x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
22-2267658
|
(State
or other jurisdiction of incorporation or organization )
|
(I.R.S.
Employer Identification No.)
|
2121
Avenue of the Stars, Suite 2550, Los Angeles, CA
|
90067
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
Accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
(do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Page(s)
|
|
Consolidated
Balance Sheets for the Successor as of June 30, 2008 (Unaudited)
and
|
|
March
31, 2008 (Audited)
|
1
|
Consolidated
Statements of Operations (Unaudited) for the Successor’s three months
ended
|
|
June
30, 2008 and June 30, 2007; and Predecessor’s three months ended June 30,
2007
|
2
|
Consolidated
Statements of the Successor’s Stockholders’ Equity and Comprehensive Loss
(Unaudited)
|
|
for
the three months ended June 30, 2008
|
3
|
Consolidated
Statements of Cash Flows (Unaudited) for the Successor’s three months
ended
|
|
June
30, 2008 and June 30, 2007; and Predecessor’s three months ended June 30,
2007
|
4
|
Notes
to Unaudited Consolidated Financial Statements
|
5-25
|
Successor
|
||||||||
June
30,
|
March
31,
|
|||||||
2008
|
2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 6,987 | $ | 10,936 | ||||
Accounts
receivable, net of allowances
|
6,486 | 6,162 | ||||||
Note
Receivable
|
2,025 | - | ||||||
Prepaid
expenses and other current assets
|
775 | 531 | ||||||
Total
current assets
|
16,273 | 17,629 | ||||||
Property
and equipment, net
|
1,029 | 1,037 | ||||||
Other
long-term assets
|
210 | 301 | ||||||
Intangible
assets, net
|
19,541 | 19,780 | ||||||
Goodwill
|
61,377 | 61,377 | ||||||
TOTAL
ASSETS
|
$ | 98,430 | $ | 100,124 | ||||
LIABILITIES
AND STOCKHOLDERS’
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 2,688 | $ | 2,399 | ||||
Accrued
license fees
|
3,856 | 3,833 | ||||||
Accrued
compensation
|
589 | 688 | ||||||
Current
portion of long term debt
|
631 | 248 | ||||||
Other
current liabilities
|
2,126 | 2,087 | ||||||
Total
currrent liabilities
|
9,890 | 9,255 | ||||||
Accrued
license fees, long term portion
|
1,033 | 1,337 | ||||||
Long
term debt, net of current portion
|
16,483 | 16,483 | ||||||
Total
liabilities
|
$ | 27,406 | 27,075 | |||||
Commitments
and contingencies (Note 15)
|
||||||||
Stockholders
equity
|
||||||||
Preferred
stock, 1,000 shares authorized
|
||||||||
Series
A Convertible Preferred Stock, 100,000 shares; authorized
|
||||||||
at
$0.0001 par value; 100,000 shares issued and outstanding
|
100 | 100 | ||||||
Common
stock, $0.0001 par value: 100,000,000 shares authorized;
|
||||||||
32,415,777
issued and outstanding at June 30, 2008;
|
||||||||
32,149,089
issued and outstanding at March 31, 2008;
|
3 | 3 | ||||||
Additional
paid-in capital
|
77,476 | 76,154 | ||||||
Accumulated
other comprehensive income/(loss)
|
51 | 61 | ||||||
Accumulated
deficit
|
(6,606 | ) | (3,269 | ) | ||||
Total
stockholders' equity
|
71,024 | 73,049 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 98,430 | $ | 100,124 |
Mandalay
Media, Inc. and Subsidiaries
|
2
|
Consolidated
Statement of Operations (Unaudited)
|
Successor
|
Predecessor
|
|||||||||||
3 Months Ended
|
3 Months Ended
|
3 Months Ended
|
||||||||||
June 30
|
June 30
|
