**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-KSB**




**(Mark
      One)**




x
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
                EXCHANGE ACT OF 1934**


For
      the
      fiscal year ended December 31, 2007




o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
                EXCHANGE ACT OF 1934**


For
      the
      transition period from ____________________ to
      ____________________.




Commission
      File Number 00-10039




**MANDALAY
      MEDIA, INC.**




(Name
      of
      Small Business Issuer in its Charter)




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)





(310)
      601-2500


(Issuer’s
      Telephone Number, Including Area Code)




Securities
      registered pursuant to Section 12(b) of the Act: None




Securities
      registered under Section 12(g) of the Exchange Act:




Common
      Stock, Par Value $0.0001 Per Share


(Title
      of
      Class)




Check
      whether the Issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.  o




Check
      whether the Issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the Registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90
      days.




Yes
       x No 
      o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of Registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.  o




Indicate
      by check mark whether the Registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange
      Act).




Yes 
      o No  x




The
        Issuer’s revenues for the fiscal year ended December 31, 2007 were $0. The
        aggregate market value of the Issuer’s voting and non-voting common equity held
        by non-affiliates of the Issuer as of April 11, 2008 was
        $31,159,927.




Check
      whether the Issuer has filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of
      securities under a plan confirmed by a court. Yes  x No 
      o




As
        of
        April 11, 2008, the Issuer had 32,048,366 shares of its common stock,
        $0.0001 par value per share, outstanding.




Transitional
      Small Business Disclosure Format (check one):  Yes  o No  x







**Mandalay
      Media, Inc.**





ANNUAL
      REPORT ON FORM 10-KSB


FOR
      THE
      YEAR ENDED DECEMBER 31, 2007





**TABLE
      OF CONTENTS**





**PART
                  I**ITEM
                  1.
              DESCRIPTION
                  OF BUSINESS
              1ITEM
                  2.
              DESCRIPTION
                  OF PROPERTY
              6ITEM
                  3.
              LEGAL
                  PROCEEDINGS
              6ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              6**PART
                  II**ITEM
                  5.
              MARKET
                  FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
                  ISSUER
                  PURCHASES OF EQUITY SECURITIES
              6ITEM
                  6.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              7ITEM
                  7.
              FINANCIAL
                  STATEMENTS
              33ITEM
                  8.
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE
              49ITEM
                  8A(T).
              CONTROLS
                  AND PROCEDURES
              49ITEM
                  8B.
              OTHER
                  INFORMATION
              49**PART
                  III**ITEM
                  9.
              DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
                  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
              50ITEM
                  10.
              EXECUTIVE
                  COMPENSATION
              55ITEM
                  11.
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  STOCKHOLDER MATTERS
              58ITEM
                  12.
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                  INDEPENDENCE
              61ITEM
                  13.
              EXHIBITS
              63ITEM
                  14.
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              67




i


**PART
      I**




**ITEM
      1. DESCRIPTION OF BUSINESS**




***Historical
      Operations of Mandalay Media, Inc.***




Mandalay
        Media, Inc. (“Mandalay,” the “Registrant” or the “Company”) was originally
        incorporated in the State of Delaware on November 6, 1998 under the name
        eB2B
        Commerce, Inc. On April 27, 2000, Mandalay merged into DynamicWeb Enterprises
        Inc., a New Jersey corporation, and changed its name to eB2B Commerce, Inc.
        On
        April 13, 2005, Mandalay changed its name to Mediavest, Inc. On November
        7,
        2007, through a merger, the Company reincorporated in the State of
        Delaware under the name Mandalay Media, Inc.




On
      October 27, 2004, and as amended on December 17, 2004, Mandalay filed a plan
      for
      reorganization under Chapter 11 of the United States Bankruptcy Code in the
      United States Bankruptcy Court for the Southern District of New York (the “Plan
      of Reorganization”). Under the Plan of Reorganization, as completed on January
      26, 2005: (1) Mandalay’s net operating assets and liabilities were transferred
      to the holders of the secured notes in satisfaction of the principal and accrued
      interest thereon; (2) $400,000 were transferred to a liquidation trust and
      used
      to pay administrative costs and certain preferred creditors; (3) $100,000 were
      retained by Mandalay to fund the expenses of remaining public; (4) 3.5% of
      the
      new common stock of Mandalay (140,000 shares) was issued to the holders of
      record of Mandalay’s preferred stock in settlement of their liquidation
      preferences; (5) 3.5% of the new common stock of Mandalay (140,000 shares)
      was
      issued to common stockholders of record as of January 26, 2005 in exchange
      for
      all of the outstanding shares of the common stock of the company; and (6) 93%
      of
      the new common stock of Mandalay (3,720,000 shares) was issued to the sponsor
      of
      the Plan of Reorganization in exchange for $500,000 in cash. Through January
      26,
      2005, Mandalay and its subsidiaries were engaged in providing
      business-to-business transaction management services designed to simplify
      trading between buyers and suppliers.




Prior
      to
      February 12, 2008, Mandalay was a public shell company with no operations,
      and
      controlled by its significant stockholder, Trinad Capital Master Fund,
      L.P.




On
      February 12, 2008, Mandalay’s wholly-owned subsidiary, Twistbox Acquisition
      Inc., merged with and into Twistbox Entertainment, Inc. (“Twistbox”), with
      Twistbox as the surviving corporation, through an exchange of capital stock
      of
      Twistbox for common stock of Mandalay (the “Merger”). Effective as of the
      closing of the Merger, Twistbox became Mandalay’s wholly-owned subsidiary. As a
      result thereof, the historical and current business operations of Twistbox
      now
      comprise Mandalay’s principal business operations.




***Our
      Current Operations***




Twistbox
      Entertainment, Inc. 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 over 40 countries representing more than one billion subscribers.
      Operating since 2003, Twistbox has developed an intellectual property portfolio
      unique to its target demographic (18 to 35 year old) that includes worldwide
      exclusive (or territory exclusive) 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 over 1,500 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 leveraged its brand portfolio
      and platform to secure “direct” distribution agreements with the largest mobile
      operators in the world, including, among others, AT&T, Hutchinson 3G, O2,
      MTS, Orange, T-Mobile, Telefonica, Verizon and Vodafone. Twistbox has
      experienced annual revenue growth in excess of 50% over the past two years
      and
      expects to become one of the leading players in the rapidly-growing,
      multibillion-dollar mobile entertainment market.




Twistbox
      maintains a worldwide distribution agreement with Vodafone. Through this
      relationship, Twistbox serves as Vodafone’s exclusive supplier of late night
      content, a portion of which is age-verified. Additionally, Twistbox is one
      of
      the select few content aggregators for Vodafone. Twistbox aggregates content
      from leading entertainment companies and manages distribution of this content
      to
      Vodafone. Additionally, Twistbox maintains distribution agreements with other
      leading mobile network operators throughout the North American, European, and
      Asia-Pacific regions that include Verizon, Virgin Mobile, T-Mobile, Telefonica,
      Hutchinson 3G, Three, O2 and Orange.









Twistbox’s
      intellectual property encompasses over 75 worldwide exclusive or territory
      exclusive content licensing agreements that cover all of its key content genres
      including lifestyle, glamour, and celebrity news and gossip for U.S. Hispanic
      and Latin American markets, poker news and information, late night entertainment
      and casual games.




Twistbox
      currently has content live on more than 100 network operators in 40 countries.
      Through these relationships, Twistbox can currently reach over one billion
      mobile subscribers worldwide. Its existing content portfolio includes 300 WAP
      sites, 250 games and 66 mobile TV channels.




In
      addition to its content publishing business, Twistbox operates a rapidly growing
      suite of Premium Short Message Service (Premium SMS) services that include
      text
      and video chat and web2mobile marketing services of video, images and games
      that
      are promoted through on-line, magazine and TV affiliates. The Premium SMS
      infrastructure essentially allows end consumers of Twistbox content to pay
      for
      their content purchases directly from their mobile phone bills.




Twistbox’s
      end-users are the highly-mobile, digitally-aware 18 to 35 year old demographic.
      This group is a major consumer of digital entertainment services and commands
      significant amounts of disposable income. In addition, this group is very
      focused on consumer lifestyle brands and is much sought after by
      advertisers.




**Revenue
      Model**




Twistbox’s
      revenue model is based primarily on a per-download or, alternatively,
      subscription charge for video clips, games, WAP sites and other
      content.




In
      addition to its mobile content offerings, Twistbox has begun to leverage its
      distribution and traffic to generate revenues from WAP advertising where it
      manages mobile content portals on an exclusive basis.




Twistbox
      typically bills and receives payment directly through mobile operators and
      portals that form the majority of its customers. The network operators typically
      receive between 40% to 50% of the retail purchase price in the on-deck
      environment. The remainder, the net revenue, is shared with Twistbox’s content
      providers, with the licensor typically receiving between 20% to 50% of the
      net
      revenue.




Payment
      methods available to end-users include SMS reverse billing and prepayment as
      well as the more traditional credit and debit card channels. Twistbox typically
      receives payment directly from the mobile operators and portals that constitute
      the majority of its customers.




**Development
      Process**




Twistbox
      has an active content development program and has experience producing
      release-ready applications for the world’s leading wireless formats and
      platforms, including J2ME, BREW, DoJa, Windows Mobile, SMS and
      Symbian.




Twistbox
      intends to acquire additional third-party licenses and to develop new
      applications through relationships with outside developers and its in-house
      development staff. We believe that these efforts will assure that Twistbox
      has a
      steady stream of new content to offer its customers and end-users.




**Twistbox
      Technology and Tools**




Twistbox’s
      production activities currently address over 1,500 handsets, including models
      manufactured by Nokia, Motorola, Samsung and Sony Ericsson. Twistbox has created
      an automated handset abstraction tool that significantly reduces the time
      required to “port” a game across a significant number of these
      handsets.




Twistbox
      works with a number of languages, platforms, and formats, including J2ME, BREW,
      DoJa, and Symbian, and localizes its releases in the EFIGS languages (English,
      French, Italian, German and Spanish). It is actively involved in a number of
      technical initiatives aimed at enhancing its titles with value-added features,
      such as multi-player functionality, 3D graphics, and location-based features.
      The market for mobile entertainment should increase dramatically as mobile
      operators continue to roll out their next generation service offerings and
      we
      see increases in bandwidth drive acceptance of handsets and other connected
      devices offering improvements in data handling capability, graphics resolution
      and other features. Real-time, operating-system based, handsets (smart
      phones/PDA phones) were previously available but at high price points,
      reflecting the fact they were high-end devices. As prices decrease in the
      future, phones should continue to grow steadily in both penetration and
      power.




2




The
      availability of mobile content should hasten the adoption of the next generation
      of handsets and promote the increase in data traffic required by carriers for
      recovery of their investments in 3G licenses and infrastructure.




Twistbox’s
      proprietary portfolio of technology encompasses platforms and tools that enhance
      the delivery, management and quality of Twistbox’s programming.




**RenuxTM**




RenuxTM
is
      Twistbox’s carrier class content management, publishing and distribution
      platform developed internally for the development, integration, deployment
      and
      marketing of mobile programming. The system has been in operation for over
      five
      years and today supports over 300 WAP sites, more than 66 mobile TV channels
      and
      250 games in 18 languages. The RenuxTM content management system stores image and
      video content formatted for 1.5G to up to 3G devices, and incorporates a
      comprehensive metadata format that categorizes the content for handset
      recognition, programming, marketing and reporting. Twistbox maintains content
      hosting facilities in Los Angeles, Washington, D.C. and Frankfurt that support
      the distribution of content to mobile network operators.




**RapidPortTM**




RapidPortTM
      is Twistbox’s software suite that enables the development and porting of mobile
      games and applications to over 1,000 different handsets from leading
      manufacturers including Nokia, Motorola, Samsung and Sony Ericsson. Twistbox
      has
      created an automated handset abstraction tool that significantly reduces the
      time required to “port” a game across a significant number of these handsets.
      The RapidPortTM development platform supports a broad number of wireless device
      formats including J2ME, BREW, DoJa and Symbian, and provides localization in
      over 18 languages. Twistbox Games has recently enhanced RapidPortTM to include
      new technology designed to enhance titles with value-added features, such as
      in-game advertising, multi-player and play for prizes functionality, 3D graphics
      and location-based services (LBS).




**Nitro-CDPTM**




Nitro-CDPTM
      is an internally developed content download and delivery platform for mobile
      network operators, portals and content publishers. The Nitro-CDPTM platform
      allows for real-time content upload, editing, rating and deployment, and
      merchandising, while maintaining carrier-grade security, reliability and
      scalability. The platform enables mobile network operators to effectively manage
      millions of mobile download transactions across multiple channels and
      categories. Nitro-CDPTM also provides innovative cross-promotional tools,
      including purchase history-based up-sales and advertising, an individual “My
      Downloads” area for each consumer and peer-to-peer recommendations.




**CMX
      WrapperTM**




The
      CMX
      WrapperTM technology, developed internally by Twistbox, enables mobile operators
      to integrate additional and complimentary functionality into existing mobile
      games and applications without the need to alter the original code or involve
      the original developer. This value-added functionality includes support for
      in-game promotions and billing, and “try before you buy” and “refer a friend”
functionality.




**Play
      for Prizes - Competition goes mobile** **®**




The
      Twistbox Games For-Prizes Network, currently deployed by major mobile operators
      across the U.S. such as AT&T Wireless and Verizon, offers several genres of
      games in which players compete in daily and weekly skill-based multiplayer
      tournaments to win prizes. Subscribers can compete in both daily head-to-head
      and weekly progressive tournaments. The Twistbox Games For-Prizes platform
      enables unique in-game promotions through carrier-specific campaigns in
      cooperation with sponsors and advertisers.




**WAAT
      Media Wireless Content Standards Rating Matrix** **©**




First
      developed in 2003, and refined over the last several years, WAAT Media has
      developed a proprietary content standards matrix widely known as the “WAAT Media
      Wireless Content Standards Ratings Matrix©” (the “Ratings Matrix”). The Ratings
      Matrix has been filed with the Library of Congress’s Copyright Office. It is the
      globally-accepted content ratings system for age-verified mobile programming
      that encompasses language, violence and explicitness. The system is licensed
      on
      a royalty-free basis by the world’s leading mobile carriers and leading content
      providers and is the basis for the United Kingdom’s Code of Practice. The
      Ratings Matrix currently supports 33 ratings levels and incorporates a suite
      of
      content validation tools and industry best practices that takes into account
      country-by-country carrier programming requirements and local broadcast
      standards.




3




**Mobile
      Rights**




Twistbox
      has major mobile publishing agreements with leading entertainment companies.
      Through such agreements, as well as its own portfolio of intellectual property,
      Twistbox has the wireless mobile rights to the following applications and brands
      that include but are not limited to:




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




We
      believe that these widely recognized brands attract both mobile operators and
      end users. Twistbox intends to exploit the depth and breadth of its intellectual
      property in order to continue to grow its revenue and cash flow.




**Content
      Development**




Twistbox
      has experience producing release-ready entertainment applications for several
      wireless formats and platforms, including J2ME, BREW, WAP 2.0, Symbian and
      DoJa.




Twistbox
      intends to acquire additional third-party licenses and to develop new
      applications through relationships with third-party developers as well as its
      in-house development staff. We believe that these efforts will assure that
      it
      has a steady supply of new content to offer its customers.




In
      addition to mobile video clips, games, WAP sites, and other entertainment
      applications, Twistbox is currently focusing its development and licensing
      activities on complementary applications such as in game advertising, TV-SMS
      campaigns, play-for-prizes and multi-player games.




**Distribution**




Twistbox
      distributes its programming and services through on-deck relationships with
      mobile carriers and off-deck relationships with third-party aggregation,
      connectivity and billing providers.




**On-Deck**




Twistbox’s
      on-deck services include the programming and provisioning of games and games
      aggregation, images, videos and mobileTV content and portal management. Twistbox
      currently has on-deck agreements with more than 100 mobile operators including
      Vodafone, T-Mobile, Verizon, AT&T, Orange, O2, Virgin Mobile, Telefonica and
      MTS in over 40 countries. Through these on-deck agreements, Twistbox relies
      on
      the carriers for both marketing and billing. Twistbox currently reaches over
      one
      billion mobile subscribers worldwide through these relationships. Its currently
      deployed programming includes over 300 WAP sites, 250 games and 66 mobile TV
      channels.




**Off-Deck**




Twistbox
      has recently deployed off-deck services that include the programming and
      distribution of games, images, videos, chat services and mobile marketing
      campaigns. Twistbox manages the campaigns directly and maintains billing and
      connectivity agreements with leading service providers in each territory. In
      addition, Twistbox has built and implemented a “Web-to-Mobile” affiliate program
      that allows for the cross-marketing and sales of mobile content from Web
      storefronts of its various programming partners and their affiliates. To date,
      Twistbox’s content partners generate in excess of eight million on-line unique
      users per day.




4




**Mobile
      Operators (Carriers)**




Twistbox
      currently has a large number of distribution agreements with mobile operators
      and portals in Europe, the U.S., Japan and Latin America. Twistbox currently
      has
      distribution agreements with more than 100 single territory operators in 40
      countries. Twistbox continues to sign new operators on a quarterly basis and,
      in
      the near term, intends to extend its distribution base into Eastern Europe
      and
      South America. The strength and coverage of these relationships is of paramount
      importance and the ability to support and service them is a vital component
      in
      route to the consumer. Twistbox’s distribution agreements with Vodafone account
      for approximately 36% of the company’s current revenue.




**Affiliates
      Program**




Twistbox
      has also established an Affiliates Program to market and sell its content
“off-deck,” that is, through a direct-to-consumer online portal that end users
      can access directly from their PCs or phones. We believe that this channel
      offers an attractive secondary outlet for consumers wishing to peruse and
      purchase content in an environment less limiting and restrictive than an
      operator’s “walled garden.”




**Sales
      and Marketing**




In
        order
        to sell to its target base of carrier and infrastructure customers, Twistbox
        has
        built a growing affiliate sales and marketing team that is localized on a
        country-by-country basis. In order to sell to its target base of carrier
        and
        infrastructure customers, Twistbox has built a growing affiliate sales and
        marketing team that is localized on a country-by-country basis. As of April
        11,
        2008, Twistbox had a workforce of approximately 156
        employees.




**Competition**




While
      many mobile marketing companies sell a diversified portfolio of content from
      ring tones to wall papers and kids programming to adult, Twistbox has taken
      a
      more focused and disciplined approach. Twistbox focuses on programming and
      platforms where it can manage categories on an exclusive or semi-exclusive
      basis
      for a mobile operator. Target markets include Age Verified Programming,
      Play4Prizes or areas in which Twistbox has exclusive rights to the top one
      or
      two brands in a genre.




In
      the
      area of mature themed mobile entertainment, Twistbox is a leading provider
      of
      content and services. The
      industry trend has been for leading operators to focus on fewer partners and
      often assign a company to manage the category. We believe that its responsible
      reputation and the Ratings Matrix combined with its publishing platform and
      leading brands that maximize revenue, positions it to manage the age-verified
      category for operators globally.




Twistbox
      competes with a number of other companies in the mobile games publishing
      industry, including Arvato, Minick, Jamba, Buongiorno, Mobile Streams, Glu
      Mobile, Player X and Gameloft. Brands such as Playboy have sought to create
      their own direct distribution arrangements with network operators. To the extent
      that such firms continue to seek such relationships, they will compete directly
      with Twistbox in their respective content segments. While Twistbox competes
      with
      many of the leading publishers, its core business is providing services and
      platforms for operators and publishers to enhance revenues. In turn, through
      the
      management of an operator’s download platform, providing a cross carrier
      Play4Prizes infrastructure or facilitating in game advertising or billing,
      Twistbox has become a strategic value added partner to both the mobile operator
      and publishing communities.




Direct-to-consumer
      (D2C) Web portals may have an adverse impact on Twistbox’s business, as these
      portals may not strike distribution arrangements with Twistbox. Additionally,
      wireless device manufacturers such as Nokia, Sony Ericsson and Motorola may
      choose to pursue their own content strategies.




We
      believe that the principal competitive factors in the market for mobile games
      and other content include carrier relationships, access to compelling content,
      quality and reliability of content delivery, availability of talented content
      developers and skilled technical personnel, and financial
      stability.




5




**Trademarks,
      Tradenames and Copyrights**




Twistbox
      has used, registered and applied to register certain trademarks and service
      marks to distinguish its products, technologies and services from those of
      its
      competitors in the United States and in foreign countries. Twistbox also
      has a copyright known as the “WAAT Media Wireless Content Standards Ratings
      Matrix©”, which has been filed with the Library of Congress’s Copyright Office.
      We believe that these trademarks, tradenames and copyright are important to
      its
      business. The loss of some of Twistbox’s intellectual property might have a
      negative impact on its financial results and operations.




**ITEM
      2. DESCRIPTION OF PROPERTY**




The
      principal offices of the Registrant are the offices of Trinad Capital, L.P.,
      located at 2121 Avenue of the Stars, Suite 2550, Los Angeles, California 90067.
      In March 2007, we entered into a month-to-month lease for such office space
      with
      Trinad Management, LLC (“Trinad Management”) for rent in the amount of $8,500
      per month.




The
        principal offices of our sole operating subsidiary, Twistbox, are headquartered
        at 14242 Ventura Boulevard, 3rd Floor, Sherman Oaks, California 91423. On
        July
        1, 2005, the WAAT Corp. (Twistbox’s predecessor-in-interest) entered into a
        lease for these premises with Berkshire Holdings, LLC at a base rent of $21,000
        per month. The term of the lease expires on July 15, 2010. Twistbox also
        leases
        property  in Dortmund, Germany and Poland, where it has branch
        operations.




**ITEM
      3. LEGAL PROCEEDINGS**




As
      of the
      date of filing this Annual Report on Form 10-KSB, we are not a party to any
      litigation that we believe would have a material adverse effect on
      us.




