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 December 31, 2008
(Unaudited)
|
|
and
March 31, 2008 (Audited)
|
1
|
Consolidated
Statements of Operations (Unaudited) for the Successor’s three and nine
months
|
|
ended
December 31, 2008 and December 31, 2007; and Predecessor’s three and nine
months
|
|
ended
December 31, 2007
|
2
|
Consolidated
Statements of the Successor’s Stockholders’ Equity and Comprehensive Loss
(Unaudited)
|
|
for
the nine months ended December 31, 2008
|
3
|
Consolidated
Statements of Cash Flows (Unaudited) for the Successor’s nine months
ended
|
|
December
31, 2008 and December 31, 2007; and Predecessor’s nine months ended
December 31, 2007
|
4
|
Notes
to Unaudited Consolidated Financial Statements
|
5-29
|
Successor
|
||||||||
December
31,
|
March
31,
|
|||||||
2008
|
2008
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 6,411 | $ | 10,936 | ||||
Accounts
receivable, net of allowances
|
11,835 | 6,162 | ||||||
Prepaid
expenses and other current assets
|
798 | 531 | ||||||
Total
current assets
|
19,044 | 17,629 | ||||||
Property
and equipment, net
|
1,266 | 1,037 | ||||||
Other
long-term assets
|
278 | 301 | ||||||
Intangible
assets, net
|
20,366 | 19,780 | ||||||
Goodwill
|
84,124 | 61,377 | ||||||
TOTAL
ASSETS
|
$ | 125,078 | $ | 100,124 | ||||
LIABILITIES
AND STOCKHOLDERS’
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable
|
$ | 9,930 | $ | 2,399 | ||||
Accrued
license fees
|
2,749 | 3,833 | ||||||
Accrued
compensation
|
674 | 688 | ||||||
Current
portion of long term debt
|
3 | 248 | ||||||
Other
current liabilities
|
6,317 | 2,087 | ||||||
Total
currrent liabilities
|
19,673 | 9,255 | ||||||
Accrued
license fees, long term portion
|
530 | 1,337 | ||||||
Long
term debt, net of current portion
|
23,089 | 16,483 | ||||||
Other
long-term liabilities
|
57 | - | ||||||
Total
liabilities
|
$ | 43,349 | 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 at December 31, 2008
|
100 | 100 | ||||||
Common
stock, $0.0001 par value: 100,000,000 shares authorized;
|
||||||||
38,965,643
issued and outstanding at December 31, 2008;
|
||||||||
32,149,089
issued and outstanding at March 31, 2008;
|
4 | 3 | ||||||
Additional
paid-in capital
|
93,486 | 76,154 | ||||||
Accumulated
other comprehensive income/(loss)
|
340 | 61 | ||||||
Accumulated
deficit
|
(12,201 | ) | (3,269 | ) | ||||
Total
stockholders' equity
|
81,729 | 73,049 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 125,078 | $ | 100,124 |
Mandalay
Media, Inc. and Subsidiaries
|
2
|
Consolidated
Statement of Operations (Unaudited)
|
|
|
|
Successor
|
Predecessor
|
|||||||||||||||||||||||
3 Months Ended
|
3 Months Ended
|
9 Months Ended
|
9 Months Ended
|
3 Months Ended
|
9 Months Ended
|
|||||||||||||||||||
December 31,
|
December 31,
|
December 31,
|
December 31,
|
December 31,
|
December 31,
|
|||||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2007
|
2007
|
|||||||||||||||||||
Revenues
|
$ | 11,005 | $ | - | $ | 21,354 | $ | - | $ | 4,019 | $ | 11,083 | ||||||||||||
Cost
of revenues
|
||||||||||||||||||||||||
License
fees
|
1,670 | - | 5,604 | - | 1,330 | 4,548 | ||||||||||||||||||
Other
direct cost of revenues
|
2,264 | - | 2,468 | - | - | 269 | ||||||||||||||||||
Total
cost of revenues
|
3,934 | - | 8,072 | - | 1,330 | 4,817 | ||||||||||||||||||
Gross
profit
|
7,071 | - | 13,282 | - | 2,689 | 6,266 | ||||||||||||||||||
Operating
expenses
|
||||||||||||||||||||||||
Product
development
|
1,563 | - | 5,130 | - | 1,761 | 6,553 | ||||||||||||||||||
Sales
and marketing
|
4,243 | - | 6,526 | - | 987 | 3,541 | ||||||||||||||||||
General
and administrative
|
2,173 | 1,278 | 7,545 | 2,189 | 1,036 | 3,356 | ||||||||||||||||||