June 30
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
Revenues
|
$ | 5,347 | $ | - | $ | 3,708 | ||||||
Cost
of revenues
|
||||||||||||
License
fees
|
2,150 | - | 1,669 | |||||||||
Other
direct cost of revenues
|
102 | - | 169 | |||||||||
Total
cost of revenues
|
2,252 | - | 1,838 | |||||||||
Gross
profit
|
3,095 | - | 1,870 | |||||||||
Operating
expenses
|
||||||||||||
Product
development
|
1,766 | - | 2,491 | |||||||||
Sales
and marketing
|
1,280 | - | 1,352 | |||||||||
General
and administrative
|
2,813 | 264 | 1,176 | |||||||||
Amortization
of intangible assets
|
137 | - | 30 | |||||||||
Total
operating expenses
|
5,996 | 264 | 5,049 | |||||||||
Loss
from operations
|
(2,901 | ) | (264 | ) | (3,179 | ) | ||||||
Interest
and other income/(expense)
|
||||||||||||
Interest
income
|
76 | - | 10 | |||||||||
Interest
(expense)
|
(484 | ) | - | (55 | ) | |||||||
Foreign
exchange transaction gain (loss)
|
131 | - | 68 | |||||||||
Other
(expense)
|
(86 | ) | - | (202 | ) | |||||||
Interest
and other income/(expense)
|
(363 | ) | - | (179 | ) | |||||||
Loss
before income taxes
|
(3,264 | ) | (264 | ) | (3,358 | ) | ||||||
Income
tax provision
|
(73 | ) | - | 2 | ||||||||
Net
loss
|
$ | (3,337 | ) | $ | (264 | ) | $ | (3,356 | ) | |||
Preferred
Stock Dividends
|
- | - | - | |||||||||
Net
Loss attributable to Common Shareholders
|
$ | (3,337 | ) | $ | (264 | ) | $ | (3,356 | ) | |||
Basic
and Diluted net loss per common share
|
$ | (0.10 | ) | $ | (0.02 | ) | $ | (0.43 | ) | |||
Weighted average
common shares outstanding,
basic
and diluted
|
32,330 | 16,730 | 7,786 |
Mandalay
Media, Inc. and Subsidiaries
|
3
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Loss
(Unaudited)
|
Accumulated
|
||||||||||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||||||||||
Common
Stock
|
Preferred
Stock
|
Paid-In
|
Comprehensive
|
Accumulated
|
Comprehensive
|
|||||||||||||||||||||||||||||||
Successor
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Income/(Loss)
|
Deficit
|
Total
|
Loss
|
|||||||||||||||||||||||||||
Balance
at March 31, 2008
|
32,149,089 | $ | 3 | 100,000 | $ | 100 | $ | 76,154 | $ | 61 | $ | (3,269 | ) | $ | 73,049 | |||||||||||||||||||||
Net
Loss
|
(3,337 | ) | (3,337 | ) | (3,337 | ) | ||||||||||||||||||||||||||||||
Issuance
of common stock
|
||||||||||||||||||||||||||||||||||||
in
satisfaction of amount payable
|
25,000 | 0 | 100 | 100 | ||||||||||||||||||||||||||||||||
Issuance
of common stock
|
||||||||||||||||||||||||||||||||||||
on
cashless exercise of warrants
|
241,688 | 0 | 0 | |||||||||||||||||||||||||||||||||
Foreign
currency translation gain/(loss)
|
(10 | ) | (10 | ) | (10 | ) | ||||||||||||||||||||||||||||||
Deferred
stock-based compensation
|
1,222 | 1,222 | ||||||||||||||||||||||||||||||||||
Comprehensive
loss
|
$ | (3,347 | ) | |||||||||||||||||||||||||||||||||
Balance
at June 30, 2008
|
32,415,777 | $ | 3 | 100,000 | $ | 100 | $ | 77,476 | $ | 51 | $ | (6,606 | ) | $ | 71,024 |
Mandalay
Media, Inc. and Subsidiaries
|
4
|
Consolidated
Statements of Cash Flows (Unaudited)
|
Successor
|
Predecessor
|
|||||||||||
3 Months Ended
|
3 Months Ended
|
3 Months Ended
|
||||||||||
June 30,
|
June 30,
|
June 30,
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
