ITEM 9A (T) CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of March 31, 2009 excluded AMV, which was acquired by the Company in October 2008. AMV is a wholly-owned subsidiary of the Company whose total assets represented less than 30% of the consolidated total and net revenues represented less than 40% of consolidated net revenues, respectively, of the Company as of and for the year ended March 31, 2009. Companies are allowed to exclude acquisitions from their assessment of internal control over financial reporting during the first year of acquisition while integrating the acquired company under guidelines established by the SEC.

Changes in Controls and Procedures

There were no changes in our internal controls over financial reporting or in other factors identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during the fiscal period ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal controls over financial reporting as of March 31, 2009 based on the framework in Internal Control-Integrated Framework, published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, we have concluded that our internal controls over financial reporting were effective as of March 31, 2009.

This Annual Report on Form 10-K does not include an attestation report by our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only our management’s report in this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth our directors and executive officers as of July 13, 2009:

Name	Age	Position(s)
James Lefkowitz	50	President
Russell Burke	49	Chief Financial Officer, and Senior Vice President and Chief Financial Officer of Twistbox
Ian Aaron	49	President and Chief Executive Officer of Twistbox, Director
David Mandell	48	Executive Vice President, General Counsel and Corporate Secretary of Twistbox
Adi McAbian	35	Director
Peter Guber	67	Co-Chairman
Robert S. Ellin	44	Co-Chairman
Barry I. Regenstein	52	Director
Paul Schaeffer	61	Director
Jay Wolf	36	Director
Richard Spitz	48	Director

Biographical information for our directors and executive officers are as follows:

James Lefkowitz. Mr. Lefkowitz has been our President since June 2007. He is a 20 year entertainment industry veteran with a wide range of experience in law, business, finance, film and television. Mr. Lefkowitz joined Mandalay from Cantor Fitzgerald (Cantor), where he was managing director of Cantor Entertainment. Prior to Cantor, Mr. Lefkowitz was an agent for eight years at Creative Artists Agency, the premiere talent agency in Hollywood, where he represented actors, writers and directors. He began his career as an attorney at the law firm of Manatt, Phelps, and Phillips in Los Angeles. He subsequently worked for six years as a business affairs executive at Walt Disney Studios and Touchstone Pictures. Mr. Lefkowitz is a graduate of the University of Michigan School of Business Administration and Michigan Law School.

Russell Burke. Mr. Burke has served as our Chief Financial Officer since May 21, 2009 and Senior Vice President and Chief Financial Officer of Twistbox since December 2006 and is responsible for all aspects of Twistbox’s financial infrastructure including reporting and financial systems and information systems. He also has responsibility for strategic planning and for managing investor relationships. Mr. Burke was previously the Managing Director for Australia and New Zealand for Weight Watchers International, Inc, a publicly traded company. He had full responsibility for the company’s operations across those territories, and was a member of the company’s global executive committee. Prior to this, Mr. Burke served as the Senior Vice-President and Chief Financial Officer of Pressplay, a joint venture of Sony Music and Universal Music. He joined Pressplay at the start up stage and was part of a small management team which forged a viable business in the digital music arena. He was responsible for developing all financial systems and oversaw the creation of management and external reporting; as well as international business development. Additionally, he was involved in the acquisition of Pressplay by Roxio, Inc. and the subsequent re-branding and re-launching of the service as Napster. Before joining Pressplay, Mr. Burke held a number of senior financial positions at Sony Music International in Sydney (Australia), New York and London. Mr. Burke began his career with Price Waterhouse (now PricewaterhouseCoopers) in Australia, where over a period of 13 years he worked with a broad range of clients in the Los Angeles, Sydney and Newcastle (Australia) offices of Price Waterhouse, advising on business and compliance matters. Mr. Burke received a B. Comm. from the University of Newcastle (Australia).

Ian Aaron. Mr. Aaron has been a member of our Board of Directors since February 2008 and has been the President and Chief Executive Officer of Twistbox since January 2006. He is responsible for Twistbox’s general entertainment, games and late night business units. Mr. Aaron has over 20 years of experience in the fields of international CATV, telecom and mobile distribution and has served on the board of directors of a number of international media and technology-based companies. Prior to joining Twistbox, Mr. Aaron served as President of the TV Guide Television Group of Gemstar - TV Guide International, Inc., a NASDAQ publicly traded company that engages in the development, licensing, marketing, and distribution of products and services for TV guidance and home entertainment needs of TV viewers worldwide. From August 2000 to May 2003, Mr. Aaron served as President, Chief Executive Officer and Director of TVN Entertainment, Inc., which is the largest privately held digital content aggregation, management, distribution and services company in the United States. From October 1994 to August 2000, Mr. Aaron worked in a number of capacities, including as President and Director, with SoftNet Systems, Inc., a broadband internet service provider that was traded publicly on NASDAQ. Mr. Aaron received a B.S. in electrical engineering and a B.S. in communications from the University of Illinois.

David Mandell. Mr. Mandell has served as Executive Vice President, General Counsel and Corporate Secretary of Twistbox since June 2006. Mr. Mandell is responsible for all corporate governance matters for Twistbox, including those related to all foreign and domestic subsidiaries and affiliated companies. Prior to joining Twistbox, Mr. Mandell was Senior Vice President, Business/Legal Affairs of Gemstar-TV Guide International, Inc., a NASDAQ publicly traded company that engages in the development, licensing, marketing, and distribution of products and services for TV guidance and home entertainment needs of TV viewers worldwide. From October 1998 to January 2003, Mr. Mandell served as Vice President, Business/Legal Affairs of Playboy Entertainment Group, Inc., a subsidiary of Playboy Enterprises, Inc., which owns adult film and television properties (Playboy Films, Playboy TV, Spice Networks), related home video imprints, and online content and gaming operations. Mr. Mandell received a B.A. from the University of Florida and a J.D. from the University of Miami School of Law.

Adi McAbian. Mr. McAbian has served on our Board of Directors since February 2008 and is a co-founder and has been Managing Director of Twistbox since May 2003 . As the Managing Director of Twistbox, Mr. McAbian is responsible for global sales and carrier relationships that span the globe. Mr. McAbian’s background includes experience as an entrepreneur and executive business leader with over 12 years experience as a business development and sales manager in the broadcast television industry. Mr. McAbian is experienced in entertainment and media rights management, licensing negotiation and production, and has previously secured deals with AOL/Time Warner, Discovery Channel, BMG, RAI, Disney, BBC and Universal among others. He has been responsible for facilitating strategic collaborations with over 60 mobile operators worldwide on content standards and minor protection legislation and he has been a frequent speaker, lecturing on adult mobile content business and management issues throughout Europe and the U.S., including conferences organized by iWireless World, Mobile Entertainment Forum, and Informa.

Peter Guber. Mr. Guber has served as Co-Chairman of our Board of Directors since August 2007. He is a 30-year veteran of the entertainment industry. His positions previously held include: Former Studio Chief, Columbia Pictures; Founder of Casablanca Record and Filmworks; Founder, and Former Chairman/CEO, PolyGram Filmed Entertainment; Founder and Former Co-owner, Guber-Peters Entertainment Company; Former Chairman and CEO, Sony Pictures Entertainment (SPE). Films directly produced and executive produced by Guber have received more than 50 Academy Award nominations, including four times for Best Picture. Among his personal producing credits are Witches of Eastwick, The Deep, Color Purple, Midnight Express, The Jacket, Missing, Batman and Rain Man, which won the Oscar for best picture. During Mr. Guber’s tenure at SPE, the Motion Picture Group achieved, over four years, an industry-best domestic box office market share averaging 17%. During the same period, Sony Pictures led all competitors with a remarkable total of 120 Academy Award nominations, the highest four-year total ever for a single company. After leaving Sony in 1995, Mr. Guber formed Mandalay Entertainment Group (“Mandalay Entertainment”) as a multimedia entertainment vehicle in motion pictures, television, sports entertainment and new media. Mr. Guber is a full professor at the UCLA School of Theater, Film and Television and has been a member of the faculty for over 30 years. He also can be seen every Sunday morning on the American Movie Channel (AMC), as the co-host of the critically acclaimed show, Sunday Morning Shootout. He received his B.A. from Syracuse University, and both a Masters and Juris Doctor degree in law from New York University and was recruited by Columbia Pictures Corporation from NYU where he pursued an M.B.A. degree. He is a member of the New York and California Bars.

Robert S. Ellin. Mr. Ellin has been a member of our Board of Directors and our Co-Chairman since February 2005. Mr. Ellin has twenty years of investment and turnaround experience. Mr. Ellin is a partner and co-founder of Trinad, an activist hedge fund focused on micro-cap public companies. Prior to founding Trinad, Mr. Ellin was the founder and President of Atlantis Equities, Inc. (“Atlantis”), a personal investment company. Founded in 1990, Atlantis actively managed an investment portfolio of small capitalization public companies, as well as select private company investments. Mr. Ellin frequently played an active role in its investee companies including board representation, management selection, corporate finance and other advisory services. Through Atlantis and related companies, Mr. Ellin spearheaded investments into ThQ, Inc., Grand Toys, Forward Industries, Inc. and completed a leveraged buyout of S&S Industries, Inc. where he also served as President from 1996 to 1998. Prior to founding Atlantis, Mr. Ellin worked in Institutional Sales at LF Rothschild and prior to that he was the Manager of Retail Operations at Lombard Securities. Mr. Ellin is Chief Executive Officer of Zoo Entertainment, Inc. and President of Noble Medical Technologies, Inc. Mr. Ellin currently sits on the boards of Command Security Corporation, Lateral Media, Inc., Zoo Entertainment, Inc., Noble Medical Technologies, Inc. and New Motion, Inc. d/b/a Artrinsic, Inc. Mr. Ellin also serves on the Board of Governors at Cedars-Sinai Hospital. Mr. Ellin received his B.A. from Pace University.

Barry I. Regenstein. Mr. Regenstein has served on our Board of Directors since February 2005. Mr. Regenstein is also the President and Chief Financial Officer of Command Security Corporation. Trinad Capital Master Fund, Ltd. is a significant shareholder of Command Security Corporation and Mr. Regenstein has formerly served as a consultant for Trinad Capital Master Fund, Ltd. Mr. Regenstein has over 28 years of experience with 23 years of such experience in the aviation services industry. Mr. Regenstein was formerly Senior Vice President and Chief Financial Officer of Globe Ground North America (previously Hudson General Corporation), and previously served as the company’s Controller and as a Vice President. Prior to joining Hudson General Corporation in 1982, he had been with Coopers & Lybrand in Washington, D.C. since 1978. Mr. Regenstein currently sits of the boards of ProLink Holdings Corporation, Lateral Media, Inc., Zoo Entertainment, Inc. and Command Security Corporation. Mr. Regenstein is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Maryland and an M.S. in Taxation from Long Island University.

Paul Schaeffer. Mr. Schaeffer has served on our Board of Directors since August 2007 as Vice-Chairman. He is Vice Chairman, Chief Operating Officer and Co-Founder of the Mandalay Entertainment. Along with Peter Guber, Mr. Schaeffer is responsible for all aspects of the motion picture and television business, focusing primarily on the corporate and business operations of those entities. Prior to forming Mandalay Entertainment, Mr. Schaeffer was the Executive-Vice President of Sony Pictures Entertainment, overseeing the worldwide corporate operations for SPE including Worldwide Administration, Financial Affairs, Human Resources, Corporate Affairs, Legal Affairs and Corporate Communications. During his tenure, Mr. Schaeffer also had supervisory responsibility for the $105 million rebuilding and renovation of Sony Pictures Studios. Mr. Schaeffer is a member of the Academy of Motion Pictures, Arts, & Sciences. A veteran of 20 years of private law practice, Mr. Schaeffer joined SPE from Armstrong, Hirsch and Levine, where he was a senior partner working with corporate entertainment clients. He spent two years as an accountant with Arthur Young & Company in Philadelphia. He graduated from the University of Pennsylvania Law School and received his accounting degree from Pennsylvania State University.

Jay Wolf. Mr. Wolf has served on our Board of Directors since February 2005. Mr. Wolf is a partner and co-founder of Trinad. Mr. Wolf has a broad range of investment and operations experience that includes senior and subordinated debt lending, private equity and venture capital investments, mergers and acquisitions and public equity investments. Prior to his work at Trinad, Mr. Wolf served as EVP of Corporate Development for Wolf Group Integrated Communications Ltd. where he was responsible for the company’s acquisition program. Mr. Wolf worked at Canadian Corporate Funding, Ltd., a Toronto-based merchant bank as an analyst in the firm’s senior debt department and subsequently for Trillium Growth Capital, the firm’s venture capital fund. Mr. Wolf is the Secretary of Zoo Entertainment, Inc. and Lateral Media, Inc. and Chairman and Chief Executive Officer of Noble Medical Technologies, Inc. Mr. Wolf currently sits on the boards of Noble Medical Technologies, Inc., Lateral Media, Inc., Zoo Entertainment, Inc. ProLink Holdings Corporation, Xcorporeal, Inc. and Northstar Systems, Inc. Mr. Wolf is also a member of the Board of Governors at Cedars-Sinai Hospital. Mr. Wolf received his B.A from Dalhousie University.