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




None.




**PART
      II**




**ITEM
              5.**
            **MARKET
                FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
                ISSUER
                PURCHASES OF EQUITY
                SECURITIES**




***Market
      Information***




As
        of
        April 11, 2008, the closing price of our common stock was
        $5.50.




Our
      common stock is quoted on the OTC Bulletin Board under the symbol “MNDL.OB.” Any
      investor who purchases our common stock is not likely to find any liquid trading
      market for our common stock and there can be no assurance that any liquid
      trading market will develop.




The
        following table reflects the high and low closing quotations of our common
        stock
        for the years ended December 31, 2006 and December 31, 2007. The quotations
        reflect last sale closing price on a daily basis and reflect inter-dealer
        prices, without retail mark-up, mark-down or commission and may not represent
        actual transactions.




**Fiscal
                2006**
            
            
            **High**
            
            
            **Low**
            
            **Fiscal
                2007**
            
            
            **High**
            
            
            **Low**First
                quarter
            
            
            N/A
            
            
            N/A
            
            First
                quarter
            
            $
            2.50
            
            $
            1.75Second
                quarter
            
            $
            5.75
            
            $
            0.40
            
            Second
                quarter
            
            $
            3.00
            
            $
            1.90Third
                quarter
            
            $
            2.05
            
            $
            1.25
            
            Third
                quarter
            
            $
            4.00
            
            $
            2.25Fourth
                quarter
            
            $
            2.05
            
            $
            2.00
            
            Fourth
                quarter
            
            $
            4.50
            
            $
            2.30





There
      has
      never been a public trading market for any of our securities other than our
      common stock.




***Holders***




As
        of
        April 11, 2008, there were 549 holders of record of our common stock. There
        were also an undetermined number of holders who hold their stock in nominee
        or
“street” name.




6




***Dividends***




We
      have
      not declared cash dividends on our common stock since our inception and we
      do
      not anticipate paying any cash dividends in the foreseeable future.




***Equity
      Compensation Plan Information***




The
      following table sets forth information concerning our equity compensation plans
      as of December 31, 2007.




**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
            
            
            1,600,000
            
            $
            2.64
            
            
            1,400,000Equity
                compensation plans not approved by security holders
            
            
            0
            
            
            0
            
            
            0**Total**
            
            
            1,600,000
            
            $
            2.64
            
            
            1,400,000





**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




The
        following discussion should be read in conjunction with, and is qualified
        in its
        entirety by, the Financial Statements and the Notes thereto included in this
        report. This discussion contains certain forward-looking statements that
        involve
        substantial risks and uncertainties. When used in this Annual Report on Form
        10-KSB, the words “anticipate,” “believe,” “estimate,” “expect” and similar
        expressions, as they relate to our management or us, are intended to identify
        such forward-looking statements. Our actual results, performance or achievements
        could differ materially from those expressed in, or implied by, these
        forward-looking statements as a result of a variety of factors including
        those
        set forth under “Risk Factors” beginning on page 16 and elsewhere in this
        filing. Historical operating results are not necessarily indicative of the
        trends in operating results for any future period.




Unless
      the context otherwise indicates, the use of the terms “we,” “our” or “us” refers
      to the business and operations of Mandalay Media, Inc. through its sole
      operating and wholly-owned subsidiary, Twistbox Entertainment, Inc.




***Historical
      Operations of Mandalay Media, Inc.***




Mandalay
        was originally incorporated in the State of Delaware on November 6, 1998
        under
        the name eB2B Commerce, Inc. On April 27, 2000, Mandalay merged into DynamicWeb
        Enterprises Inc., a New Jersey corporation, and changed its name to eB2B
        Commerce, Inc. On April 13, 2005, Mandalay changed its name to Mediavest,
        Inc.
        On November 7, 2007, through a merger, the Company reincorporated
        in the State of Delaware under the name Mandalay Media, Inc.




On
      October 27, 2004, and as amended on December 17, 2004, Mandalay filed a plan
      for
      reorganization under Chapter 11 of the United States Bankruptcy Code in the
      United States Bankruptcy Court for the Southern District of New York (the “Plan
      of Reorganization”). Under the Plan of Reorganization, as completed on January
      26, 2005: (1) Mandalay’s net operating assets and liabilities were transferred
      to the holders of the secured notes in satisfaction of the principal and accrued
      interest thereon; (2) $400,000 were transferred to a liquidation trust and
      used
      to pay administrative costs and certain preferred creditors; (3) $100,000 were
      retained by Mandalay to fund the expenses of remaining public; (4) 3.5% of
      the
      new common stock of Mandalay (140,000 shares) was issued to the holders of
      record of Mandalay’s preferred stock in settlement of their liquidation
      preferences; (5) 3.5% of the new common stock of Mandalay (140,000 shares)
      was
      issued to common stockholders of record as of January 26, 2005 in exchange
      for
      all of the outstanding shares of the common stock of the company; and (6) 93%
      of
      the new common stock of Mandalay (3,720,000 shares) was issued to the sponsor
      of
      the Plan of Reorganization in exchange for $500,000 in cash. Through January
      26,
      2005, Mandalay and its subsidiaries were engaged in providing
      business-to-business transaction management services designed to simplify
      trading between buyers and suppliers.




7




Prior
      to
      February 12, 2008, Mandalay was a public shell company with no operations,
      and
      controlled by its significant stockholder, Trinad Capital Master Fund,
      L.P.




**SUMMARY
      OF THE MERGER**




Mandalay
      entered into an Agreement and Plan of Merger on December 31, 2007, as
      subsequently amended by the Amendment to Agreement and Plan of Merger dated
      February 12, 2008 (the “Merger Agreement”), with Twistbox Acquisition, Inc. (a
      Delaware corporation and a wholly-owned subsidiary of Mandalay (“Merger Sub”),
      Twistbox Entertainment, Inc. (“Twistbox”), and Adi McAbian and Spark Captial,
      L.P., as representatives of the stockholders of Twistbox, pursuant to which
      Merger Sub would merge with and into Twistbox, with Twistbox as the surviving
      corporation (the “Merger”). The Merger was completed on February 12,
      2008.




Pursuant
      to the Merger Agreement, upon the completion of the Merger, each outstanding
      share of Twistbox common stock, $0.001 par value per share, on a fully-converted
      basis, with the conversion on a one-for-one basis of all issued and outstanding
      shares of the Series A Convertible Preferred Stock of Twistbox and the Series
      B
      Convertible Preferred Stock of Twistbox, each $0.01 par value per share (the
      “Twistbox Preferred Stock”), converted automatically into and became
      exchangeable for Mandalay common stock in accordance with certain exchange
      ratios set forth in the Merger Agreement. In addition, by virtue of the Merger,
      each outstanding Twistbox option to purchase Twistbox common stock issued
      pursuant to the Twistbox 2006 Stock Incentive Plan was assumed by Mandalay,
      subject to the same terms and conditions as were applicable under such plan
      immediately prior to the Merger, except that (a) the number of shares of
      Mandalay common stock issuable upon exercise of each Twistbox option was
      determined by multiplying the number of shares of Twistbox common stock that
      were subject to such Twistbox option immediately prior to the Merger by 0.72967
      (the “Option Conversion Ratio”), rounded down to the nearest whole number; and
      (b) the per share exercise price for the shares of Mandalay common stock
      issuable upon exercise of each Twistbox option was determined by dividing the
      per share exercise price of Twistbox common stock subject to such Twistbox
      option, as in effect prior to the Merger, by the Option Conversion Ratio,
      subject to any adjustments required by the Internal Revenue Code. As part of
      the
      Merger, Mandalay also assumed all unvested Twistbox options. The merger
      consideration consisted of an aggregate of up to 12,325,000 shares of Mandalay
      common stock, which included the conversion of all shares of Twistbox capital
      stock and the reservation of 2,144,700 shares of Mandalay common stock required
      for assumption of the vested Twistbox options. Mandalay reserved an additional
      318,722 shares of Mandalay common stock required for the assumption of the
      unvested Twistbox options. All warrants to purchase shares of Twistbox
      common stock outstanding at the time of the Merger were terminated on or before
      the effective time of the Merger.




Upon
      the
      completion of the Merger, all shares of the Twistbox capital stock were no
      longer outstanding and were automatically canceled and ceased to exist, and
      each
      holder of a certificate representing any such shares ceased to have any rights
      with respect thereto, except the right to receive the applicable merger
      consideration. Additionally, each share of the Twistbox capital stock held
      by
      Twistbox or owned by Merger Sub, Mandalay or any subsidiary of Twistbox or
      Mandalay immediately prior to the Merger, was canceled and extinguished as
      of
      the completion of the Merger without any conversion or payment in respect
      thereof. Each share of common stock, $0.001 par value per share, of Merger
      Sub
      issued and outstanding immediately prior to the Merger was converted upon
      completion of the Merger into one validly issued, fully paid and non-assessable
      share of common stock, $0.001 par value per share, of the surviving
      corporation.




8




As
        part
        of the Merger, Mandalay agreed to guarantee up to $8,250,000 of
        Twistbox’s outstanding debt to ValueAct SmallCap Master Fund L.P.
        (“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 a note in the amount of
        $16,500,000 (the “Note”) and a warrant which entitled ValueAct to purchase from
        Twistbox up to a total of 2,401,747 shares of Twistbox’s common stock (the
“Warrant”).  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.




Effective
      as of the closing of the Merger, Ian Aaron and Adi McAbian were appointed to
      our
      board of directors (the “Board of Directors”).




**Overview**




As
        of
        February 12, 2008, our operations are currently those of our wholly-owned,
        sole
        operating subsidiary, Twistbox Entertainment, Inc. (“Twistbox”). 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 over 40 countries
        representing more than one billion subscribers. Operating since 2003, Twistbox
        has developed an intellectual property portfolio unique to its target
        demographic (18 to 35 year old) that includes worldwide exclusive (or territory
        exclusive) 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
        over 1,500 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 leveraged its brand portfolio and platform
        to
        secure “direct” distribution agreements with the largest mobile operators in the
        world, including, among others, AT&T, Hutchinson 3G, O2, MTS, Orange,
        T-Mobile, Telefonica, Verizon and Vodafone. Twistbox has experienced annual
        revenue growth in excess of 50% over the past two years and expects to become
        one of the leading players in the rapidly-growing, multibillion-dollar mobile
        entertainment market.




Twistbox
      maintains a worldwide distribution agreement with Vodafone. Through this
      relationship, Twistbox serves as Vodafone’s exclusive supplier of late night
      content, a portion of which is age-verified. Additionally, Twistbox is one
      of
      the select few content aggregators for Vodafone. Twistbox aggregates content
      from leading entertainment companies and manages distribution of this content
      to
      Vodafone. Additionally, Twistbox maintains distribution agreements with other
      leading mobile network operators throughout the North American, European, and
      Asia-Pacific regions that include Verizon, Virgin Mobile, T-Mobile, Telefonica,
      Hutchinson 3G, Three, O2 and Orange.




Twistbox’s
      intellectual property encompasses over 75 worldwide exclusive or territory
      exclusive content licensing agreements that cover all of its key content genres
      including lifestyle, glamour, and celebrity news and gossip for U.S. Hispanic
      and Latin American markets, poker news and information, late night entertainment
      and casual games.




Twistbox
      currently has content live on more than 100 network operators in 40 countries.
      Through these relationships, Twistbox can currently reach over one billion
      mobile subscribers worldwide. Its existing content portfolio includes 300 WAP
      sites, 250 games and 66 mobile TV channels.




In
      addition to its content publishing business, Twistbox operates a rapidly growing
      suite of Premium Short Message Service (Premium SMS) services that include
      text
      and video chat and web2mobile marketing services of video, images and games
      that
      are promoted through on-line, magazine and TV affiliates. The Premium SMS
      infrastructure essentially allows end consumers of Twistbox content to pay
      for
      their content purchases directly from their mobile phone bills.




Twistbox’s
      end-users are the highly-mobile, digitally-aware 18 to 35 year old demographic.
      This group is a major consumer of digital entertainment services and commands
      significant amounts of disposable income. In addition, this group is very
      focused on consumer lifestyle brands and is much sought after by
      advertisers.




9




**Stock
      Sales and Liquidity**




On
      August
      3, 2006, we increased our authorized shares of common stock from 19,000,000
      to
      100,000,000 and authorized and effectuated a 2.5 to 1 stock split of our common
      stock to increase our outstanding shares from 4,000,000 to 10,000,000. All
      share
      and per share amounts have been retroactively adjusted to reflect the effect
      of
      the stock split.




On
      September 14, 2006, we sold 2,800,000 units; on October 12, 2006, we sold
      3,400,000 units; and on December 26, 2006, we sold 530,000 units. Each unit
      sold, at a price per unit of $1.00, consisted of one share of our common stock
      and one warrant to purchase one share of our common stock. We realized net
      proceeds of $6,057,000 after the costs of the offering. The warrants have an
      exercise price of $2.00 per share and expire as follows: 2,800,000 warrants
      expire in September 2008; 3,400,000 warrants expire in October 2008; and 530,000
      warrants expire in December 2008.




On
        October 12, 2006, we entered into a Series A Convertible Preferred Stock
        Purchase Agreement with Trinad Management, LLC (“Trinad Management”). Pursuant
        to the terms of the agreement, Trinad Management purchased 100,000 shares
        of our
        Series A Convertible Preferred Stock, par value $ 0.0001 per share (“Series A
        Preferred Stock”), for an aggregate purchase price of $100,000. Series A
        Preferred stockholders are entitled to convert, at their option, all or any
        shares of the Series A Preferred Stock into the number of fully paid and
        non-assessable shares of common stock equal to the number obtained by dividing
        the original purchase price of such Series A Preferred Stock, 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. The fair value of the 100,000 shares of
        our
        common stock underlying the Series A Convertible Preferred Stock was $1.425
        per
        share at the date of grant. Since the value was $0.425 lower than the fair
        value
        of our common stock on October 12, 2006, the $42,500 intrinsic value of the
        conversion option resulted in the reduction of stockholders’ equity for
        the recognition of a preferred stock dividend and an increase to additional
        paid-in capital.




On
      July
      24, 2007, we entered into a Subscription Agreement with certain investors,
      pursuant to which such investors agreed to subscribe for an aggregate of
      5,000,000 shares of our common stock. Each share of common stock was sold
      at the price of $0.50, for an aggregate purchase price of
      $2,500,000.




On
        November 7, 2007, we entered into non-qualified stock option agreements with
        certain of our directors and officers (the “Option Holders”) pursuant to our
        2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”), whereby we
        issued options (the “Options”) to purchase an aggregate of 1,500,000 shares of
        our common stock. The Option Holders included James Lefkowitz, President
        of the
        Company, Robert Zangrillo, a director of the Company, and Bruce Stein, a
        director of the Company and our Chief Executive Officer as of March 7, 2008,
        each of whom was granted an Option to purchase 500,000 shares in connection
        with
        services provided to the Company. The Options have a ten-year term and are
        exercisable at a price of $2.65 per share. On November 14, 2007, we entered
        into
        a non-qualified stock option agreement with Richard Spitz, a director of
        the
        Company, whereby we issued an option to purchase 100,000 shares of its common
        stock.  The options granted to Mr. Spitz have a ten-year term and are
        exercisable at a price of $2.50 per share. The Options for Messrs. Zangrillo,
        Stein and Spitz become exercisable over a two-year period, with one-third
        of the
        Options granted vesting immediately upon grant, an additional one-third vesting
        on the first anniversary thereafter and the remaining one-third on the second
        anniversary thereafter. The Options for Mr. Lefkowitz also become exercisable
        over a two-year period, with one-third of the Options granted vesting
        immediately upon grant, an additional one-third vesting on June 28, 2008
        and the
        remainder vesting on June 28, 2009. The Options were granted pursuant to
        the
        exemption from registration permitted under Rule 506 of Regulation D of the
        Securities Act of 1933, as amended (the “Securities Act”).




On
      January 2, 2008, we granted Mr. Stein additional options to purchase 50,000
      shares of our common stock. The options have a ten-year term and are exercisable
      at a price of $4.65 per share. One-third of the options granted were immediately
      exercisable upon grant, an additional one-third will vest on November 7, 2008
      and the remaining one-third will vest on November 7, 2009. The options were
      granted pursuant to the exemption from registration permitted under Rule 506
      of
      Regulation D of the Securities Act.




As
      described above, pursuant to the Merger, we issued 10,180,292 shares of
      Mandalay common stock as part of the merger consideration in connection with
      the
      Merger. Such issuance was made pursuant to the exemption from registration
      permitted under Section 4(2) of the Securities Act.




10




In
        addition, also in connection with the Merger, on February 12, 2008, we entered
        into non-qualified stock option agreements with certain of our directors
        and
        officers under the 2007 Plan, as amended, whereby we issued options to purchase
        an aggregate of 1,700,000 shares of our common stock. Ian Aaron, Chief Executive
        Officer of Twistbox and a director of Mandalay, Russell Burke, Chief Financial
        Officer of Twistbox, David Mandell, Executive Vice-President, General Counsel
        and Corporate Secretary of Twistbox and Patrick Dodd, Senior Vice of Worldwide
        Sales and Marketing of Twistbox, each of whom received an option to purchase
        600,000 shares, 350,000 shares, 450,000 shares and 300,000 shares, respectively,
        of our common stock. The options have a ten-year term and are exercisable
        at a
        price of $4.75 per share. The options become exercisable over a two-year
        period,
        with one-third of the options granted vesting immediately upon grant, an
        additional 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 granted pursuant to the exemption from registration permitted
        under
        Rule 506 of Regulation D of the Securities Act.




On
        March
        7, 2008, the Company granted Mr. Stein options to purchase an aggregate of
        1,001,864 shares of common stock, pursuant to the 2007 Plan, in connection
        with
        an amendment to his employment agreement. The options have a ten-year term
        and
        are exercisable at a price of $4.25 per share. The options vest as follows:
        options to purchase 233,830 shares will vest on March 7, 2009, options to
        purchase 233,830 shares will vest on March 7, 2010 and Options to purchase
        the
        remaining 534,204 shares will vest on March 7, 2011. The options were granted
        pursuant to the exemption from registration permitted under Rule 506 of
        Regulation D of the Securities Act.




As
        of December 31, 2007, Twistbox had
        approximately $7,250,000 of cash, and management believes it has sufficient
        cash
        to satisfy the Company’s monetary needs for the next twelve months.




**Revenues**




The
        discussion herein regarding our future operations pertain to the results
        and
        operations of Twistbox, which became our wholly-owned and sole operating
        subsidiary as of February 12, 2008. Twistbox has historically generated and
        expects to continue to generate the vast majority of its revenues from mobile
        phone carriers that market and distribute its content. These carriers generally
        charge a one-time purchase fee or a monthly subscription fee on their
        subscribers’ phone bills when the subscribers download Twistbox’s games to their
        mobile phones. The carriers perform the billing and collection functions
        and
        generally remit to Twistbox a contractual percentage of their collected fee
        for
        each game. Twistbox recognizes as revenues the percentage of the fees due
        to it
        from the carrier. End users may also initiate the purchase of Twistbox’s games
        through various Internet portal sites or through other delivery mechanisms,
        with
        carriers or third parties being responsible for billing, collecting and
        remitting to Twistbox a portion of their fees. To date, Twistbox’s international
        revenues have been much more significant than its domestic
        revenues.




We
      believe that improving quality and greater availability of 2.5 and 3G handsets
      is in turn encouraging consumer awareness and demand for high quality content
      on
      their mobile devices. At the same time, carriers and branded content owners
      are
      focusing on a small group of publishers that have the ability to provide
      high-quality mobile content consistently and port it rapidly and
      cost-effectively to a wide variety of handsets. Additionally, branded content
      owners are seeking publishers that have the ability to distribute content
      globally through relationships with most or all of the major carriers. We
      believe Twistbox has created the requisite development and porting technology
      and has achieved the scale to operate at this level. We also believe that
      leveraging carrier and content owner relationships will allow us to grow our
      revenues without corresponding percentage growth in our infrastructure and
      operating costs. Our revenue growth rate will depend significantly on continued
      growth in the mobile content market and our ability to leverage our distribution
      and content relationships, as well as to continue to expand. Our ability to
      attain profitability will be affected by the extent to which we must incur
      additional expenses to expand our sales, marketing, development, and general
      and
      administrative capabilities to grow our business. The largest component of
      our
      expenses is personnel costs. Personnel costs consist of salaries, benefits and
      incentive compensation, including bonuses and stock-based compensation, for
      our
      employees. Our operating expenses will continue to grow in absolute dollars,
      assuming our revenues continue to grow. As a percentage of revenues, we expect
      these expenses to decrease.




Many
      new
      mobile handset models are released in the fourth calendar quarter to coincide
      with the holiday shopping season. Because many end users download our content
      soon after they purchase new handsets, we may experience seasonal sales
      increases based on this key holiday selling period. However, due to the time
      between handset purchases and content purchases, much of this holiday impact
      may
      occur in our March quarter. For a variety of reasons, we may experience seasonal
      sales decreases during the summer, particularly in Europe, which is
      predominantly reflected in our September quarter. In addition to these possible
      seasonal patterns, our revenues may be impacted by new or changed carrier deals,
      and by changes in the manner that our major carrier partners marketing our
      content on their deck. Initial spikes in revenues as a result of successful
      launches or campaigns may create further aberrations in our revenue
      patterns.