Cash flows
from operating activities
|
||||||||||||
Net
loss
|
$ | (3,337 | ) | $ | (264 | ) | $ | (3,356 | ) | |||
Adjustments
to reconcile net loss to net cash
|
||||||||||||
used
in operating activities:
|
||||||||||||
Depreciation
and amortization
|
317 | - | 105 | |||||||||
Provision
for doubtful accounts
|
(56 | ) | - | 22 | ||||||||
Stock-based
compensation
|
1,222 | - | 19 | |||||||||
(Increase)
/ decrease in assets:
|
||||||||||||
Accounts
receivable
|
(268 | ) | - | 132 | ||||||||
Prepaid
expenses and other
|
(153 | ) | - | 2 | ||||||||
Increase
/ (decrease) in liabilities:
|
||||||||||||
Accounts
payable
|
389 | (60 | ) | 712 | ||||||||
Accrued
license fees
|
23 | - | (747 | ) | ||||||||
Accrued
compensation
|
(99 | ) | - | 401 | ||||||||
Other
liabilities
|
118 | - | (351 | ) | ||||||||
Net
cash used in operating activities
|
(1,844 | ) | (324 | ) | (3,061 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Purchase
of property and equipment
|
(70 | ) | - | (145 | ) | |||||||
Issuance
of Note Receivable
|
(2,025 | ) | - | - | ||||||||
Repayment
of notes receivable
|
13 | |||||||||||
Net
cash used in investing activities
|
(2,095 | ) | - | (132 | ) | |||||||
Cash
flows from financing activities
|
||||||||||||
Proceeds
from the sale of preferred stock
|
- | 3,000 | ||||||||||
Repayment
of short-term debt
|
335 | |||||||||||
- | - | |||||||||||
Net
cash provided by financing activities
|
- | - | 3,335 | |||||||||
Effect
of exchange rate changes on cash and cash equivalents
|
(10 | ) | - | 53 | ||||||||
Net
increase/(decrease) in cash and cash equivalents
|
(3,949 | ) | (324 | ) | 195 | |||||||
Cash
and cash equivalents, beginning of period
|
10,936 | 5,742 | 631 | |||||||||
Cash
and cash equivalents, end of period
|
$ | 6,987 | $ | 5,418 | $ | 826 | ||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Interest
paid
|
- | - | 55 | |||||||||
Taxes
paid
|
(73 | ) | - | - |
Mandalay
Media, Inc. and Subsidiaries
|
5
|
Notes
to Unaudited Consolidated Financial Statements
|
1.
|
Organization
|
Mandalay
Media, Inc. and Subsidiaries
|
6
|
Notes
to Unaudited Consolidated Financial Statements
|
2.
|
Summary
of Significant Accounting Policies
|
Mandalay
Media, Inc. and Subsidiaries
|
7
|
Notes
to Unaudited Consolidated Financial Statements
|
·
|
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 Twistbox a fixed percentage of their revenues or a fixed fee
for each game;
|
Mandalay
Media, Inc. and Subsidiaries
|
8
|
Notes
to Unaudited Consolidated Financial Statements
|
·
|
carriers
are directly responsible for billing and collecting fees from their
subscribers, including the resolution of billing
disputes;
|
·
|
carriers
generally pay Twistbox a fixed percentage of their revenues or a fixed fee
for each game;
|
Mandalay
Media, Inc. and Subsidiaries
|
9
|
Notes
to Unaudited Consolidated Financial Statements
|
Mandalay
Media, Inc. and Subsidiaries
|
10
|
Notes
to Unaudited Consolidated Financial Statements
|
Mandalay
Media, Inc. and Subsidiaries
|
11
|
Notes
to Unaudited Consolidated Financial Statements
|
Mandalay
Media, Inc. and Subsidiaries
|
12
|
Mandalay
Media, Inc. and Subsidiaries
|
13
|
3.
|
Liquidity
|
Mandalay
Media, Inc. and Subsidiaries
|
14
|
4.
