**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-KT**




**(Mark
      One)**




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


For
      the
      fiscal year ended _________


or





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


For
      the
      transition period from January 1, 2008 to March 31, 2008.




Commission
      File Number 00-10039




**MANDALAY
      MEDIA, INC.**




(Exact
      Name of Registrant as Specified 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)




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes  o No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Exchange Act. Yes   o No x




Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 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




Indicate
      by check mark if disclosure of delinquent filers in response to Item 405 of
      Regulation S-K (§ 229.405) is not contained herein, and will not 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-K or any
      amendment to this Form 10-K. x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      definitions of a “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check One)





oLarge
                Accelerated Filer
            oAccelerated
                FileroNon-accelerated
                Filer (do not check if smaller reporting company
            xSmaller
                Reporting Company





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
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant (without admitting that any person whose shares
      are not included in such calculation is an affiliate) computed by reference
      to the price at which the common equity was last sold on the OTC Bulletin Board
      on June 30, 2007 was $11,490,000.




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




As
      of
      July 10, 2008, the registrant had 32,315,054 shares of its common
      stock, $0.0001 par value per share, outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE


None


**Mandalay
      Media, Inc.**





ANNUAL
      REPORT ON FORM 10-KT


FOR
      THE
      TRANSITION PERIOD ENDED MARCH 31, 2008





**TABLE
      OF CONTENTS**


**PART
                I**ITEM
                1.
            BUSINESS
            2ITEM
                1A.
            RISK
                FACTORS
            6ITEM
                2.
            PROPERTIES
            19ITEM
                3.
            LEGAL
                PROCEEDINGS
            20ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            20**PART
                II**ITEM
                5.
            MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY SECURITIES
            20ITEM
                6.
            SELECTED
                FINANCIAL DATA
            21ITEM
                7.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS
            21ITEM
                7A.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            32ITEM
                8.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA
            33ITEM
                9.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            63ITEM
                9A(T).
            CONTROLS
                AND PROCEDURES
            63ITEM
                9B.
            OTHER
                INFORMATION
            64**PART
                III**ITEM
                10.
            DIRECTORS,
                EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            64ITEM
                11.
            EXECUTIVE
                COMPENSATION
            68ITEM
                12.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            70ITEM
                13.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE
            72ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            74ITEM
                15.
            EXHIBITS
                AND FINANCIAL STATEMENT SCHEDULES
            75


**PART
      I**





**ITEM
      1. 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, the Company merged into DynamicWeb Enterprises
      Inc., a New Jersey corporation, and changed its name to eB2B Commerce, Inc.
      On
      April 13, 2005, the Company 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, eB2B Commerce, Inc.,
      Mandalay’s predecessor (“eB2B”) 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) eB2B’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 eB2B to fund the
      expenses of remaining public; (4) 3.5% of the new common stock of eB2B (140,000
      shares) was issued to the holders of record of eB2B’s preferred stock in
      settlement of their liquidation preferences; (5) 3.5% of the new common stock
      of
      eB2B (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 eB2B (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, eB2B 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.





In
      connection with the Merger, on March 31, 2008, the Board of Directors (the
      “Board of Directors”) of Mandalay approved a change in the Company’s fiscal year
      end from December 31 to March 31 in order to conform to the fiscal year end
      of
      Twistbox. As a result of this change, this Form 10-KT is a transition report
      and
      includes financial information for the three month period ended March 31, 2008
      (the “Transition Period”) and the twelve month periods ended December 31, 2007
      and 2006. Subsequent to this report, our reports on Form 10-K will cover the
      year beginning April 1 and ending March 31 of the following year. The
      twelve-month period ended March 31, 2009 is hereinafter referred to as fiscal
      2009.





***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.


2


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.




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.


3


**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.




**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
              ·Learning
                Annex
              ·American Greetings
            
            ·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.


4


**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.




**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 48% of Twistbox’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 June
      30,
      2008, Twistbox had a workforce of approximately 164 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.


5


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.




**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. We do not believe
      any
      of these technologies infringe on any intellectual property owned by third
      parties.  We do not license any patents.  We also own trademarks on
“Charismatix”, “Delight Entertainment”, “Babe Shuffle”, “Babe Tris”, Bomb’s n
      Boobs”, “Erotrix”, “Competition Goes Mobile” and “Prize-21 for Prizes”.  We
      have pending before the USPTO and several international trademark offices an
      application to register the tradename “Twistbox Entertainment, Inc.”.  We
      own a registered copyright in the “Content Rating Matrix”.








**Government
      and Regulations**





As
      a
      provider of products and services to wireless carriers for the distribution
      of
      such products and the use of such services over their wireless networks,
      generally, we are instructed by the wireless carrier in each particular
      territory of the world on best practices consistent with local laws and
      regulations as respects our products and services.  We rely on the
      carriers’ understanding and knowledge of local laws and regulations. 
Separately, we are familiar with and follow codes of practice which generally
      regulate the delivery of the kinds of products and services provided by
      Twistbox.





**ITEM
      1A. RISK FACTORS**




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




Statements
      in this Transition Report on Form 10-KT under the captions “Description of
      Business,” “Management’s Discussion and Analysis or Plan of Operation,” and
      elsewhere in this Form 10-KT, 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-KT 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-KT
      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-KT, including our
      consolidated financial statements and the notes to those statements.




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.






6
 
 **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;




·
            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.


7


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;




·
            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.


8


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.





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.


9


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




·
            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.




***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.


10


***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.







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.


11


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;




·
            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.


12


***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.







***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.


13


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.





***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.


14


***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.




**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.


15


***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.





***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.


16


***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.





***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.


17


***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:





·
            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 .




***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 March 31, 2009. 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.


18


***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 71% 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.




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.




**ITEM
                  2.**
              **PROPERTIES**


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
      additional space on  a month to month basis at the same location for an
      additional $9,000 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.


19


**ITEM
                  3.**
              **LEGAL
                  PROCEEDINGS**


As
      of the
      date of filing this Transition Report on Form 10-KT, 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 REGISTRANT’S COMMON EQUTY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY SECURITIES**




***Market
      Information***




As
      of
      July 10, 2008, the closing price of our common stock was $2.75.




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 periods indicated. 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.







**High******
            
            **Low********Three
                Months Ended March 31, 2008***First
                quarter
            
            $
            6.50
            
            $
            2.40**Year
                Ended December 31, 2007**First
                quarter
            
            $
            2.50
            
            $
            1.75Second
                quarter
            
            $
            3.00
            
            $
            1.90Third
                quarter
            
            $
            4.00
            
            $
            2.25Fourth
                quarter
            
            $
            4.50
            
            $
            2.30**Year
                Ended December 31, 2006**First
                quarter
            
            $
            N/A
            
            $
            N/ASecond
                quarter
            
            $
            5.75
            
            $
            0.40Third
                quarter
            
            $
            2.05
            
            $
            1.25Fourth
                quarter
            
            $
            2.05
            
            $
            2.00







*  We
      changed our fiscal year end to March 31, effective March 31, 2008.
      Accordingly, our fiscal period ended March 31, 2008 was comprised of only one
      fiscal quarter.





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




***Holders***




As
      of
      July 10, 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.




***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.





20


***Equity
      Compensation Plan Information***




The
      following table sets forth information concerning our equity compensation plans
      as of March 31, 2008.




**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
            
            
            4,351,864
            
            $
            3.86
            
            
            2,698,136Equity
                compensation plans not approved by security holders
            
            
            0
            
            
            0
            
            
            0**Total**
            
            
            4,351,864
            
            $
            3.86
            
            
            2,698,136







(1) The
      table
      above does not include options to purchase an aggregate of 2,463,472 shares
      of
      the Company’s common stock pursuant to the Twistbox 2006 Stock Incentive Plan,
      at a weighted average exercise price of
      $0.64, which
      were assumed by the Company in connection with **** the
      Merger.





**RECENT
      SALES OF UNREGISTERED SECURITIES**





On
      July
      24, 2007, pursuant to a subscription agreement, we sold an aggregate
      of 5,000,000 shares of our common stock, at $0.50 per share, for an aggregate
      price of $2,500,000. The issuance of the shares was made in reliance on the
      exemption from registration pursuant to Section 4(2) of the Securities
      Act .




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. The issuance of the
      shares was made in reliance on the exemption from registration pursuant to
      Section 4(2) of the Securities Act.





On
      May
      28, 2008, pursuant to a subscription agreement, we issued 25,000 shares of
      our
      common stock to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz
      Levin”) for an aggregate price of $100,000, of which we acknowledged receipt by
      a reduction in legal fees owed by us to Mintz Levin. The issuance of the shares
      was made in reliance on the exemption from registration pursuant to Section
      4(2)
      of the Securities Act.







**ITEM
      6. SELECTED CONSOLIDATED FINANCIAL DATA**





Not
      applicable as we are a smaller reporting company.





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




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 Transition Report on
      Form
      10-KT, 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 6 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.


21


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.




**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
      318,772 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.




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. See “Notes to Consolidated Financial Statements -  Note 6.”


22


Effective
      as of the closing of the Merger, Ian Aaron and Adi McAbian were appointed to
      our
      Board of Directors.





In
      connection with the Merger, on March 31, 2008, the Board of Directors approved
      a
      change in the Company’s fiscal year end from December 31 to March 31 in Board of
      Directors order to conform to the fiscal year end of Twistbox.




**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.





***Comparison
      of the Year Ended December 31, 2006 and 2007***





***Operating
      Expenses***




**Year
                  Ended December 31,****2007**
              
              **2006****(In
                  thousands)**General
                  and Administrative Expenses
              
              $
              2,521
              
              $
              553


Prior
      to
      the Merger, Mandalay was a public shell company with no operations, and as
      a
      result the only activity in both years represents expenses incurred in
      developing the company. In both years, General and Administrative expenses
      consisted primarily of consulting and professional fees, accounting and legal
      expenses and employee-related expenses, including stock based compensation.
      The
      increase in 2007 over 2006 is primarily the result of employing executive
      management for the Company, and a significant increase in legal and other
      professional fees, as the Company began to explore strategic alternatives.





***Other
      Expenses***




**Year
                  Ended December 31,****2007**
              
              **2006****(In
                  thousands)**Interest
                  and other income (expense)
              
              $
              317
              
              $
              —


Other
      Expenses in 2007 consisted entirely of interest income earned.





23


***Comparison
      of the Three Months Ended March 31, 2008 and 2007***





***Revenues***




**Three
                  Months Ended March 31,****2008**
              
              **2007****(In
                  thousands)**Revenues
                  by type:Games
              
              $
              598
              
              $
              —Other
                  content
              
              
              2,610
              
              
              —Total
              
              $
              3,208
              
              
              —





The
      Company had no operations in 2007 and consequently no revenues. Revenues in
      2008
      related to the post-acquisition revenues of Twistbox, which was acquired during
      the period. Games revenue includes both licensed and internally developed games
      for use on mobile phones. Other content includes a broad range of primarily
      licensed product delivered in the form of WAP, Video, Wallpaper and Mobile
      TV.





***Cost
      of Revenues***


**Three
                    Months Ended March 31,****2008**
                
                **2007****(In
                    thousands)**Cost
                    of Revenues:License
                    Fees
                
                $
                1,539
                
                $
                —Adjustment
                    to impairment of guarantees
                
                
                (1,745
                )
                
                —Other
                    direct cost of revenues
                
                
                53
                
                
                —Total
                    Cost of Revenues
                
                $
                (153
                )
                $
                —Revenues
                
                
                3,208
                
                $
                —








The
      Company had no operations in 2007 and consequently no cost of revenues. Cost
      of
      revenues in 2008 related to the post-acquisition revenues of Twistbox, which
      was
      acquired during the period. License fees represent costs payable to content
      providers for use of their intellectual property in products sold. The
      adjustment to impairment of guarantees relates to the reassessment of the
      impairment reserve for guarantees payable under content provider contracts.
      The
      partial reversal is largely the result of a major content provider contract
      which was renegotiated during the period. Other direct cost of revenues includes
      amortization of the intangibles identified as part of the purchase price
      accounting and attributed to cost of revenues.




***Operating
      Expenses***




**Three
                  Months Ended March 31,****2008**
              
              **2007****(In
                  thousands)**Product
                  Development Expenses
              
              $
              946
              
              $
              —Sales
                  and Marketing Expenses
              
              
              891
              
              
              —General
                  and Administrative Expenses
              
              
              1,467
              
              
              264Amortization
                  of Intangible Assets
              
              
              72
              
              
              —





Prior
      to
      the Merger, Mandalay was a public shell company with no operations, and as
      a
      result the only activity in 2007 represents expenses incurred in developing
      the
      Company. In both years, General and Administrative expenses consisted primarily
      of consulting and professional fees, accounting and legal expenses and employee
      related expenses including stock based compensation. The increase in 2007 over
      2006 is primarily the result of employing executive management for the company,
      a significant increase in legal and other professional fees, and the addition
      of
      Twistbox expenses subsequent to the merger. Product Development and Sales and
      Marketing Expenses represent the operating expenses of Twistbox
      post-acquisition. Amortization of Intangibles represents amortization of the
      intangibles identified as part of the purchase price accounting and attributed
      to operating expenses.


24


***Other
      Expenses***





**Three
                  Months Ended March 31,****2008**
              
              **2007****(In
                  thousands)**Interest
                  and other income (expense)
              
              $
              (267
              )
              $
              —




Interest
      and other income (expense) includes interest income on invested funds, interest
      expense related the Twistbox’s senior secured note, foreign exchange transaction
      gains and losses, and depreciation expense.




**Liquidity
      and Capital Resources**




**Three
                  Months Ended****Year
                  Ended December 31,**
              
              **March
                  31,****2007**
              
              **2006**
              
              **2008****(In
                  thousands)**
              
              **(In
                  thousands)****Consolidated
                  Statement of Cash Flows Data:**Capital
                  expenditures
              
              
              —
              
              
              —
              
              
              (103
              )Cash
                  flows used in operating activities
              
              
              (819
              )
              
              (418
              )
              
              (2,482
              )Cash
                  flows (used in)/ provided by investing activities
              
              
              (141
              )
              
              —
              
              
              6,152Cash
                  flows provided by financing activities
              
              
              2,473
              
              
              6,157
              
              
              —


Prior
      to
      the Merger, Mandalay was a public shell company with no operations. Twistbox
      has
      incurred losses and negative annual cash flows since inception. The primary
      sources of funding have historically been the issuance of common and
      preferred stock, and in the case of Twistbox, borrowings under credit facilities
      with aggregate proceeds of $16.5 million. In the future, we anticipate that
      our
      primary sources of liquidity will be cash generated by our operating
      activities.