Richard Spitz. Mr. Spitz has served on our Board of Directors since November 2007. He is the head of Korn/Ferry International Global Technology Markets where he is in charge of go-to market strategy across all subsectors and regions within the technology market. Mr. Spitz has worked at Korn/Ferry International since May 1996 where he has advised investors and companies on leadership issues, talent management and senior executive recruitment. From August 1987 through May 1996, Mr. Spitz worked at Paul, Hastings, Janofsky and Walker. Mr. Spitz has served on and advises private and public company boards as well as on the Dean’s Special Task Force for New York University Law School. He also currently serves on the Board of Advisors to the Harold Price Center for Entrepreneurial Studies at the Anderson School of Business. Mr. Spitz received a BS from California State University, Northridge, a J.D. from Tulane University Law School and an L.L.M. from New York University Law School.

Audit Committee

As of July 14, 2009, the Board of Directors had not established an audit committee. We are exempt from the listing standards for audit committees under Rule 10A-3, Listing Standards Relating to Audit Committees, as promulgated under the Exchange Act. However, for certain purposes of the rules and regulations of the SEC, our Board of Directors is deemed to be our audit committee. Our Board of Directors has determined that Paul Schaeffer is an “audit committee financial expert” within the meaning of the rules and regulations of the SEC. We plan on establishing an audit committee that complies with the standards of Rule 10A-3 in the next 12 months.

Nominating Committee

The entire Board of Directors currently operates as our Nominating Committee.

Code of Ethics

We intend to establish a code of ethics.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers, directors, and persons owning more than ten percent of a registered class of our equity securities (“ten percent stockholders”) to file reports of ownership and changes of ownership with the SEC. Officers, directors, and ten-percent stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports they file with the SEC. To the best of our knowledge, based solely on review of the copies of such reports and amendments thereto furnished to us, we believe that during our Transition Period ended March 31, 2008, all Section 16(a) filing requirements applicable to our officers, directors, and ten percent stockholders were met except for the following: one Form 4 report was not timely filed by Eugen Barteska as to one transaction, one Form 4 was not timely filed by Guber Family Trust as to one transaction, one Form 4 report was not timely filed by Adi McAbian as to one transaction, one Form 4 report was not timely filed by Ian Aaron as to one transaction, one Form 4 was not timely filed by Peter Guber as to one transaction and one Form 4 report was not timely filed by Bruce Stein as to one transaction.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the total compensation paid during our fiscal year ended March 31, 2009, our transition period ended March 31, 2008 and our fiscal year ended December 31, 2007 for our principal executive officer and two most highly compensated executive officers:

Name and Principal Position	Year	Salary		Bonus		Stock Awards		Option Awards (1)		All Other Compensation		Total
		($)		($)		($)		($)		($)		($)

Bruce Stein, Former Chief Executive Officer(through January 12, 2009)	Year ended March 31, 2009		277,083						690,388		22,187		989,658

	The Transition Period Ended March 31, 2008		68,974						158,821		7,418		235,213

	Year ended December 31, 2007		25,641						385,931		-		411,572

James Lefkowitz, President	Year ended March 31, 2009		245,313				3,842		257,287		21,626		528,069

	The Transition Period Ended March 31, 2008		62,500		-		-		64,322		3,391-		130,213-

	Year ended December 31, 2007		126,923		100,000				295,352		4,730		527,005

Ian Aaron, Chief Executive Officer of Twistbox	Year ended March 31, 2009		132,034				182,130		482,076		23,457		819,697

	The Transition Period Ended March 31, 2008		40,385		-		-		467,950		1,944		510,278

(1) This amount was calculated using the provisions of FAS 123R. For a description of FAS 123R and the assumptions used in determining the value of the options, see “Management’s Discussion and Analysis or Plan of Operation - Critical Accounting Policies - Stock Based Compensation”.

On June 28, 2007, James Lefkowitz was appointed our President pursuant to an employment letter. Pursuant to such employment letter, his initial base salary was set at $250,000 per year. Additionally, he received a signing bonus of $100,000 and is eligible for bonus compensation at the discretion of the Board. In the event that he is terminated without cause, meaning misconduct that harms the company, conviction of a felony or a crime involving fraud or financial misconduct, violation of our Code of Ethics, or violation of confidentiality obligations, he is eligible for severance equal to one month of base pay (determined at the time of termination) for each year of employment, up to a maximum of 12 months of base pay. He is not eligible for severance if he resigns or is terminated for cause.

Our Board of Directors granted Mr. Lefkowitz options to purchase 500,000 shares of our common stock pursuant to the Plan on November 7, 2007 in connection with his employment as President. The options have a 10-year term and are exercisable at a price of $2.65 per share. One-third of the options were immediately exercisable upon grant, an additional one-third become exercisable on June 28, 2008, and the remaining one-third become exercisable on June 28, 2009.

On March 16, 2009, Mr. Lefkowitz agreed to reduce his salary for a period of one year in exchange for 37,500 shares of common stock. The shares are subject to forfeiture in the event that Mr. Lefkowitz leaves the Company within one year from the date of grant and become fully vested one year from the date of grant or in the event of change of control of the Company.

On January 17, 2006, Mr. Aaron was granted options to purchase 75,000 shares of common stock of Twistbox, pursuant to the terms of the Twistbox 2006 Stock Incentive Plan, at $0.35 per share in connection with his employment agreement. The options have a term of 10 years. Upon consummation of the Merger, all of the options held by Mr. Aaron, which pursuant to the Merger became exercisable for 54,725 shares of Mandalay common stock, became immediately exercisable.

On February 12, 2008, in connection with the closing of the Merger, Twistbox entered into the Second Amendment to Employment Agreement (the “Second Amendment”), an amendment to its existing letter employment agreement with Ian Aaron for his service as Chief Executive Officer of Twistbox, dated as of May 16, 2006, as amended by that certain Amendment to Employment Agreement dated December 30, 2007 and then in effect. Pursuant to such employment agreement, as amended by the Second Amendment (the “Employment Agreement”), Mr. Aaron shall serve in his role as CEO until February 12, 2011, such term to thereafter renew upon mutual agreement of Twistbox and Mr. Aaron (to be determined on or about August 12, 2010), unless earlier terminated pursuant to the Employment Agreement. Mr. Aaron’s Employment Agreement provides that his base salary shall be at the annual rate of $350,000 from February 12, 2008 through February 11, 2009, $367,500 from February 12, 2009 through February 11, 2010, and $385,875 from February 12, 2010 through February 12, 2011. He is eligible for an annual cash bonus of up to 50% of base salary based upon the achievement of performance goals set by Twistbox’s board of directors, a minimum of four weeks paid vacation, reimbursement of certain expenses, an automobile allowance of $1,000 per month, and life insurance equal to two times base salary. During the term of his employment and for 12 months thereafter, Mr. Aaron is prohibited from competing with the company directly or indirectly by participating in any business relating to Mobile Adult WAP, Adult MobileTV, Adult Off-Deck Services, Mobile AVS Systems or Mobile Adult Advertising Services, soliciting customers, or soliciting employees.

Upon termination of Mr. Aaron’s employment as a result of disability or death, he is entitled to receive all accrued but unpaid payments and benefits and any bonus earned but unpaid. Upon termination of Mr. Aaron’s employment as a result of cause, generally defined as willful misconduct having a material negative impact on the company, indictment for, conviction of, or pleading guilty to a felony or any crime involving fraud, dishonesty or moral turpitude, failure to perform duties or follow legal direction of Board of Directors in good faith, or any uncured other material breach of the Employment Agreement, he is entitled to receive all accrued but unpaid payments and benefits excluding any bonus earned but unpaid. In addition, if Mr. Aaron’s employment is terminated by us without cause or by Mr. Aaron for good reason, which is defined as material diminution in title, position, authority, duties or reporting requirements unless incapacitated, mandatory relocation to a principal place of employment greater than 15 miles from current location, or any other material breach of the Employment Agreement, then he is entitled to receive all accrued but unpaid payments and benefits and any bonus earned but unpaid, and (i) continued payment of base salary for a period equal to six months following the termination, (ii) a pro-rata bonus based on actual results achieved during the fiscal year of termination, (iii) continued participation during the six month period following termination in our group health plan, subject to certain conditions and restrictions and (iv) immediate vesting of all outstanding stock options to purchase our common stock.

In addition, pursuant to the Second Amendment, Mr. Aaron received options on February 12, 2008 pursuant to the Plan to purchase 600,000 shares of our common stock at an exercise price of equal to $4.75 per share. One-third of the options vested on February 12, 2008, with the remaining amount vesting annually in equal installments over a two-year period thereafter. All of such options accelerate upon a change of control or sale of all or substantially all of the assets of Mandalay.

On March 16, 2009, Mr. Aaron agreed to reduce his salary from August 8, 2008 through February 12, 2010 in exchange for 504,218 shares of the Company’s common stock. 350,360 of the shares are subject to forfeiture in the event that Mr. Lefkowitz leaves the Company within one year from the date of grant and become fully vested one year from the date of grant or in the event of change of control of the Company.

Other than as described above, we have no plans or arrangements with respect to remuneration received or that may be received by our named executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.

OUTSTANDING EQUITY AWARDS AT THE PERIOD ENDED MARCH 31, 2009

The following table presents information regarding outstanding options held by certain of our executive officers as of March 31, 2009.

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, Former Chief Executive Officer (1)		333,333		—		—		2.65	6/28/17
		33,333		—		—		4.65	1/2/08

James Lefkowitz, President (2)		333,333		166,667		—		2.65	11/7/17

Ian Aaron, Chief Executive Officer of Twistbox (3)		54,725		—		—		.35	1/17/16
		400,000		200,000		—		4.75	2/12/18

(1)

The Board of Directors granted Mr. Stein the options pursuant to the Plan on June 28, 2007 and January 2, 2008 in connection with his employment as President of the Company. The options have a 10 year term and are exercisable at a price of $2.65 and $4.65 per share, respectively. One-third of the options were immediately exercisable upon grant, an additional one-third became exercisable on the first anniversary of the grant date and the remaining one-third of the options become exercisable on the second anniversary of the grant date. At the time of his resignation on January 12, 2009 the remaining unvested options were cancelled.

(2) The Board of Directors granted Mr. Lefkowitz the options pursuant to the Plan on November 7, 2007 in connection with his employment as President of the Company. The options have a 10 year term and are exercisable at a price of $2.65 per share. One-third of the options were immediately exercisable upon grant, an additional one-third became exercisable on June 28, 2008 and the remaining one-third of the options become exercisable on June 28, 2009.

(3) Twistbox’s board of directors granted Mr. Aaron the options pursuant to the terms of the Twistbox 2006 Stock Incentive Plan on January 17, 2006 in connection with his employment as Chief Executive Officer of Twistbox. The options have a 10-year term and are exercisable at a price of $0.35 per share. Upon consummation of the Merger, all of the options held by Mr. Aaron, became immediately exercisable for 54,725 shares of Mandalay common stock. In connection with the Merger, the Board of Directors granted Mr. Aaron the options pursuant to the Plan on February 12, 2008 as partial compensation in connection with Mr. Aaron entering into an amendment to his employment agreement with Twistbox. One-third of the options were immediately exercisable upon grant, an additional one-third become exercisable on February 12, 2009 and the remaining options become exercisable on February 12, 2010.

DIRECTOR COMPENSATION

The following table presents information regarding outstanding compensation paid to our directors during the Transition Period.

Name	Fees Earned or Paid in Cash ($)		Option Awards(1) ($)		All Other Compensation ($)		Total ($)
Paul Schaeffer	$	3,750		288,246		-	$	291,996
Richard Spitz	$	3,750		240,709		-	$	244,459
Peter Guber	$	-		480,411		-	$	480,411
Robert Ellin	$	-		480,411		-	$	480,411
Barry Regenstein	$	-		70,096		-	$	70,096
Jay Wolf	$	-		175,240		-	$	175,240

(1)This amount was calculated using the provisions of FAS 123R. For a description of FAS 123R and the assumptions used in determining the value of the options, see “Management’s Discussion and Analysis or Plan of Operation - Critical Accounting Policies - Stock Based Compensation”.

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

Reference is made to the information contained in the Equity Compensation Plan Information table contained in Item 5 of this Annual Report on Form 10-K, which is incorporated herein by reference.

The following table sets forth certain information regarding the beneficial ownership of our common stock as of July 14, 2009, by (i) each of our current named executive officers and directors, (ii) all persons, including groups, known to us to own beneficially more than five percent (5%) of the outstanding common stock, and (iii) all current executive officers and directors as a group. As of July 14, 2009, there were a total of 36,653,125 † shares of common stock outstanding.

	Number of Shares
Name and Address (1)	Beneficially Owned (2)		Percentage Owned(%)

Trinad Capital Master Fund, Ltd. (2)		10,267,223		21.3	%

Robert S. Ellin (4)		10,433,890		21.7	%

Jay A. Wolf (5)		10,350,556		21.5	%

Lyrical Partners, L.P. (6)		1,500,000		3.1	%

David E. Smith (7)		2,232,000		4.6	%

Barry I. Regenstein (8)		83,333			*

Peter Guber (9)		6,080,791		12.6	%

Paul Schaeffer (10)		600,000		1.2	%

Jim Lefkowitz (11)		337,176			*

Richard Spitz (12)		133,333			*

Ian Aaron (13)		1,548,943		3.2	%

Adi McAbian (14)		966,813		2.0	%

Spark Capital, L.P. (15)		2,857,144		5.9	%

ValueAct SmallCap Master Fund L.P. (16)		3,027,940		6.3	%

All directors and executive officers as a group (12 individuals)		34,413,310		71.5	%

* Less than one percent.

† The Company and its transfer agent have a 100,723 share discrepancy that it is in the process of investigating. In the event that the transfer agent's records are correct, we will adjust our numbers accordingly in future filings.