11




**Cost
      of Revenues**




Twistbox’s
      cost of revenues historically, and our cost of revenues going forward, consists
      primarily of royalties that we pay to content owners from which we license
      brands and other intellectual property. In addition, certain other direct costs
      such as quality assurance (“QA”) and use of short codes are included in cost of
      revenues. Our cost of revenues also includes noncash expenses—amortization of
      certain acquired intangible assets, and any impairment of guarantees. We
      generally do not pay advance royalties to licensors. Where we acquire rights
      in
      perpetuity or for a specific time period without revenue share or additional
      fees, we record the payments made to content owners as prepaid royalties on
      our
      balance sheet when payment is made to the licensor. We recognize royalties
      in
      cost of revenues based upon the revenues derived from the relevant game
      multiplied by the applicable royalty rate. If applicable, we will record an
      impairment of prepaid royalties or accrue for future guaranteed royalties that
      are in excess of anticipated recoupment. At each balance sheet date, we perform
      a detailed review of prepaid royalties and guarantees that considers multiple
      factors, including forecasted demand, anticipated share for specific content
      providers, development and launch plans, and current and anticipated sales
      levels. We expense the costs for development of our content prior to
      technological feasibility as we incur them throughout the development process,
      and we include these costs in product development expenses.




**Gross
      Margin**




Our
      gross
      margin going forward will be determined principally by the mix of content that
      we deliver. Our games based on licensed intellectual property require us to
      pay
      royalties to the licensor and the royalty rates in our licenses vary
      significantly. Our own in-house developed games, which are based on our own
      intellectual property, require no royalty payments to licensors. For late night
      business, branded content requires royalty payment to the licensors, generally
      on a revenue share basis, while for acquired content we amortize the cost
      against revenues, and this will generally result in a lower cost associated
      with
      it. There are multiple internal and external factors that affect the mix of
      revenues between games and late night content, and among licensed, developed
      and
      acquired content within those categories, including the overall number of
      licensed games and developed games available for sale during a particular
      period, the extent of our and our carriers’ marketing efforts for each type of
      content, and the deck placement of content on our carriers’ mobile handsets. We
      believe the success of any individual game during a particular period is
      affected by the recognizability of the title, its quality, its marketing and
      media exposure, its overall acceptance by end users and the availability of
      competitive games. In the case of Play for Prizes games, this is further
      impacted by its suitability to “tournament” play and the prizes available. For
      other content, we believe that success is driven by the carrier’s deck
      placement, the rating of the content, by quality and by brand recognition.
      If
      our product mix shifts more to licensed games or games with higher royalty
      rates, our gross margin would decline. For other content as we increase scale,
      we believe that we will have the opportunity to move the mix towards higher
      margin acquired product. Our gross margin is also affected by direct costs
      such
      as charges for mobile phone short codes, and QA, and by periodic charges for
      impairment of intangible assets and of prepaid royalties and guarantees. These
      charges can cause gross margin variations, particularly from quarter to
      quarter.




**Operating
      Expenses**




Our
      operating expenses going forward will primarily include product development
      expenses, sales and marketing expenses and general and administrative expenses.
      Our product development expenses consist primarily of salaries and benefits
      for
      employees working on creating, developing, editing, programming, porting,
      quality assurance, carrier certification and deployment of our content, on
      technologies related to interoperating with our various mobile phone carriers
      and on our internal platforms, payments to third parties for developing our
      content, and allocated facilities costs. We devote substantial resources to
      the
      development, supporting technologies, porting and quality assurance of our
      content. We believe that developing games internally through our own development
      studios allows us to increase operating margins, leverage the technology we
      have
      developed and better control game delivery. Games development may encompass
      development of a game from concept through deployment or adaptation or
      rebranding of an existing game. For acquired content, typically we will receive
      content from our licensors which must be edited for mobile phone users, combined
      with other appropriate content, and packaged for end consumers. The process
      is
      made more complex by the need to deliver content on multiple carriers platforms
      and across a large number of different handsets.




*Sales
      and Marketing* .
      Twistbox’s sales and marketing expenses historically, and our sales and
      marketing expenses going forward, will consist primarily of salaries, benefits
      and incentive compensation for sales, business development, project management
      and marketing personnel, expenses for advertising, trade shows, public relations
      and other promotional and marketing activities, expenses for general business
      development activities, travel and entertainment expenses and allocated
      facilities costs. We expect sales and marketing expenses to increase in absolute
      terms with the growth of our business and as we further promote our content
      and
      expand our carrier network.




12




*General
      and Administrative* .
      Twistbox’s general and administrative expenses historically, and our sales and
      marketing expenses going forward, will consist primarily of salaries and
      benefits for general and administrative personnel, consulting fees, legal,
      accounting and other professional fees, information technology costs and
      allocated facilities costs. We expect that general and administrative expenses
      will increase in absolute terms as we hire additional personnel and incur costs
      related to the anticipated growth of our business and our operation as a public
      company. We also expect that these expenses will increase because of the
      additional costs to comply with the Sarbanes-Oxley Act and related regulation,
      our efforts to expand our international operations and, in the near term,
      additional accounting costs related to our operation as a public company.




*Amortization
      of Intangible Assets* .
      We will
      record amortization of acquired intangible assets that are directly related
      to
      revenue-generating activities as part of our cost of revenues and amortization
      of the remaining acquired intangible assets, such as customer lists and
      platform, as part of our operating expenses. We will record intangible assets
      on
      our balance sheet based upon their fair value at the time they are acquired.
      We
      will determine the fair value of the intangible assets using a contribution
      approach. We will amortize the amortizable intangible assets using the
      straight-line method over their estimated useful lives of three to five
      years.




**Contractual
      Obligations**




The
      following table is a summary of Twistbox's contractual obligations as of
      December 31, 2007:


**Payments
                      due by period****Less
                      than****Total**
                  
                  **1
                      Year**
                  
                  **1-3
                      Years**
                  
                  **Thereafter****(In
                      thousands)**Long-term
                      debt obligations
                  
                  $
                  19,842
                  
                  $
                  1,554
                  
                  $
                  18,288
                  
                  $
                  0Operating
                      lease obligations
                  
                  
                  671
                  
                  
                  276
                  
                  
                  395
                  
                  
                  0Guaranteed
                      royalties
                  
                  
                  6,680
                  
                  
                  2,730
                  
                  
                  3,950
                  
                  
                  0Capitalized
                      leases and other obligations
                  
                  
                  4,974
                  
                  
                  3,051
                  
                  
                  1,923
                  
                  
                  0


Debt
      obligations include interest payments on the loan from ValueAct described above.
      Operating lease obligations represent noncancelable operating leases for
      Twistbox’s office facilities in several locations, expiring in various years
      through 2010. Twistbox has entered into license agreements with various owners
      of brands and other intellectual property so that we could develop and publish
      branded products for mobile handsets. Pursuant to some of these agreements,
      we
      are required to pay minimum royalties over the term of the agreements regardless
      of actual sales. Capitalized leases and other obligations include payments
      to
      various distribution providers, technical providers and employees for agreements
      with initial terms greater than one year at December 31, 2007.




On
      May
      30, 2006, Twistbox entered into a distribution agreement pursuant to which
      it is
      required to pay quarterly license fees for the use and distribution of certain
      intellectual property. The amount of license fees payable is equal to the
      greater of 50% of the net revenues received by us in connection with the use
      and
      distribution of the intellectual property subject to the agreement and certain
      minimum guarantee payments. The term of the agreement expires on December 1,
      2009, subject to earlier termination under certain circumstances, and
      automatically renews for one two-year period unless prior notice is given by
      either party of its intent not to renew the agreement.




**Off-Balance
      Sheet Arrangements**




We
      do not
      have any relationships with unconsolidated entities or financial partners,
      such
      as entities often referred to as structured finance or special purpose entities,
      which would have been established for the purpose of facilitating off-balance
      sheet arrangements or other contractually narrow or limited purposes. In
      addition, we do not have any undisclosed borrowings or debt, and we have not
      entered into any synthetic leases. We are, therefore, not materially exposed
      to
      any financing, liquidity, market or credit risk that could arise if we had
      engaged in such relationships.




13




**Management
      Changes**




On
      August
      6, 2007, we increased the size of our Board of Directors to six members
      and appointed Peter Guber as Co-Chairman of the Board and a director of the
      Company and Paul Schaeffer as Vice-Chairman of the Board and a director of
      the
      Company. On November 7, 2007, we increased the size of the Board to eight
      members and appointed Robert Zangrillo and Bruce Stein as directors of the
      Company. On November 14, 2007, we increased the size of our Board of Directors
      to nine members and appointed Richard Spitz as a director at the
      Company.




On
      February 12, 2008, we increased the size of our Board of Directors to eleven
      members and appointed Ian Aaron and Adi McAbian as directors of the Company.




On
      March
      7, 2008, Bruce Stein was appointed as Chief Executive Officer of the
      Company.




On
        April 9, 2008, David Chazen resigned from our
        Board of Directors.




**Estimates
      and Assumptions**




The
      preparation of our financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the dates
      of
      the financial statements and the reported amounts of revenue and expenses during
      the reporting period. Actual results could differ from those
      estimates.




**Income
      Taxes**




We
      provide for deferred income taxes using the liability method. Deferred tax
      assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amounts
      of
      existing assets and liabilities and their respective tax bases and the tax
      effect of net operating loss carry-forwards. A valuation allowance has been
      provided as it is more likely than not that the deferred assets will not be
      realized.




**Recent
      Accounting Pronouncements**




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(SFAS No. 157). This statement clarifies the definition of fair value,
      establishes a framework for measuring fair value, and expands the disclosures
      on
      fair value measurements. SFAS No. 157 is effective for fiscal years
      beginning after November 15, 2007. The adoption of SFAS No. 157 is not
      expected to have a material effect on our consolidated results of
      operations or financial condition.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Liabilities, including an amendment of FASB Statement
      No.
      115” (SFAS No. 159). SFAS No. 159 permits entities to choose, at specified
      election dates, to measure many financial instruments and certain other items
      at
      fair value that are not currently required to be measured at fair value.
      Unrealized gains and losses shall be reported on items for which the fair value
      option has been elected in earnings at each subsequent reporting date. SFAS
      No.
      159 is effective for fiscal years beginning after November 15, 2007. Early
      adoption is permitted as of the beginning of a fiscal year that begins on or
      before November 15, 2007, provided the entity also elects to apply the
      provisions of SFAS No. 157 “Fair Value Measurements”. We are currently assessing
      the impact that SFAS No. 159 will have on our financial
      statements.




14




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




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




**QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




***Interest
      Rate and Credit Risk***




Our
      current operations have exposure to interest rate risk that relates primarily
      to
      our investment portfolio. All of our current investments are classified as
      cash
      equivalents or short-term investments and carried at cost, which approximates
      market value. We do not currently use or plan to use derivative financial
      instruments in our investment portfolio. The risk associated with fluctuating
      interest rates is limited to our investment portfolio, and we do not believe
      that a 10% change in interest rates would have a significant impact on our
      interest income, operating results or liquidity.




Currently,
        our cash and cash equivalents are maintained by financial institutions in
        the United States, Germany, the United Kingdom, Poland, Russia, Argentina
        and
        Colombia, and our current deposits are likely in excess of insured limits.
        We
        believe that the financial institutions that hold our investments are
        financially sound and, accordingly, minimal credit risk exists with respect
        to
        these investments. Our accounts receivable primarily relate to revenues earned
        from domestic and international Mobile phone carriers. We perform ongoing
        credit
        evaluations of our carriers’ financial condition but generally require no
        collateral from them. At April 11, 2008, our largest customer represented
        36% of our gross accounts receivable.




***Foreign
      Currency Risk***




The
      functional currencies of our United States and German operations are the United
      States Dollar, or USD, and the Euro, respectively. A significant portion of
      our
      business is conducted in currencies other than the USD or the Euro. Our revenues
      are usually denominated in the functional currency of the carrier. Operating
      expenses are usually in the local currency of the operating unit, which
      mitigates a portion of the exposure related to currency fluctuations.
      Intercompany transactions between our domestic and foreign operations are
      denominated in either the USD or the Euro. At month-end, foreign
      currency-denominated accounts receivable and intercompany balances are marked
      to
      market and unrealized gains and losses are included in other income (expense),
      net. Our foreign currency exchange gains and losses have been generated
      primarily from fluctuations in the Euro and pound sterling versus the USD and
      in
      the Euro versus the pound sterling. In the future, we may experience foreign
      currency exchange losses on our accounts receivable and intercompany receivables
      and payables. Foreign currency exchange losses could have a material adverse
      effect on our business, operating results and financial condition.




***Inflation***




We
      do not
      believe that inflation has had a material effect on our business, financial
      condition or results of operations. If our costs were to become subject to
      significant inflationary pressures, we might not be able to offset these higher
      costs fully through price increases. Our inability or failure to do so could
      harm our business, operating results and financial condition.




15




**RISK
      FACTORS**




***Cautionary
      Statements Regarding Forward-Looking Statements***




Statements
      in this Annual Report on Form 10-KSB under the captions “Description of
      Business,” “Management’s Discussion and Analysis or Plan of Operation,” and
      elsewhere in this Form 10-KSB, as well as statements made in press releases
      and
      oral statements that may be made by us or any of our officers, directors or
      employees acting on our behalf that are not statements of historical fact,
      constitute forward-looking statements within the meaning of the Private
      Securities Litigation Reform Act of 1995. Such forward-looking statements
      involve known and unknown risks, uncertainties and other factors, including
      those described in this Form 10-KSB under the caption “Risk Factors,” that could
      cause our actual results to be materially different from the historical results
      or from any future results expressed or implied by such forward-looking
      statements. In addition to statements which explicitly describe such risks
      and
      uncertainties, readers are urged to consider statements with the terms
“believes,” “belief,” “expects,” “plans,” “anticipates,” or “intends,” to be
      uncertain and forward-looking. All cautionary statements made in this Form
      10-KSB should be read as being applicable to all related forward-looking
      statements wherever they appear. Investors should consider the following risk
      factors as well as the risks described elsewhere in this Form
      10-KSB.




Unless
      the context otherwise indicates, the use of the terms “we,” “our” or “us” refers
      to the business and operations of Mandalay Media, Inc. through its sole
      operating and wholly-owned subsidiary, Twistbox Entertainment, Inc.




**Risks
      Related to Our Business**




***Twistbox
      has a history of net losses, may incur substantial net losses in the future
      and
      may not achieve profitability.***




We
      expect
      to continue to increase expenses as we implement initiatives designed to
      continue to grow our business, including, among other things, the development
      and marketing of new products and services, further international and domestic
      expansion, expansion of our infrastructure, development of systems and
      processes, acquisition of content, and general and administrative expenses
      associated with being a public company. If our revenues do not increase to
      offset these expected increases in operating expenses, we will continue to
      incur
      significant losses and will not become profitable. Our revenue growth in recent
      periods should not be considered indicative of our future performance. In fact,
      in future periods, our revenues could decline. Accordingly, we may not be able
      to achieve profitability in the future.




***We
      have a limited operating history in an emerging market, which may make it
      difficult to evaluate our business.***




We
      have
      only a limited history of generating revenues, and the future revenue potential
      of our business in this emerging market is uncertain. As a result of our short
      operating history, we have limited financial data that can be used to evaluate
      our business. Any evaluation of our business and our prospects must be
      considered in light of our limited operating history and the risks and
      uncertainties encountered by companies in our stage of development. As an early
      stage company in the emerging mobile entertainment industry, we face increased
      risks, uncertainties, expenses and difficulties. To address these risks and
      uncertainties, we must do the following:




·
            maintain
                our current, and develop new, wireless carrier relationships, in
                both the
                international and domestic markets;·
            maintain
                and expand our current, and develop new, relationships with third-party
                branded and non-branded content owners;·
            retain
                or improve our current revenue-sharing arrangements with carriers
                and
                third-party content owners;·
            maintain
                and enhance our own brands;·
            continue
                to develop new high-quality products and services that achieve significant
                market acceptance;·
            continue
                to port existing products to new mobile handsets;·
            continue
                to develop and upgrade our technology;·
            continue
                to enhance our information processing
                systems;




16




·
            increase
                the number of end users of our products and services;·
            maintain
                and grow our non-carrier, or “off-deck,” distribution, including through
                our third-party direct-to-consumer distributors;·
            expand
                our development capacity in countries with lower costs;·
            execute
                our business and marketing strategies successfully;·
            respond
                to competitive developments; and·
            attract,
                integrate, retain and motivate qualified
                personnel.





We
      may be
      unable to accomplish one or more of these objectives, which could cause our
      business to suffer. In addition, accomplishing many of these efforts might
      be
      very expensive, which could adversely impact our operating results and financial
      condition.




***Our
      financial results could vary significantly from quarter to quarter and are
      difficult to predict.***




Our
      revenues and operating results could vary significantly from quarter to quarter
      because of a variety of factors, many of which are outside of our control.
      As a
      result, comparing our operating results on a period-to-period basis may not
      be
      meaningful. In addition, we may not be able to predict our future revenues
      or
      results of operations. We base our current and future expense levels on our
      internal operating plans and sales forecasts, and our operating costs are to
      a
      large extent fixed. As a result, we may not be able to reduce our costs
      sufficiently to compensate for an unexpected shortfall in revenues, and even
      a
      small shortfall in revenues could disproportionately and adversely affect
      financial results for that quarter. Individual products and services, and
      carrier relationships, represent meaningful portions of our revenues and net
      loss in any quarter. We may incur significant or unanticipated expenses when
      licenses are renewed. In addition, some payments from carriers that we recognize
      as revenue on a cash basis may be delayed unpredictably.




In
      addition to other risk factors discussed in this section, factors that may
      contribute to the variability of our quarterly results include:




·
            the
                number of new products and services released by us and our
                competitors;·
            the
                timing of release of new products and services by us and our competitors,
                particularly those that may represent a significant portion of revenues
                in
                a period;·
            the
                popularity of new products and services, and products and services
                released in prior periods;·
            changes
                in prominence of deck placement for our leading products and those
                of our
                competitors;·
            the
                expiration of existing content licenses;·
            the
                timing of charges related to impairments of goodwill, intangible
                assets,
                royalties and minimum guarantees;·
            changes
                in pricing policies by us, our competitors or our carriers and other
                distributors;·
            changes
                in the mix of original and licensed content, which have varying gross
                margins;·
            the
                timing of successful mobile handset
                launches;


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




17




·
            strategic
                decisions by us or our competitors, such as acquisitions, divestitures,
                spin-offs, joint ventures, strategic investments or changes in business
                strategy;·
            our
                success in entering new geographic markets;·
            foreign
                exchange fluctuations;·
            accounting
                rules governing recognition of revenue;·
            the
                timing of compensation expense associated with equity compensation
                grants;
                and·
            decisions
                by us to incur additional expenses, such as increases in marketing
                or
                research and development.





As
      a
      result of these and other factors, our operating results may not meet the
      expectations of investors or public market analysts who choose to follow our
      company. Failure to meet market expectations would likely result in decreases
      in
      the trading price of our common stock.




***The
      markets in which we operate are highly competitive, and many of our competitors
      have significantly greater resources than we do.***




The
      development, distribution and sale of mobile products and services is a highly
      competitive business. We compete for end users primarily on the basis of
“on-deck” or “off-deck” positioning, brand, quality and price. We compete for
      wireless carriers for “on-deck” placement based on these factors, as well as
      historical performance, technical know-how, perception of sales potential and
      relationships with licensors of brands and other intellectual property. We
      compete for content and brand licensors based on royalty and other economic
      terms, perceptions of development quality, porting abilities, speed of
      execution, distribution breadth and relationships with carriers. We also compete
      for experienced and talented employees.




Our
      primary competitors include Arvato, Minick, Jamba, Buongiorno, Mobile Streams,
      Glu Mobile, Player X and Gameloft. In the future, likely competitors include
      major media companies, traditional video game publishers, platform developers,
      content aggregators, mobile software providers and independent mobile game
      publishers. Carriers may also decide to develop, internally or through a managed
      third-party developer, and distribute their own products and services. If
      carriers enter the wireless market as publishers, they might refuse to
      distribute some or all of our products and services or might deny us access
      to
      all or part of their networks.




Some
      of
      our competitors’ and our potential competitors’ advantages over us, either
      globally or in particular geographic markets, include the
      following:




·
            significantly
                greater revenues and financial resources;·
            stronger
                brand and consumer recognition regionally or worldwide;·
            the
                capacity to leverage their marketing expenditures across a broader
                portfolio of mobile and non-mobile products;·
            more
                substantial intellectual property of their own from which they can
                develop
                products and services without having to pay royalties;·
            pre-existing
                relationships with brand owners or carriers that afford them access
                to
                intellectual property while blocking the access of competitors to
                that
                same intellectual property;·
            greater
                resources to make acquisitions;·
            lower
                labor and development costs; and·
            broader
                global distribution and presence.




18




If
      we are
      unable to compete effectively or we are not as successful as our competitors
      in
      our target markets, our sales could decline, our margins could decline and
      we
      could lose market share, any of which would materially harm our business,
      operating results and financial condition.




***Failure
      to renew our existing brand and content licenses on favorable terms or at all
      and to obtain additional licenses would impair our ability to introduce new
      products and services or to continue to offer our products and services based
      on
      third-party content.***




Revenues
      are derived from our products and services based on or incorporating brands
      or
      other intellectual property licensed from third parties. Any of our licensors
      could decide not to renew our existing license or not to license additional
      intellectual property and instead license to our competitors or develop and
      publish its own products or other applications, competing with us in the
      marketplace. Several of these licensors already provide intellectual property
      for other platforms, and may have significant experience and development
      resources available to them should they decide to compete with us rather than
      license to us.




We
      have
      both exclusive and non-exclusive licenses and both licenses that are global
      and
      licenses that are limited to specific geographies. Our licenses generally have
      terms that range from two to five years *.* We may
      be unable to renew these licenses or to renew them on terms favorable to us,
      and
      we may be unable to secure alternatives in a timely manner. Failure to maintain
      or renew our existing licenses or to obtain additional licenses would impair
      our
      ability to introduce new products and services or to continue to offer our
      current products or services, which would materially harm our business,
      operating results and financial condition. Some of our existing licenses impose,
      and licenses that we obtain in the future might impose, development,
      distribution and marketing obligations on us. If we breach our obligations,
      our
      licensors might have the right to terminate the license which would harm our
      business, operating results and financial condition.