*Operating
      Activities*





In
      the
      years ended December 31, 2006 and 2007, operating expense consisted solely
      of
      employee compensation and other general and administrative expenses. In the
      period ended March 31, 2008, we used $2.5 million of net cash in operating
      expenses. This primarily related to an increase in receivables of $1.4 million
      and a decrease in accrued license fees of $2.0 million, partially offset by
      increases in accounts payable and other liabilities.




*Investing
      Activities*





In
      the
      year ended December 31, 2007, investing expenses consisted solely of prepaid
      acquisition costs. In the period ended March 31, 2008, investing activities
      provided $6.2 million of net cash, primarily related to cash acquired with
      the
      acquisition of Twistbox.





*Financing
      Activities*





Net
      cash
      provided by financing activities represented proceeds from the sales of common
      stock in the years ended December 31, 2006 and 2007 and preferred stock in
      the
      year ended December 31, 2006.





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 are
      currently exercisable and 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.


25


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.




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
      March 31, 2008, Twistbox had approximately $10,936,000 of cash, and
      management believes it has sufficient cash to satisfy the Company’s monetary
      needs for the next twelve months. We may, however, require additional cash
      resources due to changed business conditions or other future developments,
      including any investments or acquisitions we may decide to pursue. If these
      sources are insufficient to satisfy our cash requirements, we may seek to sell
      additional debt securities or additional equity securities or to obtain a credit
      facility. The sale of convertible debt securities or additional equity
      securities could result in additional dilution to our stockholders. The
      incurrence of increased indebtedness would result in additional debt service
      obligations and could result in additional operating and financial covenants
      that would restrict our operations. In addition, there can be no assurance
      that
      any additional financing will be available on acceptable terms, if at
      all.


26


**Contractual
      Obligations**




The
      following table is a summary of Twistbox’s contractual obligations as of March
      31, 2008:




**Payments
                  due by period****Less
                  than****Total**
              
              **1
                  Year**
              
              **1-3
                  Years**
              
              **Thereafter****(In
                  thousands)**Long-term
                  debt obligations
              
              $
              19,470
              
              $
              1,595
              
              $
              17,875
              
              $
              —Operating
                  lease obligations
              
              
              600
              
              
              272
              
              
              328
              
              
              —Guaranteed
                  royalties
              
              
              4,713
              
              
              1,923
              
              
              2,760
              
              
              30Capitalized
                  leases and other obligations
              
              
              6,947
              
              
              2,845
              
              
              3,937
              
              
              165




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.




**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.




**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 content and
      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 content and 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, although the domestic market is growing quickly.




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.


27


**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”) platform services 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 content and 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 content and 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 product or 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.





*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, as part
      of
      our operating expenses. We will record intangible assets on our balance sheet
      based upon their fair value at the time of the Merger. We determined the fair
      value of the intangible assets based on independent valuation. We will amortize
      the amortizable intangible assets using the straight-line method over their
      estimated useful lives of between five and eight years.


28


**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 of Directors and
      a director of the Company and Paul Schaeffer as Vice-Chairman of the Board
      of
      Directors and a director of the Company. On November 7, 2007, we increased
      the
      size of the Board of Directors 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.





**Critical
      Accounting Policies**








*Fiscal
      Year Change*





On
      March
      31, 2008, the Board of Directors approved a change in the Company’s fiscal year
      from December 31 to March 31, effective March 31, 2008. This Transitional
      Report includes information for the three month transitional period ended March
      31, 2008 and for the twelve month periods ended December 31, 2007 and 2006.
      The unaudited financial information for the three month comparative period 
ended March 31, 2007 is as follows:




3
                  months endedMarch
                  31, 2007Total
                  revenues
              
              $
              —Operating
                  loss
              
              
              (264
              )Net
                  loss
              
              
              (264
              )Basic
                  and diluted net loss per common share
              
              $
              (0.02
              )Basic
                  and diluted weighted average shares outstanding
              
              $
              16,730




*Revenue
      Recognition*





Twistbox’s
      revenues are derived primarily by licensing material and software products
      in
      the form of products (Image Galleries, Wallpapers, video, WAP Site access,
      Mobile TV) and mobile games. License arrangements with the end user can be
      on a
      perpetual or subscription basis.





A
      perpetual license gives an end user the right to use the product, image or
      game
      on the registered handset on a perpetual basis. A subscription license gives
      an
      end user the right to use the product, image or game on the registered handset
      for a limited period of time, ranging from a few days to as long as one month.
      Twistbox distributes its products primarily through mobile telecommunications
      service providers (“carriers”), which market the product, images or games to end
      users. License fees for perpetual and subscription licenses are usually billed
      by the carrier upon download of the product, image or game by the end user.
      In
      the case of subscriber licenses, many subscriber agreements provide for
      automatic renewal until the subscriber opts-out, while the others provide opt-in
      renewal. In either case, subsequent billings for subscription licenses are
      generally billed monthly. Twistbox applies the provisions of Statement of
      Position 97-2, Software Revenue Recognition, as amended by Statement of Position
      98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect
      to
      Certain Transactions, to all transactions.





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


29


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





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





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





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





·
            carriers
                generally pay Twistbox a fixed percentage of their revenues or a
                fixed fee
                for each game;




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





·
            Twistbox
                has limited risks, including no inventory risk and limited credit
                risk.





While
      not
      a significant portion of revenue, in some instances revenue is earned by
      delivering a product or service directly to the end user of that product or
      service. In those cases, Twistbox records as revenue the amount billed to that
      end user and recognizes the revenue when persuasive evidence of an arrangement
      exists, the product, image or game has been delivered, the fee is fixed or
      determinable, and the collection of the resulting receivable is
      probable.





*Content
      Provider License Fees and Minimum Guarantees*





Twistbox’s
      royalty expenses consist of fees that it pays to branded content owners for
      the
      use of their intellectual property in the development of Twistbox’s games and
      other content, and other expenses directly incurred in earning revenue.
      Royalty-based obligations are either accrued as incurred and subsequently paid,
      or in the case of longer term content acquisitions, paid in advance and
      capitalized on our balance sheet as prepaid royalties. These royalty-based
      obligations are expensed to cost of revenues either at the applicable
      contractual rate related to that revenue or over the estimated life of the
      prepaid royalties. Advanced license payments that are not recoupable against
      future royalties are capitalized and amortized over the lesser of the estimated
      life of the branded title or the term of the license agreement.





Twistbox’s
      contracts with some licensors include minimum guaranteed royalty payments,
      which
      are payable regardless of the ultimate volume of sales to end users. Each
      quarter, Twistbox evaluates the realization of its royalties as well as any
      unrecognized guarantees not yet paid to determine amounts that it deems unlikely
      to be realized through product sales. The Company uses estimates of revenues,
      and share of the relevant licensor to evaluate the future realization of future
      royalties and guarantees. This evaluation considers multiple factors, including
      the term of the agreement, forecasted demand, product life cycle status, product
      development plans, and current and anticipated sales levels, as well as other
      qualitative factors. To the extent that this evaluation indicates that the
      remaining future guaranteed royalty payments are not recoverable, Twistbox
      records an impairment charge to cost of revenues and a liability in the period
      that impairment is indicated. During the period ended March 31, 2008 this
      evaluation has resulted in an adjustment to previously recorded charges and
      the
      associated liability due to the renegotiation of a significant content provider
      contract which changed the amount and duration of minimum guarantee payments
      that the company is obligated to pay. This resulted in a partial reversal of
      prior impairment charges amounting to $1,745 in the period. This reversal has
      been included in cost of revenues.


30


*Stock-based
      compensation.*





We
      have
      applied SFAS No. 123(R) Share-Based Payment (“FAS 123R”) and accordingly, we
      record stock-based compensation expense for all of our stock-based awards.





Under
      FAS
      123R, we estimate the fair value of stock options granted using the
      Black-Scholes option pricing model. The fair value for awards that are expected
      to vest is then amortized on a straight-line basis over the requisite service
      period of the award, which is generally the option vesting term. The amount
      of
      expense recognized represents the expense associated with the stock options
      we
      expect to ultimately vest based upon an estimated rate of forfeitures; this
      rate
      of forfeitures is updated as necessary and any adjustments needed to recognize
      the fair value of options that actually vest or are forfeited are
      recorded.





The
      Black-Scholes option pricing model, used to estimate the fair value of an award,
      requires the input of subjective assumptions, including the expected volatility
      of our common stock and an option’s expected life. As a result, the financial
      statements include amounts that are based upon our best estimates and judgments
      relating to the expenses recognized for stock-based compensation.





*Reclassification*




Certain
      amounts previously reported as deferred compensation resulting from share based
      compensation costs with future service periods have been reclassified to
      additional paid-in capital to conform with the March 31, 2008
      presentation.





*Goodwill*




In
      accordance with Statement of Financial Accounting Standards No. 142, Goodwill
      and Other Intangible Assets (“SFAS No. 142”), the Company’s goodwill is not
      amortized but is tested for impairment on an annual basis or whenever events
      or
      changes in circumstances indicate that the carrying amount of these assets
      may
      not be recoverable.





*Impairment
      of Long-Lived Assets and Intangibles*





Long-lived
      assets, including purchased intangible assets with finite lives are amortized
      using the straight-line method over their useful lives ranging from three to
      ten
      years and are reviewed for impairment in accordance with SFAS No. 144,
      Accounting for the Impairment or Disposal of Long-Lived Assets, whenever events
      or changes in circumstances indicate that the carrying amount of an asset may
      not be recoverable. Recoverability of assets to be held and used is measured
      by
      a comparison of the carrying amount of an asset to future undiscounted net
      cash
      flows expected to be generated by the asset. If such assets are considered
      to be
      impaired, the impairment to be recognized is measured by the amount by which
      the
      carrying amount of the assets exceeds the fair value of the assets. Assets
      to be
      disposed of are reported at the lower of the carrying amount or fair value
      less
      costs to sell.





**Income
      Taxes**




We
      account for income taxes in accordance with Statement of Financial Accounting
      Standards No. 109, Accounting for Income Taxes (“SFAS No. 109”), which requires
      recognition of deferred tax assets and liabilities for the expected future
      tax
      consequences of events that have been included in its financial statements
      or
      tax returns. Under SFAS No. 109, the Company determines deferred tax assets
      and
      liabilities for temporary differences between the financial reporting basis
      and
      the tax basis of assets and liabilities along with net operating losses, if
      it
      is more likely than not the tax benefits will be realized using the enacted
      tax
      rates in effect for the year in which it expects the differences to reverse.
      To
      the extent a deferred tax asset cannot be recognized, a valuation allowance
      is
      established if necessary.





We
      adopted the provisions of FASB Interpretation No. 48, Accounting for
      Uncertainty in Income Taxes—An Interpretation of FASB Statement 109 (“FIN 48”)
      on January 1, 2008. FIN 48 did not impact the Company’s financial position or
      results of operations at the date of adoption. FIN 48 clarifies the accounting
      for uncertainty in income taxes recognized in an enterprise’s financial
      statements in accordance with Statement of Financial Accounting Standards
      No. 109, Accounting for Income Taxes. FIN 48 prescribes that a company
      should use a more-likely-than-not recognition threshold based on the technical
      merits of the tax position taken. Tax positions that meet the
“more-likely-than-not” recognition threshold should be measured as the largest
      amount of the tax benefits, determined on a cumulative probability basis, which
      is more likely than not to be realized upon ultimate settlement in the financial
      statements. We recognize interest and penalties related to income tax matters
      as
      a component of the provision for income taxes. We do not currently anticipate
      that the total amount of unrecognized tax benefits will significantly change
      within the next 12 months.




**Recent
      Accounting Pronouncements**




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.


31


**ITEM
        7A. 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 March 31, 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.




32
 ITEM
        8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
        DATA
  **Page(s)**Reports
                  of Independent Registered Public Accounting Firms
              34-36Consolidated
                  Balance Sheets as of March 31, 2008; December 31, 2007 and
                  2006
              37Consolidated
                  Statements of Operations for the three months ended March 31, 2008;and
                  the years ended December 31, 2007 and 2006
              38Consolidated
                  Statements of Stockholders’ Equity and Comprehensive Lossfor
                  the three months ended March 31, 2008; and the years ended December
                  31,
                  2007 and 2006
              39Consolidated
                  Statements of Cash Flows for the three months ended March 31, 2008;and
                  the years ended December 31, 2007 and 2006
              40Notes
                  to Consolidated Financial Statements
              41-62
  33
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors
 Mandalay
        Media Inc. and Subsidiaries
 Los
        Angeles, California
 
 We
        have
        audited the accompanying consolidated balance sheet of Mandalay Media Inc.
        and
        Subsidiaries (the “Company”) as of March 31, 2008 and the related consolidated
        statements of operations, stockholders’ equity and comprehensive loss and cash
        flows for the three months then ended. These consolidated financial statements
        are the responsibility of the Company’s management. Our responsibility is to
        express an opinion on these consolidated financial statements based on our
        audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. The
        Company
        is not required to have, nor were we engaged to perform, an audit of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        also
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall consolidated financial statement
        presentation. We believe that our audit provides a reasonable basis for our
        opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Mandalay Media Inc. and
        Subsidiaries as of March 31, 2008, and the results of its operations and
        its
        cash flows for the three months then ended in conformity with accounting
        principles generally accepted in the United States of America.
   **/s/
        GROBSTEIN, HORWATH & COMPANY LLP**
 
 Sherman
        Oaks, California
 July
        8,
        2008
  34
  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
  35
  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
  36
 **Mandalay
          Media Inc. and Subsidiaries**
 **Consolidated
          Balance Sheets**
  
