x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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¨
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Delaware
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22-2267658
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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2121 Avenue of the Stars, Suite 2550, Los Angeles, CA
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90067
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Large Accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
(do not check if a smaller reporting company)
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Smaller reporting company x
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Page
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|||
PART
I - FINANCIAL INFORMATION
|
|||
Item
1.
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Financial
Statements
|
||
Consolidated
Balance Sheets as of December 31, 2009 (Unaudited) and March 31,
2009
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1
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||
Consolidated
Statements of Operations (Unaudited) For the Nine Month Periods Ended
December 31, 2009 and 2008
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2
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||
Consolidated
Statements of Cash Flows (Unaudited) For the Three Month and the Nine
Month Periods December 31, 2009 and 2008
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4
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||
Notes
to the Unaudited Consolidated Financial Statements
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5
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||
Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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31
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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38
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Item
4T.
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Controls
and Procedures
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38
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PART
II - OTHER INFORMATION
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|||
Item
1.
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Legal
Proceedings
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39
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Item 1A.
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Risk
Factors
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39
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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39
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Item
3.
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Defaults
Upon Senior Securities
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39
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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39
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Item
5.
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Other
Information
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39
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|
Item
6.
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Exhibits
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39
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|
Signatures
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40
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Page(s)
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||
Consolidated
Balance Sheets as of December 31, 2009 (Unaudited) and March 31,
2009
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1
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|
Consolidated
Statements of Operations (Unaudited) for the three months and the nine
months ended December 31, 2009 and December 31, 2008
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2
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Consolidated
Statements of Stockholders’ Equity and Comprehensive Loss (Unaudited) for
the period ended December 31, 2009
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3
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|
Consolidated
Statements of Cash Flows (Unaudited) for the nine months ended December
31, 2009 and December 31, 2008
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4
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|
Notes
to Unaudited Consolidated Financial Statements
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5-30
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Mandalay
Media, Inc. and Subsidiaries
|
|
Consolidated
Balance Sheets
|
|
December 31,
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March 31,
|
|||||||
2009
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2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
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||||||||
Current
assets
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||||||||
Cash
and cash equivalents
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$ | 2,313 | $ | 5,927 | ||||
Accounts
receivable, net of allowances of $266 and $174,
respectively
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9,925 | 10,745 | ||||||
Prepaid
expenses and other current assets
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1,599 | 1,334 | ||||||
Total
current assets
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13,837 | 18,006 | ||||||
Property
and equipment, net
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1,400 | 1,230 | ||||||
Intangible
assets, net
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15,209 | 16,121 | ||||||
Goodwill
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55,833 | 55,833 | ||||||
TOTAL
ASSETS
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$ | 86,279 | $ | 91,190 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities
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||||||||
Accounts
payable
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$ | 5,304 | $ | 9,557 | ||||
Accrued
license fees
|
2,801 | 2,795 | ||||||
