ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page(s)

Reports of Independent Registered Public Accounting Firms	34-36

Consolidated Balance Sheets as of March 31, 2008; December 31, 2007 and 2006	37

Consolidated Statements of Operations for the three months ended March 31, 2008;
and the years ended December 31, 2007 and 2006	38

Consolidated Statements of Stockholders’ Equity and Comprehensive Loss
for the three months ended March 31, 2008; and the years ended December 31, 2007 and 2006	39

Consolidated Statements of Cash Flows for the three months ended March 31, 2008;
and the years ended December 31, 2007 and 2006	40

Notes to Consolidated Financial Statements	41-62

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Mandalay Media Inc. and Subsidiaries

Los Angeles, California

We have audited the accompanying consolidated balance sheet of Mandalay Media Inc. and Subsidiaries (the “Company”) as of March 31, 2008 and the related consolidated statements of operations, stockholders’ equity and comprehensive loss and cash flows for the three months then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mandalay Media Inc. and Subsidiaries as of March 31, 2008, and the results of its operations and its cash flows for the three months then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ GROBSTEIN, HORWATH & COMPANY LLP

Sherman Oaks, California

July 8, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Mandalay Media, Inc. (Formerly Mediavest, Inc.)

We have audited the accompanying balance sheet of Mandalay Media, Inc. (formerly Mediavest, Inc.) as of December 31, 2007 and the related statements of operations, stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mandalay Media, Inc. (formerly Mediavest, Inc.) as of December 31, 2007 and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Raich Ende Malter & Co. LLP

Raich Ende Malter & Co. LLP

New York, New York

April 11, 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Mandalay Media, Inc. (Formerly Mediavest, Inc.)

We have audited the accompanying statements of operations, stockholders’ equity and cash flows of Mandalay Media, Inc. (formerly Mediavest, Inc.) for the year ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of its operations and cash flows of Mandalay Media, Inc. (formerly Mediavest, Inc.) for the year ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.


		/s/Most & Company, LLP
		Most & Company, LLP

New York, New York

March 26, 2007

Mandalay Media Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share amounts)

	March 31,			December 31,			December 31,
	2008			2007			2006

ASSETS

Current Assets
Cash and cash equivalents	$	10,936		$	7,255		$	5,742
Accounts receivable, net of allowances		6,162			-			-
Prepaid expenses and other current assets		531			141			-

Total current assets		17,629			7,396			5,742

Property and equipment, net		1,037			-			-
Other long-term assets		301			-			-
Intangible assets, net		19,780			-			-
Goodwill		61,377			-			-

TOTAL ASSETS	$	100,124		$	7,396		$	5,742

LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities
Accounts payable	$	2,399		$	447		$	98
Accrued license fees		3,833			-			-
Accrued compensation		688			-			-
Current portion of long term debt		248			-			-
Other current liabilities		2,087			-			-

Total currrent liabilities		9,255			447			98

Accrued license fees, long term portion		1,337			-			-
Long term debt, net of current portion		16,483			-			-

Total liabilities		27,075			447			98

Commitments and contingencies (Note 15)

Stockholders equity
Preferred stock, 1,000 shares authorized
Series A convertible Preferred Stock, 100,000 shares; authorized
at $0.0001 par value; 100,000 shares issued and outstanding		100			100			100
Common stock, $0.0001 par value: 100,000,000 shares authorized;
32,149,089 issued and outstanding at March 31, 2008;
21,968,797 issued and outstanding at December 31, 2007;
16,730,000 issued and outstanding at December 31, 2006		3			3			2
Additional paid-in capital		76,154			9,817			6,309
Accumulated other comprehensive income/(loss)		61			-			-
Accumulated deficit		(3,269	)		(2,971	)		(767	)

Total stockholders equity		73,049			6,949			5,644

TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT	$	100,124		$	7,396		$	5,742

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

Mandalay Media Inc. and Subsidiaries

Consolidated Statement of Operations

(In thousands, except per share amounts)

	3 Months Ended
	March 31,			Year Ended December 31,
	2008			2007			2006

Revenues	$	3,208		$	-		$	-

Cost of revenues
License fees		1,539			-			-
Adjustment to impairment of guarantees		(1,745	)		-			-
Other direct cost of revenues		53			-			-

Total cost of revenues		(153	)		-			-

Gross profit		3,361			-			-

Operating expenses
Product development		946			-			-
Sales and marketing		891			-			-
General and administrative		1,467			2,521			553
Amortization of intangible assets		72			-			-

Total operating expenses		3,376			2,521			553

Loss from operations		(15	)		(2,521	)		(553	)

Interest and other income/(expense)
Interest income		97			317			-
Interest (expense)		(310	)		-			-
Foreign exchange transaction gain (loss)		2			-			-
Other (expense)		(56	)		-			-

Interest and other income/(expense)		(267	)		317			-

Loss before income taxes		(282	)		(2,204	)		(553	)

Income tax provision		(16	)		-			-

Net loss		(298	)		(2,204	)		(553	)

Preferred Stock Dividends		-			-			(43	)

Net Loss attributable to Common Shareholders	$	(298	)	$	(2,204	)	$	(596	)

Basic and Diluted net loss per common share	$	(0.01	)	$	(0.12	)	$	(0.05	)

Weighted average common shares outstanding,		21,628			18,997			11,599
basic and diluted

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

Mandalay Media Inc. and Subsidiaries

Consolidated Statements of Stockholders Equity and Comprehensive Loss

(In thousands, except share amounts)

Three Months Ended March 31, 2008 and Fiscal Years Ended December, 2007 and 2006

												Accumulated
									Additional			Other
	Common Stock				Preferred Stock				Paid-In			Comprehensive		Accumulated						Comprehensive
	Shares		Amount		Shares		Amount		Capital			Income/(Loss)		Deficit			Total			Loss


Balance at December 31, 2005		10,000,000	$	1		-	$	-		99			-	$	(171	)	$	(71	)	$

Net loss															(553	)		(553	)		(553	)
Issuance of common stock		6,730,000		1						6,056								6,057
Sale of preferred stock						100,000		100										100
Preferred stock dividend										43					(43	)		-
Warrants isued for
stock-based compensation										111								111

Comprehensive loss

Balance at December 31, 2006		16,730,000		2		100,000		100		6,309			-		(767	)		5,644			(553	)

Net Loss															(2,204	)		(2,204	)		(2,204	)
Issuance of common stock
(net of offering costs of $27)		5,000,000		1						2,472								2,473
Cashless exercise of warrants		238,797		0						(0	)							-			-
Deferred stock-based compensation										1,036								1,036

Comprehensive loss

Balance at December 31, 2007		21,968,797		3		100,000		100		9,817			-		(2,971	)		6,949			(2,204	)

Net Loss															(298	)		(298	)		(298	)
Issuance of common stock
in connection with the merger		10,180,292		0						48,356								48,356
Assumption of employee stock options
in connection with the merger										11,019								11,019
Issuance of new employee stock options
in connection with the merger										3,938								3,938
Issuance of warrants to lender
in connection with the merger										2,711								2,711
Foreign currency translation gain/(loss)													61					61			61
Deferred stock-based compensation										313								313