Even
      if
      we are successful in gaining new licenses or extending existing licenses, we
      may
      fail to anticipate the entertainment preferences of our end users when making
      choices about which brands or other content to license. If the entertainment
      preferences of end users shift to content or brands owned or developed by
      companies with which we do not have relationships, we may be unable to establish
      and maintain successful relationships with these developers and owners, which
      would materially harm our business, operating results and financial condition.
      In addition, some rights are licensed from licensors that have or may develop
      financial difficulties, and may enter into bankruptcy protection under U.S.
      federal law or the laws of other countries. If any of our licensors files for
      bankruptcy, our licenses might be impaired or voided, which could materially
      harm our business, operating results and financial condition.




***We
      currently rely on wireless carriers to market and distribute our products and
      services and thus to generate our revenues. The loss of or a change in any
      of
      these significant carrier relationships could cause us to lose access to their
      subscribers and thus materially reduce our revenues.***




Our
      future success is highly dependent upon maintaining successful relationships
      with the wireless carriers with which we currently work and establishing new
      carrier relationships in geographies where we have not yet established a
      significant presence. A significant portion of our revenue is derived from
      a
      very limited number of carriers. We expect that we will continue to generate
      a
      substantial majority of our revenues through distribution relationships with
      a
      limited number of carriers for the foreseeable future. Our failure to maintain
      our relationships with these carriers would materially reduce our revenues
      and
      thus harm our business, operating results and financial condition.




We
      have
      both exclusive and non-exclusive carrier agreements. Typically, carrier
      agreements have a term of one or two years with automatic renewal provisions
      upon expiration of the initial term, absent a contrary notice from either party.
      In addition, some carrier agreements provide that the carrier can terminate
      the
      agreement early and, in some instances, at any time without cause, which could
      give them the ability to renegotiate economic or other terms. The agreements
      generally do not obligate the carriers to market or distribute any of our
      products or services. In many of these agreements, we warrant that our products
      do not violate community standards, do not contain libelous content, do not
      contain material defects or viruses, and do not violate third-party intellectual
      property rights and we indemnify the carrier for any breach of a third party’s
      intellectual property. In addition, many of our agreements allow the carrier
      to
      set the retail price without adjustment to the negotiated revenue split. If
      one
      of these carriers sets the retail price below historic pricing models, the
      total
      revenues received from these carriers will be significantly
      reduced.




Many
      other factors outside our control could impair our ability to generate revenues
      through a given carrier, including the following:




19




·
            the
                carrier’s preference for our competitors’ products and services rather
                than ours;·
            the
                carrier’s decision not to include or highlight our products and services
                on the deck of its mobile handsets;·
            the
                carrier’s decision to discontinue the sale of some or all of products and
                services;·
            the
                carrier’s decision to offer similar products and services to its
                subscribers without charge or at reduced prices;·
            the
                carrier’s decision to require market development funds from publishers
                like us;·
            the
                carrier’s decision to restrict or alter subscription or other terms for
                downloading our products and services;·
            a
                failure of the carrier’s merchandising, provisioning or billing
                systems;·
            the
                carrier’s decision to offer its own competing products and
                services;·
            the
                carrier’s decision to transition to different platforms and revenue
                models; and·
            consolidation
                among carriers.





If
      any of
      our carriers decides not to market or distribute our products and services
      or
      decides to terminate, not renew or modify the terms of its agreement with us
      or
      if there is consolidation among carriers generally, we may be unable to replace
      the affected agreement with acceptable alternatives, causing us to lose access
      to that carrier’s subscribers and the revenues they afford us, which could
      materially harm our business, operating results and financial
      condition.




***End
      user tastes are continually changing and are often unpredictable; if we fail
      to
      develop and publish new products and services that achieve market acceptance,
      our sales would suffer.***




Our
      business depends on developing and publishing new products and services that
      wireless carriers distribute and end users will buy. We must continue to invest
      significant resources in licensing efforts, research and development, marketing
      and regional expansion to enhance our offering of new products and services,
      and
      we must make decisions about these matters well in advance of product release
      in
      order to implement them in a timely manner. Our success depends, in part, on
      unpredictable and volatile factors beyond our control, including end-user
      preferences, competing products and services and the availability of other
      entertainment activities. If our products and services are not responsive to
      the
      requirements of our carriers or the entertainment preferences of end users,
      or
      they are not brought to market in a timely and effective manner, our business,
      operating results and financial condition would be harmed. Even if our products
      and services are successfully introduced and initially adopted, a subsequent
      shift in our carriers or the entertainment preferences of end users could cause
      a decline in the popularity of our offerings that could materially reduce our
      revenues and harm our business, operating results and financial
      condition.




***Inferior
      deck placement would likely adversely impact our revenues and thus our operating
      results and financial condition.***




Wireless
      carriers provide a limited selection of products that are accessible to their
      subscribers through a deck on their mobile handsets. The inherent limitation
      on
      the volume of products available on the deck is a function of the limited screen
      size of handsets and carriers’ perceptions of the depth of menus and numbers of
      choices end users will generally utilize. Carriers typically provide one or
      more
      top level menus highlighting products that are recent top sellers or are of
      particular interest to the subscriber, that the carrier believes will become
      top
      sellers or that the carrier otherwise chooses to feature, in addition to a
      link
      to a menu of additional products sorted by genre. We believe that deck placement
      on the top level or featured menu or toward the top of genre-specific or other
      menus, rather than lower down or in sub-menus, is likely to result in products
      achieving a greater degree of commercial success. If carriers choose to give
      our
      products less favorable deck placement, our products may be less successful
      than
      we anticipate, our revenues may decline and our business, operating results
      and
      financial condition may be materially harmed.




20




***If
      we are unsuccessful in establishing and increasing awareness of our brand and
      recognition of our products and services or if we incur excessive expenses
      promoting and maintaining our brand or our products and services, our potential
      revenues could be limited, our costs could increase and our operating results
      and financial condition could be harmed.***




We
      believe that establishing and maintaining our brand is critical to retaining
      and
      expanding our existing relationships with wireless carriers and content
      licensors, as well as developing new relationships. Promotion of the company’s
      brands will depend on our success in providing high-quality products and
      services. Similarly, recognition of our products and services by end users
      will
      depend on our ability to develop engaging products and quality services to
      maintain existing, and attract new, business relationships and end users.
      However, our success will also depend, in part, on the services and efforts
      of
      third parties, over which we have little or no control. For instance, if our
      carriers fail to provide high levels of service, our end users’ ability to
      access our products and services may be interrupted, which may adversely affect
      our brand. If end users, branded content owners and carriers do not perceive
      our
      offerings as high-quality or if we introduce new products and services that
      are
      not favorably received by our end users and carriers, then we may be
      unsuccessful in building brand recognition and brand loyalty in the marketplace.
      In addition, globalizing and extending our brand and recognition of our products
      and services will be costly and will involve extensive management time to
      execute successfully. Further, the markets in which we operate are highly
      competitive and some of our competitors already have substantially more brand
      name recognition and greater marketing resources than we do. If we fail to
      increase brand awareness and consumer recognition of our products and services,
      our potential revenues could be limited, our costs could increase and our
      business, operating results and financial condition could suffer.




***Our
      business and growth may suffer if we are unable to hire and retain key
      personnel, who are in high demand.***




We
      depend
      on the continued contributions of our domestic and international senior
      management and other key personnel. The loss of the services of any of our
      executive officers or other key employees could harm our business. All of our
      executive officers and key employees are under short term employment agreements
      which means, that their future employment with the company is uncertain. We
      do
      maintain a key-person life insurance policy on some of our officers or other
      employees, but the continuation of such insurance coverage is
      uncertain.




Our
      future success also depends on our ability to identify, attract and retain
      highly skilled technical, managerial, finance, marketing and creative personnel.
      We face intense competition for qualified individuals from numerous technology,
      marketing and mobile entertainment companies. In addition, competition for
      qualified personnel is particularly intense in the Los Angeles area, where
      our
      headquarters are located. Further, two of our principal overseas operations
      are
      based in the United Kingdom and Germany, areas that, similar to our headquarters
      region, have high costs of living and consequently high compensation standards
      and/or intense demand for qualified individuals which may require us to incur
      significant costs to attract them. We may be unable to attract and retain
      suitably qualified individuals who are capable of meeting our growing creative,
      operational and managerial requirements, or may be required to pay increased
      compensation in order to do so. If we are unable to attract and retain the
      qualified personnel we need to succeed, our business would suffer.




Volatility
      or lack of performance in our stock price may also affect our ability to attract
      and retain our key employees. Many of our senior management personnel and other
      key employees have become, or will soon become, vested in a substantial amount
      of stock or stock options. Employees may be more likely to leave us if the
      shares they own or the shares underlying their options have significantly
      appreciated in value relative to the original purchase prices of the shares
      or
      the exercise prices of the options, or if the exercise prices of the options
      that they hold are significantly above the market price of our common stock.
      If
      we are unable to retain our employees, our business, operating results and
      financial condition would be harmed.




***Growth
      may place significant demands on our management and our
      infrastructure.***




We
      operate in an emerging market and have experienced, and may continue to
      experience, growth in our business through internal growth and acquisitions.
      This growth has placed, and may continue to place, significant demands on our
      management and our operational and financial infrastructure. Continued growth
      could strain our ability to:




·
            develop
                and improve our operational, financial and management
                controls;·
            enhance
                our reporting systems and procedures;·
            recruit,
                train and retain highly skilled personnel;·
            maintain
                our quality standards; and·
            maintain
                branded content owner, wireless carrier and end-user
                satisfaction.




21




Managing
      our growth will require significant expenditures and allocation of valuable
      management resources. If we fail to achieve the necessary level of efficiency
      in
      our organization as it grows, our business, operating results and financial
      condition would be harmed.




***The
      acquisition of other companies, businesses or technologies could result in
      operating difficulties, dilution and other harmful consequences.***




We
      have
      made acquisitions and, although we have no present understandings, commitments
      or agreements to do so, we may pursue further acquisitions, any of which could
      be material to our business, operating results and financial condition. Future
      acquisitions could divert management’s time and focus from operating our
      business. In addition, integrating an acquired company, business or technology
      is risky and may result in unforeseen operating difficulties and expenditures.
      We may also raise additional capital for the acquisition of, or investment
      in,
      companies, technologies, products or assets that complement our business. Future
      acquisitions or dispositions could result in potentially dilutive issuances
      of
      our equity securities, including our common stock, or the incurrence of debt,
      contingent liabilities, amortization expenses or acquired in-process research
      and development expenses, any of which could harm our financial condition and
      operating results. Future acquisitions may also require us to obtain additional
      financing, which may not be available on favorable terms or at all.




International
      acquisitions involve risks related to integration of operations across different
      cultures and languages, currency risks and the particular economic, political
      and regulatory risks associated with specific countries.




Some
      or
      all of these issues may result from our acquisition of the Germany based mobile
      games development and publishing company Charismatix Ltd & Co KG in May 2006
      and the U.S. based mobile games studio from Infospace, Inc. in January 2007.
      If
      the anticipated benefits of these or future acquisitions do not materialize,
      we
      experience difficulties integrating Charismatix, the games studio or businesses
      acquired in the future, or other unanticipated problems arise, our business,
      operating results and financial condition may be harmed.




In
      addition, a significant portion of the purchase price of companies we acquire
      may be allocated to acquired goodwill and other intangible assets, which must
      be
      assessed for impairment at least annually. In the future, if our acquisitions
      do
      not yield expected returns, we may be required to take charges to our earnings
      based on this impairment assessment process, which could harm our operating
      results.




***We
      face added business, political, regulatory, operational, financial and economic
      risks as a result of our international operations and distribution, any of
      which
      could increase our costs and hinder our growth.***




We
      expect
      international sales to continue to be an important component of our revenues.
      Risks affecting our international operations include:




·
            challenges
                caused by distance, language and cultural differences;·
            multiple
                and conflicting laws and regulations, including complications due
                to
                unexpected changes in these laws and regulations;·
            the
                burdens of complying with a wide variety of foreign laws and
                regulations;·
            higher
                costs associated with doing business internationally;·
            difficulties
                in staffing and managing international operations;·
            greater
                fluctuations in sales to end users and through carriers in developing
                countries, including longer payment cycles and greater difficulty
                collecting accounts receivable;·
            protectionist
                laws and business practices that favor local businesses in some
                countries;·
            foreign
                tax consequences;




22




·
            foreign
                exchange controls that might prevent us from repatriating income
                earned in
                countries outside the United States;·
            price
                controls;·
            the
                servicing of regions by many different carriers;·
            imposition
                of public sector controls;·
            political,
                economic and social instability;·
            restrictions
                on the export or import of technology;·
            trade
                and tariff restrictions;·
            variations
                in tariffs, quotas, taxes and other market barriers;
                and·
            difficulties
                in enforcing intellectual property rights in countries other than
                the
                United States.




In
      addition, developing user interfaces that are compatible with other languages
      or
      cultures can be expensive. As a result, our ongoing international expansion
      efforts may be more costly than we expect. Further, expansion into developing
      countries subjects us to the effects of regional instability, civil unrest
      and
      hostilities, and could adversely affect us by disrupting communications and
      making travel more difficult. These risks could harm our international expansion
      efforts, which, in turn, could materially and adversely affect our business,
      operating results and financial condition.




***If
      we fail to deliver our products and services at the same time as new mobile
      handset models are commercially introduced, our sales may suffer.***




Our
      business is dependent, in part, on the commercial introduction of new handset
      models with enhanced features, including larger, higher resolution color
      screens, improved audio quality, and greater processing power, memory, battery
      life and storage. We do not control the timing of these handset launches. Some
      new handsets are sold by carriers with certain products or other applications
      pre-loaded, and many end users who download our products or use our services
      do
      so after they purchase their new handsets to experience the new features of
      those handsets. Some handset manufacturers give us access to their handsets
      prior to commercial release. If one or more major handset manufacturers were
      to
      cease to provide us access to new handset models prior to commercial release,
      we
      might be unable to introduce compatible versions of our products and services
      for those handsets in coordination with their commercial release, and we might
      not be able to make compatible versions for a substantial period following
      their
      commercial release. If, because of launch delays, we miss the opportunity to
      sell products and services when new handsets are shipped or our end users
      upgrade to a new handset, or if we miss the key holiday selling period, either
      because the introduction of a new handset is delayed or we do not deploy our
      products and services in time for the holiday selling season, our revenues
      would
      likely decline and our business, operating results and financial condition
      would
      likely suffer.




***Wireless
      carriers generally control the price charged for our products and services
      and
      the billing and collection for sales and could make decisions detrimental to
      us.***




Wireless
      carriers generally control the price charged for our products and services
      either by approving or establishing the price of the offering charged to their
      subscribers. Some of our carrier agreements also restrict our ability to change
      prices. In cases where carrier approval is required, approvals may not be
      granted in a timely manner or at all. A failure or delay in obtaining these
      approvals, the prices established by the carriers for our offerings, or changes
      in these prices could adversely affect market acceptance of our offerings.
      Similarly, for the significant minority of our carriers, when we make changes
      to
      a pricing plan (the wholesale price and the corresponding suggested retail
      price
      based on our negotiated revenue-sharing arrangement), adjustments to the actual
      retail price charged to end users may not be made in a timely manner or at
      all
      (even though our wholesale price was reduced). A failure or delay by these
      carriers in adjusting the retail price for our offerings, could adversely affect
      sales volume and our revenues for those offerings.




Carriers
      and other distributors also control billings and collections for our products
      and services, either directly or through third-party service providers. If
      our
      carriers or their third-party service providers cause material inaccuracies
      when
      providing billing and collection services to us, our revenues may be less than
      anticipated or may be subject to refund at the discretion of the carrier. This
      could harm our business, operating results and financial condition.




23




***We
      may be unable to develop and introduce in a timely way new products or services,
      and our products and services may have defects, which could harm our brand.***




The
      planned timing and introduction of new products and services are subject to
      risks and uncertainties. Unexpected technical, operational, deployment,
      distribution or other problems could delay or prevent the introduction of new
      products and services, which could result in a loss of, or delay in, revenues
      or
      damage to our reputation and brand. If any of our products or services is
      introduced with defects, errors or failures, we could experience decreased
      sales, loss of end users, damage to our carrier relationships and damage to
      our
      reputation and brand. Our attractiveness to branded content licensors might
      also
      be reduced. In addition, new products and services may not achieve sufficient
      market acceptance to offset the costs of development, particularly when the
      introduction of a product or service is substantially later than a planned
      “day-and-date” launch, which could materially harm our business, operating
      results and financial condition.




***If
      we fail to maintain and enhance our capabilities for porting our offerings
      to a
      broad array of mobile handsets, our attractiveness to wireless carriers and
      branded content owners will be impaired, and our sales could
      suffer.***




Once
      developed, a product or application may be required to be ported to, or
      converted into separate versions for, more than 1,000 different handset models,
      many with different technological requirements. These include handsets with
      various combinations of underlying technologies, user interfaces, keypad
      layouts, screen resolutions, sound capabilities and other carrier-specific
      customizations. If we fail to maintain or enhance our porting capabilities,
      our
      sales could suffer, branded content owners might choose not to grant us licenses
      and carriers might choose not to give our products and services desirable deck
      placement or not to give our products and services placement on their decks
      at
      all.




Changes
      to our design and development processes to address new features or functions
      of
      handsets or networks might cause inefficiencies in our porting process or might
      result in more labor intensive porting processes. In addition, we anticipate
      that in the future we will be required to port existing and new products and
      applications to a broader array of handsets. If we utilize more labor intensive
      porting processes, our margins could be significantly reduced and it might
      take
      us longer to port our products and applications to an equivalent number of
      handsets. This, in turn, could harm our business, operating results and
      financial condition.




***If
      we do not adequately protect our intellectual property rights, it may be
      possible for third parties to obtain and improperly use our intellectual
      property and our competitive position may be adversely affected.***




Our
      intellectual property is an essential element of our business. We rely on a
      combination of copyright, trademark, trade secret and other intellectual
      property laws and restrictions on disclosure to protect our intellectual
      property rights. To date, we have not sought patent protection. Consequently,
      we
      will not be able to protect our technologies from independent invention by
      third
      parties. Despite our efforts to protect our intellectual property rights,
      unauthorized parties may attempt to copy or otherwise to obtain and use our
      technology and software. Monitoring unauthorized use of our technology and
      software is difficult and costly, and we cannot be certain that the steps we
      have taken will prevent piracy and other unauthorized distribution and use
      of
      our technology and software, particularly internationally where the laws may
      not
      protect our intellectual property rights as fully as in the United States.
      In
      the future, we may have to resort to litigation to enforce our intellectual
      property rights, which could result in substantial costs and diversion of our
      management and resources.




In
      addition, although we require third parties to sign agreements not to disclose
      or improperly use our intellectual property, it may still be possible for third
      parties to obtain and improperly use our intellectual properties without our
      consent. This could harm our business, operating results and financial
      condition.




***Third
      parties may sue us for intellectual property infringement, which, if successful,
      may disrupt our business and could require us to pay significant damage awards.***




Third
      parties may sue us for intellectual property infringement or initiate
      proceedings to invalidate our intellectual property, either of which, if
      successful, could disrupt the conduct of our business, cause us to pay
      significant damage awards or require us to pay licensing fees. In the event
      of a
      successful claim against us, we might be enjoined from using our licensed
      intellectual property, we might incur significant licensing fees and we might
      be
      forced to develop alternative technologies. Our failure or inability to develop
      non-infringing technology or software or to license the infringed or similar
      technology or software on a timely basis could force us to withdraw products
      and
      services from the market or prevent us from introducing new products and
      services. In addition, even if we are able to license the infringed or similar
      technology or software, license fees could be substantial and the terms of
      these
      licenses could be burdensome, which might adversely affect our operating
      results. We might also incur substantial expenses in defending against
      third-party infringement claims, regardless of their merit. Successful
      infringement or licensing claims against us might result in substantial monetary
      liabilities and might materially disrupt the conduct of our
      business.




24




***Indemnity
      provisions in various agreements potentially expose us to substantial liability
      for intellectual property infringement, damages caused by malicious software
      and
      other losses.***




In
      the
      ordinary course of our business, most of our agreements with carriers and other
      distributors include indemnification provisions. In these provisions, we agree
      to indemnify them for losses suffered or incurred in connection with our
      products and services, including as a result of intellectual property
      infringement and damages caused by viruses, worms and other malicious software.
      The term of these indemnity provisions is generally perpetual after execution
      of
      the corresponding license agreement, and the maximum potential amount of future
      payments we could be required to make under these indemnification provisions
      is
      generally unlimited. Large future indemnity payments could harm our business,
      operating results and financial condition.




***As
      a result of a majority of our revenues currently being derived from a limited
      number of wireless carriers, if any one of these carriers were unable to fulfill
      its payment obligations, our financial condition and results of operations
      would
      suffer.***




If
      any of
      our primary carriers is unable to fulfill its payment obligations to us under
      our carrier agreements with them, our revenues could decline significantly
      and
      our financial condition will be harmed.




***We
      may need to raise additional capital to grow our business, and we may not be
      able to raise capital on terms acceptable to us or at all.***




The
      operation of our business and our efforts to grow our business will further
      require significant cash outlays and commitments. If our cash, cash equivalents
      and short-term investments balances and any cash generated from operations
      are
      not sufficient to meet our cash requirements, we will need to seek additional
      capital, potentially through debt or equity financings, to fund our growth.
      We
      may not be able to raise needed cash on terms acceptable to us or at all.
      Financings, if available, may be on terms that are dilutive or potentially
      dilutive to our stockholders, and the prices at which new investors would be
      willing to purchase our securities may be lower than the fair market value
      of
      our common stock. The holders of new securities may also receive rights,
      preferences or privileges that are senior to those of existing holders of our
      common stock. If new sources of financing are required but are insufficient
      or
      unavailable, we would be required to modify our growth and operating plans
      to
      the extent of available funding, which would harm our ability to grow our
      business.