  **(In
          thousands, except share amounts)**
 
 **March 31,**
              
              **December 31,**
              
              **December 31,****2008**
              
              **2007**
              
              **2006****ASSETS**Current
                  AssetsCash
                  and cash equivalents
              
              $
              10,936
              
              $
              7,255
              
              $
              5,742Accounts
                  receivable, net of allowances
              
              
              6,162
              
              
              -
              
              
              -Prepaid
                  expenses and other current assets
              
              
              531
              
              
              141
              
              
              -Total
                  current assets
              
              
              17,629
              
              
              7,396
              
              
              5,742Property
                  and equipment, net
              
              
              1,037
              
              
              -
              
              
              -Other
                  long-term assets
              
              
              301
              
              
              -
              
              
              -Intangible
                  assets, net
              
              
              19,780
              
              
              -
              
              
              -Goodwill
              
              
              61,377
              
              
              -
              
              
              -**TOTAL
                  ASSETS**
              
              **$**
              **100,124**
              
              **$**
              **7,396**
              
              **$**
              **5,742****LIABILITIES
                  AND STOCKHOLDERS EQUITY**Current
                  liabilitiesAccounts
                  payable
              
              $
              2,399
              
              $
              447
              
              $
              98Accrued
                  license fees
              
              
              3,833
              
              
              -
              
              
              -Accrued
                  compensation
              
              
              688
              
              
              -
              
              
              -Current
                  portion of long term debt
              
              
              248
              
              
              -
              
              
              -Other
                  current liabilities
              
              
              2,087
              
              
              -
              
              
              -Total
                  currrent liabilities
              
              
              9,255
              
              
              447
              
              
              98Accrued
                  license fees, long term portion
              
              
              1,337
              
              
              -
              
              
              -Long
                  term debt, net of current portion
              
              
              16,483
              
              
              -
              
              
              -Total
                  liabilities
              
              
              27,075
              
              
              447
              
              
              98Commitments
                  and contingencies (Note 15)Stockholders
                  equityPreferred
                  stock, 1,000 shares authorizedSeries
                  A convertible Preferred Stock, 100,000 shares; authorizedat
                  $0.0001 par value; 100,000 shares issued and outstanding
              
              
              100
              
              
              100
              
              
              100Common
                  stock, $0.0001 par value: 100,000,000 shares authorized;32,149,089
                  issued and outstanding at March 31, 2008;21,968,797
                  issued and outstanding at December 31, 2007;16,730,000
                  issued and outstanding at December 31, 2006
              
              
              3
              
              
              3
              
              
              2Additional
                  paid-in capital
              
              
              76,154
              
              
              9,817
              
              
              6,309Accumulated
                  other comprehensive income/(loss)
              
              
              61
              
              
              -
              
              
              -Accumulated
                  deficit
              
              
              (3,269
              )
              
              (2,971
              )
              
              (767
              )Total
                  stockholders equity
              
              
              73,049
              
              
              6,949
              
              
              5,644**TOTAL
                  LIABILITIES AND STOCKHOLDERS DEFICIT**
              
              **$**
              **100,124**
              
              **$**
              **7,396**
              
              **$**
              **5,742**
  *The
        accompanying notes are an integral part of these consolidated financial
        statements.*
 37
  **Mandalay
        Media Inc. and Subsidiaries**
 **Consolidated
        Statement of Operations**
 
 **(In
        thousands, except per share amounts)**
 
 **3 Months Ended****March 31,**
              
              **Year Ended December 31,****2008**
              
              **2007**
              
              **2006**Revenues
              
              $
              3,208
              
              $
              -
              
              $
              -Cost
                  of revenuesLicense
                  fees
              
              
              1,539
              
              
              -
              
              
              -Adjustment
                  to impairment of guarantees
              
              
              (1,745
              )
              
              -
              
              
              -Other
                  direct cost of revenues
              
              
              53
              
              
              -
              
              
              -Total
                  cost of revenues
              
              
              (153
              )
              
              -
              
              
              -Gross
                  profit
              
              
              3,361
              
              
              -
              
              
              -Operating
                  expensesProduct
                  development
              
              
              946
              
              
              -
              
              
              -Sales
                  and marketing
              
              
              891
              
              
              -
              
              
              -General
                  and administrative
              
              
              1,467
              
              
              2,521
              
              
              553Amortization
                  of intangible assets
              
              
              72
              
              
              -
              
              
              -Total
                  operating expenses
              
              
              3,376
              
              
              2,521
              
              
              553Loss
                  from operations
              
              
              (15
              )
              
              (2,521
              )
              
              (553
              )Interest
                  and other income/(expense)Interest
                  income
              
              
              97
              
              
              317
              
              
              -Interest
                  (expense)
              
              
              (310
              )
              
              -
              
              
              -Foreign
                  exchange transaction gain (loss)
              
              
              2
              
              
              -
              
              
              -Other
                  (expense)
              
              
              (56
              )
              
              -
              
              
              -Interest
                  and other income/(expense)
              
              
              (267
              )
              
              317
              
              
              -Loss
                  before income taxes
              
              
              (282
              )
              
              (2,204
              )
              
              (553
              )Income
                  tax provision
              
              
              (16
              )
              
              -
              
              
              -Net
                  loss
              
              
              (298
              )
              
              (2,204
              )
              
              (553
              )Preferred
                  Stock Dividends
              
              
              -
              
              
              -
              
              
              (43
              )Net
                  Loss attributable to Common Shareholders
              
              $
              (298
              )
              $
              (2,204
              )
              $
              (596
              )Basic
                  and Diluted net loss per common share
              
              $
              (0.01
              )
              $
              (0.12
              )
              $
              (0.05
              )Weighted
                  average common shares outstanding,
              
              
              21,628
              
              
              18,997
              
              
              11,599basic
                  and diluted
  The
        accompanying notes are an integral part of
        these consolidated financial statements.
 38
  **Mandalay
        Media Inc. and Subsidiaries**
 **Consolidated
        Statements of Stockholders Equity and Comprehensive Loss**
  
 
 **(In
        thousands, except share amounts)**
 
 **Three
        Months Ended March 31, 2008 and Fiscal Years Ended December, 2007 and
        2006**
 
 **Accumulated****Additional**
              
              **Other****Common Stock**
              
              **Preferred Stock**
              
              **Paid-In**
              
              **Comprehensive**
              
              **Accumulated**
              
              
              
              **Comprehensive**Shares
              
              Amount
              
              Shares
              
              Amount
              
              **Capital**
              
              **Income/(Loss)**
              
              **Deficit**
              
              **Total**
              
              **Loss**Balance
                  at December 31, 2005
              
              
              10,000,000
              
              $
              1
              
              
              -
              
              $
              -
              
              
              99
              
              
              -
              
              $
              (171
              )
              $
              (71
              )
              $Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (553
              )
              
              (553
              )
              
              (553
              )Issuance
                  of common stock
              
              
              6,730,000
              
              
              1
              
              
              
              
              
              
              
              
              6,056
              
              
              
              
              
              
              
              
              6,057Sale
                  of preferred stock
              
              
              
              
              
              
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              
              
              
              100Preferred
                  stock dividend
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              43
              
              
              
              
              
              (43
              )
              
              -Warrants
                  isued forstock-based
                  compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              111
              
              
              
              
              
              
              
              
              111Comprehensive
                  lossBalance
                  at December 31, 2006
              
              
              16,730,000
              
              
              2
              
              
              100,000
              
              
              100
              
              
              6,309
              
              
              -
              
              
              (767
              )
              
              5,644
              
              
              (553
              )Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,204
              )
              
              (2,204
              )
              
              (2,204
              )Issuance
                  of common stock(net
                  of offering costs of $27)
              
              
              5,000,000
              
              
              1
              
              
              
              
              
              
              
              
              2,472
              
              
              
              
              
              
              
              
              2,473Cashless
                  exercise of warrants
              
              
              238,797
              
              
              0
              
              
              
              
              
              
              
              
              (0
              )
              
              
              
              
              
              
              
              -
              
              
              -Deferred
                  stock-based compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,036
              
              
              
              
              
              
              
              
              1,036Comprehensive
                  lossBalance
                  at December 31, 2007
              
              
              21,968,797
              
              
              3
              
              
              100,000
              
              
              100
              
              
              9,817
              
              
              -
              
              
              (2,971
              )
              
              6,949
              
              
              (2,204
              )Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (298
              )
              
              (298
              )
              
              (298
              )Issuance
                  of common stockin
                  connection with the merger
              
              
              10,180,292
              
              
              0
              
              
              
              
              
              
              
              
              48,356
              
              
              
              
              
              
              
              
              48,356Assumption
                  of employee stock optionsin
                  connection with the merger
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              11,019
              
              
              
              
              
              
              
              
              11,019Issuance
                  of new employee stock optionsin
                  connection with the merger
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,938
              
              
              
              
              
              
              
              
              3,938Issuance
                  of warrants to lenderin
                  connection with the merger
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,711
              
              
              
              
              
              
              
              
              2,711Foreign
                  currency translation gain/(loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              61
              
              
              
              
              
              61
              
              
              61Deferred
                  stock-based compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              313
              
              
              
              
              
              
              
              
              313Comprehensive
                  lossBalance
                  at March 31, 2008
              
              
              32,149,089
              
              $
              3
              
              
              100,000
              
              $
              100
              
              $
              76,154
              
              $
              61
              
              $
              (3,269
              )
              $
              73,049
              
              $
              (237
              )
  The
        accompanying notes are an integral part of
        these consolidated financial statements.
 39
 **Mandalay
          Media Inc. and Subsidiaries**
 Consolidated
          Statements of Cash Flows
 **(In
        thousands)**
 **3 Months Ended****March 31,**
                
                **Years Ended December 31,****2008**
                
                **2007**
                
                **2006****Cash
                    flows from operating activities**Net
                    loss
                
                $
                (298
                )
                $
                (2,204
                )
                $
                (553
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activities:Depreciation
                    and amortization
                
                
                253
                
                
                -
                
                
                -Provision
                    for doubtful accounts
                
                
                168
                
                
                -
                
                
                -Stock-based
                    compensation
                
                
                313
                
                
                1,036
                
                
                111(Increase)
                    / decrease in assets:Accounts
                    receivable
                
                
                (1,364
                )
                
                -
                
                
                -Prepaid
                    expenses and other current assets
                
                
                (222
                )
                
                -
                
                
                -Increase
                    / (decrease) in liabilities:Accounts
                    payable
                
                
                352
                
                
                349
                
                
                24Accrued
                    license fees
                
                
                (2,043
                )
                
                -
                
                
                -Accrued
                    compensation
                
                
                (128
                )
                
                -
                
                
                -Other
                    liabilities
                
                
                487
                
                
                -
                
                
                -Net
                    cash used in operating activities
                
                
                (2,482
                )
                
                (819
                )
                
                (418
                )**Cash
                    flows from investing activities**Acquisition
                    costs
                
                
                (424
                )
                
                (141
                )
                
                -Purchase
                    of property and equipment
                
                
                (103
                )
                
                -
                
                
                -Cash
                    acquired with purchase of subsidiary
                
                
                6,679
                
                
                -
                
                
                -Net
                    cash used in investing activities
                
                
                6,152
                
                
                (141
                )
                
                -**Cash
                    flows from financing activities**Proceeds
                    from the sale of preferred stock
                
                
                -
                
                
                -
                
                
                100Proceeds
                    from the sale of common stock (netof
                    offering costs of $27)
                
                
                -
                
                
                2,473
                
                
                6,057Net
                    cash provided by financing activities
                
                
                -
                
                
                2,473
                
                
                6,157Effect
                    of exchange rate changes on cash and cash equivalents
                
                
                11
                
                
                -
                
                
                -**Net
                    increase/(decrease) in cash and cash equivalents**
                
                
                3,681
                
                
                1,513
                
                
                5,739**Cash
                    and cash equivalents, beginning of period**
                
                
                7,255
                
                
                5,742
                
                
                3**Cash
                    and cash equivalents, end of period**
                
                $
                10,936
                
                $
                7,255
                
                $
                5,742**Supplemental
                    disclosure of cash flow information:**Income
                    taxes paid
                
                
                16
                
                
                -
                
                
                -**Noncash
                    investing and financing activities:**Acquisition
                    of Twistbox
                
                
                66,025
                
                
                -
                
                
                -Deemed
                    preferrred dividend
                
                
                -
                
                
                -
                
                
                43
  The
        accompanying notes are an integral part of
        these consolidated financial statements.
 40
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(all
          numbers in thousands except per share amounts)**
 **1.**
              **Organization**
 
 Mandalay
        Media, Inc. (the Company), formerly Mediavest, Inc. (Mediavest) 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 6). 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.
 
 On
        February 12, 2008, Mandalay completed a merger with Twistbox Entertainment,
        Inc.
        (Twistbox) through an exchange of all outstanding capital stock of Twistbox
        for
        10,180 shares of common stock of the Company 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 shares of common stock of the Company, including
        2,145 vested and 319 unvested options.
 
 After
        the
        merger with Mandalay, Twistbox became a wholly owned subsidiary of the Company,
        and the company’s only active subsidiary.
 
 Twistbox
        Entertainment Inc. (formerly known as The WAAT Corporation) is incorporated
        in
        the State of Delaware.
 
 Twistbox
        is a global publisher and distributor of branded entertainment content,
        including images, video, TV programming and games, for Third Generation (3G)
        mobile networks. Twistbox publishes and distributes its content in a number
        of
        countries. Since operations began in 2003, Twistbox has developed an
        intellectual property portfolio that includes mobile rights to global brands
        and
        content from leading film, television and lifestyle content publishing
        companies. Twistbox has built a proprietary mobile publishing platform that
        includes: tools that automate handset portability for the distribution of
        images
        and video; a mobile games development suite that automates the porting of
        mobile
        games and applications to multiple handsets; and a content standards and
        ratings
        system globally adopted by major wireless carriers to assist with the
        responsible deployment of age-verified content. Twistbox has distribution
        agreements with many of the largest mobile operators in the world.
 
 Twistbox
        is headquartered in the Los Angeles area and has offices in Europe and South
        America that provide local sales and marketing support for both mobile operators
        and third party distribution in their respective regions.
  41
 **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(all
          numbers in thousands except per share amounts)**
 **2.**
              **Summary
                  of Significant Accounting
                  Policies**
 
 **Basis
        of Presentation**
 The
        financial statements have been prepared in accordance with accounting principles
        generally accepted in the United States of America (“GAAP”) and pursuant to the
        rules and regulations of the Securities and Exchange Commission (“SEC”) for
        annual financial statements. The financial statements, in the opinion of
        management, include all adjustments necessary for a fair statement of the
        results of operations, financial position and cash flows for each period
        presented. The financial statements for the period ended March 31, 2008 and
        as
        at March 31, 2008 represent the results of the Company prior to the merger
        described in Note 6, and consolidated results subsequent to the merger; and
        the
        consolidated position of the group at the end of the period.
  **Principles
        of Consolidation**
 The
        consolidated financial statements include the accounts of the Company and
        our
        wholly owned subsidiaries. The results of operations for acquisitions of
        companies have been included in the consolidated statements of operations
        beginning on the closing date of acquisition. All material intercompany balances
        and transactions have been eliminated in consolidation.
 