Comprehensive loss

Balance at March 31, 2008		32,149,089	$	3		100,000	$	100	$	76,154		$	61	$	(3,269	)	$	73,049		$	(237	)

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

Mandalay Media Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

	3 Months Ended
	March 31,			Years Ended December 31,
	2008			2007			2006
Cash flows from operating activities
Net loss	$	(298	)	$	(2,204	)	$	(553	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		253			-			-
Provision for doubtful accounts		168			-			-
Stock-based compensation		313			1,036			111
(Increase) / decrease in assets:
Accounts receivable		(1,364	)		-			-
Prepaid expenses and other current assets		(222	)		-			-
Increase / (decrease) in liabilities:
Accounts payable		352			349			24
Accrued license fees		(2,043	)		-			-
Accrued compensation		(128	)		-			-
Other liabilities		487			-			-

Net cash used in operating activities		(2,482	)		(819	)		(418	)

Cash flows from investing activities

Acquisition costs		(424	)		(141	)		-
Purchase of property and equipment		(103	)		-			-
Cash acquired with purchase of subsidiary		6,679			-			-

Net cash used in investing activities		6,152			(141	)		-

Cash flows from financing activities

Proceeds from the sale of preferred stock		-			-			100
Proceeds from the sale of common stock (net
of offering costs of $27)		-			2,473			6,057

Net cash provided by financing activities		-			2,473			6,157

Effect of exchange rate changes on cash and cash equivalents		11			-			-

Net increase/(decrease) in cash and cash equivalents		3,681			1,513			5,739

Cash and cash equivalents, beginning of period		7,255			5,742			3

Cash and cash equivalents, end of period	$	10,936		$	7,255		$	5,742

Supplemental disclosure of cash flow information:

Income taxes paid		16			-			-

Noncash investing and financing activities:

Acquisition of Twistbox		66,025			-			-

Deemed preferrred dividend		-			-			43

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

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Organization

Mandalay Media, Inc. (the Company), 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. (Mediavest). 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 through its merger with Twistbox Entertainment, Inc., February 12, 2008 (Note 6). On September 14, 2007, Mandalay Media, Inc. (Mandalay) was incorporated by Mediavest in the state of Delaware.

On November 7, 2007, Mediavest merged into its wholly-owned, newly formed subsidiary, Mandalay, with Mandalay as the surviving corporation. Mandalay issued: (1) one new share of common stock in exchange for each share of Mediavest’s outstanding common stock and (2) one new share of preferred stock in exchange for each share of Mediavest’s outstanding preferred stock as of November 7, 2007. Mandalay’s preferred and common stock assumed the same status and par value as Mediavest’s and acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mediavest.

On February 12, 2008, Mandalay completed a merger with Twistbox Entertainment, Inc. (Twistbox) through an exchange of all outstanding capital stock of Twistbox for 10,180 shares of common stock of the Company and the Company’s assumption of all the outstanding options of Twistbox’s 2006 Stock Incentive Plan by the issuance of options to purchases 2,463 shares of common stock of the Company, including 2,145 vested and 319 unvested options.

After the merger with Mandalay, Twistbox became a wholly owned subsidiary of the Company, and the company’s only active subsidiary.

Twistbox Entertainment Inc. (formerly known as The WAAT Corporation) is incorporated in the State of Delaware.

Twistbox is a global publisher and distributor of branded entertainment content, including images, video, TV programming and games, for Third Generation (3G) 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 and content from leading film, television and lifestyle content publishing companies. Twistbox has built a proprietary mobile publishing platform that includes: tools that automate handset portability for the distribution of images and video; a mobile games development suite 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 agreements with many of the largest mobile operators in the world.

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

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

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. The financial statements for the period ended March 31, 2008 and as at March 31, 2008 represent the results of the Company prior to the merger described in Note 6, and consolidated results subsequent to the merger; and the consolidated position of the group at the end of the period.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries. The results of operations for acquisitions of companies have been included in the consolidated statements of operations beginning on the closing date of acquisition. All material intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year Change

On March 31, 2008, the Board of Directors of the Company approved a change in the Company's fiscal year from December 31 to March 31, effective March 31, 2008. This Form 10-K/T is a transitional report, and includes information for the three month transitional period ended March 31, 2008 and for the twelve month periods ended December 31, 2007 and 2006. The unaudited financial information for the three month period ended March 31, 2007 is as follows:

	3 months ended March 31, 2007

Total revenues	$	-
Operating loss		(264	)
Net loss		(264	)

Basic and diluted net loss per common share	$	(0.02	)
Basic and diluted weighted average shares outstanding		16,730

Revenue Recognition

Twistbox’s revenues are derived primarily by licensing material and software products in the form of products (Image Galleries, Wallpapers, video, WAP Site access, Mobile TV) 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. Twistbox distributes its products primarily through mobile telecommunications service providers (“carriers”), which market the product, images or games to end users. License fees for perpetual and subscription licenses are usually billed by the carrier upon download of the product, image or game by the end user. In the case of subscriber licenses, many subscriber agreements provide for automatic renewal until the subscriber opts-out, while the others provide opt-in renewal. In either case, subsequent billings for subscription licenses are generally billed monthly. Twistbox applies the provisions of Statement of Position 97-2, Software Revenue Recognition, as amended by Statement of Position 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions, to all transactions.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Revenues are recognized from our 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 signed license agreement to be evidence of an arrangement with a carrier and a “clickwrap” agreement to be evidence of an arrangement with an end user. For these licenses, Twistbox defines delivery as the download of the product, image or game by the end user. Twistbox 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 Twistbox 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 Twistbox believes are reasonable, but it is possible that actual results may differ from Twistbox’s estimates, and those differences may be material. Twistbox’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 new handsets, growth of 3G subscribers by carrier, promotions during the period and economic trends. When Twistbox receives the final carrier reports, to the extent not received within a reasonable time frame following the end of each month, Twistbox records any differences between estimated revenues and actual revenues in the reporting period when Twistbox determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If Twistbox is unable to reasonably estimate the amount of revenues to be recognized in the current period, Twistbox recognizes revenues upon the receipt of a carrier revenue report and when Twistbox’s portion of licensed revenues are fixed or determinable and collection is probable. To monitor the reliability of Twistbox’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 Twistbox deems a carrier not to be creditworthy, Twistbox defers all revenues from the arrangement until Twistbox receives payment and all other revenue recognition criteria have been met.

In accordance with Emerging Issues Task Force, or EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent, Twistbox recognizes as revenues the amount the carrier reports as payable upon the sale of Twistbox’s products, images or games. Twistbox 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;

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

•

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

•

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

•

Twistbox has limited risks, including no inventory risk and limited credit risk

While not a significant portion of revenue, in some instances revenue is earned by delivering a product or service direct to the end user of that product or service. In those cases Twistbox 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.

