473,000 452,000
Warrant to Purchase 2,500,000
Common stock, shares authorized 200,000,000 200,000,000 200,000,000 200,000,000 200,000,000
Period for which share is restricted from individual selling from the date of vesting 1 year 1 year 2 years 3 months 2 years 3 months 2 years
Number of shares issued 15,850 2,375 0 1,500,000 583,000 22,000,000 2,083 7,100
Gross proceed 5,000,000
Stock Trading Period 30 days
Average daily trading price for Common Stock 100,000,000
Enterprise value 200,000,000 100,000,000 200,000,000
Voting Power 50.00%
Economic interest 50.00%
Share based compensation arrangement by share based payment award vesting description (i) one third vested upon the completion our most recent equity financing; (ii) one third shall vest if on any date during the term or within 12 months following the term, our total enterprise value equals or exceeds $100,000; and (iii) one third shall vest immediately if on any date during the term or within 12 months following the term our total enterprise value equals or exceeds $200,000; The vesting is as follows: (i) one third (1/3) shall vest immediately upon the completion of one or more debt or equity financings during the period ending two (2) years from the date hereof (the “Measurement Period”) in favor of the Company of gross proceeds of at least $5 million; (ii) one third (1/3) shall vest immediately if on any date during the Measurement Period the Company’s total enterprise value (computed by multiplying the number of outstanding shares of Common Stock on a fully diluted (taking into account only those stock options that are in-the-money on such date), as-converted basis by the average daily trading price for Common Stock for the thirty (30) trading day period immediately preceding the date of determination) equals or exceeds $100 million; and (iii) one third (1/3) shall vest immediately if on any date during the Measurement Period the Company’s total enterprise value (calculated as set forth in clause (ii) above) equals or exceeds $200 million; provided, however, that all unvested shares of restricted common stock shall vest immediately upon the sale of all or substantially all of the assets of the Company, upon the merger or reorganization of the Company following which the equity holders of the Company immediately prior to the consummation of such merger or reorganization collectively own less than 50% of the voting power of the resulting entity, or upon the sale of equity securities of the Company representing 50% or more of the voting power of the Company or 50% or more of the economic interest in the Company in a single transaction or in a series of related transactions.
Value of financing agreement entered into by the Company 7,000,000
Value of vested RSAs 3,223,000
Share price per share $ 0.61 $ 0.65 $ 0.641 $ 0.782 $ 0.9
Fair value par share $ 0.279 $ 0.206
Volatility 100.00%
Restricted stock discount 36.10%
Risk free interest rate of 0.10%
Dividend yield 0.00%
Compensation Expense $ 4,515,000 $ 1,270,000 $ 1,229,000
Number of restricted shares, vested 425 1,025 250 3,413,000 696,000 38,000 7,079
Number of restricted shares, unvested 1,350 675 13,303,000 16,716,000 15,912,000 15,367,000   
Probability of meeting the performance criteria 0.00%
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Summary of RSA Activity (Detail) (USD $)
12 Months Ended 3 Months Ended 6 Months Ended
Mar. 31, 2012
Dec. 31, 2012
Restricted Stock
Sep. 30, 2012
Restricted Stock
Jun. 30, 2012
Restricted Stock
May 31, 2012
Restricted Stock
Mar. 31, 2011
Restricted Stock
Number Of Shares
Beginning Balance 16,716,000 15,912,000 15,367,000   
Granted 0 1,500,000 583,000 22,000,000
Canceled 134,990         
Vested (3,413,000) (696,000) (38,000)
Ending Balance 13,303,000 16,716,000 15,912,000   
Weighted average exercise price
Beginning Balance $ 0.411 $ 0.387 $ 0.36   
Granted $ 0.8 $ 0.8 $ 1
Canceled         
Vested $ 0.641 $ 0.782 $ 0.9
Ending Balance $ 0.352 $ 0.411 $ 0.387   
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Segment and Geographic information - Additional Information (Detail)
9 Months Ended
Dec. 31, 2012
Segment
Segment Reporting Information [Line Items]
Number of Operating Segments 1
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Segment Geographic Information on Sales and Net Property and Equipment (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Revenue, Major Customer [Line Items]
Revenue from External Customers $ 4,252 $ 5,788
Property and equipment, net 201 230
North America
Revenue, Major Customer [Line Items]
Revenue from External Customers 41 138
Property and equipment, net 134 177
Europe
Revenue, Major Customer [Line Items]
Revenue from External Customers 2,630 4,087
Property and equipment, net 17 52
Other Regions
Revenue, Major Customer [Line Items]
Revenue from External Customers 1,581 1,562
Property and equipment, net $ 50 $ 1
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Commitments and Contingencies - Additional Information (Detail)
In Thousands, except Share data, unless otherwise specified
9 Months Ended 1 Months Ended
Dec. 31, 2012
USD ($)
Dec. 31, 2011
USD ($)
May 04, 2012
GBP (£)
Jan. 23, 2013
Subsequent Event
Loss Contingencies [Line Items]
Future minimum payments under initial terms of leases $ 64
Rental expense for continuing operations 155 133
Dispute settlement amount £ 23
Settlement of common stock 240,569
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Future Payments for Other Obligations (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Other Commitments And Contingencies [Line Items]
2013 $ 350
2014 350
2015 204
Total payments $ 904
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Subsequent Events - Additional Information (Detail) (USD $)
1 Months Ended
Dec. 31, 2012
Subsequent Event [Line Items]
Warrants issued 357,142
Warrants exercise price 0.7
Warrant term 5 years
Subsequent Event
Subsequent Event [Line Items]
Issuance of common stock for cash 785,714
Warrants issued 196,429
Purchase price of common stock $ 550,000
Warrants exercise price 0.7
Number of equity agreements 2
Warrant term 5 years
Subsequent Event | Equity Agreement One
Subsequent Event [Line Items]
Equity Financing Binding Term Sheets, closing date Jan 28, 2013
Subsequent Event | Equity Agreement Two
Subsequent Event [Line Items]
Equity Financing Binding Term Sheets, closing date Feb 4, 2013
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