***We
      face risks associated with currency exchange rate fluctuations.***




We
      currently transact a significant portion of our revenues in foreign currencies.
      Conducting business in currencies other than U.S. Dollars subjects us to
      fluctuations in currency exchange rates that could have a negative impact on
      our
      reported operating results. Fluctuations in the value of the U.S. Dollar
      relative to other currencies impact our revenues, cost of revenues and operating
      margins and result in foreign currency transaction gains and losses. To date,
      we
      have not engaged in exchange rate hedging activities. Even if we were to
      implement hedging strategies to mitigate this risk, these strategies might
      not
      eliminate our exposure to foreign exchange rate fluctuations and would involve
      costs and risks of their own, such as ongoing management time and expertise,
      external costs to implement the strategies and potential accounting
      implications.




***Our
      business in countries with a history of corruption and transactions with foreign
      governments, including with government owned or controlled wireless carriers,
      increase the risks associated with our international activities.***




As
      we
      operate and sell internationally, we are subject to the U.S. Foreign Corrupt
      Practices Act, or the FCPA, and other laws that prohibit improper payments
      or
      offers of payments to foreign governments and their officials and political
      parties by the United States and other business entities for the purpose of
      obtaining or retaining business. We have operations, deal with carriers and
      make
      sales in countries known to experience corruption, particularly certain emerging
      countries in Eastern Europe and Latin America, and further international
      expansion may involve more of these countries. Our activities in these countries
      create the risk of unauthorized payments or offers of payments by one of our
      employees, consultants, sales agents or distributors that could be in violation
      of various laws including the FCPA, even though these parties are not always
      subject to our control. We have attempted to implement safeguards to discourage
      these practices by our employees, consultants, sales agents and distributors.
      However, our existing safeguards and any future improvements may prove to be
      less than effective, and our employees, consultants, sales agents or
      distributors may engage in conduct for which we might be held responsible.
      Violations of the FCPA may result in severe criminal or civil sanctions, and
      we
      may be subject to other liabilities, which could negatively affect our business,
      operating results and financial condition.




25




***Changes
      to financial accounting standards could make it more expensive to issue stock
      options to employees, which would increase compensation costs and might cause
      us
      to change our business practices.***




We
      prepare our financial statements to conform with accounting principles generally
      accepted in the United States. These accounting principles are subject to
      interpretation by the Financial Accounting Standards Board, or FASB, the
      Securities and Exchange Commission (“SEC” or the “Commission”) and various other
      bodies. A change in those principles could have a significant effect on our
      reported results and might affect our reporting of transactions completed before
      a change is announced. For example, we have used stock options as a fundamental
      component of our employee compensation packages. We believe that stock options
      directly motivate our employees to maximize long-term stockholder value and,
      through the use of vesting, encourage employees to remain in our employ. Several
      regulatory agencies and entities have made regulatory changes that could make
      it
      more difficult or expensive for us to grant stock options to employees. We
      may,
      as a result of these changes, incur increased compensation costs, change our
      equity compensation strategy or find it difficult to attract, retain and
      motivate employees, any of which could materially and adversely affect our
      business, operating results and financial condition.




***We
      may be liable for the content we make available through our products and
      services with mature themes.***




Because
      some of our products and services contain content with mature themes, we may
      be
      subject to obscenity or other legal claims by third parties. Our business,
      financial condition and operating results could be harmed if we were found
      liable for this content. Implementing measures to reduce our exposure to this
      liability may require us to take steps that would substantially limit the
      attractiveness of our products and services and/or its availability in various
      geographic areas, which would negatively impact our ability to generate revenue.
      Furthermore, our insurance may not adequately protect us against all of these
      types of claims.




***Government
      regulation of our content with mature themes could restrict our ability to
      make
      some of our content available in certain
      jurisdictions.***




Our
      business is regulated by governmental authorities in the countries in which
      we
      operate. Because of our international operations, we must comply with diverse
      and evolving regulations. The governments of some countries have sought to
      limit
      the influence of other cultures by restricting the distribution of products
      deemed to represent foreign or “immoral” influences. Regulation aimed at
      limiting minors’ access to content with mature themes could also increase our
      cost of operations and introduce technological challenges, such as by requiring
      development and implementation of age verification systems. As a result,
      government regulation of our adult content could have a material adverse effect
      on our business, financial condition or results of operations.




***Negative
      publicity, lawsuits or boycotts by opponents of content with mature themes
      could
      adversely affect our operating performance and discourage investors from
      investing in our publicly traded securities.***




We
      could
      become a target of negative publicity, lawsuits or boycotts by one or more
      advocacy groups who oppose the distribution of adult-oriented entertainment.
      These groups have mounted negative publicity campaigns, filed lawsuits and
      encouraged boycotts against companies whose businesses involve adult - oriented
      entertainment. To the extent our content with mature themes is viewed as
      adult-oriented entertainment, the costs of defending against any such negative
      publicity, lawsuits or boycotts could be significant, could hurt our finances
      and could discourage investors from investing in our publicly traded securities.
      To date, we have not been a target of any of these advocacy groups. As a
      provider of content with mature themes, we cannot assure you that we may not
      become a target in the future.




26




**Risks
      Relating to Our Industry**




***Wireless
      communications technologies are changing rapidly, and we may not be successful
      in working with these new technologies.***




Wireless
      network and mobile handset technologies are undergoing rapid innovation. New
      handsets with more advanced processors and supporting advanced programming
      languages continue to be introduced. In addition, networks that enable enhanced
      features are being developed and deployed. We have no control over the demand
      for, or success of, these products or technologies. If we fail to anticipate
      and
      adapt to these and other technological changes, the available channels for
      our
      products and services may be limited and our market share and our operating
      results may suffer. Our future success will depend on our ability to adapt
      to
      rapidly changing technologies and develop products and services to accommodate
      evolving industry standards with improved performance and reliability. In
      addition, the widespread adoption of networking or telecommunications
      technologies or other technological changes could require substantial
      expenditures to modify or adapt our products and services.




Technology
      changes in the wireless industry require us to anticipate, sometimes years
      in
      advance, which technologies we must implement and take advantage of in order
      to
      make our products and services, and other mobile entertainment products,
      competitive in the market. Therefore, we usually start our product development
      with a range of technical development goals that we hope to be able to achieve.
      We may not be able to achieve these goals, or our competition may be able to
      achieve them more quickly and effectively than we can. In either case, our
      products and services may be technologically inferior to those of our
      competitors, less appealing to end users, or both. If we cannot achieve our
      technology goals within our original development schedule, then we may delay
      their release until these technology goals can be achieved, which may delay
      or
      reduce our revenues, increase our development expenses and harm our reputation.
      Alternatively, we may increase the resources employed in research and
      development in an attempt either to preserve our product launch schedule or
      to
      keep up with our competition, which would increase our development expenses.
      In
      either case, our business, operating results and financial condition could
      be
      materially harmed.




***The
      complexity of and incompatibilities among mobile handsets may require us to
      use
      additional resources for the development of our products and services.***




To
      reach
      large numbers of wireless subscribers, mobile entertainment publishers like
      us
      must support numerous mobile handsets and technologies. However, keeping pace
      with the rapid innovation of handset technologies together with the continuous
      introduction of new, and often incompatible, handset models by wireless carriers
      requires us to make significant investments in research and development,
      including personnel, technologies and equipment. In the future, we may be
      required to make substantial investments in our development if the number of
      different types of handset models continues to proliferate. In addition, as
      more
      advanced handsets are introduced that enable more complex, feature rich products
      and services, we anticipate that our development costs will increase, which
      could increase the risks associated with one or more of our products or services
      and could materially harm our operating results and financial
      condition.




***If
      wireless subscribers do not continue to use their mobile handsets to access
      mobile entertainment and other applications, our business growth and future
      revenues may be adversely affected.***




We
      operate in a developing industry. Our success depends on growth in the number
      of
      wireless subscribers who use their handsets to access data services and, in
      particular, entertainment applications of the type we develop and distribute.
      New or different mobile entertainment applications developed by our current
      or
      future competitors may be preferred by subscribers to our offerings. In
      addition, other mobile platforms may become widespread, and end users may choose
      to switch to these platforms. If the market for our products and services does
      not continue to grow or we are unable to acquire new end users, our business
      growth and future revenues could be adversely affected. If end users switch
      their entertainment spending away from the kinds of offerings that we publish,
      or switch to platforms or distribution where we do not have comparative
      strengths, our revenues would likely decline and our business, operating results
      and financial condition would suffer.




***Our
      industry is subject to risks generally associated with the entertainment
      industry, any of which could significantly harm our operating
      results.***




Our
      business is subject to risks that are generally associated with the
      entertainment industry, many of which are beyond our control. These risks could
      negatively impact our operating results and include: the popularity, price
      and
      timing of release of our offerings and mobile handsets on which they are
      accessed; economic conditions that adversely affect discretionary consumer
      spending; changes in consumer demographics; the availability and popularity
      of
      other forms of entertainment; and critical reviews and public tastes and
      preferences, which may change rapidly and cannot necessarily be
      predicted.




27




***A
      shift of technology platform by wireless carriers and mobile handset
      manufacturers could lengthen the development period for our offerings, increase
      our costs and cause our offerings to be of lower quality or to be published
      later than anticipated.***




Mobile
      handsets require multimedia capabilities enabled by technologies capable of
      running applications such as ours. Our development resources are concentrated
      in
      today’s most popular platforms, and we have experience developing applications
      for these platforms. If one or more of these technologies fall out of favor
      with
      handset manufacturers and wireless carriers and there is a rapid shift to a
      new
      technology where we do not have development experience or resources, the
      development period for our products and services may be lengthened, increasing
      our costs, and the resulting products and services may be of lower quality,
      and
      may be published later than anticipated. In such an event, our reputation,
      business, operating results and financial condition might suffer.




***System
      or network failures could reduce our sales, increase costs or result in a loss
      of end users of our products and services.***




Mobile
      publishers rely on wireless carriers’ networks to deliver products and services
      to end users and on their or other third parties’ billing systems to track and
      account for the downloading of such offerings. In certain circumstances, mobile
      publishers may also rely on their own servers to deliver products on demand
      to
      end users through their carriers’ networks. In addition, certain products ** require
      access over the mobile internet to our servers in order to enable certain
      features. Any failure of, or technical problem with, carriers’, third parties’
or our billing systems, delivery systems, information systems or communications
      networks could result in the inability of end users to download our products,
      prevent the completion of a billing transaction, or interfere with access to
      some aspects of our products. If any of these systems fails or if there is
      an
      interruption in the supply of power, an earthquake, fire, flood or other natural
      disaster, or an act of war or terrorism, end users might be unable to access
      our
      offerings. For example, from time to time, our carriers have experienced
      failures with their billing and delivery systems and communication networks,
      including gateway failures that reduced the provisioning capacity of their
      branded e-commerce system. Any failure of, or technical problem with, the
      carriers’, other third parties’ or our systems could cause us to lose end users
      or revenues or incur substantial repair costs and distract management from
      operating our business. This, in turn, could harm our business, operating
      results and financial condition.




***Our
      business depends on the growth and maintenance of wireless communications
      infrastructure.***




Our
      success will depend on the continued growth and maintenance of wireless
      communications infrastructure in the United States and internationally. This
      includes deployment and maintenance of reliable next-generation digital networks
      with the speed, data capacity and security necessary to provide reliable
      wireless communications services. Wireless communications infrastructure may
      be
      unable to support the demands placed on it if the number of subscribers
      continues to increase, or if existing or future subscribers increase their
      bandwidth requirements. Wireless communications have experienced a variety
      of
      outages and other delays as a result of infrastructure and equipment failures,
      and could face outages and delays in the future. These outages and delays could
      reduce the level of wireless communications usage as well as our ability to
      distribute our products and services successfully. In addition, changes by
      a
      wireless carrier to network infrastructure may interfere with downloads and
      may
      cause end users to lose functionality. This could harm our business, operating
      results and financial condition.




***Future
      mobile handsets may significantly reduce or eliminate wireless carriers’ control
      over delivery of our products and services and force us to rely further on
      alternative sales channels, which, if not successful, could require us to
      increase our sales and marketing expenses significantly.***




A
      growing
      number of handset models currently available allow wireless subscribers to
      browse the internet and, in some cases, download applications from sources
      other
      than through a carrier’s on-deck portal. In addition, the development of other
      application delivery mechanisms such as premium-SMS may enable subscribers
      to
      download applications without having to access a carrier’s on-deck portal.
      Increased use by subscribers of open operating system handsets or premium-SMS
      delivery systems will enable them to bypass the carriers’ on-deck portal and
      could reduce the market power of carriers. This could force us to rely further
      on alternative sales channels and could require us to increase our sales and
      marketing expenses significantly. Relying on placement of our products and
      services in the menus of off-deck distributors may result in lower revenues
      than
      might otherwise be anticipated. We may be unable to develop and promote our
      direct website distribution sufficiently to overcome the limitations and
      disadvantages of off-deck distribution channels. This could harm our business,
      operating results and financial condition.




28




***Actual
      or perceived security vulnerabilities in mobile handsets or wireless networks
      could adversely affect our revenues.***




Maintaining
      the security of mobile handsets and wireless networks is critical for our
      business. There are individuals and groups who develop and deploy viruses,
      worms
      and other illicit code or malicious software programs that may attack wireless
      networks and handsets. Security experts have identified computer “worm” programs
      that target handsets running on certain operating systems. Although these worms
      have not been widely released and do not present an immediate risk to our
      business, we believe future threats could lead some end users to seek to reduce
      or delay future purchases of our products or reduce or delay the use of their
      handsets. Wireless carriers and handset manufacturers may also increase their
      expenditures on protecting their wireless networks and mobile phone products
      from attack, which could delay adoption of new handset models. Any of these
      activities could adversely affect our revenues and this could harm our business,
      operating results and financial condition.




***Changes
      in government regulation of the media and wireless communications industries
      may
      adversely affect our business.***




It
      is
      possible that a number of laws and regulations may be adopted in the United
      States and elsewhere that could restrict the media and wireless communications
      industries, including laws and regulations regarding customer privacy, taxation,
      content suitability, copyright, distribution and antitrust. Furthermore, the
      growth and development of the market for electronic commerce may prompt calls
      for more stringent consumer protection laws that may impose additional burdens
      on companies such as ours conducting business through wireless carriers. We
      anticipate that regulation of our industry will increase and that we will be
      required to devote legal and other resources to address this regulation. Changes
      in current laws or regulations or the imposition of new laws and regulations
      in
      the United States or elsewhere regarding the media and wireless communications
      industries may lessen the growth of wireless communications services and may
      materially reduce our ability to increase or maintain sales of our products
      and
      services.




A
      number
      of studies have examined the health effects of mobile phone use, and the results
      of some of the studies have been interpreted as evidence that mobile phone
      use
      causes adverse health effects. The establishment of a link between the use
      of
      mobile phone services and health problems, or any media reports suggesting
      such
      a link, could increase government regulation of, and reduce demand for, mobile
      phones and, accordingly, the demand for our products and services, and this
      could harm our business, operating results and financial condition.




**Risks
      Relating to Our Common Stock**




***There
      is a limited trading market for our common stock.***




Although
      prices for our shares of common stock are quoted on the OTC Bulletin Board
      (under the symbol MNDL.OB), there is no established public trading market for
      our common stock, and no assurance can be given that a public trading market
      will develop or, if developed, that it will be sustained.




***The
      liquidity of our common stock will be affected by its limited trading
      market.***




Bid
      and
      ask prices for shares of our common stock are quoted on the OTC Bulletin Board
      under the symbol MNDL.OB. There is currently no broadly followed, established
      trading market for our common stock. While we are hopeful that, following the
      Merger, we will command the interest of a greater number of investors, an
      established trading market for our shares of common stock may never develop
      or
      be maintained. Active trading markets generally result in lower price volatility
      and more efficient execution of buy and sell orders. The absence of an active
      trading market reduces the liquidity of our common stock. As a result of the
      lack of trading activity, the quoted price for our common stock on the OTC
      Bulletin Board is not necessarily a reliable indicator of its fair market value.
      Further, if we cease to be quoted, holders of our common stock would find it
      more difficult to dispose of, or to obtain accurate quotations as to the market
      value of, our common stock, and the market value of our common stock would
      likely decline.




***If
      and when a trading market for our common stock develops, the market price of
      our
      common stock is likely to be highly volatile and subject to wide fluctuations,
      and you may be unable to resell your shares at or above the current
      price.***




The
      market price of our common stock is likely to be highly volatile and could
      be
      subject to wide fluctuations in response to a number of factors that are beyond
      our control, including announcements of new products or services by our
      competitors. In addition, the market price of our common stock could be subject
      to wide fluctuations in response to a variety of factors,
      including:




29




·
            quarterly
                variations in our revenues and operating expenses;·
            developments
                in the financial markets, and the worldwide or regional
                economies;·
            announcements
                of innovations or new products or services by us or our
                competitors;·
            fluctuations
                in merchant credit card interest rates;·
            significant
                sales of our common stock or other securities in the open market;
                and·
            changes
                in accounting principles.





In
      the
      past, stockholders have often instituted securities class action litigation
      after periods of volatility in the market price of a company’s securities. If a
      stockholder were to file any such class action suit against us, we would incur
      substantial legal fees and our management’s attention and resources would be
      diverted from operating our business to respond to the litigation, which could
      harm our business.




***The
      sale of securities by us in any equity or debt financing could result in
      dilution to our existing stockholders and have a material adverse effect on
      our
      earnings.***




Any
      sale
      of common stock by us in a future private placement offering could result in
      dilution to the existing stockholders as a direct result of our issuance of
      additional shares of our capital stock. In addition, our business strategy
      may
      include expansion through internal growth by acquiring complementary businesses,
      acquiring or licensing additional brands, or establishing strategic
      relationships with targeted customers and suppliers. In order to do so, or
      to
      finance the cost of our other activities, we may issue additional equity
      securities that could dilute our stockholders’ stock ownership. We may also
      assume additional debt and incur impairment losses related to goodwill and
      other
      tangible assets if we acquire another company, and this could negatively impact
      our earnings and results of operations.




***If
      securities or industry analysts do not publish research or reports about our
      business, or if they downgrade their recommendations regarding our common stock,
      our stock price and trading volume could decline.***




The
      trading market for our common stock will be influenced by the research and
      reports that industry or securities analysts publish about us or our business.
      If any of the analysts who cover us downgrade our common stock, our common
      stock
      price would likely decline. If analysts cease coverage of our company or fail
      to
      regularly publish reports on us, we could lose visibility in the financial
      markets, which in turn could cause our common stock price or trading volume
      to
      decline.




***“Penny
      stock” rules may restrict the market for our common stock.***




Our
      common stock is subject to rules promulgated by the SEC relating to “penny
      stocks,” which apply to companies whose shares are not traded on a national
      stock exchange, trade at less than $5.00 per share, or who do not meet certain
      other financial requirements specified by the SEC. These rules require brokers
      who sell “penny stocks” to persons other than established customers and
“accredited investors” to complete certain documentation, make suitability
      inquiries of investors, and provide investors with certain information
      concerning the risks of trading in such penny stocks. These rules may discourage
      or restrict the ability of brokers to sell our common stock and may affect
      the
      secondary market for our common stock. These rules could also hamper our ability
      to raise funds in the primary market for our common stock .




30




***If
      we fail to maintain an effective system of internal controls, we might not
      be
      able to report our financial results accurately or prevent fraud; in that case,
      our stockholders could lose confidence in our financial reporting, which could
      negatively impact the price of our stock.***




Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      prevent fraud. In addition, Section 404 of the Sarbanes-Oxley Act of 2002,
      or the Sarbanes-Oxley Act, will require us to evaluate and report on our
      internal control over financial reporting and have our independent registered
      public accounting firm attest to our evaluation beginning with our Annual Report
      on Form 10-K for the year ending December 31, 2008. We are in the process of
      preparing and implementing an internal plan of action for compliance with
      Section 404 and strengthening and testing our system of internal controls
      to provide the basis for our report. The process of implementing our internal
      controls and complying with Section 404 will be expensive and time -
      consuming, and will require significant attention of management. We cannot
      be
      certain that these measures will ensure that we implement and maintain adequate
      controls over our financial processes and reporting in the future. Even if
      we
      conclude, and our independent registered public accounting firm concurs, that
      our internal control over financial reporting provides 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 its inherent limitations, internal control
      over financial reporting may not prevent or detect fraud or misstatements.
      Failure to implement required new or improved controls, or difficulties
      encountered in their implementation, could harm our operating results or cause
      us to fail to meet our reporting obligations. If we or our independent
      registered public accounting firm discover a material weakness or a significant
      deficiency in our internal control, the disclosure of that fact, even if quickly
      remedied, could reduce the market’s confidence in our financial statements and
      harm our stock price. In addition, a delay in compliance with Section 404
      could subject us to a variety of administrative sanctions, including
      ineligibility for short form resale registration, action by the SEC, and the
      inability of registered broker-dealers to make a market in our common stock,
      which could further reduce our stock price and harm our business.




***We
      do not anticipate paying dividends.***




We
      have
      never paid cash or other dividends on our common stock. Payment of dividends
      on
      our common stock is within the discretion of our Board of Directors and will
      depend upon our earnings, our capital requirements and financial condition,
      and
      other factors deemed relevant by our Board of Directors. However, the earliest
      our Board of Directors would likely consider a dividend is if we begin to
      generate excess cash flow.