 **Fiscal
        Year Change**
 On March
        31,
        2008, the Board of Directors of the Company approved a change in the Company's
        fiscal year from December 31 to March 31, effective March 31, 2008. This
        Form 10-K/T is a transitional report, and includes information for the
        three month transitional period ended March 31, 2008 and for the twelve month
        periods ended December 31, 2007 and 2006. The unaudited financial
        information for the three month period ended March 31, 2007 is as follows:
  3 months ended
                March 31, 2007Total
                  revenues
              
              $
              -Operating
                  loss
              
              
              (264
              )Net
                  loss
              
              
              (264
              )Basic
                  and diluted net loss per common share
              
              $
              (0.02
              )Basic
                  and diluted weighted average shares outstanding
              
              
              16,730
  **Revenue
        Recognition**
 Twistbox’s
        revenues are derived primarily by licensing material and software products
        in
        the form of products (Image Galleries, Wallpapers, video, WAP Site access,
        Mobile TV) and mobile games. License arrangements with the end user can be
        on a
        perpetual or subscription basis.
 
 A
        perpetual license gives an end user the right to use the product, image or
        game
        on the registered handset on a perpetual basis. A subscription license gives
        an
        end user the right to use the product, image or game on the registered handset
        for a limited period of time, ranging from a few days to as long as one month.
        Twistbox distributes its products primarily through mobile telecommunications
        service providers (“carriers”), which market the product, images or games to end
        users. License fees for perpetual and subscription licenses are usually billed
        by the carrier upon download of the product, image or game by the end user.
        In
        the case of subscriber licenses, many subscriber agreements provide for
        automatic renewal until the subscriber opts-out, while the others provide
        opt-in
        renewal. In either case, subsequent billings for subscription licenses are
        generally billed monthly. Twistbox applies the provisions of Statement of
        Position 97-2, *Software
        Revenue Recognition* ,
        as
        amended by Statement of Position 98-9, Modification of SOP 97-2, *Software
        Revenue Recognition, With Respect to Certain Transactions* ,
        to all
        transactions.
  42
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(all
          numbers in thousands except per share amounts)**
 Revenues
        are recognized from our products, images and games when persuasive evidence
        of
        an arrangement exists, the product, image or game has been delivered, the
        fee is
        fixed or determinable, and the collection of the resulting receivable is
        probable. For both perpetual and subscription licenses, management considers
        a
        signed license agreement to be evidence of an arrangement with a carrier
        and a
“clickwrap” agreement to be evidence of an arrangement with an end user. For
        these licenses, Twistbox defines delivery as the download of the product,
        image
        or game by the end user. Twistbox estimates revenues from carriers in the
        current period when reasonable estimates of these amounts can be made. Most
        carriers only provide detailed sales transaction data on a one to two month
        lag.
        Estimated revenue is treated as unbilled receivables until the detailed
        reporting is received and the revenues can be billed. Some carriers provide
        reliable interim preliminary reporting and others report sales data within
        a
        reasonable time frame following the end of each month, both of which allow
        Twistbox to make reasonable estimates of revenues and therefore to recognize
        revenues during the reporting period when the end user licenses the product,
        image or game. Determination of the appropriate amount of revenue recognized
        involves judgments and estimates that Twistbox believes are reasonable, but
        it
        is possible that actual results may differ from Twistbox’s estimates, and those
        differences may be material. Twistbox’s estimates for revenues include
        consideration of factors such as preliminary sales data, carrier-specific
        historical sales trends, volume of activity on company monitored sites,
        seasonality, time elapsed from launch of services or product lines, the age
        of
        games and the expected impact of newly launched games, successful introduction
        of new handsets, growth of 3G subscribers by carrier, promotions during the
        period and economic trends. When Twistbox receives the final carrier reports,
        to
        the extent not received within a reasonable time frame following the end
        of each
        month, Twistbox records any differences between estimated revenues and actual
        revenues in the reporting period when Twistbox determines the actual amounts.
        Revenues earned from certain carriers may not be reasonably estimated. If
        Twistbox is unable to reasonably estimate the amount of revenues to be
        recognized in the current period, Twistbox recognizes revenues upon the receipt
        of a carrier revenue report and when Twistbox’s portion of licensed revenues are
        fixed or determinable and collection is probable. To monitor the reliability
        of
        Twistbox’s estimates, management, where possible, reviews the revenues by
        country by carrier and by product line on a regular basis to identify unusual
        trends such as differential adoption rates by carriers or the introduction
        of
        new handsets. If Twistbox deems a carrier not to be creditworthy, Twistbox
        defers all revenues from the arrangement until Twistbox receives payment
        and all
        other revenue recognition criteria have been met.
 
 In
        accordance with Emerging Issues Task Force, or EITF Issue No. 99-19, *Reporting
        Revenue Gross as a Principal Versus Net as an Agent* ,
        Twistbox recognizes as revenues the amount the carrier reports as payable
        upon
        the sale of Twistbox’s products, images or games. Twistbox has evaluated its
        carrier agreements and has determined that it is not the principal when selling
        its products, images or games through carriers. Key indicators that it evaluated
        to reach this determination include:
 
 •
              wireless
                  subscribers directly contract with the carriers, which have most
                  of the
                  serviceinteraction
                  and are generally viewed as the primary obligor by the
                  subscribers;
 •
              carriers
                  generally have significant control over the types of content that
                  they
                  offer to theirsubscribers;
 •
              carriers
                  are directly responsible for billing and collecting fees from their
                  subscribers, including the resolution of billing
                  disputes;
  43
 **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(all
          numbers in thousands except per share amounts)**
 
 •
              carriers
                  generally pay Twistbox a fixed percentage of their revenues or
                  a fixed fee
                  foreach
                  game;
 •
              carriers
                  generally must approve the price of Twistbox’s content in advance of their
                  sale to subscribers, and Twistbox’s more significant carriers generally
                  have the ability  to set the ultimate price charged to their
                  subscribers; and
 •
              Twistbox
                  has limited risks, including no inventory risk and limited credit
                  risk
 
 While
        not
        a significant portion of revenue, in some instances revenue is earned by
        delivering a product or service direct to the end user of that product or
        service. In those cases Twistbox records as revenue the amount billed to
        that
        end user and recognizes the revenue when persuasive evidence of an arrangement
        exists, the product, image or game has been delivered, the fee is fixed or
        determinable, and the collection of the resulting receivable is
        probable.
 
 **Net
        Income (Loss) per Common Share** ******
 
 Basic
        income (loss) per common share is computed by dividing net income (loss)
        attributable to common stockholders by the weighted average number of common
        shares outstanding for the period. Diluted net income (loss) per share is
        computed by dividing net income (loss) attributable to common stockholders
        by
        the weighted average number of common shares outstanding for the period plus
        dilutive common stock equivalents, using the treasury stock method. Potentially
        dilutive shares from stock options and warrants and the conversion of the
        Series
        A preferred stock for the period ended March 31, 2008; and the years ended
        December 31, 2007 and 2006 consisted of 5,586; 1,592 and  24 shares,
        respectively, and were not included in the computation of diluted loss per
        share
        as they were anti-dilutive in each period. Preferred stock dividends were
        not
        included in the Company’s diluted net loss per share calculations because to do
        so would be anti-dilutive for all periods presented.
 
 **Comprehensive
        Income/(Loss)**
 Comprehensive
        income/(loss) consists of two components, net income/(loss) and other
        comprehensive income/(loss). Other comprehensive income/(loss) refers to
        gains
        and losses that under generally accepted accounting principles are recorded
        as
        an element of stockholders’ equity but are excluded from net income/(loss). The
        Company’s other comprehensive income/(loss) currently includes only foreign
        currency translation adjustments.
 
 **Cash
        and Cash Equivalents**
 The
        Company considers all highly liquid short-term investments purchased with
        a
        maturity of three months or less to be cash equivalents.
 
 **Content
        Provider Licenses**
 
 ***Content
        Provider License Fees and Minimum Guarantees***
 The
        Company’s royalty expenses consist of fees that it pays to branded content
        owners for the use
        of
        their intellectual property in the development of the Company’s games and other content, and other expenses directly incurred in
        earning revenue. Royalty-based obligations are either accrued as incurred
        and
        subsequently paid, or in the case of longer term content acquisitions, paid
        in
        advance and capitalized on our balance sheet as prepaid royalties. These
        royalty-based obligations are expensed to cost of revenues either at the
        applicable contractual rate related to that revenue or over the estimated
        life
        of the prepaid royalties. Advanced license payments that are not recoupable
        against future royalties are capitalized and amortized over the lesser of
        the
        estimated life of the branded title or the term of the license
        agreement.
  44
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(all
          numbers in thousands except per share amounts)**
 The
        Company’s contracts with some licensors include minimum guaranteed royalty
        payments, which are payable regardless of the ultimate volume of sales to
        end
        users. Each quarter, the Company evaluates the realization of its royalties
        as
        well as any unrecognized guarantees not yet paid to determine amounts that
        it
        deems unlikely to be realized through product sales. The Company uses estimates
        of revenues, and share of the relevant licensor to evaluate the future
        realization of future royalties and guarantees. This evaluation considers
        multiple factors, including the term of the agreement, forecasted demand,
        product life cycle status, product development plans, and current and
        anticipated sales levels, as well as other qualitative factors. To the extent
        that this evaluation indicates that the remaining future guaranteed royalty
        payments are not recoverable, the Company records an impairment charge to
        cost
        of revenues and a liability in the period that impairment is indicated. During
        the period ended March 31, this evaluation has resulted in an adjustment
        to
        previously recorded charges and the associated liability due to the
        renegotiation of a significant content provider contract which changed the
        amount and duration of minimum guarantee payments that the company is obligated
        to pay. This resulted in a partial reversal of prior impairment charges
        amounting to $1,745 in the period. This reversal has been included in cost
        of
        revenues.
 
 ***Content
        Acquired***
 Amounts
        paid to third party content providers as part of an agreement to make content
        available to the Company for a term or in perpetuity, without a revenue share,
        have been capitalized and are included in the balance sheet as prepaid expenses.
        These balances will be expensed over the estimated life of the material
        acquired.
 
 **Software
        Development Costs**
 The
        Company applies the principles of Statement of Financial Accounting Standards
        No. 86, *Accounting
        for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed* (“SFAS
        No. 86”). SFAS No. 86 requires that software development costs incurred in
        conjunction with product development be charged to research and development
        expense until technological feasibility is established. Thereafter, until
        the
        product is released for sale, software development costs must be capitalized
        and
        reported at the lower of unamortized cost or net realizable value of the
        related
        product.
 
 The
        Company has adopted the “tested working model” approach to establishing
        technological feasibility for its products and games. Under this approach,
        the
        Company does not consider a product or game in development to have passed
        the
        technological feasibility milestone until the Company has completed a model
        of
        the product or game that contains essentially all the functionality and features
        of the final game and has tested the model to ensure that it works as expected.
        To date, the Company has not incurred significant costs between the
        establishment of technological feasibility and the release of a product or
        game
        for sale; thus, the Company has expensed all software development costs as
        incurred. The Company considers the following factors in determining whether
        costs can be capitalized: the emerging nature of the mobile market; the gradual
        evolution of the wireless carrier platforms and mobile phones for which it
        develops products and games; the lack of pre-orders or sales history for
        its
        products and games; the uncertainty regarding a product’s or game’s
        revenue-generating potential; its lack of control over the carrier distribution
        channel resulting in uncertainty as to when, if ever, a product or game will
        be
        available for sale; and its historical practice of canceling products and
        games
        at any stage of the development process.
 
 45
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(all
          numbers in thousands except per share amounts)**
 **Product
        Development Costs**
 The
        Company charges costs related to research, design and development of products
        to product
        development expense as incurred. The types of costs included in product
        development expenses include salaries, contractor fees and allocated facilities
        costs.
 
 **Advertising
        Expenses**
 The
        Company expenses the production costs of advertising, including direct response
        advertising, the first time the advertising takes place. Advertising expense
        was
        $226 in the period ended March 31, 2008.
 
 **Restructuring**
 The
        Company accounts for costs associated with employee terminations and other
        exit
        activities in accordance with Statement of Financial Accounting Standards
        No.
        146, Accounting for Costs Associated with Exit or Disposal Activities. The
        Company records employee termination benefits as an operating expense when
        it
        communicates the benefit arrangement to the employee and it requires no
        significant future services, other than a minimum retention period, from
        the
        employee to earn the termination benefits.
 
 **Fair
        Value of Financial Instruments**
 For
        certain of the Company’s financial instruments, including cash and cash
        equivalents, accounts receivable, accounts payable and other current
        liabilities, the carrying amounts approximate their fair value due to their
        relatively short maturity. Based on the borrowing rates available to the
        Company
        for loans with similar terms, the carrying value of borrowings outstanding
        approximates their fair value.
 
 **Foreign
        Currency Translation** *.*
 The
        Company uses the United States dollar for financial reporting purposes. Assets
        and liabilities of foreign operations are translated using current rates
        of
        exchange prevailing at the balance sheet date. Equity accounts have been
        translated at their historical exchange rates when the capital transaction
        occurred. Statement of Operations amounts are translated at average rates
        in
        effect for the reporting period. The foreign currency translation adjustment
        of
        $61 in the period ended March 31, 2008 has been reported as a component of
        comprehensive loss in the consolidated statement of stockholders equity
        (deficit) and comprehensive loss. Translation gains or losses are shown as
        a
        separate component of retained earnings.
 