(1) Except as otherwise indicated, the address of each of the following persons is c/o Mandalay Media, Inc., 2121 Avenue of the Stars, Suite 2550, Los Angeles, CA 90067.

(2) Except as specifically indicated in the footnotes to this table, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options, warrants or rights held by that person that are currently exercisable or exercisable, convertible or issuable within 60 days of July 14, 2009, are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

(3) Consists of 9,986,329 shares of common stock and 280,899 shares of common stock issuable upon exercise of warrants held by Trinad Capital Master Fund, Ltd. ,and 100,000 shares of common stock issuable upon conversion of 100,000 shares of Series A Convertible Preferred Stock held by Trinad Management, assuming a conversion on a one-for-one basis of the Series A Convertible Preferred Stock,. The number of shares of common stock into which the Series A Convertible Preferred Stock is convertible is subject to adjustment for stock splits, stock dividends, reorganizations, the issuance of dividends, and other events specified in our certificate of incorporation. Trinad Management is an affiliate of, and provides investment management services to, Trinad Capital Master Fund. The address of Trinad Capital Master Fund, Ltd. is 2121 Avenue of the Stars, Suite 2550, Los Angeles, CA 90067.

(4) Consists of 9,986,329 shares of common stock and 280,899 shares of common stock issuable upon exercise of warrants held by Trinad Capital Master Fund, Ltd. and100,000 shares of common stock issuable upon conversion of 100,000 shares of Series A Convertible Preferred Stock held by Trinad Management; and 166,667 vested options held personally. Trinad Management is an affiliate of, and provides investment management services to, Trinad Capital Master Fund. Robert Ellin and Jay Wolf are the managing members of Trinad Management. As a result, each may be deemed indirectly to beneficially own an aggregate of 9,400,000 shares of common stock. Mr. Ellin disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein.

(5) Consists of 9,986,329 shares of common stock and 280,899 shares of common stock issuable upon exercise of warrants held by Trinad Capital Master Fund and 100,000 shares of common stock issuable upon conversion of 100,000 shares of Series A Convertible Preferred Stock held by Trinad Management; and 83,333 vested options held personally. Trinad Management is an affiliate of, and provides investment management services to, Trinad Capital Master Fund. Robert Ellin and Jay Wolf are the managing members of Trinad Management. As a result, each may be deemed indirectly to beneficially own an aggregate of 9,400,000 shares of common stock. Mr. Wolf disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein.

(6) Lyrical Multi-Manager Fund, LP beneficially owns 1,000,000 units and Lyrical Multi-Manager Offshore Fund Ltd. beneficially owns 500,000 units of the company. Lyrical Partners, L.P., as the investment manager of Lyrical Multi-Manager Fund, LP and Lyrical Multi-Manager Offshore Fund Ltd., has the sole power to vote and dispose of the 1,500,000 shares of common stock held collectively by Lyrical Multi-Manager Fund, LP and Lyrical Multi-Manager Offshore Fund Ltd. This information is based solely on a Schedule 13D filed by Jeffrey Keswin with the Commission on February 13, 2007, which reported ownership as of September 12, 2006. The address for Lyrical Multi-Manager Fund is 405 Park Avenue, 6th Floor, New York, New York 10022.

(7) David E. Smith beneficially owns 2,232,000 shares of common stock of the company. This information is based solely on a Schedule 13D filed by David E. Smith with the Commission on November 27, 2006, which reported ownership as of September 25, 2006. The address for Mr. Smith is 888 Linda Flora Drive, Los Angeles, California 90049.

(8) Consists of a warrant to purchase 50,000 shares of our common stock and 33,333 shares of common stock underlying options.

(9) The securities indicated are held indirectly by Mr. Guber through the Guber Family Trust for which he serves as a trustee. Mr. Guber disclaims beneficial ownership of these securities except to the extent of his pecuniary interest.

(10) Consists of 500,000 shares of common stock and 100,000 shares of common stock underlying options. The securities indicated are held indirectly by Mr. Schaeffer through the Paul and Judy Schaeffer Living Trust for which he serves as a trustee. Mr. Schaeffer disclaims beneficial ownership of these securities except to the extent of his pecuniary interest.

(11) Consists of 3,842 shares of common stock and 333,333 shares of common stock underlying options.

(12) Includes 133,333 shares of common stock underlying options.

(13) Includes 454,725 shares of common stock underlying options. The address for Mr. Aaron is c/o Twistbox Entertainment, Inc., 14242 Ventura Blvd., 3 rd Floor, Sherman Oaks, CA 91423.

(14) Includes 54,725 shares of common stock underlying options. The address for Mr. McAbian is c/o Twistbox Entertainment, Inc., 14242 Ventura Blvd., 3 rd Floor, Sherman Oaks, CA 91423.

(15) Consists of: (i) 2,779,986 shares of common stock held by Spark Capital, (ii) 49,357 shares of common stock held by Spark Founders Fund, and (iii) 27,801 shares of common stock held by Spark Member Fund. Messrs. Dagres, Politi, Miller, Sabet and Conway are the sole managing members of Spark Management, the sole general partner of each of Spark Capital, Spark Member Fund and Spark Founders Fund. Each of Spark Member Fund and Spark Founders Fund invests alongside Spark Capital in investments made by Spark Capital. This information is based solely on a Schedule 13G filed with the Commission on February 21, 2008 by Spark Capital, L.P. (“Spark Capital”), Spark Management Partners, LLC (“Spark Management”), Spark Member Fund, L.P. (“Spark Member Fund”), Spark Capital Founders’ Fund, L.P. (“Spark Founders Fund”), Todd Dagres, Santo Politi, Dennis A. Miller, Bijan R. Sabet and Paul J. Conaway. The address for Spark Capital is 137 Newbury Street, Boston, Massachusetts 02116.

(16) Represents 561,798 shares of common stock and 2,466,142 shares of common stock underlying currently exercisable warrants. The address for ValueAct SmallCap Master Fund, L.P. is c/o ValueAct Capital, 435 Pacific Avenue, 4th Floor, San Francisco, CA 94133.

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

Mandalay

On September 14, 2006, we entered into a management agreement (the “Management Agreement”) with Trinad Management, an affiliate of Trinad Capital Master Fund, which is one of our principal stockholders. Pursuant to the terms of the Management Agreement, which is for a term of five years, Trinad Management will provide certain management services, including without limitation the sourcing, structuring and negotiation of a potential business combination transaction involving the Company. We have agreed to pay Trinad Management a management fee of $90,000 per quarter, plus reimbursement of all expenses reasonably incurred by Trinad Management in connection with the provision of management services. Either party may terminate with prior written notice. However, in the event the Company terminates the Management Agreement, we shall pay to Trinad Management a termination fee of $1,000,000. For the year ended March 31, 2009 the Company paid management fees under the agreement of $360,000; for the three months ended March 31, 2008, the Company paid management fees under the agreement of $90,000; and for the year ended December 31, 2007 the Company paid management fees under the agreement of $360,000.

In March 2007, the Company entered into a month to month lease for office space with Trinad Management for rent of $9,000 per month. Rent expense in connection with this lease was $104,000; $26,000 and $104,000 respectively for the year ended March 31, 2009; for the three months ended March 31, 2008; and for the year ended December 31, 2007.

In addition, Trinad Capital Master Fund beneficially owns 9,400,000 shares of Mandalay, which consists of 9,300,000 shares of Mandalay common stock and 100,000 shares of Mandalay Common Stock issuable upon conversion of 100,000 shares of Series A Convertible Preferred Stock held by Trinad Management. Robert Ellin and Jay Wolf are the managing members of Trinad Management.

Twistbox

Twistbox engages in various business relationships with its shareholders and officers and their related entities. The significant relationships are as follows:

Lease of Premises

Twistbox leases its primary offices in Los Angeles, California from Berkshire Holdings, LLC, a company with common ownership by Adi McAbian, an officer of Twistbox and a common stockholder. Amounts paid in connection with this lease were $314,000 and $213,000 for the years ended March 31, 2007 and 2006 respectively.

Twistbox was party to an oral agreement with a person affiliated with Twistbox with respect to a lease of an apartment in London. Amounts paid in connection with this lease was $48,000 ; $12,000 and $0 for the year ended March 31, 2009; for the three months ended March 31, 2008; and for the year ended December 31, 2007, respectively.

Loans

As part of the Merger, Mandalay agreed to guarantee up to $8,250,000 of Twistbox’s outstanding debt to ValueAct, with certain amendments. On July 30, 2007, Twistbox had entered into a Securities Purchase Agreement by and among Twistbox, the Subsidiary Guarantors, as defined therein, and ValueAct, pursuant to which ValueAct purchased the Note in the amount of $16,500,000 and the Warrant which entitled ValueAct to purchase from Twistbox up to a total of 2,401,747 shares of Twistbox’s common stock. In connection therewith, Twistbox and ValueAct had also entered into a Guarantee and Security Agreement by and among Twistbox, each of the subsidiaries of Twistbox, the Investors, as defined therein, and ValueAct, as collateral agent, pursuant to which the parties agreed that the Note would be secured by substantially all of the assets of Twistbox and its subsidiaries. In connection with the Merger, the Warrant was terminated and we issued two warrants in place thereof to ValueAct to purchase shares of our common stock. One of such warrants entitles ValueAct to purchase up to a total of 1,092,622 shares of our common stock at an exercise price of $7.55 per share. The other warrant entitles ValueAct to purchase up to a total of 1,092,621 shares of our common stock at an initial exercise price of $5.00 per share, which, if not exercised in full by February 12, 2009, will be permanently increased to an exercise price of $7.55 per share. Both warrants expire on July 30, 2011. We also entered into a Guaranty with ValueAct whereby Mandalay agreed to guarantee Twistbox’s payment to ValueAct of up to $8,250,000 of principal under the Note in accordance with the terms, conditions and limitations contained in the Note. The financial covenants of the Note were also amended, pursuant to which Twistbox is required maintain a cash balance of not less than $2,500,000 at all times and Mandalay is required to maintain a cash balance of not less than $4,000,000 at all times. ValueAct is one of our greater than 5% stockholders.

On October 23, 2008, in connection with the AMV Acquisition, Mandalay, Twistbox and ValueAct entered into a Second Amendment to the ValueAct Note in the amount of $16,500,000, which among other things, provides for a payment in kind election at the option of Twistbox, modifies the financial covenants set forth in the ValueAct Note to require that Mandalay and Twistbox maintain certain minimum combined cash balances and provides for certain covenants with respect to the indebtedness of Mandalay and its subsidiaries. Also on October 23, 2008, AMV granted to ValueAct a security interest in its assets to secure the obligations under the ValueAct Note. In addition, Mandalay and ValueAct entered into an allonge to each of those certain warrants issued to ValueAct in connection with the Merger, which, among other things, amended the exercise price of each of the warrants to $4.00 per share.

Director Independence

Of the 8 members on our Board of Directors, the following directors are independent directors: Paul Schaeffer, Barry Regenstein and Richard Spitz. We determined these directors are independent based on the listing standards of the NYSE Alternext.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Effective May 28, 2008, the Board approved the engagement of Grobstein Horwath & Company LLP (“Grobstein”) as the Company’s new independent registered public accounting firm to provide audit services for the Company. We have engaged Grobstein to audit our financial statements for the Transition Period Ended March 31, 2008. Raiche Ende Malter & Co. LLP conducted the reviews of our annual financial statements and other audit related services for the fiscal years ended December 31, 2007 and 2006. Effective May 28, 2008, the Board approved the engagement of Grobstein as the Company’s new independent registered public accounting firm to provide audit services for the Company.

Effective February 15, 2009, the Company's Board of Directors approved the engagement of Crowe Horwath LLP ("Crowe") as the Company's new independent certified registered public accounting firm due to the acquisition of certain assets of Grobstein, the Company's former independent certified public accounting firm. Grobstein resigned as the Company's independent certified public accounting firm simultaneous with the engagement of Crowe.

On June 2, 2009, the Company dismissed Crowe as the Company's independent registered public accounting firm. The decision to change accountants was approved by the Company's Board of Directors. No reports issued by Crowe during the time that it served as the Company's principal accountant, from February 15, 2009 to June 2, 2009, contained an adverse opinion or disclaimer of opinion, nor were any reports issued by Crowe qualified or modified as to uncertainty, audit scope, or accounting principles. During the time that Crowe served as the Company's principal accountant, there were no disagreements with Crowe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Crowe, would have caused Crowe to make reference to the subject matter of the disagreements in connection with its reports on the Company's financial statements during such periods. None of the events described in Item 304(a)(1)(iv) or (v) of Regulation S-K occurred during the period that Crowe served as the Company's principal accountant.

Effective June 2, 2009, the Company engaged Singer Lewak, LLP ("Singer") as the Company's new independent registered public accounting firm to provide audit services for the Company. During the period that Crowe served as the Company's principal accountant, the Company did not consult with Singer regarding the application of accounting principles to a specific transaction, or type of audit opinion that might be rendered on the Company's financial statements and no written or oral advice was provided by Singer that was a factor considered by the Company in reaching a decision as to accounting, auditing or financial reporting issues, and the Company did not consult with Singer on or regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.

Fees

Aggregate fees for professional services rendered to us by Singer, MacIntrye Hudson LLP, Grobstein and Raiche Ende Malter & Co. LLP for the Year Ended March 31, 2009, the Transition Period ended March 31, 2008 and for the Year ended December 31, 2007, respectively were:

	Year Ended March 31, 2009		Transition Period Ended March 31, 2008		Year Ended December 31, 2007

Audit fees		400,436	$	23,749	$	70,085

Audit related fees		3,695		4,078		-

Tax fees		8,840		-		-

All other fees		17,679		-		-

Total	$	430,650	$	27,827	$	70,085

Policy on Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors

Consistent with the SEC policies regarding auditor independence, the Board of Directors has responsibility for appointing, setting compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Board of Directors has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.