|
Balance
Sheet Components
|
June
30,
|
March
31,
|
|||||||
2008
|
2008
|
|||||||
Accounts
receivable
|
$ | 6,598 | $ | 6,330 | ||||
Less:
allowance for doubtful accounts
|
(112 | ) | (168 | ) | ||||
$ | 6,486 | $ | 6,162 |
June
30,
|
March
31,
|
|||||||
2008
|
2008
|
|||||||
Loan
secured by Note inclusive of interest (refer Note 15)
|
$ | 2,025 | $ | - |
June
30,
|
March
31,
|
|||||||
2008
|
2007
|
|||||||
Equipment
|
$ | 708 | $ | 654 | ||||
Equipment
subject to capitalized lease
|
81 | 71 | ||||||
Furniture
& fixtures
|
234 | 228 | ||||||
Leasehold
improvements
|
140 | 140 | ||||||
1,163 | 1,093 | |||||||
Accumulated
depreciation
|
(134 | ) | (56 | ) | ||||
$ | 1,029 | $ | 1,037 |
Mandalay
Media, Inc. and Subsidiaries
|
15
|
5.
|
Description
of Stock Plans
|
Number
of
|
Weighted
Average
|
|||||||
Shares
|
Exercise
Price
|
|||||||
Outstanding
at December 31, 2005
|
||||||||
Granted
|
||||||||
Canceled
|
||||||||
Exercised
|
||||||||
Outstanding
at December 31, 2006
|
- | - | ||||||
Granted
|
1,600,000 | $ | 2.64 | |||||
Canceled
|
- | - | ||||||
Exercised
|
- | - | ||||||
Outstanding
at December 31, 2007
|
1,600,000 | $ | 2.64 | |||||
Granted
|
2,751,864 | $ | 4.57 | |||||
Transferred
in from Twistbox
|
2,462,090 | $ | 0.64 | |||||
Canceled
|
(11,855 | ) | $ | 0.81 | ||||
Outstanding
at March 31, 2008
|
6,802,099 | $ | 2.70 | |||||
Granted
|
1,500,000 | $ | 2.75 | |||||
Canceled
|
- | $ | - | |||||
Exercised
|
(2,189 | ) | $ | 0.48 | ||||
Outstanding
at June 30, 2008
|
8,299,910 | $ | 2.71 | |||||
Exercisable
at June 30, 2008
|
4,325,711 | $ | 2.10 |
Options Granted
|
||||||||
Three Months Ended
|
Options tranferred
|
|||||||
June 30, 2008
|
Options Granted
|
from Twistbox
|
||||||
Expected
life (years)
|
4 |
4
to 6
|
3
to 7
|
|||||
Risk-free
interest rate
|
3.89 |
2.7%
to 3.89
|
% |
2.03%
to 5.03
|
% | |||
Expected
volatility
|
75.20 | % |
70%
to 75.2
|
% |
70%
to 75
|
% | ||
Expected
dividend yield
|
0 | % |
0
|
% |
Mandalay
Media, Inc. and Subsidiaries
|
16
|
Weighted
|
||||||||||||||||
Average
|
Weighted
|
|||||||||||||||
Remaining
|
Number
|
Average
|
Aggregate
|
|||||||||||||
Range
of
|
Contractual
Life
|
Outsanding
|
Exercise
|
Intrinsic
|
||||||||||||
Exercise
Price
|
(Years)
|
June
30, 2008
|
Price
|
Value
|
||||||||||||
$0
- $1.00
|
8.07 | 2,448,047 | $ | 0.64 | $ | 5,536,245 | ||||||||||
$2.00
- $3.00
|
9.60 | 3,100,000 | $ | 2.69 | $ | 640,000 | ||||||||||
$3.00
- $4.00
|
- | - | $ | - | $ | - | ||||||||||
$4.00
- $5.00
|
9.65 | 2,751,864 | $ | 4.57 | $ | - | ||||||||||
9.17 | 8,299,911 | 2.71 | $ | 6,176,245 |
Weighted
|
||||||||||||||||
Average
|
Weighted
|
|||||||||||||||
Remaining
|
Options
|
Average
|
Aggregate
|
|||||||||||||
Range
of
|
Contractual
Life
|
exercisable
|
Exercise
|
Intrinsic
|
||||||||||||
Exercise
Price
|
(Years)
|
at
June 30, 2008
|
Price
|
Value
|
||||||||||||
$0
- $1.00
|
8.02 | 2,206,502 | $ | 0.63 | $ | 5,018,365 | ||||||||||
$2.00
- $3.00
|
9.56 | 1,111,762 | $ | 2.69 | $ | 232,291 | ||||||||||
$3.00
- $4.00
|
- | - | $ | - | $ | - | ||||||||||
$4.00
- $5.00
|
9.63 | 1,007,447 | $ | 4.70 | $ | - | ||||||||||
8.79 | 4,325,711 | 2.10 | 5,250,656 |
6.