 **Concentrations
        of Credit Risk.**
 Financial
        instruments which potentially subject us to concentration of credit risk
        consist
        principally of cash and cash equivalents, short-term investments, and accounts
        receivable. We have placed cash and cash equivalents and short-term investments
        with a single high credit-quality institution. As of March 31, 2007 we did
        not
        have any long-term marketable securities. Most of our sales are made directly
        to
        large national Mobile Phone Operators in the countries that we operate. We
        have
        a significant level of business and resulting significant accounts receivable
        balance with one operator and therefore have a high concentration of credit
        risk
        with that operator. We perform ongoing credit evaluations of our customers
        and
        maintain an allowance for potential credit losses. As of March 31, 2008,
        approximately 36% of our gross accounts receivable outstanding was with one
        major customer. This customer accounted for 48% of our gross sales in the
        period
        ended March 31, 2008.
  46
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(a** **ll
        numbers in thousands except per share amounts)**
 
  **Property
        and Equipment**
 Property
        and equipment is stated at cost. Depreciation and amortization is calculated
        using the straight-line method over the estimated useful lives of the related
        assets. Estimated useful lives are 8 to 10 years for leasehold improvements
        and
        5 years for other assets.
  **Goodwill**
 In
        accordance with Statement of Financial Accounting Standards No. 142, Goodwill
        and Other Intangible
        Assets (“SFAS No. 142”), the Company’s goodwill is not amortized but is tested
        for impairment
        on an annual basis or whenever events or changes in circumstances indicate
        that
        the carrying
        amount of these assets may not be recoverable.
 
 **Impairment
        of Long-Lived Assets and Intangibles**
 Long-lived
        assets, including purchased intangible assets with finite lives are amortized
        using the straight-line method over their useful lives ranging from three
        to ten
        years and are reviewed for impairment in accordance with SFAS No. 144, *Accounting
        for the Impairment or Disposal of Long-Lived Assets,* whenever
        events or changes in circumstances indicate that the carrying amount of an
        asset
        may not be recoverable. Recoverability of assets to be held and used is measured
        by a comparison of the carrying amount of an asset to future undiscounted
        net
        cash flows expected to be generated by the asset. If such assets are considered
        to be impaired, the impairment to be recognized is measured by the amount
        by
        which the carrying amount of the assets exceeds the fair value of the assets.
        Assets to be disposed of are reported at the lower of the carrying amount
        or
        fair value less costs to sell.
 
 **Income
        Taxes**
 The
        Company accounts for income taxes in accordance with Statement of Financial
        Accounting Standards No. 109, *Accounting
        for Income Taxes* (“SFAS
        No. 109”), which requires recognition of deferred tax assets and liabilities for
        the expected future tax consequences of events that have been included in
        its
        financial statements or tax returns. Under SFAS No. 109, the Company determines
        deferred tax assets and liabilities for temporary differences between the
        financial reporting basis and the tax basis of assets and liabilities along
        with
        net operating losses, if it is more likely than not the tax benefits will
        be
        realized using the enacted tax rates in effect for the year in which it expects
        the differences to reverse. To the extent a deferred tax asset cannot be
        recognized, a valuation allowance is established if necessary.
 
 We
        adopted the provisions of FASB Interpretation No. 48, Accounting for
        Uncertainty in Income Taxes—An Interpretation of FASB Statement 109 (“FIN 48”)
        on January 1, 2008. FIN 48 did not impact the Company’s financial position or
        results of operations at the date of adoption. FIN 48 clarifies the accounting
        for uncertainty in income taxes recognized in an enterprise’s financial
        statements in accordance with Statement of Financial Accounting Standards
        No. 109, Accounting for Income Taxes. FIN 48 prescribes that a company
        should use a more-likely-than-not recognition threshold based on the technical
        merits of the tax position taken. Tax positions that meet the
“more-likely-than-not” recognition threshold should be measured as the largest
        amount of the tax benefits, determined on a cumulative probability basis,
        which
        is more likely than not to be realized upon ultimate settlement in the financial
        statements. We recognize interest and penalties related to income tax matters
        as
        a component of the provision for income taxes. We do not currently anticipate
        that the total amount of unrecognized tax benefits will significantly change
        within the next 12 months.
 
 **Stock-based
        compensation** *.*
 We
        have
        applied SFAS No. 123(R) Share-Based Payment (“FAS 123R”) and accordingly, we
        record stock-based compensation expense for all of our stock-based awards.
  47
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(a** **ll
          numbers in thousands except per share amounts)**
  Under
        FAS
        123R, we estimate the fair value of stock options granted using the
        Black-Scholes option pricing model. The fair value for awards that are expected
        to vest is then amortized on a straight-line basis over the requisite service
        period of the award, which is generally the option vesting term. The amount
        of
        expense recognized represents the expense associated with the stock options
        we
        expect to ultimately vest based upon an estimated rate of forfeitures; this
        rate
        of forfeitures is updated as necessary and any adjustments needed to recognize
        the fair value of options that actually vest or are forfeited are
        recorded.
 
 The
        Black-Scholes option pricing model, used to estimate the fair value of an
        award,
        requires the input of subjective assumptions, including the expected volatility
        of our common stock and an option’s expected life. As a result, the financial
        statements include amounts that are based upon our best estimates and judgments
        relating to the expenses recognized for stock-based compensation.
 
 **Reclassification**
 Certain
        amounts previously reported as deferred compensation resulting from share
        based
        compensation costs with future service periods have been reclassified to
        additional paid-in capital to conform with the March 31, 2008
        presentation.
 
 **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.
 
 **Use
        of Estimates**
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosures of
        contingent asset and liabilities at the date of the financial statements
        and
        reported amounts of revenue and expenses during the period. Actual results
        could
        differ from those estimates. The most significant estimates relate to revenues
        for periods not yet reported by Carriers, liabilities recorded for future
        minimum guarantee payments under content licenses, accounts receivable
        allowances, and stock-based compensation expense.
 
 **Recent
        Accounting Pronouncements**
 In
        October 2006, the FASB issued FASB Staff Position No. 123R-5, “ *Amendment
        of FASB Staff Position FAS 123(R)-1* ”. 
        The FSP amends FSP 123(R)-1 for equity instruments that were originally issued
        as employee compensation and then modified, with such modification made to
        the
        terms of the instrument solely to reflect an equity restructuring that occurs
        when the holders are no longer employees.  In such circumstances, no change
        in the recognition or the measurement date of those instruments will result
        if
        both of the following conditions are met: a. There is no increase in fair
        value
        of the award (or the ratio of intrinsic value to the exercise price of the
        award
        is preserved, that is, the holder is made whole), or the antidilution provision
        is not added to the terms of the award in contemplation of an equity
        restructuring; and b. All holders of the same class of equity instruments
        (for
        example, stock options) are treated in the same manner.  The Company
        believes that FSP 123(R)-5 will not have a significant impact on its results
        of
        operations or financial position.
  48
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(a** **ll
          numbers in thousands except per share amounts)**
  In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements”, which is an amendment of Accounting Research
        Bulletin (“ARB”) No. 51.  This statement clarifies that a
        noncontrolling interest in a subsidiary is an ownership interest in the
        consolidated entity that should be reported as equity in the consolidated
        financial statements.  This statement changes the way the consolidated
        income statement is presented, thus requiring consolidated net income to
        be
        reported at amounts that include the amounts attributable to both parent
        and the
        noncontrolling interest.  This statement is effective for the fiscal
        years, and interim periods within those fiscal years, beginning on or after
        December 15, 2008.  Based on current conditions, the Company does not
        expect the adoption of SFAS 160 to have a significant impact on its results
        of
        operations or financial position.
  In
        December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
        Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
        SFAS 141 that the acquisition method of accounting (which SFAS 141 called
        the purchase method) be used for all business combinations and for an acquirer
        to be identified for each business combination. This statement defines the
        acquirer as the entity that obtains control of one or more businesses in
        the
        business combination and establishes the acquisition date as the date that
        the
        acquirer achieves control. This statement requires an acquirer to recognize
        the
        assets acquired, the liabilities assumed, and any 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. The Company does not expect the adoption of SFAS 160 to
        have
        a significant impact on its results of operations or financial
        position.
 
 **3.**
              **Liquidity**
  The
        accompanying consolidated financial statements have been prepared in conformity
        with generally accepted accounting principles, which contemplates continuation
        of the Company as a going concern.  The Company’s operating subsidiary,
        Twistbox, has sustained substantial operating losses since commencement of
        operations.  In addition, the Company has incurred negative cash flows from
        operating activities and the majority of the Company’s assets are intangible
        assets and goodwill.
  In
        view
        of these matters, realization of a major portion of the assets in the
        accompanying consolidated balance sheet is dependent upon continued operations
        of the Company, which is in turn dependent on the Company reaching a positive
        cash flow position or obtaining additional financing, while maintaining adequate
        liquidity.
  Management
        believes that actions undertaken to achieve this position provide the
        opportunity for the Company to continue as a going concern. These actions
        include continued increases in revenues by introducing new products and revenue
        streams, continued expansion into new territories, reviewing additional
        financing options and accretive acquisitions.
  49
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(a** **ll
          numbers in thousands except per share amounts)**
  **4.**
              **Balance
                  Sheet Components**
  ***Accounts
        Receivable***
  **March 31,**
                **2008**
              
              **December 31,**
                **2007**
              
              **December 31,**
                **2006**Accounts
                  receivable
              
              $
              6,330
              
              $
              -
              
              $
              -Less:
                  allowance for doubtful accounts
              
              
              (168
              )
              
              -
              
              
              -$
              6,162
              
              $
              -
              
              $
              -
  Accounts
        receivable includes amounts billed and unbilled as of the respective balance
        sheet dates. The Company had no significant write-offs or recoveries during
        the
        period ended March 31, 2008.
  ***Property
        and Equipment***
  **March 31,**
                **2008**
              
              **December 31,**
                **2007**
              
              **December 31,**
                **2006**Equipment
              
              $
              654
              
              $
              -
              
              $
              -Equipment
                  subject to capitalized lease
              
              $
              71
              
              
              -
              
              
              -Furniture
                  & fixtures
              
              $
              228
              
              
              -
              
              
              -Leasehold
                  improvements
              
              $
              140
              
              
              -
              
              
              -1,093
              
              
              -
              
              
              -Accumulated
                  depreciation
              
              
              (56
              )
              
              -
              
              
              -$
              1,037
              
              $
              -
              
              $
              -
  Depreciation
        expense for the period ended March 31, 2008 was $56; depreciation expense
        for
        the years ended December 31, 2007 and 2006 was $0 and $0
        respectively.
  ***Capital
        Lease***
 Accumulated
        depreciation associated with the equipment under capital lease noted above
        was
        $72 $0, and $0 at March 31, 2008 and December 31, 2007 and December 31, 2006,
        respectively. The Company has a commitment to pay $20 under these leases
        during
        the year ending March 31, 2009. These payments have a net present value of
        $20.
  **5.**
              **Description
                  of Stock Plans**
  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 shares or equivalents of common stock of the Company as incentive
        stock options (ISO), non-qualified options (NQO), stock grants or stock-based
        awards to employees, directors or consultants, except that ISO’s shall only be
        issued to employees. Generally, ISO’s and NQO’s shall be issued at prices not
        less than fair market value at the date of issuance, as defined, and for
        terms
        ranging up to ten years, as defined. All other terms of grants shall be
        determined by the board of directors of the Company, subject to the Plan.
 
 On
        February 12, 2008, the Company amended the Plan to increase the number of
        shares
        of our common stock that may be issued under the Plan to 7,000 shares and
        on
        March 7, 2008, amended the Plan to increase the maximum number of shares of
        the Company's common stock with respect to which stock rights may be granted
        in
        any fiscal year to 1,100 shares. All other terms of the plan remain in full
        force and effect.
  50
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(a** **ll
          numbers in thousands except per share amounts)**
 The
        following table summarizes options granted for the periods or as of the dates
        indicated:
 
 Number of
                Shares
              
              Weighted Average
                Exercise PriceOutstanding
                  at December 31, 2005GrantedCanceledExercisedOutstanding
                  at December 31, 2006
              
              
              -
              
              
              -Granted
              
              
              1,600,000
              
              $
              2.64Canceled
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Outstanding
                  at December 31, 2007
              
              
              1,600,000
              
              $
              2.64Granted
              
              
              2,751,864
              
              $
              4.57Transferred
                  in from Twistbox
              
              
              2,462,090
              
              $
              0.64Canceled
              
              
              (11,855
              )
              $
              0.81Outstanding
                  at March 31, 2008
              
              
              6,802,099
              
              $
              2.70Exercisable
                  at March 31, 2008
              
              
              3,279,584
              
              $
              1.76
 
 The
        fair
        value for these options was estimated at the date of grant using a Black-Scholes
        option pricing model with the following weighted-average
        assumptions:
 
 Options Granted
              
              Options tranferred
                from TwistboxExpected
                  life (years)
              
              
              4
                  to 6
              
              
              3
                  to 7Risk-free
                  interest rate
              
              
              2.7%
                  to 3.89
              %
              
              2.03%
                  to 5.03
              %Expected
                  volatility
              
              
              70%
                  to 75.2
              %
              
              70%
                  to 75
              %Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
 
 The
        weighted-average grant-date fair value of stock options granted during the
        three
        months ended March 31, 2008 was $2.83 and during the year ended December
        31, 2007 was $1.54.
  51
  **Mandalay
          Media Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
 **(a** **ll
          numbers in thousands except per share amounts)**
  The
        exercise price for options outstanding at March 31, 2008 was as
        follows:
 
 Range of
                Exercise Price
              
              Weighted
                Average
                Remaining
                Contractual Life
                (Years)
              
              Number
                Outsanding
                March 31, 2008
              
              Weighted
                Average
                Exercise
                Price
              
              Aggregate
                Intrinsic
                Value$0
                  - $1.00
              
              
              8.32
              
              
              2,450,235
              
              $
              0.64
              
              $
              13,112,767$2.00
                  - $3.00
              
              
              9.50
              
              
              1,600,000
              
              $
              2.64
              
              $
              5,359,000$3.00
                  - $4.00
              
              
              -
              
              
              -
              
              $
              -
              
              $
              -$4.00
                  - $5.00
              
              
              9.90
              
              
              2,751,864
              
              $
              4.57
              
              $
              3,918,2439.24
              
              
              6,802,099
              
              
              2.70
              
              $
              22,390,010
 
 The
        exercise price for options exercisable at March 31, 2007 was as
        follows:
 
 Range of
                Exercise Price
              
              Weighted
                Average
                Remaining
                Contractual Life
                (Years)
              
              Options
                exercisable
                at March 31, 2008
              
              Weighted
                Average
                Exercise
                Price
              
              Aggregate
                Intrinsic
                Value$0
                  - $1.00
              
              
              8.25
              
              
              2,165,588
              
              $
              0.62
              
              $
              11,622,615$2.00
                  - $3.00
              
              
              9.44
              
              
              407,661
              
              $
              2.64
              
              $
              1,364,562$3.00
                  - $4.00
              
              
              -
              
              
              -
              
              $
              -
              
              $
              -$4.00
                  - $5.00
              
              
              9.88
              
              
              706,335
              
              $
              4.73
              
              $
              887,4448.75
              
              
              3,279,584
              
              
              1.76
              
              
              13,874,621
 
 Operating
        expenses included amounts related to stock option expense of $313 for the
        period
        ended March 31, 2008; and $1,036 for the year ended December 31,
        2007.
 