***Our
      officers, directors and principal stockholders can exert significant influence
      over us and may make decisions that are not in the best interests of all
      stockholders.***




Our
        officers, directors and principal stockholders (greater than 5% stockholders)
        collectively beneficially own approximately 77.4% of our outstanding common
        stock. As a result, this group will be able to affect the outcome of, or
        exert
        significant influence over, all matters requiring stockholder approval,
        including the election and removal of directors and any change in control.
        In
        particular, this concentration of ownership of our common stock could have
        the
        effect of delaying or preventing a change of control of us or otherwise
        discouraging or preventing a potential acquirer from attempting to obtain
        control of us. This, in turn, could have a negative effect on the market
        price
        of our common stock. It could also prevent our stockholders from realizing
        a
        premium over the market prices for their shares of common stock. Moreover,
        the
        interests of this concentration of ownership may not always coincide with
        our
        interests or the interests of other stockholders, and, accordingly, this
        group
        could cause us to enter into transactions or agreements that we would not
        otherwise consider.




***Maintaining
      and improving our financial controls and the requirements of being a public
      company may strain our resources, divert management’s attention and affect our
      ability to attract and retain qualified members for our Board of Directors.***




As
      a
      public company, we will be subject to the reporting requirements of the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the
      Sarbanes-Oxley Act. The requirements of these rules and regulations will
      increase our legal, accounting and financial compliance costs, will make some
      activities more difficult, time-consuming and costly and may also place undue
      strain on our personnel, systems and resources.




31




The
      Sarbanes-Oxley Act requires, among other things, that we maintain effective
      disclosure controls and procedures and internal control over financial
      reporting. This can be difficult to do. For example, we depend on the reports
      of
      wireless carriers for information regarding the amount of sales of our products
      and services and to determine the amount of royalties we owe branded content
      licensors and the amount of our revenues. These reports may not be timely,
      and
      in the past they have contained, and in the future they may contain,
      errors.




In
      order
      to maintain and improve the effectiveness of our disclosure controls and
      procedures and internal control over financial reporting, we will need to expend
      significant resources and provide significant management oversight. We have
      a
      substantial effort ahead of us to implement appropriate processes, document
      our
      system of internal control over relevant processes, assess their design,
      remediate any deficiencies identified and test their operation. As a result,
      management’s attention may be diverted from other business concerns, which could
      harm our business, operating results and financial condition. These efforts
      will
      also involve substantial accounting-related costs.




The
      Sarbanes-Oxley Act will make it more difficult and more expensive for us to
      maintain directors’ and officers’ liability insurance, and we may be required to
      accept reduced coverage or incur substantially higher costs to maintain
      coverage. If we are unable to maintain adequate directors’ and officers’
insurance, our ability to recruit and retain qualified directors, and officers
      will be significantly curtailed.




32
 
  **ITEM
          7. FINANCIAL STATEMENTS**
 
 **Mandalay
          Media, Inc. (Formerly Mediavest, Inc.)**
 
 Index
          to
          Financial Statements
 
 Reports
                    of Independent Registered Public Accounting Firms
                34Balance
                    Sheet as of December 31, 2007
                36Statement
                    of Operations For the Years Ended December 31, 2007 and 2006
                37Statement
                    of Stockholders’ Equity For the Years Ended December 31, 2007 and 2006
                38Statement
                    of Cash Flows For the Years Ended December 31, 2007 and 2006
                39Notes
                    to the Financial Statements
                40
  33
 
 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., LLPRaich
                    Ende Malter & Co., LLP
 New
          York,
          New York
 April
          11,
          2008
  34
 
 REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
          the
          Board of Directors
 Mandalay
          Media, Inc. (Formerly Mediavest, Inc.)
 
 We
          have
          audited the accompanying statements of operations, stockholders’ equity and cash
          flows of Mandalay Media, Inc. (formerly Mediavest, Inc.) for the year ended
          December 31, 2006. These financial statements are the responsibility of
          the
          Company’s management. Our responsibility is to express an opinion on these
          financial statements based on our audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. The Company is not required
          to
          have, nor were we engaged to perform, an audit of its internal control
          over
          financial reporting. Our audit included consideration of internal control
          over
          financial reporting as a basis for designing audit procedures that are
          appropriate in the circumstances, but not for the purpose of expressing
          an
          opinion on the effectiveness of the Company's internal control over financial
          reporting. Accordingly, we express no such opinion. An audit includes examining,
          on a test basis, evidence supporting the amounts and disclosures in the
          financial statements. An audit also includes assessing the accounting principles
          used and significant estimates made by management, as well as evaluating
          the
          overall financial statement presentation. We believe that our audit provides
          a
          reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the results of its operations and cash flows of Mandalay
          Media, Inc. (formerly Mediavest, Inc.) for the year ended December 31,
          2006 in
          conformity with accounting principles generally accepted in the United
          States of
          America.
 
 /s/Most
                    & Company, LLPMost
                    & Company, LLP
 New
          York,
          New York
 March
          26,
          2007
 
 35
  **MANDALAY
                      MEDIA, INC.****(Formerly
                      Mediavest, Inc.)****BALANCE
                      SHEET****DECEMBER
                      31, 2007**
 
 **ASSETS**Current
                        assets:Cash
                    
                    $
                    7,254,662Deferred
                        acquisition costs
                    
                    
                    141,258Total
                        assets
                    
                    $
                    7,395,920**LIABILITIES
                        AND STOCKHOLDERS' EQUITY**Current
                        Liabilities:Accounts
                        payable and accrued expenses
                    
                    $
                    447,337Stockholders'
                        equity:Series
                        A Convertible Preferred stock, 1,000,000 shares authorized
                        at $.0001 par
                        value,100,000
                        shares issued or outstanding
                    
                    
                    100,000Common
                        stock, 100,000,000 shares authorized at $.0001 par value,21,968,797
                        shares issued and outstanding
                    
                    
                    2,197Additional
                        paid-in capital
                    
                    
                    11,257,469Deferred
                        Compensation
                    
                    
                    (1,439,928
                    )Accumulated
                        deficit
                    
                    
                    (2,971,155
                    )Total
                        stockholders' equity
                    
                    
                    6,948,583Total
                        liabilities and stockholders' equity
                    
                    $
                    7,395,920
  See
              notes
              to financial statements
  36
 **MANDALAY
                      MEDIA, INC.****(Formerly
                      Mediavest, Inc.)****STATEMENT
                      OF OPERATIONS****Years
                      Ended December 31,**
  **2007**
                    
                    **2006**General
                        and administrative expenses
                    
                    $
                    (2,520,621
                    )
                    $
                    (553,486
                    )Interest
                        income
                    
                    
                    316,510
                    
                    
                    -Net
                        Loss
                    
                    
                    (2,204,111
                    )
                    
                    (553,486
                    )Preferred
                        stock dividend
                    
                    
                    -
                    
                    
                    (42,500
                    )Net
                        loss attributable to common stockholders
                    
                    $
                    (2,204,111
                    )
                    $
                    (595,986
                    )Basic
                        and diluted net loss per common share
                    
                    $
                    (0.12
                    )
                    $
                    (0.05
                    )Weighted
                        average common shares outstanding,basic
                        and diluted
                    
                    
                    18,996,679
                    
                    
                    11,599,397
  See
            notes to financial statements
 37
 **MANDALAY
                      MEDIA, INC.****(Formerly
                      Mediavest, Inc.)****STATEMENT
                      OF STOCKHOLDERS' EQUITY****YEARS
                      ENDED DECEMBER 31, 2007 AND 2006**
  **Preferred
                        Stock**
                    
                    
                    
                    
                    
                    **Additional****Series
                        A**
                    
                    **Common
                        Stock**
                    
                    **Paid-in**
                    
                    **Deferred**
                    
                    **Accumulated**
                    
                    **Total****Shares**
                    
                    **Amount**
                    
                    **Shares**
                    
                    **Amount**
                    
                    **Capital**
                    
                    **Compensation**
                    
                    **Deficit**
                    
                    **Equity**Balance
                        at December 31, 2005
                    
                    
                    -
                    
                    
                    -
                    
                    
                    10,000,000
                    
                    $
                    1,000
                    
                    $
                    99,000
                    
                    
                    -
                    
                    $
                    (171,058
                    )
                    $
                    (71,058
                    )Warrants
                        issued for sharebased
                        compensation
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    111,080
                    
                    
                    -
                    
                    
                    -
                    
                    
                    111,080Sale
                        of common stock
                    
                    
                    
                    
                    
                    
                    
                    
                    6,730,000
                    
                    
                    673
                    
                    
                    6,056,327
                    
                    
                    -
                    
                    
                    -
                    
                    
                    6,057,000Sale
                        of preferred stock
                    
                    
                    100,000
                    
                    $
                    100,000
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    100,000Preferred
                        stock dividend
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    42,500
                    
                    
                    -
                    
                    
                    (42,500
                    )
                    
                    -Net
                        Loss
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (553,486
                    )
                    
                    (553,486
                    )Balance
                        at December 31, 2006
                    
                    
                    100,000
                    
                    
                    100,000
                    
                    
                    16,730,000
                    
                    
                    1,673
                    
                    
                    6,308,907
                    
                    
                    -
                    
                    
                    (767,044
                    )
                    
                    5,643,536Stock
                        options issued for sharebased
                        compensation
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    2,475,784
                    
                    $
                    (2,475,784
                    )
                    
                    -
                    
                    
                    -Amortization
                        of share basedcompensation
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    1,035,856
                    
                    
                    -
                    
                    
                    1,035,856Sale
                        of common stock (net ofoffering
                        costs of $26,698)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    5,000,000
                    
                    
                    500
                    
                    
                    2,472,802
                    
                    
                    -
                    
                    
                    -
                    
                    
                    2,473,302Cashless
                        exercise of warrants
                    
                    
                    -
                    
                    
                    -
                    
                    
                    238,797
                    
                    
                    24
                    
                    
                    (24
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    -Net
                        Loss
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (2,204,111
                    )
                    
                    (2,204,111
                    )Balance
                        at December 31, 2007
                    
                    
                    100,000
                    
                    $
                    100,000
                    
                    
                    21,968,797
                    
                    $
                    2,197
                    
                    $
                    11,257,469
                    
                    $
                    (1,439,928
                    )
                    $
                    (2,971,155
                    )
                    $
                    6,948,583
  See
            notes to financial statements
 
 38
 **MANDALAY
                      MEDIA, INC.****(Formerly
                      Mediavest, Inc.)****STATEMENT
                      OF CASH FLOWS****Years
                      Ended December 31,**
 **2007**
                    
                    **2006****CASH
                        FLOWS FROM OPERATING ACTIVITIES:**Net
                        loss
                    
                    $
                    (2,204,111
                    )
                    $
                    (553,486
                    )Adjustments
                        to reconcile net loss to net cashused
                        in operating activities:Share
                        based compensation (net of deferredcompensation
                        of $1,439,928 in 2007)
                    
                    
                    1,035,856
                    
                    
                    111,080Changes
                        in assets and liabilities:Accounts
                        payable and accrued expenses
                    
                    
                    348,640
                    
                    
                    24,273Net
                        cash used in operating activities
                    
                    
                    (819,615
                    )
                    
                    (418,133
                    )**CASH
                        FLOWS FROM INVESTING ACTIVITIES:**Acquisition
                        costs
                    
                    
                    (141,258
                    )**CASH
                        FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                        from sale of preferred stock
                    
                    
                    -
                    
                    
                    100,000Proceeds
                        from sale of common stock (net ofoffering
                        costs of $26,698)
                    
                    
                    2,473,302
                    
                    
                    6,057,000Net
                        cash provided by financing activities
                    
                    
                    2,473,302
                    
                    
                    6,157,000Net
                        increase (decrease) in cash
                    
                    
                    1,512,429
                    
                    
                    5,738,867Cash
                        and cash equivalents, beginning of period
                    
                    
                    5,742,233
                    
                    
                    3,366Cash
                        and cash equivalents, end of period
                    
                    $
                    7,254,662
                    
                    $
                    5,742,233SCHEDULE
                        OF NONCASH INVESTING AND FINANCING ACTIVITIES:Preferred
                        stock dividend
                    
                    
                    
                    
                    $
                    42,500
  See
            notes to financial statements
 39
 
 **MANDALAY
          MEDIA, INC**
 **(Formerly
          Mediavest, Inc.)**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 **FOR
          THE YEAR ENDED DECEMBER 31, 2007**
 
 **NOTE
          1. ORGANIZATION AND OPERATIONS**
 
 Mandalay
          Media, Inc. (Company), formerly Mediavest, Inc. (Mandalay) was originally
          incorporated in the state of Delaware on November 6, 1998 under the name
          eB2B
          Commerce, Inc. On April 27, 2000, it merged into DynamicWeb Enterprises
          Inc., a
          New Jersey corporation, the surviving company, and changed its name to
          eB2B
          Commerce, Inc. On April 13, 2005, the Company changed its name to Mediavest,
          Inc. (Mediavest). Through January 26, 2005, the Company and its former
          subsidiaries were engaged in providing business-to-business transaction
          management services designed to simplify trading between buyers and suppliers.
          The Company was inactive from January 26, 2005 through its merger with
          Twistbox
          Entertainment, Inc., February 12, 2008 (Note 10).
 
 On
          September 14, 2007, Mandalay Media, Inc. (Mandalay) was incorporated by
          Mediavest in the state of Delaware.
 
 On
          November 7, 2007, Mediavest merged into its wholly-owned, newly formed
          subsidiary, Mandalay, with Mandalay as the surviving corporation. Mandalay
          issued: (1) one new share of common stock in exchange for each share of
          Mediavest’s outstanding common stock and (2) one new share of preferred
          stock in exchange for each share of Mediavest’s outstanding preferred stock
          as of November 7, 2007. Mandalay’s preferred and common stock assumed the
          same status and par value as Mediavest’s and acceded to all the rights, acquired
          all the assets and assumed all of the liabilities of Mediavest.
  **NOTE
          2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  ***Basis
          of Presentation***
  The
          financial statements include all the accounts of the Company.
  ***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 assets and liabilities at the dates of the financial statements
          and
          the reported amounts of revenues and expenses during the reporting periods.
          Actual results could differ from those estimates.
 
 40
  ***Income
          Taxes***
  Deferred
          income taxes are provided for temporary differences between financial statement
          and income tax reporting under the liability method, using expected tax
          rates
          and laws that are expected to be in effect when the differences are expected
          to
          reverse. A valuation allowance is provided when it is more likely than
          not, that
          the deferred tax assets will not be realized.
 
 Effective
          January 1, 2007, the Company adopted the provisions of Financial Accounting
          Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in
          Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). FIN 48
          clarifies the accounting for uncertainty in income taxes recognized in
          the
          Company’s financial statements in accordance with FASB Statement 109,
“Accounting for Income Taxes”, and prescribes a recognition threshold and
          measurement process for financial statement recognition and measurement
          of a tax
          position taken or expected to be taken in a tax return. FIN 48 also provides
          guidance on derecognition, classification, interest and penalties, accounting
          in
          interim periods, disclosure and transition.
 
 The
          Company’s policy is to classify income tax assessments, if any, for tax related
          interest as interest expenses and for tax related penalties as general
          and
          administrative expenses.
 
 ***Financial
          Instruments***
 
 The
          carrying amounts of financial instruments, including cash and accounts
          payable
          and accrued expenses, approximate their fair values because of their relatively
          short maturities.
  ***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 years ended December 31, 2007 and 2006 consisted
            of  1,591,948 and  24,384 shares, respectively, and were not included
            in the computation of diluted loss per share as they were antidilutive
            in each
            period.
  ***Share-based
          Compensation***
  The
          Company recognizes compensation expense for all share-based payment awards
          made
          to employees and directors based on the estimated fair values of the awards
          on
          the date of the grant. Warrants and options are valued using the Black-Scholes
          Option-Pricing Model using the market price of our common stock on the
          date of
          valuation, an expected dividend yield of zero, the remaining period or
          maturity
          date of the warrants and the expected volatility of our common
          stock.
 
 Share
          based compensation costs with future services periods were recorded as
          deferred
          compensation and amortized over the respective service period.
 
 ***Preferred
          Stock***
 
 The
          Company applies the guidance enumerated in SFAS No. 150, “Accounting
          for Certain Financial Instruments with Characteristics of both Liabilities
          and
          Equity,” and EITF Topic D-98, “Classification and Measurement of Redeemable
          Securities,” when determining the classification and measurement of preferred
          stock. Preferred shares subject to mandatory redemption (if any) are classified
          as liability instruments and are measured at fair value in accordance with
          SFAS 150. All other issuances of preferred stock are subject to the
          classification and measurement principles of EITF Topic D-98. Accordingly,
          the
          Company classifies conditionally redeemable preferred shares (if any),
          which
          includes preferred shares that feature redemption rights that are either
          within
          the control of the holder or subject to redemption upon the occurrence
          of
          uncertain events not solely within the Company’s control, as temporary equity.
          At all other times, the Company classifies its preferred shares in stockholders’
equity.
  41
  The
          Company’s preferred shares do not feature any redemption rights within the
          holders control or conditional redemption features not within the Company’s
          control as of December 31, 2007. Accordingly all issuances of preferred
          shares
          are presented as a component of stockholders equity.
  ***Accounting
          Pronouncements***
  In
          September 2006, the FASB issued SFAS No. 157, “Fair Value
          Measurements” (“SFAS 157”). SFAS 157 provides guidance for using fair
          value to measure assets and liabilities. The standard also responds to
          investors’ request for expanded information about the extent to which a company
          measures assets and liabilities at fair value, the information used to
          measure
          fair value, and the effect of fair value measurements on earnings. SFAS 157
          will be effective for the Company’s fiscal year beginning January 1, 2008.
          The Company is currently reviewing the effect SFAS 157 will have on its
          financial statements; however, it is not expected to have a material impact
          on
          the Company’s financial position, results of operations or cash flows.
 
 In
          February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
          for Financial Assets and Financial Liabilities, Including an Amendment
          of FASB
          Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to
          choose to measure certain financial assets and liabilities at fair value.
          Unrealized gains and losses on items for which the fair value option has
          been
          elected will be reported in earnings. SFAS No. 159 will be effective
          for the Company’s fiscal year beginning January 1, 2008. The Company is
          currently reviewing the effect SFAS 159 will have on its financial
          statements; however, it is not expected to have a material impact on the
          Company’s financial position, results of operations or cash flows.
 
 In December
          2007, the FASB issued Statement of Financial Accounting Standards No. 141(R),
          “Business Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
          Combinations.” SFAS 141R establishes principles and requirements for determining
          how an enterprise recognizes and measures the fair value of certain assets
          and
          liabilities acquired in a business combination, including noncontrolling
          interests, contingent consideration, and certain acquired contingencies.
          SFAS
          141R also requires acquisition-related transaction expenses and restructuring
          costs be expensed as incurred rather than capitalized as a component of
          the
          business combination. SFAS 141R will be applicable 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.
          SFAS 141R
          would have an impact on accounting for any businesses acquired after the
          effective date of this pronouncement.
 
 In
          December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
          Consolidated Financial Statements - An Amendment of ARB No. 51” (“SFAS 160”).
          SFAS 160 establishes accounting and reporting standards for the noncontrolling
          interest in a subsidiary (previously referred to as minority interests).
          SFAS
          160 also requires that a retained noncontrolling interest upon the
          deconsolidation of a subsidiary be initially measured at its fair value.
          Upon
          adoption of SFAS 160, the Company would be required to report any noncontrolling
          interests as a separate component of stockholders’ equity. The Company would
          also be required to present any net income allocable to noncontrolling
          interests
          and net income attributable to stockholders of the Company separately in
          its
          consolidated statements of income. SFAS 160 is effective for fiscal years,
          and
          interim periods within those fiscal years, beginning on or after December
          15,
          2008. SFAS 160 requires retroactive adoption of the presentation and disclosure
          requirements for existing minority interests. All other requirements of
          SFAS 160
          shall be applied prospectively. SFAS 160 would have an impact on the
          presentation and disclosure of the noncontrolling interests of any non
          wholly-owned businesses acquired in the future.
  42
  Management
          does not believe that any other recently issued, but not yet effective
          accounting pronouncements, if adopted, would have a material effect on
          the
          accompanying financial statements. ****
  **NOTE
          3.**  **PREFERRED
          STOCK**
  On
          October 3, 2006, the Company designated a Series A Preferred Stock, par
          value
          $.0001 per share (Series A). The Series A holders shall be entitled to:
          (1) vote
          on an equal per share basis as common, (2) dividends on an if-converted
          basis
          and (3) a liquidation preference equal to the greater of $10, per share
          of
          Series A (subject to adjustment) or such amount that would have been paid
          on an
          if-converted basis. Each Series A holder may treat as a dissolution or
          winding
          up of the Company any of the following transactions: a consolidation, merger,
          sale of substantially all the assets of the company, issuance/sale of common
          stock of the Company constituting a majority of all shares outstanding
          and a
          merger/business combination, each as defined.
 
 In
          addition, the Series A holders may convert, at their discretion, all or
          any of
          their Series A shares into the number of common shares equal to the number
          calculated by dividing the original purchase price of such Series A Preferred,
          plus the amount of any accumulated, but unpaid dividends, as of the conversion
          date, by the original purchase price (subject to certain adjustments) in
          effect
          at the close of business on the conversation date.
 
 On
          August
          3, 2006, the Company sold 100,000 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
          $100,000, $1.00 per share. The Company recognized a one time, non-cash
          deemed
          preferred dividend of $42,500 because the fair value of our common stock
          at the
          time of the sale of $1.425 per share, was greater than the conversion price
          of
          $1.00 per share.
 