Amortization
of intangible assets
|
177 | - | 451 | - | 30 | 120 | ||||||||||||||||||
Total
operating expenses
|
8,156 | 1,278 | 19,652 | 2,189 | 3,814 | 13,570 | ||||||||||||||||||
Loss
from operations
|
(1,085 | ) | (1,278 | ) | (6,370 | ) | (2,189 | ) | (1,125 | ) | (7,304 | ) | ||||||||||||
Interest
and other income/(expense)
|
||||||||||||||||||||||||
Interest
income
|
21 | 91 | 141 | 256 | 92 | 192 | ||||||||||||||||||
Interest
(expense)
|
(465 | ) | - | (1,417 | ) | - | (553 | ) | (879 | ) | ||||||||||||||
Foreign
exchange transaction gain (loss)
|
(418 | ) | - | (345 | ) | - | 52 | 156 | ||||||||||||||||
Other
(expense)
|
(276 | ) | - | (463 | ) | - | 252 | - | ||||||||||||||||
Interest
and other income/(expense)
|
(1,138 | ) | 91 | (2,084 | ) | 256 | (157 | ) | (531 | ) | ||||||||||||||
Loss
before income taxes
|
(2,223 | ) | (1,187 | ) | (8,454 | ) | (1,933 | ) | (1,282 | ) | (7,835 | ) | ||||||||||||
Income
tax provision
|
(350 | ) | 1 | (497 | ) | 2 | (42 | ) | (42 | ) | ||||||||||||||
Minority
interest in consolidated subsidiaries
|
19 | - | 19 | - | - | - | ||||||||||||||||||
Net
loss
|
$ | (2,554 | ) | $ | (1,186 | ) | $ | (8,932 | ) | $ | (1,931 | ) | $ | (1,324 | ) | $ | (7,877 | ) | ||||||
Basic
and Diluted net loss per common share
|
$ | (0.07 | ) | $ | (0.05 | ) | $ | (0.26 | ) | $ | (0.09 | ) | $ | (0.17 | ) | $ | (1.01 | ) | ||||||
Comprehensive
loss
|
$ | (2,159 | ) | $ | (1,186 | ) | $ | (8,653 | ) | $ | (1,931 | ) | $ | (1,315 | ) | $ | (7,770 | ) | ||||||
Weighted
average common shares outstanding, basic and diluted
|
37,366 | 21,730 | 34,028 | 21,902 | 7,786 | 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 | ) | ||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||
Net
Loss
|
(3,041 | ) | (3,041 | ) | (3,041 | ) | ||||||||||||||||||||||||||||||
Issuance
of common stock
|
||||||||||||||||||||||||||||||||||||
on
cashless exercise of warrants
|
33,672 | 0 | 0 | |||||||||||||||||||||||||||||||||
Foreign
currency translation gain/(loss)
|
(106 | ) | (106 | ) | (106 | ) | ||||||||||||||||||||||||||||||
Stock-based
compensation
|
744 | 744 | ||||||||||||||||||||||||||||||||||
Comprehensive
loss
|
$ | (3,147 | ) | |||||||||||||||||||||||||||||||||
Balance
at September 30, 2008
|
32,449,449 | $ | 3 | 100,000 | $ | 100 | $ | 78,220 | $ | (55 | ) | $ | (9,647 | ) | $ | 68,621 | ||||||||||||||||||||
Net
Loss
|
(2,554 | ) | (2,554 | ) | (2,554 | ) | ||||||||||||||||||||||||||||||
Issuance
of common stock
|
||||||||||||||||||||||||||||||||||||
related
to acquisition
|
4,500,000 | 1 | 9,899 | 9,900 | ||||||||||||||||||||||||||||||||
Adjustment
in valuation of warrants in connection with the
acquisition
|
313 | 313 | ||||||||||||||||||||||||||||||||||
Issuance
of common stock
|
||||||||||||||||||||||||||||||||||||
in
satisfaction of amount payable
|
45,000 | 0 | 79 | 79 | ||||||||||||||||||||||||||||||||
Issuance
of common stock
|
||||||||||||||||||||||||||||||||||||
on
cashless exercise of warrants
|
285,800 | 0 | 0 | |||||||||||||||||||||||||||||||||
Issuance
of common stock
|
||||||||||||||||||||||||||||||||||||
net
of issuance costs
|
1,685,394 | 0 | 4,354 | 4,354 | ||||||||||||||||||||||||||||||||
Foreign
currency translation gain/(loss)
|
395 | 395 | 395 | |||||||||||||||||||||||||||||||||
Stock-based
compensation
|
621 | 621 | ||||||||||||||||||||||||||||||||||
Comprehensive
loss
|
$ | (2,159 | ) | |||||||||||||||||||||||||||||||||
Balance
at December 31, 2008
|
38,965,643 | $ | 4 | 100,000 | $ | 100 | $ | 93,486 | $ | 340 | $ | (12,201 | ) | $ | 81,729 |
Mandalay
Media, Inc. and Subsidiaries
|
4
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