 **6.**
              **Acquisitions/Purchase
                  Price Accounting**
  The
        Company made one significant acquisition during the period covered by these
        financial statements. The acquisition and related purchase accounting are
        summarized as follows:
  **Twistbox
        Entertainment, Inc.** **and related entities**
 
 On
        February 12, 2008, Mandalay completed a merger with Twistbox Entertainment,
        Inc.
        (Twistbox) through an exchange of all outstanding capital stock of Twistbox
        for
        10,180 shares of common stock of the Company 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 shares of common stock of the Company, including
        2,145 vested and 318 unvested options. After the Merger, Twistbox became
        a
        wholly owned subsidiary of the Company.
  52
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  Twistbox
        is a global publisher and distributor of branded entertainment content,
        including images, video, TV programming and games, for Third Generation (3G)
        mobile networks. It publishes and distributes its content globally and has
        developed an intellectual property portfolio unique to its target demographic
        that includes worldwide mobile rights to global brands and content from leading
        film, television and lifestyle content publishing companies. Twistbox has
        built
        a proprietary mobile publishing platform and has leveraged its brand portfolio
        and platform to secure “direct” distribution agreements with the largest mobile
        operators in the world. These factors contributed to a purchase price in
        excess
        of the fair value of net tangible and intangible assets acquired, and, as
        a
        result, the Company recorded goodwill in connection with this
        transaction.
  In
        connection with the Merger, the Company guaranteed up to $8,250 of principal
        under an existing note of Twistbox in accordance with the terms, conditions
        and
        limitations contained in the note. In connection with the guaranty, the Company
        issued the lender warrants to purchase 1,093 and 1,093 shares of common stock
        of
        the Company, exercisable at $7.55 per share, and at $5.00 per share, (increasing
        to $7.55 per share, if not exercised in full by February 12, 2009),
        respectively, through July 30, 2011. The warrants have been included as part
        of
        the purchase consideration and have been valued using the Black Scholes method,
        using the stock price at the merger date of $4.75 per share discounted for
        certain restrictions, a volatility of 70%, and the exercise price and the
        expected time to vest for each group.
  The
        purchase consideration was determined by an independent valuation to be $67,479,
        consisting of $66,025 attributed to the common stock and options exchanged
        and
        warrants issued, and $1,454 in transaction costs. The stock and options were
        valued using the Black Scholes method, using the stock price at the merger
        date
        of $4.75 per share, a volatility of 70%, and in the case of options the exercise
        price and the expected time to vest for each group. Under the purchase method
        of
        accounting, the Company allocated the total purchase price of $67,479 to
        the net
        tangible and intangible assets acquired and liabilities assumed based upon
        their
        respective estimated fair values as of the acquisition date as
        follows:
  Cash
              
              $
              6,679Accounts
                  receivable
              
              
              4,966Prepaid
                  expenses and other current assets
              
              
              1,138Property
                  and equipment
              
              
              1,062Other
                  long-term assets
              
              
              361Accounts
                  Payable, accrued license fees and accruals
              
              
              (6,882
              )Other
                  current liabilities
              
              
              (814
              )Accrued
                  license fees, long term portion
              
              
              (2,796
              )Long
                  term debt
              
              
              (16,483
              )Identified
                  Intangibles
              
              
              19,905Merger
                  related restructuring reserves
              
              
              (1,034
              )Goodwill
              
              
              61,377$
              67,479
  Goodwill
        recognized in the above transaction amounted to $61,377. Goodwill in relation
        to
        the acquisition of Twistbox is not expected to be deductible for income tax
        purposes. The preliminary purchase price allocation, including the allocation
        of
        goodwill, will be updated as additional information becomes available. Merger
        related restructuring reserves include reserves for employee severance and
        for
        office relocation.
 
 53
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  ***Unaudited
        Pro Forma Summary***
 
 The
        following pro forma consolidated amounts give effect to the acquisition of
        Twistbox by Mandalay Media accounted for by the purchase method of accounting
        as
        if it had occurred as at January 1, 2008, the beginning of the period presented,
        and as at January 1, 2007 for the comparable three month period. The pro
        forma
        consolidated results are not necessarily indicative of the operating results
        that would have been achieved had the transaction been in effect as of the
        beginning of the period presented and should not be construed as being
        representative of future operating results.
 
 **3 months ended**
              
              **3 months ended****March 31, 2008**
              
              **March 31, 2007****(unaudited)**
              
              **(unaudited)**Revenues
              
              $
              4,646
              
              $
              3,708Cost
                  of revenues
              
              
              494
              
              
              7,926Gross
                  profit/(loss)
              
              
              4,152
              
              
              (4,218
              )Operating
                  expenses net of interestincome
                  and other expense
              
              
              5,174
              
              
              6,145Income
                  tax expense
              
              
              30
              
              
              20Net
                  loss
              
              
              (1,052
              )
              
              (10,383
              )Basic
                  and Diluted net loss per common share
              
              $
              (0.05
              )
              $
              (0.62
              )
  **7.**
                  **Goodwill**
  The
        changes in the carrying amount of goodwill for the period ended March 31,
        2008
        was as follows:
  Balance
                  at December 31, 2007
              
              
              -Goodwill
                  acquired
              
              
              61,377Balance
                  at March 31, 2008
              
              $
              61,377
  **8.**
                  **Other
                      Intangible
                      Assets**
  **March 31,**
              
              **December 31,**
              
              **December 31,****2008**
              
              **2007**
              
              **2006**Software
              
              $
              1,611
              
              $
              -
              
              $
              -Trade
                  Name / Trademark
              
              
              13,030
              
              
              -
              
              
              -Customer
                  list
              
              
              4,378
              
              
              -
              
              
              -License
                  agreements
              
              
              886
              
              
              -
              
              
              -19,905
              
              
              -
              
              
              -Accumulated
                  amortization
              
              
              (125
              )
              
              -
              
              
              -$
              19,780
              
              $
              -
              
              $
              -
  The
        Company has included amortization of acquired intangible assets directly
        attributable to revenue-generating activities in cost of revenues. The Company
        has included amortization of acquired intangible assets not directly
        attributable to revenue-generating activities in operating expenses. During
        the
        period ended March 31, 2008 the Company recorded amortization expense in
        the
        amount of $53 in cost of revenues; and amortization expense in the amount
        of $72
        in operating expenses.
 
 54
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  As
        of
        March 31, 2008, the total expected future amortization related to intangible
        assets was as follows:
 
 2009
              
              2010
              
              2011
              
              2012
              
              2013
              
              ThereafterSoftware
              
              $
              230
              
              $
              230
              
              $
              230
              
              $
              230
              
              $
              230
              
              $
              430Customer
                  List
              
              
              547
              
              
              547
              
              
              547
              
              
              547
              
              
              547
              
              
              1,570License
                  Agreements
              
              
              177
              
              
              177
              
              
              177
              
              
              177
              
              
              154
              
              
              -$
              954
              
              $
              954
              
              $
              954
              
              $
              954
              
              $
              931
              
              $
              2,000
 
 **9.**
                  **Debt**
  **March 31,**
              
              **December 31,**
              
              **December 31,****2008**
              
              **2007**
              
              **2006*****Short
                  Term Debt***Capitalized
                  lease liabilities, current portion
              
              $
              20
              
              $
              -
              
              $
              -Senior
                  secured note, accrued interest
              
              
              228
              
              
              -
              
              
              -$
              248
              
              $
              -
              
              $
              -
 
 
 **March 31,**
              
              **December 31,**
              
              **December 31,****2008**
              
              **2007**
              
              **2006*****Long
                  Term Debt***Capitalized
                  lease liabilities, long term portion
              
              $
              -
              
              $
              -
              
              $
              -Senior
                  Secured Note, long term portion, net of discount
              
              
              16,483
              
              
              -
              
              
              -$
              16,483
              
              $
              -
              
              $
              -
 
 In
        July
        2007, Twistbox entered into a debt financing agreement in the form of a Senior
        Secured Note amounting to $16,500, payable at 30 months. The holder of the
        Note
        was granted first lien over all of the Company’s assets. The Note carries
        interest of 9% annually for the first year and 10% subsequently, with
        semi-annual interest only payments. The agreement included certain restrictive
        covenants. In conjunction with the merger described in Note 6, the Company
        guaranteed up to $8,250 of the principal; and the restrictive covenants were
        modified, including a requirement for both Mandalay and Twistbox to maintain
        certain minimum cash balances. In connection with the guaranty, the Company
        issued the lender warrants to purchase 1,093 and 1,093 shares of common stock
        of
        the Company, exercisable at $7.55 per share, and at $5.00 per share, (increasing
        to $7.55 per share, if not exercised in full by February 12, 2009),
        respectively, through July 30, 2011. These warrants replaced warrants originally
        issued by Twistbox in conjunction with the Senior Secured Note.
  Minimum
        future obligations, including interest, under the Senior Secured Note are
        $1,595
        for the year ended March 31, 2009 and $17,875 during the year ended March
        31,
        2010 including repayment of the principle. Capitalized lease assets are set
        out
        in Note 4. Future obligations under capitalized leases are included as part
        of
        Other Obligations in Note 15.
 
 **10.**
                  **Related
                      Party
                      Transactions**
  The
        Company engages in various business relationships with shareholders and officers
        and their related entities. The significant relationships are disclosed
        below.
  55
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  ***Mandalay
        Media Inc***
  In
        2006,
        the Company borrowed an aggregate of $100 from Trinad Capital, with interest
        at
        10%, per annum. The loans were repaid on October 10, 2006, with interest
        of $5.
  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
        per
        quarter, plus reimbursements of all expenses reasonably incurred in connection
        with the provision of Agreement. The Management Agreement expires on September
        14, 2011. Either party may terminate with prior written notice. However,
        if the
        Company terminates, it shall pay a termination fee of $1,000. For the years
        ended December 31, 2007 and 2006, the Company paid management fees under
        the
        agreement of $360 and $107, respectively.
  In
        January 2007, prior to his employment as an officer of the Company, the
        president received $25 in consulting fees.
  In
        March
        2007, the Company entered into a month to month lease for office space with
        Trinad Management for rent of $9 per month. Rent expense in connection with
        this
        lease was $26 for the period ended March 31, 2007; and $77 for the year ended
        December 31, 2007.
  ***Twistbox
        Entertainment, Inc***
 
 Lease
        of Premises
 The
        Company leases its primary offices in Los Angeles from Berkshire Holdings,
        LLC,
        a company with common ownership by officers of Twistbox. Amount paid in
        connection with this lease was $63 for the period ended March 31,
        2008.
 
 The
        Company is party to an oral agreement with a person affiliated with the Company
        with respect to a lease of an apartment in London. Amount paid in connection
        with this lease was $12 for the period ended March 31, 2008.
 
 **11.**
                  **Capital
                      Stock
                      Transactions**
 
 ***Preferred
        Stock***
 
 On
        October 3, 2006, the Company designated a Series A Preferred Stock, par value
        $.0001 per share (Series A). The Series A holders shall be entitled to: (1)
        vote
        on an equal per share basis as 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 conversion date.
  56
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  On
        August
        3, 2006, the Company sold 100 shares of the Series A to Trinad Management,
        LLC
        (Trinad Management), an affiliate of Trinad Capital LP (Trinad Capital),
        one of
        the Company’s principal shareholders, for an aggregate sale price of $100, $1.00
        per share. The Company recognized a one time, non-cash deemed preferred dividend
        of $43 because the fair value of our common stock at the time of the sale
        of
        $1.425 per share, was greater than the conversion price of $1.00 per share.
 
 ***Common
        Stock***
 
 On
        August
        3, 2006, the Company authorized an increase in their authorized shares of
        common
        stock from 19,000 to 100,000 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 to 10,000. In connection with
        the
        split, the Company transferred $6 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 and 50 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 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, 3,400 and 530 units, respectively, at $1.00 per unit, for an aggregate
        proceeds of $ 6,057, net of offering costs of $673. 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 shares of the Company's common stock,
        at $0.50 per share, for aggregate proceeds of $2,473, net of offering
        costs of $27.
 
 In
        September, October and December 2007, warrants to purchase 625 shares of
        common
        stock were exercised in a cashless exchange for 239 shares of the Company’s
        common stock based on the average closing price of the Company’s common stock
        for the five days prior to the exercise date.
 
 On
        November 7, 2007, the Company granted non-qualified stock options to purchase
        500 shares of common stock of the Company to a director under the Plan. The
        options have a ten year term and are exercisable at $2.65 per share, with
        one-third of the options vesting immediately upon grant, one-third vesting
        on
        the first anniversary of the date of grant and the one-third on the second
        anniversary of the date of grant. The options were valued at $772 using a
        Black-Scholes model assuming a risk free interest rate of 3.89%, expected
        life
        of four years, and expected volatility of 75.2%.
 