Prior to engagement of the independent auditor for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of the following four categories of services to the Board of Directors for approval.

1. Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

2. Audit-Related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

3. Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

4. Other Fees are those associated with services not captured in the other categories.

Prior to engagement, the Board of Directors pre-approves these services by category of service. The fees are budgeted and the Board of Directors requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, the Board of Directors requires specific pre-approval before engaging the independent auditor.

The Board of Directors may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Board of Directors at its next scheduled meeting.

Our Board of Directors has pre-approved the retention of Singer for all audit and audit-related services during fiscal 2009.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

The following documents are filed as part of this Annual Report on Form 10-K.

(1)Financial Statements: The list of financial statements required by this item is set forth in Item 8.

(2)Financial Statement Schedules: All financial statement schedules called for under Regulation S-X are not required under the related instructions, are not material or are not applicable and, therefore, have been omitted or are included in the consolidated financial statements or notes thereto included elsewhere in this Annual Report on Form 10-K.

(3)Exhibits: The following documents are filed as exhibits to this Annual Report on Form 10-K or have been previously filed with the SEC as indicated and are incorporated herein by reference:

2.1	Amended Disclosure Statement filed with the United States Bankruptcy Court for the Southern District of New York. 1

2.2	Amended Plan of Reorganization filed with the United States Bankruptcy Court for the Southern District of New York 1

2.3	Order Confirming Amended Plan of Reorganization issued by the United States Bankruptcy Court for the Southern District of New York. 1

2.4	Plan and Agreement of Merger, dated September 27, 2007, of Mandalay Media, Inc., a Delaware corporation, and Mediavest, Inc., a New Jersey corporation. 2

2.5	Certificate of Merger merging Mediavest, Inc., a New Jersey corporation, with and into Mandalay Media, Inc., a Delaware corporation, as filed with the Secretary of State of the State of Delaware. 2

2.6	Certificate of Merger merging Mediavest, Inc., a New Jersey corporation, with and into Mandalay Media, Inc., a Delaware corporation, as filed with the Secretary of State of the State of New Jersey. 2

2.7	Agreement and Plan of Merger, dated as of December 31, 2007, by and among Mandalay Media, Inc., Twistbox Acquisition, Inc., Twistbox Entertainment, Inc. and Adi McAbian and Spark Capital, L.P. 3

2.8	Amendment to Agreement and Plan of Merger, dated as of February 12, 2008, by and among Mandalay Media, Inc., Twistbox Acquisition, Inc., Twistbox Entertainment, Inc. and Adi McAbian and Spark Capital, L.P. 4

3.1	Certificate of Incorporation. 2

3.2

Bylaws. 2

4.1	Form of Warrant to Purchase Common Stock dated September 14, 2006. 5

4.2	Form of Warrant to Purchase Common Stock dated October 12, 2006. 6

4.3	Form of Warrant to Purchase Common Stock dated December 26, 2006. 7

4.4	Form of Warrant Issued to David Chazen to Purchase Common Stock dated August 3, 2006. 8

4.5	Senior Secured Note, dated July 30, 2007, by and between Twistbox and ValueAct SmallCap Master Fund, L.P. 4

4.6	Class A Warrant, dated July 30, 2007, issued to ValueAct SmallCap Master Fund, L.P. 4

4.7	Warrant dated February 12, 2008 issued to ValueAct SmallCap Master Fund, L.P. (fixed exercise price). 4

4.8	Warrant dated February 12, 2008 issued to ValueAct SmallCap Master Fund, L.P. (adjusting exercise price). 4

4.9	Amendment and Waiver to Senior Secured Note, dated February 12, 2008, by and between Twistbox and ValueAct SmallCap Master Fund, L.P. 4

4.10	Second Amendment, by and among Mandalay Media, Inc., Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P., dated October 23, 2008, to the Senior Secured Note, issued by Twistbox to ValueAct, due January 30, 2010, and as amended on February 12, 2008.9

4.11	Allonge, dated October 23, 2008, to the Warrant dated February 12, 2008 issued to ValueAct. 9

4.12	Allonge, dated October 23, 2008, to the Warrant dated February 12, 2008 issued to ValueAct. 9

4.13	Form of Warrant issued to Investors, dated October 23, 2008. 9

10.1	2007 Employee, Director and Consultant Stock Plan. 2

10.1.1

Form of Non-Qualified Stock Option Agreement. 2

10.2	Amendment to 2007 Employee, Director and Consultant Stock Plan. 4

10.3	Second Amendment to 2007 Employee, Director and Consultant Stock Plan. 10

10.4	Form of Restricted Stock Agreement.11

10.5	Twistbox 2006 Stock Incentive Plan. 4

10.6	Form of Stock Option Agreement for Twistbox 2006 Stock Incentive Plan. 4

10.7	Loan Agreement with Trinad Capital Master Fund, Ltd., dated March 20, 2006. 12

10.8	Form of Subscription Agreement between the Company and certain investors listed thereto dated September 14, 2006. 5

10.9	Form of Subscription Agreement between the Company and certain investors listed thereto dated October 12, 2006. 6

10.10

Series A Convertible Preferred Stock Purchase Agreement dated October 12, 2006 between the Company and Trinad Management, LLC. 6

10.11

Form of Subscription Agreement between the Company and certain investors listed thereto dated December 26, 2006. 7

10.12

Form of Subscription Agreement between the Company and certain investors listed thereto. 13

10.13

Employment Letter, by and between the Company and James Lefkowitz, dated as of June 28, 2007. 14

10.14

Salary Reduction Letter by and between Mandalay Media, Inc. and James Lefkowitz, dated March 16, 2009.11

10.15

Securities Purchase Agreement, dated July 30, 2007, by and among Twistbox Entertainment, Inc., the Subsidiary Guarantors and ValueAct SmallCap Master Fund, L.P. 4

10.16

Guarantee and Security Agreement, dated July 30, 2007 by and among Twistbox Entertainment, Inc., each of the Subsidiaries party thereto, the Investor party thereto and ValueAct SmallCap Master Fund, L.P. 4

10.17

Control Agreement, dated July 30, 2007, by and among Twistbox Entertainment. Inc. and ValueAct SmallCap Master Fund, L.P. to East West Bank. 4

10.18

Trademark Security Agreement, dated July 30, 2007, by Twistbox, in favor of ValueAct SmallCap Master Fund, L.P. 4

10.19

10.20

Guaranty given as of February 12, 2008, by Mandalay Media, Inc. to ValueAct SmallCap Master Fund, L.P. 4

10.21

Termination Agreement, dated as of February 12, 2008, by and between Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P. 4

10.22

Waiver to Guarantee and Security Agreement, dated February 12, 2008, by and between Twistbox Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P. 4

10.23

Standard Industrial/Commercial Multi-Tenant Lease, dated July 1, 2005, by and between Berkshire Holdings, LLC and The WAAT Corp. 4

10.24

Letter Agreement, dated May 16, 2006, between The WAAT Corp. and Adi McAbian. 4

10.25

Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Adi McAbian, dated as of December 31, 2007. 4

10.26

Second Amendment to Employment Agreement, dated February 12, 2008, by and between Twistbox Entertainment, Inc. and Adi McAbian. 4

10.27

Letter Agreement, dated May 16, 2006 between The WAAT Corp. and Ian Aaron. 4

10.28

Salary Reduction Letter by and between Mandalay Media, Inc. and Ian Aaron, dated March 16, 2009.11

10.29

Amendment to Employment Agreement, by and between Twistbox Entertainment, Inc. and Ian Aaron, dated as of December 31, 2007. 4

10.30

Second Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Ian Aaron, dated February 12, 2008. 4

10.31

Employment Agreement, dated May 9, 2006, between Charismatix and Eugen Barteska. 4

10.32

Employment Agreement, dated June 5, 2006, between The WAAT Corp. and David Mandell. 4

10.33

First Amendment to Employment Agreement, by and between Twistbox Entertainment, Inc. and David Mandell, dated February 12, 2008. 4

10.34

Employment Agreement, dated December 11, 2006 between Twistbox and Russell Burke. 4

10.35

First Amendment to Employment Agreement by and between Twistbox Entertainment, Inc. and Russell Burke, dated February 12, 2008. 4

10.36

Directory Agreement, dated as of May 1, 2003, between Vodafone Global Content Services Limited and The WAAT Corporation. 4

10.37

Contract Acceptance Notice - Master Global Content Reseller Agreement by Vodafone Hungary Ltd. 4

10.38

Master Global Content Agency Agreement, effective as of December 17, 2004, between Vodafone Group Services Limited and The WAAT Media Corporation. 4

10.39

Letter of Amendment, dated February 27, 2007, by and between WAAT Media Corporation and Vodafone UK Content Services Limited. 4

10.40

Content Schedule, dated December 17, 2004, by and between WAAT Media Corporation and Vodafone Group Services Limited. 4

10.41

Contract Acceptance Notice - Master Global Content Agency Agreement by Vodafone D2 GmbH. 4

10.42

Contract Acceptance Notice - Master Global Content Agency Agreement by Vodafone Sverige AB. 4

10.43

Master Global Content Reseller Agreement, effective January 17, 2005, between Vodafone Group Services Limited and The WAAT Corporation. 4

10.44

Contract Acceptance Notice - Master Global Content Agency Agreement by Vodafone New Zealand Limited. 4

10.45

Contract Acceptance Notice - Master Global Content Agency Agreement by Vodafone España, S.A. 4

10.46

Contract Acceptance Notice - Master Global Content Reseller Agreement by Vodafone UK Content Services LTD. 4

10.47

Contract Acceptance Notice - Master Global Content Reseller Agreement by VODAFONE-PANAFON Hellenic Telecommunications Company S.A.4

10.48

Content Schedule, dated January 17, 2005, by and between WAAT Media Corporation and Vodafone Group Services Limited. 4

10.49

Contract Acceptance Notice - Master Global Content Agency Agreement by Belgacom Mobile NV. 4

10.50

Content Schedule, dated January 17, 2005, by and between WAAT Media Corporation and Vodafone Group Services Limited. 4

10.51

Contract Acceptance Notice - Master Global Content Agency Agreement by Swisscom Mobile. 4

10.52

Linking Agreement, dated November 1, 2006 between Vodafone Libertel NV and Twistbox Entertainment, Inc. 4

10.53

Agreement, dated as of March 23, 2007, between Twistbox Entertainment, Inc. and Vodafone Portugal - COMUNICAÇÕES PESSOAIS, S.A 4

10.54

Contract for Content Hosting and Services “Applications and Games Services,” effective August 27, 2007 between Vodafone D2 GmbH and Twistbox Games Ltd & Co. KG. 4

10.55

Partner Agreement, dated August 27, 2007, by and between Vodafone D2 GmbH and Twistbox. 4

10.56

Letter of Amendment, dated February 25, 2006 by and between WAAT Media Corporation and Vodafone UK Content Services Limited. 4

10.57

Letter of Amendment, dated August 2007, by and between WAAT Media Corporation and Vodafone UK Content Services Limited. 4

10.58

Content Schedule, dated December 17, 2004, by and between WAAT Media Corporation and Vodafone Group Services Limited. 4

10.59

Consolidated financial statements of Twistbox Entertainment, Inc. for the fiscal years ended March 31, 2006 and March 31, 2007. 4

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

10.61	Stock Purchase Agreement, by and among Mandalay Media, Inc., Jonathan Cresswell, Nathaniel MacLeitch and the shareholders of AMV Holding Limited signatories thereto, dated as of October 8, 2008.15
10.62	Amendment to the Stock Purchase Agreement, between Mandalay Media, Inc. and Nathaniel MacLeitch as the Sellers’ Representative, dated as of October 23, 2008.9

10.63	Employment Agreement, by and between AMV Holding Limited and Nathaniel MacLeitch, dated as of October 23, 2008. 9

10.64	Employment Agreement, by and between AMV Holding Limited and Jonathan Cresswell (a/k/a Jack Cresswell), dated as of October 23, 2008. 9

10.65	Securities Purchase Agreement, by and among Mandalay Media, Inc. and the investors set forth therein, dated as of October 23, 2008.9

10.66	Note, dated October 23, 2008, issued by Mandalay Media, Inc. to Nathaniel MacLeitch, as the Sellers’ Representative.9

10.67	Management Agreement dated September 14, 2006 between the Company and Trinad Management, LLC.5

10.68	Commercial Lease Agreement, dated as of March 1, 2007, between Trinad Management LLC and Mediavest, Inc. 16

16.1	Letter dated May 11, 2007 from Most & Company, LLP to the Securities and Exchange Commission. 17

16.2	Letter regarding change in certifying accountant, dated June 2, 2008 from Raich Ende Malter & Co. LLP.18

16.3	Letter from Grobstein Horwath & Company LLP, dated February 20, 2009.19

16.4	Letter regarding change in certifying accountant, dated June 4, 2009 from Crowe Horwath, LLP. 20

31.1	Certification of James Lefkowitz, Principal Executive Officer. *

31.2	Certification of Russell Burke, Principal Financial Officer. *

32.1	Certification of James Lefkowitz, Principal Executive Officer pursuant to U.S.C. Section 1350. *

32.2	Certification of Russell Burke, Principal Financial Officer pursuant to U.S.C. Section 1350. *

* Filed herewith

(1) Incorporated by reference to the Registrant’s Annual Report on Form 10-KSB (File No. 000-10039), filed with the Commission on December 2, 2005.