Accrued
compensation
|
466 | 592 | ||||||
Current
portion of long term debt
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25,229 | 23,296 | ||||||
Other
current liabilities
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3,606 | 5,899 | ||||||
Total
currrent liabilities
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37,406 | 42,139 | ||||||
Other
long-term liabilities
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- | 27 | ||||||
Total
liabilities
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$ | 37,406 | 42,166 | |||||
Commitments
and contingencies (Note 15)
|
||||||||
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)
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100 | 100 | ||||||
Common
stock, $0.0001 par value: 100,000,000 shares authorized;
39,845,881
issued and outstanding at December 31, 2009;
39,653,125
issued and outstanding at March 31, 2009
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4 | 4 | ||||||
Additional
paid-in capital
|
95,505 | 93,918 | ||||||
Accumulated
other comprehensive income/(loss)
|
(290 | ) | (129 | ) | ||||
Accumulated
deficit
|
(46,446 | ) | (44,869 | ) | ||||
Total
stockholders' equity
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48,873 | 49,024 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 86,279 | $ | 91,190 |
Mandalay
Media, Inc. and Subsidiaries
|
|
Consolidated
Statements of Operations (Unaudited)
|
|
3 Months Ended
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3 Months Ended
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9 Months Ended
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9 Months Ended
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|||||||||||||
December 31,
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December 31,
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December 31,
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December 31,
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|||||||||||||
2009
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2008
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2009
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2008
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|||||||||||||
Net
revenues
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$ | 9,651 | $ | 11,005 | $ | 29,875 | $ | 21,354 | ||||||||
Cost
of revenues
|
||||||||||||||||
License
fees
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974 | 1,670 | 2,849 | 5,604 | ||||||||||||
Other
direct cost of revenues
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1,948 | 2,264 | 5,934 | 2,468 | ||||||||||||
Total
cost of revenues
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2,922 | 3,934 | 8,783 | 8,072 | ||||||||||||
Gross
profit
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6,729 | 7,071 | 21,092 | 13,282 | ||||||||||||
Operating
expenses
|
||||||||||||||||
Product
development
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1,184 | 1,563 | 3,964 | 5,130 | ||||||||||||
Sales
and marketing
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2,276 | 4,243 | 8,681 | 6,526 | ||||||||||||
General
and administrative
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2,986 | 2,173 | 8,330 | 7,545 | ||||||||||||
Amortization
of intangible assets
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177 | 177 | 531 | 451 | ||||||||||||
Total
operating expenses
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6,623 | 8,156 | 21,506 | 19,652 | ||||||||||||
Income
/ (Loss) from operations
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106 | (1,085 | ) | (414 | ) | (6,370 | ) | |||||||||
Interest
and other income / (expense)
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||||||||||||||||
Interest
income
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1 | 21 | 8 | 141 | ||||||||||||
Interest
expense
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(811 | ) | (465 | ) | (2,217 | ) | (1,417 | ) | ||||||||
Foreign
exchange transaction gain / (loss)
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114 | (418 | ) | 408 | (345 | ) | ||||||||||
Other
income / (expense)
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1,449 | (276 | ) | 1,598 | (463 | ) | ||||||||||
Interest
and other income / (expense)
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753 | (1,138 | ) | (203 | ) | (2,084 | ) | |||||||||
Income
/ (Loss) from operations before income taxes
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859 | (2,223 | ) | (617 | ) | (8,454 | ) | |||||||||
Income
tax provision
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(274 | ) | (350 | ) | (960 | ) | (497 | ) | ||||||||
Minority
interest in consolidated subsidiaries
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- | 19 | - | 19 | ||||||||||||
Net
income / (loss)
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$ | 585 | $ | (2,554 | ) | $ | (1,577 | ) | $ | (8,932 | ) | |||||
Comprehensive income
(loss)
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$ | 583 | $ | (2,159 | ) | $ | (1,739 | ) | $ | (8,653 | ) | |||||
Basic
and diluted net income / (loss) per common share
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$ | 0.01 | $ | (0.07 | ) | $ | (0.04 | ) | $ | (0.26 | ) | |||||
Weighted
average common shares outstanding, basic and diluted
|
39,850 | 37,366 | 39,839 | 34,028 |
Mandalay
Media, Inc. and Subsidiaries
|
|
Consolidated
Statements of Stockholders’ Equity and Comprehensive Loss
(Unaudited)
|
|
Accumulated
|
||||||||||||||||||||||||||||
Additional
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Other
|
|||||||||||||||||||||||||||
Common Stock
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Preferred Stock
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Paid-In
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Comprehensive
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Accumulated
|
Comprehensive
|
|||||||||||||||||||||||
Shares
|
Amount
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Shares
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Amount
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Capital
|
Income/(Loss)
|
Deficit
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Total