Net Income (Loss) per Common Share

Basic income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (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 for the period ended March 31, 2008; and the years ended December 31, 2007 and 2006 consisted of 5,586; 1,592 and 24 shares, respectively, and were not included in the computation of diluted loss per share as they were anti-dilutive in each period. Preferred stock dividends were not included in the Company’s diluted net loss per share calculations because to do so would be anti-dilutive for all periods presented.

Comprehensive Income/(Loss)

Comprehensive income/(loss) consists of two components, net income/(loss) and other comprehensive income/(loss). Other comprehensive income/(loss) 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/(loss). The Company’s other comprehensive income/(loss) 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.

Content Provider Licenses

Content Provider License Fees and Minimum Guarantees

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 longer term content acquisitions, paid in advance and capitalized on our balance sheet as prepaid royalties. 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 prepaid royalties. Advanced 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.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

The Company’s contracts with some licensors include minimum guaranteed royalty payments, which are payable regardless of the ultimate volume of sales to end users. Each quarter, the Company evaluates the realization of its royalties as well as any unrecognized guarantees not yet paid to determine amounts that it deems unlikely to be realized through product sales. The Company uses estimates of revenues, and share of the relevant licensor to evaluate the future realization of future royalties and guarantees. This evaluation considers multiple factors, including the term of the agreement, forecasted demand, product life cycle status, product development plans, and current and anticipated sales levels, as well as other qualitative factors. To the extent that this evaluation indicates that the remaining future guaranteed royalty payments are not recoverable, the Company records an impairment charge to cost of revenues and a liability in the period that impairment is indicated. During the period ended March 31, this evaluation has resulted in an adjustment to previously recorded charges and the associated liability due to the renegotiation of a significant content provider contract which changed the amount and duration of minimum guarantee payments that the company is obligated to pay. This resulted in a partial reversal of prior impairment charges amounting to $1,745 in the period. This reversal has been included in cost of revenues.

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 material acquired.

Software Development Costs

The Company applies the principles of Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“SFAS No. 86”). SFAS No. 86 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.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

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 production costs of advertising, including direct response advertising, the first time the advertising takes place. Advertising expense was $226 in the period ended March 31, 2008.

Restructuring

The Company accounts for costs associated with employee terminations and other exit activities in accordance with Statement of Financial Accounting Standards No. 146, 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.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to their relatively short maturity. Based on the borrowing rates available to the Company for loans with similar terms, the carrying value of borrowings outstanding approximates their fair value.

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 of $61 in the period ended March 31, 2008 has been reported as a component of comprehensive loss in the consolidated statement of stockholders equity (deficit) and comprehensive loss. Translation gains or losses are shown as a separate component of retained earnings.

Concentrations of Credit Risk.

Financial instruments which potentially subject us to concentration of credit risk consist principally of cash and cash equivalents, short-term investments, and accounts receivable. We have placed cash and cash equivalents and short-term investments with a single high credit-quality institution. As of March 31, 2007 we did not have any long-term marketable securities. 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 March 31, 2008, approximately 36% of our gross accounts receivable outstanding was with one major customer. This customer accounted for 48% of our gross sales in the period ended March 31, 2008.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

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 8 to 10 years for leasehold improvements and 5 years for other assets.

Goodwill

In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Impairment of Long-Lived Assets and Intangibles

Long-lived assets, including purchased intangible assets with finite lives are amortized using the straight-line method over their useful lives ranging from three to ten years and are reviewed for impairment in accordance with SFAS No. 144, 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.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (“SFAS No. 109”), 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 SFAS No. 109, 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.

We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement 109 (“FIN 48”) on January 1, 2008. FIN 48 did not impact the Company’s financial position or results of operations at the date of adoption. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. FIN 48 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 SFAS No. 123(R) Share-Based Payment (“FAS 123R”) and accordingly, we record stock-based compensation expense for all of our stock-based awards.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Under FAS 123R, 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 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.

Reclassification

Certain amounts previously reported as deferred compensation resulting from share based compensation costs with future service periods have been reclassified to additional paid-in capital to conform with the March 31, 2008 presentation.

Preferred Stock

The Company applies the guidance enumerated in SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” and EITF Topic D-98, “Classification and Measurement of Redeemable Securities,” 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 SFAS 150. All other issuances of preferred stock are subject to the classification and measurement principles of EITF Topic D-98. 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.

Recent Accounting Pronouncements

In October 2006, the FASB issued FASB Staff Position No. 123R-5, “Amendment of FASB Staff Position FAS 123(R)-1”. The FSP amends FSP 123(R)-1 for equity instruments that were originally issued as employee compensation and then modified, with such modification made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees. In such circumstances, no change in the recognition or the measurement date of those instruments will result if both of the following conditions are met: a. There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and b. All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The Company believes that FSP 123(R)-5 will not have a significant impact on its results of operations or financial position.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”, which is an amendment of Accounting Research Bulletin (“ARB”) No. 51. This statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement changes the way the consolidated income statement is presented, thus requiring consolidated net income to be reported at amounts that include the amounts attributable to both parent and the noncontrolling interest. This statement is effective for the fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Based on current conditions, the Company does not expect the adoption of SFAS 160 to have a significant impact on its results of operations or financial position.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” This statement replaces FASB Statement No. 141, “Business Combinations.” This statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS 160 to have a significant impact on its results of operations or financial position.

Liquidity

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. The Company’s operating subsidiary, Twistbox, has sustained substantial operating losses since commencement of operations. In addition, the Company has incurred negative cash flows from operating activities and the majority of the Company’s assets are intangible assets and goodwill.

In view of these matters, realization of a major portion of the assets in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which is in turn dependent on the Company reaching a positive cash flow position or obtaining additional financing, while maintaining adequate liquidity.

Management believes that actions undertaken to achieve this position provide the opportunity for the Company to continue as a going concern. These actions include continued increases in revenues by introducing new products and revenue streams, continued expansion into new territories, reviewing additional financing options and accretive acquisitions.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Balance Sheet Components

Accounts Receivable

	March 31, 2008			December 31, 2007		December 31, 2006

Accounts receivable	$	6,330		$	-	$	-
Less: allowance for doubtful accounts		(168	)		-		-

	$	6,162		$	-	$	-

Accounts receivable includes amounts billed and unbilled as of the respective balance sheet dates. The Company had no significant write-offs or recoveries during the period ended March 31, 2008.

Property and Equipment

	March 31, 2008			December 31, 2007		December 31, 2006

Equipment	$	654		$	-	$	-
Equipment subject to capitalized lease	$	71			-		-
Furniture & fixtures	$	228			-		-
Leasehold improvements	$	140			-		-
		1,093			-		-
Accumulated depreciation		(56	)		-		-
	$	1,037		$	-	$	-

Depreciation expense for the period ended March 31, 2008 was $56; depreciation expense for the years ended December 31, 2007 and 2006 was $0 and $0 respectively.

Capital Lease

Accumulated depreciation associated with the equipment under capital lease noted above was $72 $0, and $0 at March 31, 2008 and December 31, 2007 and December 31, 2006, respectively. The Company has a commitment to pay $20 under these leases during the year ending March 31, 2009. These payments have a net present value of $20.