(2) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on November 14, 2007.

(3) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on January 2, 2008.

(4) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on February 12, 2008.

(5) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on September 20, 2006.

(6) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on October 18, 2006.

(7) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on January 3, 2007.

(8) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on August 9, 2006.

(9) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on October 27, 2008.

(10) Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on March 28, 2008.

(11) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on March 20, 2009.

(12) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on March 23, 2006.

(13) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on July 30, 2007.

(14) Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-10039), filed with the Commission on July 3, 2007.

(15) Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on October 15, 2008.

(16) Incorporated by reference to our Registrant’s Transition Report on Form 10-KT (File No. 000-10039), filed with the Commission on July 15, 2008.

(17) Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on May 16, 2007.

(18) Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 2, 2008.

(19) Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on February 23, 2009.

(20) Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ), filed with the Commission on June 4, 2009.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Mandalay Media, Inc.
Dated: July 14, 2009
	By:	/s/ James Lefkowitz
		President (Principal Executive Officer)

Pursuant to the requirements of the Exchange Act, this Report has been signed below by the following persons in the capacities and on the dates indicated.

Signatures	Title	Date

/s/ Robert S. Ellin	Co- Chairman of the Board	July 14, 2009
Robert S. Ellin

/s/ Peter Guber	Co-Chairman of the Board	July 14, 2009
Peter Guber

/s/ James Lefkowitz	President	July 14, 2009
James Lefkowtiz	(Principal Executive Officer)

/s/ Russell Burke	Chief Financial Officer	July 14, 2009
Russell Burke	(Principal Financial Officer)

/s/ Jay A. Wolf	Director	July 14, 2009
Jay A. Wolf

	Director	July 14, 2009
Barry Regenstein

/s/ Paul Schaeffer	Director	July 14, 2009
Paul Schaeffer

/s/ Richard Spitz	Director	July 14, 2009
Richard Spitz

/s/ Ian Aaron	President and Chief Executive Officer of Twistbox, Director	July 14, 2009
Ian Aaron

		Director		July 14, 2009
Adi McAbian

Page(s)

Reports of Independent Registered Public Accounting Firms	F-2

Consolidated Balance Sheets as of March 31, 2009 and March 31, 2008	F-5

Consolidated Statements of Operations for the year ended March 31, 2009; the three months
ended March 31, 2008 and the year ended December 31, 2007	F-6

Consolidated Statements of Stockholders’ Equity and Comprehensive Loss for
the year ended March 31, 2009; the three months ended March 31, 2008; and
the year ended December 31, 2007	F-7

Consolidated Statements of Cash Flows for the year ended March 31, 2009;
the three months ended March 31, 2008; and the year ended December 31, 2007	F-8

Notes to Consolidated Financial Statements	F-9-36

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Mandalay Media, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Mandalay Media, Inc. and Subsidiaries collectively, (the “Company”) as of March 31, 2009, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. These consolidated 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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2009, and the results of its operations and its cash flows for the year ended March 31, 2009, in conformity with generally accepted accounting principles in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, certain factors give rise to substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We were not engaged to examine management's assessment of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2009, included in the Form 10-K annual report and, accordingly, we do not express an opinion thereon.

SingerLewak LLP

Los Angeles, California

July 14, 2009

F-2

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

F-3

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

F-4

Mandalay Media Inc. and Subsidiaries
Consolidated Balance Sheets

(In thousands, except share amounts)

	March 31,			March 31,
	2009			2008
ASSETS

Current Assets
Cash and cash equivalents	$	5,927		$	10,936
Accounts receivable, net of allowances of $174 and $168 respectively		10,745			6,162
Prepaid expenses and other current assets		1,334			531
Total current assets		18,006			17,629

Property and equipment, net		1,230			1,037
Other long-term assets		-			301
Intangible assets, net		16,121			19,780
Goodwill		55,833			61,377
TOTAL ASSETS	$	91,190		$	100,124


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$	9,557		$	2,399
Accrued license fees		2,795			3,833
Accrued compensation		592			688
Current portion of long term debt		23,296			248
Other current liabilities		5,899			2,087
Total currrent liabilities		42,139			9,255

Accrued license fees, long term portion		-			1,337
Long term debt, net of current portion		-			16,483
Other long-term liabilities		27			-
Total liabilities	$	42,166			27,075

Commitments and contingencies (Note 14)

Stockholders' equity
Preferred stock
Series A Convertible Preferred Stock
at $0.0001 par value; 100,000 shares authorized,issued and outstanding
(liquidation preference of $1,000,000)		100			100
Common stock, $0.0001 par value: 100,000,000 shares authorized;
39,653,125 issued and outstanding at March 31, 2009;
32,149,089 issued and outstanding at March 31, 2008;		4			3
Additional paid-in capital		93,918			76,154
Accumulated other comprehensive income/(loss)		(129	)		61
Accumulated deficit		(44,869	)		(3,269	)
Total stockholders' equity		49,024			73,049
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	91,190		$	100,124

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

F-5

Mandalay Media Inc. and Subsidiaries
Consolidated Statement of Operations

(In thousands, except per share amounts)

	Year Ended			3 Months Ended			Year Ended
	March 31,			March 31,			December 31,
	2009			2008			2007

Net Revenues	$	31,256		$	3,208		$	-

Cost of revenues
License fees		7,387			1,539			-
Adjustment to impairment of guarantees		-			(1,745	)		-
Other direct cost of revenues		3,763			53			-
Total cost of revenues		11,150			(153	)		-
Gross profit		20,106			3,361			-

Operating expenses
Product development		6,981			946			-
Sales and marketing		9,236			891			-
General and administrative		10,338			1,467			2,521
Amortization of intangible assets		628			72			-
Impairment of goodwill and intangible assets		31,784			-			-
Total operating expenses		58,967			3,376			2,521

Loss from continuing operations		(38,861	)		(15	)		(2,521	)

Interest and other income/(expense)
Interest income		141			97			317
Interest (expense)		(2,302	)		(310	)		-
Foreign exchange transaction gain (loss)		(471	)		2			-
Other (expense)		(71	)		(56	)		-
Interest and other income/(expense)		(2,703	)		(267	)		317
Loss from continuing operations before income taxes		(41,564	)		(282	)		(2,204	)
Income tax benefit / (provision)		111			(16	)		-
Net loss from continuing operations net of taxes		(41,453	)		(298	)		(2,204	)

Discontinued operations, net of taxes:
Loss from discontinued operations, net of taxes		(147	)		-			-

Net loss	$	(41,600	)	$	(298	)	$	(2,204	)

Comprehensive loss	$	(41,790	)	$	(298	)	$	(2,204	)

Basic and Diluted net loss per common share
Continuing operations	$	(1.14	)	$	(0.01	)	$	(0.12	)
Discontinued opeations	$	(0.00	)	$	-		$	(0.12	)
Net loss	$	(1.15	)	$	(0.01	)	$	(0.12	)

Weighted average common shares outstanding, basic and diluted		36,264			21,628			18,997

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

F-6

Mandalay Media Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

Year Ended March 31, 2009; Three Months Ended March 31, 2008 and Year Ended December, 2007

												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, 2006		16,730,000	$	2		100,000	$	100	$	6,309		$	-		$	(767	)	$	5,644

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																					$	(2,204	)

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

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																					$	(237	)

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

Net Loss																(41,600	)		(41,600	)		(41,600	)
Issuance of common stock
in satisfaction of payable		25,000		0						100									100
Issuance of common stock
on cashless exercise of warrants		241,688		0															0
Issuance of common stock
on cashless exercise of warrants		38,000		0															0
Issuance of common stock
related to acquisition		4,499,997		1						9,899									9,900
Adjustment in valuation of warrants
in connection with the acquisition										377									377
Issuance of common stock
in satisfaction of payable		45,000		0						79									79
Issuance of common stock
on cashless exercise of warrants		285,500		0															0
Issuance of common stock
net of issuance costs		1,685,394		0						4,354									4,354
Issuance of common stock
as part of compensation		683,457		0						155									155
Foreign currency translation gain/(loss)													(190	)					(190	)		(190	)
Deferred stock-based compensation										2,800									2,800

Comprehensive loss																					$	(41,790	)

Balance at March 31, 2009		39,653,125	$	4		100,000	$	100	$	93,918		$	(129	)	$	(44,869	)	$	49,024

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

F-7

Mandalay Media Inc. and Subsidiaries
Consolidated Statements of Cash Flows

(In thousands)

	Year Ended			3 Months Ended			Year Ended
	March 31,			March 31,			December 31,
	2009			2008			2007
Cash flows from operating activities
Net loss	$	(41,600	)	$	(298	)	$	(2,204	)
Less: Loss from discontinued operations, net of taxes		(147	)
Net loss from continuing operations, net of taxes		(41,453	)		(298	)		(2,204	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		1,518			253			-
Allowance for doubtful accounts		6			168			-
Stock-based compensation		2,955			313			1,036
Impairment of goodwill and intangibles		31,784
(Increase) / decrease in assets:
Accounts receivable		4,489			(1,364	)		-
Prepaid expenses and other		(312	)		(222	)		-
Increase / (decrease) in liabilities:
Accounts payable		(3,280	)		352			349
Accrued license fees		(1,039	)		(2,043	)		-
Accrued compensation		(96	)		(128	)		-
Other liabilities		68			487			-

Net cash used in operating activities		(5,360	)		(2,482	)		(819	)

Cash flows from investing activities

Purchase of property and equipment		(219	)		(103	)		-
Transaction costs		(802	)		(424	)		(141	)
Cash used in acquisition of subsidiary		(6,132	)		-			-
Cash acquired with acquisitionof subsidiary		3,380			6,679			-

Net cash used in investing activities		(3,773	)		6,152			(141	)

Cash flows from financing activities

Proceeds from the sale of common stock
(net of issuance costs of $146)		4,354			-			2,473
Instalment payments related to prior acquisition		(54	)		-			-

Net cash provided by financing activities		4,300			-			2,473

Effect of exchange rate changes on cash and cash equivalents		(176	)		11			-

Net increase/(decrease) in cash and cash equivalents		(5,009	)		3,681			1,513

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

Cash and cash equivalents, end of period	$	5,927		$	10,936		$	7,255

Supplemental disclosure of cash flow information:

Taxes paid		561			16			-

Noncash investing and financing activities:

Acquisition of subsidiary		16,047			66,025			-

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

F-8

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., was originally incorporated in the state of Delaware on November 6, 1998 under the name eB2B Commerce, Inc. On April 27, 2000, it merged into DynamicWeb Enterprises Inc., a New Jersey corporation, the surviving company, and changed its name to eB2B Commerce, Inc. On April 13, 2005, the Company changed its name to Mediavest, Inc. Through January 26, 2005, the Company and its former subsidiaries were engaged in providing business-to-business transaction management services designed to simplify trading between buyers and suppliers. The Company was inactive from January 26, 2005 until its merger with Twistbox Entertainment, Inc., February 12, 2008 (Note 6). On September 14, 2007, the Company was re-incorporated in the state of Delaware as Mandalay Media Inc.

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 had the same status and par value as the respective stock of Mediavest and Mandalay acceded to all the rights, acquired all the assets and assumed all of the liabilities of Mediavest.

On February 12, 2008, the Company completed a merger (the “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. In connection with the Merger, the Company assumed all the outstanding options under Twistbox’s Stock Incentive Plan by the issuance of options to purchase 2,463 shares of common stock of the Company, including 2,145 vested and 319 unvested options.

After the Merger, Twistbox became a wholly-owned subsidiary of the Company, and the company’s only active subsidiary at that time. 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.

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

F-9

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

In consideration for the shares, and subject to adjustment as set forth in the agreement, the aggregate purchase price (the “Purchase Price”) consisted of: (a) $5,375 in cash (the “Cash Consideration”); (b) 4,500 fully paid shares of Common Stock (the “Stock Consideration”); (c) a secured promissory note in the aggregate original principal amount of $5,375 (the “Note”); and (d) additional earn-out amounts, if any, if the Acquired Companies achieve certain targeted earnings for each of the periods from October 1, 2008 to March 31, 2009, April 1, 2009 to March 31, 2010, and April 1, 2010 to September 30, 2010, as determined in accordance with the Agreement. The Purchase Price was subject to certain adjustments based on the working capital of AMV, to be determined initially within 75 days of the closing, and subsequently within 60 days following June 30, 2009. Any such adjustment of the Purchase Price will be made first by means of an adjustment to the principal sum due under the Note, as set forth in the Agreement. An initial adjustment of $443 was made subsequent to closing, and has been added to the Note. The initial period earn-out has been recognized in the current period and has been added to the amount of consideration for the acquisition, as described in Note 6.

AMV is a leading mobile media and marketing company delivering games and lifestyle content directly to consumers in the United Kingdom, Australia, South Africa and various other European countries. AMV markets its well established branded services through a unique Customer Relationship Management (CRM) platform that drives revenue through mobile internet, print and TV advertising. AMV is headquartered in Marlow, outside of London in the United Kingdom.

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. All material intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

The Company’s revenues are derived primarily by licensing material and software in the form of products (Image Galleries, Wallpapers, video, WAP Site access, Mobile TV) 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.