|
Loss
|
||||||||||||||||||||
Balance
at March 31, 2009
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39,653,125 | $ | 4 | 100,000 | $ | 100 | $ | 93,918 | $ | (129 | ) | $ | (44,869 | ) | $ | 49,024 | ||||||||||||
Net
Loss
|
(961 | ) | (961 | ) | (961 | ) | ||||||||||||||||||||||
Foreign
currency translation gain/(loss)
|
203 | 203 | 203 | |||||||||||||||||||||||||
Issuance
of common stock as part of compensation
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210,066 | 172 | 172 | |||||||||||||||||||||||||
Deferred
stock-based compensation
|
311 | 311 | ||||||||||||||||||||||||||
Comprehensive
loss
|
$ | (758 | ) | |||||||||||||||||||||||||
Balance
at June 30, 2009
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39,863,191 | $ | 4 | 100,000 | $ | 100 | $ | 94,401 | $ | 74 | $ | (45,830 | ) | $ | 48,749 | |||||||||||||
Net
Loss
|
(1,201 | ) | (1,201 | ) | (1,201 | ) | ||||||||||||||||||||||
Foreign
currency translation gain/(loss)
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(362 | ) | (362 | ) | (362 | ) | ||||||||||||||||||||||
Issuance
of warrants to vendor for services rendered
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134 | 134 | ||||||||||||||||||||||||||
Deferred
stock-based compensation
|
513 | 513 | ||||||||||||||||||||||||||
Comprehensive
loss
|
$ | (1,563 | ) | |||||||||||||||||||||||||
Balance
at September 30, 2009
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39,863,191 | $ | 4 | 100,000 | $ | 100 | $ | 95,048 | $ | (288 | ) | (47,031 | ) | $ | 47,833 | |||||||||||||
Net
Profit / (Loss)
|
585 | 585 | 585 | |||||||||||||||||||||||||
Foreign
currency translation gain/(loss)
|
(2 | ) | (2 | ) | (2 | ) | ||||||||||||||||||||||
Deferred
stock-based compensation
|
456 | 456 | ||||||||||||||||||||||||||
Issuance
of common stock as part of compensation
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79,938 | 40 | 40 | |||||||||||||||||||||||||
Common
stock forfeited and cancelled
|
(97,248 | ) | (39 | ) | (39 | ) | ||||||||||||||||||||||
Comprehensive
income
|
$ | 583 | ||||||||||||||||||||||||||
Balance
at December 31, 2009
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39,845,881 | $ | 4 | 100,000 | $ | 100 | $ | 95,505 | $ | (290 | ) | (46,446 | ) | $ | 48,873 |
Mandalay
Media, Inc. and Subsidiaries
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
9 Months Ended
|
9 Months Ended
|
|||||||
December 31,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (1,577 | ) | $ | (8,932 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
1,273 | 1,060 | ||||||
Allowance
for doubtful accounts
|
92 | 50 | ||||||
Stock-based
compensation
|
1,453 | 2,587 | ||||||
Warrants
issued as compensation for services
|
134 | - | ||||||
(Increase)
/ decrease in assets:
|
||||||||
Accounts
receivable
|
563 | 3,424 | ||||||
Prepaid
expenses and other current assets
|
(310 | ) | (24 | ) | ||||
Increase
/ (decrease) in liabilities:
|
||||||||
Accounts
payable
|
(4,291 | ) | (2,721 | ) | ||||
Accrued
license fees
|
(14 | ) | (1,064 | ) | ||||
Accrued
compensation
|
(146 | ) | (14 | ) | ||||
Other
liabilities
|
(466 | ) | 43 | |||||
Net
cash used in operating activities
|
(3,289 | ) | (5,591 | ) | ||||
Cash
flows from investing activities
|
||||||||
Purchase
of property and equipment
|
(530 | ) | (101 | ) | ||||
Transaction
costs
|
- | (812 | ) | |||||
Cash
used in acquisition of subsidiary
|
- | (5,470 | ) | |||||
Cash
acquired with acquisition of subsidiary
|
- | 3,020 | ||||||
Net
cash used in investing activities
|
(530 | ) | (3,363 | ) | ||||
Cash
flows from financing activities
|
||||||||
Proceeds
from the sale of common stock
(net
of issuance costs of $146)
|
- | 4,354 | ||||||
Installment
payments related to prior acquisition
|
- | (54 | ) | |||||
Net
cash provided by financing activities
|
- | 4,300 | ||||||
Effect
of exchange rate changes on cash and cash equivalents
|
205 | 129 | ||||||
Net
decrease in cash and cash equivalents
|
(3,614 | ) | (4,525 | ) | ||||
Cash
and cash equivalents, beginning of period
|
5,927 | 10,936 | ||||||
Cash
and cash equivalents, end of period
|
$ | 2,313 | $ | 6,411 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Taxes
paid
|
230 | (270 | ) |
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
|
1.
|
Organization
|
Mandalay
Media, Inc. and Subsidiaries
|
|
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
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
|
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
|
3 Months Ended
|
3 Months Ended
|
9 Months Ended
|
9 Months Ended
|
|||||||||||||
December 31
|
December 31
|
December 31
|
December 31
|
|||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Potentially
dilutive shares
|
100 | 1,630 | 100 | 1,986 |
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share amounts)
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share
amounts)
|
|
3.
|
Liquidity
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share
amounts)
|
4.
|
Fair
Value Measurements
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share
amounts)
|
|
Fair Value Measurement as of December 31, 2009
|
||||||||||||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
Description
|
$
|
$
|
$
|
$
|
|||||||||
Cash
and cash equivalents
|
2,313
|
2,313
|
-
|
-
|
5.
|
Balance
Sheet Components
|
December 31,
|
March 31,
|
|||||||
2009
|
2009
|
|||||||
(unaudited)
|
||||||||
Accounts
receivable
|
$ | 10,191 | $ | 10,919 | ||||
Less:
allowance for doubtful accounts
|
(266 | ) | (174 | ) | ||||
$ | 9,925 | $ | 10,745 |
December 31,
|
March 31,
|
|||||||
2009
|
2009
|
|||||||
(unaudited)
|
||||||||
Equipment
|
$ | 1,431 | $ | 1,192 | ||||
Furniture
& fixtures
|
677 | 386 | ||||||
Leasehold
improvements
|
140 | 140 | ||||||
2,248 | 1,718 | |||||||
Accumulated
depreciation
|
(848 | ) | (488 | ) | ||||
$ | 1,400 | $ | 1,230 |
6.
|
Description
of Stock Plans
|
Mandalay
Media, Inc. and Subsidiaries
|
|
Notes
to Unaudited Consolidated Financial Statements
|
|
(all
numbers in thousands except per share
amounts)
|
Number of
|
Weighted Average
|
|||||||
Shares
|
Exercise Price
|
|||||||
Outstanding
at December 31, 2006
|
- | - | ||||||
Granted
|
1,600 | $ | 2.64 | |||||
Canceled
|
- | - | ||||||
Exercised
|
- |