 **NOTE
          4.**  **COMMON
          STOCK**
 
 On
          August
          3, 2006, the Company authorized an increase in their authorized shares
          of common
          stock from 19,000,000 to 100,000,000 shares.
  On
          August
          3, 2006, the Company authorized a 2.5 to 1 stock split of its common stock,
          increasing its outstanding shares from 4,000,000 to 10,000,000. In connection
          with the split, the Company transferred $6,000 from additional paid-in
          capital
          to common stock. All share and per share amounts have been retroactively
          adjusted to reflect the effect of the stock split.
 
 On
          August
          3, 2006, the Company granted warrants to purchase 150,000 and 50,000 shares
          of
          common stock of the Company to its president and a director, respectively.
          Each
          warrant is exercisable at $2.50 per share, through August 1, 2008. The
          warrants
          were valued at $111,000 using a Black-Scholes model assuming a risk free
          interest rate of 4.89%, expected life of two years, and expected volatility
          of
          105.67%.
  On
          September 14, 2006, October 12, 2006 and December 26, 2006, the Company
          sold
          2,800,000, 3,400,000 and 530,000 units, respectively, at $1.00 per unit,
          for an
          aggregate proceeds of $ 6,057,000, net of offering costs of $673,000. Each
          unit
          consisted of one share of common stock of the Company and one warrant.
          Each
          warrant is exercisable to purchase one share of common stock of the Company
          at
          $2.00 per share, through September, October and December 2008.
 On
            July
            24, 2007, the Company sold 5,000,000 shares of the Company's common
            stock, at $0.50 per share, for aggregate proceeds of $2,473,302, net
            of offering costs of $26,698.
  43
 In
            September, October and December 2007, warrants to purchase 625,000 shares
            of
            common stock were exercised in a cashless exchange for 238,797 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
          500,000 shares of common stock of the Company to a director under the Plan.
          The
          options have a ten year term and are exercisable at $2.65 per share, with
          one-third of the options vesting immediately upon grant, one-third vesting
          on
          the first anniversary of the date of grant and the one-third on the second
          anniversary of the date of grant. The options were valued at $771,862 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
          100,000 shares of common stock of the Company to a director under the Plan.
          The
          options have a ten year term and are exercisable at a price of $2.50 per
          share,
          with one-third of the options granted vesting immediately upon grant, one-third
          vesting on the first anniversary of the date of grant and one-third on
          the
          second anniversary of the date of grant. The options were valued at $160,198
          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%.
 Series
                      A Preferred Stock
                  
                  
                  100,000Options
                      under the Plan
                  
                  
                  7,000,000Warrants
                      not under the Plan
                  
                  
                  100,000Warrants
                      issued with units
                  
                  
                  6,205,00013,405,000
 
 **NOTE
          5.**  **STOCK
          OPTION PLAN**
 
 On
          September 27, 2007, the stockholders of the Company adopted the 2007 Employee,
          Director and Consultant Stock Plan (Plan). Under the Plan, the Company
          may grant
          up to 3,000,000 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 7,000,000 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 1,100,000 shares. All other terms of the plan remain
          in full
          force and effect.
  44
  For
          the
          year ended December 31, 2007, option activity under the plan was as
          follows:
 Number
                    of Shares
                
                Weighted-Average
                    Exercise Price per ShareOutstanding
                    - January 1, 2007
                
                NoneGranted
                
                
                1,600,000
                
                $
                2.64Cancelled
                
                
                -
                
                
                -Exercised
                
                
                -
                
                
                -Outstanding
                    -December 31, 2007
                
                
                1,600,000
                
                $
                2.64Exercisable
                    at end of year
                
                
                533,333
                
                $
                2.64Available
                    for future grants
                
                
                1,400,000
  As
          of
          December 31, 2007, a summary of options outstanding under the Plan was
          as
          follows:
  Range
                    of Exercise Price
                
                Weighted-Average
                    Remaining Contractual Life (Years)
                
                Number
                    Outstanding at 12/31/07
                
                Weighted-Average
                    Exercise Price
                
                Number
                    Exercisable at December 31, 2007
                
                Weighted-Average
                    Exercise Price$2.00-$3.00
                
                
                9.85
                    Years
                
                
                1,600,000
                
                $
                2.64
                
                
                533,333
                
                $
                2.64
  For
          the
          years ended December 31, 2007 and 2006, non plan warrant activity was as
          follows:
  2007
                
                2006Number
                    of Shares
                
                Weighted-Average
                    Exercise Price per Share
                
                Number
                    of Shares
                
                Weighted-Average
                    Exercise Price per ShareOutstanding
                    at beginning of year
                
                
                6,930,000
                
                $
                2.01
                
                
                None
                
                
                -Granted
                
                
                -
                
                
                -
                
                
                6,930,000
                
                $
                2.01Cancelled
                
                
                -
                
                
                -
                
                
                -
                
                
                -Exercised
                
                
                (625,000
                )
                $
                2.08
                
                
                -
                
                
                -Outstanding
                    at end of year
                
                
                6,305,000
                
                $
                2.01
                
                
                6,930,000
                
                $
                2.01Exercisable
                    at end of year
                
                
                6,305,000
                
                $
                2.01
                
                
                6,930,000
                
                $
                2.01
 
 45
  **NOTE
          6. COMMITMENTS**
 
 Effective
          October 1, 2006, the Company entered into an agreement for consultancy
          and
          advisory services, payable $10,000, per month, until termination by either
          party.
 
 **Employment
          Agreements**
 
 On
          June
          28, 2007, the Company entered into an employment agreement with its president
          providing for: (1) an initial base salary of $250,000, per year; (2) a
          signing
          bonus of $100,000; (3) bonuses at the discretion of the Board of Directors;
          and
          (4) severance equal to one month of base pay for each year of employment
          up to a
          maximum of 12 months in the event of termination by the Company without
          cause.
          In connection with the employment agreement, the Company granted non-qualified
          stock options to purchase 500,000 shares of common stock of the Company
          under
          the Plan. The options are exercisable at $2.65 per share, over a two year
          period, with one-third of the options granted vesting immediately upon
          grant,
          one-third vesting on June 28, 2008, and one third vesting on June 28, 2009.
          The
          options were valued at $771,862 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 7, 2007, the Company entered into an employment agreement, as
            amended,
            on March 7, 2008, with its new chief executive officer for a term of
            two years
            providing for an initial base salary of $350,000 per year, and provided
            for
            grants of non-qualified stock options to purchase 550,000 shares of common
            stock
            of the Company under the Plan. On November 7, 2007, options to purchase
            500,000
            shares of common stock which were granted which are exercisable at $2.65
            per
            share, over ten years, 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 $771,862 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 January 2, 2008, an option to purchase an additional 50,000
            shares of
            common stock was granted, exercisable at $4.65 per share, over ten years,
            with
            one-third vesting immediately on the grant date, one-third vesting on
            November
            7, 2008 and one-third vesting on November 7, 2009.
 
 Further,
            in connection with the amendment on March 7, 2008, the Company granted
            an
            additional option to purchase 1,001,864 shares of the Company’s common stock
            under the Plan, exercisable over a ten year period at an exercise price
            of $4.25
            per share, with 233,830 options vesting on the first anniversary of the
            date of
            grant, 233,830 options vesting on the second anniversary of the grant
            and the
            remaining 534,204 vesting on the third anniversary of the grant.
 
 **NOTE
          7. INCOME TAX**
 
 As
          of
          December 31, 2007, the Company had of net operating loss (NOL) carryforwards
          to
          reduce future Federal income taxes of approximately $38,000,000, 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'
          carryforwards.
 As
            of
            December 31, 2007, realization of the Company's net deferred tax asset
            of
            approximately $15,100,000 was not considered more likely than not and,
            accordingly, a valuation allowance of $15,100,000 has been provided.
            During the
            year ended December 31, 2007, the valuation allowance increased by
            $900,000.
 
 Management
          has evaluated and concluded that there are no significant uncertain tax
          positions requiring recognition in the Company’s financial statements as of
          January 31, 2007 and December 31, 2007.
 
 46
 
 As
          of
          December 31, 2007, the components of deferred tax asset consisted of the
          following:
 Net
                    operating loss carryforwards
                
                $
                14,700.000Share-based
                    compensation
                
                
                400,000Valuation
                    allowance
                
                
                (15,100,000
                )None
 
 For
          the
          years ended December 31, 2007 and 2006 the components of deferred
          tax  expense
          consisted of the following:
 
 2007
                
                2006Net
                    operating loss
                
                $
                500,000
                
                $
                200,000Share-based
                    compensation
                
                
                400,000
                
                
                -Less
                    valuation allowance
                
                
                (900,000
                )
                
                (200,000
                )None
                
                
                None
 
 For
          the
          years ended December 31, 2007 and 2006, the provision for income taxes
          on the
          statement of operations differs from the amount computed by applying the
          statutory Federal income tax rate to income before the provision for income
          taxes, as follows:
  **Year
                    Ended December 31,****2007**
                
                **2006**Federal
                    income tax, at statutory rate
                
                $
                (800,000
                )
                $
                (180,000
                )State
                    income tax, net of federal benefit
                
                
                (100,000
                )
                
                (20,000
                )Change
                    in valuation allowance
                
                
                900,000
                
                
                200,000None
                
                
                None
  **NOTE
          8.**  **RELATED
          PARTY TRANSACTIONS**
 
 In
          2006,
          the Company borrowed an aggregate of $100,000 from Trinad Capital,
          with **** interest
          at 10%, per annum. The loans were repaid on October 10, 2006, with interest
          of
          $5,082.
  On
          September 14, 2006, the Company entered into a management agreement (Agreement)
          with Trinad Management for five years. Pursuant to the terms of the Agreement,
          Trinad Management will provide certain management services, including,
          without
          limitation, the sourcing, structuring and negotiation of a potential business
          combination transaction involving the Company in exchange for a fee of
          $90,000
          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
          $1,000,000. For the years ended December 31, 2007 and 2006, the Company
          paid
          management fees under the agreement of $360,000 and $107,000,
          respectively.
  In
          January 2007, prior to his employment as an
          officer of the Company, our president received $25,000 in consulting
          fees.
  47
  In
          March
          2007, the Company entered into a month to month lease for office space
          with
          Trinad Management for rent of $8,500 per month. Rent expense was $76,500
          as of
          December 31, 2007.
  **NOTE
          9.****CONCENTRATIONS**
  The
          Company maintains cash in financial institutions in excess of insured limits.
          In
          assessing its risk, the Company’s policy is to maintain cash only with reputable
          financial institutions.
  **NOTE
          10. SUBSEQUENT EVENTS**
 
 On
          February 12, 20087, Mandalay completed a merger with Twistbox Entertainment,
          Inc. (Twistbox) through an exchange of all outstanding capital stock of
          Twistbox
          for 9,861,578 shares of common stock of the Company and the Company’s assumption
          of all the outstanding options of Twistbox’s
          2006 Stock Incentive Plan by the
          issuance of options to purchases 2,463,472 shares
          of common stock of the Company, including 2 ,144,700
          vested and 318,722 unvested options.
 
 After
          the
          Merger, Twistbox
          became a wholly owned subsidiary of the Company.
 
 In
          connection with the Merger, the Company guaranteed up to $8,250,000 of
          principal
          under an existing note of Twistbox in accordance with the terms, conditions
          and
          limitations contained in the note. In connection with the guaranty, the
          Company
          issued the lender warrants to purchase 1,092,622 and 1,092,621 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. In connection with the note, Twistbox
          and
          the Company are required to maintain cash balances of not less than
          $2,500,000 and not less than $4,000,000, respectively, at all times.
 As
            of
            December 31, 2007, in connection with the acquisition of Twistbox, the
            Company
            incurred deferred acquisition costs of $141,258.
 
 Effective
          March 31, 2008, the Company changed the fiscal year end from December 31,
          to
          March 31.
  48





**ITEM
        8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 None.
  **ITEM
        8A(T). CONTROLS AND PROCEDURES**
 
 ***Evaluation
        of Disclosure Controls and Procedures***
 
 Members
        of our management, including our Chief Executive Officer, Bruce Stein, and
        Chief
        Financial Officer, Jay A. Wolf, have evaluated the effectiveness of our
        disclosure controls and procedures, as defined by Exchange Act Rules 13a(e)-15
        or 15d-15(e), as of December 31, 2007, the end of the period covered by this
        report. Based upon that evaluation, Messrs. Stein and Wolf concluded that
        our
        disclosure controls and procedures are adequate and effective to ensure that
        material information relating to use was made known to them by others within
        those entities, particularly during the period in which this Annual Report
        on
        Form 10-KSB was prepared.
 
 ***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 year ended December
        31, 2007 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 December 31, 2007. Based on our assessment, we have concluded
        that our internal controls over financial reporting were effective as of
        December 31, 2007.
 
 This
        annual report 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.
  **ITEM
        8B. OTHER INFORMATION**
  None.
  49
 
 **PART
        III**
 
 **ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
        GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
        ACT**
  The
        following table contains certain information with respect to our current
        officers and directors.
 
 **DIRECTORS,
        EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS**
 
 The
          following table sets forth our directors and executive officers as of April
          11, 2008:
 
 **Name**
                
                **Age**
                
                **Position(s)**Bruce
                    Stein
                
                53
                
                Chief
                    Executive Officer, DirectorJames
                    Lefkowitz
                
                49
                
                PresidentIan
                    Aaron
                
                47
                
                President
                    and Chief Executive Officer of Twistbox, DirectorRussell
                    Burke
                
                47
                
                Senior
                    Vice President and Chief Financial Officer of TwistboxDavid
                    Mandell
                
                46
                
                Executive
                    Vice President, General Counsel and Corporate Secretary of
                    TwistboxEugen
                    Barteska
                
                36
                
                Managing
                    Director of Twistbox GamesAdi
                    McAbian
                
                34
                
                DirectorPeter
                    Guber
                
                66
                
                Co-ChairmanRobert
                    S. Ellin
                  Jay
                    A. Wolf
                
                43
                  35
                
                Co-Chairman
                  DirectorBarry
                    I. Regenstein
                
                51
                
                DirectorPaul
                    Schaeffer
                
                60
                
                DirectorRobert
                    Zangrillo
                
                42
                
                DirectorRichard
                    Spitz
                
                47
                
                Director
  50
  Biographical
        information for our directors and executive officers are as
        follows:
  **Bruce
          Stein.** Mr.
          Stein has been our Chief Executive Officer since March 2008 and has served
          on our Board of Directors since November 2007. From January 2008 until
          March 2008, Mr. Stein was our Chief Operating
          Officer.   Prior to joining the Company, Mr. Stein was
          founder and since September 2003 had been Co-Chief Executive Officer of
          The
          Hatchery LLC (“The Hatchery”), a company specializing in intellectual property
          development and entertainment production of kids and family franchises.
          Since
          2003, he has served on the board of directors of ViewSonic, Inc. and is
          chairman
          of the compensation committee. Prior to joining The Hatchery, Mr. Stein
          held
          various executive titles at Mattel, Inc., including Worldwide President,
          Chief
          Operating Officer and a member of the board of directors from August 1996
          through March 1999. From August 1995 through August 1996, Mr. Stein was
          Chief
          Executive Officer of Sony Interactive Entertainment Inc., a subsidiary
          of Sony
          Computer Entertainment America Inc. At various times between January 1995
          and
          June 1998, Mr. Stein served as a consultant to DreamWorks SKG, Warner Bros.
          Entertainment and Mandalay Entertainment. From 1987 through 1994, Mr. Stein
          served as President of Kenner Products, Inc. Mr. Stein received a B.A.
          from
          Pitzer College and an M.B.A. from the University of
          Chicago.
 **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.
  **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
        service 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.
 
 **Russell
          Burke.** Mr.
          Burke has served as 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).
  51
 **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.
 
 **Eugen
          Barteska.** Mr.
          Barteska is the co-founder and has been Managing Director of Twistbox Games
          since September 2004 .
          As
          Managing Director of Twistbox Games, Mr. Barteska designs and develops
          Java
          games and applications for the mobile space and is responsible for the
          deployment of games and application to wireless telephone operators. Prior
          to
          co-founding Twistbox Games, Mr. Barteska served as manager of technical
          support
          and a programmer for HSP GmbH, a German company that delivers and supports
          leading high-end development tools for the embedded real-time market. Mr.
          Barteska graduated with a degree in civil engineering for microelectronics
          and
          physics from the University of Applied Sciences Südwestfalen in Iserlohn,
          Germany.
  **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 our Co-Chairman since February 2005, and was our Chief Executive
        Officer from February 2005 until March 2008. Mr. Ellin is also a Managing
        Member
        of Trinad Capital Master Fund, Ltd., our principal stockholder and a hedge
        fund dedicated to investing in micro-cap public companies. Mr. Ellin currently
        sits on the boards of Command Security Corporation (CMMD), ProLink Holdings
        Corporation (PLKH), MPLC, Inc. (MPNC) and U.S. Wireless Data, Inc. (USWD).
        Prior
        to joining Trinad Capital Master Fund Ltd., Mr. Ellin was the founder and
        President of Atlantis Equities, Inc., (Atlantis) a personal investment company.
        Founded in 1990, Atlantis has 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 Atlantis 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. (OTC:THQI), Grand Toys (OTC: GRIN),
        Forward Industries, Inc. (OTC: FORD) and completed a leveraged buyout of
        S&S
        Industries, Inc. where he also served as President from 1996 to 1998. Prior
        to
        founding Atlantis Equities, 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 received his B.A. from Pace University.
 
 **Jay
        A. Wolf.** Mr. Wolf
        has been our Chief Financial Officer since February 2005, and was Chief
        Operating Officer from February 2005 until January 2008. He has
        served on our Board of Directors since February 2005. Mr. Wolf is also a
        Managing Director of Trinad Capital Master Fund Ltd. Mr. Wolf currently sits
        on
        the boards of Shells Seafood Restaurants (SHLL), ProLink Holdings Corporation
        (PLKH), U.S. Wireless Data, Inc. (USWD) and Optio Software, Inc. Mr.
        Wolf has ten years of investment and operations experience in a broad range
        of
        industries. Mr. Wolf is a co-founder of Trinad Capital, L.P., where he served
        as
        a managing director since its inception in 2003. Prior to founding Trinad,
        Mr.
        Wolf served as the Executive Vice-President of Corporate Development for
        Wolf
        Group Integrated Communications where he was responsible for the company’s
        acquisition program. Prior to Wolf Group Integrated Communications, Mr. Wolf
        worked at Canadian Corporate Funding, a Toronto-based merchant bank, in the
        senior debt department, and subsequently for Trillium Growth, the Canadian
        Corporate Funding’s venture capital fund. Mr. Wolf received his B.A from
        Dalhousie University.
  52
 
 **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 GTJ Co., Inc., ProLink Holdings Corporation (PLKH) and MPLC, Inc.
        (MPNC).  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.
  **Robert
        Zangrillo.** Mr. Zangrillo  has served on our Board of Directors since November
        2007.  He  is a 19-year veteran of the financial services, software
        and Internet-based industries. Mr. Zangrillo is the founder, Chairman and
        Chief
        Executive Officer of North Star Systems International (“North Star”), which
        provides wealth management software to financial services institutions. Prior
        to
        joining North Star, Mr. Zangrillo was founder, Chairman and Chief Executive
        Officer of InterWorld, Corp., a provider of eCommerce software applications.
        Over the last 19 years, Mr. Zangrillo has held various positions including
        Chairman, Chief Executive Officer, private equity investor, director and
        advisor
        to numerous growth companies including ArcSight, Inc., Dick’s Sporting Goods
        Inc. (NYSE: DKS), EarthLink, Inc. (NASDAQ: ELNK), HomeSpace (acquired by
        Lending
        Tree International, Inc., NASDAQ: LTRE), InterWorld Corp. (acquired by The
        Essar
        Group), Imperium Renewables, Inc., Loudeye Corp. (acquired by Nokia, NYSE:
        NOK),
        Overture (acquired by Yahoo, NASDAQ: YHOO), Project PlayList, UGO Networks
        (acquired by the Hearst Corporation), Ulta Salon, Cosmetics & Fragrance,
        Inc. (NASDAQ:ULTA) and YOUcentric Inc. (acquired by JG Edwards, NASDAQ: ORCL).
        Mr. Zangrillo also worked as an associate in the Investment Banking Division
        of
        Donaldson, Lufkin & Jenrette. He recently served as a member of the Council
        on Foreign Relations, where he served on the Committee on Finance and Budget.
        Mr. Zangrillo received a B.A. from the University of Vermont and an M.B.A.
        from
        Stanford University Graduate School of Business.
  53
 
 **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 April 11, 2008, 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 Barry Regenstein
          is an “audit committee financial expert” within the meaning of the rules and
          regulations of the SEC. Our Board of Directors has determined that each
          of its
          members is able to read and understand fundamental financial statements
          and has
          substantial business experience that results in that member’s financial
          sophistication. Accordingly, our Board of Directors believes that each
          of its
          members has sufficient knowledge and experience necessary to fulfill the
          duties
          and obligations that an audit committee would have. Now that we have completed
          the Merger, we plan on establishing an audit committee that complies with
          the
          standards of Rule 10A-3.
  **Nominating
        Committee**
 
 As
          of April 11, 2008, the Board of Directors had not established an nominating
          committee. The entire Board of Directors currently operates as our Nominating
          Committee. We plan on establishing a nominating committee, even though
          we are
          not required to, now that we have completed the Merger.
 