F-10

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

The Company either markets and distributes its products directly to consumers, or distributes products through mobile telecommunications service providers (carriers), in which case the carrier markets the product, images or games to end users. License fees for perpetual and subscription licenses are usually billed upon download of the product, image or game by the end user. In the case of subscriber licenses, many subscriber agreements provide for automatic renewal until the subscriber opts-out, while others provide opt-in renewal. In either case, subsequent billings for subscription licenses are generally billed monthly. The Company 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.

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

The Company estimates revenues from carriers in the current period when reasonable estimates of these amounts can be made. Most carriers only provide detailed sales transaction data on a one to two month lag. Estimated revenue is treated as unbilled receivables until the detailed reporting is received and the revenues can be billed. Some carriers provide reliable interim preliminary reporting and others report sales data within a reasonable time frame following the end of each month, both of which allow the Company to make reasonable estimates of revenues and therefore to recognize revenues during the reporting period when the end user licenses the product, image or game. Determination of the appropriate amount of revenue recognized involves judgments and estimates that the Company believes are reasonable, but it is possible that actual results may differ from the Company’s estimates. The Company’s estimates for revenues include consideration of factors such as preliminary sales data, carrier-specific historical sales trends, volume of activity on company monitored sites, seasonality, time elapsed from launch of services or product lines, the age of games and the expected impact of newly launched games, successful introduction of new handsets, growth of 3G subscribers by carrier, promotions during the period and economic trends. When the Company receives the final carrier reports, to the extent not received within a reasonable time frame following the end of each month, the Company records any differences between estimated revenues and actual revenues in the reporting period when the Company determines the actual amounts. Revenues earned from certain carriers may not be reasonably estimated. If the Company is unable to reasonably estimate the amount of revenues to be recognized in the current period, the Company recognizes revenues upon the receipt of a carrier revenue report and when the Company’s portion of licensed revenues are fixed or determinable and collection is probable. To monitor the reliability of the Company’s estimates, management, where possible, reviews the revenues by country by carrier and by product line on a regular basis to identify unusual trends such as differential adoption rates by carriers or the introduction of new handsets. If the Company deems a carrier not to be creditworthy, the Company defers all revenues from the arrangement until the Company receives payment and all other revenue recognition criteria have been met.

F-11

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

In accordance with Emerging Issues Task Force, or EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent, the Company recognizes as revenues the amount the carrier reports as payable upon the sale of the Company’s products, images or games. The Company has evaluated its carrier agreements and has determined that it is not the principal when selling its products, images or games through carriers. Key indicators that it evaluated to reach this determination include:

•

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

•

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

•

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

•

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

•

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

•

The Company has limited risks, including no inventory risk and limited credit risk

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

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 year ended March 31, 2009, the three months ended March 31, 2008 and the year ended December 31, 2007 consisted of 2,478; 4,415 and 1,592 shares, respectively, and were not included in the computation of diluted loss per share as they were anti-dilutive in each period.

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.

F-12

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

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 the 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.

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.

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.

F-13

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. Direct response advertising is expensed immediately since there is a very limited ongoing return. Advertising expense was $4,874; $226 and $0 in the year ended March 31, 2009, the three months ended March 31, 2008 and the year ended December 31, 2007, respectively. Advertising costs are expensed as incurred.

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 (loss) of ($190) in the year ended March 31, 2009; $61 in the three months ended March 31, 2008 and $0 in the year ended December 31, 2007 has been reported as a component of comprehensive loss in the consolidated statement of stockholders’ equity and comprehensive loss. Translation gains or losses are shown as a separate component of accumulated deficit. Other comprehensive income / (loss) amounted to ($190) in the year ended March 31, 2009; $61 in the three months ended March 31, 2008 and $0 in the year ended December 31, 2007.

Concentrations of Credit Risk.

Financial instruments which potentially subject us to concentration of credit risk consist principally of cash and cash equivalents, and accounts receivable. We have placed cash and cash equivalents with a single high credit-quality institution. As of March 31, 2008, we did not have any long-term marketable securities. The Company’s sales are made either directly to consumers, with the billings performed by and the receivable due from industry aggregators; or directly to the 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, 2009, our two largest customers represented approximately 19% and 13% of our gross accounts receivable outstanding. These customers accounted for 5% and 19%, respectively, of our gross sales in the year ended March 31, 2009. At March 31, 2008 our largest customer represented approximately 36% of our gross accounts receivable outstanding; and this customer accounted for 48% of our gross sales in the three months ended March 31, 2008.

F-14

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 are 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 and Indefinite Life Intangible Assets

Goodwill represents the excess of cost over fair value of net assets of businesses acquired. In accordance with Statement of Financial Accounting Standards No. 142 (“SFAS 142”) “Goodwill and Other Intangible Assets”, the value assigned to goodwill and indefinite lived intangible assets, including trademarks and tradenames, is not amortized to expense, but rather they are evaluated at least on an annual basis to determine if there are potential impairments. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit goodwill is less than the carrying value. If the fair value of an indefinite lived intangible (such as trademarks and trade names) is less than its carrying amount, an impairment loss is recorded. Fair value is determined based on discounted cash flows, market multiples or appraised values, as appropriate. Discounted cash flow analysis requires assumptions about the timing and amount of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these factors can significantly affect the value of the intangible asset. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s judgment. Any changes in key assumptions about the Company’s businesses and their prospects, or changes in market conditions, could result in an impairment charge. Some of the more significant estimates and assumptions inherent in the intangible asset valuation process include: the timing and amount of projected future cash flows; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal or regulatory trends.

The Company has determined that there was an impairment of goodwill, amounting to $31,784, as a result of completing its annual impairment analysis as of March 31, 2009. In performing the related valuation analysis the Company used various valuation methodologies including probability weighted discounted cash flows, comparable transaction analysis, and market capitalization and comparable company multiple comparison. The impairment is detailed in Note 6 below.

Impairment of Long-Lived Assets and Finite Life 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.

F-15

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

Intangible assets subject to amortization primarily consist of customer lists, license agreements and software that have been acquired. The intangible asset values assigned to the identified assets for each acquisition were generally determined based upon the expected discounted aggregate cash flows to be derived over the estimated useful life. The method of amortizing the intangible asset values are based upon the Company’s historical experience. The Company reviews the recoverability of its finite-lived intangible assets for recoverability whenever events or circumstances indicated that the carrying amount of an asset may not be recoverable. Recoverability is assessed by comparison to associated undiscounted cash flows. The Company determined that there were no impairments during the year ended March 31, 2009.

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.

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.

F-16

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

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.

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. The Company does not have any preferred shares subject to mandatory redemption. 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, stock-based compensation expense, the application of purchase accounting, the carrying value and recoverability of long-lived assets, including goodwill, amortizable intangibles, the realizability of deferred tax assets, and the fair value of equity instruments.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“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. The adoption of SFAS 160 did not have a significant impact on the Company’s Consolidated Financial Statements.

F-17

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. 141R (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 non controlling 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. In April 2009, the FASB issued FSP FAS 141(R)-1, which amends the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The impact of the adoption of SFAS No. 141(R) and FSP FAS 141(R)-1 on the Company’s results of operations and financial position will depend on the nature and extent of business combinations that it completes, if any, in or after fiscal 2010; however, it is expected to change the Company’s accounting treatment for any business combinations completed after this statement becomes effective.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB No. 133,” (“SFAS 161”). SFAS 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 161 also applies to non-derivative hedging instruments and all hedged items designated and qualifying under SFAS 133. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS 161 encourages, but does not require, comparative disclosures for periods prior to its initial adoption. The Company does not expect the adoption of SFAS 161 to have a significant impact on its results of operations or financial position.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of Intangible Assets”. FSP 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, “Goodwill and Other Intangible Assets”. This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The impact of the adoption of FSP FAS 142-3 on the Company’s results of operations and financial position will depend on the nature and extent of business combinations that it completes, if any, in or after fiscal 2010.

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. One of the Company’s operating subsidiaries, Twistbox, has sustained substantial operating losses since commencement of operations. The Company has also incurred negative cash flows from operating activities and the majority of the Company’s assets are intangible assets and goodwill, which have been subject to impairment in the current year.

In addition, Twistbox has a significant amount of debt, in the form of a Secured Note, as detailed in Note 8, which becomes due within twelve months. The Company has guaranteed 50% of this debt, and the group is subject to covenants including a covenant to maintain a minimum cash balances of $4 million. The company was not in breach of any covenants at March 31, 2009. There is a significant risk that the minimum cash balance covenant will be breached as the result of paying out the earn-out payment associated with the acquisition of AMV as more fully described in Note 6. We have initiated discussions with the holder of the Secured Note regarding a waiver for the covenant.

F-18

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

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 restructuring its financing arrangements, obtaining additional financing, and/or reaching accommodations with the holder of the Secured Note, and reaching a positive cash flow position while maintaining adequate liquidity.

The Company has undertaken a number of specific steps to achieve positive cashflow in the future. These actions include the acquisition consummated in the current year along with the economic cost associated with the integration, and debt restructuring and equity placements which occurred at the same time as the acquisition. The Company has taken further action to reduce its ongoing operating cost base, and has been in discussions with the holder of the Secured Note and with unsecured creditors regarding restructuring of commitments. Other actions include continued increases in revenues by introducing new products and revenue streams, reductions in the cost of revenues, continued expansion into new territories, reviewing additional financing options, and accretive acquisitions. Management believes that actions undertaken as a whole provide the opportunity for the Company to continue as a going concern, although this will be highly dependent on the ability to restructure our financing arrangements.

Balance Sheet Components

Accounts Receivable

	March 31,			March 31,
	2009			2008

Accounts receivable	$	10,919		$	6,330
Less: allowance for doubtful accounts		(174	)		(168	)
	$	10,745		$	6,162

Accounts receivable includes amounts billed and unbilled as of the respective balance sheet dates. Unbilled receivables were $5,269 at March 31, 2009 and $983 at March 31, 2008. During the year ended March 31, 2009, $6 was provided for and $0 was written off against the allowance. During the three months ended March 31, 2008, $0 was provided for and $0 was written off against the allowance. During the year ended December 31, 2007 $0 was provided for and $0 was written off against the allowance.

F-19

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

Property and Equipment

	March 31,			March 31,
	2009			2008

Equipment	$	1,192		$	654
Equipment subject to capitalized lease		-			71
Furniture & fixtures		386			228
Leasehold improvements		140			140
		1,718			1,093
Accumulated depreciation		(488	)		(56	)
	$	1,230		$	1,037

Depreciation expense for the year ended March 31, 2009 was $431; for the three months ended March 31, 2008 was $56; and for the year ended December 31, 2007 was $0. Depreciation expense is included in other expenses in the Consolidated Statements of Operations.

Description of Stock Plans

On September 27, 2007, the stockholders of the Company adopted the 2007 Employee, Director and Consultant Stock Plan (the “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.

F-20

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			Weighted Average
	Shares			Exercise Price
Outstanding at December 31, 2006		-			-
Granted		1,600		$	2.64
Canceled		-			-
Exercised		-			-
Outstanding at December 31, 2007		1,600		$	2.64
Granted		2,752		$	4.57
Transferred in from Twistbox		2,462		$	0.64
Canceled		(12	)	$	0.81
Outstanding at March 31, 2008		6,802		$	2.70
Granted		1,860		$	2.67
Canceled		(1,702	)	$	0.48
Exercised		-		$	0.48
Outstanding at March 31, 2009		6,960		$	2.52
Exercisable at March 31, 2009		5,426		$	2.29

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
	Year ended					Options tranferred
	March 31, 2009			Options Granted		from Twistbox
Expected life (years)		6		4 to 6		3 to 7
Risk-free interest rate	3.90% to 3.92		%	2.7% to 3.89	%	2.03% to 5.03	%
Expected volatility	49.73% to 54.33		%	70% to 75.2	%	70% to 75	%
Expected dividend yield		0	%	0	%	0	%

The exercise price for options outstanding at March 31, 2009 was as follows:

Options outstanding
	Weighted
	Average				Weighted
	Remaining		Number		Average		Aggregate
Range of	Contractual Life		Outsanding		Exercise		Intrinsic
Exercise Price	(Years)		March 31, 2009		Price		Value

$0 - $1.00		7.33		2,277	$	0.64	$	618,093
$2.00 - $3.00		8.99		2,950	$	2.67	$	-
$4.00 - $5.00		8.88		1,733	$	4.75	$	-
		8.42		6,960	$	2.52	$	618,093

F-21

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

The exercise price for options exercisable at March 31, 2009 was as follows:

Options Exercisable
	Weighted
	Average				Weighted
	Remaining		Options		Average		Aggregate
Range of	Contractual Life		Exercisable		Exercise		Intrinsic
Exercise Price	(Years)		March 31, 2009		Price		Value

$0 - $1.00		7.31		2,174	$	0.63	$	603,476
$2.00 - $3.00		8.94		2,098	$	2.66	$	-
$4.00 - $5.00		8.88		1,154	$	4.75	$	-
		8.27		5,426	$	2.29		603,476

During the year, the Company approved the issuance of an aggregate of 938,697 shares of common stock pursuant to the Company’s 2007 Employee, Director and Consultant Stock Plan at a purchase price of $0.0001 per share to certain executives of the Company and subsidiary in connection with agreed salary reductions.

A summary of the status of the Company’s nonvested shares as of March 31, 2009, and changes during the year ended March 31, 2009 is presented below:

				Weighted Average
				Grant Date
Nonvested shares	Shares (000s)			Fair Value
Nonvested at March 31, 2008		-		$	-
Granted		745,468		$	0.85
Vested		246,702		$	0.85
Nonvested at March 31, 2009		498,767		$	0.85
Forfeited		(62,011	)	$	0.88

As of March 31, 2009, there was $424 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a period of 11.5 months. The total fair value of shares vested during the year ended March 31, 2009, was $210.