Description of Stock Plans

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 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 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.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

The following table summarizes options granted for the periods or as of the dates indicated:

	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2005
Granted
Canceled
Exercised
Outstanding at December 31, 2006		-			-
Granted		1,600,000		$	2.64
Canceled		-			-
Exercised		-			-
Outstanding at December 31, 2007		1,600,000		$	2.64
Granted		2,751,864		$	4.57
Transferred in from Twistbox		2,462,090		$	0.64
Canceled		(11,855	)	$	0.81
Outstanding at March 31, 2008		6,802,099		$	2.70
Exercisable at March 31, 2008		3,279,584		$	1.76

The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	Options Granted			Options tranferred from Twistbox
Expected life (years)		4 to 6			3 to 7
Risk-free interest rate		2.7% to 3.89	%		2.03% to 5.03	%
Expected volatility		70% to 75.2	%		70% to 75	%
Expected dividend yield		0	%		0	%

The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2008 was $2.83 and during the year ended December 31, 2007 was $1.54.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

The exercise price for options outstanding at March 31, 2008 was as follows:

Range of Exercise Price	Weighted Average Remaining Contractual Life (Years)		Number Outsanding March 31, 2008		Weighted Average Exercise Price		Aggregate Intrinsic Value

$0 - $1.00		8.32		2,450,235	$	0.64	$	13,112,767
$2.00 - $3.00		9.50		1,600,000	$	2.64	$	5,359,000
$3.00 - $4.00		-		-	$	-	$	-
$4.00 - $5.00		9.90		2,751,864	$	4.57	$	3,918,243
		9.24		6,802,099		2.70	$	22,390,010

The exercise price for options exercisable at March 31, 2007 was as follows:

Range of Exercise Price	Weighted Average Remaining Contractual Life (Years)		Options exercisable at March 31, 2008		Weighted Average Exercise Price		Aggregate Intrinsic Value

$0 - $1.00		8.25		2,165,588	$	0.62	$	11,622,615
$2.00 - $3.00		9.44		407,661	$	2.64	$	1,364,562
$3.00 - $4.00		-		-	$	-	$	-
$4.00 - $5.00		9.88		706,335	$	4.73	$	887,444
		8.75		3,279,584		1.76		13,874,621

Operating expenses included amounts related to stock option expense of $313 for the period ended March 31, 2008; and $1,036 for the year ended December 31, 2007.

Acquisitions/Purchase Price Accounting

The Company made one significant acquisition during the period covered by these financial statements. The acquisition and related purchase accounting are summarized as follows:

Twistbox Entertainment, Inc. and related entities

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Twistbox is a global publisher and distributor of branded entertainment content, including images, video, TV programming and games, for Third Generation (3G) mobile networks. It publishes and distributes its content globally and has developed an intellectual property portfolio unique to its target demographic that includes worldwide mobile rights to global brands and content from leading film, television and lifestyle content publishing companies. Twistbox has built a proprietary mobile publishing platform and has leveraged its brand portfolio and platform to secure “direct” distribution agreements with the largest mobile operators in the world. These factors contributed to a purchase price in excess of the fair value of net tangible and intangible assets acquired, and, as a result, the Company recorded goodwill in connection with this transaction.

In connection with the Merger, the Company guaranteed up to $8,250 of principal under an existing note of Twistbox in accordance with the terms, conditions and limitations contained in the note. In connection with the guaranty, the Company issued the lender warrants to purchase 1,093 and 1,093 shares of common stock of the Company, exercisable at $7.55 per share, and at $5.00 per share, (increasing to $7.55 per share, if not exercised in full by February 12, 2009), respectively, through July 30, 2011. The warrants have been included as part of the purchase consideration and have been valued using the Black Scholes method, using the stock price at the merger date of $4.75 per share discounted for certain restrictions, a volatility of 70%, and the exercise price and the expected time to vest for each group.

The purchase consideration was determined by an independent valuation to be $67,479, consisting of $66,025 attributed to the common stock and options exchanged and warrants issued, and $1,454 in transaction costs. The stock and options were valued using the Black Scholes method, using the stock price at the merger date of $4.75 per share, a volatility of 70%, and in the case of options the exercise price and the expected time to vest for each group. Under the purchase method of accounting, the Company allocated the total purchase price of $67,479 to the net tangible and intangible assets acquired and liabilities assumed based upon their respective estimated fair values as of the acquisition date as follows:

Cash	$	6,679
Accounts receivable		4,966
Prepaid expenses and other current assets		1,138
Property and equipment		1,062
Other long-term assets		361
Accounts Payable, accrued license fees and accruals		(6,882	)
Other current liabilities		(814	)
Accrued license fees, long term portion		(2,796	)
Long term debt		(16,483	)
Identified Intangibles		19,905
Merger related restructuring reserves		(1,034	)
Goodwill		61,377

	$	67,479

Goodwill recognized in the above transaction amounted to $61,377. Goodwill in relation to the acquisition of Twistbox is not expected to be deductible for income tax purposes. The preliminary purchase price allocation, including the allocation of goodwill, will be updated as additional information becomes available. Merger related restructuring reserves include reserves for employee severance and for office relocation.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Unaudited Pro Forma Summary

The following pro forma consolidated amounts give effect to the acquisition of Twistbox by Mandalay Media accounted for by the purchase method of accounting as if it had occurred as at January 1, 2008, the beginning of the period presented, and as at January 1, 2007 for the comparable three month period. The pro forma consolidated results are not necessarily indicative of the operating results that would have been achieved had the transaction been in effect as of the beginning of the period presented and should not be construed as being representative of future operating results.

	3 months ended			3 months ended
	March 31, 2008			March 31, 2007
	(unaudited)			(unaudited)

Revenues	$	4,646		$	3,708
Cost of revenues		494			7,926
Gross profit/(loss)		4,152			(4,218	)


Operating expenses net of interest
income and other expense		5,174			6,145
Income tax expense		30			20
Net loss		(1,052	)		(10,383	)

Basic and Diluted net loss per common share	$	(0.05	)	$	(0.62	)

7.	Goodwill

The changes in the carrying amount of goodwill for the period ended March 31, 2008 was as follows:

Balance at December 31, 2007		-
Goodwill acquired		61,377
Balance at March 31, 2008	$	61,377

8.	Other Intangible Assets

	March 31,			December 31,		December 31,
	2008			2007		2006

Software	$	1,611		$	-	$	-
Trade Name / Trademark		13,030			-		-
Customer list		4,378			-		-
License agreements		886			-		-

		19,905			-		-
Accumulated amortization		(125	)		-		-
	$	19,780		$	-	$	-

The Company has included amortization of acquired intangible assets directly attributable to revenue-generating activities in cost of revenues. The Company has included amortization of acquired intangible assets not directly attributable to revenue-generating activities in operating expenses. During the period ended March 31, 2008 the Company recorded amortization expense in the amount of $53 in cost of revenues; and amortization expense in the amount of $72 in operating expenses.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

As of March 31, 2008, the total expected future amortization related to intangible assets was as follows:

	2009		2010		2011		2012		2013		Thereafter
Software	$	230	$	230	$	230	$	230	$	230	$	430
Customer List		547		547		547		547		547		1,570
License Agreements		177		177		177		177		154		-
	$	954	$	954	$	954	$	954	$	931	$	2,000

Debt

	March 31,		December 31,		December 31,
	2008		2007		2006
*Short Term Debt*

Capitalized lease liabilities, current portion	$	20	$	-	$	-
Senior secured note, accrued interest		228		-		-
	$	248	$	-	$	-

	March 31,		December 31,		December 31,
	2008		2007		2006
*Long Term Debt*

Capitalized lease liabilities, long term portion	$	-	$	-	$	-
Senior Secured Note, long term portion, net of discount		16,483		-		-
	$	16,483	$	-	$	-

In July 2007, Twistbox entered into a debt financing agreement in the form of a Senior Secured Note amounting to $16,500, payable at 30 months. The holder of the Note was granted first lien over all of the Company’s assets. The Note carries interest of 9% annually for the first year and 10% subsequently, with semi-annual interest only payments. The agreement included certain restrictive covenants. In conjunction with the merger described in Note 6, the Company guaranteed up to $8,250 of the principal; and the restrictive covenants were modified, including a requirement for both Mandalay and Twistbox to maintain certain minimum cash balances. In connection with the guaranty, the Company issued the lender warrants to purchase 1,093 and 1,093 shares of common stock of the Company, exercisable at $7.55 per share, and at $5.00 per share, (increasing to $7.55 per share, if not exercised in full by February 12, 2009), respectively, through July 30, 2011. These warrants replaced warrants originally issued by Twistbox in conjunction with the Senior Secured Note.

Minimum future obligations, including interest, under the Senior Secured Note are $1,595 for the year ended March 31, 2009 and $17,875 during the year ended March 31, 2010 including repayment of the principle. Capitalized lease assets are set out in Note 4. Future obligations under capitalized leases are included as part of Other Obligations in Note 15.

10.

Related Party Transactions

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

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Mandalay Media Inc

In 2006, the Company borrowed an aggregate of $100 from Trinad Capital, with interest at 10%, per annum. The loans were repaid on October 10, 2006, with interest of $5.

On September 14, 2006, the Company entered into a management agreement (Agreement) with Trinad Management for five years. Pursuant to the terms of the Agreement, Trinad Management will provide certain management services, including, without limitation, 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 expenses reasonably incurred in connection with the provision of Agreement. The Management Agreement expires on September 14, 2011. Either party may terminate with prior written notice. However, if the Company terminates, it shall pay a termination fee of $1,000. For the years ended December 31, 2007 and 2006, the Company paid management fees under the agreement of $360 and $107, respectively.

In January 2007, prior to his employment as an officer of the Company, the president received $25 in consulting fees.

In March 2007, the Company entered into a month to month lease for office space with Trinad Management for rent of $9 per month. Rent expense in connection with this lease was $26 for the period ended March 31, 2007; and $77 for the year ended December 31, 2007.

Twistbox Entertainment, Inc

Lease of Premises

The Company leases its primary offices in Los Angeles from Berkshire Holdings, LLC, a company with common ownership by officers of Twistbox. Amount paid in connection with this lease was $63 for the period ended March 31, 2008.

The Company is party to an oral agreement with a person affiliated with the Company with respect to a lease of an apartment in London. Amount paid in connection with this lease was $12 for the period ended March 31, 2008.

11.

Capital Stock Transactions

Preferred Stock

On October 3, 2006, the Company designated a Series A Preferred Stock, par value $.0001 per share (Series A). The Series A holders shall be entitled to: (1) vote on an equal per share basis as common, (2) dividends on an 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 on an if-converted basis. Each Series A holder may treat as a dissolution or winding up of the Company any of the following transactions: a consolidation, merger, sale of substantially all the assets of the company, issuance/sale of common stock of the Company constituting a majority of all shares outstanding and a merger/business combination, each as defined.

In addition, the Series A holders may convert, at their discretion, all or any of their Series A shares into the number of common shares equal to the number calculated by dividing the original purchase price of such Series A Preferred, plus the amount of any accumulated, but unpaid dividends, as of the conversion date, by the original purchase price (subject to certain adjustments) in effect at the close of business on the conversion date.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

On August 3, 2006, the Company sold 100 shares of the Series A to Trinad Management, LLC (Trinad Management), an affiliate of Trinad Capital LP (Trinad Capital), one of the Company’s principal shareholders, for an aggregate sale price of $100, $1.00 per share. The Company recognized a one time, non-cash deemed preferred dividend of $43 because the fair value of our common stock at the time of the sale of $1.425 per share, was greater than the conversion price of $1.00 per share.

Common Stock

On August 3, 2006, the Company authorized an increase in their authorized shares of common stock from 19,000 to 100,000 shares.

On August 3, 2006, the Company authorized a 2.5 to 1 stock split of its common stock, increasing its outstanding shares from 4,000 to 10,000. In connection with the split, the Company transferred $6 from additional paid-in capital to common stock. All share and per share amounts have been retroactively adjusted to reflect the effect of the stock split.

On August 3, 2006, the Company granted warrants to purchase 150 and 50 shares of common stock of the Company to its president and a director, respectively. Each warrant is exercisable at $2.50 per share, through August 1, 2008. The warrants were valued at $111 using a Black-Scholes model assuming a risk free interest rate of 4.89%, expected life of two years, and expected volatility of 105.67%.

On September 14, 2006, October 12, 2006 and December 26, 2006, the Company sold 2,800, 3,400 and 530 units, respectively, at $1.00 per unit, for an aggregate proceeds of $ 6,057, net of offering costs of $673. Each unit consisted of one share of common stock of the Company and one warrant. Each warrant is exercisable to purchase one share of common stock of the Company at $2.00 per share, through September, October and December 2008.

On July 24, 2007, the Company sold 5,000 shares of the Company's common stock, at $0.50 per share, for aggregate proceeds of $2,473, net of offering costs of $27.

In September, October and December 2007, warrants to purchase 625 shares of common stock were exercised in a cashless exchange for 239 shares of the Company’s common stock based on the average closing price of the Company’s common stock for the five days prior to the exercise date.

On November 7, 2007, the Company granted non-qualified stock options to purchase 500 shares of common stock of the Company to a director under the Plan. The options have a ten year term and are exercisable at $2.65 per share, with one-third of the options vesting immediately upon grant, one-third vesting on the first anniversary of the date of grant and the one-third on the second anniversary of the date of grant. The options were valued at $772 using a Black-Scholes model assuming a risk free interest rate of 3.89%, expected life of four years, and expected volatility of 75.2%.