|
Acquisitions/Purchase
Price Accounting
|
Mandalay
Media, Inc. and Subsidiaries
|
17
|
Cash
|
$ | 6,679 | ||
Accounts
receivable
|
4,966 | |||
Prepaid
expenses and other current assets
|
1,138 | |||
Property
and equipment
|
1,062 | |||
Other
long-term assets
|
361 | |||
Accounts
Payable, accrued license fees and accruals
|
(6,882 | ) | ||
Other
current liabilities
|
(814 | ) | ||
Accrued
license fees, long term portion
|
(2,796 | ) | ||
Long
term debt
|
(16,483 | ) | ||
Identified
Intangibles
|
19,905 | |||
Merger
related restructuring reserves
|
(1,034 | ) | ||
Goodwill
|
61,377 | |||
$ | 67,479 |
Mandalay
Media, Inc. and Subsidiaries
|
18
|
3 months ended
|
||||
June 30, 2007
|
||||
Revenues
|
$ | 3,708 | ||
Cost
of revenues
|
1,838 | |||
Gross
profit/(loss)
|
1,870 | |||
Operating
expenses net of interest
|
||||
income
and other expense
|
4,870 | |||
Income
tax expense
|
(2 | ) | ||
Net
loss
|
(3,356 | ) | ||
Basic
and Diluted net loss per common share
|
$ | (0.43 | ) |
7.
|
Other
Intangible Assets
|
June 30,
|
March 31,
|
|||||||
2008
|
2008
|
|||||||
Software
|
$ | 1,611 | $ | 1,611 | ||||
Trade
Name / Trademark
|
13,030 | 13,030 | ||||||
Customer
list
|
4,378 | 4,378 | ||||||
License
agreements
|
886 | 886 | ||||||
19,905 | 19,905 | |||||||
Accumulated
amortization
|
(364 | ) | (125 | ) | ||||
$ | 19,541 | $ | 19,780 |
Mandalay
Media, Inc. and Subsidiaries
|
19
|
12 Months ended June 30,
|
||||||||||||||||||||||||
2009
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
|||||||||||||||||||
Software
|
$ | 230 | $ | 230 | $ | 230 | $ | 230 | $ | 230 | $ | 373 | ||||||||||||
Customer
List
|
547 | 547 | 547 | 547 | 547 | 1,435 | ||||||||||||||||||
License
Agreements
|
177 | 177 | 177 | 177 | 110 | - | ||||||||||||||||||
$ | 954 | $ | 954 | $ | 954 | $ | 954 | $ | 887 | $ | 1,808 |
8.
|
Debt
|
June 30,
|
March 31,
|
|||||||
2008
|
2008
|
|||||||
Short
Term Debt
|
||||||||
Capitalized
lease liabilities, current portion
|
$ | 12 | $ | 20 | ||||
Senior
Secured Note, accrued interest
|
619 | 228 | ||||||
$ | 631 | $ | 248 | |||||
June 30,
|
March 31,
|
|||||||
2008
|
2008
|
|||||||
Long
Term Debt
|
||||||||
Senior
Secured Note, long term portion, net of discount
|
$ | 16,483 | $ | 16,483 |
Mandalay
Media, Inc. and Subsidiaries
|
20
|
9.
|
Related
Party Transactions
|
10.
|
Capital
Stock Transactions
|
Mandalay
Media, Inc. and Subsidiaries
|
21
|