 **Code
        of Ethics**
  Now
        that
        we have completed the Merger and are no longer a shell company, 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 fiscal year ended December 31, 2007, all Section 16(a) filing
          requirements applicable to our officers, directors, and ten percent stockholders
          were met except for the following: two Form 4 reports were not timely filed
          by
          Jay Wolf, one Form 3 report was not timely filed by David Smith, one Form
          3
          report was not timely filed by Lyrical Partners, L.P., one Form 4 report
          was not
          timely filed by Robert Zangrillo, one Form 4 report was not timely filed
          by
          Bruce Stein as to one transaction, and one Form 4 was not timely filed
          by David
          Chazen as to one transaction.
  54
  
 **ITEM
        10. EXECUTIVE COMPENSATION**
 
 **SUMMARY
        COMPENSATION TABLE**
 
 The
        following table sets forth information concerning all compensation paid during
        our fiscal year ended December 31, 2007 to our named executive
        officers:
 
 **Name
                    and Principal Position**
                
                **Year**
                
                **Salary**
                
                **Bonus**
                
                **Stock**
                  **Awards**
                
                **Option**
                  **Awards**
                
                **All
                    Other**
                  **Compensation**
                
                **Total**($)
                
                ($)
                
                ($)
                
                ($)
                
                ($)
                
                ($)Robert
                    S. Ellin,
                
                
                2006
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -*Chief
                    Executive*
                
                
                2007
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -*Officer*(1)James
                    Lefkowitz,
                
                
                2006
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -*President*
                
                
                2007
                
                
                126,923
                
                
                100,000
                
                
                -
                
                
                771,862
                (2)
                
                25,000
                
                
                1,023,785Ian
                    Aaron, *Chief**Executive
                    Officer of**Twistbox*
                    (3)
                
                
                2007
                
                
                396,538
                (4)
                
                -
                
                
                -
                
                
                3,048
                (5)
                
                23,888
                
                
                423,474
  (1)
        Mr.
        Ellin served as our Chief Executive Officer until March 7, 2008, and now
        serves
        as Co-Chairman of our Board of Directors.
 
 (2)
        We
        valued the options for FAS 123R purposes utilizing the Black-Scholes method.
        The
        assumptions made for utilizing the Black-Scholes method were a volatility
        equal
        to 75.2% and a discount rate equal to 3.89%.
  (3)
        Ian
        Aaron became one of our executive officers in connection with the Merger.
        The
        table reflects his compensation received as an executive officer of Twistbox
        in
        2007. 
 (4)
          This
          amount reflects Mr. Aaron’s salary reduction that occurred during the fourth
          quarter of 2007.
 
 (5)
          This
          amount was calculated using the provisions of FAS 123R for the calendar
          year
          ended December 31, 2007. 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
        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.
  55
  On
        February 12, 2008, in connection with the Closing, 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.
  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.
  56




**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END**




The
      following table presents information regarding outstanding options held by
      certain of our executive officers as of December 31, 2007.





**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**Robert
                S. Ellin,*Chief
                Executive Officer*(1)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —James
                Lefkowitz,*President*(2)
            
            
            166,667
            
            
            333,333
            
            
            —
            
            
            2.65
            
            
            11/7/17Ian
                Aaron,*Chief
                Executive Officer of Twistbox*(3)
            
            
            54,725
            
            
            —
            
            
            —
            
            
            .35
            
            
            1/17/16




(1)
      Mr.
      Ellin served as our Chief Executive Officer until March 7, 2008, and now serves
      as Co-Chairman of our Board of Directors.




(2)
      Mandalay’s Board of Directors granted Mr. Lefkowitz the options pursuant to the
      Mandalay Media, Inc. 2007 Employee, Director and Consultant Plan on November
      7,
      2007 in connection with his employment as President of Mandalay. 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.





(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.





**DIRECTOR
      COMPENSATION**




The
      following table presents information regarding outstanding compensation paid
      to
      our directors as of December 31, 2007.




**Name**
            
            **Fees Earned or**
              **Paid in Cash**
              **($)**
            
            **Option Awards**
              **($)**
            
            **All**
              **Other**
              **Compensation**
              **($)**
            
            **Total ($)**Bruce
                Stein
            
            $
            25,641
            
            
            771,862
            (1)
            
            -
            
            $
            797,503Robert
                Zangrillo
            
            $
            -
            
            
            771,862
            (2)
            
            -
            
            $
            771,862Richard
                Spitz
            
            $
            -
            
            
            145,634
            (3)
            
            -
            
            $
            145,634Adi
                McAbian (4)
            
            $
            -
            
            
            -
            
            
            -
            
            $
            -




(1)
      Mandalay’s Board of Directors granted Mr. Stein the options pursuant to the 2007
      Employee, Director and Consultant Plan on November 7, 2007 in connection with
      services provided to Mandalay. 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 the first anniversary of the date of grant and the remaining one-third become
      exercisable on the second anniversary of the date of grant.




57




(2)
      Mandalay’s Board of Directors granted Mr. Zangrillo the options pursuant to the
      2007 Employee, Director and Consultant Plan on November 7, 2007 in connection
      with services provided to Mandalay. 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 the first anniversary of the date of grant and the remaining one-third become
      exercisable on the second anniversary of the date of grant.




(3)
      Mandalay’s Board of Directors granted Mr. Spitz the options pursuant to the 2007
      Employee, Director and Consultant Plan on November 14, 2007 in connection with
      services provided to Mandalay. The options have a 10-year term and are
      exercisable at a price of $2.50 per share. One-third of the options were
      immediately exercisable upon grant, an additional one-third become exercisable
      on the first anniversary of the date of grant and the remaining one-third become
      exercisable on the second anniversary of the date of grant.




(4)
      Mr.
      McAbian became a member of our Board of Directors in connection with the Merger.
      He was not a director of Twistbox, but did receive compensation for his services
      as an executive officer of Twistbox in 2007, which is not reflected in this
      table.





**ITEM
      11. 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-KSB, which is
      incorporated herein by reference.





The
        following table sets forth certain information regarding the beneficial
        ownership of our common stock as of April 11, 2008, by (i) each of our
        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 April 11, 2008, there were a total of 32,048,366† shares of common
        stock
        outstanding.


**Name and Address**(1)
                
                **Number of Shares**
                  **Beneficially Owned**(2)
                
                **Percentage Owned(%)**Trinad
                    Capital Master Fund, Ltd.(3)
                
                
                9,400,000
                
                
                29.3Robert
                    S. Ellin(4)
                
                
                9,400,000
                
                
                29.3Jay
                    A. Wolf (5)
                
                
                9,400,000
                
                
                29.3Lyrical
                    Partners, L.P.(6)
                
                
                3,000,000
                
                
                8.9David
                    E. Smith (7)
                
                
                4,000,000
                
                
                11.7Barry
                    I. Regenstein (8)
                
                
                50,000
                
                
                
                *Peter
                    Guber (9)
                
                
                5,071,427
                
                
                15.8Paul
                    Schaeffer (10)
                
                
                500,000
                
                
                1.6Jim
                    Lefkowitz (11)
                
                
                166,667
                
                
                
                *Bruce
                    Stein (12)
                
                
                183,334
                
                
                
                *Robert
                    Zangrillo (13)
                
                
                166,667
                
                
                
                *Richard
                    Spitz (14)
                
                
                33,333
                
                
                
                *
  58
  Ian
                    Aaron(15)
                
                
                1,166,813
                
                
                3.6Adi
                    McAbian (16)
                
                
                966,813
                
                
                3.0Russell
                    Burke (17)
                
                
                194,124
                
                
                
                *David
                    Mandell (18)
                
                
                263,394
                
                
                
                *Eugen
                    Barteska (19)
                
                
                251,281
                
                
                
                *Spark
                    Capital, L.P. (20)
                
                
                2,857,144
                
                
                8.9ValueAct
                    SmallCap Master Fund L.P. (21)
                
                
                2,185,243
                
                
                6.4All
                    directors and executive officers as a group (14
                    individuals)
                
                
                18,563,853
                
                
                553




*
      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
        April 11, 2008, 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 9,300,000 shares of common stock 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 9,300,000 shares of common stock 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. 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 9,300,000 shares of common stock 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. 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.




59




(6)
      Lyrical Multi-Manager Fund, LP beneficially owns 2,000,000 units (1,000,000
      of
      which are shares of common stock and 1,000,000 of which are shares of common
      stock issuable upon exercise of warrants held by Lyrical Multi-Manager
      Fund, LP) and Lyrical Multi-Manager Offshore Fund Ltd. beneficially owns
      1,000,000 units (500,000 of which are shares of common stock and 500,000 of
      which are shares of common stock issuable upon exercise of warrants held by
      Lyrical Multi-Manager Offshore Fund Ltd.) 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
      3,000,000 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 4,000,000 units, consisting of 2,000,000 shares
      of
      common stock of the company and 2,000,000 warrants, each exercisable
      for one share of common stock. 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.





(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. 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)
        Includes 166,667 shares of common stock underlying options.





(12)
        Includes 183,334 shares of common stock underlying options.





(13)
        Includes 166,667 shares of common stock underlying options.





(14)
        Includes 33,333 shares of common stock underlying options.




(15)
        Includes 254,725 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.





(15)
        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.





(17)
        Includes 194,124  shares
        of
        common stock underlying options. The address for Mr. Burke is c/o Twistbox
        Entertainment, Inc., 14242 Ventura Blvd., 3 rd Floor,
        Sherman Oaks, CA 91423.





(18)
        Includes 263,394 shares of common stock underlying options. The address for
        Mr.
        Mandell is c/o Twistbox Entertainment, Inc., 14242 Ventura Blvd., 3 rd Floor,
        Sherman Oaks, CA 91423.





(19)
        Includes 199,161 shares of common stock underlying options. The address for
        Mr.
        Barteska is c/o Twistbox Games Ltd & Co KG (Charismatix), Lohbachestr. 12,
        D-58239, Schwerte, Germany.




60




(20)
        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.





(21)
        Represents 2,185,243 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
      12. 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. Management fee expenses for the year ended
      December 31, 2006 totaled $107,000 and for the year ended December 31, 2007
      totaled $360,000.





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
        is party to an oral agreement with Yael Pipekintch, a relative of Adi
        McAbian, a director of the Company and a member of Twistbox's board of
        directors, with respect to a lease of an apartment in London. Amounts paid
        in
        connection with this lease were $59,000 and $48,000 for the years ended March
        31, 2007 and 2006 respectively.





In
      addition, Twistbox paid the costs of a leased apartment in Sherman Oaks,
      California that was rented by an officer of Twistbox. The apartment was used
      to
      accommodate employees visiting from other locations. Amounts paid in connection
      with this lease were $18,000 and $2,000 for the years ended March 31, 2007
      and
      2006 respectively. In August 2007, Twistbox entered into a one-year written
      agreement to rent an apartment in the same building at a cost of $1,500 per
      month.





***Loans***




Twistbox
      had a note payable to an affiliated company, PowerSports Video Productions
      CCT,
      Inc., as of March 31, 2007 for $250,000 (the “PowerSports Note”). The
      PowerSports Note had a maturity date of March 28, 2008 and carried interest
      at
      8.25%. The PowerSports Note was subsequently cancelled. In addition, Twistbox
      had an advance from an affiliated company, PowerSports Video Productions CCT,
      Inc., as of March 31, 2006 for $1,335, inclusive of accrued interest. The
      advance did not have a specific maturity date and carried interest at 7.73%.
      Interest expense paid or payable to PowerSports Video Productions CCT was
      $18,000 and $80,000, for the years ended March 31, 2007 and 2006
      respectively.




61




Twistbox
      is party to a loan from East-West Bank, which originated on January 27, 2006
      in
      an amount of $161,000. Twistbox also entered into a loan agreement with an
      affiliated company, PowerSports Video Productions CCT, **** effective on the same date for the same amount. The bank agreement was secured
      with a motor vehicle operated exclusively by an officer of Twistbox. The
      interest income under the loan to an affiliate completely offset interest
      expense incurred under the bank loan. As of March 31, 2007, $106,000 was due
      to
      Twistbox under this loan, and the amount payable under the bank loan was
      $102,000. Amounts paid for the years ended March 31, 2007 and 2006 were $59,000
      and, $10,000, respectively, including interest of $8,000 and $1,000,
      respectively. Amounts received for the years ended March 31, 2007 and 2006
      were
      $55,000 and $10,000, respectively, including interest of $8,000 and $1,000,
      respectively. The agreement has subsequently been terminated.





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.





***Dealings
      with Content Provider***





Of
        the ten members on our Board of Directors, the following directors are
        independent directors: Paul Schaeffer, Barry Regenstein, Richard Spitz and
        Robert Zangrillo. We determined these directors are independent based on
        the
        listing standards of the American Stock Exchange.




62




**ITEM
      13. EXHIBITS**




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 York1




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




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.9


63




10.4
            Twistbox
                2006 Stock Incentive Plan.4




10.5
            Form
                of Stock Option Agreement for Twistbox 2006 Stock Incentive
                Plan.4




10.6
            Loan
                Agreement with Trinad Capital Master Fund, Ltd., dated March 20,
                2006.1




10.7
            Form
                of Subscription Agreement between the Company and certain investors
                listed
                thereto dated September 14, 2006.5




10.8
            Form
                of Subscription Agreement between the Company and certain investors
                listed
                thereto dated October 12, 2006.6




10.9
            Series
                A Convertible Preferred Stock Purchase Agreement dated October 12,
                2006
                between the Company and Trinad Management, LLC.6




10.10
            Form
                of Subscription Agreement between the Company and certain investors
                listed
                thereto dated December 26, 2006.1




10.11
              Form
                  of Subscription Agreement between the Company and certain investors
                  listed
                  thereto.10




10.12
              Employment
                  Letter, by and between the Company and James Lefkowitz, dated as
                  of June
                  28, 2007.11




10.13
              Employment
                  Letter, by and between the Company and Bruce Stein, dated as of
                  November
                  7, 2007.2




10.14
            Securities
                Purchase Agreement, dated July 30, 2007, by and among Twistbox
                Entertainment, Inc., the Subsidiary Guarantors and ValueAct SmallCap
                Master Fund, L.P.4




10.15
            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




10.16
            Control
                Agreement, dated July 30, 2007, by and among Twistbox Entertainment.
                Inc.
                and ValueAct SmallCap Master Fund, L.P. to East West Bank.4




10.17
            Trademark
                Security Agreement, dated July 30, 2007, by Twistbox, in favor of
                ValueAct
                SmallCap Master Fund, L.P.4




10.18
            Copyright
                Security Agreement, dated July 30, 2007, by Twistbox in favor of
                ValueAct
                SmallCap Master Fund, L.P.4




10.19
            Guaranty
                given as of February 12, 2008, by Mandalay Media, Inc. to ValueAct
                SmallCap Master Fund, L.P.4




10.20
            Termination
                Agreement, dated as of February 12, 2008, by and between Twistbox
                Entertainment, Inc. and ValueAct SmallCap Master Fund, L.P.4




10.21
            Waiver
                to Guarantee and Security Agreement, dated February 12, 2008, by
                and
                between Twistbox Entertainment, Inc. and ValueAct SmallCap Master
                Fund,
                L.P.4




10.22
            Standard
                Industrial/Commercial Multi-Tenant Lease, dated July 1, 2005, by
                and
                between Berkshire Holdings, LLC and The WAAT Corp.4




10.23
            Letter
                Agreement, dated May 16, 2006, between The WAAT Corp. and Adi
                McAbian.4




64




10.24
            Amendment
                to Employment Agreement by and between Twistbox Entertainment, Inc.
                and
                Adi McAbian, dated as of December 31, 2007.4




10.25
            Second
                Amendment to Employment Agreement, dated February 12, 2008, by and
                between
                Twistbox Entertainment, Inc. and Adi McAbian.4




10.26
            Letter
                Agreement, dated May 16, 2006 between The WAAT Corp. and Ian
                Aaron.4




10.27
            Amendment
                to Employment Agreement, by and between Twistbox Entertainment, Inc.
                and
                Ian Aaron, dated as of December 31, 2007.4




10.28
            Second
                Amendment to Employment Agreement by and between Twistbox Entertainment,
                Inc. and Ian Aaron, dated February 12, 2008.4




10.29
            Employment
                Agreement, dated May 9, 2006, between Charismatix and Eugen
                Barteska.4




10.30
            Employment
                Agreement, dated June 5, 2006, between The WAAT Corp. and David
                Mandell.4




10.31
            First
                Amendment to Employment Agreement, by and between Twistbox Entertainment,
                Inc. and David Mandell, dated February 12, 2008.4




10.32
            Employment
                Agreement, dated December 11, 2006 between Twistbox and Russell
                Burke.4




10.33
            First
                Amendment to Employment Agreement by and between Twistbox Entertainment,
                Inc. and Russell Burke, dated February 12, 2008.4




10.34
            Directory
                Agreement, dated as of May 1, 2003, between Vodafone Global Content
                Services Limited and The WAAT Corporation.4




10.35
            Contract
                Acceptance Notice - Master Global Content Reseller Agreement by Vodafone
                Hungary Ltd.4




10.36
            Master
                Global Content Agency Agreement, effective as of December 17, 2004,
                between Vodafone Group Services Limited and The WAAT Media
                Corporation.4




10.37
            Letter
                of Amendment, dated February 27, 2007, by and between WAAT Media
                Corporation and Vodafone UK Content Services Limited.4




10.38
            Content
                Schedule, dated December 17, 2004, by and between WAAT Media Corporation
                and Vodafone Group Services Limited.4




10.39
            Contract
                Acceptance Notice - Master Global Content Agency Agreement by Vodafone
                D2
                GmbH.4




10.40
            Contract
                Acceptance Notice - Master Global Content Agency Agreement by Vodafone
                Sverige AB.4




10.41
            Master
                Global Content Reseller Agreement, effective January 17, 2005, between
                Vodafone Group Services Limited and The WAAT Corporation.4




10.42
            Contract
                Acceptance Notice - Master Global Content Agency Agreement by Vodafone
                New
                Zealand Limited.4




10.43
            Contract
                Acceptance Notice - Master Global Content Agency Agreement by Vodafone
                España, S.A.4




10.44
            Contract
                Acceptance Notice - Master Global Content Reseller Agreement by Vodafone
                UK Content Services LTD.4




10.45
            Contract
                Acceptance Notice - Master Global Content Reseller Agreement by
                VODAFONE-PANAFON Hellenic Telecommunications Company S.A.4




65




10.46
            Content
                Schedule, dated January 17, 2005, by and between WAAT Media Corporation
                and Vodafone Group Services Limited.4




10.47
            Contract
                Acceptance Notice - Master Global Content Agency Agreement by Belgacom
                Mobile NV.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 Swisscom
                Mobile.4




10.50
            Linking
                Agreement, dated November 1, 2006 between Vodafone Libertel NV and
                Twistbox Entertainment, Inc.4




10.51
            Agreement,
                dated as of March 23, 2007, between Twistbox Entertainment, Inc.
                and
                Vodafone Portugal - COMUNICAÇÕES PESSOAIS, S.A4




10.52
            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




10.53
            Partner
                Agreement, dated August 27, 2007, by and between Vodafone D2 GmbH
                and
                Twistbox.4




10.54
            Letter
                of Amendment, dated February 25, 2006 by and between WAAT Media
                Corporation and Vodafone UK Content Services Limited.4




10.55
            Letter
                of Amendment, dated August 2007, by and between WAAT Media Corporation
                and
                Vodafone UK Content Services Limited.4




10.56
            Content
                Schedule, dated December 17, 2004, by and between WAAT Media Corporation
                and Vodafone Group Services Limited.4




10.57
            Consolidated
                financial statements of Twistbox Entertainment, Inc. for the fiscal
                years
                ended March 31, 2006 and March 31, 2007.4




10.58
            Consolidated
                financial statements of Twistbox Entertainment, Inc. for the six
                months
                ended September 20, 2006 and September 30, 2007.4




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




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




31.1
            Certification
                of Robert S. Ellin, Chief Executive Officer.*




31.2
            Certification
                of Jay A. Wolf, Chief Financial Officer.*




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




32.2
            Certification
                of Jay A. Wolf, 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.




66




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


(10)
        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.


(11)
        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.


(12)
        Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ),
        filed
        with the Commission on March 12, 2008.


(13)
          Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039 ),
          filed
          with the Commission on May 16, 2007.




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
        following table presents fees for professional audit services rendered
        by Raiche Ende Malter & Co. LLP for the audit and reviews of our
        annual financial statements and other audit related services for the fiscal
        years ended December 31, 2007 and 2006:




**2007**
            
            **2006**Audit
                fees
            
            $
            70,085
            
            $
            57,000Audit
                related fees
            
            
            0
            
            
            0Tax
                fees
            
            
            0
            
            
            0All
                other fees
            
            
            0
            
            
            0Total
            
            $
            70,085
            
            
            $57,000




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




Consistent
      with the Commission 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.




67




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 pre-approved the retention of Raiche Ende Malter & Co., LLP for
        all audit and audit-related services during fiscal 2007.




68




**SIGNATURES**




In
      accordance with 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:
                    April 15, 2008By:
                /s/
                    Bruce SteinChief
                    Executive Officer and
                    Director




In
      accordance with 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
                
                April
                    15, 2008Robert
                    S. Ellin/s/
                    Peter Guber
                
                Co-Chairman
                    of the Board
                
                April
                    15, 2008Peter
                    Guber/s/
                    Bruce Stein
                
                Chief
                    Executive Officer, Director
                
                April
                    15, 2008Bruce
                    Stein/s/
                    Jay A. Wolf
                
                Director,
                    Chief Financial Officer, Secretary
                
                April
                    15, 2008Jay A. Wolf/s/
                    Barry Regenstein
                
                Director
                
                April
                    15, 2008Barry
                    Regenstein/s/
                    Paul Schaeffer
                
                Director
                
                April
                    15, 2008Paul
                    Schaeffer/s/
                    Robert Zangrillo
                
                Director
                
                April
                    15, 2008Robert
                    Zangrillo/s/
                    Richard Spitz
                
                Director
                
                April
                    15, 2008Richard
                    Spitz/s/
                    Ian Aaron
                
                President
                    and Chief Executive Officer of Twistbox, Director
                
                April
                    15, 2008Ian
                    Aaron
  /s/
                    Adi McAbian
                
                Director
                
                April
                    15, 2008Adi
                    McAbian
 69