Successor
|
Predecessor
|
|||||||||||
9
Months Ended
|
9
Months Ended
|
9
Months Ended
|
||||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||||
2008
|
2007
|
2007
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
loss
|
$ | (8,932 | ) | $ | (1,931 | ) | $ | (7,877 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
Depreciation
and amortization
|
1,060 | - | 334 | |||||||||
Allowance
for doubtful accounts
|
50 | - | 22 | |||||||||
Stock-based
compensation
|
2,587 | 1,036 | 131 | |||||||||
(Increase)
/ decrease in assets:
|
||||||||||||
Accounts
receivable
|
3,424 | - | 136 | |||||||||
Prepaid
expenses and other
|
(24 | ) | - | (1,422 | ) | |||||||
Increase
/ (decrease) in liabilities:
|
||||||||||||
Accounts
payable
|
(2,721 | ) | 399 | 1,484 | ||||||||
Accrued
license fees
|
(1,064 | ) | - | (3,511 | ) | |||||||
Accrued
compensation
|
(14 | ) | - | 121 | ||||||||
Other
liabilities
|
43 | - | 1,048 | |||||||||
Accrued
expenses
|
(119 | ) | ||||||||||
Net
cash used in operating activities
|
(5,591 | ) | (496 | ) | (9,653 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Purchase
of property and equipment
|
(101 | ) | - | (301 | ) | |||||||
Transaction
costs
|
(812 | ) | (141 | ) | - | |||||||
Cash
used in acquisition of subsidiary
|
(5,470 | ) | - | - | ||||||||
Cash
acquired with purchase of subsidiary
|
3,020 | - | - | |||||||||
Repayment
of notes receivable
|
- | - | 25 | |||||||||
Repayment
of advance to related party
|
- | - | 20 | |||||||||
Net
cash used in investing activities
|
(3,363 | ) | (141 | ) | (256 | ) | ||||||
Cash
flows from financing activities
|
||||||||||||
Proceeds
from the sale of common stock (net of issuance costs)
|
4,354 | 2,473 | - | |||||||||
Installment
payments related to prior acquisition
|
(54 | ) | - | - | ||||||||
Proceeds
from the issuance of debt, net of costs
|
- | - | 16,480 | |||||||||
Proceeds
from the sale of Series B-1 preferred stock
|
- | - | 3,000 | |||||||||
Repayment
of short-term debt
|
- | - | (2,010 | ) | ||||||||
Net
cash provided by financing activities
|
4,300 | 2,473 | 17,470 | |||||||||
Effect
of exchange rate changes on cash and cash equivalents
|
129 | - | 74 | |||||||||
Net
increase/(decrease) in cash and cash equivalents
|
(4,525 | ) | 1,836 | 7,635 | ||||||||
Cash
and cash equivalents, beginning of period
|
10,936 | 5,418 | 631 | |||||||||
Cash
and cash equivalents, end of period
|
$ | 6,411 | $ | 7,254 | $ | 8,266 | ||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Interest
paid
|
(183 | ) | - | 252 | ||||||||
Taxes
paid
|
(270 | ) | - | 42 |
Mandalay
Media, Inc. and Subsidiaries
|
5
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
1.
|
Organization
|
Mandalay
Media, Inc. and Subsidiaries
|
6
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
2.
|
Summary
of Significant Accounting
Policies
|
Mandalay
Media, Inc. and Subsidiaries
|
7
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
8
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
|
•
|
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
|
Mandalay
Media, Inc. and Subsidiaries
|
9
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
10
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
11
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
12
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
13
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
14
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
3.
|
Liquidity
|
4.
|
Balance
Sheet Components
|
December 31,
|
March 31,
|
|||||||
2008
|
2008
|
|||||||
Accounts
receivable
|
$ | 12,053 | $ | 6,330 | ||||
Less:
allowance for doubtful accounts
|
(218 | ) | (168 | ) | ||||
$ | 11,835 |