Stock-based compensation expense of $3,169 for the year ended March 31, 2009; $313 for the three months ended March 31, 2008; and $1,036 for the year ended December 31, 2007, is included primarily in general and administrative expense.

F-22

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

Acquisitions/Purchase Price Accounting

Twistbox Entertainment, Inc. and related entities

On February 12, 2008, the Company completed an acquisition of Twistbox Entertainment, Inc. (“Twistbox”) through an exchange of all outstanding capital stock of Twistbox for 10,180 shares of common stock of the Company (the “Merger”) and the Company’s assumption of all the outstanding options of Twistbox’s 2006 Stock Incentive Plan by the issuance of options to purchase 2,463 shares of common stock of the Company, including 2,145 vested and 318 unvested options. After the Merger, Twistbox became a wholly-owned subsidiary of the Company.

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 two warrants, one to purchase 1,093 and the other to purchase 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. These warrants were subsequently amended as described in Note 8.

The purchase consideration was determined 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. During the year, a further $59 of transaction costs were recognized, with the result that the purchase consideration was increased to $67,538, with an equivalent increase in Goodwill. The options and warrants 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 $67,538 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:

F-23

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

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		61,436
	$	67,538

The Merger related restructuring reserves were subsequently reduced by $215, increasing net assets acquired and consequentially reducing goodwill by that amount. As a result, Goodwill recognized in the above transaction amounted to $61,221. Goodwill in relation to the acquisition of Twistbox is not expected to be deductible for income tax purposes. Merger related restructuring reserves include reserves for employee severance and for office relocation.

AMV Holding Limited group

On October 23, 2008, the Company completed an acquisition of 100% of AMV Holding Limited, a United Kingdom private limited company (“AMV”) and 80% of Fierce Media Limited. The acquisition was effective on October 1, 2008.

Subject to adjustment as set forth in the Stock Purchase Agreement, the aggregate purchase price (the “Purchase Price”) consisted of: (a) $5,375 in cash (the “Cash Consideration”); (b) 4,500 fully paid and non-assessable shares of Common Stock (the “Stock Consideration”); (c) a secured promissory note in the aggregate original principal amount of $5,375 (the “Note”); and (d) additional earn-out amounts, if any, if the Acquired Companies achieve certain targeted earnings for each of the periods from October 1, 2008 to March 31, 2009, April 1, 2009 to March 31, 2010, and April 1, 2010 to September 30, 2010, as determined in accordance with the Stock Purchase Agreement. The Purchase Price is subject to certain adjustments based on the working capital of AMV, to be determined initially within 75 days of the closing, and subsequently within 60 days following June 30, 2009. Any such adjustment of the Purchase Price will be made first by means of an adjustment to the principal sum due under the Note, as set forth in the Stock Purchase Agreement. The initial adjustment has been determined preliminarily as $443, to be added to the secured promissory note.

F-24

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

Prior to closing, each outstanding option to purchase shares of capital stock of AMV (an “AMV Option”) was either exercised in full or terminated. The Note matures on January 30, 2010, and bears interest at an initial rate of 5% per annum, subject to adjustment as provided therein. In the event the Company completes an equity financing that results in gross proceeds of over $6,000, the Company will prepay a portion of the Note in an amount equal to one-third of the excess of the gross proceeds of such financing over $6,000. In addition, if within nine months of the issuance date of the Note, the Company completes a financing that results in gross proceeds of over $15,000, then the Company shall prepay the entire principal amount then outstanding under the Note, plus accrued interest. If within nine months of the issuance date of the Note, the aggregate principal sum then outstanding under the Note plus accrued interest thereon has not been prepaid, then on and after such date, interest shall accrue on the unpaid principal balance of the Note at a rate of 7% per annum. Additionally, in connection with the Note, AMV granted to the Sellers a security interest in its assets. Such security interest is subordinate to the security interest granted to ValueAct Small Cap Master Fund, L.P. (“ValueAct) under the Senior Secured Note, issued by Twistbox Entertainment, Inc., a wholly-owned subsidiary of the Company (“Twistbox”), due January 30, 2010, as amended on February 12, 2008 (the “ValueAct Note”), and as subsequently amended on October 23, 2008. AMV also agreed to guarantee Mandalay’s repayment of the Note to the Sellers.

The Purchase Price was preliminarily estimated by the Company to be $23,030 consisting of $9,900 attributed to the Stock Consideration issued, $5,375 in cash, $95 in stamp duty, $5,818 under the Note referenced above (inclusive of the working-capital adjustment), $1,098 as an estimate of the initial period earn-out adjustment and $744 in transaction costs. Any further adjustments required under the “working capital adjustment” provision and any further adjustment under the “earn-out” provision of the Agreement have not yet been determined and therefore have not been included in the preliminary calculation of the purchase price. The shares of the Stock Consideration were valued using the closing stock price at the acquisition date of $2.20 per share. Under the purchase method of accounting, the Company allocated the total Purchase Price of $23,030 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 and cash equivalents	$	3,380
Accounts receivable, net of allowances		9,087
Prepaid expenses and other current assets		16
Property and equipment, net		406
Accounts payable		(10,391	)
Bank overdrafts		(1,902	)
Other current liabilities		(1,262	)
Other long term liabilities		(223	)
Minority interests		95
Identified intangibles		1,368
Goodwill		22,456
	$	23,030

Net assets associated with Fierce Media were insignificant. Goodwill recognized in the above transaction is preliminarily estimated at $22,456. The business acquired is not capital intensive and does not require significant identifiable intangible assets – as a result the greater proportion of consideration has been allocated to goodwill. Goodwill in relation to the acquisition of AMV is not expected to be deductible for US income tax purposes. The preliminary purchase price allocation, including the allocation of goodwill, will be updated as additional information becomes available.

F-25

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 and AMV by the Company accounted for by the purchase method of accounting as if it had occurred as at the beginning of each of the periods presented. 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.

	Year ended			3 months ended			Year ended
	March 31,			March 31,			December 31,
	2009			2008			2007

Revenues	$	51,734		$	13,939		$	44,289
Cost of revenues		18,654			2,739			23,887
Gross profit/(loss)		33,080			11,200			20,402

Operating expenses net of interest income and other expense		72,244			11,643			36,063
Income tax expense and minority interests		(112	)		(153	)		(1,358	)
Net loss from continuing operations, net of taxes		(39,276	)		(596	)		(17,019	)

Income (loss) from discontinued operations, net of taxes		(147	)		-			-
Net loss	$	(39,423	)	$	(596	)	$	(17,019	)

Basic and Diluted net loss per common share
Continuing operations	$	(1.08	)	$	(0.02	)	$	(0.65	)
Discontinued opeations	$	(0.00	)	$	-		$	-
Net loss	$	(1.09	)	$	(0.02	)	$	(0.65	)

Goodwill and Other Intangible Assets

Goodwill

A reconciliation of the changes to the Company's carrying amount of goodwill for fiscal 2009 was as follows:

Balance at March 31, 2008	$	61,377
Goodwill acquired during the period		22,456
adjustments made to goodwill		(156	)
Goodwill impairment		(27,844	)
Balance at March 31, 2009	$	55,833

In October 2008, goodwill was increased by $22,456 due to the acquisition of AMV (Note 6). Both acquisitions described in Note 6 included the issuance of Company stock as all or part of the consideration. Based on the trading price of the Company’s common stock as of the acquisition dates, the total consideration was $67,538 for the Twistbox acquisition and $23,342 for the AMV acquisition. Subsequent to the acquisitions, the Company experienced a significant and continued decline in the market value of its common stock, which resulted in the Company’s market capitalization falling below its net book value. In addition, the Company performed its annual review of goodwill in the fourth quarter of fiscal 2009. As a result of the assessment, the Company determined that its net book value exceeded the implied fair value; therefore, the Company recorded an impairment charge of $27,844 in fiscal 2009 to write down goodwill. This impairment charge was recorded as “Impairment of goodwill and intangible assets” in the Consolidated Statements of Operations.

F-26

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

Other Intangible Assets

A reconciliation of the changes to the Company's carrying amount of intangible assets for fiscal 2009 was as follows:

Balance at March 31, 2008	$	19,780
Intangibles acquired during the period		1,368
Amortization		(1,087	)
Impairment charge		(3,940	)
Balance at March 31, 2009	$	16,121

In October 2008, intangible assets were increased by $1,368 due to the acquisition of AMV (Note 6). The Company performed its annual review of the fair value of intangible assets in the fourth quarter of fiscal 2009. As a result of the assessment, the Company determined that its net book value exceeded the implied fair value; therefore, the Company recorded an impairment charge of $3,940 in fiscal 2009 to write down intangible assets. This impairment charge was recorded as “Impairment of Goodwill and intangible assets” in the Consolidated Statements of Operations.

The components of intangible assets as at March 31, 2009 and 2008 were as follows:

	March 31,			March 31,
	2009			2008

Software	$	1,922		$	1,611
Trade Name / Trademark		9,824			13,030
Customer list		4,378			4,378
License agreements		886			886
Non-compete agreements		323			-
		17,333			19,905
Accumulated amortization		(1,212	)		(125	)
	$	16,121		$	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 year ended March 31, 2009; the three months ended March 31, 2008 and the year ended December 31, 2007, the Company recorded amortization expense in the amount of $459; $53 and $0, respectively, in cost of revenues; and amortization expense in the amount of $628; $72 and $0 respectively in operating expenses.

F-27

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

As of March 31, 2009, the total expected future amortization related to intangible assets was as follows:

	12 Months ended March 31,
	2010		2011		2012		2013		2014		Thereafter
Software	$	334	$	334	$	282	$	230	$	230	$	200
Customer List		547		547		547		547		547		1,023
License Agreements		177		177		177		154		-		-
Non-compete agreements		162		81		-		-		-		-
	$	1,220	$	1,139	$	1,006	$	931	$	777	$	1,223

Debt

	March 31,		March 31,
	2009		2008
Short Term Debt
Capitalized lease liabilities, current portion	$	-	$	20
Senior secured note, inclusive of accrued interest, net of discount of $247 and $0, respectively		17,598		228
Deferred purchase consideration inclusive of accrued interest		5,945		-
	$	23,543	$	248

	March 31,		March 31,
	2009		2008

Long Term Debt

Senior Secured Note, long term portion, net of discount of $2	$	-	$	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 with ValueAct Small Cap Master Fund L.P. (the “ValueAct Note”). The holder of the ValueAct Note was granted first lien over all of the Company’s assets. The ValueAct Note carried 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 the Company 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 ValueAct Note.

F-28

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

On October 23, 2008, the Company, Twistbox and ValueAct entered into a Second Amendment (the “Second Amendment”) to the ValueAct Note. Among other things, the Second Amendment provides for a payment in kind election, whereby, in lieu of making any cash payments to ValueAct on the following two interest payment dates, Twistbox may elect that the amount of any interest due on such date be added to the principal amount due under the ValueAct Note. That election was made in connection with the first interest payment following the amendment. In addition, ValueAct agreed to amend the ValueAct Note to modify the covenant requiring that the Company and Twistbox maintain certain minimum combined cash balances, during specified periods of time. Lastly, the Second Amendment provides that an event of default may be triggered in the event the Company fails to observe certain covenants as agreed to in the Second Amendment, including a covenant that, until all principal and interest and any other amounts due under the ValueAct Note are paid in full in cash, the Company: (i) will not create, incur, assume or permit to exist certain indebtedness, except for indebtedness in connection with a receivables facility as described in the Second Amendment, which indebtedness would rank pari passu in right of payment on the ValueAct Note, provided, that any receivables used to procure and maintain such receivables facility shall not be subject to any lien of ValueAct during the term of such receivables facility; and (ii) will not, and will not permit any subsidiary to, without the prior consent of ValueAct, prepay any indebtedness incurred in connection with the AMV Note, other than prepayments with proceeds raised in an equity financing as permitted by the AMV Note. Additionally, on October 23, 2008, in connection with the ValueAct Note, as amended, AMV agreed to grant to ValueAct a security interest in its assets, which ranks senior to the security interest granted to the Sellers. AMV also agreed to guarantee Twistbox’s repayment of the ValueAct Note.

As described above, the Company had previously issued to ValueAct two warrants to purchase shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”). One warrant entitled ValueAct to purchase up to a total of 1,093 shares of Common Stock at an exercise price of $7.55 per share (“$7.55 Warrant”). The other warrant entitled ValueAct to purchase up to a total of 1,093 shares of Common Stock at an initial exercise price of $5.00 per share (“$5.00 Warrant,” and together with the $7.55 Warrant, the “ValueAct Warrants”). On October 23, 2008, the Company and ValueAct entered into an allonge to each of the ValueAct Warrants. Among other things, the exercise price of each of the ValueAct Warrants was amended to be $4.00 per share.

Minimum future obligations, including interest, under the Senior Secured Note are $19,101 during the year ended March 31, 2010 including repayment of the principal. Capitalized lease assets are set out in Note 4. Future obligations under capitalized leases are included as part of Other Obligations in Note 15.

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.

On September 14, 2006, the Company entered into a management agreement (the “Management Agreement”) with Trinad Management for five years. Pursuant to the terms of the Management 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 year ended March 31, 2009 the Company paid management fees under the agreement of $360; for the three months ended March 31, 2008, the Company paid management fees under the agreement of $90; and for the year ended December 31, 2007 the Company paid management fees under the agreement of $360.