On November 14, 2007, the Company granted non-qualified stock options to purchase 100 shares of common stock of the Company to a director under the Plan. The options have a ten year term and are exercisable at a price of $2.50 per share, with one-third of the options granted vesting immediately upon grant, one-third vesting on the first anniversary of the date of grant and one-third on the second anniversary of the date of grant. The options were valued at $160 using a Black-Scholes model assuming a risk free interest rate of 3.89%, expected life of four years, and expected volatility of 75.2%.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

Series A Preferred Stock			100
Options under the Plan			7,000
Warrants not under the Plan			100
Warrants issued with units			6,205

			13,405

On February 12, 2008, the Company issued 10,180 shares of common stock in connection with the merger with Twistbox. The Company also assumed all the outstanding options of Twistbox’s 2006 Stock Incentive Plan by the issuance of options to purchases 2,463 shares of common stock of the Company, including 2,144 vested and 319 unvested options; and the Company issued warrants to a lender to Twistbox, to purchase 1,093 and 1,093 shares of common stock of the Company, exercisable at $7.55 per share, and at $5.00 per share, (increasing to $7.55 per share, if not exercised in full by February 12, 2009), respectively, through July 30, 2011.

12.

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.

13.

Income Taxes

As of March 31, 2008, the Company had net operating loss (NOL) carry-forwards to reduce future Federal income taxes of approximately $36,300, expiring in various years ranging through 2027. The Company may have had ownership changes, as defined by the Internal Revenue Service, which may subject the NOL's to annual limitations which could reduce or defer the use of the NOL' carry-forwards.

In connection with the merger described in Note 6 above, the Company has recorded goodwill and intangibles which will have differing amortization for book and tax purposes. Goodwill and trademarks, amounting to $74,407 will not be amortized for book purposes, but will be subject to amortization for tax purposes, giving rise to a permanent difference. Other intangible assets, amounting to $6,875 will be amortized over a shorter period for book purposes than tax purposes, giving rise to timing differences. These differences will impact the Company’s NOL carry-forwards in the future.

As of March 31, 2008, realization of the Company's net deferred tax asset of approximately $14,750 was not considered more likely than not and, accordingly, a valuation allowance of $14,750 has been provided. During the three months ended March 31, 2008, the valuation allowance increased by $350.

Management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements as of March 31, 2008.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

As of March 31, 2008, the components of deferred tax asset consisted of the following:

Net operating loss carry-forwards	$	14,200
Amortization of intangible assets		25
Share-based compensation		525
Valuation allowance		(14,750	)
	$	-

For the three months ended March 31, 2008, and the years ended December 31, 2007 and 2006, the components of deferred tax expense consisted of the following:

	2008			2007			2006

Net operating loss	$	200		$	500		$	200
Amortization of intangible assets		25
Share-based compensation		125			400			-
		350			900			200
Less valuation allowance		(350	)		(900	)		(200	)
	$	-		$	-		$	-

For the three months ended March 31, 2008 and the years ended December 31, 2007 and 2006, the provision for income taxes on the statement of operations differs from the amount computed by applying the statutory Federal income tax rate to income before the provision for income taxes, as follows:

	March 31,			December 31,			December 31,
	2008			2007			2006

Federal income tax, at statutory rate	$	(100	)	$	(800	)	$	(180	)
State income tax, net of federal benefit		(15	)		(100	)		(20	)
Amortization of intangibles		(235	)
Change in valuation allowance		350			900			200
	$	-		$	-		$	-

The Company adopted the provisions of FIN 48 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 FIN 48 and those after the adoption of FIN 48. There were no unrecognized tax benefits not subject to valuation allowance as at March 31, 2008, December 31, 2007 and December 31, 2006. The Company will classify interest and penalties on any unrecognized tax benefits as a component of the provision for income taxes. The total amount of interest and penalties recognized in the consolidated statement of income for the period ended March 31, 2008 and the years ended December 31, 2007 and 2006 was not material.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

14.

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 and net property and equipment for the period ended March 31, 2008:

	North				South		Other
	America		Europe		America		Regions		Consolidated
Year ended March 31, 2008
Net sales to unaffiliated customers		398		2,553		147		110		3,208
Property and equipment, net		846		191		-		-		1,037

Our largest single customer accounted for 48% of our revenue in the period ended March 31, 2008.

15.

Commitments and Contingencies

Operating Lease Obligations

The Company leases office facilities under noncancelable operating leases expiring in various years through 2011.

Following is a summary of future minimum payments under initial terms of leases at March 31, 2008:

Year Ending March 31,
2009	$	272
2010		254
2011		74
Total minimum lease payments	$	600

These amounts do not reflect future escalations for real estate taxes and building operating expenses. Rental expense amounted to $121 for the period ended March 31, 2008.

Minimum Guaranteed Royalties

The Company has entered into license agreements with various owners of brands and other intellectual property so that it could develop and publish branded products for mobile handsets.

Pursuant to some of these agreements, the Company is required to pay minimum royalties over the term of the agreements regardless of actual sales. Future minimum royalty payments for those

agreements as of March 31, 2008 were as follows:

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

	Minimum
	Guaranteed
Year Ending March 31,	Royalties
2009	$	1,923
2010		1,560
2011		1,200
2012		30
Total minimum payments	$	4,713

Commitments in the above table include guaranteed royalties to licensors that are included as a liability in the Company’s consolidated balance sheet of $2,487 as of March 31, 2008, because the Company has determined that recoupment is unlikely.

Other Obligations

As of March 31, 2008, the Company was obligated for payments under various distribution agreements, equipment lease agreements, employment contracts and the management agreement described in Note 10 with initial terms greater than one year at March 31, 2008. Annual payments relating to these commitments at March 31, 2008 are as follows:

Year Ending March 31,	Commitments
2009		3,195
2010		2,554
2011		1,521
2012		165
Total minimum payments	$	7,435

Litigation

The Company is subject to various claims and legal proceedings arising in the normal course of business. Based on the opinion of the Company’s legal counsel, management believes that the ultimate liability, if any in the aggregate 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.

On March 20, 2007, Twistbox and FTV GmbH entered into a Content License Agreement (“CLA”) pursuant to which, among other things, Twistbox licensed certain FTV GmbH content and, in exchange, Twistbox agreed to make certain payments to FTV GmbH. On or about April 17, 2007, Leaway Enterprises, Ltd. dba “Mobival” (“Mobival”) filed an action in the High Court of Justice, Queen’s Bench Division, Commercial Court, Royal Courts of Justice, Claim No. 2007 Folio 458 against FTV Ltd. BVI (“FTV BVI”) alleging breach of a “Content Distribution Agreement” between Mobival and FTV BVI (hereinafter, the “U.K. Action”). On or about July 20, 2007, Mobival filed an action in the Los Angeles Superior Court, No. LC 078611 against Twistbox, FTV GmbH and Michel Adam Lisowksi (“Adam”) alleging interference, unfair business practices and fraud (hereinafter, the “U.S. Action”). On or about February 28, 2008, Twistbox, FTV GmbH, Mobival and all other interested parties executed a Settlement Agreement and Mutual General Release which released all parties from any and all claims and liabilities related to the matters raised in the U.K. Action and the U.S. Action. No expenses related to this settlement were incurred in the period ended March 31, 2008.

Mandalay Media Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(all numbers in thousands except per share amounts)

16.