 On
        November 14, 2007, the Company granted non-qualified stock options to purchase
        100 shares of common stock of the Company to a director under the Plan. The
        options have a ten year term and are exercisable at a price of $2.50 per
        share,
        with one-third of the options granted vesting immediately upon grant, one-third
        vesting on the first anniversary of the date of grant and one-third on the
        second anniversary of the date of grant. The options were valued at $160
        using a
        Black-Scholes model assuming a risk free interest rate of 3.89%, expected
        life
        of four years, and expected volatility of 75.2%.
  57
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  Series
                  A Preferred Stock
              
              
              100Options
                  under the Plan
              
              
              7,000Warrants
                  not under the Plan
              
              
              100Warrants
                  issued with units
              
              
              6,20513,405
  On
        February 12, 2008, the Company issued 10,180 shares of common stock in
        connection with the merger with Twistbox. The Company also assumed all the
        outstanding options of Twistbox’s 2006 Stock Incentive Plan by the issuance of
        options to purchases 2,463 shares of common stock of the Company, including
        2,144 vested and 319 unvested options; and the Company issued warrants to
        a
        lender to Twistbox, to purchase 1,093 and 1,093 shares of common stock of
        the
        Company, exercisable at $7.55 per share, and at $5.00 per share, (increasing
        to
        $7.55 per share, if not exercised in full by February 12, 2009), respectively,
        through July 30, 2011.
  **12.**
                  **Employee
                      Benefit Plans**
 
 The
        Company has an employee 401(k) savings plan covering full-time eligible
        employees. These employees may contribute eligible compensation up to the
        annual
        IRS limit. The Company does not make matching contributions.
 
 **13.**
                  **Income
                      Taxes**
 
 As
        of
        March 31, 2008, the Company had net operating loss (NOL) carry-forwards to
        reduce future Federal income taxes of approximately $36,300, expiring in
        various
        years ranging through 2027. The Company may have had ownership changes, as
        defined by the Internal Revenue Service, which may subject the NOL's to annual
        limitations which could reduce or defer the use of the NOL' carry-forwards.
  In
        connection with the merger described in Note 6 above, the Company has recorded
        goodwill and intangibles which will have differing amortization for book
        and tax
        purposes. Goodwill and trademarks, amounting to $74,407 will not be amortized
        for book purposes, but will be subject to amortization for tax purposes,
        giving
        rise to a permanent difference. Other intangible assets, amounting to $6,875
        will be amortized over a shorter period for book purposes than tax purposes,
        giving rise to timing differences. These differences will impact the Company’s
        NOL carry-forwards in the future.
  As
        of
        March 31, 2008, realization of the Company's net deferred tax asset of
        approximately $14,750 was not considered more likely than not and, accordingly,
        a valuation allowance of $14,750 has been provided. During the three months
        ended March 31, 2008, the valuation allowance increased by $350.
  Management
        has evaluated and concluded that there are no significant uncertain tax
        positions requiring recognition in the Company’s financial statements as of
        March 31, 2008.
  58
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  As
        of
        March 31, 2008, the components of deferred tax asset consisted of the following:
  Net
                  operating loss carry-forwards
              
              $
              14,200Amortization
                  of intangible assets
              
              
              25Share-based
                  compensation
              
              
              525Valuation
                  allowance
              
              
              (14,750
              )$
              -
  For
        the
        three months ended March 31, 2008, and the years ended December 31, 2007
        and
        2006, the components of deferred tax expense consisted of the
        following:
  2008
              
              2007
              
              2006Net
                  operating loss
              
              $
              200
              
              $
              500
              
              $
              200Amortization
                  of intangible assets
              
              
              25Share-based
                  compensation
              
              
              125
              
              
              400
              
              
              -350
              
              
              900
              
              
              200Less
                  valuation allowance
              
              
              (350
              )
              
              (900
              )
              
              (200
              )$
              -
              
              $
              -
              
              $
              -
  For
        the
        three months ended March 31, 2008 and 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:
  March
                  31,
              
              December
                  31,
              
              December
                  31,2008
              
              2007
              
              2006Federal
                  income tax, at statutory rate
              
              $
              (100
              )
              $
              (800
              )
              $
              (180
              )State
                  income tax, net of federal benefit
              
              
              (15
              )
              
              (100
              )
              
              (20
              )Amortization
                  of intangibles
              
              
              (235
              )Change
                  in valuation allowance
              
              
              350
              
              
              900
              
              
              200$
              -
              
              $
              -
              
              $
              -
 
 The
        Company adopted the provisions of FIN 48 on January 1, 2008 and there was
        no
        difference between the amounts of unrecognized tax benefits recognized in
        the
        balance sheet prior to the adoption of FIN 48 and those after the adoption
        of
        FIN 48. There were no unrecognized tax benefits not subject to valuation
        allowance as at March 31, 2008, December 31, 2007 and December 31, 2006.
        The Company will classify interest and penalties on any unrecognized tax
        benefits as a component of the provision for income taxes. The total amount
        of
        interest and penalties recognized in the consolidated statement of income
        for
        the period ended March 31, 2008 and the years ended December 31, 2007 and
        2006
        was not material.
  59
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  **14.**
                  **Segment
                      and Geographic
                      information**
  The
        Company operates in one reportable segment in which it is a developer and
        publisher of branded entertainment content for mobile phones. Revenues are
        attributed to geographic areas based on the country in which the carrier’s
        principal operations are located. The company attributes its long-lived assets,
        which primarily consist of property and equipment, to a country primarily
        based
        on the physical location of the assets. Goodwill and intangibles are not
        included in this allocation. The following information sets forth geographic
        information on our sales and net property and equipment for the period ended
        March 31, 2008:
 
 North
              
              
              
              South
              
              OtherAmerica
              
              Europe
              
              America
              
              Regions
              
              ConsolidatedYear
                  ended March 31, 2008Net
                  sales to unaffiliated customers
              
              
              398
              
              
              2,553
              
              
              147
              
              
              110
              
              
              3,208Property
                  and equipment, net
              
              
              846
              
              
              191
              
              
              -
              
              
              -
              
              
              1,037
  Our
        largest single customer accounted for 48% of our revenue in the period ended
        March 31, 2008.
 
 **15.**
                  **Commitments
                      and
                      Contingencies**
 
 **Operating
        Lease Obligations**
 The
        Company leases office facilities under noncancelable operating leases expiring
        in various years through 2011.
 
 Following
        is a summary of future minimum payments under initial terms of leases at
        March
        31, 2008:
  **Year Ending March 31,**2009
                
                $
                2722010
                
                
                2542011
                
                
                74Total
                    minimum lease payments
                $
                600
  These
        amounts do not reflect future escalations for real estate taxes and building
        operating expenses. Rental expense amounted to $121 for the period ended
        March
        31, 2008.
 
 **Minimum
        Guaranteed Royalties**
 The
        Company has entered into license agreements with various owners of brands
        and
        other intellectual property so that it could develop and publish branded
        products for mobile handsets.
 
 Pursuant
        to some of these agreements, the Company is required to pay minimum royalties
        over the term of the agreements regardless of actual sales. Future minimum
        royalty payments for those
 agreements
        as of March 31, 2008 were as follows:
  60
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  **Minimum****Guaranteed****Year Ending March 31,**
                
                **Royalties**2009
                
                $
                1,9232010
                
                
                1,5602011
                
                
                1,2002012
                
                
                30Total
                    minimum payments
                $
                4,713
  Commitments
        in the above table include guaranteed royalties to licensors that are included
        as a liability in the Company’s consolidated balance sheet of $2,487 as of March
        31, 2008, because the Company has determined that recoupment is unlikely.
 
 **Other
        Obligations**
 As
        of
        March 31, 2008, the Company was obligated for payments under various
        distribution agreements, equipment lease agreements, employment contracts
        and
        the management agreement described in Note 10 with initial terms greater
        than
        one year at March 31, 2008. Annual payments relating to these commitments
        at
        March 31, 2008 are as follows:
  **Year Ending March 31,**
                
                **Commitments**2009
                
                
                3,1952010
                
                
                2,5542011
                
                
                1,5212012
                
                
                165Total
                    minimum payments
                $
                7,435
  **Litigation**
 The
        Company is subject to various claims and legal proceedings arising in the
        normal
        course of business. Based on the opinion of the Company’s legal counsel,
        management believes that the ultimate liability, if any in the aggregate
        will
        not be material to the financial position or results of operations of the
        Company for any future period; and no liability has been accrued.
  On
        March
        20, 2007, Twistbox and FTV GmbH entered into a Content License Agreement
        (“CLA”)
        pursuant to which, among other things, Twistbox licensed certain FTV GmbH
        content and, in exchange, Twistbox agreed to make certain payments to FTV
        GmbH.  On or about April 17, 2007, Leaway Enterprises, Ltd. dba “Mobival”
(“Mobival”) filed an action in the High Court of Justice, Queen’s Bench
        Division, Commercial Court, Royal Courts of Justice, Claim No. 2007 Folio
        458
        against FTV Ltd. BVI (“FTV BVI”) alleging breach of a “Content Distribution
        Agreement” between Mobival and FTV BVI (hereinafter, the “U.K. Action”). 
On or about July 20, 2007, Mobival filed an action in the Los Angeles Superior
        Court, No. LC 078611 against Twistbox, FTV GmbH and Michel Adam Lisowksi
        (“Adam”) alleging interference, unfair business practices and fraud
        (hereinafter, the “U.S. Action”).  On or about February 28, 2008, Twistbox,
        FTV GmbH, Mobival and all other interested parties executed a Settlement
        Agreement and Mutual General Release which released all parties from any
        and all
        claims and liabilities related to the matters raised in the U.K. Action and
        the
        U.S. Action. No expenses related to this settlement were incurred in the
        period
        ended March 31, 2008.
  61
  **Mandalay
        Media Inc. and Subsidiaries**
 **Notes
        to Consolidated Financial Statements**
 **(all
        numbers in thousands except per share amounts)**
 
  **16.**
                  **Subsequent
                      Events
                      (unaudited)**
  On
        May
        16, 2008, the Company signed a letter of intent to purchase video gaming
        company
        Green Screen Interactive Software, Inc. (“Green Screen”).
 
 In
        connection with the potential acquisition, the Company also provided a bridge
        loan of $2,000 to Green Screen on May 16, 2008 by purchasing a Convertible
        Secured Promissory Note in the aggregate principal amount of $2,000 (the
“Note”)
        from Green Screen. The Note matured at any time on or after October 15, 2008
        (the “Maturity Date”), within five business days of written demand by the
        Company, unless it was prepaid or converted in accordance with the terms
        of the
        Note. The Note initially bore interest at a rate of 10% per annum (increasing
        after a certain period of time or on default). The Note was convertible into
        equity securities of Green Screen at the option of the Company.
 
 In
        connection with the bridge loan, Green Screen granted the Company a first
        priority security interest in and to all of Green Screen’s tangible and
        intangible assets. As of June 16, 2008 the letter of intent expired without
        execution of a definitive acquisition agreement, and has therefore been
        terminated. The entire Note, plus interest ($2,028), was repaid on July 7,
        2008.
  62


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





None.





**ITEM
      9A (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 March 31, 2008, 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 Transition Report
      on Form 10-KT was prepared.




63


***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 Transition Period ended
      March 31, 2008 that have materially affected, or are reasonably likely to
      materially affect, our internal controls over financial reporting.





***Management’s
      Report on Internal Control Over Financial Reporting***





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





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





Our
      management assessed the effectiveness of our internal controls over financial
      reporting as of March 31, 2008. Based on our assessment, we have concluded
      that
      our internal controls over financial reporting were effective as of March 31,
      2008.





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
      9B. OTHER INFORMATION**




None.


**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE COVERNANCE**





The
      following table sets forth our directors and executive officers as of July
      15, 2008:





**Name**
            
            **Age**
            
            **Position(s)**Bruce
                Stein
            
            54
            
            Chief
                Executive Officer, DirectorJames
                Lefkowitz
            
            50
            
            PresidentJay
                A. Wolf
            
            35
            
            Chief
                Financial Officer, DirectorIan
                Aaron
            
            48
            
            President
                and Chief Executive Officer of Twistbox, DirectorRussell
                Burke
            
            48
            
            Senior
                Vice President and Chief Financial Officer of TwistboxDavid
                Mandell
            
            47
            
            Executive
                Vice President, General Counsel and Corporate Secretary of
                TwistboxEugen
                Barteska
            
            37
            
            Managing
                Director of Twistbox GamesAdi
                McAbian
            
            35
            
            DirectorPeter
                Guber
            
            66
            
            Co-ChairmanRobert
                S. Ellin
            
            43
            
            Co-ChairmanBarry
                I. Regenstein
            
            52
            
            DirectorPaul
                Schaeffer
            
            61
            
            DirectorRobert
                Zangrillo
            
            42
            
            DirectorRichard
                Spitz
            
            47
            
            Director




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




**Bruce
      Stein.** Mr.
      Stein is the Chief Executive Officer of Mandalay Media, Inc. and a member
      of its Board of Directors. Prior to joining Mandalay in October 2007, Mr.
      Stein was founder and Co-Chief Executive Officer of The Hatchery LLC (“The
      Hatchery”) from April 2003 through October 2007, 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.


64


**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 from 2005 through 2007.
      Prior to Cantor, Mr. Lefkowitz was an agent at Creative Artists Agency from
      1998
      through 2005, 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, from June 2003 through April 2005, 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).




**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.


65


**Robert
      S. Ellin.** Mr.
      Ellin has twenty years of investment and turnaround experience. Mr. Ellin is
      a
      partner and co-founder of Trinad, an activist hedge fund focused on micro-cap
      public companies. Prior to founding Trinad, Mr. Ellin was the founder and
      President of Atlantis Equities, Inc. (“Atlantis”), a personal investment
      company. Founded in 1990, Atlantis actively managed an investment portfolio
      of
      small capitalization public companies, as well as select private company
      investments. Mr. Ellin frequently played an active role in its investee
      companies including board representation, management selection, corporate
      finance and other advisory services. Through Atlantis and related companies,
      Mr.
      Ellin spearheaded investments into ThQ, Inc. (THQI), Grand Toys (GRIN), Forward
      Industries, Inc. (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, 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
      currently sits on the boards of Command Security Corporation (MOC), Mandalay
      Media, Inc. (MNDL), Asianada, Inc. (ASND) and New Motion, Inc. d/b/a Artrinsic,
      Inc. (NWMO). Mr. Ellin also serves on the Board of Governors at Cedars-Sinai
      Hospital. Mr. Ellin received his B.A. from Pace University.