F-29

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

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 $104; $26 and $104 respectively for the year ended March 31, 2009; for the three months ended March 31, 2008; and for the year ended December 31, 2007.

Twistbox Entertainment, Inc.

Lease of Premises

Twistbox 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 $380; $95 and $380 for the year ended March 31, 2009; for the three months ended March 31, 2008; and for the year ended December 31, 2007, respectively.

Twistbox was party to an oral agreement with a person affiliated with Twistbox with respect to a lease of an apartment in London. Amounts paid in connection with this lease was $48 ; $12 and $0 for the year ended March 31, 2009; for the three months ended March 31, 2008; and for the year ended December 31, 2007, respectively.

10.

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 holders of common stock; (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.

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, greater than the conversion price of $1.00 per share.

Common Stock

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.

F-30

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

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 remaining 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 the remaining one-third vesting 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%.

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 two warrants to a lender to Twistbox, one to purchase 1,093 shares of common stock and the other to purchase 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.

On April 9, 2008 a former director of the Company exercised warrants to purchase 50 shares of common stock in a cashless exchange for 25 shares of the Company’s common stock.

In April and June 2008, warrants to purchase 350 shares of common stock were exercised in a cashless exchange for 217 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 June 18, 2008, the Company granted non-qualified stock options to purchase 1,500 shares of common stock of the Company to four directors under the Plan. The options have a ten year term and are exercisable at a price of $2.75 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 the remaining one-third vesting on the second anniversary of the date of grant. The options were valued at $2,403 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 September 29, 2008, the Company granted non-qualified stock options to purchase 350 shares of common stock of the Company to two directors under the Plan. The options have a ten year term and are exercisable at a price of $2.40 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 the remaining one-third vesting on the second anniversary of the date of grant. The options were valued at $489 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%.

F-31

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

On October 23, 2008, the Company entered into a Securities Purchase Agreement with certain investors, pursuant to which the Company agreed to sell in a private offering an aggregate of 1,685 shares of Common Stock and warrants to purchase 843 shares of Common Stock (the “Warrants”), for gross proceeds to the Company of $4,500. Offering costs were $146. The Warrants have a five year term and an exercise price of $2.67 per share.

In October 2008, warrants to purchase 2,300 shares of common stock were exercised in a cashless exchange for 286 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 March 16, 2009, the Company approved the issuance of an aggregate of 938,697 shares of common stock pursuant to the Company’s 2007 Employee, Director and Consultant Stock Plan at a purchase price of $0.0001 per share to certain executives of the Company and subsidiary in connection with agreed salary reductions. An aggregate of 683,457 shares were granted prior to March 31, 2009. Certain of the shares granted are subject to forfeiture to the Company if such executive terminates his position with the Company prior to one year from the grant date, and such shares become fully vested one year from the grant date or upon the occurrence of a change-in-control of the Company. 184,691 of these shares were vested as of March 31, 2009. All such shares granted to the executives may not be sold or transferred for a period of one year from the Grant Date.

11.

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.

12.

Income Taxes

The components of income tax benefit/(provision) were as follows:

	Year Ended			3 Months ended			Year Ended
	March 31,			March 31,			December 31,
	2009			2008			2007
Statutory federal income tax rate	$	(14,191	)	$	(100	)	$	(800	)
State income taxes (benefit), net of federal taxes		(2,087	)		(15	)		(100	)
Write down of goodwill and other permanent differences		12,057			(219	)		-
Difference in depreciation and amortization		171			25			-
Stock-based compensation		1,154			125			400
Net operating loss carryforward		2,785			200			500
Income tax provision (benefit)	$	(111	)	$	16		$	-

For the year ended March 31, 2009, the three months ended March 31, 2008, and the year ended December 31, 2007, the components of deferred tax expense consisted of the following:

F-32

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

	Year Ended			3 Months ended			Year Ended
	March 31,			March 31,			December 31,
	2009			2008			2007
Net operating loss		2,785			200			500
Amortization of intangible assets		171			25
Stock-based compensation		1,154			125			400
		4,110			350			900
Less valuation allowance		(4,110	)		(350	)		(900	)
		-			-			-

Deferred tax assets and liabilities consist of the following:

	2009			2008
Deferred tax assets (liabilities):
Net operating loss carry-forwards		16,985			14,200
Amortization of intangible assets		196			25
Stock-based compensation		1,679			525
Deferred tax assets, net		18,860			14,750
Valuation allowance		(18,860	)		(14,750	)
Net deferred tax assets	$	-		$	-

In accordance with SFAS 109 and based on all available evidence on a jurisdictional basis, the Company believes that, it is more likely than not that its deferred tax assets will not be utilized, and has recorded a full valuation allowance against its net deferred tax assets in each jurisdiction.

As of March 31, 2009, the Company had net operating loss (NOL) carry-forwards to reduce future Federal income taxes of approximately $42,900, 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 acquisitions described in Note 6 above, the Company has recorded Goodwill, amounting to $55,833 after impairment, which will not be amortized for book purposes and is not deductible for US tax purposes. The Company also recorded intangibles which will have differing amortization for book and tax purposes. Trademarks, amounting to $9,821 after impairment, 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 $7,506, 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, 2009, realization of the Company's net deferred tax asset of approximately $18,860 was not considered more likely than not and, accordingly, a valuation allowance of $18,860 has been provided. During the year ended March 31, 2009, the valuation allowance increased by $4,110.

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, 2009.

F-33

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

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, 2009 and March 31, 2008. The Company recognized no interest and penalties on income taxes in its statement of operations for the year ended March 31, 2009; the three months ended March 31, 2008 or the year ended December 31, 2007. Management believes that with few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before March 31, 2004.

13.

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 net property and equipment as at March 31, 2009; and for revenues in the year ended March 31, 2009; the three months ended March 31, 2009 and the year ended:

	North				South		Other
	America		Europe		America		Regions		Consolidated
Year ended March 31, 2009
Net sales to unaffiliated customers	$	4,818	$	22,030	$	671	$	3,737	$	31,256

Three Months ended March 31, 2008
Net sales to unaffiliated customers	$	398	$	2,553	$	147	$	110	$	3,208

Property and equipment, net at March 31, 2009	$	730	$	490	$	-	$	10	$	1,230

Our three largest customers accounted for 21%, 19% and 11% of our revenue in the year ended March 31, 2009; and 48%, 0% and 0% of our revenue in the three months ended March 31, 2008.

14.

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, 2009:

Year Ending March 31
2009	$	369
2010	$	111
Total minimum lease payments	$	480

F-34

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

These amounts do not reflect future escalations for real estate taxes and building operating expenses. Rental expense amounted to $867 for the year ended March 31, 2009; $121 for the three months ended March 31, 2008; and $102 for the year ended December 31, 2007.

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, 2009 were as follows:

	Minimum
	Guaranteed
Year Ending March 31	Royalties
2009	$	90
2010		120
2011		60
Total minimum payments	$	270

Other Obligations

As of March 31, 2009, the Company was obligated for payments under various distribution agreements, equipment lease agreements, employment contracts and the management agreement described in Note 9 with initial terms greater than one year. Annual payments relating to these commitments at March 31, 2009 are as follows:

Year Ending March 31	Commitments
2009	$	2,798
2010		2,028
2011		226
Total minimum payments	$	5,052

Litigation

Twistbox’s wholly owned subsidiary WAAT Media Corp. (“WAAT”) and General Media Communications, Inc. (“GMCI”) are parties to a content license agreement dated May 30, 2006, whereby GMCI granted to WAAT certain exclusive rights to exploit GMCI branded content via mobile devices. GMCI terminated the agreement on January 26, 2009 based on its claim that WAAT failed to cure a material breach pertaining to the non-payment of a minimum royalty guarantee installment in the amount of $485,000. On or about March 16, 2009, GMCI filed a complaint seeking the balance of the minimum guarantee payments due under the agreement in the approximate amount of $4,085,000. WAAT has counter-sued claiming GMCI is not entitled to the claimed amount and that it has breached the agreement by, among other things, failing to promote, market and advertise the mobile services as required under the agreement and by fraudulently inducing WAAT to enter into the agreement based on GMCI’s repeated assurances of its intention to reinvigorate its flagship brand. GMCI has filed a demurrer to the counter-claim. WAAT's response is due by August 31, 2009. WAAT intends to vigorously defend against this action. Principals of both parties continue to communicate to find a mutually acceptable resolution. The company has accrued for its estimated liability in this matter.

F-35

Mandalay Media Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(all numbers in thousands except per share amounts)

From time to time, we are subject to various claims, complaints and legal actions in the normal course of business. We do not believe we are party to any currently pending litigation, the outcome of which will have a material adverse effect on our operations or financial position.

15.

Discontinued Operations

Discontinued operations consist of Fierce Media, a 80% subsidiary of AMV Holdings, Limited. In conjunction with the acquisition of the Company's acquisition of AMV, the Company had the intention of discontinuing the Fierce Media subsidiary. The assets of Fierce Media on October 23, 2008 (date of AMV acquisition) were less than ($150) and as such, were not segregated on the balance sheets as assets held for sale. On January 31, 2009, the Company finalized the sale of Fierce Media to the 20% minority owner for a nominal amount. In March 2009, the Company evaluated the continued costs of operating Fierce Media from October 23, 2008 to January 31, 2009 in accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) and determined that the continued costs of operating this subsidiary met the criteria required to account for the operations as discontinued.

The Company recorded a pre tax charge of $147 related to the costs of operating Fierce Media from the acquisition date to sale date. These costs are included in discontinued operations in the accompanying consolidated statement of operations for the year ended March 31, 2009.

F-36

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

¨ Large Accelerated Filer	¨ Accelerated Filer

¨ Non-accelerated Filer (do not check if smaller reporting company)	x Smaller Reporting Company

	·	accounting rules governing recognition of revenue;

	·	general economic, political and market conditions and trends;

	High		Low

Year Ended March 31, 2009
First quarter	$	6.00	$	2.00
Second quarter	$	2.90	$	1.50
Third quarter	$	2.39	$	0.60
Fourth quarter	$	1.75	$	0.51

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

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		6,960,000	$	2.52		40,000

Equity compensation plans not approved by security holders		0		0		0

Total		6,960,000	$	2.52		40,000

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

PART I		3

ITEM 1.	BUSINESS	3

ITEM 1A.	RISK FACTORS	8

ITEM 2.	PROPERTIES	23

ITEM 3.	LEGAL PROCEEDINGS	23

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	23

PART II		23

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	23

ITEM 6.	SELECTED FINANCIAL DATA	25

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	39

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	39

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	39

ITEM 9A(T).	CONTROLS AND PROCEDURES	40

ITEM 9B.	OTHER INFORMATION	40

PART III		40

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	40

ITEM 11.	EXECUTIVE COMPENSATION	43

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	45

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	48

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	49

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	50

Period	(a) Total Number of Shares (or Units) Purchased			(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1, 2009- January 31, 2009	-			-		-		-
February 1, 2009- February 28, 2009		-			-		-		-
March 1, 2009- March 31, 2009	62,011(1		)	$	0.88		-		-

	Year ended			3 months ended			12 months ended			Year ended
	March 31,			March 31,			March 31,			December 31,
	2009			2008			2008			2007
							(unaudited)

Revenues	$	31,256		$	3,208		$	3,208		$	-
Cost of revenues		11,150			(153	)		(153	)		-

Gross profit		20,106			3,361			3,361			-
SG&A		26,555			3,304			5,561			2,521
Amortization of intangible assets		628			72			72			-
Restructuring charges		-			-			-			-
Impairment of goodwill		31,784			-			-			-

Operating income (loss)		(38,861	)		(15	)		(2,272	)		(2,521	)
Interest expense, net		(2,161	)		(213	)		104			317
Other expenses		(542	)		(54	)		(54	)		-

(Loss) before income taxes		(41,564	)		(282	)		(2,222	)		(2,204	)
Income taxes (benefit)		111			(16	)		(16	)		-

(Loss) from continuing operations		(41,453	)		(298	)		(2,238	)		(2,204	)
(Loss) from discontinued operations, net of taxes		(147	)		-			-			-

Net (loss)	$	(41,600	)	$	(298	)	$	(2,238	)	$	(2,204	)

Basic and Diluted net loss per common share:
Continuing operations	$	(1.14	)	$	(0.01	)	$	(0.10	)	$	(0.12	)
Discontinued opeations	$	(0.00	)	$	-		$	-		$	-
Net loss	$	(1.15	)	$	(0.01	)	$	(0.10	)	$	(0.12	)
Basic and Diluted weighted average shares outstanding		36,264			21,628			21,628			18,997

	Year Ended March 31,
	2009		2008
			(unaudited)
	(In thousands)

Revenues by type:

Games	$	5,736	$	598
Other content		25,520		2,610

Total		31,256		3,208

	Year Ended March 31,			Year Ended December 31,
	2008			2007
	(unaudited)
	(In thousands)

Cost of Revenues:

License Fees	$	1,539		$	-
Impairment of guarantees		(1,745	)		-
Other direct cost of revenues		53			-

Total Cost of Revenues	$	(153	)	$	-

Revenues		3,208		$	-

Gross Margin		N/A			N/A

	Year Ended			3 Months			Year Ended
	March 31,			March 31,			December 31,
	2009			2008			2007
				(In thousands)

Consolidated Statement of Cash Flows Data:

Capital expenditures		(219	)		(103	)		-
Cash flows used in operating activities		(5,360	)		(2,482	)		(819	)
Cash flows (used in)/ provided by investing activities		(3,773	)		6,152			(141	)
Cash flows (used in)/ provided by financing activities		4,300			-			2,473