Subsequent Events (unaudited)

On May 16, 2008, the Company signed a letter of intent to purchase video gaming company Green Screen Interactive Software, Inc. (“Green Screen”).

In connection with the potential acquisition, the Company also provided a bridge loan of $2,000 to Green Screen on May 16, 2008 by purchasing a Convertible Secured Promissory Note in the aggregate principal amount of $2,000 (the “Note”) from Green Screen. The Note matured at any time on or after October 15, 2008 (the “Maturity Date”), within five business days of written demand by the Company, unless it was prepaid or converted in accordance with the terms of the Note. The Note initially bore interest at a rate of 10% per annum (increasing after a certain period of time or on default). The Note was convertible into equity securities of Green Screen at the option of the Company.

In connection with the bridge loan, Green Screen granted the Company a first priority security interest in and to all of Green Screen’s tangible and intangible assets. As of June 16, 2008 the letter of intent expired without execution of a definitive acquisition agreement, and has therefore been terminated. The entire Note, plus interest ($2,028), was repaid on July 7, 2008.

Delaware		22-2267658
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2121 Avenue of the Stars, Suite 2550, Los Angeles, CA		90067
(Address of Principal Executive Offices)		(Zip Code)

	o Large Accelerated Filer	o Accelerated Filer
	o Non-accelerated Filer (do not check if smaller reporting company	x Smaller Reporting Company

PART I

ITEM 1.	BUSINESS	2

ITEM 1A.	RISK FACTORS	6

ITEM 2.	PROPERTIES	19

ITEM 3.	LEGAL PROCEEDINGS	20

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	20

PART II

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	20

ITEM 6.	SELECTED FINANCIAL DATA	21

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	33

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	63

ITEM 9A(T).	CONTROLS AND PROCEDURES	63

ITEM 9B.	OTHER INFORMATION	64

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	64

ITEM 11.	EXECUTIVE COMPENSATION	68

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	70

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	72

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	74

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	75

Games		General Entertainment		Late Night
· Taito · Sony · EA · i-Play · PopCap · Konami · Namco		· Editorial Televisa · CardPlayer Magazine · Learning Annex · American Greetings		· Playboy · Penthouse · Girls Gone Wild · Vivid · Portland TV

	·	maintain our current, and develop new, wireless carrier relationships, in both the international and domestic markets;

	·	maintain and expand our current, and develop new, relationships with third-party branded and non-branded content owners;

	·	retain or improve our current revenue-sharing arrangements with carriers and third-party content owners;

	·	maintain and enhance our own brands;

	·	continue to develop new high-quality products and services that achieve significant market acceptance;

	·	continue to port existing products to new mobile handsets;

	·	continue to develop and upgrade our technology;

	·	continue to enhance our information processing systems;

	·	increase the number of end users of our products and services;

	·	maintain and grow our non-carrier, or “off-deck,” distribution, including through our third-party direct-to-consumer distributors;

	·	expand our development capacity in countries with lower costs;

	·	execute our business and marketing strategies successfully;

	·	respond to competitive developments; and

	·	attract, integrate, retain and motivate qualified personnel.

	·	the number of new products and services released by us and our competitors;

	·	the timing of release of new products and services by us and our competitors, particularly those that may represent a significant portion of revenues in a period;

	·	the popularity of new products and services, and products and services released in prior periods;

	·	changes in prominence of deck placement for our leading products and those of our competitors;

	·	the expiration of existing content licenses;

	·	the timing of charges related to impairments of goodwill, intangible assets, royalties and minimum guarantees;

	·	changes in pricing policies by us, our competitors or our carriers and other distributors;

	·	changes in the mix of original and licensed content, which have varying gross margins;

	·	the timing of successful mobile handset launches;

	·	the seasonality of our industry;

	·	fluctuations in the size and rate of growth of overall consumer demand for mobile products and services and related content;

	·	strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

	·	our success in entering new geographic markets;

	·	foreign exchange fluctuations;

	·	accounting rules governing recognition of revenue;

	·	the timing of compensation expense associated with equity compensation grants; and

	·	decisions by us to incur additional expenses, such as increases in marketing or research and development.

	·	significantly greater revenues and financial resources;

	·	stronger brand and consumer recognition regionally or worldwide;

	·	the capacity to leverage their marketing expenditures across a broader portfolio of mobile and non-mobile products;

	·	more substantial intellectual property of their own from which they can develop products and services without having to pay royalties;

	·	pre-existing relationships with brand owners or carriers that afford them access to intellectual property while blocking the access of competitors to that same intellectual property;

	·	greater resources to make acquisitions;

	·	lower labor and development costs; and

	·	broader global distribution and presence.

	·	the carrier’s preference for our competitors’ products and services rather than ours;

	·	the carrier’s decision not to include or highlight our products and services on the deck of its mobile handsets;

	·	the carrier’s decision to discontinue the sale of some or all of products and services;

	·	the carrier’s decision to offer similar products and services to its subscribers without charge or at reduced prices;

	·	the carrier’s decision to require market development funds from publishers like us;

	·	the carrier’s decision to restrict or alter subscription or other terms for downloading our products and services;

	·	a failure of the carrier’s merchandising, provisioning or billing systems;

	·	the carrier’s decision to offer its own competing products and services;

	·	the carrier’s decision to transition to different platforms and revenue models; and

	·	consolidation among carriers.

	·	develop and improve our operational, financial and management controls;

	·	enhance our reporting systems and procedures;

	·	recruit, train and retain highly skilled personnel;

	·	maintain our quality standards; and

	·	maintain branded content owner, wireless carrier and end-user satisfaction.

	·	challenges caused by distance, language and cultural differences;

	·	multiple and conflicting laws and regulations, including complications due to unexpected changes in these laws and regulations;

	·	the burdens of complying with a wide variety of foreign laws and regulations;

	·	higher costs associated with doing business internationally;

	·	difficulties in staffing and managing international operations;

	·	greater fluctuations in sales to end users and through carriers in developing countries, including longer payment cycles and greater difficulty collecting accounts receivable;

	·	protectionist laws and business practices that favor local businesses in some countries;

	·	foreign tax consequences;

	·	foreign exchange controls that might prevent us from repatriating income earned in countries outside the United States;

	·	price controls;

	·	the servicing of regions by many different carriers;

	·	imposition of public sector controls;

	·	political, economic and social instability;

	·	restrictions on the export or import of technology;

	·	trade and tariff restrictions;

	·	variations in tariffs, quotas, taxes and other market barriers; and

	·	difficulties in enforcing intellectual property rights in countries other than the United States.

	·	quarterly variations in our revenues and operating expenses;

	·	developments in the financial markets, and the worldwide or regional economies;

	·	announcements of innovations or new products or services by us or our competitors;

	·	fluctuations in merchant credit card interest rates;

	·	significant sales of our common stock or other securities in the open market; and

	·	changes in accounting principles.