**Jay
      Wolf.** Mr.
      Wolf
      is a partner and co-founder of Trinad. Mr. Wolf has a broad range of investment
      and operations experience that includes senior and subordinated debt lending,
      private equity and venture capital investments, mergers and acquisitions and
      public equity investments. Prior to his work at Trinad, Mr. Wolf served as
      EVP
      of Corporate Development for Wolf Group Integrated Communications Ltd. where
      he
      was responsible for the company’s acquisition program. Mr. Wolf worked at
      Canadian Corporate Funding, Ltd., a Toronto-based merchant bank as an analyst
      in
      the firm’s senior debt department and subsequently for Trillium Growth Capital,
      the firm’s venture capital fund. Mr. Wolf currently sits on the boards of
      Mandalay Media, Inc. (MNDL), ProLink Holdings Corporation (PLKH), Shells Seafood
      Restaurants (SHLL), Xcorporeal, Inc. (XCR), Asianada, Inc. (ASND) and Northstar
      Systems, Inc. Mr. Wolf is also a member of the Board of Governors at
      Cedars-Sinai Hospital. Mr. Wolf received his B.A from Dalhousie
      University.




**Barry
      I. Regenstein.** Mr.
      Regenstein has served on our Board of Directors since February 2005. Mr.
      Regenstein is also the President since 2006 and Chief Financial Officer
      since 2004 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), Asianada, Inc. (ASND) 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 since 1995. 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.


66


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




**Audit
      Committee**





As
      of
      July 15, 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**





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 Transition Period ended March 31, 2008, all Section 16(a) filing
      requirements applicable to our officers, directors, and ten percent stockholders
      were met except for the following: one Form 4 report was not timely filed by
      Eugen Barteska as to one transaction, one Form 4 was not timely filed by Guber
      Family Trust as to one transaction, one Form 4 report was not timely filed
      by
      Adi McAbian as to one transaction, one Form 4 report was not timely filed by
      Ian
      Aaron as to one transaction, one Form 4 was not timely filed by Peter Guber
      as
      to one transaction and one Form 4 report was not timely filed by Bruce Stein
      as
      to one transaction.


67


**ITEM
      11. EXECUTIVE COMPENSATION**


**SUMMARY
      COMPENSATION TABLE**




The
      following table sets forth information concerning the total compensation paid
      during the Transition Period ended March 31, 2008 to our named executive
      officers:


**Name
                    and Principal Position**
                
                
                **Year**
                
                
                **Salary**
                
                
                **Bonus**
                
                
                **Stock**
                  **Awards**
                
                
                **Option**
                  **Awards**
                
                
                **All
                    Other**
                  **Compensation**
                
                
                **Total**($)
                
                
                ($)
                
                
                ($)
                
                
                ($)
                
                
                ($)
                
                
                ($)Bruce
                  Stein, *Chief
                  Executive Officer*
                
                
                The
                    Transition Period Ended March 31, 2008
                
                
                68,974
                
                
                —
                
                
                —
                
                
                2,615,839
                (1)
                
                —
                
                
                2,684,813Robert
                  S. Ellin,*Former Chief Executive Officer*(2)
                
                
                The
                    Transition Period Ended March 31, 2008
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —James
                    Lefkowitz,*President*
                
                
                The
                    Transition Period Ended March 31, 2008
                
                
                62,500
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                62,500Ian
                    Aaron,*Chief
                    Executive Officer of Twistbox*(3)
                
                
                The
                    Transition Period Ended March 31, 2008
                
                
                44,000
                
                
                —
                
                
                —
                
                
                1,389,979
                (4)
                
                —
                
                
                1,433,979




(1)
      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%.





(2)
      Mr.
      Ellin served as our Chief Executive Officer until March 7, 2008, and now serves
      as Co-Chairman of our Board of Directors.





(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
      and
      as a director of Mandalay.





(4)
      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 70% and a discount rate equal to 2.7%.





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 Mandalay Media, Inc. 2007 Employee, Director
      and Consultant 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.




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




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


68


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.







**OUTSTANDING
      EQUITY AWARDS AT THE TRANSITION PERIOD ENDED MARCH 31,
      2008**




The
      following table presents information regarding outstanding options held by
      certain of our executive officers as of March 31, 2008.




**Name**
            
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Exercisable**
            
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Unexercisable**
            
            
            **Equity**
              **Incentive Plan**
              **Awards:**
              **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options**
              **(#)**
            
            
            **Option**
              **Exercise Price**
              **($)**
            
            
            **Option**
              **Expiration**
              **Date**Bruce
                Stein,*Chief
                Executive Officer*
            
            
            166,667
            (1)
            
            333,333
            
            
            —
            
            
            2.65
            
            
            11/7/1716,667
            (2)
            
            33,333
            
            
            —
            
            
            4.65
            
            
            1/2/18—
            
            
            1,001,864
            (3)
            
            —
            
            
            4.25
            
            
            3/17/18Robert
                S. Ellin,*Chief
                Executive Officer*(4)
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —James
                Lefkowitz,*President*
            
            
            333,333
            (5)
            
            166,667
            
            
            —
            
            
            2.65
            
            
            11/7/17Ian
                Aaron,*Chief
                Executive Officer of Twistbox*
            
            
            54,725
            (6)
            
            —
            
            
            —
            
            
            .35
            
            
            1/17/16200,000
            (7)
            
            400,000
            
            
            —
            
            
            4.75
            
            
            2/12/18




(1)
      Mandalay’s Board of Directors granted Mr. Stein the options pursuant to the
      Mandalay Media, Inc. 2007 Employee, Director and Consultant Plan on November
      7,
      2007 in connection with Mr. Stein entering into an employment letter with
      Mandalay, pursuant to which Mr. Stein was appointed a director of the Company,
      effective immediately, and as Chief Operating Officer of Mandalay, effective
      as
      of January 1, 2008, or earlier at the option of Mr. Stein. 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 November 7, 2008 and the remaining one-third become exercisable
      on November 7, 2009.





(2)
      Mandalay’s Board of Directors granted Mr. Stein the options pursuant to the
      Mandalay Media, Inc. 2007 Employee, Director and Consultant Plan on January
      2,
      2008 as partial compensation for Mr. Stein entering into an employment letter
      with Mandalay, pursuant to which Mr. Stein was appointed a director of Mandalay,
      effective immediately, and as Chief Operating Officer of Mandalay, effective
      as
      of January 1, 2008, or earlier at the option of Mr. Stein. The options have
      a 10
      year term and are exercisable at a price of $4.65 per share. One-third of the
      options were immediately exercisable upon grant, an additional one-third become
      exercisable on November 7, 2008 and the remaining one-third become exercisable
      on November 7, 2009.





(3)
      Mandalay’s Board of Directors granted Mr. Stein the options pursuant to the
      Mandalay Media, Inc. 2007 Employee, Director and Consultant Plan on March 7,
      2008 as partial compensation in connection with Mr. Stein entering into an
      amendment to his employment letter with Mandalay. The options have a 10 year
      term and are exercisable at a price of $4.25 per share. Options to purchase
      233,830 shares become exercisable on March 7, 2009, options to purchase 233,830
      shares become exercisable on March 7, 2010 and the remaining 534,204 shares
      become exercisable on March 7, 2011.




(4)
      Mr.
      Ellin served as our Chief Executive Officer until March 7, 2008, and now serves
      as Co-Chairman of our Board of Directors.




(5)
      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
      became exercisable on June 28, 2008 and the remaining one-third become
      exercisable on June 28, 2009.





(6) **** 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.





(7)
      In
      connection with the Merger, Mandalay’s Board of Directors granted Mr. Aaron the
      options pursuant to the Mandalay Media, Inc. 2007 Employee, Director and
      Consultant Plan on February 12, 2008 as partial compensation in connection
      with
      Mr. Aaron entering into an amendment to his employment agreement with Twistbox.
      The options have a 10 year term and are exercisable at a price of $4.75 per
      share. One-third of the options were immediately exercisable upon grant, an
      additional one-third become exercisable on February 12, 2009 and the remainder
      become exercisable on February 12, 2010.


69


**DIRECTOR
      COMPENSATION**





Other
      than the compensation described above, we did not compensate any of our other
      directors during the Transition Period.





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




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





The
      following table sets forth certain information regarding the beneficial
      ownership of our common stock as of July 10, 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 July 10, 2008, there were a total of 32,315,054 † 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
            
            
            29.2Robert
                S. Ellin(4)
            
            
            9,566,666
            
            
            29.4Jay
                A. Wolf (5)
            
            
            9,400,000
            
            
            29.2Lyrical
                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)
            
            
            5,238,094
            
            
            16.3Paul
                Schaeffer (10)
            
            
            600,000
            
            
            1.9Jim
                Lefkowitz (11)
            
            
            166,667
            
            
            *Bruce
                Stein (12)
            
            
            183,334
            
            
            *Robert
                Zangrillo (13)
            
            
            166,667
            
            
            *Richard
                Spitz (14)
            
            
            99,999
            
            
            *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
            
            
            8.8ValueAct
                SmallCap Master Fund L.P. (21)
            
            
            2,185,243
            
            
            6.3All
                directors and executive officers as a group (14
                individuals)
            
            
            18,913,852
            
            
            54.2




70




*
      Less
      than one percent.




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




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





(2)
      Except as specifically indicated in the footnotes to this table, the persons
      named in this table have sole voting and investment power with respect to all
      shares of common stock shown as beneficially owned by them, subject to community
      property laws where applicable. Beneficial ownership is determined in accordance
      with the rules of the Commission. In computing the number of shares beneficially
      owned by a person and the percentage ownership of that person, shares of common
      stock subject to options, warrants or rights held by that person that are
      currently exercisable or exercisable, convertible or issuable within 60 days
      of
      July 10, 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., 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
      and 166,667 shares of common stock underlying options. 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.





(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.


71


(9)
      Includes 166,667 shares of common stock underlying options. Some of the
      securities indicated are held indirectly by Mr. Guber through the Guber
      Family Trust for which he serves as a trustee. Mr. Guber disclaims
      beneficial ownership of these securities except to the extent of his pecuniary
      interest.





(10)
      Consists of 500,000 shares of common stock and 100,000 shares of common stock
      underlying options. Some of 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.





(16)
      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.





(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
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**




**Mandalay**





In
      2006,
      we borrowed an aggregate of $100,000 from Trinad Capital Master Fund (“Trinad
      Capital”), with interest at 10%, per annum. The loans were repaid on October 20,
      2006, with interest of $5,082.





On
      September 14, 2006, we entered into a management agreement (the “Management
      Agreement”) with Trinad Management, an affiliate of Trinad Capital, 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
      January 2007, prior to his employment as an officer of the Company, Jim
      Lefkowitz, President of the Company, received $25,000 in consulting
      fees.


72


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 in connection
      with
      this lease was $25,600 for the Transition Period ended March 31, 2008; and
      $76,500 for the year ended December 31, 2007.





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





**Twistbox**





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





***Lease
      of Premises***




Twistbox
      leases its primary offices in Los Angeles, California from Berkshire Holdings,
      LLC, a company with common ownership by Adi McAbian, an officer of Twistbox
      and
      a common stockholder. Amounts paid in connection with this lease were $314,000
      and $213,000 for the years ended March 31, 2007 and 2006 respectively. The
      amount paid in connection with the lease for the Transition Period ended March
      31, 2008 was $63,000.





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. The amount paid in connection with this lease
      was $12,000 for the Transition Period.





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.





Twistbox
      was 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.


73


**Director
      Independence**





Of
      the ten members of 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.







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





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





**Fees**




Aggregate
      fees for professional services rendered to us by Grobstein
      Horwath & Company LLP and Raich
      Ende Malter & Co. LLP for the Transition Period ended March 31, 2008 and for
      the Fiscal Years ended December 31, 2007 and December 31, 2006, respectively
      were:




**Transition
                Period Ended March 31, 2008**
            
            **Year
                Ended**
              **December
                31, 2007**
            
            **Year
                Ended**
              **December
                31, 200****6**Audit
                fees
            
            $
            125,000
            
            $
            80,085
            
            $
            57,000Audit
                related fees
            
            $
            0
            
            
            0
            
            $
            0Tax
                fees
            
            $
            0
            
            
            0
            
            $
            0All
                other fees
            
            $
            0
            
            
            0
            
            $
            0Total
            
            $
            125,000
            
            $
            80,085
            
            $
            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.


74


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.




**ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**





(a) The
      following documents are filed as part of this Transition Report on
      Form 10-KT.





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





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





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







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




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




75




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.910.4
            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




76




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




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




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




77




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, 2007.410.59
            Amendment
                to Employment Letter, by and between the Company and Bruce Stein,
                dated as
                of March 7, 2008.1210.60
            Commercial
                Lease Agreement, dated as of March 1, 2007, between Trinad Management
                LLC
                and Mediavest, Inc.*16.1
            Letter
                dated May 11, 2007 from Most & Company, LLP to the Securities and
                Exchange Commission.13




16.2
            Letter
                regarding change in certifying accountant, dated June 2, 2008 fromRaich
                Ende Malter & Co. LLP.14




31.1
            Certification
                of Bruce Stein, Chief Executive Officer pursuant to Section 3.02
                of the
                Sarbanes-Oxley Act of 2002.*




31.2
            Certification
                of Jay A. Wolf, Chief Financial Officer pursuant to Section 3.02
                of the
                Sarbanes-Oxley Act of 2002.*




32.1
            Certification
                of Bruce Stein, 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.


(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.


(14)
      Incorporated by reference to our Current Report on Form 8-K (File No. 000-10039
      ), filed with the Commission on June 2, 2008.


78


**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:
                July 15, 2008By:
            /s/
                Bruce SteinChief
                Executive Officer




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
            
            July
                15, 2008Robert
                S. Ellin/s/
                Peter Guber
            
            Co-Chairman
                of the Board
            
            July
                  15, 2008Peter
                Guber/s/
                Bruce Stein
            
            Chief
                Executive Officer, Director
            
            July
                  15, 2008Bruce
                Stein
            
            (Principal
                Executive Officer)/s/
                Jay A. Wolf
            
            Director,
                Chief Financial Officer, Secretary
            
            July
                  15, 2008Jay A. Wolf
            
            (Principal
                Financial Officer, Principal Accounting Officer)Director
            
            July
                  15, 2008Barry
                Regenstein/s/
                Paul Schaeffer
            
            Director
            
            July
                  15, 2008Paul
                Schaeffer/s/
                Robert Zangrillo
            
            Director
            
            July
                  15, 2008Robert
                ZangrilloDirector
            
            July
                  15, 2008Richard
                Spitz/s/
                Ian Aaron
            
            President
                and Chief Executive Officer of Twistbox, Director
            
            July
                  15, 2008Ian
                Aaron




/s/
                Adi McAbian
            
            Director
            
            July
                  15, 2008Adi
                McAbian





79