	High		Low
Three Months Ended March 31, 2008*
First quarter	$	6.50	$	2.40
Year Ended December 31, 2007
First quarter	$	2.50	$	1.75
Second quarter	$	3.00	$	1.90
Third quarter	$	4.00	$	2.25
Fourth quarter	$	4.50	$	2.30
Year Ended December 31, 2006
First quarter	$	N/A	$	N/A
Second quarter	$	5.75	$	0.40
Third quarter	$	2.05	$	1.25
Fourth quarter	$	2.05	$	2.00

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Equity compensation plans approved by security holders	4,351,864	$	3.86	2,698,136

Equity compensation plans not approved by security holders	0		0	0

Total	4,351,864	$	3.86	2,698,136

	Three Months Ended March 31,
	2008		2007
	(In thousands)
Revenues by type:

Games	$	598	$	—
Other content		2,610		—
Total	$	3,208		—

							Three Months Ended
	Year Ended December 31,						March 31,
	2007			2006			2008
	(In thousands)						(In thousands)
Consolidated Statement of Cash Flows Data:

Capital expenditures		—			—			(103	)
Cash flows used in operating activities		(819	)		(418	)		(2,482	)
Cash flows (used in)/ provided by investing activities		(141	)		—			6,152
Cash flows provided by financing activities		2,473			6,157			—

	Payments due by period
			Less than
	Total		1 Year		1-3 Years		Thereafter
	(In thousands)
Long-term debt obligations	$	19,470	$	1,595	$	17,875	$	—
Operating lease obligations		600		272		328		—
Guaranteed royalties		4,713		1,923		2,760		30
Capitalized leases and other obligations		6,947		2,845		3,937		165

	3 months ended
	March 31, 2007

Total revenues	$	—
Operating loss		(264	)
Net loss		(264	)
Basic and diluted net loss per common share	$	(0.02	)
Basic and diluted weighted average shares outstanding	$	16,730

Name	Age	Position(s)
Bruce Stein	54	Chief Executive Officer, Director
James Lefkowitz	50	President
Jay A. Wolf	35	Chief Financial Officer, Director
Ian Aaron	48	President and Chief Executive Officer of Twistbox, Director
Russell Burke	48	Senior Vice President and Chief Financial Officer of Twistbox
David Mandell	47	Executive Vice President, General Counsel and Corporate Secretary of Twistbox
Eugen Barteska	37	Managing Director of Twistbox Games
Adi McAbian	35	Director
Peter Guber	66	Co-Chairman
Robert S. Ellin	43	Co-Chairman
Barry I. Regenstein	52	Director
Paul Schaeffer	61	Director
Robert Zangrillo	42	Director
Richard Spitz	47	Director

Name and Principal Position	Year	Salary	Bonus	Stock Awards	Option Awards		All Other Compensation	Total
		($)	($)	($)	($)		($)	($)

Bruce Stein, Chief Executive Officer	The Transition Period Ended March 31, 2008	68,974	—	—	2,615,839	(1)	—	2,684,813

Robert S. Ellin, Former Chief Executive Officer(2)	The Transition Period Ended March 31, 2008	—	—	—	—		—	—

James Lefkowitz, President	The Transition Period Ended March 31, 2008	62,500	—	—	—		—	62,500

Ian Aaron, Chief Executive Officer of Twistbox (3)	The Transition Period Ended March 31, 2008	44,000	—	—	1,389,979	(4)	—	1,433,979

Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date
Bruce Stein, Chief Executive Officer	166,667	(1)	333,333		—	2.65	11/7/17
	16,667	(2)	33,333		—	4.65	1/2/18
	—		1,001,864	(3)	—	4.25	3/17/18
Robert S. Ellin, Chief Executive Officer (4)	—		—		—	—	—
James Lefkowitz, President	333,333	(5)	166,667		—	2.65	11/7/17
Ian Aaron, Chief Executive Officer of Twistbox	54,725	(6)	—		—	.35	1/17/16
	200,000	(7)	400,000		—	4.75	2/12/18

Name and Address ⁽¹⁾	Number of Shares Beneficially Owned ⁽²⁾	Percentage Owned(%)
Trinad Capital Master Fund, Ltd.(3)	9,400,000	29.2

Robert S. Ellin(4)	9,566,666	29.4

Jay A. Wolf (5)	9,400,000	29.2

Lyrical Partners, L.P.(6)	3,000,000	8.9

David E. Smith (7)	4,000,000	11.7

Barry I. Regenstein (8)	50,000	*

Peter Guber (9)	5,238,094	16.3

Paul Schaeffer (10)	600,000	1.9

Jim Lefkowitz (11)	166,667	*

Bruce Stein (12)	183,334	*

Robert Zangrillo (13)	166,667	*

Richard Spitz (14)	99,999	*

Ian Aaron(15)	1,166,813	3.6

Adi McAbian (16)	966,813	3.0

Russell Burke (17)	194,124	*

David Mandell (18)	263,394	*

Eugen Barteska (19)	251,281	*

Spark Capital, L.P. (20)	2,857,144	8.8

ValueAct SmallCap Master Fund L.P. (21)	2,185,243	6.3

All directors and executive officers as a group (14 individuals)	18,913,852	54.2

	Transition Period Ended March 31, 2008		Year Ended December 31, 2007		Year Ended December 31, 2006
Audit fees	$	125,000	$	80,085	$	57,000

Audit related fees	$	0		0	$	0

Tax fees	$	0		0	$	0

All other fees	$	0		0	$	0

Total	$	125,000	$	80,085	$	57,000

10.3	Second Amendment to 2007 Employee, Director and Consultant Stock Plan. ⁹

10.4	Twistbox 2006 Stock Incentive Plan. ⁴

10.58	Consolidated financial statements of Twistbox Entertainment, Inc. for the six months ended September 20, 2006 and September 30, 2007. ⁴

10.59	Amendment to Employment Letter, by and between the Company and Bruce Stein, dated as of March 7, 2008.¹²

10.60	Commercial Lease Agreement, dated as of March 1, 2007, between Trinad Management LLC and Mediavest, Inc. ^*

16.1	Letter dated May 11, 2007 from Most & Company, LLP to the Securities and Exchange Commission. ¹³

	Mandalay Media, Inc.

Dated: July 15, 2008
	By:	/s/ Bruce Stein
		Chief Executive Officer

Signatures	Title	Date

/s/ Robert S. Ellin	Co- Chairman of the Board	July 15, 2008
Robert S. Ellin

/s/ Peter Guber	Co-Chairman of the Board	July 15, 2008
Peter Guber

/s/ Bruce Stein	Chief Executive Officer, Director	July 15, 2008
Bruce Stein	(Principal Executive Officer)

/s/ Jay A. Wolf	Director, Chief Financial Officer, Secretary	July 15, 2008
Jay A. Wolf	(Principal Financial Officer, Principal Accounting Officer)

	Director	July 15, 2008
Barry Regenstein

/s/ Paul Schaeffer	Director	July 15, 2008
Paul Schaeffer

/s/ Robert Zangrillo	Director	July 15, 2008
Robert Zangrillo

	Director	July 15, 2008
Richard Spitz

/s/ Ian Aaron	President and Chief Executive Officer of Twistbox, Director	July 15, 2008
Ian Aaron